Disney Proposes Big Cuts in Westcot Plans : Expansion: Revised 1,800 hotel rooms instead of 4,600 that Anaheim based redevelopment on could scotch deal.

Walt Disney Co. officials are proposing to scale back their $3-billion Disneyland expansion project, with current plans calling for the company to build fewer than half of the 4,600 hotel rooms it originally asked to build.

Disney now proposes to build only 1,800 hotel rooms during the initial phase of the project--a move that radically alters the city of Anaheim’s economic forecasts and threatens to undermine a tentative development agreement between Disney and the city.

“A reduced Disney investment in hotels seems like a prudent option,” said Kenneth P. Wong, senior vice president of Disney’s development division, said Thursday. He said reductions were being proposed to make the project more feasible financially.

He declined say how many hotel rooms Disney currently planned to build. “That’s part of the negotiations,” he said.

The number of hotel rooms on Disney’s drawing boards is critical, since the city is depending on projected revenue from hotel room taxes to pay for public infrastructure improvements in the Disneyland area.

If fewer hotel rooms are built, there will be less money available to widen sidewalks, enlarge sewer pipes and transform the dilapidated area into a lushly landscaped “garden district.”

Slashing the number of hotel rooms would mark another setback for the project that was once hailed as potentially being one of Southern California’s largest private construction endeavors, as well as a tourism magnet that would help revitalize the sagging local economy.

The project is now about two years behind schedule. Disney has been balking on making the final decision to go forward, saying the project still is too financially risky to start right now.

Nonetheless, Wong said, company officials “really want this project to go forward.”

Anaheim City Manager James D. Ruth acknowledged Thursday that city officials were reviewing revenue projections of the planned hotel and theme park project, but declined to discuss the city’s ongoing negotiations with the Walt Disney Co. or any of the possible design changes being considered.

Mayor Tom Daly said both sides are diligently working to reach a final agreement on the project.

“The remaining issues are challenging, but I’m confident they can be resolved,” he said. “Both parties are working very hard to make sure it’s economically feasible.”

He added that “the city is being very careful to protect our revenues and preserve our long-term financial strength.” Daly, too, declined to discuss any design changes.

Under Disney’s original design, unveiled in November, 1992, 4,600 hotel rooms were to be built adjacent to Westcot, an internationally themed park that would be constructed on what is now the main parking lot of Disneyland. Combined with the 1,000 rooms to be renovated at the Disneyland Hotel, that would have provided some 5,600 Disney-owned hotel rooms.

The original design document stated that the resort’s 97-acre “hotel district” would be the second-largest component of the expansion project. City officials apparently made their economic calculations on Disney building all the hotel rooms it originally sought permission to erect.

Wong said the company may eventually build the maximum number of hotel rooms, but it is not now willing to guarantee that to the city.

The project envisioned a major expansion in the number of hotel rooms because it was assumed that many visitors would spend two or more days at Disneyland and Westcot, and then visit other Southland tourist spots.

But a similar strategy has proven disastrous at EuroDisney outside Paris. Disney officials have acknowledged that they overbuilt hotels there, and blame that miscalculation as one of the reasons the European resort has piled up more than $1 billion in losses.

Wong said the EuroDisney experience was not a “direct lesson” that’s being applied in Anaheim.

Under a tentative accord announced by Anaheim officials on May 2, Disney and the city had apparently reached agreement on how infrastructure improvements would be funded.

Disney is asking local, state and federal agencies for some $800 million in public improvements, including street widening, burying utility lines underground and construction of two of the nation’s largest parking structures.

The city’s costs were to be covered by raising its current 13% tax on hotel room bills to 15%. But the revenues the city expected to collect were premised on the much larger number of hotel rooms.

“It does make sense to cut back on the number of hotel rooms,” said Susan Putnam, analyst for the brokerage of Moran & Associates in New York. She said that the project deserves “rethinking” in light of a slowdown in attendance at Disney theme parks and increased competition in the West from the new family-friendly resorts in Las Vegas.

James C. Goss, an analyst for the Chicago brokerage Duff & Phelps, said that there are so many hotels already encircling Disneyland that the company could not hope to emulate its hotel-building success at Walt Disney World in Florida. There, he said, the theme parks are farther removed from the competition.