CANDIDATES CLASH OVER HOME LOAN.

Byline: Yvette Cabrera Daily News Staff Writer

Los Angeles Councilman and state Senate candidate Richard Alarcon on Thursday defended his acceptance of a home improvement loan from the wife a developer and accused his primary opponent, former Assemblyman Richard Katz, of taking a negative approach by attacking his moral character.

The comments came during an early morning debate, much of which focused on where Alarcon and Katz, opponents for the 20th District Senate seat, stand on issues. But both Democrats also used the forum to volley shots at each other about the loan and ethics.

At the heart of the controversy is a $38,700 loan made by Sarah Lulloff, wife of developer Mark Handel. In 1995, after that loan was made, Alarcon voted to approve a $1.1 million city loan for the partnership of developers Mark Armbruster, Scott Adler and Handel, according to records and interviews.

``The loan was perfectly appropriate,'' said Alarcon, during the breakfast debate sponsored by The Executives, a support group of the Jewish Home for the Aging.

``I did recuse myself on a project (the developers) built in my council district . . . so clearly the evidence is that I would have done the same had I known'' of the connection in this instance, Alarcon told the group of about 130 gathered at the Warner Center Marriott.

Though Alarcon dismissed the loan amount as minor, Katz said more important was the alleged conflict of interest, which is under review by the state Fair Political Practices Commission.

``It speaks a lot to what goes on in City Hall and what may go on in Sacramento - conflicts of interest are improper,'' said Katz, who assured the group that his record in the state Assembly is spotless in that respect.

Alarcon also found himself on the defensive over Katz's accusation that Alarcon lied to voters by saying he gave up his entire pay raise while on the City Council.

``Records at the City Controller's Office show otherwise,'' said Katz, claiming that Alarcon only gave his salary up for one year. ``We appreciated the year, but let's be upfront about what happened with the rest of the years.''

Alarcon disputed that and said he gave up his pay raise for two years to help pay for police bicycles, computer services and graffiti programs in his district. But after the 1994 Northridge Earthquake affected the equity on his house, he said he accepted the pay raise to help pay for his daughter's college education.

``I measure that against somebody that's making $78,000 a year to go to two meetings a month,'' said Alarcon, referring to Katz's appointment to the Medical Assistance Commission. ``If this is an issue of moral character, let's weigh the facts.''

While agreeing on education issues, Alarcon and Katz differed on questions such as San Fernando Valley secession. Katz supports efforts to study secession and has signed a Valley campaign's petition, saying these efforts will put pressure on charter reform.

Alarcon said he doesn't oppose secession but is not willing to sign the petition because he is a public official and wants to work to create a government worthy of residents' confidence.

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2 Photos

PHOTO (1) Richard Alarcon

Borrowed $38,700

(2) Richard Katz

Cites clean record