Anaheim City Council Approves Massive Luxury Hotel Subsidy Deals

Kaitlin Washburn/Voice of OC

The audience at a the Anaheim City Council meeting in which council members approved more than $500 million in hotel subsidies.

In a move that adds to longstanding tensions between Anaheim’s resort industry and neighborhood advocates, the City Council late Tuesday night voted to approve tax subsidy deals for luxury hotel developers that could end up being worth more than a half-billion dollars.

The subsidy for a four-diamond hotel proposed by Disneyland has the potential to be worth more than $200 million over two decades, which would make it the richest tax giveaway in the city’s history. In addition, subsidies for two hotel projects bankrolled by the multinational developer Wincome Group could be worth as much as $300 million.

Council members — in front of a crowd of both subsidy supporters and detractors — voted 3-1 to approve the deals. Councilwomen Kris Murray and Lucille Kring, and Councilman Jordan Brandman voted in favor, while Councilman James Vanderbilt was opposed. Mayor Tom Tait, a vocal opponent of subsidy deals, had to jet off for a meeting among mayors at the White House before the vote was taken.

With the council chambers filled to capacity, residents waited in the spillover room or outside City Hall. Many left without speaking after waiting for hours.

The companies applied for the subsidies under the city’s hotel incentive program, which allows builders of hotels that receive a four-diamond rating from AAA to collect 70 percent of the room taxes generated by their projects during their first 20 years of operation. After that period, the city would begin to receive 100 percent of bed taxes. Also, any hotelier who upgrades a hotel to four-diamond status gets a 50-percent rebate on bed taxes on that hotel for 20 years.

Subsidy opponents say the program results in unnecessary giveaways of taxpayer dollars that could either be saved or spent on city services that improve neighborhoods.

“These deals would be built without the subsidy…We didn’t even ask them if they need the money and we’re giving it to them,” Tait said before he left. “If we approve it, this is a straight on gift of $550 million from our general fund.”

Proponents of the deal say building a four-diamond hotel would be unfeasible without assistance, and that the deal opens up revenue streams and job opportunities that the city would not have if the projects don’t go forward.

“Disney is by far, exponentially, the highest taxpayer in this city. It has been a windfall for Orange County and the region,” said Councilwoman Kris Murray, during an impassioned speech defending both Disney and the tax breaks. “For sixty years they’ve been an extraordinary partner…and the alternative is going into the wallets of our residents, many who are low income.”

Three Big Projects

Disneyland’s proposal calls for a 700-room, 900,000-square-foot hotel to be built on what is currently a parking lot adjacent to the resort. It claims that the hotel would generate nearly $300 million in room tax revenue over twenty years, $205.8 million which would go back to Disney.

An artists rendering of the proposed Disneyland hotel.

An artists rendering of the proposed Disneyland hotel.

Two local affiliates of Hong Kong-based Wincome Group submitted proposals for hotels that would be situated within the city’s resort district.

The owner of the existing Anabella Hotel on Katella Street plans to bulldoze the existing boutique hotel and acquire a 1.87-acre city property to build an eight story, 634-room luxury hotel.

A second proposal by Goodhope International for a 580-room hotel would be built on the southeast corner of the intersection of Harbor Boulevard and Disney Way.

The developers of all three hotels projects will pay a $100,000 “public benefit” fee toward public improvements around the hotel sites. And at the end of each fiscal year, they will receive a check from the city worth 70-percent of the bed taxes generated by their hotel.

Many subsidy proponents argued that it’s unfair to describe the deals as subsidies because it makes it seem like existing general-fund dollars are being handed out to corporations.

“I’m frustrated when people say its giving away money. It’s money that has not been generated that is not in the general fund,” said Jill Kanzler of Support Our Anaheim Resort (SOAR), a political action committee that has campaigned heavily in support of the hotel incentive program.

Both the city’s police and fire unions also support the tax breaks, pointing to new revenue for public safety during a time when many agencies are reporting rising crime rates.

“I truly believe if it wasn’t for the revenue Anaheim receives from tourism and the resort area, Anaheim would be similar to Stanton,” said resident Jim Adams.

The hotel projects by Wincome were also praised by the county Democratic Party, several elected officials and councilman Jordan Brandman for including project labor agreements that promise to use union labor for construction and prioritize local residents and veterans for hiring.

Disneyland has also agreed to use union labor, including a deal with UNITE-HERE Local 11, which represents hotel workers.

UNITE-HERE, however, said they would not support the subsidies for Wincome because the company has not agreed to use unionized hotel workers, although the union did not contact the company until last week.

Luis Aleman, a member of the Teamsters local 166 and whose father was a union member, said he sympathized with the struggle of union households to find jobs, but saw the hotel deals as ultimately unfair to residents.

“We are saying, if you give the Disney corporation $200 million plus you’ll get a project – I think that’s cruel. You’re trying to rationalize the subsidy by promising the carrot,” Aleman said.  “Anaheim has to be able to invest in their citizens, not just when a big company needs it.”

‘Intentionally Misleading’

Tait gave a detailed presentation that rebuked talking points put out by SOAR, calling them “intentionally misleading at best.”

He called a claim that the resort district generates 50-percent of the city’s revenue a “half truth.” And, he said, much of the money generated by businesses in the resort district flow back to the district through bond payments and other services.

Tait also argued that building one or two three-diamond hotels with no subsidy, rather than one subsidized four-diamond hotel, would generate a better return for taxpayers over 20 years given the significant tax rebate.

“This is a thriving hotel market – the best in decades. We saw how many hotels are going to be built with no subsidy. All a sudden they would stop?” Tait said.

Anaheim Mayor Tom Tait (left); and Councilman James Vanderbilt before the hotel subsidy vote.

Kaitlin Washburn/Voice of OC

Anaheim Mayor Tom Tait (left); and Councilman James Vanderbilt before the hotel subsidy vote.

Tait, Vanderbilt, and others also questioned whether the new rooms provided by the three luxury hotels would end up creating a glut in the overall market.

Assistant City Manager Kristine Ridge said ahead of a 2013 council vote to give a $158-million subsidy for two four-diamond hotels near the GardenWalk mall, the city did an analysis that found the resort area has 2,000 existing four-diamond rooms and that adding an additional 500 rooms would create a market able to sustain four-diamond hotels without subsidies.

The first of the GardenWalk hotels, a planned JW Marriott, would add another 466 rooms and thus meet the projected capacity, leading Vanderbilt to speculate that “we could have saturated that four-diamond capacity.” Subsidies for a second hotel near GardenWalk was approved by the council, although so far there are no concrete plans.

Both Ridge and Planning Director David Belmer agreed.

“I believe that if [the GardenWalk] hotels are built we will have accomplished what we intended to do under the policy,” said Belmer.

Resident Sean Paden echoed an earlier comparison by Tait to Soviet-style central planning.

“Why these three projects, and only these three projects, are getting this kickback…when we just heard staff say that only 2,500 units are needed in the city?” Paden said. “My problem with this program is it’s not pro-market, it’s pro-crony capitalism.”

‘Tsunami of Future Revenue’

Murray gave her own presentation in defense of the tax breaks, where she cited examples of cities across the state that have multiple four-diamond hotels as well as generous tax breaks for developers.

Los Angeles, for example, has 13 four-diamond hotels and gives developers in the downtown area a 50 percent sales, hotel, property and utility tax break for 25 years.

Anaheim Councilwoman Kris Murray speaks in favor of hotel subsidies.

Kaitlin Washburn/Voice of OC

Anaheim Councilwoman Kris Murray speaks in favor of hotel subsidies.

Murray pointed to five other cities in the county that have or are considering sales tax increases. The Anaheim resort district, especially Disney, has given the city the unusual ability to avoid taxing citizens for services through hotel bed taxes, Murray said.

“Five cities in Orange County are looking at sales tax increase, a regressive tax to fund services and we don’t even have to consider it because of our resort,” said Murray. “[We] have this incredible investment and tsunami of future revenue that will ensure a sustainable budget that is far more recession-proof.”

Councilwoman Lucille Kring added that hotel developers would take their money elsewhere without tax incentives.

“Anaheim competes for investment. That is why we have not seen a four-star built here in fifteen years,” said Kring. “Disneyland Hotel was awarded a four diamond rating after massive renovations, so we’ve had to work to entice four diamond hotels.”

Tait left the meeting at 9:45 p.m. to catch an overnight flight to Washington, after he was called by the White House Monday to attend a last-minute summit about re-building public trust with law enforcement.

After nearly five hours of public comment and presentations, Tait requested the council continue the action to their next council meeting, but that vote failed 3-2, with Tait and Vanderbilt voting for the continuance.

The three votes went forward without the mayor, with Vanderbilt approving the projects but opposing the tax breaks for each project.

Contact Thy Vo at tvo@voiceofoc.org or follow  her on Twitter @thyanhvo.  

  • Jacki Livingston

    The fact is, Disney owns Anaheim, right down to the council members’ knickers. This is garbage. Disney insults the residents with one hand, by pricing themselves out of the reach of middle class families, but they want those same overtaxed residents to support them as they build yet another lousy, dirty, substandard dump. They buy off the politicians, so they get the votes to get rid of private homes for visitors to use, and now to get freebies paid by taxpayers they openly despise. Recall!

  • kburgoyne

    In the world of business I’m finding it pretty far fetched to envision two businesses getting together, one saying “you fork over $200M”, and the other immediately rolling over and saying “sure, why not.” Why in these giveaway do we never hear something at least like “they asked for $200M, we counter-offered with $100M.”

  • kburgoyne

    Hey, just so long as the tennis courts get their funding.

  • Angel Perea

    MORE INCONVENIENT TRUTH: So “Councilwoman Lucille Kring added that hotel developers would take their money elsewhere without tax incentives.” Really? The hotel developers will take their money investment away from Disneyland magnetic area? Really? Such BS non-sense! This City Council insults the intelligence of the tax payers. Maybe an investigation of Qui pro quid deal is the mix? Hum.

    • kburgoyne

      Plus they never seem concerned over negotiating how much is enough to stop them from going anywhere else (assuming they even would).

      I actually have no desired to attack Disney(land). They’re a huge local business that employes a lot of local people, brings in a lot of tourist dollars, and offers the population a service which clearly their attendance numbers show is in high demand.

      As a business they’re simply coming to the city to see what they can get. Frankly, that’s just good business. The problem is on the city’s side and the council lacking responsible business sense. Where is there even a resemblance of negotiating? It’s the city council that’s completely and totally failing to engage in good business.

      Imagine Disney going to a large contractor to say “well might give you the contract to build the hotel if you slash your bid by $2M.” No responsible business is going to respond with “sure, why didn’t we just think of doing that right up front?”. The business is going to respond with “what if we make it $1M” or something along those lines, or let’s look at other adjustments to the arrangements.

      • Philmore

        Remember the Angels Lease Fiasco ? “Everything the Team Owner Wanted” was presented BY THE CITY (‘s hired “consultant” – NOT by the Team Owner !) as a STARTING POINT ! STARTING with Total Capitulation eludes me as a negotiation tactic, but CERTAINLY fits the template for the perfect mix of Corruption and Incompetence.

    • Angel Perea

      KEEPING IT THOUGHTFULLY HONEST: To avoid the expense of a future need of a Recall election, maybe it is time to now elect new members to represent your taxpayer interests on the City Council. Send a message that of NO MORE FREE STUFF!

    • Philmore

      Perhaps you missed the chart-topping “Lucille’s Greatest Hits !” ? Here’s another cut.-
      We HAVE to build these hotels, because we are losing ALL the business from Sports Players who come here, but lodge elsewhere (Orange Coast, LA, etc.) to escape the ‘Disney Kids crowd’ in an ‘adult’ atmosphere.
      Well, how, pray tell, would that SOLVE the ‘problem’ and not ADD TO IT, since Disney’s ADMISSION HIKES have not dampened the OVER CAPACITY crowds of the 1% seeking fun for their kids ? (Though done WELL for the cash registers !) Restaurants tried ‘adults only’ zones a while back for quiet, and got SUED for DISCRIMINATION, so neither CURRENT nor FUTURE hotels NEAR THE PARK can AVOID filling with “Disney Kids’ BECAUSE Disney is HERE, and seeking to avoid them cannot HELP but drive those guests ELSEWHERE. ALSO, NOWHERE did Kring (or anyone else) attempt to QUANTIFY that loss to see if it would support even a FRACTION of a hotel’s business. HAH ! Numbers ! — WHO NEEDS ‘EM ?? NOT the Council Majority !

  • Angel Perea

    THE INCONVENIENT TRUTH: A formal motion maybe required by this Council to rename: The City of Disney at Anaheim! Hum..

  • Kathleen Heard

    I knew this was going to happen but it still hurts. It makes me so angry to think of the public funds just given away and the community goes without. This council will forever be known as the council that destroyed Anaheim at the request of a corporation that could not see beyond its own greed.

  • David Zenger

    “‘Anaheim competes for investment. That is why we have not seen a four-star built here in fifteen years,’ said Kring.”

    No, we have not seen a four star hotel built in 15 years because nobody wanted to build one – until they were offered a massive government subsidy offered them to remove the risk that is supposed to make capitalism work.

    And a PLA? Driving up the cost of the project because the taxpayers are financing the hotels and you wanted union support for the heist. Really?

    You and Murray should just change your party affiliation so you can openly cheer the PLA, along with Brandman and the Democrats.

    • RyanCantor

      Hmmmm. Did anything happen about 15 years ago that kinda sorta devastated tourism?

      9-11? Oh. Right.

      THAT’s why there hasn’t been a new 4 star hotel. 9-11 and a freaking global recession. Duh.

  • Cynthia Ward

    When did Obama get subpoena power?

    • Philmore

      My guess is in an Executive Order to himself.

  • Cynthia Ward

    Disney learned long ago that it is cheaper to buy a Council than pay for their own projects. The return on THEIR investment is substantially higher than return on OURS. Anaheim put in half again more than Disney in their last expansion. Disney spent $1BB on the 1996 agreement. Taxpayers will fund $1 1/2 BB until 2037. Right in our own budget docs it says 100% of TOT sales and property tax on Disney property goes to pay the bonds. That is in place for the life of the bonds unless Finance Director Debbie Moreno wants to show where in the agreement it says otherwise But Moreno ain’t talking and neither is the Council majority. Disney now has the right to demand 70% of money we don’t keep, so that 70% will come from the GENERAL FUND. But Please, Jill Kanzler, tell me how frustrated you get at people telling the truth, I don’t see you advocating for Newport to give away money needed to keep your precious island from flooding but it is OK for them to not fix my sidewalks? So that you can get a bonus? How about SOAR’s uber shill, claiming his expertise as the former Chair of the Budget commish who fails basic math 101 because he doesn’t know where our money GOES. Lucille, you were right about ONE THING. You can’t give away what you don’t have. Oops, looks like you CAN.

    • David Zenger

      “You can’t give away what you don’t have.”

      The biggest lie of the bunch, but basic PR spin. Why didn’t Kringle say: you can’t encumber revenue you don’t have, yet. Then everybody who’s ever bought any thing on credit would know what a shameless liar she is.

      • RyanCantor

        Well, that’s what happens when folks without a cornflake of economic competency get elected.

        This isn’t giving away what Anaheim doesn’t have– but of course you can give away what you don’t have. Nicely stated, Dave.

    • cynthia curran

      La does the same thing with tax breaks for hotels. Disneyland’s taxes are exaggerated they get prop 13 and instead of hiring 29,000 its more like 10,000 full time year around. They hire a lot of folks seasonal that make money as a 2nd job. Disneyland has a lot of challenges in 10 years. Arizona, Texas and New Mexico are going to fly people to space for lots of money in the next 10 years which makes Disneyland looked dated. Tuscon has world enterprises that is going to fly people in a balloon to the edge of space. Not everyone can afford if but thousands will probably go to Tucson Arizona to see it or use a certain device to view the folks in space. I told the politicians in Anaheim about virtual reality which could make any state or city have a tourist industry or space tourism and so forth coming in the next decade that could really hit into Disneyland’s profits.

  • RyanCantor

    I’m going to be blunt.

    Anaheim just failed a very basic intelligence test.

    Giving away $560,000,000 for absolutely no reason is by definition stupid.

    This wasn’t an incentive, it was a giveaway. Disney and Friends paid to put three people in office, who turned around and gave them public money.

    Why? Because they can.

    The real question is who will still care in November. Lucille Kring and Jordan Brandman think Anaheim is so stupid that most voters will either believe their completely unsubstantiated tripe or forget about a half billion dollars being given away.

    I bet they’re right. They’re going to finance their reelection with dollars from construction unions and Disney’s surrogates while mostly brown kids will be playing soccer on dirt fields in the flatlands of Anaheim . . . And who will care? Five months from now they’ll spend $150,000 a piece of the same people’s money who just raked Anaheim taxpayers over the coals, right in front of everyone’s faces.

    Seriously. Who is going to care?

    • David Zenger

      No one ever gives a lot of thought to the idea that public money is handed over to people like the Disney who just recycle some of it back at election time. The beneficiaries of the grift don’t even have to spend their own dough on electing puppets. They do it with our money.

  • David Zenger

    I often wonder how people like Kris Murray and Jordan Brandman can look at themselves in the mirror. Then I remember that the face looking back at them is Curt Pringle.

    • Kathleen Heard

      You are absolutely right.