DALLAS -- Williams, Ariz., the self-proclaimed "Gateway to the Grand Canyon," is working on a plan to sidetrack tourists to a bond-financed amusement park and railroad museum that could cost $400 million.
Plenty of obstacles lie in the park's path, including a lack of water in the desert environment and the need to issue debt at an affordable rate, but city officials are working with a newly created Arizona Theme Park Tax District to solve those problems.
"This type of project has been talked about many, many times over the years," said Williams City Manager Brandon Buchanan. "It's something that would have a big impact on a small community. I think we still need to see some information before we jump on this 100%."
A feasibility study due at the end of April is expected to help leaders decide how large the park should be at a site already selected. The entire 488-acre site is three times the size of the whole Anaheim, Calif. Disneyland Resort.
Williams City Council member Craig Fritsinger, who chairs the tax district board, is seeking a financial advisor. Officials estimate the project's cost somewhere between $300 million to $500 million.
The Williams park's future is tied through legislation to another park proposed in Phoenix 180 miles to the south.
Under House Bill 2694, signed into law in 2008, and subsequent legislation in 2014, two amusement parks, one in Williams and one in Phoenix could issue up to $1 billion of bonds. Previous legislation in 2005 defined the administrative, operational and financial parameters of theme park districts.
The board that supervises the Arizona Theme Park Tax District is made up of two council members each from Williams and Phoenix.
The Granger Group of Wyoming, Mich. is the proposed developer. The firm has heretofore specialized in healthcare and senior citizens housing projects. Granger officials have said that about 40% of the bonding authority would go to the Williams park.
Debt service is expected to require about 9% of the theme park revenues the district projects. Property purchased by the theme park district would be exempt from local and state income and property tax.
"This is not something that the community is going to pay taxes on," Gary Granger, president of the Granger Group, told the Williams city council, as reported in the Williams News. "All we are going to do is take the revenue that is generated that you don't have today, and we're going to be able to recapture 9% of that revenue and that 9% is used to pay off the capital investment."
According to a 2007 study by University of Central Florida researcher Kelly T. Kaak, the average cost of developing 51 theme parks across the U.S. was $109.61 per first year visitor. Proponents of the Williams park anticipate between 2.5 million to 4 million visitors.
Such numbers would put it in the top 20 of North American theme parks, according to figures published by the Themed Entertainment Association, placing the park in the company of well-established attractions like Kings Island and Cedar Point in Ohio and the Six Flags park in New Jersey.
Using Kaak's formula, that would put the park's cost at between $275 million and $438 million.
"Based on the track record of the parks opened in the past decade, the cost of developing a theme park in such a developed market as North America might have reached a point to where they are no longer capable of generating the needed revenues to pay off construction costs, operating costs and the required capital acquisition costs and still provide an adequate return on investment," Kaak wrote.
Gross revenues of between $100 million and $125 million would mean $3.5 million to $4.4 million in sales tax revenue for Williams, which has only 3,000 year-round residents, according to a letter from the city's mayor John Moore to Coconino County Commissioners.
"Saying nothing of ancillary development and benefits that would come later, the immediate benefits of just the theme park development itself are nothing short of transformational for our small, struggling economy," Moore wrote. "To the City of Williams, with an annual budget of around $18 million, a 24% increase in annual revenue collections is unfathomable."
The tax district board has not decided on a theme for the park or officially awarded the project to the Granger Group. But Buchanan told the board that the city wanted more than "a roller coaster in the middle of an asphalt parking lot."
Boosters also envision as a companion project a $25 million state railroad museum tied to the Grand Canyon Railway, a 65-mile excursion line from Williams to the south rim of the canyon. The original railway, which made its last run in 1968, was revived in 1989 through donations by philanthropists Max and Thelma Biegert.
The Biegerts sold the railway in 2006 to Xanterra Corp., a Colorado firm founded by billionaire Philip Anschutz that operates hotels and other facilities in and around national parks.
Max Biegert owns the proposed park land in Williams and reportedly has an option with the Granger Group for Granger to buy the property if the theme park becomes reality. Biegert has said the amusement park would be as attractive to tourists as the railway.
Promoters of the State Railroad Museum are still raising donations for the project.
The overarching goal of the museum and theme park is to divert to Williams a larger share of the roughly 4.6 million annual visitors to the Grand Canyon.
"As the Gateway to the Grand Canyon an almost incalculable economic engine of tourism flows constantly through our community," Mayor Moore wrote in his letter. "However, we currently only capture a minor fraction of that potential."
One of the most difficult hurdles is finding sufficient water to supply a projected 2.5 million to 4 million visitors per year. Williams is already struggling to supply water for its small population. The city's current water supply is obtained from five surface reservoirs and two deep wells.
Building an amusement park would require a major investment in new wells to supply the facility, planners say.
"A project of that scale has quite a bit of demand that we can't accommodate right now," Buchanan said. "It's not a problem that's insolvable. They can drill some new wells. But from my perspective with an $18 million budget, we don't have $2 million lying around to drill new wells."
The municipal bond market has a long history of revenue bonds issued for tourist attractions that failed to attract enough tourists or revenue. If Williams overcomes the market, it will have to overcome the memories of such busts as Nebraska's Great Platte River Road Memorial Archway and the Sports Museum of America in New York City, not to mention qualified successes like the Oregon Coast Aquarium, which survives after avoiding bankruptcy in 2005 when bondholders accepted a haircut.
Other perils of building a theme park can be found scattered across the country.
When Disney California Adventure opened in Anaheim, Calif., in 2001, it drew far fewer visitors than expected, leading to ticket discounts and another round of investment in rides designed to attract more families.
The $400 million Hard Rock Park opened in Myrtle Beach, S.C., in April 2008 and lasted only four months before filing for bankruptcy amid high gas prices and a collapsing financial market. The park reopened in 2009 as Freestyle Music Park under owners who bought it out of bankruptcy for $25 million, but the park closed again after the 2009 season.
The Hard Rock theme park's developers expected earnings of $61.8 million in the first year - projections that investors later discovered where far too optimistic.
Developers expected 3.09 million people to visit the theme park during its first year in 2008 and projected that would increase by 9.3% in 2009, according to a feasibility study.
According to Kaak's study, the cost of building the Hard Rock Park came to more than $1,000 per first-year visitor, about 10 times the average cost.
"Hard Rock Park used all its funding just to get open, leaving nothing left for expansion or even marketing," Kaak wrote. "Its overall cost, at $400 million, might not have been out-of-line, but its inability to attract paying guests certainly inflated its investment to guest ratio and ultimately doomed the venture."
