NEWS ANALYSIS : The Big Question : Why Spend Millions in Taxes to Help Disney?

Eight hundred million dollars is enough money to staff an entire police department, shelter thousands of homeless or build dozens of schools. Why would government invest that spectacular sum to help the Walt Disney Co. build a resort in Anaheim?

Disney and the city say that the project could create thousands of new jobs and a stream of tax revenue. But the idea of spending such vast amounts of taxpayer money to support one of America’s richest corporations is as incongruous to some as the thought of Mickey Mouse standing in a welfare line.

“I find it hard to believe there is a compelling argument for a public subsidy,” said Peter Eisinger, director of the LaFollette Institute of Public Affairs at the University of Wisconsin. “This is a proven moneymaker . . . Why should the city be spending its scarce resources to create minimum-wage jobs?”

Others see the project as a way to get the Southland economy moving again. Says Irvine architect David Baab: “Without Disneyland, Southern California wouldn’t be as good as it is today, and therefore the government should help support Disney’s effort to build the project.”

Disney’s $3-billion resort, billed as one of the largest private construction projects ever undertaken in Southern California, would include an amusement park with an international theme, three new hotels, a number of restaurants, two of the world’s largest parking structures, extensive landscaping and a man-made lake.

None of it will be built, Disney officials have warned, unless the city, state and federal governments chip in as much as $800 million for parking structures, freeway off-ramps, sewers, utility line relocation and other public works.

“The fact that we happen to be a successful company I’m sure causes questions to be raised,” said Ken Wong, a senior vice president of the Disney Development Co., “but if I were a (government) decision maker I would want to invest in . . . public infrastructure that would stimulate companies that I know would deliver.”

Disney Chairman Michael Eisner says the California business climate has turned chilly, that building costs here are exceedingly high and that the project will not be feasible unless government shares part of the investment.

It’s a huge request, for sure, but one that government officials are treating seriously. Gov. Pete Wilson has already promised $60 million in transportation funds in direct support of the project, despite a troubled state fiscal condition that has required cuts in social services and higher education. Last week, House and Senate conferees approved $15.5 million toward the $223-million cost of one of the project’s two huge parking structures, which are supposed to double as a transit bus terminal.

As the next major step for the project, the city of Anaheim is negotiating with Disney over its share of public-works costs. Both sides expect to resolve their differences and announce a deal by early next year.

Now that the city has decided it is willing to make concessions, it is facing the question of how much to provide. In this case, the city is having to ask itself how far it should go to accommodate a Wall Street darling that had profits of $816.7 million last year--roughly the amount is it demanding of government.

“There is no magic formula” for determining the correct amount of public investment, said Kathleen Connell, a public sector investment adviser and UCLA professor.

Trying to evaluate whether taxpayers should contribute to funding the project--and if so, how much--requires a look at what each side has to gain and how badly each needs the project to go forward.

Disney needs the project to add new life to its aging flagship, Disneyland. With this project, the company hopes to follow its Florida success formula: Build a resort of multiple theme parks and hotels that have visitors spending Disney Dollars day and night.

Tourism provides $4.7 billion a year to Anaheim’s economy, and Disneyland’s 12 million visitors a year are a large part that. An expansion would spur badly needed improvements to the area around the park, which has deteriorated in the 38 years since the attraction opened.

The project has also engendered considerable public and business support because of the economic benefits Disney promises: an estimated 28,000 jobs, both inside and outside the resort, with park visitors and employees pumping another $2.3 billion a year of spending into the moribund Southland economy, according to a study commissioned by Disney. Much of that spending would benefit the restaurant, gift shop and hotel owners near Anaheim. The project would also create thousands of construction jobs.

“The deal you cut depends on who is hungrier, the buyer or the seller,” said urban affairs expert Christopher B. Leinberger, managing partner of Robert Charles Lesser & Co., a Los Angeles-based real estate advisory firm. “If Anaheim is hungrier because it is looking for new economic stimulus and new jobs, it will cut (Disney) a better deal than if this were 1988, when there was not a cloud on the horizon.”

Certainly the notion of public funds being committed to private projects is well accepted. From the federal government guarantees on nearly $1 billion in loans to Chrysler Corp. in 1980 to local governments’ generous tax relief and other inducements for numerous auto malls in Southern California, government has steadily increased its investment in the private sector.

But there are few hard-and-fast mechanisms to determine the level of public support that a particular project deserves.

Wisconsin’s Eisinger notes that South Carolina shelled out about $68,000 per job to lure Germany’s BMW to open an auto plant in its state. Fuji Isuzu received about $50,000 a job to build a car factory in Lafayette, Ind., and Diamond-Star Motors, a subsidiary of Mitsubishi Motors Corp., got about $40,000 per job in incentives for a Mitsubishi auto plant in Bloomington, Ind.

Earlier this month, Alabama gave Mercedes-Benz incentives amounting to as much as $200,000 a job to build a plant outside Tuscaloosa.

Those, however, are high-paying, largely skilled manufacturing jobs. The Disneyland Resort, by contrast, would be staffed largely as the existing Magic Kingdom is now, by college students and others working part-time in entry-level jobs that pay close to minimum wage.

Using Eisinger’s methodology, Disney is asking for a government subsidy that amounts to about $28,500 for each of the permanent jobs created in the Southland; $64,000 each if applied to just those jobs created inside the perimeter of the project. Generally, these kinds of incentives can take years to amortize, Eisinger said.

With such a public cost, the proposed Disney deal deserves a careful examination, said Cal State Fullerton professor Ray Young. “One has to stop and carefully examine (when) a corporation with such deep pockets is going to Washington or Sacramento or the city of Anaheim and asking for such high levels of support.”

Still Young said the project could yield long-term benefits not just for Anaheim, but all of Orange County. It comes as a time when local tourism needs a boost, not only because of the recession but also because other tourist spots are making additional investments in their attractions.

Las Vegas, in an attempt to attract more family business, has undergone a building boom, with several new mega-resorts either recently opened or under construction. Entertainment giant MCA--parent of Universal Studios--last month announced a multibillion-dollar expansion of its theme park in Orlando, Fla.

Anaheim officials, intent on keeping their city competitive, are pursuing the Disneyland Resort as a priority. The city’s chief negotiator, Deputy City Manager Tom Wood, declines to comment on the negotiations, citing the crucial status of the talks, but maintains that the city will not enter into any deal that would not have the taxpayers come out ahead.

The city predicts the new complex could deliver at least $27 million a year in additional tax revenue if it opens as projected in 1999.

“You have to be extremely cautious that there is no risk, a clear public purpose and substantial public benefit,” Wood said. No deal will be struck that puts the city’s general fund, its main pot of tax money, at risk or that does not deliver additional tax revenue to the city, he insists.

Disney’s Wong, for his part, said he would expect nothing less.

The project, he said, could allow both the city and Disney to get the “best bang for our buck.” But in no case, he said, will Disneyland be allowed to languish even if the surrounding resort never gets built.

“Disneyland is where it all started, and we will never let the polish go off that jewel,” Wong said. “We will always reinvest in Disneyland.”