Anaheim City Council members are slated to consider issuing $400 million in bonds and OC Vibe, a 95-acre development proposal around the Honda Center tonight.
City officials say the private owners of the arena’s home team, the Anaheim Ducks, will pay off the bonds themselves.
“There would be no recourse to the city from the bonds,” City Spokesman Mike Lyster said in a Friday email.
Lyster said the revenue from the city-owned Honda Center would go toward bond repayment under a proposed agreement with Anaheim Arena Management, which is headed up by Ducks owner Henry Samueli.
“In practice, Anaheim Arena would forward money to an independent trustee who would actually make bond payments, similar to an escrow account,” Lyster wrote in a Friday email.
The $400 million in bonds would be used in part to finance parking structures in Anaheim’s Platinum Triangle around the Honda center as part of the OC Vibe proposal.
“The bonds would fund parking structures that would bring people to Honda Center and (Anaheim Regional Transportation Intermodal Center) and also free up land around both for hotels, offices, entertainment, restaurants, shops and park space that would bring either city revenue or other public benefit,” Lyster said.
The deal’s got the markings of a government subsidy, if you ask Victor Matheson, a sports economist and professor at the College of the Holy Cross.
“I presume the organization would like to fund the parking through lease revenue bonds in order to obtain lower interest rates, in particular tax-exempt municipal bond rates,” he wrote in a Monday email.
“There is definitely a subsidy aspect here – part of which is a loss of property tax base for local taxpayers and part of which is paid by taxpayers across the country who subsidize the lower interest rate paid by tax-exempt munis.”
Matheson wrote that if Anaheim Arena Management goes bankrupt the city will bear the risk.
While the staff report indicates the bonds could be taxable, it also states “all or a portion thereof may be issued as tax-exempt bonds so long as the requirements under federal tax law are met.”
In an email after this story was published, OC Vibe’s chief spokesman Matthew Hicks said they’re pursuing taxable bonds.
Lyster assured no general fund dollars – meaning direct taxpayer dollars – would go to the debt and that Anaheim Arena Management would be entirely responsible for it.
“[…] all lease payments will only be payable from revenues generated by the Honda Center and other sources included in the definition of “Gross Revenues” under the Amended and Restated Facility Management Agreement to be entered into by the City and the Manager, and not from the City’s general fund,” reads a staff report for tonight’s meeting.
That management agreement defines gross revenue as ticket sales, advertising revenue, beer and hot dog sales, merchandise revenue and a host of other things like seat licensing fees.
City officials secured a bigger share of Honda Center revenue in 2018 – and offloaded the management, maintenance, and $2.5 million annual operating debt of the nearby ARTIC train station to the Samuelis.
Lyster said an amendment to the revenue-sharing process will also be considered by council members, which wouldn’t kick in until the bonds are paid off.
“Under the current agreement, Anaheim would share 50 percent of any yearly Honda Center revenue of more than $6 million after expenses and investment. We have not hit that as Anaheim Arena reinvests in Honda Center,” Lyster said.
“Under a proposed updated agreement, Anaheim would still share in 50 percent of $6 million in yearly revenue after expenses, once any debt is paid off.”
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The OC Vibe proposal comes after an FBI corruption probe into former Mayor Harry Sidhu that caused city council members to cancel the $150 million cash sale of Angel Stadium in May. Sidhu, who resigned in May, has denied any wrongdoing.
City Councilman Jose Moreno, a staunch critic of the Angel Stadium deal, drew a stark difference between the OC Vibe proposal and the proposal to sell Angel Stadium – both in its feedback and benefits back to the city.
“From what I can tell so far, it seems like the kind of development project that is inclusive, engaging, responsive to the feedback and that is really working in a publicly engaged and transparent manner with substantive investment in the city without asking for city dollars,” he said in a Friday interview.
Although Moreno voted against the Honda Center deal in 2018 because he said residents didn’t have enough time to review the proposal, he said the overall process of negotiations was much better than Angel Stadium.
“It is diametrically opposite of how that deal was handled.”
Council members nixed the Angel Stadium land sale after federal agents in a sworn FBI affidavit accused Sidhu of trying to get a $1 million in campaign contribution from the Angels to ram through the deal.
[Read: Anaheim City Council Cans Angel Stadium Deal After FBI Corruption Probe Into City Hall]
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The $4 billion OC Vibe development is being proposed by Anaheim Real Estate Partners LLC, a development company run by the Samuelis.
The OC Vibe proposal promises to bring in 1,500 new homes – 15% of which are supposed to be affordable, two hotels, a 5,700 capacity concert hall, shopping, dining and office spaces as well as four public plazas and two parks across 95 acres of land around the Honda Center.
Click here to see project renderings of OC Vibe and here for the project website.
“What I like from this project is you guys look at every angle, every detail, everything that could have stopped the project and you address it in front. That’s genius,” said Councilman Jose Diaz at the Sept. 13 meeting.
City officials estimate $255 million of that will go towards public benefits, like affordable housing, park improvements, road and infrastructure improvements and $80 million paid in development fees.
At a council meeting earlier this month, Councilman Stephen Faessel praised the proposal’s planned private investment into the city.
“That’s a commitment,” he said.
Most council members thought so.
The project is expected to create 10,000 jobs during the construction phase and more than 3,000 ongoing jobs, according to a city document.
“This looks amazing,” said Councilwoman Gloria Ma’ae at the Sept. 13 city council meeting.
The city estimates it will reel in around $9.2 million from hotel taxes, property taxes and sales taxes in the area. Officials also estimate an advertising revenue will bring in an additional $1.1 million a year, which kicks in after 10 years.
“That money will go directly to the general fund for public safety and community services,” Lyster wrote.
Moreno said he hoped there would be a greater percentage of affordable homes allocated as part of the proposal.
“Right now they’re at 15% equally distributed at very low income, low income and moderate, which is good. That creates an integrated housing approach. It doesn’t create economic segregation, which was my concern with the stadium deal,” Moreno said, adding that he’s going to ask staff if that percentage will go up.
As part of the overall agreement, the Samuelis are committing to keeping the Ducks in Anaheim until at least 2053, with options to extend the lease at the Honda Center by another 20 years.
The city also sold 16 acres of the Honda Center parking lot to the Samueli’s for $10.1 million at a price city officials said was market rate in 2018 – yet the land was never put on the market.
They also agreed to keep Anaheim in the team’s name – something Angels officials refused to do when negotiating with the city in 2019.
If approved, the OC Vibe project is expected to start construction at the end of this year and is expected to be completed by the 2028 Olympics, where the Honda Center will host indoor volleyball.
This article was updated with a statement from OC Vibe spokesman Matthew Hick, indicating that developers are looking to get taxable bonds, not tax-exempt ones.
Hosam Elattar is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at helattar@voiceofoc.org or on Twitter @ElattarHosam.