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SHADOW OF A DOUBT

THE DEFECTION OF PHILIP ANSCHUTZ IS JUST THE LATEST RED FLAG IN THE PEPSI CENTER DEAL.

Tim Leiweke was whistling Dixie last March. When the boyish 38-year-old former president of the Denver Nuggets unveiled the Pepsi Center, the team's planned $132 million sports arena across the railroad tracks from Elitch's in downtown Denver, a Dixieland band tooted its horns at the conference room in the Westin Hotel. The choice of music was appropriate: Those present at the glitzy ceremony were offered a vision of downtown Denver as a Rocky Mountain Disneyland.

A scale model of the Central Platte Valley stood at the center of the hotel conference room, showing the Pepsi Center, a fortress-like 610,000-square-foot building with windowless walls that loomed over the heart of Denver's new entertainment district. Other displays highlighted Colorado's Ocean Journey, a $64 million public aquarium planned just across the South Platte river from Elitch's, and a $20 million television production center slated to be part of the Pepsi Center development.

Leiweke had been in Denver little more than three years at the time, having arrived in town after a stint as vice-president of sales and marketing for the Minnesota Timberwolves. But he'd already established a reputation as a showman with a flair for the dramatic. Half a dozen Pepsi corporate brass squirmed nervously next to him at the press conference, understandably anxious since their company had just signed off on a deal worth nearly $68 million. Leiweke barely broke a sweat. As smiling hostesses in denim skirts passed out Pepsi and cotton candy, he placed his hand on a black drape covering a scale drawing of the arena and lifted it off with the flourish of a matador.

It was a moment of personal triumph for Leiweke. He'd been in negotiations with city officials for months, hinting that the Nuggets might have to leave town if the city didn't let them out of their lease at McNichols Sports Arena. The team was offering the city what it described as a risk-free compromise: It would build a new arena itself and then sell it to taxpayers for $1. The team, in return, would control the revenue stream at the facility and kick back a couple of million a year to the city. As they prepared to sell their plan to the public, Leiweke and the unlikely consortium of other big players in the valley he had assembled to back the Pepsi Center--including Denver billionaire Philip Anschutz and Tele-Communications Inc., the Englewood-based cable television giant--were almost giddy, undoubtedly dreaming of Disney-sized profits coming their way.

Just five days later, a tearful Leiweke would hold another press conference to announce his resignation from Comsat, the Maryland-based satellite communications company that owns the Nuggets. That was the start of a run of bad luck for the Pepsi Center, culminating in last week's blockbuster announcement that Anschutz--who had pledged to provide the land for the arena--was backing out of the deal.

Today Leiweke is in Utah, working as president of the United States Ski Team and wondering if the project would still be on track if he hadn't left. Anschutz, angry that he didn't get a piece of the Colorado Avalanche hockey franchise Comsat bought earlier this year for $75 million, has packed his moneybags and headed to California, where he and L.A. developer Edward Roski Jr. plan to buy the Los Angeles Kings for $100 million and possibly put up a new state-of-the-art arena of their own. Comsat, meanwhile, remains determined to erect a posh new venue for its Nuggets and Avalanche somewhere in downtown Denver.

There's still a Pepsi Center in Denver's future. But will the deal really be risk-free? All one need do is look to Minneapolis--the city, ironically, where the idea for the Pepsi Center was spawned--to see that sports arenas, just like soda pop, can easily go flat.

If the idea of a privately funded arena being sold to taxpayers for $1 sounds too good to be true, it probably is. The experience of Minneapolis has shown how quickly privately funded arenas can become public burdens.

Privately financed arenas are something of a trend these days. New arenas in Boston and Seattle are being built with private funds, although public guarantees and tax breaks are part of those deals. But Minneapolis's experience with a privately funded arena, the ill-fated Target Center, was disastrous enough to make some wonder what Denver may be getting itself into.

The owners of the Minnesota Timberwolves, Marv Wolfenson and Harvey Ratner, opened the Target Center in 1990, loudly trumpeting the fact that they had paid for it themselves. However, the 20,000-seat arena ran into trouble almost as soon as construction started. Construction workers hit bedrock at the site in downtown Minneapolis, an inexperienced architect and faulty design led to huge cost overruns, and the Target Center's final price soared from a planned $60 million to $100 million.

To make matters worse, Ratner and Wolfenson--known sardonically around Minneapolis as "Harv and Marv"--lost money on several other real estate ventures. The expansion Timberwolves had a series of losing seasons, and ticket sales plummeted.

By the fall of 1993, the co-owners announced they would sell the team to out-of-town investors and leave the Target Center empty unless the city agreed to buy the arena. Months of private negotiations and public threats followed. In May 1994 Ratner and Wolfenson agreed to sell the Timberwolves to a group from New Orleans who planned to move the team to Louisiana. However, NBA commissioner David Stern nixed that $152 million deal and made it clear it was up to Minnesota's public officials to find a way to keep professional basketball in Minneapolis.

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