A SPORTING DEAL IN A USUALLY DUBIOUS ARENA; TAXPAYERS SHOULD CHEER TERMS OF DOWNTOWN STADIUM.

Byline: David M. Carter

IT has become customary for local governments to come out on the losing end of negotiations with professional sports franchise owners. The negotiations over the amount of the subsidy earmarked for such sports projects as new arenas and state-of-the-art stadiums, typically favor the affluent and politically savvy team owners for two reasons.

First, sports is enthusiastically supported because it has been granted and maintains a privileged position in our communities. Justifiable or not, the importance society places on sports surpasses that of virtually all other industries and endeavors - public or private.

Second, the absolute control sports franchise owners have over the number and location of teams creates an artificial scarcity of sports franchises, resulting in fierce competition between cities desiring a team to call their own. Franchise owners, sensing the public sector's thirst for sports, exploit their advantage and hold municipalities hostage. More often than not, this exploitation results in the granting of favorable financial terms to franchise owners considering relocating their team.

In almost every case, the public sector's financial involvement in arena projects is a dubious allocation of tax dollars since municipalities are forced to finance a disproportionately large portion of the projects, projects that usually boast significant cost overruns and hidden expenses but are seldom part of comprehensive community development plans.

Better situation in L.A.

Fortunately, however, for the taxpayers of Los Angeles, this will not be the case here. The proposed financial terms of the new arena downtown for the Kings and Lakers will ultimately provide a win-win situation for both the public and private sectors. This is the case because the proposed arena complex is part of a substantial redevelopment plan for the downtown area and is primarily being financed by the private sector.

To ensure the project's financial feasibility and reassure taxpayers regarding the fairness of the arena proposal, the City Council appropriately required full disclosure of all pertinent information regarding the deal prior to committing the investment of tax dollars. Thoroughly reviewing the requested documentation will enable the City Council to make an educated decision about the proposal's viability and will eliminate much of the guesswork associated with the project.

The new arena, to be located on the North Hall site of the Convention Center, is scheduled to open in 1999 and will seat approximately 20,000. In addition to the arena plan, another proposal calls for an 1,800-room hotel to be built as part of this new sports and entertainment complex. Complementing each of these are a proposed 500,000 square feet of newly refurbished and constructed commercial and retail space.

At an estimated cost of $240 million, this new arena complex will establish and maintain a revitalized identity for downtown, while hosting more than 200 sports and entertainment events per year.

More importantly, taxpayers will be responsible for less than 30 percent of the cost as the owners of the Kings, billionaire Philip Anschutz and real estate developer Edward Roski, are providing $170 million. If the deal is finalized under these terms, the city will advance $70 million to turn over the property to the developers and acquire adjacent land for parking; all construction costs will then be borne by Anschutz and Roski.

This is significant as taxpayers will not be responsible for the costly overruns routinely associated with such arena developments. Additionally, the developers are willing to guarantee repayment of the city's $70 million advance, essentially eliminating the city's financial risk.

May create 1,800 jobs

In exchange for the $70 million concession, Ernst and Young projects the arena alone will generate $200 million annually and create 1,800 jobs. The existence of the sports complex will lead to increased corporate occupancy and rental rates in the area. This will increase property values and, consequently, property taxes. These increased tax revenues will help the city finance and undertake additional worthwhile programs.

It is critical to note that this $200 million does not necessarily constitute ``new spending.'' Rather, much of it will result from a transfer of the sports and entertainment expenditures presently taking place in Inglewood, Old Town Pasadena, Universal CityWalk and Santa Monica's Third Street Promenade. Moreover, some of the 1,800 jobs created will come at the expense of these locations as a reduction in their business activity will no doubt result in reduced employment opportunities. Certainly these locations are likely to feel the financial consequences of the new arena complex, consequences not overlooked by elected officials in those communities who now realize they will once again have to compete with downtown Los Angeles for the sports and entertainment dollar.

Nevertheless, in total, the proposed downtown arena will be a tremendous boost to the Los Angeles area as a whole, providing the entertainment capital of the country with the sports and entertainment complex it so richly deserves.

This is precisely why Councilman Joel Wachs' initiative for a citywide arena vote is so distressing. Wachs' ``City of Los Angeles Taxpayers Right to Vote Act'' is well-intentioned; unfortunately, he has selected as his test case a partnership arrangement which could serve as a model for municipalities considering the merits of investing in sports.

If the reason for such an initiative at this late date is to extract additional concessions from Anschutz and Roski, he is undertaking an extremely risky strategy. Such a strategy not only threatens to delay the start of construction, but may ultimately serve to kill the deal. Should this occur, the ramifications will reverberate throughout the sports-business community and will reinforce the city's perceived ``can't-do'' attitude.

If and when this initiative runs its course and the arena project proceeds as presently negotiated, the credit for crafting such a mutually beneficial partnership will lie with three entities:

Southern California's sports fans and taxpayers whose reluctance to subsidize the relocating Raiders and Rams set the tone for a reduced financial commitment from the city.

By extension, these taxpayers' elected officials who understood and appreciated the healthy skepticism and cynicism voiced by their constituencies should be acknowledged for their efforts to contain the sports subsidy.

And finally, Anschutz and Roski deserve a measure of gratitude. Although each will profit handsomely with the increase in downtown real estate values (as well as a rapid increase in the value of the Kings franchise), neither brazenly displayed the typical divide-and-conquer mentality associated with most arena negotiations.

The purported financial advantages of having a professional sports franchise, when combined with its perceived social value, all too often result in elected officials throwing caution to the wind - doing whatever it takes to secure a team for a particular location. But this is not the case in Los Angeles, as taxpayers, elected officials and franchise owners see sports for what it is in our community - a tremendous asset whose financial burden must be borne fairly by all parties involved.