Anaheim Council Set to Vote on $500 Million in Luxury Hotel Subsidies

The Anaheim City Council on Tuesday is scheduled to vote on a half a billion dollars in proposed luxury hotel subsidies, including a proposal from Disneyland for the largest hotel subsidy in the city’s history – a 20-year tax rebate that could return more than $200 million in bed taxes to the company in exchange for building a four-diamond luxury hotel.

The deal, the latest in a string of subsidies that council members have approved for hoteliers in recent years, throws fuel on an ongoing debate in Anaheim over the political influence of the resort district and whether the economic benefits of a tourism-based economy will reach the city’s most disadvantaged neighborhoods.

Disneyland is requesting the subsidy under a program approved by council members a year ago that focuses on upscale hotels.

The program allows builders of hotels that receive a four-diamond rating from AAA to collect 70 percent of the room taxes generated by their projects during their first 20 years of operation. After that period, the city would begin to receive 100 percent of bed taxes. Also, any hotelier who upgrades a hotel to four-diamond status gets a 50-percent rebate on bed taxes on that hotel for 20 years.

Disneyland’s proposal calls for a 700-room, 900,000 square-foot hotel to be built on what is currently a parking lot adjacent to the resort. It will feature rooftop dining, swimming pools and spas, a fitness center and other amenities.

Disneyland claims in an application for the subsidy that the hotel would generate $14.7 million in room tax revenue in its first year of operation, $10.3 million of which would be rebated back to Disney. Over twenty years, the company would receive back $205.8 million.

Also on Tuesday’s agenda are two requests for subsidies from two affiliates of the multinational real estate firm the Wincome Group.

The owner of the Anabella hotel on Katella Street has submitted a proposal to bulldoze the boutique hotel to build an eight story, 634 room hotel with 50,000 square feet of meeting and ballroom space and 30,400 square feet of retail and commercial space.

According to the proposal, the project would generate about $211.2 million in bed tax over twenty years, $147.8 million of which would go back to the developer.

A second proposal by Goodhope International for a 580-room hotel with a rooftop bar, pool bar and grill, meeting space, fitness center and retail space would be built on the southeast corner of the intersection of Harbor Boulevard and Disney Way.

The developer estimates the project would generate $206.8 million in bed tax over twenty years, $144.8 million which would go back to the developer.

Anaheim Mayor Tom Tait, who has been the most vocal opponent of tax subsidies for Disney and hoteliers, said the amount of money at stake is “hard to fathom.”

He said approving the Disneyland proposal would be tantamount to “writing a check” to the mega resort. Disney’s 11 parks worldwide reported a profit of $3.9 billion profit in the second quarter of 2016, according to an earnings statement. 

“Disney obviously doesn’t need the money,” said Tait. “Not only do the taxpayers lose, but when there’s no funding for city services, that means less city employees to provide those services.”

Councilman James Vanderbilt said subsidies should be evaluated on a case-by-case basis and said he doesn’t have a position yet on any of the three proposals.

He said that, beyond money, the council should also weigh whether the money invested would enrich the community.

“Some programs are appropriate in certain situations in which the project benefits the community in more than just dollars and cents,” said Vanderbilt. “A hotel doesn’t necessarily provide other virtues of a museum or a project like the Packing House, where lots of citizens can use it.”

Council members Lucille Kring, Jordan Brandman and Kris Murray, who have supported tax subsidies in the past, did not return calls for comment.

Proponents of the subsidy say the incentive will help draw in wealthier visitors who currently opt to stay at high-end hotels in neighboring cities.

The city and resort interest groups have waged a media campaign in support of the deal, with videos, mailers and social media posts.

In videos and posts on its official Facebook page, the city characterizes the hotel incentive program as an opportunity to create $290 million in new tax revenue from projects that would otherwise never be built, expanding the revenue available to fund important city services.

“The Hotel Program follows a proven strategy of promoting economic development to fund police, firefighters, community centers, libraries, parks and other services for residents,” according to one post.

Another post claims the three projects will generate 8,988 construction jobs and 2,134 “high-paying hotel jobs.”

A political action committee called Support Our Anaheim Resort, or SOAR, also sent mailers to residents the week before the city council vote, urging them to contact the city or attend the meeting in support of the hotel tax deal.

The project comes nearly a year after the City Council voted to institute a 45-year moratorium on voters’ ability to tax admission tickets to Disneyland, in exchange for a $1 billion expansion of the theme park.

In 2013, council members approved a luxury hotel subsidy deal for two projects planned at the GardenWalk mall, which would give the developers back 70 percent of hotel bed tax revenue, or $158 million, over 15 years

Both the gate tax and hotel subsidies have been highly controversial among residents, especially Latino activists.

In a city that has seen riots over police-involved shootings, a heated fight for district elections, and battles over the proliferation of short term rentals, many see subsidy deals as part of a long-standing practice of giving away tax dollars – present and future – to Disney and hoteliers, at the expense of poor and underserved neighborhoods.

One group of residents opposing the subsidy started their own social media campaign called “Stop Disney” that calls the subsidies a “money grab” that would take away funding for vital city services.

The group has also latched onto a nationwide discussion about inequality, sending a Voice of OC story about the Disney subsidy to former U.S. Labor Secretary Robert Reich, who retweeted it with the comment: “Another example of how the political power of big corporations redistributes wealth upward.”

Tuesday’s city council meeting begins at 5:00 p.m.

Contact Thy Vo at tvo@voiceofoc.org or follow her on Twitter @thyanhvo.