DCA, Future Expansion
Topic: So when is serious construction going to begin?

#	Author	Message
101	jonvn Wed 9/26/2007 11:44a	Maybe they could have. It seems they spend a lot of money and not get that much out of it sometimes. Since neither of us were there when the place was planned, nor really are experts at how money flows in Disney and what things exactly cost, we can't know this. Just relax about the place already. It's done ok. Maybe not the runaway hit they were hoping for (and who doesn't hope for such things when they open a new business) but who knows. They now consider Anaheim worth spending a large sum of money on. This has changed from 10 years ago when they considered the place an eroding asset with little to no growth potential. Do you see the difference?
102	jonvn Wed 9/26/2007 11:44a	darn it...i never do the dalmatians thing...
103	pwrof3 Wed 9/26/2007 12:00p	Since Anaheim was an eroding asset, what could they have done? It's not like you can rip out Disneyland and move it somewhere else. They owuld have had to build a completely new park somewhere else and right now Walt's dream would have been a Wal-Mart or something, and Anaheim would be full of crime (well, it still is full of crime, just tidied up to look nicer now).
104	bean Wed 9/26/2007 1:16p	That was actually considered. The whole idea was that they could re-use all if not most of the mechanism of every attraction. Attractions would have closed down while a new property was developed that had more room. A new park would also have had less attractions and be more in lines to its WDW counterpart. At certain point the park would be closed for good.
105	danyoung Wed 9/26/2007 1:17p	>Just relax about the place already.< I'm completely relaxed about the place. The only thing that gets me riled up is YOU (just kidding, but not really ;)). >This has changed from 10 years ago when they considered the place an eroding asset with little to no growth potential.< I was going to agree with this, but after further thought I'm not sure I can. I think there was ALWAYS growth potential to DL. But they had to be careful to help the entire area grow, and not just have a shining jewel in the middle of blocks of urban blight. From that standpoint, they did a terrific job - very few people have ever had anything bad to say about Downtown Disney, the Grand Californian, and the refurb of Harbor Blvd.
106	jonvn Wed 9/26/2007 1:29p	"It's not like you can rip out Disneyland and move it somewhere else. " "That was actually considered." I heard they were looking at El Toro for land for this. "I think there was ALWAYS growth potential to DL." I really think its growth was at an end. That's what they were saying. And really, there is only so many people you can physically cram into the place at one time. The area was falling to pieces.
107	jonvn Wed 9/26/2007 1:30p	Here is an interview that was in the Orange County Business Journal in 1996. It talks about what was going on then. I'll put some quotes of it in an article after. 07/29/1996 Orange County Business Journal Pg. 1 Copyright Scott Publications Inc 1996 Anaheim, CA, US, Pacific -- No new taxes. No risk to Anaheim's general fund. A project, funded primarily from the bed and sales taxes it will generate, that will restore Disneyland to its once-premier standing among amusement parks, while upgrading the Anaheim Convention Center and the rest of the tourist district. And, unlike Westcot or the off-again, on. again Anaheim Stadium negotiations, there will be no backing away by Disney this time around. Those, say Anaheim and Walt Disney Co. officials, are the key points of the planned $2 billion Disneyland expansion and Anaheim tourist district upgrade. The go-ahead at this point depends on City Council approval, which could come by early fall. Beyond that, city voters must approve on the November ballot a recent hotel bed increase that would be used to fund the public improvements surrounding Disneyland. Presenting a united front, Disneyland president Paul Pressler, Anaheim Deputy City Manager Tom Wood and Disney Development Co. finance director B.J. Fair met with the Business Journal to discuss the project, its prospects and its financing in detail. OCBJ: Let's start with the basics: What does this new resort mean to Disney and to the city of Anaheim? Paul Pressler: It's so hard to separate out the Disney vision from the city vision. I think we have to recognize that like anything in life we have to continue to nurture it, propel it forward, otherwise it becomes stale and it will die. Not that I want to grossly exaggerate that Disneyland is not going to continue to be healthy or that the city of Anaheim is not going to be healthy, but we are at a crossroads at this point in time. As it relates to Disneyland, there's just so much investment that you can put inside the walls of Disneyland to continue to make it a viable resort destination. One, because we're running out of land. Also, there are clearly lessons learned down in Florida. We know that we've got a guest who has a very strong appetite to come to California, and to come to Southern California and come to Disneyland. And we are not even coming close to satisfying their appetite, both for Disney and as a destination. Then you start to think about other locations, including locations in Florida, Las Vegas, Napa Valley, San Diego; and what all these places have going for them is a quality infrastructure, a resort environment. It's just common sense that when you go on vacation, unless you're going for that "city experience," you want to step into an environment where you can feel relaxed. It's difficult to do that in Disneyland -- because once you walk through our front door it's relaxed, but that parking lot is not relaxed, the buildings around here, the street surface -- and when I say it's not relaxed, it's not visually relaxed. From a Disney perspective, I really worry about an eroding asset. I have to question how much investment I can put into an eroding asset. The Walt Disney Co. is big enough that at the end of the day we'll make those investments simply because this is the greatest original theme park ever built and that's a commitment that we have to our legacy. And thank goodness our company is as big as it is, because as an independent free-standing business, I'm not sure any bankers would continue to fund us. As I look at it for the next 25 to 30 years, if I want tourists to come to Disneyland, I've got to do something in terms of a tourist resort. I also have to turn to Tom, because it's not just about what sits in my parking lot. A good portion of the time you come to Anaheim is not in this theme park; it's sleeping in another hotel, it's commuting, and walking and trailing and bumping from one location to another. And if the aesthetics of what's happening there are not up to the same quality level, again we have to make choices. So for us it was vital in terms of entertainment, and hopefully building upon that tourist base. Tom Wood: Let me summarize it this way: The status quo is not acceptable. Disneyland, hotel, the Convention Center, the stadium and the Pond are all wonderful assets to have. But having them in a rough environment, an environment that is not at the same standards as those excellent venues, leaves a person kind of wondering, "Why am I coming here? Is this where I really want to be?" You've got to interconnect those venues and put it in a place that works not only while they're at Disneyland, at the new park, at the Convention Center, but when they're going to and from and spending time between venues. If we stay where we're at right now, we're going to lose market share. I think we all recognized that in the late '80s when there were discussions between the city and Disney management. It was said at that time: "We're missing the boat. The area is not at the same level as other premium resorts. It is frankly getting seedy. And if we recognize it, clearly the guests who are going to these other venues, seeing the other places, are going to stop coming and we've got to do something about it." It was at that point in time we started in on a resort program and on the Westcot program. Together we decided it was of mutual benefit for us to create a place that has great venues in an environment that's very desirable. Why does that matter to a city? We're supposed to worry about trash collection, and making sure the sewers work. But cities are economic engines; providing services for the public depends on the business community. Businesses quite frankly pay sales tax, transient occupancy tax; those types of taxes pay for a lot of the services received by the residents. If you don't have a vibrant business community capable of paying those taxes, the services you give your residents are going to decline. You're just not going to have the resources. You see that in bedroom communities these days, where their budget is all residential-based, property tax-based. And they're shrinking; they're losing ground relative to inflation. That's why Anaheim is very fortunate to have tourism. It's a clean industry. It's the state's biggest industry. Because that industry generates - - and it's not a term we like to use in government, but it generates -- profit. Direct profit in taxes and tremendous indirect profit in terms of jobs in other businesses that support this tourist area. What share of revenue does tourism generate for the city? Wood: We've never calculated out in terms of the larger budget. But the Anaheim Resort, the 1,100 acres that includes Disneyland, the Convention Center and thereabouts, generates about $10 million in profits, or net operating income, after we pay for everything we require. It's a sizable hunk of our discretionary budget. We have no choice but to keep it healthy. The key for all of the renovation outside the park is the issuance of the $395 million in city bonds. Will those be general obligation or revenue bonds? Wood: Probably some form of revenue bonds. Can we walk through the details of the funds that will be used to service the debt? Wood: Roughly, there are three streams of cash, three flows, if you will. The first is the increment of new business brought to the area by the Disney expansion -- the increment of sales tax, property tax and transient occupancy tax above what currently exists, which is 7 million clicks (of the turnstile), 750 hotel rooms and 200,000- square-feet of dining/entertainment, That increment is roughly $10 million. The second is the 3% of TOT (transient occupancy, or bed, tax), of which 1% was levied a number of years ago, and 2% was levied in 1994 with the cooperation of the hotel/motel industry and will not go into effect for debt service payments until 2001. That is estimated at roughly $20 million. And then you have the induced growth fees, all of the growth that occurs external to Disney's property from additional hotel rooms, occupancies, etc. So you have those three streams. We're merging the first two -- roughly $20 million. It is being secured by a Disney debt guarantee, leverage at roughly a 20-to-1 ratio, so this $20 million gets close to $400 million. More specifically, the bonds will be issued in two tranches. The first will be sold to bondholders with bond insurance, normal market coverage. The second, more aggressive tranche, will be sold with the Disney guarantee. Together, these two tranches raise $395 million. The term is roughly 36 years. To that we add three additional pots of money: the $96 million from federal, state, regional transportation funds -- those are dollars already pledged. The figure given is about $200 million for the portion Disney will guarantee. Wood: Actually, I think that's wrong. I think it's about a 60-40 split; 60 is guaranteed by Disney, 40 is the first tranche. So it's better than what I was saying earlier, but 1 think I'll stick with 50-50, because of the conservative approach we've been taking. Pressler: We liked the numbers Tom said earlier. But until you actually sit down with the market you don't know exactly how it'll play out. B.J. Fair: These will all be bonds floated by the city of Anaheim, but the junior tranche will have a definite Disney guarantee on it. The senior tranche has enough market coverage that they will be able to get normal insurance say that they are insured by a third party. So there remains no risk to the city on this. If there is ever a shortfall on these bonds, the city's general fund is not exposed. Is the $96 million in government transportation funding for the I-5 widening, or far the Katella Superstreet? Wood: All those things. Are these all existing projects, with or without the Disney expansion? Wood: Yes. Already approved, locked in place. And then, $1 2 million is from Convention Center parking structure reserves. That's for what we call Car Park One on Katella, which has some structural deficiencies. We have held the reserves to replace that structure. Because of the joint parking arrangement we have negotiated with Disney, Convention Center guests will be able to park in the Disney lot, and the net operating income from that will be a revenue stream to the Convention Center. We will no longer need to hold this reserve when the old parking structure is replaced. What other revenue will the city use to pay for the areawide improvements? Wood: We have bond interest earnings we'll sell the bonds, we'll have the bonds, we'll draw down the bonds on a construction schedule and there will be interest earnings -- that's roughly $5 million. And then you have the 3% TOT -- remember we don't start debt service payment until 2001 -- between now and 2001 we'll collect about $42.8 million, we believe. Add that up, that comes to $546 million. And we will apply it to that list of areawide improvements, the Convention Center expansion and the new parking structure. Pressler: I think an important piece to recognize is when you look at those top two streams of cash, they're mostly TOT, so it is all tourists' use fees. Not local residents. It is those tourists, who we're effectively asking to take their use fees and we're going to invest those dollars in making the place nicer. It's literally as simple as that. So, you've got use fees from tourists that are coming in. You've got Disney that's guaranteeing a big chunk of it to do all this work. It's not an easy story to get out in some ways, but that's the story. Wood: Let's assume for a moment that the city of Anaheim said we're not going to use those (TOT) flows for the purpose they were raised. We had an agreement with the hotel/ motel community. We said, we need to do these improvements and they said, we agree with you. How should we do it? Let's raise the TOT rate to accomplish this. Let's be honest, the 15% TOT rate is the upper end of the marketplace. And that's a difficult thing for our business community to swallow, because they knew that had to be sold every time a group came in here or every time a person looked at the bill. But it was an item they strongly advocated and encouraged the City Council to do because they knew it was key for their industry. How much of these improvements would be made with or without the Disney Resort? Can you explain the Anaheim Resort program? Wood: Basically, in what we call phase one, we had a 1% (TOT raise) and we raised it 2% more. It will raise $227.2 million for improvements. We're only in the first year of a five-year program. Roughly $55 million has been spent. A year ago, we started the program: the undergrounding of the utilities, the replacement of monument signs, the beginning of the design work on the streetscape throughout he area. So we're 20% into this program. We have up until this point been using cash flow. There's been sufficient cash flow coming in to pay the capital expenses today. But now you're looking to do major project? Wood: Right. Much of the schedule for the Anaheim Resort is dictated by when Katella is going to be widened as part of the Smart Street program and the I-5 widening project and Caltrans schedule. So the Anaheim Resort revitalization schedule is structured based upon other people's schedules, if you will. And that allowed our cash flow for the first year to be on cash rather than debt. And our intention was to go to the debt markets to complete that program this fall. The good news was we have been able to structure the program with Disney, which will encompass not only those plans but what we're calling phase two, which will accomplish what we couldn't afford to do under phase one, a classic example being the Convention Center. The city hired Coopers & Lybrand to look at where the industry was going, and they told us what we would have to do to stay competitive. And we then hired HOK to tell us what it would cost to build that. To expand the Convention Center, they said you need a $150 million to do that. We had a shortfall. What was the turning point in the negotiations between the city and Disney? Pressler: The principles that Tom gave you, that Jim (Ruth) gave me when we sat down, were pretty clear. They had articulated what they needed and when we saw the shortfall in the Convention Center ... the Convention Center is important simply because it's important to the health of the other hoteliers that are around here. It is not important to us in terms of visitation to the Convention Center. I don't have enough hotel rooms. It's not anywhere significant enough to justify the guarantee to go and do that. What's important to us is the health of the other hoteliers because those are my guests that are staying in that hotel and I want the benefits to be what's important to them. So that was the first piece, and recognizing that, and recognizing we wanted to accomplish the revitalization of Harbor and Walnut, that was important to us for the aesthetic value, there were two pieces that couldn't get done. It was as simple as saying maybe we should take a look at combining it and using our leverage to be able to come in and do it. So we take those two boxes -- the Disney box that's the new incremental box, and the existing box that's only going to get them a certain amount of proceeds, and had no backstop, so if they default on this it puts the general fund at risk. Our market position allowed them to generate more proceeds off of that if we put on the guarantee. And that's what got that third column (total program costs) funded, which was critical because now it met the convention needs that they had, which was a primary concern, and it met the needs we had, which was making sure that this was a resort destination in the rest of the environment, that the facilities and amenities were brought up to a standard that is a necessity of going and building a new project. For me to build a new project, and not have an environment that Disney can sit in, I'd be fighting an uphill battle. The initial project that was discussed, the Westcot project introduced several years ago, had a $3 billion total price tag with a $2 billion investment by Disney. Now we're talking about a $2 billion project with a $1.4 billion investment by Disney, What changed? Pressler: The big investment in Westcot was the hotels. We got rid of that, and shrunk the park a little bit. And that gets you back down to what our dollars are today. The Westcot hotel program was four times the size of this one. We had initially put in for 5,600 rooms. The requirements of building that kind of hotel program were forcing us to build structured parking facilities as a piece of that. When we brought the hotel program down to the current 750 rooms, many of the things that were triggered by the old Westcot just went away. Wood: It's hard for people to understand how smoothly and well this came together, how the needs of the Disney company and the needs of the city -- what they were looking for and what we were looking for -- blended themselves together amazingly well. It worked, and as a result we're going to have an extremely exciting product and place. If you get the necessary approvals this time around, when do you expect groundbreaking to commence? Fair: The sooner the better. Wood: Interest rates are going up and that's a helluva debt. As we have said, the hurdle we have, the constraint is, the Council vote. If everything goes well, we could have groundbreaking in the early part of 1997. If it doesn't go okay, we have to go back. ... Pressler: This is probably the most telling thing: The National Recording Artists convention, which has been at the convention center here for a long time, we lost it. That's a key indicator of a facility that doesn't serve you anymore. They have said to us specifically, they will come back in 1999 if the work is done, but if there is not a commitment now, they'll start writing long-term contracts at other places. And that's one example of many that will follow suit. So the longer it takes to finish the bigger the chance that some are going to get comfortable with where they've moved to. Did the recent negotiations between the city and Disney over the new Anaheim Stadium lease arrangements complicate the Disney Resort negotiations? Pressler: From my perspective I'd say the only complication was the number of hours we had to sleep. But the two were completely separate processes. Another issue from Disney's standpoint is an issue of credibility. Is this a key to you, reestablishing credibility about expanding the resort here, because this has been going on so long? Pressler: That's a good question. When we put our piece together I, our company, decided we were not going to go public until we knew we had the framework, and if that framework was approved, we were going forward. This is different than Westcot; during the Westcot process, we had a framework, but never really said we were going to build it completely. We wanted to go through a process, we were still working out the numbers. One of the reasons we didn't rush to make this announcement in January was because if this framework is approved, that's a commitment made to the city. We aren't going to walk away from it this time. The only thing that's going to stop us at this point is the city Council vote. Fair: Some of us got our training on Westcot. There was a lot of groundwork done on Westcot, and as painful -- I'll use that word -- as painful as it was, we knew that when we came back, we knew what we needed to accomplish and the city knew what we needed to get. Wood: We cut our teeth on Westcot and we brought it all together on the California Adventure expansion. Pressler: My second day on the job, I got -- a tutorial on Westcot. And at that time I tried to get my old job back.
108	jonvn Wed 9/26/2007 1:31p	Some talking points: Pressler: It's so hard to separate out the Disney vision from the city vision. I think we have to recognize that like anything in life we have to continue to nurture it, propel it forward, otherwise it becomes stale and it will die. Not that I want to grossly exaggerate that Disneyland is not going to continue to be healthy or that the city of Anaheim is not going to be healthy, but we are at a crossroads at this point in time. As it relates to Disneyland, there's just so much investment that you can put inside the walls of Disneyland to continue to make it a viable resort destination. ... From a Disney perspective, I really worry about an eroding asset. I have to question how much investment I can put into an eroding asset. The Walt Disney Co. is big enough that at the end of the day we'll make those investments simply because this is the greatest original theme park ever built and that's a commitment that we have to our legacy. And thank goodness our company is as big as it is, because as an independent free-standing business, I'm not sure any bankers would continue to fund us. As I look at it for the next 25 to 30 years, if I want tourists to come to Disneyland, I've got to do something in terms of a tourist resort. ... Tom Wood: Let me summarize it this way: The status quo is not acceptable. Disneyland, hotel, the Convention Center, the stadium and the Pond are all wonderful assets to have. But having them in a rough environment, an environment that is not at the same standards as those excellent venues, leaves a person kind of wondering, "Why am I coming here? Is this where I really want to be?" You've got to interconnect those venues and put it in a place that works not only while they're at Disneyland, at the new park, at the Convention Center, but when they're going to and from and spending time between venues. If we stay where we're at right now, we're going to lose market share. I think we all recognized that in the late '80s when there were discussions between the city and Disney management. It was said at that time: "We're missing the boat. The area is not at the same level as other premium resorts. It is frankly getting seedy. And if we recognize it, clearly the guests who are going to these other venues, seeing the other places, are going to stop coming and we've got to do something about it." It was at that point in time we started in on a resort program and on the Westcot program. Together we decided it was of mutual benefit for us to create a place that has great venues in an environment that's very desirable. ... Pressler: I think an important piece to recognize is when you look at those top two streams of cash, they're mostly TOT, so it is all tourists' use fees. Not local residents. It is those tourists, who we're effectively asking to take their use fees and we're going to invest those dollars in making the place nicer. It's literally as simple as that. ... OCBJ: The initial project that was discussed, the Westcot project introduced several years ago, had a $3 billion total price tag with a $2 billion investment by Disney. Now we're talking about a $2 billion project with a $1.4 billion investment by Disney, What changed? Pressler: The big investment in Westcot was the hotels. We got rid of that, and shrunk the park a little bit. And that gets you back down to what our dollars are today. The Westcot hotel program was four times the size of this one. We had initially put in for 5,600 rooms. The requirements of building that kind of hotel program were forcing us to build structured parking facilities as a piece of that. When we brought the hotel program down to the current 750 rooms, many of the things that were triggered by the old Westcot just went away.
109	jonvn Wed 9/26/2007 1:47p	The other interesting thing that you may spot in this article is the 7 million figure that gets mentioned by Mr. Wood: "Wood: Roughly, there are three streams of cash, three flows, if you will. The first is the increment of new business brought to the area by the Disney expansion -- the increment of sales tax, property tax and transient occupancy tax above what currently exists, which is 7 million clicks (of the turnstile), 750 hotel rooms and 200,000- square-feet of dining/entertainment, That increment is roughly $10 million. " But after that, Pressler makes this statement: "Pressler: We liked the numbers Tom said earlier. But until you actually sit down with the market you don't know exactly how it'll play out. " So, again, a 7 million figure bandied about, BUT, Disney actually says "well, let's see how it goes." What does this say? It says that this figure was not a requirement, not a hard and fast number, and that a lot of room was probably figured on it. They "liked those numbers but..." means they thought that maybe they'd not get them. That's how I think you'd have to take that. OK, so really. So much of the hogwash that is spewed online about this place is just so much NOTHING. The 7 million, how the Convention Center is pushing business now and not the expansion, all of it. It flows from a very weak understanding of any of the things that caused the place to be built, what it has done for the surroundings, how it was received and what was even expected in the first place. The people who keep bringing this stuff up, as if they know something really need to give it up. They don't. They don't even sound like it is close. I've posted this stuff before. I think it's very informative. I would hope people read it and understand what is being said.
110	Sport Goofy Wed 9/26/2007 1:49p	How come Darkbeer never clips this article when he is regurgitating news feeds?

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