Disneyland’s Neighbors Size Up Plan : Expansion: City officials think scaled-back project will still have an impact. Business community is disappointed, but residents group thinks smaller is better.

Walt Disney Co.’s disclosure this week that it will reduce its expansion plans around Disneyland is being received with some disappointment, but most government and business leaders remain optimistic that an expansion of some kind will eventually happen.

A spokesman for Gov. Pete Wilson said Tuesday that the company’s continued interest in Anaheim should be viewed as promising.

“People shouldn’t overlook the fact that Disneyland isn’t closing its doors, it’s just scaling back the size of a very, very ambitious expansion,” said Wilson spokesman Paul Kranhold. “The fact they’re going forward with some type of expansion is good news for California.”

Disney had planned to build a $3-billion, world-class resort with thousands of new hotel rooms, a 5,000-seat amphitheater and a new theme park to be called Westcot. But the company revealed plans Monday for a less-ambitious and incremental expansion of its 40-year-old Anaheim theme park.

Anaheim City Council members remain optimistic that Disney will still be moving forward with some kind of major expansion. The company is expected to return to the city with a revised plan in about 90 days.

“The size is not as important as having a successful project,” Councilman Bob Zemel said.

Mayor Tom Daly said, “It’s still too soon to say whether this signifies a major change in direction by Disney or whether this is simply a part of their fine-tuning process. We will know a lot more in 90 days.”

But the news was not received as well by the local business community, which had counted on the expansion to bring an estimated 12 million additional visitors into the area each year along with more than 27,000 jobs.

“Obviously, it’s a big blow that they won’t be going full-size,” said Jeff Farano, president of the Anaheim Chamber of Commerce. “This is a bigger downsizing than I think most people thought would happen. But, they are going on with at least part of it, which is good news.”

Bob Simpson, director of a local hotel and motel association, also expressed disappointment.

“Everyone loved what they saw and were looking forward to it,” said Simpson, a former Anaheim councilman and city manager. “It’s like telling someone that you are going to buy them a Rolls-Royce then you can’t afford it and buy them something else.”

Thad Anders, general manager of Zaby’s Motor Lodge, said the original Disney expansion plan was a dream come true for many hotel and motel owners near the theme park.

“Our suspicion was that we would probably become a destination facility with people staying four to five days like at Disney World instead of day-to-day like it is now,” Anders said. “When people would come to town for a convention, they might stay a few extra days and go across the street.”

The hotels and motels were asked last year to accept an increase in the city’s bed tax--making it one of the highest in the nation--to help pay for street, sewer and other improvements to the area around Disneyland. The new rate, up 2 percentage points to 15%, becomes effective July 1.

But the downscaling wasn’t bad news for everybody.

One Anaheim homeowners group applauded Disney’s decision. Members of Homeowners Maintaining their Environment (HOME), many of whom live near the theme park, have long complained that such a major project would ruin air quality and generate excessive noise.

“The immediate impact is we are relieved we won’t be living with 20 years of construction,” said Steve White, vice president of HOME.

But group officials also said city approval for Disney’s expansion plans should be re-evaluated in light of Monday’s announcement. Group officials contend the city approved the proposed expansion expecting huge revenues and new jobs.

“If they are going to downsize the park, then the public’s commitment should be downsized too,” White said. “It seems to me that it calls into question the initial project approval.”

City Manager James D. Ruth said this week that until Disney comes back to the city with a revised plan, it is unknown what kind of further governmental approval would be needed.

“It depends on how dramatic the changes are,” Ruth said.

Disney’s intentions became clear Monday when it decided not to renew its option to buy six key parcels of land around the park, including 10 acres once envisioned for one of two of what would have become the nation’s largest parking structures.

David Malmuth, a vice president with Disney Development Co., said Tuesday that a revised project would still be built on the existing Disneyland parking lot and a new parking lot or garage would be on land near Katella Avenue and Harbor Boulevard.

Malmuth said he hopes the county will move forward with infrastructure improvements in the area, including the widening of the Santa Ana Freeway and installation of off-ramps that would flow into the new development.

“The off-ramps are critical to creating the mobility to any major project,” Malmuth said.

Anaheim city officials have said all along that whether or not Disney moves forward with its resort plans, the $172.5-million face lift will take place.

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Times staff writers Chris Woodyard, Eric Bailey and Martin Miller contributed to this report.