Disney Expansion Plan Cut Back : Anaheim: The company is proposing to build 1,800 hotel rooms instead of 4,600, sources say. Reduction would have drastic effect on tax revenues city intends to use for public improvements.

Walt Disney Co. officials are proposing to build less than half of the 4,600 hotel rooms originally planned for their Disneyland expansion project, sources said Thursday.

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

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

But Wong declined say how many hotel rooms Disney currently plans to build.

The number of hotel rooms on the drawing boards is critical, since the city is depending on projected revenue from hotel room taxes to pay for public improvements in the Disneyland area. If fewer hotel rooms are built, there will be less money to widen sidewalks, enlarge sewer pipes and landscape the area.

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

The project is 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 build now.

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

Anaheim City Manager James D. Ruth acknowledged Thursday that city officials are reviewing revenue projections of the planned $3-billion project, but declined to discuss the city’s ongoing negotiations with Disney.

Mayor Tom Daly said both sides are diligently working to reach a final agreement on the project, which would consist of a new theme park adjacent to Disneyland, a hotel and shopping district and a 5,000-seat amphitheater.

“The remaining issues are challenging, but I’m confident they can be resolved,” he said.

Daly, too, declined to discuss any design changes.

Disney’s original design, unveiled in November, 1992, called for 4,600 hotel rooms. Combined with the 1,000 rooms to be renovated at the Disneyland Hotel, that would have provided 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 based their economic calculations on Disney building all the hotel rooms for which it was seeking permission.

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

The project originally called for a major expansion in hotel rooms because it is assumed that many visitors would spend at least two days at Disneyland and the theme park, and then visit other Southern California tourist spots.

But a similar strategy has proven disastrous at EuroDisney outside Paris and the resort has piled up more than $1 billion in losses.

Under a tentative accord announced by Anaheim officials on May 2, Disney and the city apparently reached agreement on how infrastructure improvements would be funded. Disney is asking local, state and federal agencies for about $800 million in public improvements.

Anaheim’s costs were to be covered by raising the city’s 13% tax on hotel room bills to 15%, based on Disney building the much larger number of hotel rooms.