Disney Seems to Have Gotten the Best of a ‘Win-Win’ Deal

ANAHEIM — City Manager James D. Ruth calls the deal in which Walt Disney Co. will buy the California Angels and fund most of the remodeling cost of Anaheim Stadium a “win-win for everyone.”

But is it?

Disney will pay 70% of the cost of a $100-million stadium renovation but the company clearly comes out ahead in the deal, at least in the short term. To recoup its investment, it will get virtually all of the stadium’s revenue and is exempt from any future sports taxes the city might want to levy. Such taxes are usually placed on sports admission tickets and have been used in other cities.

The entertainment giant, increasingly known for the Mighty Ducks and not just Mickey Mouse, also persuaded the city to scale back its much-touted plans for a sports complex on stadium property. Further, Disney eliminated any chance of a National Football League team playing in Anaheim unless a separate football stadium can be built.

How does the city gain? That’s not as clear cut.

Certainly, the city’s name recognition will grow with the team’s hometown inserted in the Angels’ name beginning with the 1997 season, in accordance with the deal. The city is also assured that the Angels will remain in Anaheim for at least 23 years, providing a crucial anchor tenant for the proposed complex, called Sportstown Anaheim.

But some are troubled by the fact that while Disney can depend on lucrative revenue producers such as stadium-naming rights and outdoor advertising signs to directly regain its investment in stadium renovations, Anaheim has no such guarantee and will have to foot what they consider hidden costs.

“I believe in equal return for equal risk,” Councilman Bob Zemel said Thursday. “If this is a 70/30 thing, then certainly the city should get 30% of revenues until its portion of the investment is repaid.”

Zemel, who along with Councilman Tom Tait voted against the deal this week, said that if the city had been guaranteed a way of earning back its investment through a specific source, he would have supported it.

“With Disney having naming rights and concessions, their $70 million will be paid off in no time and the taxpayers will still be holding the bag for $30 million with no hope for an immediate return.”

*

For Anaheim to get any of the stadium’s revenue from parking and admission tickets, certain thresholds must be met. For instance: attendance will have to reach 2.6 million for the season--something that has only happened four times in the team’s 36-year history--before the city sees any ticket revenue.

But Ruth and others remain optimistic, banking on Disney’s marketing wizardry to turn the Angels--ranked sixth out of 14 teams in American League attendance last season--into a top draw, similar to the popular Mighty Ducks who regularly fill the Pond arena.

“I have confidence in Disney and their ability to market and manage,” Ruth said Thursday. “We have a great, young ballclub and see it as a contender for many more years. Those thresholds are very achievable.”

But until the city sees money from stadium revenue or profits from Sportstown, a third of its renovation contribution will be taken in part from city reserves. The city’s reserve account, at more than $100 million, is a healthy one and Ruth said that dipping into it to help pay for the renovation is not a major risk.

“You have to be willing to step up to the plate,” Ruth said. “We thought that, based on our reserve levels, it wouldn’t affect our bond rating or ongoing city operations.”

The remaining $20 million will be funded through existing stadium advertising revenue and a percentage of the city’s hotel bed tax, which had previously been earmarked for the Pond of Anaheim. City officials maintain the transfer of funds will not affect the arena.

Ruth and others point out that since the deal calls for Disney to take over operations of the city-owned Anaheim Stadium, Anaheim will be rid of any maintenance and operating costs for the venue.

“No longer will the citizens have to worry about the burden of overhead required to operate the stadium,” Mayor Tom Daly said this week. “For the past 30 years, it’s been a burden to Anaheim. It’s right and proper to shift the burden to the private sector.”

Still, the city will continue to be responsible for $9.3 million in stadium debt that currently amounts to $1.2 million a year over several years. That debt has historically been paid with stadium revenue. It has not been made clear how the debt will now be paid but some sources said it may have to come from the city’s general fund--a hidden cost not readily conceded by supporters of the deal.

The city could make some of that money back through the 10 events it will be allowed to hold in the stadium’s parking lot each year, though Disney will have parking lot rights at all other times.

The Sportstown complex--which initially called for 80 acres of new development--has been scaled down to about 40 acres of new development. But city officials believe that venture will still help recoup the city’s investment.

“We’re very confident that . . . the revenue generated by Sportstown will be more than sufficient to replenish reserves over time,” Ruth said.

Unveiled by the city in January, the complex is envisioned to be anchored by a renovated Big A, a new football stadium next door and linked to the Pond nearby. Planners envision visitors stopping at the restaurants, shops and other features before and after games.

*

Any construction on Sportstown, for which there are no known investors, could not begin until after the stadium renovation is completed in three years. The city hopes to have a version of the complex completed by 2004.

There are now two versions of the plan being discussed.

One includes a 20-acre football stadium, a 350-room hotel and office, retail and restaurant space. By the end of 33 years, the city would have earned $26 million, according to figures provided by the city.

The other version omits the football stadium and would include a 250-room hotel and nearly 750,000 square feet of theater, retail, office and restaurant space. This could bring the city $72 million at the end of 33 years, according to the city. Figures for both scenarios have been adjusted for inflation.

City officials, who used professional consultants to estimate the two different development estimates, said the marketplace will ultimately determine the return.

Still, no matter how much money Sportstown makes Anaheim, Zemel contends that it doesn’t make up for the city making a $30-million investment in the Big A without being able to share in 30% of its revenue.

“That $30 million isn’t being invested in Sportstown,” he said. “There is no direct relationship.”