It’s a topic rarely mentioned in public by Anaheim City Council members
– a ticket tax on large entertainment venues like Disneyland.
Even as the city budget has faced a deficit in recent years since the COVID-19 pandemic hit.
Yet that streak of silence may be coming to end.
A 2% gate tax could produce $55 million to $82 million in new annual revenue based on attendance at Disneyland and the Honda Center, according to a city staff report looking into the impacts of gate tax.
A noteworthy twist to any kind of future gate tax are the Los Angeles Angels of Anaheim.
The Major League Baseball franchise is granted credits against any future gate tax in their city stadium lease payments because of the way the 1996 city stadium lease was reinstated in 2019 by the city council majority.
The city council is expected to discuss the ticket tax ballot proposal at their Tuesday meeting.
If approved, city voters would get the final say this November.
“The proceeds of the admissions tax would go to the general fund and be used to provide general City services, such as police, fire and emergency response, street maintenance, and community services,” reads a city staff report framing the issue.
Last year, the city took out $130 million in bonds to help cover its deficits over the next few years.
Meanwhile, an FBI corruption probe’s upheaval of Anaheim City Hall, which has seemingly silenced the powerful resort-area interests, has effectively given a minority City Council member back his ability to put a gate tax discussion on the agenda.
There’s an open question whether corporate interests will speak out against the idea when it comes up for council discussion on Tuesday, amidst the corruption scandal, and bring themselves face-to-face with some in town who for years decried hotel subsidies and policies they say shifted big private businesses’ costs to the residents.
Phone and email requests for comment to Liz Jaeger, a spokesperson for Disney, went unreturned Friday.
Despite demands from residents to lessen the resort industry’s influence on city policy making, the city council has repeatedly deadlocked in recent weeks on campaign finance reforms.
Based on budgets before the COVID-19 pandemic hit in March 2020 and shut down the resort area, Anaheim routinely got more than $150 million in hotel taxes each year.
But 20% of hotel taxes go to pay down $510 million in bond debt for resort area projects floated by the city in 1997.
Former state Sen. John Moorlach, a prominent local Republican budget hawk who predicted the 1994 Orange County bankruptcy, wrote an opinion article in the OC Register calling on tourists – not residents – to pay increased taxes to help the city’s budget.
“For decades, Disney’s control of city politics has shifted its business costs from the company to its residents. Now, let tourists pay higher taxes to pay for the deficit and the deteriorating infrastructure these guests use,” Moorlach wrote in a June 5 opinion article.
He warned Anaheim could soon start losing money down the road because the city’s “latest financial statement reveals an unrestricted net deficit of $715 million, among the worst of California’s 482 cities.”
City budget projections show Anaheim could start drawing from its reserve funds in 2025.
Moorlach, also a former Orange County supervisor, called on not only increasing the hotel tax rate, but charging a ticket tax.
“Other tourist attractions around the country charge taxes and fees on top of ticket prices, why not Anaheim?” he wrote.
But fellow Republican and Anaheim Mayor Pro Tem Trevor O’Neil argued Moorlach wasn’t reading the budget correctly.
“For all of Anaheim’s issues right now, financial health is not one of them,” O’Neil wrote in an OC Register opinion article that ran June 13.
He criticized Moorlach for focusing on “Anaheim’s net position, or assets minus long-term liabilities.”
“It’s a go-to for this type of narrative, and a tiresome one at that,” wrote O’Neil in his critique of Moorlach’s math.
O’Neil argued bonds, like the 1997 resort expansion bonds, have helped bring in many more tourists over the years.
“Part of our debt is from a late-1990s expansion of The Anaheim Resort. The return on investment has been a three-fold gain in visitor revenue since 2000,” O’Neil wrote. “That has allowed us to meet our obligations while generating more revenue for public safety and community services.”
Meanwhile, Councilman Jose Moreno, a Democrat, has long proposed putting the question to city voters in an effort to create new revenue in a city that’s heavily reliant on its resort area.
Yet it failed to gain support from at least two of his colleagues, which was required under the old agenda-setting rules enforced by the city council majority when former Mayor Harry Sidhu was in office.
Now that the rules have been relaxed since Sidhu resigned in the wake of the FBI corruption probe, the City Council is slated to debate the ticket tax ballot proposal at their Tuesday meeting.
“We need more revenue, so I’d like to pursue that and allow the people to vote,” Moreno said at the June 21 meeting.
Disney heavily finances a majority of the city council’s campaigns by giving at least $1 million to the political action committee, Support Our Anaheim Resort, or SOAR.
SOAR, in turn, heavily backed council members Jose Diaz, Steve Faessel, O’Neil and Avelino Valencia.
Before being appointed to the city council, Councilwoman Gloria Ma’ae sat on SOAR’s advisory board and was heavily involved in Anaheim First, a resident advisory group created by the Chamber of Commerce.
The expected gate tax discussion marks a shift on the city council since an FBI corruption probe into city hall and Sidhu surfaced in May.
Recently, Moreno has found some allies on the council with Faessel and Valencia.
The three tried to curb the influence of the resort industry through substantial campaign reform proposals by limiting council members’ ability to vote on items that would benefit a campaign contributor, including independent expenditures from political action committees.
But Diaz, Ma’ae and O’Neil routinely voted no on the proposal, citing constitutional concerns about limiting the political expression of individuals and special interest groups.
After Sidhu resigned shortly after the corruption probe was made public, many of the rules he spearheaded were reversed – like the agenda-setting policy and a 10-minute speaking time limit on council members.
And the resort-friendly special interest groups, like the Chamber of Commerce and Anaheim First have publicly disappeared from public meetings.
In the past, the groups and their affiliates would show up publicly to decry proposed taxes on resort businesses.
They’re among the same groups that advocated for the Angel Stadium land sale, which would’ve sold the land and the roughly 150 acres it sits on for $150 million in cash.
Council members terminated the land sale a little over a week after the FBI corruption probe was made public, which alleges Sidhu tried to ram the deal through for campaign contributions.
Disney also gave the Chamber of Commerce hundreds of thousands of dollars to run a campaign against the 2018 living wage proposal that was ultimately passed by city voters. The law mandates regular pay increases workers employed by businesses that receive city subsidies, which includes a host of hotels.
Before voters went to the polls in November 2018, Disney canceled a $267 million subsidy agreement for a hotel project, which would’ve given hotel taxes back to Disney.
In doing so, Disney also gave up its 45-year protection against ticket and parking taxes.
Meanwhile, Anaheim started floating its budget with a bond last year when city council members authorized borrowing up to $210 million to help patch financial holes caused by the resort shut down.
“In the mid-year budget update, the City projected a July 2021 reopening of City theme parks, resorts and hotels, and an approximately $114 million operating deficit, despite over $19 million in expenditure reductions from the freezing of non-essential spending, hiring freeze, early retirement program and deferral of fleet purchases,” reads the March 23, 2021 staff report.
City spokesman Mike Lyster said the city ended up borrowing $138 million to help cover the deficit faced by the city.
During this fiscal year, Anaheim is using $23.4 million of that to help fill the budget gap and plans on incrementally using the rest until fiscal year 2025-2026, according to projections in the budget.
Meanwhile, last Tuesday city council members unanimously approved putting a ballot measure before voters this November, asking if the city should get room tax from online hotel booking companies.
If approved by Anaheim voters, city staff estimates the measure could generate up to $3 million more a year in hotel tax revenue.
Spencer Custodio is the civic editor. You can reach him at email@example.com. Follow him on Twitter @SpencerCustodio.
Brandon Pho is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at firstname.lastname@example.org or on Twitter @photherecord.
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