Anaheim to Put Anti-Tax Measure on Ballot

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The Anaheim City Council Tuesday night approved a measure for next year’s general election that would make it harder for the city to implement new taxes, while at the same time rejecting measures that would hinder the city’s ability to incur debt and dole out hotel tax subsidies.

Councilwoman Kris Murray’s proposed charter amendment would increase the number of council votes it takes to place new taxes on the ballot from a simple majority to a two-thirds majority.

Murray said her proposal brings Anaheim in line with general law cities under the jurisdiction of Prop. 62, passed in the 1980s, which mandates that city councils be required to reach a two-thirds majority before allowing the voters to pass new taxes. As a charter city, Anaheim is exempt.

“The voters in Anaheim approved this 30 years ago. I would ask that we give them the opportunity to close this loophole,” Murray said.

However, the timing of the measure has led to speculation that it’s being done for the benefit of Disneyland, which poured hundreds of thousands of dollars into political groups during last year’s council race that promoted certain candidates, including Murray, while attacking their opponents.

A 20-year prohibition on an admissions tax for Disneyland visitors ends next year and coincides with a voter-mandated increase in the number of council members from five to seven; as well as a transition away from an at-large voting system to one in which council members are elected by districts.

As a result, the council elected in 2016 is more likely to have members from working-class neighborhoods who are generally more supportive of levying so-called gate taxes on Disneyland and other entertainment venues that would raise money for city services.

If voters approve Murray’s proposal, it would take a 5-2 majority to get tax measures on the ballot, a tall order even with a council that might not be as friendly to the city’s business interests.

Murray denied proposing her measure to benefit Disneyland, saying that it applies to “all new taxes.”

Mayor Tom Tait, who along with Councilman Jordan Brandman voted against the measure, said that while he might support such a measure in other cities, Anaheim has been on a spending spree that binds future generations.

If rosy assumptions about revenue aren’t realized – the city has commissioned consultants several times to create forecasts that either don’t stand up to scrutiny or end up proven false — the city will have no choice but to cut services or enact new taxes, he said.

Tait referenced a list of huge new spending initiatives that the council has approved in recent years that total hundreds of millions of dollars and would cost the city tens of millions annually.

Specifically, he referred to a $158 million tax subsidy for a hotel developer; a $180 million convention center expansion; a proposed streetcar line; the new ARTIC transit hub; and a massive unfunded pension liability.

Tait’s arguments triggered a debate among himself, Murray and Councilwoman Lucille Kring on the merits of the proposed measures. Councilman Jordan Brandman didn’t comment on anything, but voted against Murray’s measure.

Councilman James Vanderbilt, considered a Tait ally, also voted against the mayor and with the majority on Murray’s measure.

Tait’s Measures

Tait proposed the two failed measures, the first of which would have closed a loophole in the city charter that allows the city to incur large debts without voter approval; and the second would have forced future hotel tax subsidies to a citywide vote.

The first measure was rejected in a 4-1 vote, with Tait being the lone vote in favor, and the hotel tax subsidy measure was shot down in a 3-2 vote, with only Tait and Vanderbilt voting for it.

Anaheim’s city charter makes it illegal for the Council to incur debts over $50,000 without a citywide vote, Tait said. But the city circumvents that provision by creating an independent entity, floating bonds under that agency, but then requiring the city to pay back the debt.

That’s the financing mechanism the city used to issue bonds to pay for its convention center expansion, which hooks the general fund for millions of dollars annually.

Tait’s debt measure would have closed that loophole by requiring agreements between the city and other entities that require payment of the other entity’s debt to go before a citywide vote.

“Before you indebt your kids, and your kids’ kids,” there should be a pause, Tait said. “I think that’s the wisdom of our charter.”

City staffers said that the measure would possibly lead to a downgrade in Anaheim’s bond ratings. The greatest impact would be on refinancing, according to Deputy City Manager Kristine Ridge and Finance Director Debbie Moreno. They also cited other impacts, like the inability to take advantage of good timing on interest rates.

Tait disagreed, arguing that, including the anti-tax measure, Anaheim is making it too easy to incur huge amounts of debt, but making it difficult to pay it back. That could lead to a credit rating downgrade, he argued.

“Coupled with that last vote, we’re sending a message, we’re making it really, really easy to borrow and spend… but boy if you want to pay for that down the road, we’re going to make it really tough to put it on the ballot,” Tait said. “I think it’s fiscally irresponsible, if this doesn’t pass, and the last one did.”

Tait suggested exempting refinancing from the measure to address the impact, but the council majority still rejected the measure.

Kring again debated the mayor on the merits of the measure, saying that the convention center expansion was a good investment because of the large shows it kept. Despite the expansion, she said Anaheim lost WonderCon – a comic books and science fiction movies convention — which is moving to the Los Angeles Convention Center and, Kring claims, taking with it $30 million in revenue to that city.

Moreno, the city finance director, pointed out that WonderCon is supposed to be generating $30 million in total economic impact, a significant difference from Kring’s description. Only a sliver of that money would end up in city coffers.

Hotel Subsidies

Lastly, Tait’s measure to put future hotel tax subsidies to a citywide vote revived a years-old debate on the issue.

Murray claimed that the GardenWalk hotels tax subsidy, which allowed the developer to keep 70 percent of all room-tax revenue the hotels generate up to the $158-million cap, would generate over $484 million in new revenue for the city.

Tait called the figure “outrageous” and “silly.” He asked if the city’s planning and community development director, John Woodhead, would stand behind that number, which Murray said came from the city’s website.

Woodhead suggested that the numbers had been “transposed.”

But Woodhead did argue that the subsidy is revenue neutral because, by building the hotels at four-star, or four-diamond, quality, the hotels will generate more room-tax revenue than three-star hotels. The 10 percent the city would get back from the four-star hotels – nearly $1 million — would equal all the room-tax revenue the city would get back under a three-star hotel, he said.

At the end of the term, decades from now, the city would receive all the room-tax revenue from the four-star hotels, he said.

Woodhead also claimed that nearby hotels would also generate more room-tax revenue because they would be able to charge higher rates by being close to the four-star hotel.

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

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  • Smeagel4T

    It is really fascinating how there are these proposals to make it harder to raise taxes, but never any proposals to make it equally hard to lower taxes and run up debt instead. I’m only against the “one-sidedness” of the whole thing.

    Want to make it harder to raise taxes? Okay fine. Then ALSO make it equally hard to lower taxes — which INCLUDES any crony capitalism handouts to corporations. The one-sidedness of the whole thing is a solid recipe for disaster.

    If such a one-sidedness situation were in effect at a company I was running, there is only one way I could intelligently deal with it. I would NEVER lower taxes because I would be denied the flexibility to raise them again if necessary. However since we’re talking about incompetent crony capitalism pay-to-play politicians, we can’t expect them to ever do the non-corrupt thing.

  • David Zenger

    Woodhead suggested that the numbers had been “transposed.”

    Ha. Haha…no wait, that’s not funny, that’s sick. Murray making her policy decisions on backwards numbers. Sheesh.

  • Cynthia Ward

    wait no, I am not done…I missed this part of the meeting.

    Murray claimed that the GardenWalk hotels tax subsidy, which allowed the developer to keep 70 percent of all room-tax revenue the hotels generate up to the $158-million cap, would generate over $484 million in new revenue for the city.

    So if 70 percent of TOT on the site equals $158MM and 20% goes to bond payment for Disney and doesn’t count, how does the remaining 10% kept by the city generate $484MM? Even I can do that math and it doesn’t work!!! What is wrong with these people?!

  • Cynthia Ward

    At this point i would settle for a Charter Amendment requiring truthful statements from staff and City Council, with perjury charged leveled for anyone who knowingly lies during these public meetings. The tone of the meetings would change in a hurry that is for certain. End of soap box.

  • Cynthia Ward

    And Lucille Kring made it completely clear that she has ZERO grip on municipal finance OR reality. She keeps yammering about why the Mayor does not understand “revenue bonds” which have a specific revenue stream and are not an obligation of the General Fund. Uh…the bonds are released and paid by the APFA, and the specific “revenue stream” the APFA is using to make the bond payments is the PAYMENTS MADE BY THE CITY FROM THE GENERAL FUND. The “new money” to make the payments is “anticipated revenue” but it is not set aside money, and if it does not materialize the payments will come from the General Fund anyway. Without the ability to let citizens choose to tax ourselves we may have no choice but cutting services. Back in the 1990s the gate tax was discussed because citizens were already facing a $20MM deficit, and had to enact a utility tax to keep from firing COPS. Yet Disney stood there, hat in hand, demanding the same cash-strapped public put up the infrastructure costs for their expansion, and the public put up ONE HUNDRED PERCENT of those improvements to benefit Disney, our only payoff being the potential tax collected by hotels around Disney because the taxes collected AT Disney are already diverted back out of the General Fund. Well now our Council has yanked what we would have collected on Gardenwalk, and any other growth will (hopefully) cover the bonds for the Convention Center. So tell me again where the economic engine is headed? It isn’t economic development if you GIVE IT ALL AWAY. That’s just stupid.

    • David Zenger

      Kring has made it abundantly clear that she is either militantly ignorant of what those bonds were all about, or she thinks she can get people to believe her natterings by simply reiterating the Big Lie.

      I challenge her to produce the Convention Center revenue stream data behind her statement and to produce evidence that the City Council in any manner attached or encumbered that revenue stream. Let’s see it, Lucille. Cough it up.

      The truth is that those bonds couldn’t have been sold without the General Fund as the debt service source.

  • Cynthia Ward

    Last night was one of the worst yet for inane misinformation.

    The reason the Gate Tax from 1996 was deferred for discussion for 20 years was to provide an out if we could not afford to cover upcoming payments on another set of bonds obligated in 1997. The Series C bonds for the Disney expansion had a set of deferred payments which begin 2017. http://emma.msrb.org/IssueView/IssueDetails.aspx?id=MS83625 thus being able to revisit the issue of Gate taxes in 2016 and reassess where we are at financially made sense. Murray wants to be sure we NEVER get to look at the funding arm that may be needed when the remaining deferred payments come online and we lack the ability to pay them. There are even MORE series in the 1997 Disney bond debt still waiting to load the General Fund with new payments, and I don’t see any if them factored into Debbie Moreno’s best guess projections for the future of the Convention Center, when she says the new payments are the same as what we have now she has skipped that some of what we just renewed for additional debt HAD to be paid down so we could cover the upcoming additional debt. So now we have these balloon payments coming that someone years ago thought they planned for by paying stuff down earlier and paying in phases, and now they stack on top of each other like bricks in a running bond pattern. Is it time to call a Realtor and get out before the idiots pancake out General Fund like the California aquifer?