The University of Virginia announced yesterday it plans to accept an invitation to play in the Sugar Bowl in New Orleans on New Year's night, spurning overtures from the Tempe, Ariz.-based Fiesta Bowl after voters in that state refused to adopt Martin Luther King Jr.'s birthday as a paid state holiday in Tuesday's general election.

After much discussion, Fiesta Bowl officials late last night decided not to move the game from Tempe. Earlier in the day, the NCAA Postseason Bowl Committee approved a move for the game, but not to any city already hosting another bowl game. Fiesta Bowl officials wanted to relocate the game to San Diego Jack Murphy Stadium, but could not since it is the site of the Holiday Bowl.

"Our feeling was that bringing in another bowl on top of an existing bowl was not at all fair to the existing bowl," said Postseason Football Committee Chairman John Swofford, athletic director at North Carolina.

So Fiesta officials decided not to make any shift.

The game "has become one of this nation's top football bowl games because of the support of Arizona and its people," Fiesta Bowl President Larry Gunning said in a news release. It "has been an Arizona tradition for 20 years. Despite the challenges we've faced, we plan to invite the best teams available to us and attempt our game in Tempe."

The Fiesta Bowl is the centerpiece of a 60-event, month-long festival throughout the Phoenix area. The 1989 game, which decided the national championship between Notre Dame and West Virginia, generated more than $45 million for the area.

Bowl publicist Brent DeRaad said the Fiesta Bowl committee had already sold 50,000 tickets to the Jan. 1 game, one reason not to move the game.

Meanwhile, Arizona Gov. Rose Mofford is considering whether to ask an upcoming special session of the state legislature to resolve the King holiday controversy, which also may cost Tempe the assignment to host the National Football League's 1993 Super Bowl.

Notre Dame, which became the nation's top-ranked team after Virginia lost to Georgia Tech nine days ago, also has declined the Fiesta Bowl's offers because of the King vote. The Irish instead appear ready to accept an offer to play in the Orange Bowl New Year's night against fourth-ranked Colorado.

Virginia had been a leading candidate for a Fiesta Bowl invitation and had indicated that it would probably accept the bid. After Tuesday's election, the school began to rethink its position. "We were certainly aware of what went on out there and it was a concern," said Jim Copeland, Virginia's athletic director.

Virginia Dean of Afro-American Affairs Rick Turner and defensive end Chris Slade spoke out last week against a possible Virginia appearance in the Fiesta Bowl, and the Virginia student newspaper urged Copeland and school President John Casteen to use caution in making a decision.

Both University of Virginia and Sugar Bowl officials, wanting to stay within the NCAA guideline that sets Nov. 24 as the date for official bowl agreements, would not label Virginia's decision as official. But they indicated the deal was final.

Copeland announced yesterday the Cavaliers would accept a Sugar Bowl offer "if an invitation is formally extended," and Sugar Bowl Executive Director Mickey Holmes said his committee will consider "no one else" to play against the Southeastern Conference champion.

Copeland refused to label Virginia's position an informal agreement, but indicated it was "doubtful" that he would talk further with other bowls.

Coach George Welsh met privately with team captains Ron Carey, Joe Hall and Shawn Moore before their game Saturday at North Carolina, advising them of the implications of playing in Arizona. But the captains told Welsh they would play in the Fiesta anyway, expressing a feeling that some good could come from Virginia's participation.

Welsh called a team meeting at 8 o'clock yesterday morning and, according to sources, told the team he did not think Virginia would have a chance to play in the Sugar Bowl, and to ponder the implications of playing in the Fiesta Bowl. The Fiesta Bowl pays each participant $2.5 million, while the Sugar Bowl pays its teams $3.25 million apiece.

Welsh then left the meeting and sources indicated several players expressed concern over playing in Tempe. But when others brought up the possibility of the game being moved to San Diego, the team agreed it would play in the Fiesta Bowl if it was moved from Tempe.

The matter was not addressed further, and the meeting concluded after only 10 minutes, with Carey, Hall and Moore leaving to tell Welsh the team would play in the Fiesta Bowl if it were played in San Diego, but would prefer a bid to the Sugar Bowl. Sources indicated that the team felt officials within the university and the state would not let the team play in the Fiesta in Tempe.

Yesterday's apparent agreement caps a seven-day whirlwind of bowl activity that began when the then-top-ranked Cavaliers lost to Georgia Tech on Nov. 3. Virginia, under terms of a four-year agreement between the Atlantic Coast Conference and the Florida Citrus Bowl, was earmarked for a second straight Citrus appearance, but the Yellow Jackets, who can clinch the ACC title with a win Saturday against 2-7 Wake Forest, have become the probable candidate for that game.

In New Orleans yesterday, NFL Commissioner Paul Tagliabue indicated he was sticking by his recommendation that the 1993 Super Bowl be moved. "It was the sensible thing to do under the circumstances," he said before the Tampa Bay-New Orleans game. But he added, "I've heard some people say that some type of solution in Arizona is possible. We don't want to foreclose that."