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Disney, Anaheim Describe Funding Plan for Projects

Business: Increased tax revenues and state, federal grants will fully finance infrastructure needed for new theme park and expansion of convention center, officials say.

July 16, 1996|MARLA DICKERSON and GREG HERNANDEZ | TIMES STAFF WRITERS

Seeking to allay worries about an extra burden on Anaheim taxpayers, the 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 and utilities 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 theme park, including plans for a 750-room luxury hotel within the park itself, a night life and shopping district and attractions celebrating Hollywood and California's beach culture.

Anaheim plans to issue nearly $400 million in bonds to finance the improvements and provide $150 million to expand the convention center.

Hotel and sales taxes as well as tourist revenue would pay the interest on the bonds, according to city officials.

In case of a shortfall, 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 Ruth portrayed the financing approach as a "partnership" and an "unprecedented collaboration between the public and private sector that minimizes municipal risk."

Officials estimate the Disneyland Resort expansion, expected to be unveiled in full this week, will generate annually an additional $25 million for the city of Anaheim, $10 million for Orange County and $35 million for California through various sales and property taxes within the resort area.

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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 Monday's financing plan as a "framework" whose specifics, including Disney's bond guarantees, must still be hammered out. The Anaheim City Council must approve both the plan and a new development agreement for construction of the new park.

Disney officials on Monday also gave new information about the theme park to be constructed on two-thirds of the Disneyland parking lot.

Construction of the new park, dubbed Disney's California Adventure, is expected to start next year and be completed by 2001. Highlights will include:

* A 750-room luxury hotel to be built inside the new 55-acre theme park. The facility will be feature a 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 offer 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 the Yosemite Valley.

The city expects to sell about $200 million in bonds backed by 3% of the city's 15% hotel occupancy tax, increased sales tax revenue from tourists and property tax generated within the Disneyland Resort area.

The Walt Disney Co. would guarantee another $200 million of riskier bonds whose funding stream is still unclear. It is also not known how Disney would guarantee those bonds, sources said, 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 with no risk to the general fund."

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Mann predicted that the bonds would be well-received by investors. He said the costs of borrowing the $400 million would be greatly reduced because it is tax-exempt debt that will carry only a 6.5% rate. If Disney had to borrow the $400 million, the borrowing rate could reach 9% or higher.

"I think it's a good framework," Mayor Tom Daly said. "The package that has been proposed seems to accomplish what the city needs with a maximum gain and very minimal risk."

Times staff writer Debora Vrana contributed to this report.

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