Tax-Break Bill Seen as Disney Windfall : Legislation: Measure in Assembly would grant breaks to companies engaged in major expansions such as the Anaheim resort plan.

Walt Disney Co. could reap millions of dollars in tax benefits for its proposed Disneyland Resort project under legislation pending in the Assembly.

The bill would grant tax breaks to companies that undertake major expansions. And it would give even bigger breaks--75%--to those that build roads and parks or make other public improvements as part of their projects.

Disney is deciding whether to proceed with the $3-billion theme park and hotel project in Anaheim. The expansion would include freeway off-ramps, roads and parking garages.

Assemblyman Richard Katz (D-Sylmar) said the measure, AB3094, is urgently needed to keep California businesses from being lured to other states by promises of lower land prices, labor costs and taxes.

“We can’t sit back and do nothing. This bill is designed to make California competitive with other states for business,” Katz said.

The measure has bipartisan support and the backing of Disney, big construction companies, the Six Flags Magic Mountain theme park in Valencia and Peter V. Ueberroth, who was chairman of the Council on California Competitiveness.

The South Coast Air Quality Management District supports the measure as way to help industries bear the financial costs of clean-air improvements.

The measure’s opponents--a handful of Assembly members who voted against it in committee and the union-backed California Tax Reform Assn.--argue that it would subsidize business expansions that would have been made anyway, shifting the tax burden to other sectors.

“Is it wise to pass a measure with a potential revenue loss of $300 million when the budget is not resolved?” asked Assemblyman Johan Klehs (D-Castro Valley). “As long as we continue to pass legislation like this without closing the loopholes, California is going to teeter on the abyss.”

The measure would give corporations a tax credit of 15% of the capital costs of new projects or expansions worth more than $10 million and creating at least 50 jobs. For related roads, parks and other infrastructure, it would give a tax credit equal to 75% of the construction costs. The credited amount would be subtracted from corporate income taxes owed when the finished project starts generating revenue.

Katz said the bill could serve as a lever to persuade companies such as computer microprocessing giant Intel Corp.--which is considering a Northern California site for a new factory--to spurn offers from elsewhere.

The measure passed two Assembly committees and will go to the full Assembly for a vote, possibly as soon as today. It must also win Senate approval and be signed by the governor before becoming law.

Disney has lobbied hard for the measure. The company has said it expects to decide by early next year whether to proceed with building the resort. Disney wants to build a second theme park, three hotels and what would be the nation’s largest parking garages. The new complex, which would surround Disneyland, would create 48,000 construction jobs in California and 14,000 permanent jobs at its opening in the late 1990s.

Joe Shapiro, Disney’s executive vice president, said the bill has the company’s support mainly because it is good public policy to stem the tide of jobs leaving the state. He acknowledges too that the measure could save Disney millions.

“It a win for the state, the people and business,” he said.

The bill, opponents warn, could have a considerable effect on state revenue. Officials estimate that California companies spend $36 billion to $40 billion a year on major expansions. Based on those figures, the potential tax breaks to all businesses under the bill would cut the state’s tax revenue by $2.6 billion to $3 billion annually, according to a legislative analysis.

Proponents of the measure say the bill would not figure into the state’s current budget crisis because several years would pass before the tax breaks could take effect. Also, they say, the losses will be offset by taxes on the increased economic activity that the bill would generate.

For a while, the bill was being referred to privately as “the Disneyland bill” because it was viewed as heavily favoring Disney’s project, one legislative source said. But two provisions that would have helped the company directly have since been removed, and the bill is considered broader in scope.

One of those provisions would have allowed corporations such as Disney that have many divisions to shift the tax benefits among them, said Lenny Goldberg, executive director of the California Tax Reform Assn.

The other provision would have given more lucrative tax credits to companies that pay a high proportion of retail sales tax, compared with other state levies. Disney generates a significant amount of tax revenue from sales of merchandise and food at its theme parks.