The announced closing of Walt Disney Animation Canada has some policy makers rethinking how best to employ fiscal incentives to encourage foreign producers to set up and maintain operations in Canada.

‘We’re understandably upset,’ says Adam Knelman Ostry, head of the Ontario Film Development Corporation, one of several government organizations which made incentives including tax credits available to the Mouse House to open operations in 1996.

Ostry says Disney’s departure, combined with ‘inter-jurisdictional competition’ in the Canadian production industry, which has left Ontario second to b.c. two years running, may indicate the province should revisit its policies for attracting investment.

‘Perhaps it signifies the current mix of incentives in Ontario needs to be improved in order to ensure the long-term sustainability of the industry as a whole,’ he says, adding that Disney was given no special enticements beyond those which are made available to other foreign producers.

Despite any incentives and in the wake of months of rumors alluding to the fact, Disney confirmed last week that it is closing its Vancouver and Toronto offices this spring.

Laurel Whitcomb, vp publicity at Walt Disney Television Animation in Los Angeles, says the accelerated production schedule that prompted the opening of the Canadian studios in 1996 and 1997 has been scaled back. In fact, the studios’ employment rosters have been trimmed for a year because productions assigned to them have been reconsidered.

‘It became apparent that we wanted to spend more time on the story and development side of those pictures,’ Whitcomb says.

‘We still have as many properties in development and in the pipeline, but in terms of being in active production, we do not have the accelerated production schedule that we had anticipated at the time. As a consequence we aren’t really able to maintain a third studio outside of Burbank.’

At their peak, the studios employed a combined work force of 225 people. In last year’s curtailment, staff was laid off. The 50 remaining jobs will be eliminated when Walt Disney Animation Canada is dissolved as a corporate entity.

Ongoing production, meanwhile, will be handled by Disney’s pre-existing facilities, including its 12-year-old animation studios in Japan and Australia.

Disney Vancouver has already closed its doors while Toronto will maintain a skeleton staff until spring. The lease runs out in April, which would indicate the logical official end to Disney’s Canadian experiment.

Robin Budd, who is helming the direct-to-home-video of Peter Pan, is one of the few left in the Toronto office. He says Disney is sending him ‘overseas’ to finish the project, which completed the storyboard and Leica reel phases in Toronto.

‘I guess by April everything will be closed up,’ Budd says. ‘As far as I know, I’m the only one they’re holding on to.’

The announcement of the Canadian closings comes as good news to many of Canada’s top animation houses, which had seen many of their best talent move to Disney.

‘The people that are left there are contacting us,’ says Deborah Fallows, director of recruiting at Nelvana in Toronto. Fallows says 14 former Disney staffers have been hired since layoffs began last year.

According to reports, Studio b in Vancouver, which has a trio of homegrown series in production, has also taken at least 17 people from Disney.

Disney Canada contributed to, or completed a number of direct-to-home-video productions in the last four years including Beauty and the Beast: The Enchanted Christmas, Pocahontas II: Journey to a New World and A Valentine for You, Winnie the Pooh.

Disney’s other business ventures in Canada – Disney Interactive Victoria, Buena Vista Home Entertainment Canada, Walt Disney Records, and all ongoing live-action productions – will continue unaffected by the closings, Disney says.

The Burbank, California-based Walt Disney Co., which owns a film studio, a tv network (abc) and runs theme parks around the world, has been looking for ways to cut costs following a drop in earnings last year.