CRA Aid to Arena Deal Stirs Some Criticism

It was the clincher the developers of a new downtown arena say they needed, but it is raising concerns over why a public agency designed to renovate decaying neighborhoods would fork over millions of dollars to wealthy developers.

In an arrangement made public Wednesday, leaders of the Community Redevelopment Agency have pledged $12 million for the proposed arena--a key development in leading to an agreement helping to clear the way for the facility.

In return for the money, the developers agreed to repay the city for municipal bonds with funds other than sales taxes, property taxes or utility taxes. That decision appeases City Councilman Joel Wachs, who Wednesday said he would exempt the arena project from a proposed ballot measure seeking voter approval for the public subsidy.

Although both sides spent Thursday praising the new deal, hashed out over the last few weeks in private meetings, the pending CRA payment is troubling to some at City Hall. Critics are quietly suggesting that the redevelopment money should be used for other projects in the central business district.

“What else could this money be used for? I think a lot,” said one City Hall source who refused to be identified. “Twelve million dollars is a lot of money, and it’s going to rich developers.”

Even Wachs, who says he is delighted by the new financial plans for the proposed home of the Los Angeles Kings and Lakers, says he is not happy that the redevelopment money will be used for the arena project. But Wachs said his initiative could not have stopped it.

The CRA, created under state guidelines, is not affected by citywide ballot measures.

Under pressure to close the deal, both sides sought help from city staff on the proposed $300-million project. CRA administrator John Molloy said he came up with the idea of using the $12 million two or three weeks ago.

“This is pretty prototypical of what we do,” Molloy said. “We try to make projects like this feasible.”

The redevelopment funds, which come from interest payments received by the CRA, have not been earmarked for any other project, Molloy said.

The CRA board has not yet voted on the proposal, a necessary first step before the money can be used for the arena.

The six-member board has expressed support for the project but has not yet reviewed the financial plans. The board is expected to vote on it next week.

Christine Essel, who chairs the CRA board, said she believes that the project has the necessary support. “This type of project is essential to making the difference downtown,” she said.

To the developers--who own the Kings hockey team--the $12 million helped settle a dispute they said could have killed the project. The $12 million is about the same amount the developers had expected to repay the city in taxes.

“They got very creative,” said L.A. Arena Co. Vice President John H. Semcken III. “It was very key, very significant. It was a breakthrough.”

Wachs had been threatening to include the proposed arena in an initiative requiring voter approval to give public subsidies to sports facilities. By repaying the bonds with taxes, Wachs said, the developers would receive “an unprecedented” subsidy.

But under the new financial arrangement, which must be approved by the City Council, the developers would provide a third-party guarantee that they will repay $58 million in bonds with other revenues earned from the arena.

Both sides said the process has been arduous.

“There were days when we thought it was best to move on and look for another location,” said Tim Leiweke, president of the Kings. “Obviously the process was difficult and I think both sides were emotional . . . [but] we are thrilled with the agreement.”

Indeed, the two sides, who only a couple months ago were chastising each other, were showing nothing but camaraderie Thursday. In back-to-back news conferences, Wachs and the developers said the deal is the best in America.

In addition, Mark S. Rosentraub, an Indiana University dean who has consulted with the mayor’s office on the project, said he too believes that it is a good deal.

“Both deals were excellent,” Rosentraub said. “If this one meets the political agenda and everyone declares victory . . . that’s great.”