Disney Shelves $3-Billion Plan : Tourism: Price for additional land is called prohibitive. Instead, a scaled-down expansion may be done in stages.

Dealing a blow to Southern California’s tourism industry, Walt Disney Co. has decided against building a $3-billion resort next to Disneyland, settling on a vastly scaled-down version instead, officials confirmed Monday.

Disney’s two top managers for the project met Monday morning with Anaheim officials, and afterward said that Disney will not renew its option to purchase six parcels of land around the park, including 10 acres once envisioned as the site for one of two huge parking structures.

“We still have this vision of creating a theme park that will work, but one that would not accommodate as many” visitors as originally outlined, said Disneyland’s new president, Paul Pressler. “What we had originally envisioned was a very, very large resort. What we are looking at today is the ability to break it into component parts and build on it.”

Anaheim City Manager James D. Ruth remained optimistic. “They are still committed to developing in Anaheim but will do so incrementally,” he said. “A lot of time, effort and energy has gone into getting us where we are, and we don’t think that is lost.”

The project, unveiled in 1991 as a splashy world-class resort with the promise of 27,000 new jobs, called for 4,600 new hotel rooms, a Westcot theme park, a 5,000-seat amphitheater, a six-acre lagoon and two of the nation’s largest parking structures. Announced when California was in the thick of a lengthy recession, the project called for public financing from the city, state and federal governments.

Anaheim approved a sweeping rezoning plan and increased its hotel bed tax. Gov. Pete Wilson lined up a $60-million state funding package, and Congress allocated additional transportation money. But Disney never formally guaranteed it would go ahead with the project, it was postponed several times, and Monday it was clear that the heady dreams of 1991 had faded.

The company said it is not going forward with six land purchase options that would have been key parcels for the Disneyland Resort because the property is too expensive.

“We just concluded that, at today’s land prices, these options just were not economic,” said David Malmuth, a vice president of Disney Development Co. and project director for the Disneyland expansion. “It did not make sense given the price.”

The tourism industry had pinned its hopes on the resort as a big drawing card that would have brought both international and domestic visitors back to Southern California after floods, fires, earthquakes and the Los Angeles riots of 1992, all of which hurt the popularity of the area as a vacation destination.

“Anything that occurs at Disneyland is very critical for the Southern California tourist industry and, by implication, the whole Southern California area,” said Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County. “Tourism is such a major industry.”

More than 22.2 million tourists visited Los Angeles County last year, a 4.4% increase over the previous year. But Orange County registered its lowest tourist count in at least eight years, with 37.1 million visitors.

The decision to abandon the original plans for Disneyland Resort also marks the third retrenchment in Disney’s theme park empire in the past five years.

First, the company scrapped plans to build a theme park on the Long Beach waterfront, choosing to expand at Disneyland instead. But the company was forced to rethink its whole strategy after a series of stunning financial losses of Euro Disneyland, now called Disneyland Paris, in Europe.

Finally, last year, the company gave up on its plan to build a history-themed amusement park in Virginia after a coalition of local property owners and historians stood firmly against the project, dubbed Disney’s America.

At the same time, the company’s theme parks in Florida and California have posted declines in attendance, though they still rank No. 1 and No. 2 in the nation in the number of visitors.

Though Disney is now backing off from the Westcot project too, “at least they plan to do something,” economist Kyser said.

“There were a lot of people concerned that they would say, ‘This is not really doable,’ ” he said. “If they did, this would have sent a negative message about Southern California that Disney didn’t think it was worthwhile to invest here.”

One of the possibilities, local officials said, is a nightclub and shopping complex outside the gates of Disneyland that would be modeled after the company’s popular Pleasure Island at Walt Disney World in Florida.

Of the parcels being given up for purchase by Disney, the largest is a 10-acre site east of Disneyland--envisioned as parking lot--that currently includes the Melodyland Christian Center, a domed church that was originally built as a dinner theater.

Frank Elfend, who represented the church in its sale negotiations with Disney, said the company’s decision is frustrating--both for him and the city.

“Anaheim is no further along today on this project than it was eight years ago,” he said, when talk of a new theme park first surfaced. “The city has spent hundreds of thousand of dollars on reports and staff time, and they do not have a single commitment from Disney.”

Disney already owns enough land in the area, however, to allow some sort of project to be designed and built, said Disneyland’s Pressler.

If the company proceeds with an entertainment district such as Pleasure Island, the aim would be to draw local residents as well as tourists. The complex south of Orlando is a group of nightclubs within a gated area.

At night, Pleasure Island becomes an adults-only district where, for an admission price of $15, patrons can visit different nightclubs featuring acts ranging from country and Western dancing to comedy and discotheque.

Unlike Disney’s family theme parks, where no alcohol is served, drinks flow freely at Pleasure Island.

Original projections for the Disneyland Resort had put the number of visitors to the new attraction at 12 million a year--approaching the annual attendance at Disneyland itself in its best year, 1989.

Pressler said that, though a scaled-down Anaheim project would not be as big a draw, “we still have this vision of creating a theme park that will work.”

Disney’s decision not to build Westcot is a huge blow to the city of Anaheim, however, which finally approved the massive project after reviewing stacks of environmental impact reports and conducting a series of public hearings.

The number of tourists in Southern California fell dramatically during the recession and, despite a modest increase in both foreign and domestic visitors in 1994, remains well below levels of the late 1980s.

Another factor, analysts said, is that Disney officials may have been put off by Orange County’s financial woes.

Disney officials have expressed concerns in private that the county’s Dec. 6 bankruptcy filing might get in the way of any new project, said Lee Isgur, an analyst for the brokerage Jefferies & Co. in San Francisco.

With public funding now a fading possibility, he said, “the only way Disney can do it is if they do it themselves.” But Disneyland’s Pressler said the bankruptcy was not a factor in the decision.

The decision also came as a something of a disappointment to Disney boosters in Anaheim.

“Disney helped put Anaheim on the map,” said Stan Pawlowski, co-chairman of Westcot 2000, a community group that had formed to support development of Disneyland Resort.

“They probably took a look and said that $3 billion is unrealistic today, but something is possible. Even though it’s not the full loaf, half a loaf is better than nothing.”

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Downsizing the Development

The new details of Disney’s downsized project won’t be unveiled for 90 days, but one major change has already been announced. The company said Monday that it will not renew its option to buy six parcels of land around the park, including one that was to be the site of a six-level parking structure.

1) Existing Disneyland park

2) Was designated for parking structure

3) Was targeted for development