Signs of strain shadowed the faces of the officials in the Burbank City Hall conference room. The city's 12-year dream of having a major shopping center in downtown Burbank was crumbling around them, and they were powerless to stop it.
It was early evening Jan. 7. Executives of Ernest W. Hahn Inc., the developer trying to build the $158-million Towncenter mall, explained to the Burbank City Council during the closed session that they were unsuccessful in finding a fourth major department store they needed for the project.
With no solutions in sight, council members and other officials began tossing ideas back and forth in an effort to salvage the shopping mall.
"Why don't we let Disney dream a dream for Burbank?" said Councilman Robert R. Bowne.
Weeks later, Burbank lost the Towncenter. In its place, however, the city gained a proposal from Burbank-based Walt Disney Co. that would revolutionize mall shopping.
A New Direction
The evolution of the Disney deal reveals how a councilman's off-the-cuff suggestion eventually routed the bedroom community made famous by Johnny Carson away from the path of failure toward an unlikely alliance with the aggressive new knights of the Magic Kingdom.
But it has not been an easy road. Along the way, Burbank city officials grappled with indecision, anger, political maneuvering and frequently frantic board-room discussions.
The result was a controversial, tentative partnership between the dream factory of Disney and a city grudgingly willing to change its small-town image to become an international destination. The partnership soon brought two lawsuits from a neighboring entertainment firm, a Disney rival.
Disney artists and architects are working on formal blueprints and designs for the office, entertainment and retail complex, to cost an estimated $150 million to $300 million, on the 40-acre former Towncenter property. By November, they must present the plans to Burbank council members, who voted in May to give the Disney company an exclusive opportunity to develop the land.
If it receives final council approval, the project is expected to generate $1 million to $3 million annually in taxes and other sources of income for the city.
The project, called the "The Disney-MGM Studio Backlot," also would represent another significant step toward establishing the credibility of a new management team at Disney that has heightened the success of the company by new business ventures and R-rated movies while maintaining traditional Disney middle-American, family-entertainment values.
But even preliminary approval of the proposal did not come easy for some Burbank City Council members, who felt overwhelmed by the Disney vision. They were worried about how some elements of the project, such as a man-made lake, a fantasy hotel and restaurants that change decor with the season, would blend into the community.
The real controversy hanging over the project is the negotiated sale price. The council awarded Disney an option to purchase the property for the bargain price of $1 million.
Critics note that some competing developers may have paid as much as $50 million for what they call one of the last prime pieces of downtown acreage in the country.
But in the end, the harsh reality of impending failure prompted city officials to accept the fantastic.
"Burbank just can't stand still anymore," said Councilwoman Mary Lou Howard, 49, often viewed as the highest-profile civic leader in Burbank.
"There needs to be progress," Howard said. "This is a once-in-a-lifetime opportunity. This won't come a second time, and it would be very foolish not to go with it."
Although Bowne, 42, a lawyer, was the first to suggest Disney's possible involvement in the development of the 40 acres, it was Howard who contacted Disney chairman and chief executive officer Michael Eisner a few days later. She did so without telling Bowne or the rest of the City Council.
"No one else followed up on what Bob said, so I thought I might as well go ahead," Howard said. "Someone has to be the leader."
Howard, who had been mayor of Burbank twice, already had the connections, having met Eisner two or three times at social functions.
Nevertheless, her maneuver angered Bowne, who said he often feels left out of actions by a council that has passed over him three times for mayor and vice mayor, even though he is second only to Howard in seniority.
"She was interested in seeking some sense of ownership," he said. "I don't understand why I wasn't included in those initial discussions. I should have been, just as a matter of courtesy, since it was my idea."
"It's not good when one of us goes off and does something behind our backs," said Mary Kelsey, 70, another council member. "Usually it causes problems."
Because city officials at that time were still concerned with saving the Towncenter, Howard had asked Eisner whether Disney would be interested in participating in that project. Eisner said he would look into it, Howard said.
A couple of weeks later, Eisner invited Howard to have lunch at the studio's executive dining room on Jan. 22. Howard asked City Manager Bud Ovrom to accompany her.
"I really didn't know what we were going to say, and I felt embarrassed, ill-prepared," Ovrom recalled. He said he thought seriously about calling Eisner and bowing out of the lunch.
Encouraged by Meeting
But Ovrom's nervousness was quickly overcome by the enthusiasm and creative energy Eisner displayed during the luncheon. Both Ovrom and Howard said they walked away encouraged.
"He told us right away he wasn't interested in being involved in the Towncenter, but he began to describe what he and Disney would like to do with the property," Howard said.
Eisner gestured energetically. He drew pictures on napkins and tablecloths to illustrate some of his ideas. His secretary kept interrupting him at the table, reminding him about another appointment he had, but he continued talking for two hours.
"I was having a fabulous time," Eisner recalled. "That's what the creative process is all about."
Ovrom and Howard returned to City Hall feeling somewhat relieved. "He hadn't told us what we had come there to hear, that he could save the Towncenter, but it was still nice to hear," Ovrom said.
That still left the Towncenter problem unresolved. The mall had been intended as the savior of a deteriorating downtown Burbank, and city officials were consumed with finding another major store to anchor the shopping complex.
Effect of Merger
The project had been seriously jeopardized last August after Robinson's, one of the four anchor department stores, was withdrawn when May Co. announced its intention to merge with Associated Dry Goods, the parent company of Robinson's.
In an 11th-hour brainstorming session, one of the alternatives mentioned for a fourth store was another kind of department store--a three-story retail outlet devoted to cars. "On each floor, we would have had showrooms and dealerships," Ovrom said. "It would have been unique. But no one had any interest in that."
As word leaked throughout the development industry of the impending failure of the Towncenter project, inquiries began pouring in to the city. Developers from as far away as Maryland sent offers to the council, asking to be considered in case the Towncenter fell through.
On Feb. 3, the city found Hahn to be in default of the firm's agreement to produce the shopping center for the city.
That same day, Eisner wrote a letter to the city officially proclaiming Disney's interest in the site.
Priority for Disney
During the following days, Burbank officials informed the other developers interested in the site that the city was giving priority to the Disney proposal.
With the city's go-ahead, Eisner assigned a team of "imagineers," the artists and creators of Disney rides, special effects and concepts, to begin forming plans for the center.
In the next three months, Disney executives and the Burbank city attorney's office tried to hammer out an agreement for the development of the site. Nine drafts of the agreement were written before the final one was completed in late April.
In one early draft, City Atty. Douglas C. Holland asked the Disney Co. to pay $1 million for 30 acres of the property and $8.71 million more for the other 10 acres.
Disney executives, however, stuck with their offer of $1 million for the entire property.
"We're still hoping that this project that we have described is economically feasible," Eisner said when asked about Disney's inflexibility on the price. "The issue is not what the land cost. It's whether we can deliver the dream, financially.
"The break we got in the cost of the land will be so compensated by what we spend on just bricks and mortar on this property that Burbank will get back its fair amount of investment."
$50 Million Speculative
In response to speculation that the city could have gotten as much as $50 million for the site, Holland said, "The only way that property would have been realistically worth $50 million is if there was intense commercial office development or residential development. We weren't interested in high-rises, and we didn't want residential."
Other sticking points during the negotiations included the financing of the parking structure.
The city felt that Disney should be responsible for planning and paying for a parking facility. But Disney wanted the city to use municipal funds to build a parking structure with 3,500 spaces. Such a structure could cost as much as $35 million, officials said.
Disney said it would then lease and operate the facility, paying $1 million a year for six years and $1.3 million a year in subsequent years.
Holland wrote back that the stipulation was unacceptable, and would have to be worked out after more specifics of the project are determined. The final agreement states that the city could provide $1 million to $3 million in property taxes toward the construction of a parking structure.
Overtures From Dallas
An event that made it easier for the city to swallow its concessions came April 28, when Ovrom, Holland and other Burbank officials were meeting with Eisner and Disney Vice President Gary Wilson.
Eisner showed the Burbank officials a videotape he received from the city of Dallas. The tape was a slick production featuring a group of beaming children wearing tuxedos and imploring Eisner to build a Disney project in Dallas. Also on the tape were prominent businessmen, developers and restaurant owners, all urging Eisner to visit Dallas.
"It drove home a good point to a certain extent," Ovrom said. "Here we were in Burbank, playing hard-to-get, and any other city in the country or the world would have given their eyeteeth for a Disney project. That tape opened our eyes."
While Ovrom and Holland were now sold on Disney's ideas, others in city government were yet to be convinced.
Ideas for Complex
The first time Mayor Michael R. Hastings, who runs his own public relations firm, had seen the Disney plans was during an April 24 meeting he attended with Councilwoman Kelsey at the Walt E. Disney Imagineering complex in Glendale.
Hastings and Kelsey said they remembered walking into the room and seeing drawings, models, paintings of Ferris wheels and posters all over the walls.
"Every little bit of wall space in that room was taken up with drawings, sketches and ideas," Kelsey said recently. "My first reaction was, 'I wonder where our stuff is, because this looks so tremendous, it can't be for us.' Then I began looking closer at the walls, and I saw the map of our property on the wall beside all these ideas."
Eisner, other Disney executives and the "imagineers" walked around the room, pointing to the various concepts as Hastings and Kelsey silently watched.
When the two-hour presentation was over, Hastings tersely thanked the executives and stormed out.
"I went out of there like a bull in a china shop," Hastings recalled. "I was imagineered into a world none of us had been exposed to. I felt like our staff was being waylaid by Mickey Mouse. I went away thinking, 'Never in my city.' "
Change of Heart
Hastings said he calmed down when he discussed the proposal over the next several days with his wife, friends and other residents of Burbank.
"The majority of the feedback I got was, 'Tread lightly on it, let's see what it's going to be' " he said. "I also started weighing the alternatives, and sorted things out. Then I was slam-dunk in favor of it.
"Anything else we would put there would be ordinary. It's time that something unusual and unique happens here. We're all used to Burbank being one way. We do a real good job of serving our senior citizens. But, unless we want to expand the Joslyn Senior Citizen Center to cover two-thirds of Burbank, we'll have to do something else for the rest of our demographics.
"Something like this would give the whole city a shot in the arm."
But Kelsey took longer to accept the Disney concept, and still has a "wait-and-see" approach toward approval.
"I have spent a lot of sleepless nights thinking about this," she said. "The more I thought about it, the more I thought, 'They can't possibly do this.' I was also bothered by the money. I felt we should get more."
Concerns Over Shopping
Her main fear was that the project would not accommodate local shoppers. "If Disney can do that, it will be a great weight off my mind," she said.
Disney could bring respectable shopping to Burbank, agree the city officials and council members, a feat they believe is beyond the reach of other developers.
"Let's face it, we had the best in here, the Ernest Hahn Co., and even they couldn't bring retail to Burbank," Kelsey said.
Councilman Al F. Dossin also had some misgivings about the project, but said he believes it would benefit the whole city. "All these people will be coming here, they will see and like Burbank and spend their dollars here," he said.
Other than Bowne, the most enthusiastic city official backing the Disney proposal is Howard. She is proud of recalling that when Eisner signed the tentative agreement May 5, he turned to her and said, "This is your project."
The agreement sparked charges from executives of Disney's biggest entertainment rival, MCA, which owns the nearby Universal Studios Tour.
Asserting that they were denied the opportunity to bid on the property, MCA officials have filed two lawsuits in an attempt to block the Disney venture. The first suit alleges that Burbank officials violated the state's public meetings act by purportedly putting together the Disney deal behind closed doors. The second contends that the city improperly ignored the project's potential effect on the surrounding neighborhood and failed to calculate the potential costs and earnings when settling on a price for the land.
City officials deny all allegations in both suits. Disney is not a defendant in either one.
Approach to Growth
The agreement also raised questions about the direction of the council, which has often characterized itself as a "slow-growth" council reluctant to approve large developments.
Howard, along with Hastings, was the proponent of a moratorium on development in Burbank two years ago. She said at the time that she felt high-rise office buildings and other developments were threatening the sanctity of residential neighborhoods in Burbank. The proposal failed to win a majority council vote.
Yet, the Disney project is expected to attract up to 15 million visitors a year to an area just a few blocks away from residential neighborhoods.
Howard said she does not see any contradiction, adding: "There is no reason for neighborhoods to be impacted. This is in the downtown area."
The Towncenter was expected to generate 9 million visitors a year, "So there's not that much difference between the traffic generated by the two projects," said City Atty. Holland.
Responding to speculations about how the "Disney-MGM Studio Backlot" would change Burbank, Eisner said, "This will be a world-class project. Burbank is a world-class community. This is not a sleepy little village of the world. It's a media center.
"Even a bedroom community needs a downtown of substance."