NEWS ANALYSIS : Is Anaheim Next in Line for a Rejection by Disney?

Burbank lost.

Long Beach lost.

Now Anaheim may become the third Southland city to lose the promise of a new Walt Disney Co. theme park and the enormous windfall of jobs and tax revenue it would bring.

This possibility became evident Monday, when project director Kerry Hunnewell resigned short of Disney’s decision whether to proceed with the $3-billion Disneyland Resort and Westcot theme park, the largest proposed construction project in Southern California.

And the man who will make that fateful decision, Disney Chairman Michael Eisner, has recently issued some decidedly ambivalent comments about the project.

When Eisner said, “I don’t even know if there’s ever going to be a Westcot. . . . I don’t think a company can ever spend this kind of money,” it hardly sounded like the chief executive known for a Midas touch and imperial ambitions for expansion.

It was a far cry from three years ago when Eisner came to Anaheim to propose the new resort, promising to “to reinvent the Disney experience” for the 1990s. Then-Mayor Fred Hunter reacted to the prospect by saying “yes, yes, yes.”

Eisner’s current pessimism could easily be dismissed as strategic posturing aimed at extracting up to $1 billion in public improvements from the city and state to accommodate the Disneyland Resort. But there is growing evidence that Disney has developed a serious case of cold feet.

“We’re at a real crossroads,” Eisner warned.

After a string of successes, Eisner was jolted back to reality by the spectacular failings of Euro Disneyland, which sapped more than $514.7 million from Disney profits last year alone with no end in sight.

The drain appears to be strapping one of America’s richest corporations. And Eisner, the man who could turn a B movie into a runaway hit like “Sister Act” or “Pretty Woman,” will surely think twice before sinking $2 billion of his own corporation’s money--apart from government’s contribution--into another theme park resort.

Since Eisner proposed the Disneyland project in 1990, the Walt Disney Co. has hired staff, and bought or optioned land at a cost of tens of millions of dollars. To walk away now would mean losing it all.

Eisner, however, has walked away twice before on projects well into the planning stages--and just before incurring the real expense of construction.

Disney scuttled a $611-million studio and shopping mall attraction in Burbank in 1988 and then abandoned plans two years later to turn the Queen Mary in Long Beach into a $2-billion amusement park called Port Disney.

But spurn Anaheim, the city where founder Walt Disney mortgaged his Palm Springs vacation house to build a dream called Disneyland?

Consider:

* Eisner has denounced the state’s poor business climate, hinting that it may be the reason for eventually not going forward with the resort. However, Julie Meier Wright, director of the state’s Department of Trade and Commerce, said her office has received no new demands from Disney since Gov. Pete Wilson announced a $60-million package of incentives to bring the resort to Anaheim.

The state and city are itching to win the project because of its promise to provide 28,000 jobs and add $2.4 billion to the moribund California economy, now mired in the worst downturn since the Great Depression. City economists say the expansion could generate $27 million a year in additional tax revenue for Anaheim alone.

* Hunnewell, the Ivy League-educated developer who was synonymous with the project, leaves in midstream, in a “mutual agreement” with his boss. Hunnewell issued a brief statement saying he enjoyed working on the project, but has refused all other comment.

His boss, Senior Vice President Ken Wong of the Disney Development Co., said he is reassigning Disneyland Resort’s 25-member staff to other projects on a temporary basis. He added that they could be recalled if the resort, already a year behind schedule, heats up again.

* Eisner has suddenly shifted public attention to a proposed history-themed amusement park in suburban Virginia, dubbed Disney’s America, that could be built at a fraction of the cost of Westcot.

* Wong and other officials continue to insist that the Disneyland Resort doesn’t “pencil out,” though they decline to publicly detail their financial calculations.

* A recession-spawned shift to shorter, cheaper vacations is causing a re-evaluation of mega-resorts, like the one proposed for Anaheim, where guests stay several days on-site. Attendance was off in 1993 at Walt Disney World, the Florida flagship of the Disney theme park empire, according to an influential industry trade magazine, Amusement Business.

Perhaps more alarming for Disney, most of the drop was attributed to just one of the Walt Disney World parks, Epcot Center, on which the proposed Westcot theme park in Anaheim is roughly modeled.

If Disney decides against the Disneyland Resort in its current form, it still has some tantalizing alternatives, but they are fraught with complications.

One possibility would be to propose something smaller. But that is unlikely, if not impossible, since much of the financing for massive public works improvements hinges on taxes from 5,600 hotel rooms that would be built as part of the project.

A less than spectacular and cheaper theme park would mean less demand for hotel rooms. Fewer hotel rooms would mean less tax revenue to pay for the public improvements. And the deal, as currently structured, would probably fall apart.

Another possibility might be to join with a wealthy partner. Disney supplies the name and expertise; the partner brings the money. Disney already has such arrangements overseas.

In Japan, for instance, the Oriental Land Co. Ltd. owns and operates Tokyo Disneyland and pays royalties to the Walt Disney Co. Outside Paris, Disney owns only about half of Euro Disneyland; the rest of the losses are being absorbed by other stockholders.

But the problem is that if the Disneyland Resort doesn’t live up to expectations, its failure could cause the same kind of collateral damage suffered by Euro Disneyland.

Then there is the matter of timing. Though tourism remains in a slump, some economic factors have improved since the project was first proposed.

Interest rates are at 20-year lows, potentially saving millions of dollars in financing costs. Public support is high, with hundreds of citizens turning out for Disney hearings, waving paddles stating “I’m a Disney fan” and drowning out the meager organized opposition.

Most legal hurdles have been overcome. Of the two remaining suits, the city agreed Thursday “in concept” to a proposed settlement of a suit involving a coffee shop, Tiffy’s Family Restaurant. Another involving various property owners was tentatively settled weeks ago.

Disney has acquired or optioned the key parcels of land it needs for the project and regulatory approvals have been won. The state’s financing package is one of the most lucrative ever offered for a private enterprise.

Because of factors like those, and the continuing negotiations, many still have hope that the project will go forward. “I’m not worried,” said Anaheim City Councilman Irv Pickler. “I think it’s going to happen--but I’m an optimist.”

Others are just groping for a direct answer about Disney’s intentions.

“If this is an exercise in futility,” City Manager James D. Ruth said Tuesday, “then we want to know about it.”

And if the worst happens--Disney scrapping the project--chances are that Anaheim will experience the same soul searching that occurred in Burbank and Long Beach when their Disney projects fell by the wayside.

Long Beach Councilman Evan Anderson Braude, whose district included the Queen Mary, recalled Thursday “a certain malaise, a downer that was created in the community when Disney left.”

“It hurts,” Braude said. “We lost the economic engine that we thought would get us through the low ebb.”

The withdrawal of the proposed Disney complex in Long Beach was especially painful because Eisner had placed the city in competition with Anaheim to see which would win out as the site of the next resort. Both cities negotiated valiantly, but in the end Anaheim prevailed.

Now Anaheim could find itself in the shoes of its onetime competitor, Long Beach.

Some in Anaheim have speculated privately that in the event of the resort deal collapsing, the city might be ready to impose a new tax that would be paid by every Disneyland patron walking through the turnstiles, something the park has successfully held at bay for many years.

In the end, Anaheim could become an asterisk on the growing list of cities that had longed for the Disney touch, only to be rejected.

”. . . Maybe Disney is hoping to find a community that will roll over and give them everything they want and have the money do it,” Braude said. “But they’re going to have to stick with a project soon, otherwise they are going to get a terrible reputation for failed projects.”