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NEWS ANALYSIS : The Big Question : Why Spend Millions in Taxes to Help Disney?


ANAHEIM — Eight hundred million dollars is enough money to staff an entire police department, shelter thousands of homeless or build dozens of schools. Why would government invest that spectacular sum to help the Walt Disney Co. build a resort in Anaheim?

Disney and the city say that the project could create thousands of new jobs and a stream of tax revenue. But the idea of spending such vast amounts of taxpayer money to support one of America's richest corporations is as incongruous to some as the thought of Mickey Mouse standing in a welfare line.

"I find it hard to believe there is a compelling argument for a public subsidy," said Peter Eisinger, director of the LaFollette Institute of Public Affairs at the University of Wisconsin. "This is a proven moneymaker . . . Why should the city be spending its scarce resources to create minimum-wage jobs?"

Others see the project as a way to get the Southland economy moving again. Says Irvine architect David Baab: "Without Disneyland, Southern California wouldn't be as good as it is today, and therefore the government should help support Disney's effort to build the project."

Disney's $3-billion resort, billed as one of the largest private construction projects ever undertaken in Southern California, would include an amusement park with an international theme, three new hotels, a number of restaurants, two of the world's largest parking structures, extensive landscaping and a man-made lake.

None of it will be built, Disney officials have warned, unless the city, state and federal governments chip in as much as $800 million for parking structures, freeway off-ramps, sewers, utility line relocation and other public works.

"The fact that we happen to be a successful company I'm sure causes questions to be raised," said Ken Wong, a senior vice president of the Disney Development Co., "but if I were a (government) decision maker I would want to invest in . . . public infrastructure that would stimulate companies that I know would deliver."

Disney Chairman Michael Eisner says the California business climate has turned chilly, that building costs here are exceedingly high and that the project will not be feasible unless government shares part of the investment.

It's a huge request, for sure, but one that government officials are treating seriously. Gov. Pete Wilson has already promised $60 million in transportation funds in direct support of the project, despite a troubled state fiscal condition that has required cuts in social services and higher education. Last week, House and Senate conferees approved $15.5 million toward the $223-million cost of one of the project's two huge parking structures, which are supposed to double as a transit bus terminal.

As the next major step for the project, the city of Anaheim is negotiating with Disney over its share of public-works costs. Both sides expect to resolve their differences and announce a deal by early next year.

Now that the city has decided it is willing to make concessions, it is facing the question of how much to provide. In this case, the city is having to ask itself how far it should go to accommodate a Wall Street darling that had profits of $816.7 million last year--roughly the amount is it demanding of government.

"There is no magic formula" for determining the correct amount of public investment, said Kathleen Connell, a public sector investment adviser and UCLA professor.

Trying to evaluate whether taxpayers should contribute to funding the project--and if so, how much--requires a look at what each side has to gain and how badly each needs the project to go forward.

Disney needs the project to add new life to its aging flagship, Disneyland. With this project, the company hopes to follow its Florida success formula: Build a resort of multiple theme parks and hotels that have visitors spending Disney Dollars day and night.

Tourism provides $4.7 billion a year to Anaheim's economy, and Disneyland's 12 million visitors a year are a large part that. An expansion would spur badly needed improvements to the area around the park, which has deteriorated in the 38 years since the attraction opened.

The project has also engendered considerable public and business support because of the economic benefits Disney promises: an estimated 28,000 jobs, both inside and outside the resort, with park visitors and employees pumping another $2.3 billion a year of spending into the moribund Southland economy, according to a study commissioned by Disney. Much of that spending would benefit the restaurant, gift shop and hotel owners near Anaheim. The project would also create thousands of construction jobs.

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