Disney Resort Area Funding Plan Outlined
Seeking to allay worries about an extra burden on Anaheim taxpayers, Walt Disney Co. and city officials on Monday said hotel bed taxes, sales taxes and state and federal grants would fully finance the $550 million needed to improve streets, landscaping, utilities and some parking for an expanded Anaheim Convention Center and a second Disney theme park.
At the same time, Disney officials released more details about the $1.4-billion companion resort, including plans for a 750-room luxury hotel within the park itself, a night life and shopping district and attractions celebrating California beach culture and Hollywood.
Anaheim plans to issue nearly $400 million in bonds to finance road and other improvements in the area as well as the $150-million expansion of the Convention Center.
Hotel and sales taxes, along with tourist revenue, would pay off the bonds, according to city officials.
In case of a shortfall, however, Disney would guarantee about $200 million of the debt, agreeing to step in and pay investors if the city can’t.
At an afternoon briefing, City Manager James D. Ruth portrayed the financing approach as a “partnership” and an “unprecedented collaboration between the public and private sectors that minimizes municipal risk.”
Officials estimate that the Disneyland Resort expansion, to be unveiled in full this week, will generate an additional $25 million annually in revenue to the city of Anaheim, $10 million to Orange County and $35 million to California through various sales and property taxes within the resort area.
Yet the risk and cost to Disney appear light, some observers say.
“Disney is getting a good deal here--we can’t really tell yet how good,” said Zane Mann, publisher of the California Municipal Bond Adviser, a bond newsletter in Palm Springs. “The city of Anaheim and its taxpayers are paying for the bulk of this project [since their] hotel taxes will be diverted from the city to pay off the bonds.”
City officials presented the financing plan as a “framework” for which specifics, including Disney’s bond guarantees, must still be hammered out. The Anaheim City Council must approve both the plan, which appears likely, and a new development agreement for construction of the new park.
Construction of the park, dubbed Disney’s California Adventure, is expected to start next year and finish by 2001. It supersedes the $3-billion Westcot expansion that Disney unveiled in 1991 but scrapped last year as too ambitious. Highlights of the new plan include:
* A 750-room luxury hotel to be built inside the new 55-acre theme park. The four-star facility will feature a classic California craftsman design and will be the first hotel ever constructed completely within the walls of a Disney theme park. It will border West Street and offer rooms overlooking the new park.
* A 200,000-square-foot retail, dining and night life district with a working title of “The Disneyland Center.” The entertainment center will be located along West Street near the Disneyland Hotel and Disneyland Pacific Hotel. The area is meant to provide convention visitors with nighttime entertainment and will not require admission.
* A tree-lined public promenade that will serve as the entrance to both Disneyland and Disney’s California Adventure. The corridor will be a drop-off and pick-up point for trams and shuttle buses and will serve as a location for ticket sales for both parks.
* A variety of California-themed attractions featuring Hollywood glamour, California’s fun-and-sun beach culture and the wonders of Yosemite Valley.
“There is something very alluring about the California dream,” said Disneyland President Paul Pressler. “This is the place where people feel everything is possible.”
Pressler said the company controls all the land upon which the new theme park, entertainment district and parking will be constructed. However, the Grand Hotel, which Disney successfully bid for earlier this year, will not figure into the current development. Pressler said the property will be reserved for future expansion.
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But financial reality rather than California dreams will dominate discussions in the coming months as the plan for issuing bonds moves through the approval process.
The city’s $400 million in bonds would be backed by 3 percentage points of its 15% hotel occupancy tax, increased sales tax revenue from tourists and property tax generated within the Disneyland Resort area.
Because $200 million worth of those bonds has a smaller safety margin in terms of revenue available for payment, Walt Disney Co. would guarantee to make up any shortfall. How Disney would make good on its guarantee is still unclear, but city officials contend that Anaheim’s general fund would not be at risk.
“We haven’t defined a structure for the bonds yet,” said Tom Wood, deputy city manager. “We are examining a variety of different structures.”
Mann predicted the bonds would be well received by investors. He said the costs of borrowing the $400 million would be greatly reduced because the debt will be tax-exempt and carry a rate of perhaps only 6.5% or so. If Disney had to borrow the $400 million, the borrowing rate could reach 9% or higher.
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Threatening this carefully crafted plan is a statewide anti-tax initiative on the November ballot sponsored by the Howard Jarvis Taxpayers Assn. The measure calls for voters to retroactively approve all new taxes and tax increases implemented after January 1995. This would include the increase of 2 percentage points in the hotel bed tax passed last year and dedicated to the Convention Center expansion and tourism area improvements.
The city has placed a measure of its own on the November ballot, asking voters to retroactively ratify the bed tax increase.
In addition, city officials are still smarting from criticism regarding a recent baseball deal with Disney which resulted in Anaheim funding 30% of a $100-million renovation of Anaheim Stadium as a condition of Disney’s purchasing controlling interest in the California Angels baseball team.
While the baseball deal was praised by many community leaders, it was criticized by others who complained that the city was not guaranteed any direct way of recouping its investment. The issue bitterly divided the City Council, which approved the baseball deal 3 to 2.
Although the latest financing scheme related to the theme park and convention center is still to be finalized, its concept appears to have the blessing of the same majority of the City Council which voted in favor of the baseball deal and must ultimately approve this one.
“I think it’s a good framework.” said Mayor Tom Daly. “The package that has been proposed seems to accomplish what the city needs with a maximum gain and very minimal risk.”
Councilman Lou Lopez said, “Ultimately, it’s not going to cost the taxpayers any money. Everyone is going to make money on the deal. The city of Anaheim and the interests of its residents are well-protected.”
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Disney and Anaheim officials said the proposed convention center expansion will complement the Disney developments by bringing more business travelers to Anaheim. Industry observers say more convention space is needed to keep Anaheim competitive with other major convention destinations across the country.
Councilman Frank Feldhaus said the city “was going to do bonding anyway” to pay for area improvements and the Convention Center expansion.
“There will be more hotel rooms and more commercial establishments that will evolve from all this and will result in more [hotel bed] tax and sales tax revenues,” Feldhaus said.
Councilman Bob Zemel expressed concern that the tentative agreement was made public before the council was able to give it extensive review.
“The part that makes me the most nervous and the most concerned is that you have a half-billion funding package that needs to be reviewed,” Zemel said. “I can guarantee that I’ll be taking a close look at the financial aspect of this deal and how it relates to the Anaheim taxpayer and how it affects the general fund.”
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Members of Homeowners Maintaining Their Environment, or HOME, a vocal group of Disney critics, are already skeptical of the proposal.
“The general fund is at risk, and Disney will tell you that it is not,” said HOME member Steve White. “Any time you go to bonding, that is what happens. The faith and credit of every property owner in the city is on the line. It certainly does impact the general fund no matter how much they deny it.”
White said his group is also upset about the city’s statement that the new Disney plan will not require the same rigorous environmental review process as the original Westcot expansion. Ruth said there will be an addendum to the current Environmental Impact Report, which will have to be approved by the Planning Commission and City Council.
The original project listed seven unavoidable impacts from the project. These included increased traffic congestion, noise and air pollution during construction, worse air quality, elimination of agricultural land and incompatible land use.
“If you reduce the size of the project and keep the basic proponents, it’s consistent from a land use perspective,” said Doug Moreland, vice president of Walt Disney Imagineering. “The impacts are basically less.”
Also contributing to this report was Times staff writer Debora Vrana.
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A Joint Venture
Officials from Walt Disney Co. and the city of Anaheim have released details on the first phase of a combined expansion of the amusement park and Anaheim Convention Center area. Building will begin next year and last through 2001. Project and financing details:
What They’ll Build: Disney Additions
* $1.4 billion in improvements, including a second theme park
* 750-room luxury hotel inside the new Disney theme park
* Retail, dining and entertainment center and additional parking
Anaheim Additions
* $150-million expansion of Anaheim Convention Center
* $400 million in improvements, including parking lots/structures, walkways, landscaped streets
* How Anaheim Will Pay $550 Million
* $395 million in revenue bonds; Disney guarantees roughly $200 million
* $96 million in existing state, federal and regional transportation funds
* $47 million in hotel bed taxes
* $12 million from existing funds earmarked to build convention center parking structures
Public meeting: City officials will discuss the convention center expansion today at 3 p.m. at the Anaheim City Council chambers, 200 S. Anaheim Blvd.
Source: City of Anaheim; Researched by JANICE L. JONES / Los Angeles Times
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Disney Expansion Chronology
1990
Jan. 12: Chairman Michael D. Eisner announces Walt Disney Co. is considering building a second theme park next to Disneyland. The proposal for Anaheim, however, will compete with plans for an ocean theme park in Long Beach.
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1991
May 8: Disney officially unveils plans for $3-billion Disneyland expansion, which includes several hotels, a shopping district and a second theme park called Westcot.
Dec. 12: Disney selects Anaheim for its Southern California expansion. Disney never promises to build project but suggests construction could begin as early as 1993 if substantial public funding supported the project.
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1992
Nov. 12: Anaheim releases environmental analysis of proposed resort. Seven short- and long-term impacts identified, including increased traffic and pollution during construction and the loss of agricultural land.
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1993
April 22: Disney releases detailed plans for Westcot theme park.
May 19: Anaheim Planning Commission endorses environmental, planning and zoning documents, setting up final review of the project by City Council.
June 22: City Council approves environmental impact report, introduces zoning ordinances authorizing the project.
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1994
May 2: Capping a year of negotiations, Disney and Anaheim reach tentative agreement on financing, public works improvements and timetable for development of proposed development.
June 9: Disney officials acknowledge it will be at least another year before they decide whether or not to move forward with the $3 billion expansion.
June 15: Orange County Board of Supervisors approves street changes for expansion, making it and the city eligible for millions of dollars in county transportation funds.
Aug. 11: Disney officials propose scaling-back the project by building less than half the 4,600 hotel rooms originally called for.
Nov. 3: With project already two years behind schedule, Anaheim officials confirm negotiations with Disney have stalled because is trying to cut costs. Disney has said it needs up to $800 million in public assistance to commit to the project.
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1995
Jan. 30: Disney officially pulls the plug on $3 billion resort project but promises to come back within 90 days with a plan for a scaled-down version. Company confirms 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.
Source: Times reports, Walt Disney Co.; Researched by GREG HERNANDEZ/Los Angeles Times
