Disney/City of Anaheim Partner To Reimagine Both Enterprises

Timur, in the March 2000 issue of Urban Land you are quoted as saying, "We saw a very successful business that was challenged first by its context and second by its age." Give us a sense of how you are responding to that challenge in Disneyland and Anaheim.

Fundamentally, we agreed on a common set of goals with the city of Anaheim in the early part of the 90's with the objective to both redevelop the resort, hotel and entertainment districts-which are central to the city's economic vitality-and expand Disneyland.

Disney's interest was to grow its business from a one-day theme park to a multi-day destination resort. That played hand and hand with the City's desire to expand their convention center and hotel base in an interest to protect the transient occupancy tax base.

What are the constituent building blocks of this strategy?

In terms of assets, we're building a new theme park-a second gated attraction called Disney's California Adventure. And for the first time in the history of the company, we're building hotel rooms inside the theme park. We're also refurbishing our existing inventory of hotel rooms in the Disneyland and Pacific hotels, and repositioning those hotels to be thematically driven.

Between the hotel district and the theme parks we're constructing Downtown Disney-300,000 square feet of ungated retail, dining and entertainment amenities. This will be the center of the resort-both in an emotional sense and geographically.

To complement these new components we have continued to invest in Disneyland over the last 5 years to keep it fresh and exciting-essentially polishing the jewel in the crown of Disney Parks and Resorts worldwide.

On the other side of the equation, the City is in the final phases of completing an expansion of the Anaheim Convention Center, which will make it the largest such facility in the west. It's a unique facility with both big meeting halls and smaller, more intimate halls and a grand ballroom that overlooks the entire resort district.

Additional City involvement comes with their significant contribution to widening and beautifying the streetscape and public right-of-ways. There is a newly formed assessment district which will maintain what-at a truly world class standard-is now taking shape as one of the most thoughtful and superbly executed public streetscape programs in the country. This takes some of the character that always lived behind the gate in Disneyland, and brings it to the entire resort district.

Could you expand for our readers on this public-private venture? What were the particular challenges confronting both the City and Disney in order to get the results that you desired?

After we identified common objectives and goals, we had to build planning strategies in an attempt to accomplish them. We had to formulate both broad master planning strategies and creative financing strategies in order to pay for the pubic improvements that would support both the Disneyland expansion and the expansion of the balance of the hotel district.

One of the key challenges was resolved in February of 1997. The City of Anaheim issued in excess of $500 million in municipal obligation bonds, secured essentially by the additional hotel tax revenues that would be generated by Disney's investment-an extraordinary arrangement between a public body and a private company-and the collateral investments of other developers that would take place as a result of the growth. So, through a unique financing arrangement, we were able to raise enough capital to accomplish the streetscape improvement, utility infrastructure, parking infrastructure, and convention center expansion that support this whole big bang.

There was an attempt to launch a similar financial agreement back in 1995, which failed because the balance had not been struck between the scale of planned growth and the demands it would create for new infrastructure. We worked diligently with the City through part of 1995 and into '96 to reformulate both the master plan for expansion, and the financing strategy for the expansion as well as the convention center and roadway improvement. One of the unique elements of that reformulation was the combining of a municipal obligation with a large company corporate guarantee.

Do you find in a California post-Prop 13, that municipalities have the wherewithal to do the kinds of projects that Disney Imagineering is now finding attractive?

The scale of our undertaking is not typical. But, municipalities alone -in this case the City of Anaheim-could not do this. And, frankly neither could The Walt Disney Company. As economically powerful as we are, it took the synergy of public infrastructure investment and tax increment financing to make it work.

What are the returns on investment to both the company and the municipality as a result of this ten-year effort?

Most importantly, the City of Anaheim has protected the integrity of its General Fund. It has redeveloped, repositioned, and revitalized the resort district, thereby insuring the integrity of the existing tax base.

The second piece is growth of that tax base through hotel and related development and the expansion of the convention center. The projected growth of that tax increment alone allows for the payment of the new services generated by the expanded resort complex.

In addition, there is what the City of Anaheim calls "profit." After servicing the bond debt and paying for additional resort area municipal services, 20% of the projected tax increment will be free and clear to go directly to the general fund, to reinvest, and to improve the quality of life for every citizen of Anaheim.

For the company, it's relatively the same. First we want to protect the integrity and the quality of the quintessential expression of the company-Disneyland.

But, beyond that we have the opportunity not only to protect the existing business but transform it into a broader, deeper and more exciting guest experience by offering a new theme park and additional hotel and entertainment options.

Could you elaborate on Downtown Disney, its significance for the convention center and as a new venture on your part. What are you hoping will happen?

Downtown adds a crucial entertainment element and guest experience to a multi-day stay at the Disneyland Resort-and more importantly a nighttime entertainment experience.

We think of it as a place where we can bring together a collection of great brands and experiences. We have some fantastic entrepreneur operators that are going to bring restaurants, entertainment and shopping experiences together with the Disney touch. It allows us to bring the best of the best to the table-we expect that it will be a very important anchor to the local entertainment scene and a very important choice for conventioneers. This is another example of the synergy between Disney and the City of Anaheim.

One of the things that the Anaheim Convention Center has lacked up until now was the range of entertainment choices. Anaheim, for example, historically had fewer choices than San Francisco or Las Vegas for conventioneers-Downtown Disney will be a big boost to the convention business, and a great anchor for local business.

This may be the jewel in the crown, but it is not the only project that you are involved in with Disney Imagineering. Is what you are doing in Anaheim going to be the model for other efforts around the world?

Our next big undertaking is in Hong Kong. What we hope to accomplish in Hong Kong is analogous to what we are in the process of completing in Anaheim-both in terms of the product and process. Anaheim is a model for what you will see Disney doing in the future.

There is an extremely important public-private partnership that has formed between the government of Hong Kong and the Walt Disney Company, analogous to the one formed with the City of Anaheim. From that starting point we will realize a destination resort of similar magnitude in Hong Kong to what we are completing in Anaheim.

Along the way, our involvement in the City of Anaheim has become broader than merely the resort district. Part of that overarching strategy is our involvement in the sports district. At the same time we were strategizing the expansion of the resort district, we were acquiring the Mighty Ducks and Anaheim Angels, and partnering with the City on the $115 million refurbishment of Edison International Field of Anaheim.

We have taken what was a pretty tired, out-dated municipal stadium and transformed it into a state-of-the-art venue for professional baseball-and one of the best fan experiences available. That has done a tremendous amount to galvanize interest in the sports district in Anaheim on the part of other investor-entrepreneurs.

Let me ask you a provocative question about the future of destination resorts in a California of congested freeways which inhibits people from getting to destinations such as Disneyland How is this partnership grappling with this transportation bottleneck and what is the role of Disney?

We have worked closely with OCTA and Caltrans in the design, coordination and execution of the I-5 project. Those agencies are spending billions of dollars immediately adjacent to our work, approximately doubling the highway capacity that services the Anaheim resort district.

This partnership with OCTA and Caltrans has evolved into a transportation system with unique attributes. We have formulated HOV access and egress from the I-5 freeway into the publicly financed parking system of the resort area. The HOV lanes are enormously advantageous and will be highly utilized. You will be able to move from the freeway out of an HOV lane directly into what we are told in the largest parking infrastructure in North America, without impacting the arterial streets that service local businesses.

We continue to look beyond the current menu of transportation improvements in Orange County to the next wave of transportation options. We work closely with the county and state planning agencies to help envision what the future will hold. We feel particularly good about the quality of infrastructure improvement that is just coming on line within the next six months.

Timur, let's wrap this up with you offering our readers a glimpse of what the timeline is and when facts on the ground are going to reveal themselves to Southern California.

We have announced the grand opening of our three new products: the theme park will open on February 8, the Downtown District will open on January 12, and January 2 for the Grand Californian Hotel. Between now and then major elements of the infrastructure will be coming on line. North America's largest parking structure will come online in late July and public-realm streetscape and other infrastructure improvements are in progressive completion as we speak.

Also, Caltrans is marching ahead with their completion of the I-5 widening program to the 91 intersection over the course of the same period of time. It's all coming together in the next six months.

I suspect that you will start to hear a little bit about our long-term vision for the resort district in the near future-we've recently acquired 55 acres of additional undeveloped land and we're always looking ahead.