Anaheim Mayor Calls for Second Meeting on Hotel Subsidies

Anaheim Mayor Tom Tait, in response to complaints from city residents that they weren't given proper notice about a City Council action last week to grant $158-million in subsidies to a hotel developer, has called for a special council meeting Tuesday to possibly rescind the move.

It is unclear, however, whether the three council members who voted for the subsidy will attend the meeting.

Tait said he called for the meeting because the previous meeting agenda didn't clearly state that council members would be voting on the plan. He also said the council should have the opportunity to vote on the actual subsidy agreement, which was not on the meeting agenda last week.

"Typically there would be another hearing to vote on the contact amendment. But that wasn't the case here. The [council] direction was for the city manager to get a contract and sign it by Feb. 1," Tait said. "The council should have the final say and actually have the contract before them."

The council voted last week to approve the subsidy for the builder of two hotels planned for the GardenWalk center in the city's resort district. Under the agreement, the developer would receive up to 80 percent of the room tax revenue generated by the hotels during the first 15 years they are open. The vote split 3-2, with Tait and Councilwoman Lorri Galloway voting no.

But Tait and Galloway might not have a quorum. Galloway said she received emails from the three council members who voted yes — Gail Eastman, Kris Murray and Harry Sidhu — saying that they wouldn't attend the meeting.

When asked whether she thought nonattendance was a tactic to stifle Tait's effort to rescind the previous vote, Galloway said she couldn't speculate.

"On its face that says a lot," she said.

Eastman said that she had a "previous commitment" and wouldn't be able to make the meeting.

"Nobody consulted me about having a meeting," Eastman said. "But that's how it goes sometimes."

Sidhu and Murray could not immediately be reached for comment.

Tait and Galloway said at last week's meeting that the subsidy set an unsustainable precedent. Tait also said it would be unfair to other hotel owners in the city.

Council members who voted for the subsidy cited the need to create jobs in an economy that is facing a sluggish recovery from recession. The construction project is expected to put about 3,000 people to work. Another 1,300 permanent jobs are projected to open after the hotels begin operating.

"If it's not going to cost a dime to the city to create jobs, why not?" Sidhu said.

Voice of OC revealed last week that Sidhu received at least $6,800 in illegal campaign donations from businesses formed by the hotel developers, William O'Connell and Ajesh Patel. He accepted more than $32,000 in various election campaigns from individuals and firms connected to the GardenWalk developments, records show.

Tait reiterated his concerns in an interview Monday afternoon. "Honestly, I think this is bad public policy," he said.

The tax subsidy amounts to $25,000 per day, Tait said. He compared the amount to recent budget cuts that amount to $50,000 per day. "We lose 50,000 a day when we started budget cutting, and that was tough," he said.

With its proposed contribution, the city would in effect foot more than 25 percent of the project's construction bill, and the investor would realize a nearly 16 percent rate of return on the project, according to the report.

Jan deRoos, associate professor at the Cornell University School of Hotel Administration, called the city-subsidized rate of return "extremely high." A normal return, deRoos said, would be about 10 percent.

A variety of powerful special interest groups — including the city's chamber of commerce, the Support Our Anaheim Resort Area (SOAR) advisory committee, the Orange County Business Council and building trade unions — packed the council chambers last week in support of the tax subsidy.

In voting no on the plan and calling for the special meeting, Tait is opposing some of the groups that spent generously in support of his 2010 mayoral campaign.

"The bottom line is no matter how unpopular my decision is, my job is to do the right thing," Tait said at last week's meeting.

Please contact Adam Elmahrek directly at aelmahrek@voiceofoc.org and follow him on Twitter: twitter.com/adamelmahrek.

 

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