Controversial Ballot Measures on Anaheim Council Agenda

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Anaheim City Council members Tuesday are expected to cast votes on whether to put forth a trio of proposed ballot measures that would significantly impact how the city collects taxes, incurs debts, and doles out subsidies.

On the agenda are Councilwoman Kris Murray’s proposed anti-tax measure; Mayor Tom Tait’s proposed measure to close a loophole allowing the city to incur debt without voters’ consent; and another Tait-backed measure requiring a citywide vote to grant tax subsidies for hotel projects.

Here’s a rundown of the measures – which if passed by the council would go to a citywide vote in the November 2016 general election:

Anaheim Taxpayer Protection Act

Murray’s proposed city 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 has acknowledged that one of the reasons behind her proposal is a ballot measure passed by voters last November that mandates council members be elected by districts rather than by the current at-large format. The new system will be in place by 2016 and is expected to give more representation to working-class Latinos voters in the city’s flatlands.

Murray said she’s been hearing potential council candidates, who she wouldn’t name, supporting proposals for new taxes.

“A lot of the taxes we’ve heard proposed… are regressive in nature,” Murray said.

Opponents of Murray’s proposal say she and other members of the current council majority are worried about adding taxes to the admission price of Disneyland and other entertainment venues to raise money for city services.

Disneyland spent more than $670,000 during the last election cycle to promote Murray and another council candidate while attacking their opponents.

If voters approved 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.

The argument that Murray’s proposal is a specific favor for Disneyland received a significant boost in March when the Orange County Register found that Murray’s proposal coincides with the ending of a prohibition on a possible tax on admission to the theme park.

According to the Register article, the city signed a deal with Disneyland in the 1990s to issue more than $500 million in bonds to finance infrastructure improvements that paved the way for the California Adventure theme park, Downtown Disney, a convention center expansion and the Grand Californian Hotel.

As part of that deal, the city agreed not to impose an admissions tax, a prohibition that extends through June, 2016, the same year that voters are going to decide on Murray’s proposal.

Tait opposes the measure and argues that it would lead to a credit rating downgrade on city bonds, resulting in higher interest rates on the city’s debt.

Tait points to the council’s approval of a $158 million room-tax subsidy for the construction of two four-star hotels and a $180 million convention center expansion financed with city bonds.

He argues that if the city isn’t able to meet its revenue expectations needed to cover the city’s commitments to those projects, then council will have to either raise taxes or cut services. Murray’s proposal will make it more difficult to raise revenue, he said.

“This proposal will tie the hands of future city councils and voters, does not protect residents or bondholders, and is simply not fiscally responsible,” Tait said. “For these reasons, I believe this proposal, if passed, will have a negative effect on our bond rating and as such our future financing costs.”

A memo from Paul Emery, interim city manager, casts doubt on Tait’s argument that the measure would lead to a credit rating downgrade. A city-hired consultant, Public Financial Management Inc., stated that they “would not see a change of this nature today to be an issue that would warrant a rating change,” according to the memo.

Murray’s proposal also has the support of the county’s business and Republican establishment, including groups like the Orange County Taxpayers Association, the Orange County Business Council, Lincoln Club of Orange County and Association of California Cities – Orange County.

“To be clear, this is not about singling out any one tax, but about applying the same high level evaluation on all local taxes, deliberated and clearly supported by a super-majority of council members,” wrote Business Council President and CEO Lucy Dunn in an op-ed for the Register.

Protect Taxpayers From Debt Act

Tait’s proposed measure would close a loophole in the city charter that allows city council members to circumvent the voters when deciding to issue bonds.

As things stand now, the city charter requires a citywide vote for general fund obligation bonds. But that requirement can be skipped if the Council forms a joint powers authority between the city and another council-created entity. This new independent entity can issue debt and require the city to pay it back.

It was this financing mechanism that allowed the city to issue hundreds of millions of dollars in bonds to finance the convention center expansion and other improvements without a citywide vote. A group of residents sued the city, arguing that the scheme was an illegal attempt to skirt the voters, but lost the case.

“Anaheim has a borrowing and spending problem, not a taxing problem,” Tait said.

Tait’s proposed measure would close the loophole by requiring majority voter approval for agreements between the city and another government agency that binds city funds to the payment of debt, according to a staff report. It would not apply to funds “solely derived from electric or water revenues,” the report states.

The council majority, which approved the convention center financing, is unlikely to support Tait’s proposal. They in the past rejected Tait’s moves to have the convention center bonds go to a citywide vote, citing their support for “economic engine” type projects that ostensibly generate more tax revenue than they cost.

“Anaheim is ahead of the curve,” Murray said last year when the expansion was approved. “Two [Orange County] cities are considering a sales tax increase because they are cutting services and can’t make ends meet. Anaheim, courtesy of our resort district, stadiums, the economic engines of our city — we aren’t in that position, we are reinvesting.”

Let The People Vote Amendment

This measure, also proposed by Tait, would require a citywide vote to approve room-tax subsidies for hotel projects.

Tait first proposed the measure in 2012, after council approved the $158-million room-tax subsidy.

Supporters of the subsidy said it was necessary to kickstart construction on the hotels and generate thousands of jobs. But opponents argued it was an unnecessary giveaway of millions of dollars to a developer just as the economy, and the hotel business in particular, was bouncing back from the recession.

That subsidy first created a rift between Tait and the majority of council members that persists to this day. At the time, council members shot down Tait’s proposed ballot measure, arguing that it would scare off new hotel development.

A signature gathering drive to put the same initiative on the ballot in 2012 also failed to meet the required threshold.

“If the city is going to give away tax money to corporate developers, all we want is the right to vote on it,” resident Larry Larsen said at the time.

Murray and others, however, back council-approved subsidies as vital to Anaheim’s economic development strategy.

“I believe we need to take bold steps to secure Anaheim’s fiscal health in the long term,” Murray said when voting a second time to approve the subsidy in 2013.

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

  • David Zenger

    “economic engine” type projects

    The problem is that these engines all seem to be stuck in reverse without back-up from the General Fund; but you’d never know it the way the books are cooked.