A modest rebuttal to Disneyland’s proposal to spend $1 billion on an expansion in Anaheim.

DisneySea at Port Disney in Long Beach

DisneySea at Port Disney in Long Beach

Back in the day, when the only theme park in Anaheim was Disneyland, the Walt Disney Company had a vision–a vision of a second Disney theme park in Southern California. They were going to build the biggest, most beautiful theme park ever and place it in Long Beach? Huh? Yeah. Port Disney, the original version of DisneySeas, was intended to be constructed in Long Beach. That was 1991.

Also in 1991, Disneyland introduced the idea of WestCOT as a potential second gate for the Disneyland Resort, a theme park that would go right in the parking lot for Disneyland.

WestCOT project overview

WestCOT project overview

In the end, Disney played off Long Beach and Anaheim to see who could come up with the better package of incentives (tax breaks, infrastructure improvements, etc). Eventually Anaheim won out, but the joke was on them. They didn’t get the amazingly conceived WestCOT $3 billion project, instead they got California Adventure, a theme park build on the cheap, with a lot of off-the-shelf attractions and more stores and restaurants than you could shake a stick at. Eventually Disneyland had to spend more than $1.2 billion to fix DCA bringing the park to the standards that it should have met in the beginning just to get guests through the gate.

The new management at Disneyland must be hoping they can pull the wool over the eyes of Anaheim once again. They’re promising to build a $1 billion-plus expansion of the Disneyland Resort (attractions, another parking garage, and street improvements) but they want more concessions from Anaheim. Essentially they want to cap Disneyland’s taxes at the same level (zero) for another 30 years. Here are the details according to a release from the Anaheim City Council.

It’s an interesting proposition. In theory, attracting more visitors to Anaheim will increase the tax revenue from said visitors, and yet, Disney wants to carve itself out from that.

Now, this expansion won’t include a new gate and only the new parking lot would be built outside the existing areas of the resort. A $1 billion investment would create jobs, and revenue for other businesses in the resort district. But does Disney really need the tax exemption to do it?

If I was on the Anaheim city council, I’d be very tempted to say no. Disney has legitimate needs to expand right now. They need to find ways to fit the Star Wars and Marvel franchises into the parks and need to increase capacity to meet increased demand for the parks. Plus Disney needs to keep up with the Joneses. Universal Studios Hollywood is in the middle of a huge expansion and threatens to soak up some of the tourist market in Los Angeles. Disney really needs to offer something new of their own to compete.

All that means, there’s a very good chance that Disney would build this expansion anyway, even if they don’t get the package of tax incentives they’re asking for. I’m not seriously suggesting that Anaheim not work something out with Disney. But they also need to remember that Disney already played them over WestCOT.

What I would push for is a committment for a third gate in the next 5 years. Heck, Anaheim could even promise land for the park a very reasonable price. $1 billion in development may be nice, but an attraction or two that Disneyland was going to build anyway, isn’t a prize. A theme park that brings an extra 30,000 guests a day, all the extra nights hotel stays, and all that tourism revenue into the city’s coffers, now that’s something a city could get behind.

Disney has the cash, they’re building a huge park in Shanghai, but China’s picking up the tab for that. So they can afford to drop $2 or $3 billion on Anaheim. After all, it’s the place where theme parks were invented. It deserves the best. Don’t you agree?

8 thoughts on “A modest rebuttal to Disneyland’s proposal to spend $1 billion on an expansion in Anaheim.”

  1. As a SoCal resident then I Disagree. While I love the idea of “more Disney in my backyard”, my backyard has become infested with weeds and litter and transients.

    Anaheim does not deserve the best because Anaheim has never been good at taking care of what it has. So IF a new investment were to be made then it would be better suited for an entirely new location where the city would actually understand how special it is to have a Disney Park of their own.

  2. Just to be clear, the “Disneyland taxes” are not taxes that would be paid by Disney. The taxes in question, if Disneyland is not exempted, would be added to the daily ticket prices and paid by guests of the park when they purchase their tickets. The effect is even higher ticket prices at the gate, which potentially decreases the length of stay or spending of guests inside and outside of the parks in Anaheim. Disney is still going to pay all its taxes and will be generating lots of taxes from others.

    Disney is proposing to make improvements that should improve traffic flow in and around the resort and to expand the capacity of the existing parks. Both of which benefit the City, as well, and should generate more tax revenue for the City in sales taxes, hotel taxes, and in several other areas. Keeping the additional tax on tickets out is a calculated risk and investment by the City of Anaheim that is far from unreasonable or unprecedented.

    Disney management ultimately is accountable to the Disney shareholders. Disney shareholders are able to influence the company through buy/sell activity, voting, and shareholder advocacy action. Disney going to present anything in the best light possible for Disney and to achieve Disney’s goals (get the best deal for shareholder value) and it is up to the City of Anaheim to do their own research and due diligence to protect the interests of City residents. How the bill is split for projects like this that benefit both parties is up to the parties involved, but the current proposal seems within the realm of a fair split once the full analysis is done and the third gate seems far more than 5 years away, if ever, given current opportunities.

    It does not seem fair to say anyone got “played” on the prior deals, although things clearly did not go as originally planned. That is not uncommon in huge projects like this. Look no further than the original plans for Walt Disney World, which has ultimately turned out to be a huge success that has paid dividends for Disney and for Florida in many ways. The current proposal from Disney does not seem that out of line.

    1. I call them as I see them, and being told a $3 billion project would be built and only getting one that cost less than $1 billion is being played.

      1. John, I certainly appreciate your willingness to publicly call them as you see them. That is one of the reasons this site is so valuable. I would be more willing to subscribe to your use of the word “played” if I thought Disney never had any intention of building what they proposed. If that is what you believe, then your characterization is dead-on correct and consistent with your perspective and view of the facts. Thank you, as always, for all your research and candid commentary on all things Disney. They are very worthwhile reads.

    2. Absolutely agree. Disney brings a tremendous value to the area and Anaheim ought to be grateful it has that rare and amazing revenue stream.

      The mere idea that some portion of Disney’s (or any business’s) revenues belongs to Anaheim/government is ludicrous. The money businesses (whether it’s Disney or a sole proprietorship) generate through investments and endeavors belongs to the people who earned it. Period. Stop with the “more taxes, more taxes, more taxes” stuff already. Ridiculous.

  3. The complaint about DCA not being what was proposed can be attributed to nonexother than Michael Eisner. He was the fool that screwed up Disney. Bob Iger is trying to expand the original in the footprint alloted. I think they will suceed in what they want. Each to his own on opinions so I will not say the author was wrong. Thank you for listening.

  4. I think someone already mentioned that the tax in question is a ticket tax and has nothing to do with other taxes that the city already gets (and benefits from) just by the fact that Disneyland exists in Anaheim. In fact, if it wasn’t for Disneyland, Anaheim would be little more than another small Orange County township a la Garden Grove. Anaheim pretty much owes its entire prosperous existence to Disneyland (more specifically, to Walt Disney who, to be fair, has been deceased for a long time and can’t really collect). So how long does Anaheim “owe” Uncle Walt for? And does the current Disney organization, which has little to do with Walt himself these days deserve to collect? My opinion is, at this point, they’re probably even. Disneyland has gotten a lot of breaks from Anaheim over the years (including the current ticket tax break). So the real issue moving is does Anaheim lose anything in this? Clearly, there’s the potential tax revenues from the tickets. I believe that whatever happens financially on-property will be passed down to the consumer. Disney consistently does this. So if the ticket tax goes into affect, ticket and pass prices will go up to compensate (they already go up every year, sometimes twice a year, so expect the leaps to be larger or even go to thrice a year). If Disney spends a billion dollars on the expansion, you can bet they’re going to pass that on too (just as they did with DCA) by… you guessed it, raising ticket prices. What they likely DON’T want is to have to increase the ticket prices enough to compensate for BOTH the ticket tax AND the expansion. And I suspect that’s why they’re trying to get the ticket tax off the table. Yes, Disney very well may expand even if the ticket tax goes into affect… but are we wiling to ultimately pay maybe twice what we pay now to go to the Disneyland Resort? If Disney can be rid of the ticket tax, even for an extended period of time, they can raise prices by less to compensate for the expansion and perhaps the bottom won’t fall out of their boat. If the ticket tax goes through AND Disney expands, it’s possible the ticket prices would go up so much as to cause park attendance to drop significantly. In this case, the city may actually get LESS than it would have gotten if the park could have expanded without breaking the bank of all of the park patrons. Just a few thoughts.

  5. As for Westcot vs DCA, I think there was every intention to build Westcot (and Port Disney for that matter) but in between the time the concepts were done and proposed, concessions granted by Anaheim, and the time came to build, what was then called EuroDisneyland had failed to make back what was expected (Disneyland Paris really is a nice park… if you’ve never been, I highly recommend it). Eisner got cold feet and pulled the plug on anything extravagant that would have gone into Anaheim’s second gate which is why we got off-the-shelf carnival rides and recycled attractions from Disney-MGM Studios. The decision was made after the concessions had been given. Was Disney going back on its word? I suppose so. But economies change and so do plans. I suppose, by the same thinking, the Orlando Florida should have a beef with Disney as well. They gave Disney UNPRECEDENTED control over their land, expecting to get an Experimental Prototype Community of Tomorrow. Instead, they just get more theme parks. Rather than be bitter about what didn’t happen last time, perhaps Anaheim should consider that the company is now under different management and work out something that will benefit both the city and the resort moving into the future. Just another fistful of thoughts… Thanks John, as always, for your site, dedication and for a forum of thoughtful discussion.

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