The Anaheim City Council Tuesday night approved a major tax break for those who build luxury hotels in the city, with the three-member council majority arguing it would ultimately triple the city's hotel tax revenue by encouraging more wealthy visitors to stay in Anaheim rather than upscale hotels in neighboring cities.
Mayor Tom Tait and Councilman James Vanderbilt voted against the citywide subsidy, which gives newly constructed four-diamond hotels 70 percent of the room tax they generate for 20 years.
Tait described the deal as another example of "corporate welfare" in Anaheim.
Existing hotels that upgrade their amenities would get a 50 percent subsidy, according to a city staff report, and developers would be required to give Anaheim residents preference in hiring.
The council approved a similar subsidy deal in 2013 for two luxury hotels planned at the Gardenwalk mall by developers William O'Connell and Ajesh Patel. Under that deal, the city will give back to the developers 70 percent of the room tax revenue generated by those hotels in their first 15 years, or an estimated $158 million in tax revenue.
The Gardenwalk subsidy prompted outcry from Tait as well as some residents and community activists who say it amounts to a giveaway of taxpayer money better spent on neighborhood improvements and other services.
Tuesday night's meeting drew a strong showing of building trade union leaders, who said the subsidy would draw in new construction projects that would generate jobs and careers for Anaheim residents.
City staff and Anaheim Resort business leaders also argued that encouraging upscale hotels would triple the city's hotel tax revenue in the long run, and ultimately boost sales and property taxes in the resort area.
Taxes on hotel rooms accounts for $123 million in general fund revenues a year, according to a city staff report.
A few residents turned out to voice their opposition to the subsidy.
Yesenia Rojas, a 25-year resident, brought up the condition of Anna Drive, a neighborhood that became the center for a debate about inequality in Anaheim after a fatal officer-involved shooting in 2012.
"Nothing has changed on Anna Drive. You guys are talking about hotels, corporations, blah blah blah, but what happened to the neighborhoods?" Rojas said. "Some of the corporations should come to Anna Drive."
Resident Richard Ward questioned how the everyday Anaheim resident would benefit from the tax subsidy.
"[The argument] that the other residents and non-resort businesses who make up the general fund somehow stand to benefit from giving to rich hoteliers -- to what, build luxury hotels and pamper the wealthiest guests of our cities?" said Ward. "We've already been giving up too much for too long."
Tait disagreed with the council majority's claims that the subsidy would more than pay for itself, calling it "financially disastrous." He questioned whether there would be the demand for upscale hotels, and if it would be more worthwhile to invest in three start hotels where the city can collect 100 percent of tax revenue.
Deputy City manager Kristine Ridge said luxury hotels are able to generate more revenue because they not only charge more, but also have steel structures and can accommodate more rooms.
Tait said government shouldn't be involved in "corporate welfare" and said that, if there's a market out there for luxury hotels in Anaheim, developers would come on their own.
"If the market demands a four diamond [hotel], people will build it. If they want to build it, put their own money at risk, not the people's money at risk," Tait said.
Councilwoman Lucille Kring bristled at Tait's argument that the hotel tax incentive amounts to a giveaway of taxpayer dollars, given that it would apply to new construction and dollars the city currently does not have.
"This is all money predicated on people opening a four diamond hotel...we won't get it until the hotels are built," said Kring. "70 percent is a lot of money...but we're getting a lot back from these developers."
She said Anaheim is already losing wealthy visitors to cities like Newport Beach and Dana Point, and with an expansion of the Convention Center underway, the city should anticipate more convention-goers in need of a hotel room.
"We have baseball players who come here to play against the Angels and they go to Dana Point or Newport [Beach]. Business people do not want to go to a Disney property with screaming kids," Kring said.
Vanderbilt, Tait's only council companion in opposing the subsidy, said he would like to see the city prioritize economic incentives for businesses that directly affect Anaheim residents, such as grocery stores.
"I'd rather have economic programs that are more tangible for everyday citizens," said Vanderbilt. "I'd like to see those kinds of economic development first instead of what speaks to the high end, the caliber I don't necessarily represent."
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