Among the many things that angered neighborhood activists and open-government advocates when the Anaheim City Council approved a $158-million subsidy in January for a resort district hotel project, was that even though investors in the project stand to make a healthy return with the help of taxpayer dollars, the developers were not required to immediately disclose who those investors are.
Under the agreement, which created uproar in the community and fractured the City Council, Bill O'Connell, the developer of GardenWalk Hotels, had until Dec. 31 — nearly a year after the project's approval — to name his investors.
Fast-forward to a Superior Court judge's ruling this week that voided the City Council's approval because it violated the state's open meetings law, known as the Ralph M. Brown Act.
This was an important but probably fleeting victory for Orange County Communities For Organized Responsible Development (OCCORD), which filed the suit. The judge’s ruling gives the City Council three options: appeal the ruling, hold another vote on the subsidy or do nothing and let the subsidy deal die.
The most likely scenario is a revote, which would have a very strong chance of passing. Mayor Tom Tait is the only member of the new council who is publicly against the deal.
But what about the Dec. 31 deadline to disclose investors? Will O'Connell be compelled to name his investors in 18 days, perhaps even before the City Council votes again on the deal?
There has been much interest on this question, especially when one considers that the city would foot more than 25 percent of the project's construction bill and that the investors would realize a nearly 16 percent rate of return on the project, according to a city staff report issued before the first vote.
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.
However, an unintended and ironic consequence of the Brown Act lawsuit might be that by forcing government to act in a more transparent way, it could end up allowing the investors to stay longer in the shadows.
O'Connell's contract with his investors includes a clause that extends the deadline for disclosure for up to six months in the event that the deal becomes a subject of a lawsuit.
But O'Connell still must strike a new deal with the City Council, which must hold a new public hearing. The activists say the new hearing gives the City Council another opportunity to more fully inform the public about the project, including the investors’ identities.
“Anytime a developer or anybody else is coming to the city, or to any level of government, to ask for that level of subsidy, that level of financial support, then they ought to be completely transparent about where the funds are going,” said activist Eric Altman of OCCORD.
It is far from clear, however, whether members of council are seeing it that way. Mayor Tait said that while he believes the investors should be disclosed before a council vote, his main focus is stopping the subsidy altogether.
Meanwhile, Councilwoman Kris Murray, seen as the leader of the council majority in favor of the subsidy, said she remains supportive of the deal because of the arguments that supporters have outlined. “I do believe this is a very good public-private partnership for the city of Anaheim,” she said.
When asked whether the identities of the project’s investors should be disclosed before considering the subsidy, Murray said she would “encourage you to reach out on the developers on that.”
Murray, responding to an argument that the public should know the investor before agreeing to such a deal, said that the public’s negotiations are with the developer, not the investor. “The agreement is with the developer, who has built quality hotels in Anaheim for decades and who had been a long-standing member of the Anaheim community,” she said.