Anaheim Council Approves Another Hotel Subsidy Deal

A boutique hotel in Anaheim, where the city council approved another tax subsidy for builders of luxury hotels. (Photo credit: Expedia.com)

A boutique hotel in Anaheim, where the city council approved another tax subsidy for builders of luxury hotels. (Photo credit: Expedia.com)

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The Anaheim City Council Tuesday night approved a major tax break for those who build luxury hotels in the city, with the three-member council majority arguing it would ultimately triple the city’s hotel tax revenue by encouraging more wealthy visitors to stay in Anaheim rather than upscale hotels in neighboring cities.

Mayor Tom Tait and Councilman James Vanderbilt voted against the citywide subsidy, which gives newly constructed four-diamond hotels 70 percent of the room tax they generate for 20 years.

Tait described the deal as another example of “corporate welfare” in Anaheim.

Existing hotels that upgrade their amenities would get a 50 percent subsidy, according to a city staff report, and developers would be required to give Anaheim residents preference in hiring.

The council approved a similar subsidy deal in 2013 for two luxury hotels planned at the Gardenwalk mall by developers William O’Connell and Ajesh Patel. Under that deal, the city will give back to the developers 70 percent of the room tax revenue generated by those hotels in their first 15 years, or an estimated $158 million in tax revenue.

The Gardenwalk subsidy prompted outcry from Tait as well as some residents and community activists who say it amounts to a giveaway of taxpayer money better spent on neighborhood improvements and other services.

Tuesday night’s meeting drew a strong showing of building trade union leaders, who said the subsidy would draw in new construction projects that would generate jobs and careers for Anaheim residents.

City staff and Anaheim Resort business leaders also argued that encouraging upscale hotels would triple the city’s hotel tax revenue in the long run, and ultimately boost sales and property taxes in the resort area.

Taxes on hotel rooms accounts for $123 million in general fund revenues a year, according to a city staff report.

A few residents turned out to voice their opposition to the subsidy.

Yesenia Rojas, a 25-year resident, brought up the condition of Anna Drive, a neighborhood that became the center for a debate about inequality in Anaheim after a fatal officer-involved shooting in 2012.

“Nothing has changed on Anna Drive. You guys are talking about hotels, corporations, blah blah blah, but what happened to the neighborhoods?” Rojas said. “Some of the corporations should come to Anna Drive.”

Resident Richard Ward questioned how the everyday Anaheim resident would benefit from the tax subsidy.

“[The argument] that the other residents and non-resort businesses who make up the general fund somehow stand to benefit from giving to rich hoteliers — to what, build luxury hotels and pamper the wealthiest guests of our cities?” said Ward. “We’ve already been giving up too much for too long.”

Tait disagreed with the council majority’s claims that the subsidy would more than pay for itself, calling it “financially disastrous.” He questioned whether there would be the demand for upscale hotels, and if it would be more worthwhile to invest in three start hotels where the city can collect 100 percent of tax revenue.

Deputy City manager Kristine Ridge said luxury hotels are able to generate more revenue because they not only charge more, but also have steel structures and can accommodate more rooms.

Tait said government shouldn’t be involved in “corporate welfare” and said that, if there’s a market out there for luxury hotels in Anaheim, developers would come on their own.

“If the market demands a four diamond [hotel], people will build it. If they want to build it, put their own money at risk, not the people’s money at risk,” Tait said.

Councilwoman Lucille Kring bristled at Tait’s argument that the hotel tax incentive amounts to a giveaway of taxpayer dollars, given that it would apply to new construction and dollars the city currently does not have.

“This is all money predicated on people opening a four diamond hotel…we won’t get it until the hotels are built,” said Kring. “70 percent is a lot of money…but we’re getting a lot back from these developers.”

She said Anaheim is already losing wealthy visitors to cities like Newport Beach and Dana Point, and with an expansion of the Convention Center underway, the city should anticipate more convention-goers in need of a hotel room.

“We have baseball players who come here to play against the Angels and they go to Dana Point or Newport [Beach]. Business people do not want to go to a Disney property with screaming kids,” Kring said.

Vanderbilt, Tait’s only council companion in opposing the subsidy, said he would like to see the city prioritize economic incentives for businesses that directly affect Anaheim residents, such as grocery stores.

“I’d rather have economic programs that are more tangible for everyday citizens,” said Vanderbilt. “I’d like to see those kinds of economic development first instead of what speaks to the high end, the caliber I don’t necessarily represent.”

Contact Thy Vo at tvo@haverford.edu or follow her on Twitter @thyanhvo.

  • Josh McIntosh

    As a former Front Desk agent at the Doubletree Hotel in Orange, I will say there is at least one good reason these professional ball players do not want to stay in a family friendly hotels near Disney. The ball players are generally not family friendly people. They are arrogant, unapologetic, overpaid, jock types that will forever keep their high school mentality. They are not going to sign an autograph for your kid if there’s no camera in the room. If they’re not getting an endorsement for it, they don’t care. I lost all respect for the majority of ball players in those years. There were a few exceptions and some of the guys were down to earth, nice guys. We had a contract where 90% of the ball players stayed at the Doubletree Hotel when playing the CA Angels. Most of these guys had their hooker-escort-girlfriends arranged to meet them when they arrived in town. I expect that they have a different lady and perhaps some kids, in every city. We were aware of this, as were the team managers, so we always arranged for a whole other floor for the “Family guys” who traveled with their wife and kids, so they were away from the hooker happy team mates. We had a local pimp, who went by the name Sammy Davis, that knew a good half of the players and ensured they had a girl lined up when they arrived. The hotel industry is aware this goes on and they fight to get those team contracts. As a seasoned Front Desk / Concierge in the Disney Resort area, I can tell you a lot of other shady business that goes on but that’s another story. Shame on the Anaheim council members who support this corporate welfare. You are showing your true colors. You’re not interested in your city and your residents’ needs. Hopefully, the paper trail follows you and we see whatever contributions the hotels have offered you for your vote of support. I just hope the residents of Anaheim who bother to pay attention and vote, will exorcise you from your positions and you will have to find a job where you cannot throw away millions of dollars.

  • CitizensForAnimal Shelter, OC

    There have been two Orange County Grand Jury reports just this year alone on the County Animal Shelter, the 2nd one issued just today making it a total of five Grand Jury Reports. The largest percentage of animals impounded at the county shelter are from the city of Anaheim. The largest percentage of animals killed at the county animal shelter are from the city of Anaheim. The Orange County Board of Supervisors have failed to replace the 74 year old antiquated (the first report this year pointed out the roof is about to fall in) and unhealthy animal shelter, yet the City of Anaheim continues to contract with the county. What a disgrace to this county and failure in stewardship.

    http://www.ocgrandjury.org/pdfs/2014_2015_GJreport/Shelter_Performance_V8R2_web.pdf

  • Philmore

    City Staff, Kring, and her “Giveaway 3” cohorts have the luxury of attempting reason in a parallel universe where facts and logic can be cut and bent to order, while unfortunately dispensing scarce tax money like water in THIS one, THE ONE WITH REAL CONSEQUENCES!
    Wanting to avoid the hazardous and unfamiliar ground of mathematics, (“My husband handles the checkbook at home”)Kring repeatedly referred to business captured from hypothetical ballplayers who stay at coastal 4 star rooms to’ avoid screaming kids at Disneys’ existing 4 star hotels. Well, these SAME KIDS and families will be PERFECTLY FREE to stay at any ‘new’ hotels, so please explain how we THEN attract ballplayers business? I have heard NOTHING about an ‘Adults-Only’ motel ! Beyond Kring’s imagination, Has anyone ASKED some REAL players WHAT their basis for room selection is? (And HOW can we know those WON’T be ballplayers’ kids? ) Perhaps it has NOTHING to do with Anaheim, or WITH a fondness for coastal BEACHES? Has anyone done ANY market studies? I guess Kring and Co feel data is a distraction from an engaging story? Or IS IT vise versa?
    Mayor Tait’s numericly-based observation that 3 star rooms net the City MORE, immediately, and continuiously, than net-of-rebate 4 star rooms was countered with belief that the higher ROOM COUNT of 4-star hotels would boost the total receipts. HOW THEN, is that reconciled with Economic Development Director Woodhead’s admission that minimum rebatable hotel size was ONLY 250 rooms, ” to capture “boutique” hotel chains”? In THEIR universe, I guess you CAN have it both ways? Similarly “property and sales tax” can be EITHER a supporting addition, or ‘de minimis’ when the moment requires? In THIS world, where their OWN information conflicts, I see only math-illterates praising the fine tailoring on the Emperor’s New Clothes. The ‘flash mob’ of self-interested Resort Industry and Union cheerleaders packing the audience and podium probably still don’t realize that THEIR OWN ACTIONS showed the HOLLOW nature of their “City support”, as they characteristicly FLED THE CHAMBER en mass after winning ‘THEIR’ vote, to leave a TINY audience for the City”s ANNUAL BUDGET HEARING and VOTE, for which one might think “CITY Supporters” might have had even some interest.
    The crowning disgrace is the G-3’s characteristic self induced hysteria to open the floodgates City wide to a blank check “solution” that may not even HAVE a problem, and whose GardenWalk ‘test case’ does not even yet exist, let alone SHOW PROOF of success. This is not vision, but the same hysterical mindset that self induces drug overdoses over impatience for relief, tragicaly risking here not one victim, but 349,000.

  • astar2b

    Psst Arte Moreno: The Anaheim City Council is in a very generous mood…

  • Cynthia Ward

    Last night was downright ugly. The disconnect
    between many Anaheim residents and the “business sector” SHOULD NOT BE as contentious and nasty as it has become. But to go along with a majority vote we may not agree with, respectful deliberation requires offering at least a
    passing attempt at valid and plausible reasons for those conclusions, based on some form of source material that makes sense. These days, the City Council has become so arrogant in their power as a voting block that even that last shred of respect for their constituents has gone out the window. The justification offered for decisions that were clearly made long before they entered the room is so factually vacant and unreasonable that it insults the intelligence of any thinking person subjected to this load of horse manure passed off as “policy.”

    I don’t know how staff or Council keeps a straight face while saying this stuff. But the Council’s thin skin and bristling retorts to even respectfully presented views not in lock step with their own tells us plenty about whether they believe what they are saying, or prompting their poor cornered staff to say. Watch how often they HAVE to get the last word in, never mind they have the bully pulpit, never mind they get to vote in complete disregard for the views of constituents who have repeatedly opposed these giveaways, it is not enough to WIN, they have to win and silence their opposition. Last night Kris Murray even barked at me for holding up a protest sign…her snotty remarks failing to address the issue written on the sign and going straight for the personal attack. Kris Murray is not required to like me, I rather prefer she didn’t because I would question my moral compass if she did, but she DOES owe me and the others who took the time last night to attend the meeting at least the respect due us as taxpayers and constituents.

    I don’t think they ever watch the videos to see just how small and mean they appear. Political opponents need only string together a series of video clips of these “public servants” interacting with the public during these meetings. It’s like, “thanks for voting me into office now go away and let me do as I please, even if it contradicts my campaign platform that misrepresented the product you believed you were getting”

    We can agree to disagree, that is how the system works, and the fact that this Council uses as a baseline for “greatness” the trappings of public expenditures borrowed from our grandchildren is a matter for voters to address, making it clear that many of us have a people-over-things based values system not represented by the current Council. But between now and the next election, what the Council does NOT have the right to do is LIE to constituents, or prompt untruths from staff in justification for their crony capitalism. There is a legal term for knowingly using false information to induce others to take action or engage in expense they would not otherwise approve. And Murray can shout back at the taxpayers in Chambers all she wants, I want to someday see her attempt that with 12 of her very carefully selected “peers” who will be unmoved by her petty little self-defensive tantrums.

  • Jon Cassidy

    Wouldn’t be surprised if the local hiring preferences violated the privileges and immunities clause.

    • Cynthia Ward

      Interesting thought, does it cover commercial contracts, or only basic Constitutional rights? But I would love someone to look at laws prohibiting the creation of an unfair business environment for those hoteliers who have units under construction and are now subject to having the investment made in good faith cannibalized by a policy created after the existing hotels were under construction. There are no protections in the policy to require room rates be collected at a set percentage above ADR, they instead set the standard at the built environment, with minimum standards for the shell, fixtures and furnishings, and compliance with the STANDARDS cited by AAA for a 4 diamond hotel, but no requirement for outside verification of that, especially as an ONGOING obligation, and I need to reread the docs but i don’t recall seeing any provision to rescind the subsidy if the hoteliers fail to maintain the standard. They set up a system that does not deliver as promised, and then dismissed all reasonable attempts to reconsider those portions of the policy that fail. What incentive did they just give for any business to invest in Anaheim, when your competition can come in and get approved for special treatment that undercuts your investment, using tax dollars needed to maintain and improve the city itself? So how do these people think they will create a “world class city” when parks go begging for reseeding and graffiti removal stalls for lack of funds? Jordan Brandman had the nerve to call this the “Anaheim Way.” That is an old, old Anaheim phrase that he misuses routinely, trying to play himself off as Old Guard Anaheim. He fails as badly as his hotel policy.

      • Jon Cassidy

        If the city made a bunch of findings as to why its hiring policy is necessary, the courts might give it a chance, but this sort of thing has been struck down repeatedly, according to a quick bit of research I just did. I think your arguments show just why this is a rabbit hole. To enforce it, you’d end up with all sorts of absurd inspections and paperwork. I see city thread count inspectors. And it’s wildly unfair to existing hotels and hotels under construction. It’s crony capitalism, plain and simple.

  • Smeagel4T

    The 15 year subsidy is PERFECT for the hotels. 15 years is just the right amount of time before the hotels get worn out and need remodeling — at which time they can get another 15 years of corporate welfare from the city.

    So uhhh… I don’t suppose the council bothered to be SPECIFIC about where else these hotels were REALLY going to be building, and did any kind of business analysis in regard to whether the hotel building someplace further from Disneyland and the convention center actually made any kind of business sense.

    And uhhh… what precisely is the follow-up plan to confirm the hotels are giving hiring priority to Anaheim residents. Or does that simply fall under the “trust us” heading as usual? And are these jobs for anyone higher up than a room cleaner? Is it even legal to deny employment to somebody else because they don’t live in Anaheim?

    And of course “given preference” never beats out “race to the gutter” when it comes to wages. If two applicants will both take $9/hour then the Anaheim applicant wins. But if the other applicant is willing to take $8.75/hour then “given preference” no longer comes into play.

    Of course if the Anaheim applicant is then willing to take $8.50/hour there is no need for “given preference”. And if the other applicant is willing to drop to $8.25, again “given preference” no longer comes into play.

    So basically, “given preference” is meaningless without other guidelines. For example, if “given preference” meant agreeing to pay an Anaheim resident $1/hour more than a non-Anaheim resident, then the concept has some meaning. Whether or not such a deal could be challenged by the non-resident is certainly open for consideration.

    Of course having a non-resident challenge the deal and get it thrown out in court is precisely what the hotel would want. They’d have the tax breaks and be able to tell the city “gosh darn, not our fault we couldn’t live up to our end of the deal.”

    Doesn’t really matter. The whole “given preference” part of deal was either blatant incompetence by the council members, or a flavorless dog treat being thrown out to try and make the Anaheim voters think the council members cared. “See, we were looking out for you. No need for torches and pitchforks.”

    Amazing how these council members never include any “teeth” in the deals like requiring the businesses perform to a certain level BEFORE they get the welfare. It’s always “here’s your corporate welfare, we don’t care what comes of it.”

  • RyanCantor

    Hundreds of millions of dollars down the drain because Anaheim loses ballplayers to Dana Point?

    #stupid.

  • Paul Lucas

    Kudos to Mr Tait and Mr Vanderbilt for holding the line. You are to be commended for your steadfast stewardship.

  • Paul Lucas

    Geez i thought the city turned corner with the garden walk deal and wouldn’t do this again. I guess i was mistaken.

    • Philmore

      New City Motto- “Nothing Exceeds like Excess” !

      • David Zenger

        Well done.