As debate continues over a controversial, $158-million tax subsidy granted last month to the developer of two proposed hotels in Anaheim, critics now are questioning why the city has allowed the developer to keep secret the identities of the project’s investors.
And among those critics are Anaheim Mayor Tom Tait and Councilwoman Lorri Galloway, the two council members who voted against the subsidy.
“When there’s a taxpayer subsidy, I think if it’s the public’s money, the public should know,” Tait said.
But because of a confidentiality agreement with the developer, the identity of the investor can’t be revealed until a later date, said the hotels’ developer, William O’Connell. “When everything’s signed, sealed and delivered, I assume I’ll be able to tell who the party is,” he said.
The subsidy plan allows a group headed by O’Connell and Ajesh Patel to build the hotels at the city’s GardenWalk mall and keep up to 80 percent of the hotels’ room-tax revenue for the first 15 years after opening.
With its proposed contribution, the city would in effect pay more than 25 percent of the project’s construction costs, and the investor in the project would realize a nearly 16 percent rate of return, according to a staff report. City staff recommended that council members reject the subsidy.
Jan deRoos, associate professor at the Cornell University School of Hotel Administration, called the city-subsidized rate of return “extremely high.” A normal return, deRoos said, would be about 10 percent.
The investor is rumored to be from the United Arab Emirates, which is no doubt fueling calls for disclosure of the investor’s identity.
O’Connell, however, said that’s not true. “It’s an American company,” he said.
Julie Biggs, an attorney with Burke, Williams & Sorensen and board member at the open-government advocacy group Californians Aware, said that requiring such disclosure would be unusual but the city could negotiate for it if the public wanted to know.
Tait, however, said that it is not at all unusual for parties in a business transaction to demand full disclosure, so it shouldn’t be when a public entity demands it.
“Any investor would want to know who is all involved,” Tait said.