The Anaheim City Council Tuesday night approved a measure for next year's general election that would make it harder for the city to implement new taxes, while at the same time rejecting measures that would hinder the city's ability to incur debt and dole out hotel tax subsidies.
Councilwoman Kris Murray’s proposed charter amendment would increase the number of council votes it takes to place new taxes on the ballot from a simple majority to a two-thirds majority.
Murray said her proposal brings Anaheim in line with general law cities under the jurisdiction of Prop. 62, passed in the 1980s, which mandates that city councils be required to reach a two-thirds majority before allowing the voters to pass new taxes. As a charter city, Anaheim is exempt.
“The voters in Anaheim approved this 30 years ago. I would ask that we give them the opportunity to close this loophole,” Murray said.
However, the timing of the measure has led to speculation that it's being done for the benefit of Disneyland, which poured hundreds of thousands of dollars into political groups during last year’s council race that promoted certain candidates, including Murray, while attacking their opponents.
A 20-year prohibition on an admissions tax for Disneyland visitors ends next year and coincides with a voter-mandated increase in the number of council members from five to seven; as well as a transition away from an at-large voting system to one in which council members are elected by districts.
As a result, the council elected in 2016 is more likely to have members from working-class neighborhoods who are generally more supportive of levying so-called gate taxes on Disneyland and other entertainment venues that would raise money for city services.
If voters approve Murray's proposal, it would take a 5-2 majority to get tax measures on the ballot, a tall order even with a council that might not be as friendly to the city's business interests.
Murray denied proposing her measure to benefit Disneyland, saying that it applies to “all new taxes.”
Mayor Tom Tait, who along with Councilman Jordan Brandman voted against the measure, said that while he might support such a measure in other cities, Anaheim has been on a spending spree that binds future generations.
If rosy assumptions about revenue aren’t realized – the city has commissioned consultants several times to create forecasts that either don’t stand up to scrutiny or end up proven false -- the city will have no choice but to cut services or enact new taxes, he said.
Tait referenced a list of huge new spending initiatives that the council has approved in recent years that total hundreds of millions of dollars and would cost the city tens of millions annually.
Specifically, he referred to a $158 million tax subsidy for a hotel developer; a $180 million convention center expansion; a proposed streetcar line; the new ARTIC transit hub; and a massive unfunded pension liability.
Tait’s arguments triggered a debate among himself, Murray and Councilwoman Lucille Kring on the merits of the proposed measures. Councilman Jordan Brandman didn’t comment on anything, but voted against Murray’s measure.
Councilman James Vanderbilt, considered a Tait ally, also voted against the mayor and with the majority on Murray’s measure.
Tait proposed the two failed measures, the first of which would have closed a loophole in the city charter that allows the city to incur large debts without voter approval; and the second would have forced future hotel tax subsidies to a citywide vote.
The first measure was rejected in a 4-1 vote, with Tait being the lone vote in favor, and the hotel tax subsidy measure was shot down in a 3-2 vote, with only Tait and Vanderbilt voting for it.
Anaheim’s city charter makes it illegal for the Council to incur debts over $50,000 without a citywide vote, Tait said. But the city circumvents that provision by creating an independent entity, floating bonds under that agency, but then requiring the city to pay back the debt.
That’s the financing mechanism the city used to issue bonds to pay for its convention center expansion, which hooks the general fund for millions of dollars annually.
Tait’s debt measure would have closed that loophole by requiring agreements between the city and other entities that require payment of the other entity’s debt to go before a citywide vote.
“Before you indebt your kids, and your kids’ kids,” there should be a pause, Tait said. “I think that’s the wisdom of our charter.”
City staffers said that the measure would possibly lead to a downgrade in Anaheim’s bond ratings. The greatest impact would be on refinancing, according to Deputy City Manager Kristine Ridge and Finance Director Debbie Moreno. They also cited other impacts, like the inability to take advantage of good timing on interest rates.
Tait disagreed, arguing that, including the anti-tax measure, Anaheim is making it too easy to incur huge amounts of debt, but making it difficult to pay it back. That could lead to a credit rating downgrade, he argued.
“Coupled with that last vote, we’re sending a message, we’re making it really, really easy to borrow and spend… but boy if you want to pay for that down the road, we’re going to make it really tough to put it on the ballot,” Tait said. “I think it’s fiscally irresponsible, if this doesn’t pass, and the last one did.”
Tait suggested exempting refinancing from the measure to address the impact, but the council majority still rejected the measure.
Kring again debated the mayor on the merits of the measure, saying that the convention center expansion was a good investment because of the large shows it kept. Despite the expansion, she said Anaheim lost WonderCon – a comic books and science fiction movies convention -- which is moving to the Los Angeles Convention Center and, Kring claims, taking with it $30 million in revenue to that city.
Moreno, the city finance director, pointed out that WonderCon is supposed to be generating $30 million in total economic impact, a significant difference from Kring’s description. Only a sliver of that money would end up in city coffers.
Lastly, Tait’s measure to put future hotel tax subsidies to a citywide vote revived a years-old debate on the issue.
Murray claimed that the GardenWalk hotels tax subsidy, which allowed the developer to keep 70 percent of all room-tax revenue the hotels generate up to the $158-million cap, would generate over $484 million in new revenue for the city.
Tait called the figure “outrageous” and “silly.” He asked if the city's planning and community development director, John Woodhead, would stand behind that number, which Murray said came from the city's website.
Woodhead suggested that the numbers had been “transposed.”
But Woodhead did argue that the subsidy is revenue neutral because, by building the hotels at four-star, or four-diamond, quality, the hotels will generate more room-tax revenue than three-star hotels. The 10 percent the city would get back from the four-star hotels – nearly $1 million -- would equal all the room-tax revenue the city would get back under a three-star hotel, he said.
At the end of the term, decades from now, the city would receive all the room-tax revenue from the four-star hotels, he said.
Woodhead also claimed that nearby hotels would also generate more room-tax revenue because they would be able to charge higher rates by being close to the four-star hotel.