Developer Says Vote Would Kill Arena

Los Angeles Kings co-owner Edward P. Roski Jr. threatened Friday to abandon plans for a new sports arena downtown if an initiative requiring a popular vote on public expenditures for the project wins a place on the ballot.

Roski told the City Council in a letter that submitting the project to voter approval “would virtually assure that no arena could be built in Los Angeles” because of the delays such a process would entail.

The arena development company, which is owned by Roski and his partner, Denver financier Philip Anschutz, launched a pressure campaign against the proposed initiative, displaying its own political muscle in the form of backing by business groups and organized labor at a rally in front of the Convention Center, next to the proposed arena site.

The head of the county labor federation, Miguel Contreras, vowed to campaign against any elected official who opposes the $300-million project, partly financed with public funds, because its progress would create jobs and hold out the prospect of a revitalized downtown.

“We’ll body-check Joel Wachs,” Contreras said, referring to the city councilman who is sponsoring the initiative.

A construction worker in the crowd had another idea. “Get a rope,” he said.

Wachs contends that the public should have the right to vote on any sports stadium receiving a public subsidy. But this week, to what arena developers said was their dismay, Wachs said he wanted to change aspects of his proposed initiative.

“We’re finished. We’re not going to negotiate [with Wachs] any more,” said L.A. Arena Co. Vice President John H. Semcken III.

Semcken said that developers had already met Wachs’ conditions for exempting their project from the initiative and that his refusal to exempt it, and his willingness to change the initiative in ways they say make it harder for the arena project to be exempted, have led the developers to conclude he cannot be trusted.

Partly in response to Wachs’ demands, the developers last week released copies of contracts in which the Lakers and Kings agreed to play in the arena for 25 years. They also promised to obtain an independent, third-party guarantee that any shortfall in the arena’s ability to pay off $70 million in city-backed bonds would be made up.

They say they thought they had met Wachs’ standards. But they and Wachs remain in dispute about two major issues: Whether certain city-owned land and buildings being used in the project should be counted as a subsidy along with the bonds, and what sorts of funds the developers should be able to use to pay off their public debt.

Wachs believes that the land and buildings do constitute a subsidy.

Negotiators for the arena and the city have arranged a tentative deal that envisions paying off the bonds with a combination of ticket surcharges, parking revenues and the increased sales and property taxes that the arena would generate. The guarantee would come into play only if those projected revenues fell short of expectations.

Last year, Wachs said in a City Council motion that city subsidies could properly be repaid in those ways.

But on Thursday, he told reporters that lawyers advising him had suggested that using sales and property tax revenues, to which the city would ordinarily be entitled, to repay city-backed bonds would be an improper double subsidy for the developers.

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Wachs made that observation while releasing an amended initiative proposal adopting language used by the city to ensure that it would not have to subsidize the privately staged 1984 Olympic Games. That language did not allow use of sales or property tax revenues to repay public subsidies.

But on Friday, Wachs said he was not wedded to the specific Olympics language. He said he will not oppose the developers using property taxes to repay their city debt if someone can show him that the city has allowed other developers to do the same thing. He said he just does not want to set a precedent.

Wachs insisted that his overall position has not changed: If the developers offer an ironclad guarantee that their project will not cost the city any money, he will exempt them from his initiative. If not, the project has to go to a popular vote.

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Wachs also is insisting that the developers include in their guarantee more than an ability to repay the $70 million in city-backed bonds. He said he wants them to pay for the value, which he has asked city workers to determine, of certain city-owned land and buildings that city negotiators already have agreed to let the developers take as part of the tentative deal.

That deal is expected to be approved by the council in a vote later this month.

Assuming the council does approve it, Semcken said that developers will begin preliminary utility construction in October.

What happens next, he said, is up in the air.

By law, Wachs has four months to collect 62,000 valid signatures to qualify his initiative for the ballot.

Developers indicated they will mount a campaign to persuade voters not to sign the measure’s petitions. But if Wachs gets enough signatures, his initiative will be slated for a vote, and developers say they will halt the planned January groundbreaking for the arena building itself. The facility is supposed to open in 1999.

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Wachs said he does not believe the developers are serious when they threaten to back away from the deal.

“I feel we are giving them so much and there is so much money to be made for them that I can’t believe repaying the city its costs will kill the deal,” he said Friday.

“If they do [repay the costs], they won’t have to worry about the initiative” because they won’t be subject to it, he added.

Wachs said he remains open to negotiating a repayment plan with the developers, but--negotiations or no--will submit a revised initiative sometime next week to the city attorney and city clerk, who by law will have 10 days to summarize it and approve its form.

Then, he said, he will begin his petition drive.