The Anaheim City Council could end up host to another controversy over giveaways of taxpayer dollars to business interests next week, with City Hall sources saying it will be considering another room tax subsidy for a four-star hotel in the city.
Councilwoman Lorri Galloway said Larry Lake, a developer with Lake Development-Anaheim, is seeking an extension on a $44-million subsidy to build a four-star hotel in the city’s resort district. The subsidy, first granted in 2009, is now in need of an extension to remain valid, the sources say.
Lake’s hotel, which a staff report states is nine stories with 252 rooms, shares some revenue with the city. For example, in the first year of the hotel’s opening, the city would receive up to $1.4 million in room tax revenue, while Lake’s hotel would receive up to $1.9 million, a city document states.
But Galloway says she suspects Lake will be seeking the “Bill O’Connell deal,” which allowed the developer of two four-star hotels near the Anaheim GardenWalk center to collect 80 percent of the room tax it generates for 15 years.
The city would not realize any room tax revenue to its general fund during that period, because the remaining 20 percent would be dedicated to paying off resort district bonds.
O’Connell’s $158-million subsidy led to a heated debate in the community and a City Council split, with Galloway and Mayor Tom Tait lining of against Councilman Harry Sidhu and Councilwomen Gail Eastman and Kris Murray.
Supporters of O’Connell’s subsidy said that it was needed to jump-start development of the hotels and generate thousands of desperately needed jobs. Those against the deal said it was negotiated without any community benefits in return and gives an unfair competitive advantage to O’Connell.
Whether Lake will seek the same deal granted to O’Connell has not yet been confirmed, but there are parallels. A partnership led by O’Connell also received a subsidy in 2009, $76-million over 15 years, but the developers said it wasn’t enough to lure investors to the project. O’Connell’s request for all the room-tax revenue the city can grant was approved by council members in January.
City Manager Bob Wingenroth had recommended against O’Connell’s subsidy because he said it set an unsustainable precedent. Lake’s proposed hotel development lies within two blocks of O’Connell’s project.
“Why wouldn’t he [Lake] ask for the same deal?” Galloway said.
When reached for comment, Tait reiterated his opposition to hotel subsidies in general and said he was “troubled” by the idea. “Anytime one party gets a subsidy over another it creates an unlevel playing field. And that’s not fair to anyone who has to pay the full tax,” he said.
Joanne Abu Qartoumy, an activist who has organized protests against O’Connell’s subsidy, said she would organize community opposition and a show of force at next week’s council meeting.
“I’ve called everybody that I can,” Abu Qartoumy said. “We’re definitely going to have a very big presence of very angry people.”
Lake’s subsidy extension also comes just as signature-gathering for a ballot initiative that would force future hotels subsidies to a vote of the people nears its 22,000 signature goal, according to sources close to the activists. Galloway said she suspects Lake wants to get his extension approved before city residents vote on the charter amendment.
There is a possibility, however, that the subsidy won’t appear on the meeting agenda. City spokeswoman Ruth Ruiz said that agendas go under a review process and are never final until publicly released. That could be as late as Friday evening.
Please contact Adam Elmahrek directly at aelmahrek@voiceofoc.org and follow him on Twitter: twitter.com/adamelmahrek.