The Mickey and Friends parking garage – a publicly owned structure – Disney leases for $1 a year from Anaheim is set to be handed over to the entertainment giant after bonds are paid off has been criticized by city hall watchdogs and residents for years.
But recently Anaheim City Council members publicly debated whether or not the deal is an illegal gift of public funds.
“I don’t think that this has ever been asked,” Councilman Jose Moreno said at the Nov. 15 meeting. “It’s one that I’ve been wanting to ask for a while, but agendizing powers hadn’t allowed it.”
City Attorney Rob Fabela said at that meeting that giving back the Mickey and Friends parking garage does not amount to a gift of public funds and said that it would be hard under the law to argue the contrary even though the city owns the structure.
“It would be difficult to make a strong legal argument that the reversion of Mickey and Friends parking structure to Disney upon payment of the bonds amounts to a gift of public funds as that term is defined in the law, considering that it was part of a deal struck to accomplish a wide variety of documented product purposes back in 1996,” Fabela said.
Click here to read the staff report prepared by Fabela.
Michael Thom, an associate professor of public policy and an expert of public finance at the University of Southern California, also said it’s not a gift of public funds.
“If my understanding is correct, transferring ownership of the (aging) parking structure back to Disney is a contractual obligation. That doesn’t strike me as a ‘gift’ in the traditional sense. Since the structure does not benefit Disney alone, it doesn’t strike me as a ‘gift’ in a legal sense, either,” Thom wrote in a Wednesday email.
Under the deal, which stems from the 1997 resort bonds, Disney keeps all revenue generated by the taxpayer-funded parking garage.
Thom acknowledged the frustration with such agreements – a frustration Thom said was common in multi-decade deals struck between corporations and cities.
“You can’t help but look back and wonder what they were thinking,” Thom wrote.
Moreno expressed concern over the law on public gifts at the meeting.
“At any point under the guise of economic development and public benefit, a municipality can just turn over public buildings and public lands, so long as you can show some kind of economic benefit or economic redevelopment benefit, which we actually saw a lot of through the Anaheim stadium deal along with other things,” he said at the meeting.
“That’s worrisome.”
The debate came 25 years after the city issued $510 million in bonds to help shore up infrastructure in the resort area so Disney could expand and build California Adventure, including a parking garage and a convention center expansion.
Once the bonds are paid off. The city is set to hand over the garage to Disney.
Moreno said if the city keeps the lot after the bonds are paid off, the city could get revenue needed for things like public safety and community services.
One of his colleagues is less concerned.
Councilman Trevor O’Neil said that the deal the city struck with Disney has brought incremental tax revenue to Anaheim and the developments that followed brought in money which the city wouldn’t have had to make the bond payments.
He also argued that Disney owned the land the structure was built on.
“We all know from looking at our budget every year the amount of surplus that we have that comes off of the resorts as a result of those investments,” O’Neil said. “This was one small component in a much larger deal that at the end of the day, brought huge benefit to the city.”
The resort makes up $226 million of the $482 million general fund revenue, according to the current budget.
But more than half of the resort revenue – $118 million – goes back to the area to pay down the 1997 bonds and other resort services, like nearly $20 million for police in the DIsneyland resort area.
And all of Disney’s incremental taxes are used to pay down the bonds, along with 20% of citywide hotel taxes.
Moreno agreed with O’Neil that the deal has benefited the city, but also said it benefited the corporation too.
“Disney has very good negotiators,” he said. “It wasn’t just us benefiting, they benefited tremendously from that and it’s just unfortunate that we cannot gain any revenues from that parking structure that can create great opportunities for a lot of other investments.”
Meanwhile, Disney poured $1.3 million into the Support Our Anaheim Resort political action committee – the entertainment juggernaut’s chief political spending vehicle in Anaheim.
In turn, SOAR spent about $1.3 million in this year’s election to back candidates Natalie Rubalcava, Natalie Meeks and Councilwoman Gloria Ma’ae – the only one who lost her race.
O’Neil did not receive any financial support from SOAR in his failed campaign for mayor this year, but the political action committee spent over $377,000 to support his successful city council run in 2018.
Other council members did not jump into the debate.
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