A new mixed-use development project, dubbed the OC Vibe, is slated to be built around the Anaheim-owned Honda Center, with the help of $400 million in city-issued bonds.
At Tuesday’s meeting, city officials repeatedly said the taxable lease revenue bonds posed no threat to the city’s general fund since Susan and Henry Samueli – owners of the Anaheim Ducks – will be responsible for paying down the debt with Honda Center revenue.
But the bonds also delay the city from getting its share of revenue from the Honda Center because the money generated there is slated to go to pay down the $400 million bonds to build the needed nearby parking structures.
Officials say their focus is on getting new tax revenue by developing hotels, restaurants and other surrounding businesses faster, rather than Honda Center revenue sharing.
The expected hotel and sales taxes are estimated to produce $9.2 million in city revenue once OC Vibe is fully developed – something they hope is done by 2028. Officials also expect an additional $1.14 million advertising revenue after 11 years.
On Tuesday, city council members voted unanimously to approve Samueli’s $4 billion OC Vibe proposal, a 95-acre project that is expected to bring in new homes, jobs, parks and open space, restaurants, hotels and parking structures to the area at the center.
“This is an exciting project,” said Councilman Jose Diaz on Tuesday. “This is a partnership with Anaheim. Anaheim will benefit. The developer will benefit. The people of Anaheim will benefit.”
City council members also amended the lease and other critical agreements for the Honda Center.
The lease agreement – overhauled in 2018 – extends the Anaheim Ducks’ lease to 2053 and offers options to extend for up to 20 years with the Ducks commiting to keep Anaheim in the team name – something Angels officials refused to do when negotiating with the city in 2019.
“That’s been a pretty sore spot for many of us here in Anaheim and we were thrilled when that’s not even a negotiating point. They’re proud to be the Anaheim Ducks, which brings a lot of market value to us in terms of branding,” Councilman Jose Moreno said.
[Read: Anaheim City Council Considers OC Vibe Development, City Says No Subsidies Involved]
The project’s approval comes on the heels of an FBI corruption probe into city hall that led to city officials canceling the $150 million Angel Stadium land sale in May.
The deal got canned after federal agents in a sworn affidavit accused former Mayor Harry Sidhu of trying to get $1 million in campaign contributions from the Angels for ramming the land sale through. Sidhu has denied any wrongdoing.
[Read: Anaheim City Council Cans Angel Stadium Deal After FBI Corruption Probe Into City Hall]
For some, the OC Vibe project is a complete contrast of the now-dead Angel Stadium land sale that some of the council members helped try to push through
And while the Angel Stadium Land Sale deal was heavily criticized by residents and local nonprofits, many of those very same people praised the OC Vibe deal.
“You brought a lot of people together, through a dark time of our city with a light of a model of how we can do things in the future,” said Moreno, a staunch critic of the Angel Stadium land sale.
Anaheim officials also offloaded the management of the city’s transportation hub ARTIC to the Samuelis, including the roughly $2.5 million in yearly operating debt as part of the 2018 Honda Center deal.
The city also sold 16 acres of the Honda Center parking lot to the Samuelis for $10.1 million at a price city officials said was market rate in 2018 – yet the land was never put on the market.
How Will OC Vibe Impact City’s Share of Revenue From Honda Center?
While the city may not be directly on the hook for the bonds, they won’t see any shared revenue from the Honda Center until the Samueli-owned Arena Management pays off the bond debt.
“[…] 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.
The management agreement defines gross revenue as “collectively, on a cash basis, for any period, any and all payments, fees and deposits of every nature received by Manager or Owner.”
Simply put, all revenues from tickets, merchandise, concessions, advertising, seat licensing fees and a host of other revenue streams from the Honda Center will be used to pay down the $400 million bonds.
“ocV!BE will be a $4 billion project activating the 100-acre site surrounding the city-owned assets of Honda Center and ARTIC, providing new community amenities and tax revenue, while also not putting the City’s General Fund at risk. In addition, ocV!BE will be responsible for the long-term maintenance of these improvements,” chief project spokesman Matthew Hicks said in a Tuesday email.
Brian Forbath, a lawyer with Stradling, Yocca, Carlson & Rauth, said if Arena Management defaults on the bonds the city can get a “new manager” for the Honda Center following questions from Councilman Steve Faessel.
The bonds will be broken into fixed interest rates that’s estimated to take 30 years to pay off, and variable rate interest bonds estimated to take 5 years to pay off, according to Debbie Moreno, the city’s finance director.
Even once the $400 million bond debt is paid off, the city won’t get any of the yearly revenue unless the Honda Center rakes in at least $6 million. After that threshold, the city gets half of all additional revenue generated at the Honda Center.
Under an old lease agreement before 2018, it was 20% of revenue after the Honda Center hit the $12 million mark.
Read the amended and reinstated facility management agreement for the Honda Center.
Anaheim Financial Director Moreno said Tuesday that the city has yet to receive shared revenues from the Honda Center following questions from Councilman Moreno.
“We may not share for longer, but I think this probably puts us in a better spot to eventually share those revenues,” she said.
City spokesman Mike Lyster said in an email the Samuelis have already been reinvesting in the Honda Center over the past decade – including a new terrace, restaurants, new seating and guest wifi.
“While we would welcome revenue sharing, the larger objective is to create new, recurring revenue from hotels, sales and property tax that we would in turn use to serve our community,” Lyster said. “Right now, city revenue from the Honda Center area is minimal.”
He added that tax revenue from the OC Vibe project would bring in revenue and their focus is getting recurring revenue from development and advertising.
Lyster also said they could see the revenue sharing from the Honda Center after the bond debt is paid.
“The different types of bonds will run from an estimated five years to 30 years, and there is always the possibility that bonds are paid off earlier,” Lyster wrote.
OC Vibe’s Impact & Expected Tax Revenue
The project proposes to bring in 1,500 new homes – 15% of which are supposed to be affordable, thousands of new jobs, two parks, two hotels, a concert hall, restaurants, office space and parking structures on 95 acres of land around the Honda Center in the Platinum Triangle.
City officials said all of those proposed developments, including the public new parks, are privately financed. The development also includes a new, city-owned parking lot.
Click here to see project renderings of OC Vibe and here for the project website.
Councilwoman Gloria Ma’ae praised the project for the homes and jobs this will create and the developers outreach efforts on the project.
“Public private partnerships make the best relationships,” she said.
The city estimates that the project will rake in $9.2 million in yearly hotel, property and sales tax revenue and an additional $1.14 million in advertising revenue that would kick in after the first decade.
They also estimate that it will bring in $255 million in public benefits including affordable housing, park improvements, road and infrastructure improvements as well as $80 million in development fees.
“Well, what’s not to like about this project?” Councilman Trevor O’Neil said.
The project promises to create 10,000 jobs during construction and 3,000 ongoing jobs.
Councilman Avelino Valencia questioned the impact the project would have on public safety needs and what the plan was to address those needs.
“We’ll have several years to really dig into that question,” responded City Manager Jim Vanderpool.
Construction on the project could start as soon as the end of the year with the goal of completion before the 2028 Olympics.
“We look forward to starting construction soon on this important community asset that will showcase Anaheim and Orange County, while also providing world-class entertainment and offerings for local residents, visitors, and our Anaheim Ducks fans,” Henry and Susan Samueli said in a statement after Tuesday’s vote.
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.