DisneyQuest-ions

The prospect of a second urban entertainment center raises new questions about Penn's Landing, but generates few answers.

by Mark Naymik

Council President John Street, like Mayor Rendell and Herb Vederman, says that even if Disney decides to build in Center City, Philadelphia could support both projects. Others have doubts.

After months of silence, city officials are now publicly acknowledging that Walt Disney Company is interested in building one of its urban entertainment centers, DisneyQuest, in Philadelphia.

But these same city officials still are not saying much about what impact the presence of a massive Disney entertainment complex—if built in Center City—might have on the city's plans for the Penn's Landing waterfront development project. They are only saying they are thrilled that Disney is considering the City of Brotherly Love.

Last week, the City Paper first reported of Disney's interest in Philadelphia and, more specifically, in the former Gimbels site at Eighth and Market Streets. Although Mayor Rendell and the city's deputy mayor for economic development, Herb Vederman, say that this site is only one of several sites Disney representatives have visited, other sources close to the negotiations contend that Disney will go to Eighth and Market Streets, if the entertainment giant decides to come to Philadelphia at all.

Upon announcing its new DisneyQuest venture last year, Disney revealed that it planned to open 20 to 30 DisneyQuest sites in major markets around the world. The only other location definite at this point is Chicago.

"Our first and foremost goal is to get them here," says Vederman, who has shown Disney representatives several city sites, including Penn's Landing, home of the proposed $177 million urban entertainment center by developer Simon DeBartolo Group. "We have been told a decision may come in a couple of weeks. But we hear that all the time."

Council President John Street, like Mayor Rendell and Vederman, says that even if Disney decides to build in Center City, Philadelphia could support both projects. "It doesn't matter where they go," Street says. "The downtown has long needed more development. The market is wide open."

The main stage, the site for summer concerts at Penn's Landing

Disney's presence in Center City, however, could pose a threat to Penn's Landing because Mickey Mouse could scare off potential tenants of the Penn's Landing project, says one development source. Simon DeBartolo still has not announced any tenant signings, least of all with a company capable of providing the high-tech entertainment component that is supposed to make the waterfront project more than a mall. Potential Simon DeBartolo tenants might be hesitant to sign on with a project that is supposed to be anchored by an entertainment entity that must compete with the renowned rodent.

City Council, however, is not showing any hesitation in its support of the Penn's Landing project. Last week, Council tentatively approved a plan to loan $62 million to Simon DeBartolo. The money would be raised via bond sales and paid off with future tax revenues generated from the project. The real cost of the loan, after interest is figured in over 20 years, is $134 million.

At the same time these bonds are repaid, the city will net $80 million from property, sales, parking, wage, and other taxes; the city schools would earn about $33 million in new property taxes, according to the Philadelphia Industrial Development Corporation (PIDC), the city's economic development arm and the entity that will actually issue the bonds. The PIDC also estimates the project will create the equivalent of 1,350 full-time jobs from the thousands of people needed to work at the mall.

The public usually is at risk if a project like Penn's Landing fails to generate enough in new taxes to make payments on the bonds. When this happens, the city's general fund could be tapped. But Simon DeBartolo—not the city—is guaranteeing to make the payment on the bond if the project fails to live up to financial expectations. This guarantee puts Street at ease.

"They cannot walk away from us," Street said about Simon DeBartolo's commitment to the project once it is built. "Our exposure is limited."

Street says the amount of the loan—roughly one third of the project's costs—is not out of line considering the infrastructure changes that are needed. He cites the cost of improving access around I-95 to the Penn's Landing.

"We put I-95 along Delaware Avenue, not Simon DeBartolo," he says. "That's why we need the money."

Roughly $5 million is needed for demolition of the existing Chestnut Street vehicular ramp to Delaware Avenue, and the creation of new ramp just north of Walnut, as well as new viaducts that will connect from Delaware Avenue to the proposed parking garage. The majority of the $62 million is for the preparation of the site, and construction of a new garage and amphitheater.

About the number of jobs to be created by the project, Street says the total is "only an estimate," one that is hard to predict precisely. He says, however, that the city will not be able to impose a minimum wage on the jobs.

According to PIDC estimates, the average full-time position—not worker—will earn $26,000 per year. That means the several part-time workers that make up one full-time position will earn substantially less. Managers of stores and restaurants, who are likely to be full-time, will earn more.

It is not clear whether Disney would ask for public money to help with infrastructure needs or a parking garage for the Eighth and Market site. Vederman says there have been no discussions with Disney about financing because Disney's commitment is not nearly final.

By comparison, neither Disney nor the developer of a larger DisneyQuest project in Chicago is receiving any financial incentives from the city, according to a spokeswoman from the Chicago Planning and Development Office.

Mayoral candidate John White, who could inherit the project if elected the city's next mayor, is not worried about the long-term financial risk to the city "given the track record of the Rendell administration," he says. White's concern is that the project reflects "in a meaningful way" the nearby historic district.

"I wouldn't get nervous if Simon DeBartolo hesitates if Disney goes to Eighth and Market," says Republican mayoral candidate George Bochetto. "I think that Simon DeBartolo will conclude, though, that they still want to go ahead with the project because Philly is a good market, and there is no question the project can work. Penn's Landing is a better site than what they have in Baltimore."

Bochetto says he supports loans paid back with a particular project's future tax revenues, known as tax increment financing (TIF). "I am comfortable with the size of the [Penn's Landing loan], particularly if Simon DeBartolo is underwriting it. It is a no-brainer," says Bochetto. "I encourage the mayor to promote both sites."

Satisfied by the city's minimal financial risk, and by the PIDC's job estimates, Council is set later this month to pass the legislation needed to float the bonds. This will shift the risk fully to Simon DeBartolo.

Simon DeBartolo, the nation's largest mall developer, will not take the risk of potentially eating the bond payments should the project fail to meet expectations. If Simon DeBartolo is unable to attract tenants, it can still pull out of the deal before construction on the project begins, and therefore, eliminate its exposure.

Simon DeBartolo executives have told Council to expect upscale retailers like F.A.O. Schwarz, and the new generation of superstores like NikeTown and Virgin Records, which use entertainment to move their products. They have also said that the project would attract an entertainment company like Steven Spielberg's DreamWorks SKG (whose GameWorks is a joint venture with Universal Studios and Sega). But even this is tentative at best. According to a GameWorks spokesperson, the company is also considering Riverview Plaza, a South Philly riverfront retail and entertainment strip.