Disneyland Asking for Largest Hotel Tax Subsidy in Anaheim History

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When Disneyland officials unveiled plans this week for a massive new luxury hotel in Anaheim, they also applied for a room-tax subsidy worth well over $200 million, which would be the largest hotel tax subsidy in the city’s history.

The proposal calls for a 700-room, 900,000 sq. ft. hotel to be built on a parking lot adjacent to the resort. It would include upscale rooftop dining, two swimming pools with food and beverage service, multiple spas, 24-hr. bell and valet services and a fitness center, among other amenities.

The mega resort’s subsidy request was made under the city’s hotel development incentive program, which allows developers to collect 70 percent of the room taxes generated over 20 years by luxury hotels. To qualify, the hotel must be built to standards that would earn a four-diamond rating from AAA.

An application for the subsidy submitted by Disneyland states that the first year of operation would generate $14.7 million in room tax revenue, 70 percent of which – or $10.3 million — would be rebated back to Disneyland.

And that’s only the first year – rebates could be much higher in future years as room rates increase. The subsidy could dwarf a highly controversial subsidy granted to the developers of two luxury hotels near the GardenWalk outdoor mall that was worth $158 million. While the GardenWalk subsidy was capped at that amount, there’s no limit to how much room-tax revenue Disneyland gets to collect under the city hotel incentive program’s new rules.

If the Disneyland subsidy and tax rebates for two other planned hotels are approved, the city will have granted $700 million in tax subsidies to hotel developers since 2013, according to figures produced by the city and the hoteliers.

Mayor Tom Tait called Disneyland’s request and other large hotel tax subsidies “insane.”

“[$200 million] is a massive amount of money given our entire general fund budget is $300 million,” Tait said, adding that the city “writing a check to Disney for $15 million a year for 20 years — coupled with tens of millions in other subsidies to hotel developers — is going to have a massive negative impact on our ability to deliver vital services.”

He also balked at Disney making this request less than a year after the Anaheim City Council in a narrow vote agreed to give Disneyland any and all revenue generated by city taxes included in the price of admission to the park. There aren’t currently any taxes on Disneyland tickets, but the city has changed its electoral system and a new, progressive council would be more likely to try and levy a tax.

Disney is building Star Wars Land in exchange for the tax protection.

“Disney of all entities doesn’t need city funds to build this hotel,” Tait said. “There’s no reason why the city would ever do this, no legitimate reason.”

Councilman James Vanderbilt wasn’t nearly as strident as Tait, but made remarks indicating he is unlikely to vote for the subsidy.

“I evaluate [tax subsidies] on a case by case basis, but in general I’m more in favor of subsidizing projects most Anaheim residents can take advantage of,” Vanderbilt said.

Members of the city’s council majority, which includes Councilwomen Kris Murray, Lucille Kring and Jordan Brandman, have routinely supported the tax subsidies. None of them returned calls seeking comment.

Disneyland says the subsidy will ultimately provide an economic boon to the city. The resort’s subsidy application states the hotel will produce 1,500 jobs during construction and an additional 1,150 full-time jobs related to hotel operations, including retail and restaurants. And a Disneyland spokeswoman said in a statement that the resort was “excited about our proposal to build the first Disneyland Resort hotel in 20 years.”

“This new flagship hotel would create thousands of jobs and benefit Anaheim with more than $750 million in additional tax revenue over the next four decades, while helping the city reach its stated goal of attracting more high-end visitors,” a statement said.

Other hotel subsidy requests in recent years have been hugely controversial.

A council vote in 2012 to grant the $158-million tax subsidy for the GardenWalk hotels created a significant rift among council members and sparked an angry backlash from many residents and activists. They questioned why the city would be giving away taxpayer money when city streets were crumbling and services for poorer residents were underfunded.

Backers of the subsidy – including members of the council majority, tourism industry representatives and building-trade unions – said the GardenWalk hotels subsidy would trigger construction during the sluggish recovery from the Great Recession, providing badly needed construction jobs.

But resistance to the subsidy was fierce, and a lawsuit alleging that the deal was approved illegally by violating the state open meetings law successfully overturned the deal.

The council ended up re-approving the deal in 2013. And by that time the hotel industry was picking up steam and financing experts said the subsidy most likely wasn’t even necessary to kickstart construction. Council members approved the subsidy regardless of those concerns.

The Disneyland subsidy is the first of three hotel tax subsidies council members could be approving in the coming months. Two other luxury hotels are also asking for hotel tax subsidies – which combined add up to $334 million, city and developer figures show.

City leaders contend such deals are needed because Anaheim is lacking in luxury hotel rooms needed to attract upscale clientele for events at the convention center.

But Alan Reay, president of Irvine-based Atlas Hospitality Group, says such arguments are dubious. Wealthy convention goers won’t be sticking around Anaheim, they’ll be going to places like the Montage Laguna Beach because of its beachside location.

“I don’t care how good a quality hotel you have in Anaheim, you can’t compete with the beach,” Reay said. “It’s a great deal for the developer… I don’t know that it’s a great deal for the city.”

Reay said that city leaders need to consider the amount of tax revenue they would be losing by inking such a deal, and says that the luxury hotels will be taking visitors away from three-star hotels that pay their full freight in taxes.

“Not only am I taking money away from a competing hotel, I’m taking money away from the city,” Reay said.

Reay also speculated that Disneyland was likely to be planning to build the hotel with or without the tax subsidy, and decided to ask for the subsidy now because council elections in November could produce a new council majority that is against hotel subsidies.

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

  • JaySFO

    Disney doesn’t need a subsidy. They are rolling in money.

  • Dadler

    What’s really laughable is the hubris of Disney in even ASKING for this. I hope the city realizes that Disney has absolutely no leverage here. They cannot up and move Disneyland elsewhere, and if they want to build this hotel somewhere else and shuttle people in, fine, let some other city get on its knees for them. Disney is like a bully with two amputated hands here. They could respond to a no vote by the city with absolutely nothing. Zero. This is such an insult that the city should basically tell Disney they’ll get nothing and like it. And from this point on, were I the city, I wouldn’t give them one inch of a break on any financial matter ever again. Disney already enjoys an absurdly low property tax rate thanks to Prop 13, has already squeezed Anaheim for all it can, now they basically want to drink every ounce of the city’s blood. It’s like a psychotic corporate vampire. Eff the mouse.

  • Mark 1911 M82A1 416

    Wow. They make Billions off Star Wars huge profits and want more money from Anaheim. I live in Anaheim and this is BS

  • JoshuaSamuels

    I love Disneyland, but Disney is a multi-billion-dollar corporation. They can pay for this new project and then simply recoup the money from guest usage.

  • techjunc

    The mayor of Anaheim is absolutely right. This request is insane. But we expect America’s corporate leaders to do things that everyone else rightly sees as insane. They are the embodiment of “1% privilege.”

  • DesertSun59

    This is insane. If Anaheim approves this clearly egregious breach of the public trust then they should be nuked out of existence.

  • Veronica Reveles

    I believe I read in the OC weekly that the OC Board of Supervisors had already approved for Disney to have a lease on the land for the parking lots for the park for the next 75 years that freezes the taxes and fees? How much exactly does the Disney Corporation own of the local OC gov’t? It is an election year it might be worth asking. Does this cronyism go all the way to Sacramento?

  • RyanCantor

    Oh come on, people. Clearly Disney can’t afford to build a new luxury hotel in Anaheim directly across the street from a brand spanking new $300,000,000 publicly funded expanded Convention Center and with direct access to two theme parks with a planned $1,000,000,000 expansion.

    It is wholly unreasonable to assume that a multi-national corporation that recently spent $5,500,000,000 opening a new resort in China can open a hotel in its original home market. These people have to make money! How can they do that by charging a measly $450 a night?

    WE NEED TO BAILOUT THIS CORPORATE GOD! IF WE DON’T ANAHEIM WILL PERISH IN A CLOUD OF FIRE AND TOXIC ASH! WE ARE WARNED OF OUR DESTRUCTION AND DOOM NIGHTLY AT 9:35PM! BE WARE! ALL IS LOST WITHOUT TRIBUTE! TRIIIIIIBUTE!

  • Cynthia Ward

    I don’t expect Disney to look out for the taxpayers of Anaheim, it is their job to look out for their stockholders, and if the policy is available to them they blow their fiduciary duty to their stockholders to not request it. I do expect my elected leaders to look out for our interests, and THAT is where this BLOWS because to even put this agreement into policy form is a complete and total violation of the public trust. The policy not only opened the floodgates, it conveniently dropped the feasibility gap requirement without disclosure while staff claimed they were simply making a policy of the previous agreements which is FALSE. So we have EPIC FAIL from both STAFF and a COUNCIL MAJORITY who are playing games with a city treasury misrepresented as healthy and prosperous when it is NOT. But there is a level of LONG TERM FAILURE on the part of Disney that Disney is missing, which shocks me when they are supposed to be business geniuses over there. When you continue to strip clean the finances of the host city where your revenue generating asset is located, sooner or later that inability to maintain the surrounding street scape is GOING TO BACKFIRE ON DISNEY. The Resort may act like its own private bubble world, but when APD is unable to keep up because they lack funding, the bad guys are not locked out of the Resort. When Resort patrons leave their green fenced boundaries, they see a city that is NOT IN ANY WAY visually benefitting from the presence of the Resort, indeed Disney should be EMBARRASSED at how bad the surrounding city often appears, when there should be a sense of civic pride in the place they chose to call home. So from a tactical standpoint, the big money grab from Le Mouse makes sense. From a long term strategic standpoint, the never ending stripping of the public purse is going to have negative effects on Disney as well as the residents. get a clue, Mr. Colglazier, YOU are also surrounded by Anaheim. Does it not make sense to help it be the best it can be?

  • Jacki Livingston

    Not. One. Nickel.

    The taxpayers of Anaheim and California used to be Disney’s bread and butter, and it used to be that they made the park available to middle class families at a price they could afford. No more. Disney is like that mean girl prom queen who is too good to fraternize with the riffraff, but they still want our vote. No. So long as Disney continues to prove, year after year, that they don’t give a tiny little mouse’s behind about the taxpayers of the city, county and state, then we should all return the favor and spend our dollars elsewhere.

  • Jeremy Miller

    I called and found it this is where you can let Disney know your thoughts on this issue. Call guest services at 714-781-4669 or e-mail guest.services@disneyland.com

  • Mike Kennedy

    I love Disney, but this request, if granted, would really be a windfall for Disney and a huge loss for the city. Disney’s execs probably figured, “doesn’t hurt to ask and maybe they will go for it.” The hotel will be built, subsidy or no subsidy.

  • Cynthia Ward

    From what funds are we supposed to “rebate” back 70% of bed tax to Disney? The map shows the hotel located on Downtown Disney parking lot, which is property already subject to the 1996 Finance Agreement. Thus ONE HUNDRED PERCENT of the bed tax from that hotel (just like the Grand Cal resort) and ONE HUNDRED PERCENT of the increased property tax from turning a parking lot into a hotel (just like when they turned a parking lot into a 2nd theme park) GETS DIVERTED TO BOND PAYMENTS for the Mickey and Friends parking structure we are already paying for!! You didn’t think Mickey paid for that parking garage did you? So how does this work? All of that tax goes to the Trust Bank to cover bond payments, and then we calculate 70% of the bed tax that was ALREADY SIPHONED OFF and deduct it in addition to the 100% siphoned due to the ’96 agreement, and pull it from Anaheim’s General Fund to go back to Disney?! Does anyone else see any other way for that to work?

    Someone is standing a little too close to the fireworks launcher over there, to even PROPOSE THIS. You think the hoteliers were afraid of protests shutting down NAMM over the District Maps? you try this, Council Majority, and watch things get uglier than you imagined. There won’t be a Disney property in Anaheim not bombarded with residents carrying bullhorns and banners, and everyone from little kids to grandmothers will be out there doing it, the PR is going to be beyond horrific. Brandman and Kring can kiss their political futures goodbye, there isn’t enough paid political fluff Disney can send to repair the damage on those two. Murray thinks she has a safe seat because an at-large office is hard to recall, but you start putting some ugly headlines out there and it gets a whole lot easier to collect signatures.

    • BeeBee.BeeLeaves

      Yep. Indeed. Point on. Look to a neighboring city to find out how well (rolls eyes) that scheme worked out for us since implemented in 1985 for the benefit of the then Princess Alicante, now Hyatt. And they built it with butt end to us, front facing Anaheim. Symbolic really.

  • astar2b

    Floodgate has opened…

  • Paul Lucas

    God damn man how much can the mouse eat?

    • Philmore

      Judging by the fecal output spread over the residents, an unlimited amount.

  • Jeremy Miller

    Hey Disney – Anaheim residents are not going to stand for this and just wait till you see the push back. It’s not enough that taxpayers paid for your parking structure, paid your employees via the Enterprise Zone credits, had no say in the gate tax vote, are spending millions on a useless streetcar, and get to breath the poison from your fireworks displays every night?