Catching the Next Wave : Will Cities Enter Mickey Mouse Deals to Survive? : Economy: Disney wants to build a better tourist mousetrap--and give the taxpayers much of the bill.
Southern California’s local governments have become their own worst enemies. Deprived of a progressive property tax by Howard Jarvis, and stripped of federal aid by Ronald Reagan, they pauperize each other in Darwinian struggles over scarce tax resources.
While bigger cities battle over convention centers, theme parks and hotels, the smaller fry compete for auto malls, even supermarkets. Paradoxically, they woo these tax generators by offering them tax subsidies, abatements, even outright gifts. Far too often, the costs of seduction cancel the benefits of marriage.
The private sector has become increasingly adroit at stimulating and exploiting these mindless municipal rivalries. Consider, for example, Disney’s current manipulation of tax-hungry city halls in Anaheim and Long Beach.
Magic Kingdom Chief Executive Officer Michael D. Eisner boasted last year that the 1990s would be the “Disney Decade,” promising shareholders a doubling of corporate income by 1995--to approximately $11 billion. A large part of this expansion is to be a second Disney theme park in Southern California.
Disney officials have long been critical of their founder’s improvidence in failing to control the periphery of his original park. Unlike the 28,000-acre self-contained--indeed, virtually sovereign--realm of Walt Disney World in Orlando, 80-acre Disneyland in Anaheim “leaks” sales to an adjacent sprawl of mom-and-pop motels, restaurants and curio shops. Moreover, Disneyland visitors typically stay only one or two days, while in Florida, with the multiple enticements of EPCOT, the Magic Kingdom and Disney-MGM Studios, affluent tourists often remain a week or more.
Thus Disney wants to build a better mousetrap in Southern California: a “second gate” theme park along with a Disney World-like complex of proprietary resort hotels, shopping and entertainment centers. And just as in Florida, where Disney World was allowed to reap the tax advantages of incorporation as a local government--the Reedy Creek Improvement District--planners of Southern California’s second Disneyland are as fixated with externalization of costs as with internalization of sales and profits.
That is to say, faced with the formidable obstacles of land acquisition and infrastructure upgrading, as well as with Eisner’s inviolable injunction that all Disney enterprises must return a 20% annualized profit on investment, Disney officials are trying to displace hundreds of millions of dollars of development costs onto local and state governments. Toward this end, they unveiled last year a high-powered lobbying apparatus in Sacramento, and quintupled their contributions to local politicians.
More cannily, Disney--repeating the same strategy that had pitted France and Spain in bitter competition for Euro Disneyland--has offered two master plans for their proposed $3-billion expansion. Disneyland Resort in Anaheim would combine 4,100 new hotel rooms with a second, World’s Fair-like theme park (Westcot Center) built over the current parking lot. Alternately, Port Disney, fronting both sides of the Los Angeles River mouth in Long Beach Harbor, would include the DisneySea amusement park, five hotels, a retail mall and several marinas.
To make mouths water in Anaheim and Long Beach, Disney has advertised each project as an “engine of regional economic revival”--promoting the idea that the victorious community will be awash in construction wages, hotel and sales taxes, and thousands of new service jobs.
Although Disney spokesperson Alan G. Epstein says, “creative development potential” will be the ultimate criterion of selection, Eisner has not been so euphemistic; he said the winner would be the community that “wants us more.”
Practically, this translates into local willingness to absorb the staggering costs of inserting Disneyland II into a mature, overdeveloped and auto-congested urban fabric. Aside from the increased demand on municipal services, local and state governments will also be expected to shoulder freeway, street, sewer and utility improvements--as well as the cost of two giant parking structures in Anaheim (where land costs $1.6 million an acre), or, conversely, part of the landfill and environmental mitigation requirements of Port Disney.
According to estimates of Anaheim city officials, the public sector’s direct contribution could exceed $500 million. Epstein, while pointing out Disney will not discuss dollar figures, assures questioners that the government share can be financed out of future tax increments.
Fiscal-impact reports prepared for Disney, however, only take into account the increase in municipal services. They do not measure increased demand on county and state services, or the social costs of associated development outside the Disney perimeter. While the reports allude to the positive fiscal effects of induced land inflation, they do not discuss the deleterious impact on affordable housing. Perhaps most brazenly, since both schemes rely on the family car, they glide over the costs in regional mobility and air quality of millions of additional freeway trips. For aficionados of the Santa Ana Freeway in particular, the prospect of Disneyland Resort is almost apocalyptic.
From this perspective, it is unclear whether the winner of the Disney competition can expect any real net fiscal gain. Meanwhile, nervous neighborhood activists are beginning to find out more about the dark side of Orlando’s Disney World experience. In Florida, the corporation made the same initial promises about tax windfalls and breakneck economic development. In reality, Orlando has been swamped by unexpected social costs, ranging from gridlock to an acute housing shortage for Disney’s army of low-wage workers. Disney World’s puppet government has also earned notoriety for grabbing nearly $60 million in tax-free municipal bonds to build a sewage-treatment plant when other counties desperately wanted the money for affordable housing.
Californians are also beginning to learn what it is like to play hard ball in Eisner’s league. When Peter M. Douglas, the outspoken Coastal Commission chief, joined environmentalists in opposition to the Port Disney landfill, pro-Disney commission members moved to fire him.
Although the environmental lobby has temporarily blocked Port Disney legislation in Sacramento, the corporation seems likely to achieve its objectives. Dealing with a fragmented and competitive array of public agencies and interests, Disney will shift hundreds of millions of dollars of development costs--seen and unforeseen--onto California taxpayers.
Whichever city emerges the victor--Anaheim (most likely) or Long Beach--will discover, too late, that they have swallowed an elephant to give birth to a lot of dead-end, poorly paid jobs. The two questions likely never to be seriously debated are, first, why a firm that can pay Eisner $11.2 million in salary and bonus compensation in 1990 needs any public subsidy; and, second, why local government should have to provide dowries to wealthy corporations?
