Three years ago, there were some within the animation industry who felt 20th Century Fox was a little crazy for setting up a new 70,000-square-foot, state-of-the-art feature animation facility in Arizona, far away from the growing L.A. talent pool. Three years later, it appears the company may indeed have been crazy like, well, a Fox.

The Fox operation in Phoenix, which was established under the leadership of feature toon veterans Don Bluth and Gary Goldman, has been largely unaffected by the rampant competition and talent poaching that has been going on in Los Angeles, and the studio’s first effort, “Anastasia,” is on track for a November release, with trailers sporting partially finished animation already running in theaters around the country.

Significantly, the film will be the only new animated feature in theaters for the vital holiday blitz, since production delays have bumped Warner Bros. Feature Animation’s “Quest for Camelot,” originally slated for a fall release, to 1998.

“We never believed that anybody else (would be ready),” says Bill Mechanic, chairman and CEO of Fox Filmed Entertainment. “A lot of people entered afterward and thought they could move quicker, but this is not a business of speed.”

“Anastasia’s” only toon competition, in fact, will come from Disney, which is rereleasing its 1989 hit “The Little Mermaid” for the holiday season. It’s a strategy Disney has tried before. Last year, the Mouse strategically timed its reissue of “Oliver & Company” to effectively take the bark out of MGM’s “All Dogs Go to Heaven 2.” “Anastasia,” however, might be a much harder puppy to whip, since Fox will sweep the picture into theaters with more fanfare than “Dogs,” and plans an aggressive marketing campaign, including a cross-promotion arrangement with fast-food giant Burger King.

The film features a song score by “Ragtime” composers Lynn Ahrens and Stephen Flaherty and a strong voice cast that includes Meg Ryan, John Cusack and Angela Lansbury. It is loosely patterned after the stage play and 1956 film of the same name, about a mysterious young woman hired to impersonate the missing daughter of the last Russian czar who does so with surprising authenticity. But despite the presence of real Russian historical figures like Anastasia and Rasputin, the animated version gives the story a mythical spin.

“It’s a 20th-century fairy tale with a lot of heart and emotion,” says producer Goldman. “Our characters have certain dreams that all young people might want in their life, and in the movie, they have to sacrifice those things for what they really want, love. The development and writing team have pulled off some really great emotional moments.”

Based on completed scenes, Mechanic goes so far as to characterize the film as “by far the best work (Bluth and Goldman) have ever done. I think when people see this movie, they will be surprised by the content and its quality. We’re far enough along to know it works as a movie, and that is the most important thing.”

The hiring of Bluth and Goldman to run Fox’s $100 million animation operation was the subject of some controversy within the toon trade when it was announced. Having exploded onto the animation scene in 1982 with “The Secret of NIMH,” the duo scored a major success with 1986’s “An American Tale,” the highest-grossing animated feature until that time and the film widely considered to have served as a wakeup call for the then-sagging Disney Feature Animation operation, which has since struck back with a vengeance. But their more recent, independently made films, such as “Rock-a-Billy,” “A Troll in Central Park” and “Thumbelina,” have fared less well, and their former base of operation, Sullivan Bluth Studio in Ireland, collapsed.

“When they went to Ireland, they were under-capitalized, and people got burned in the process, so they have carried this reputation for being bad guys,” Mechanic acknowledges. “But they have been nothing less than spectacular in Phoenix, and they have done a Herculean job of pulling together a team from scratch to make a movie.”

By Disney standards, it’s a small team, with roughly a third the number of animators that Disney Feature Animation employs. The Fox team was further challenged by the fact that “Anastasia” is the first animated film since “Lady and the Tramp” in 1955 to be filmed in widescreen CinemaScope, meaning everything from drawing paper to the studio’s video projector had to be customized for the project.

“We’ve always wanted to do something in CinemaScope, and given the landscapes, European arena and the largeness of some of the palaces we are depicting, we thought that CinemaScope would give us a much bigger canvas to paint on,” Goldman says. He adds that he is “proud of the fact that we’ve only got a 330-member team that is doing a widescreen production with these kind of production values in a two-year period.”

Despite the unit’s success putting “Anastasia” together, rumors of problems in Phoenix spread through the Hollywood animation community last year when the studio’s senior VP and general manager of the animation division, Steven Brain, resigned. During that same period, there were briefly false rumors that Bluth himself was about to ankle the studio. (“The animation industry has always been a rumor-driven pastime,” Goldman says with a laugh.)

The rumors and Brain’s departure, coupled with the fact that Fox quietly opened a satellite feature animation studio in Los Angeles last year, fueled talk of problems in Phoenix that persist to this day. But Mechanic explains that the function of the L.A. shop is to keep pace with an increasing workload after “Anastasia” is released.

“The idea is to have two pictures going in different stages, so that one is going into animation as one is going into design work, and all the while, we’re developing the next, and the next and the next,” Mechanic says.

That formula is obvious in the company’s plan to have industry veteran Art Vitello direct Fox Animation’s second picture, due out in 1999, by which time Bluth and Goldman will have started development on a third Fox animated pic.

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