Anaheim City Attorney Says Disney Exempt From $15 an Hour Wage Initiative

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Sleeping Beauty's Castle at Disneyland in Anaheim.

Anaheim City Attorney Robert Fabela said the Disneyland Resort is exempt from a “living wage” initiative on the November general election ballot, known as Measure L, because the company isn’t receiving a tax rebate, according to his report.

If adopted by Anaheim voters, the ballot initiative would set the minimum wage for employees of Anaheim Resort businesses that receive city tax rebates at $15 an hour.

Fabela, in the report to the City Council for Tuesday’s meeting, said although Disney is reimbursed for its payments from 1997 bonds which helped finance a parking garage, “the reimbursement is not a refund of any taxes paid by Disney, and therefore would not amount to a ‘tax rebate’ under Measure L.”

In 1996, the city agreed to issue $510 million in bonds to finance the expansion of the Anaheim Convention Center and build the $108 million Mickey and Friends parking structure on city land. The parking garage is used by convention goers and Disneyland customers. After the 40-year bonds and the $1.1 billion in interest are paid off, Anaheim will transfer ownership of the garage to Disney.  

Attorney Richard McCracken, who helped write the initiative, called the parking garage a “subsidy.”

“There’s no two ways of looking at it other than subsidy. Because the parking garage is built on city land and it was built entirely with tax money and Disney gets to operate and keep all the revenues from it and Disney has since (it opened)” McCracken said in a Sunday phone interview.  

“You and I wish we could do the same — probably wish we could take all the taxes we pay and get them back from the city and get them in the form of home improvements,” McCracken said.

But the city attorney wrote: “This reimbursement is not a refund of any taxes paid by Disney and, therefore would not amount to a ‘tax rebate’ under Measure L … Therefore it is the City Attorney’s opinion that Measure L would not apply to Disney by virtue of the Bond Transaction.”

McCracken, who currently represents UNITE HERE Local 11, a union representing hotel and hospitality industry workers, said: “We think he’s (Fabela) quite wrong about his opinion. He’s put in a quite unusual opinion. His opinion doesn’t mean anything more than someone you might stop and ask on the street who isn’t a lawyer … it’s up for the judges to decide who it applies to.” He added he expects litigation on the issue.

Anaheim spokesman Mike Lyster said in a phone interview Fabela consulted attorneys while writing his opinion.

“Including discussion with outside bond counsel … there was nothing in the 1996 agreement that would fall under the initiative that would clearly spell out tax rebates as the trigger for somebody to fall under the initiative,” Lyster said.

“Like I said, we know that folks out there on various sides of the issue will have thoughts on this and we will respect those,” Lyster said. “As with anything like this, the ultimate arbitrator could be a judge if there were to be litigation over it.”

McCracken said the bond repayment structure triggers the $15 minimum wage requirements in the ballot measure.

“So the repayment of those bonds is entirely derived from Disney’s tax payments. So Disney’s sales tax, (hotel tax) and its property tax, for the whole park, not just California Adventure, goes to pay for these bonds,” McCracken said. “So it’s not just that Disney got a subsidy, Disney got a massive subsidy.”

The minimum wage ordinance, which is sponsored by a coalition of labor unions representing hospitality and Disneyland workers, would require service industry businesses in the Anaheim Resort district employing at least 26 people and receiving tax rebates to pay workers an hourly minimum wage of $15 starting January 2019. The hourly wage would increase by one dollar every year until the hourly wage reaches $18 in 2022. After that, increases would be tied to cost of living increases.

The proposed ordinance defines a subsidy as “any agreement with the city pursuant to which a person other than the city has a right to receive a rebate of transient occupancy tax (hotel tax), sales tax, entertainment tax, property tax or other taxes, presently or in the future, matured or unmatured.”

Disney recently approved two major labor deals which raised wages for 12,400 of its roughly 30,000 employees in the resort area. The company agreed to pay its workers $15 an hour when it ratified a contract with the labor union in late September for 2,700 employees and 9,700 employees in a separate contract in July.

In addition to the wage increase, as a result of the negotiations Disneyland will add new, cheaper options for employee health insurance coverage, according to a union spokesman.

The statewide minimum wage is $11 an hour and is slated to hit $15 an hour by 2022.

Fabela issued the opinion after Councilwoman Kris Murray asked during the Aug. 28 City Council meeting for a legal review of the measure.

“I really sympathize with the city attorney. He’s new to the job … there’s no other way of looking at this — the opponents of this measure who are on the City Council have forced him to do this to make a political point,” McCracken said.  

The Anaheim City Council unanimously voted to cancel two Disney subsidies Aug. 28 at the request of the company.

One subsidy would have been the largest in Anaheim history: a 70 percent hotel tax subsidy to Disney. The subsidy for a four-diamond hotel proposed by Disneyland has the potential to be worth over $200 million over two decades, which would make it the richest tax giveaway in the city’s history.

Regardless if the living wage measure applies to more Disney employees should voters adopt it, Fabela said the measure would mean affected employers would have to pay the highest minimum wage in the state by 2022.

“…based on data available to city staff at this point in time, affected Anaheim employers would have the highest minimum wage in the state, higher than cities like Los Angeles, San Francisco, San Jose, San Diego, Oakland and every other city that has a voter approved minimum wage that exceeds the state’s requirements,” Fabella wrote.

Todd Ament, president of the Anaheim Chamber of Commerce, issued a statement against the wage measure Friday night.

“With the Anaheim City Attorney clearly stating that Disney is exempt from Measure L, voters in Anaheim have a fresh opportunity to re-evaluate this proposal. It’s clear that Measure L will give very few Anaheim residents a raise. But that doesn’t mean its impact is small. Measure L still hurts Anaheim. By forcing the cancellation of at least two planned four-diamond hotels, Measure L will cost Anaheim over 3,000 jobs and hundreds of millions in future tax revenue. Measure L helps a few but hurts a lot,” reads Ament’s statement.

In an Oct. 7 phone interview, UNITE HERE 11 co-President Ada Briceno said “we think it’s an exaggeration of Todd Ament. This living wage has been an incredible tool that stops people from going from couch to couch and sleeping in their cars. These are the kinds of solutions that will help people have a roof over their head. And the residents should feel proud to feel a part of that.”

Spencer Custodio is a Voice of OC reporter who covers south Orange County and Fullerton. You can reach him at scustodio@voiceofoc.org. Follow him on Twitter @SpencerCustodio