In a surprising reversal, the Disneyland Resort is asking Anaheim officials to cancel two major tax subsidy deals, including $267 million in tax rebates for a luxury hotel project, saying the deals have become “a flashpoint for controversy and dissention [sic] in our community.”
Disneyland Resort President Josh D’Amaro met with Anaheim Mayor Tom Tait and other city officials Tuesday afternoon to request the cancellation of two deals, which include a 20-year, 70 percent hotel bed tax rebate for a proposed luxury hotel and a 45-year exemption on taxing Disneyland admission tickets and parking.
“…Cities around the nation have implemented similar incentive policies with great success,” D’Amaro wrote. “However, unfortunately in Anaheim these policies have become divisive, leading to an unstable business climate and a difficult working relationship with the City.”
The request comes amid a heated, union-funded push to pass an initiative on the November 6 general election ballot, which would require all businesses in the Anaheim Resort receiving a city tax subsidy to pay a minimum wage of $18 an hour by 2022.
Although a number of hotel developers will likely be affected, Disneyland – the city’s largest employer — has been at the center of the public debate, with protests by its employees receiving attention from national media and U.S. Senator Bernie Sanders.
A recent labor-funded study called “Working for the Mouse” found almost three-quarters of surveyed Disneyland Resort employees say they don’t earn enough money to cover basic expenses each month. One in ten said they were homeless at least once over the past two years, and more than two-thirds said they are food insecure.
The Anaheim Chamber of Commerce has led a political campaign against the wage initiative dubbed the “No on the Anaheim Job Killer Initiative” campaign.
Tait, who for years was ostracized by political leaders and Anaheim Resort interests for his anti-subsidy stance, has since led the current city council majority in unwinding subsidy deals and other projects, such as the Anaheim Streetcar, that he viewed as benefiting resort businesses over the interests of taxpayers.
“Disney did the right thing,” said Tait in a phone call Wednesday. “It takes away a big financial worry [for the city], cancelling the subsidy agreements and tax exemption.”
The decision signals a major shift in the company’s political tactics in Anaheim too, Tait said.
“What they did was very bold,” Tait said. “My sense is there’s a desire by Disney to get along with everybody – the workers, the city, everybody.”
Disneyland officials announced last week their luxury hotel project will be on hold indefinitely, after city officials said a request by Disney to change the site of the hotel project would make it ineligible for the subsidy.
Disney’s attorney, David Ontko, lambasted the city for creating a difficult working environment for businesses in an August 15 letter.
“The city’s inexplicable delay in raising the hotel’s location as an issue despite knowing about the location for more than eight months and participating in multiple project meetings, coupled with the City’s unwillingness to work together in a cooperative fashion to address it, further demonstrates the ongoing challenging business environment in Anaheim,” Ontko wrote.
It’s possible that rescinding the two subsidy deals would mean the minimum wage initiative, if passed by voters, would not apply to Disneyland, said city spokesman Mike Lyster.
“It’s conceivable that if Disney does not a have hotel incentive or entertainment tax agreement, those provisions of the initiative could not apply to them. But we do not have a definitive legal determination at this time,” Lyster said in a written statement.
Disney spokeswoman Liz Jaeger declined to comment further on Disneyland’s request to cancel the subsidies.
The first deal, passed in July 2015, would create a 45-year exemption on taxing admission tickets and parking at Disneyland, known as a gate tax, in exchange for investing an additional $1 billion in the resort. That investment – a “Star Wars” themed expansion of the park – is expected to move forward and open in the summer of 2019.
The gate tax moratorium is an extension of a previous deal struck in 1996. Anaheim has never taxed admission or parking at Disneyland.
Since the city legally cannot bar voters from creating such a tax, the deal is structured so in the event that a gate tax is imposed in the future, the city would reroute that money back to Disney until the end of the 45-year agreement.
The second deal, passed in July 2016, would give back 70 percent of hotel bed taxes to Disney for a period of 20 years, worth $267 million in tax revenue. During that same period, the city would receive an estimated $133.4 million in tax revenues from the project.
Disneyland does receive a third public subsidy, which unlike the other two, is not a tax rebate. As part of a 1996 partnership agreement related to the expansion of the park to create California Adventure, Disney agreed to invest $1.95 billion in the expansion and other improvements to the resort. The city in turn issued $510 million in bonds to finance an expansion of the Anaheim Convention Center and the construction of a $108.2 million parking structure for California Adventure. After the city pays off the bonds and $1.1 billion in interest payments, Disney (which pays to operate the structure and receives any revenue from it) will own the structure outright.
The wage initiative defines a tax subsidy as a rebate, meaning it only applies to deals where the city returns tax revenue to businesses. If the wage initiative passes, opponents have said they will sue to question its legality and who the measure will apply to.
The earliest the city council can vote on the cancellation of the subsidy deals is at their next meeting on Aug. 28.
In addition to pressure from the minimum wage ballot initiative, the November election will be another test of public sentiment over what Disneyland and other Anaheim Resort businesses owe to the city’s residents.
Disney spent more than $1.22 million on the 2016 city council election, according to the Los Angeles Times, but failed to retain a politically favorable council majority. That year, which also coincided with a shift to district elections, the council flipped from a five-member council where the majority was in favor of subsidies to a seven-member council where the majority, led by Tait, is vehemently opposed to taxpayer-funded incentives for big business.
But this year Tait is termed out, while three other seats in council districts 2, 3 and 6 are up for grabs. The incumbents in Districts 2 and 3 are represented by Councilmembers James Vanderbilt and Jose Moreno, respectively, who both oppose tax subsidies and have typically voted with Tait on most major decisions.
Councilwoman Kris Murray, who currently serves at-large but lives in District 6, is also termed out and is running to replace County Supervisor Todd Spitzer should he succeed in his bid to become the next District Attorney.
In July, the Disneyland Resort came to a three-year deal with four labor unions, representing 9,700 employees, to raise the minimum hourly wage to $15 by January 2019, and includes a 3% raise for employees that earn a wage at or above that threshold.
The company has 26 unions representing nearly 23,000 cast members, about 75% of its total workforce. The ballot initiative would affect all employees, whether they are represented by a union or not.
Disney receives more subsidies than any other business in Anaheim. The resort generates $5.7 billion annually in economic activity for Southern California, according to a Disney-commissioned study, and drives 80 percent of hotel occupancy in Anaheim.
The resort accounts for nearly a third of Orange County’s $9.6 billion tourism market and generates $370 million in state and local tax revenues, according to the report.
The November ballot initiative if passed, would also apply to the Wincome Group, which has subsidy deals for the construction of two luxury hotels in Anaheim. One of those hotels, on the site of the former Anabella Hotel, is already in construction, while it’s unclear whether the company will move forward with the second project.
News of Disneyland’s request to cancel the subsidies was first reported by the Orange County Register Tuesday evening.
Contact Thy Vo at [email protected] and follow her on Twitter @thyanhvo.