Wachs Approves Altered Deal on Sports Arena

Clearing the way for a planned downtown sports arena, City Councilman Joel Wachs told reporters Wednesday that he will exempt the facility from his proposed ballot measure that would require voter approval of publicly subsidized sports stadiums.

In return, the developers--who own the Los Angeles Kings hockey team--have agreed to several new financial conditions that would dramatically reduce any taxpayer costs for the new arena, Wachs said in an interview.

According to the councilman, the developers will:

* Give the city an “ironclad” guarantee that they will repay $58 million in municipal bonds to be used for the project.

* Ensure that the $58 million will not come from sales taxes, property taxes or utility taxes generated by the arena.

* Pay about $1.6 million for a two-acre property that the city had tentatively agreed to give to the developers, and pay about $3.2 million for use of the arena site for 55 years. The previous deal called for a $1-a-year lease.

Tim Leiweke, president of the Kings, acknowledged that the deal is financially riskier for the developers, but he said their desire to build the facility in the city outweighed their concerns.

“This poses a great deal more cost and risk to the Arena Company,” Leiweke said. “Financially, this is a much more difficult transaction for us . . . [but] we want to build the arena and we want to build it in L.A.”

Wachs said he believes the developers have agreed to the new financial conditions because of the threat of his initiative.

“If the final deal is like this, it’s a big victory,” said a clearly gleeful Wachs. “They finally realized I meant business. . . . Quite frankly, I think we forced them into it by not caving.”

Wachs, who is expected to formally announce the conditions at a news conference today, has been under intense pressure not only from the arena developers but from other city officials, businessmen and lobbyists who have contended that his ballot measure would likely kill the deal.

Indeed, real estate developer Edward Roski, who is seeking to build the $300-million arena with billionaire Philip Anschutz, has said he would abandon plans for the downtown project if the arena was included in Wachs’ ballot initiative.

Although Wachs said the new proposal will save taxpayers $126 million compared to the original deal, others involved in the negotiations said that figure seemed too high.

Leiweke and George Mihlsten, a lawyer who worked on the deal for the developers, said the amount could mean “tens of millions” in additional costs for the developers.

The two sides held a series of private sessions over the last several weeks to work out a deal. The first of those meetings was hosted by Cardinal Roger M. Mahony, a strong advocate of the downtown arena.

City officials who support the arena, which would house the Kings and the Los Angeles Lakers, said they were happy that an agreement had been struck.

“I’m delighted,” said Steven L. Soboroff, a senior advisor to Mayor Richard Riordan. “I’d love to talk about it more at the opening game.”

Developers say they must begin work on the property by January to open the arena by their target of October 1999.

Under the agreement, Wachs said, the only public money involved in the arena would be $12 million given to the developers by the Community Redevelopment Agency. The CRA, which controls its own spending, can help with projects located in the central business district, a redevelopment area.

Wachs said he was unhappy about that payment but acknowledged that he has no control over it. The redevelopment agency is exempt from citywide ballot measures because it is governed by state laws.

“Nothing’s ever perfect,” Wachs said, adding that he will work with state legislators to close what he called a loophole.

The developers also will provide the city with a third party guarantee that will require them to use funds other than city taxes to repay the bonds, which will be used mostly to acquire land for parking lots.

Before Wednesday’s deal, the developers had said they would repay debt, which was then closer to $70 million, partly with sales and property taxes. Now, they will likely use ticket surcharges, profits and parking revenues generated when patrons use city-owned lots. (Wachs said those parking funds are small and not enough to worry about as a potential subsidy.)

Wachs said the most important part of the deal is that the city no longer has any financial risk. sHe said he will move forward to gather signatures for an initiative on the November ballot--omitting the arena project--to protect taxpayers from subsidies for future city sports facilities.

But if the developers renege on any part of the deal, Wachs said, he will proceed with his original initiative.

Wachs contends that the public has the right to vote on any project receiving a public subsidy. Because the developers had planned to use taxes to repay the bonds, Wachs had said the arena should be covered by his initiative. With the new agreement, he said city taxpayers are no longer on the hook.

“Even if there isn’t a single game there . . . they must repay those bonds,” Wachs said.

In addition, the title to the arena returns to the city in 55 years.

The City Council is expected to vote on the arena project Oct. 21. A majority of the council supports the facility and had sought to persuade Wachs not to launch an initiative drive.

Council President John Ferraro said he has repeatedly asked Wachs to make some demands and then reach a settlement without proceeding on the ballot proposal.

Before the agreement Wednesday, the developers had said they would wage a strong public relations campaign if the initiative, including the arena, qualified for the ballot.

Afterward, both sides could talk about little else but their excitement about the arena.

“I’ve never been against the arena,” Wachs said. “I just wanted them to pay for it.”