The issue lost 178,343, or 55 percent, to 147,352, or 45 percent.

"When voters read the facts they came our way because they know it's a bad deal and they know they have time to get a better deal for an arena, and that's exactly what we're going to do," said Harris County tax assessor collector Paul Bettencourt, a leading opponent of the proposal.

Houston Rockets owner Les Alexander has said his NBA team needs a new arena, with more revenue-generating luxury boxes and club seats, to remain competitive in a league filled with new buildings.

Alexander did not threaten to move the team if the issue failed, but arena backers such as popular former Mayor Bob Lanier repeatedly warned voters the team's departure was a possibility.

Opponents said the ballot issue was hastily thrown together and placed too much of the cost burden on taxpayers. They also contended Alexander, not the city, should be made to buy the land in downtown Houston.

The Rockets, who in their season opener failed to sell out Tuesday night for the first time in 149 consecutive games, have a lease to continue playing at the Compaq Center southwest of downtown until November 2003.

"There was a lot of disinformation. The arena is a good deal for the city," said Brown, who resisted conceding defeat late into the night.

Proposal detractor Francisco Soto appeared amused by Brown's comments: "I don't know who thought it was a good deal. It certainly wasn't the voters of Harris County."

Pro-arena forces were expected to raise more than $2 million, outspending the opposition by a wide margin.

The arena question was assembled Sept. 1 after Brown intervened in stalled negotiations between the Rockets and the Harris County-Houston Sports Authority.

Alexander and the Sports Authority would split the cost of designing and building the arena, though Alexander would have to pay $1.1 million a year for capital expenditures.

All ticket, concession, temporary advertising and naming rights revenues would go to Alexander for events involving his teams: the Rockets, the WNBA's Comets and the ThunderBears Arena Football League franchise.

Additionally, a possible 10 percent ticket tax on non-Alexander events -- such as the circus, concerts and the Aeros minor-league hockey team -- would go to the sports authority. Tax revenue from tickets to events involving Alexander-owned teams would be rebated to the Florida millionaire.

It was likely the recently refurbished Compaq Center, known as The Summit for most of its 25 years, would be torn down.