Anaheim community activists filed a lawsuit Wednesday to block a $158-million tax subsidy for a hotel developer, alleging that the subsidy is an illegal gift of public funds and violates state law and the city charter.

The lawsuit is part of a new, two-pronged approach by activists, residents and union representatives to reverse the subsidy, which was granted by a 3-2 council vote Jan. 24. In addition to the lawsuit, activists are also calling for a referendum on the subsidy.

The filing of the lawsuit followed a rally at City Hall Tuesday afternoon demanding the referendum, shouting slogans like “Let the people vote!”

The subsidy allows the developer of two proposed four-star hotels at the GardenWalk center to keep up to 80 percent of the hotels’ room-tax revenue during the first 15 years the hotels are open. Supporters say the subsidy was needed to attract investment to the project and kick-start construction. The hotels are vital to increasing business at the city’s convention center, supporters assert.

Proponents also say that the project will create 3,200 construction jobs and 1,300 permanent jobs, increase sales and property tax revenue to the city, and after 15 years produce $20 million a year in new bed-tax revenue for the city.

But opponents of the project argue that the city negotiated nothing in return for the subsidy, leaving no guarantee that the jobs will provide living wages to Anaheim residents. They also say the public was left in the dark before the council voted.

Leaders with Orange County Communities Organized for Responsible Development (OCCORD) and the Latino group Los Amigos of Orange County sent a letter to the city demanding a written response by the end of last week to allegations listed in the lawsuit. Leaders of the groups said the deadline passed with no response from the city.

“This lawsuit will guarantee that regardless if the people have their say [by referendum], they will have their day in court,” said Eric Altman, executive director of OCCORD.

Residents have expressed frustration about how the City Council fast tracked their decision. Normally, council members would direct staff to write the subsidy agreement and bring it back for another council vote. But in the case of the subsidy, staff was asked to write and execute the agreement within a few days.

At Tuesday’s regular City Council meeting, Councilwoman Lorri Galloway – who with Mayor Tom Tait voted against the subsidy – asked staff to place discussion of a possible referendum on room-tax subsidies on the March 6 council meeting agenda.

City officials say that, in order to hold a referendum on the GardenWalk hotel subsidy, about 14,000 residents must sign a petition and have it submitted by Thursday, March 1.

According to Galloway, however, the council can vote to call a referendum. The deadline for that decision, Galloway said, is March 9.

“Whether I get three votes, that remains to be seen,” Galloway said. There may be liability issues in calling for a referendum to break the subsidy agreement with the developer, she said.

Meanwhile, council members met with interim City Manager Bob Wingenroth behind closed doors Tuesday to evaluate his performance, part of a rare, three-hour closed session.

There had been speculation by City Hall observers that Councilwoman Kris Murray scheduled the review in response to Wingenroth’s recommendation that council members reject the hotel subsidy.

It is illegal for council members to talk about closed session discussions, but Galloway said that the speculation has “not been off base.”

“I wish you knew,” Galloway said.

Murray, however, said that she did not schedule the review because of any concern about Wingenroth’s position on the subsidy. “I think Bob is a man of integrity with a deep commitment to the city,” she said.

“I called for it so we could talk about a host of issues during his tenure as city manager,” Murray said. “We have not had that touch base with him since he was appointed.”

Eastman backed Murray’s assertion that the speculation has been wrong.

“It was an attempt to have an opportunity for all of us to be in the same room and speak frankly about the events over the last three months in the same place and make sure we’re all on the same page going forward,” Eastman said.

Please contact Adam Elmahrek directly at and follow him on Twitter:

Since you've made it this far,

You are obviously connected to your community and value good journalism. As an independent and local nonprofit, our news is accessible to all, regardless of what they can afford. Our newsroom centers on Orange County’s civic and cultural life, not ad-driven clickbait. Our reporters hold powerful interests accountable to protect your quality of life. But it’s not free to produce. It depends on donors like you.

Join the conversation: In lieu of comments, we encourage readers to engage with us across a variety of mediums. Join our Facebook discussion. Message us via our website or staff page. Send us a secure tip. Share your thoughts in a community opinion piece.