Anaheim Institutes New Oversight on Tourism Bureau After Searing State Audit

Now under recommendations from those same auditors, Anaheim’s elected officials are revamping their agreement with Visit Anaheim – rolling out new oversight measures.

On Tuesday, City Councilwoman Natalie Rubalcava publicly stated that it is time to hold the tourism bureau accountable and ensure they’re doing their job.

“Your feet need to be held to the fire. You make a lot of money for what you do,” Rubalcava said at last night’s city council meeting.

“We really need to be booking enough conventions or youth sports events so that we’re really helping everybody, and not just the hotels that are in and around the convention center.”

City council members voted unanimously on a one-year contract with Visit Anaheim to market the Disneyland resort and book conventions.

As part of the new contract, the tourism bureau will have to report on new key performance indicators like hotel occupancy rates and convention center bookings so city officials can gauge how effectively Visit Anaheim is spending tourism tax dollars.

[Read: Anaheim on Track to Require Tourism Bureau Show Convention, Hotel Bookings]

Visit Anaheim’s money comes from the Anaheim Tourism Improvement District, which is funded by an additional 2% tax on hotel rooms. The tourism bureau gets 75% of that money and is supposed to secure bookings at the city-owned convention center and boost hotel stays through advertising. 

The other 25% is placed in a separate fund allocated for transportation needs in the resort area.

The new agreement incorporates recommendations from state auditors like requiring Visit Anaheim to track all spending related to the contract, report unspent tourism tax dollars, develop a plan to oversee subcontractors work and make an annual report.

The agreement also requires Visit Anaheim to get permission from the city to enter an agreement with a subcontractor if the contract is more than $150,000. 

It also forbids them from commingling tourism tax dollars with money from other revenue sources and bars Visit Anaheim executives from transferring tourism tax dollars to another organization without written consent from the city.

City Councilman Carlos Leon successfully got his colleagues to approve the one-year contract with an automatic renewal of two years instead of three years. 

“We’re here because there was misuse of funds from the organization. Your predecessor is not here for a reason,” Leon said at Tuesday’s meeting. 

“This is about accountability and making sure that everybody is meeting the expectations that they need to be meeting, that we’re spending the funds correctly, that we’re not just selling the City of Anaheim,” he said, adding they should proceed with caution after the audit.

Councilwoman Natalie Meeks initially pushed back on a one-year agreement, arguing there’s a clause in the agreement that allows the city to terminate the contract with Visit Anaheim in six months.

She also said a longer term contract assures continuity for both the tourism bureau and businesses booking conventions.

“We have 180 days. It’s going to take us that long to get somebody new in here. I think that provides the protections that we need,” Meeks said.

Councilwoman Norma Kurtz concurred.

“I don’t see what a one-year contract gets us at all,” she said.

Mayor Ashleigh Aitken said a one-year agreement wouldn’t disrupt the tourism bureau, but wanted to send a clear message that Anaheim’s visitor economy was stable and there to stay.

“Whatever we can do to just move on,” she said. “And have a positive story and a positive narrative to say about our great city, I think that we would all be in agreement that that’s what we want.”

Rubalcava said continuity wasn’t a legitimate concern and people looking to book a convention wouldn’t know if Visit Anaheim was on a one-year contract or not.

“If you’re going to perform to the best of your ability, I don’t think you have to worry about whether or not you have a year contract,” she said.

Rubalcava also raised concerns Visit Anaheim had a roughly $30 million reserve while the city’s hotel tax revenue was decreasing.

She also called on the council to consider putting a cap on the tourism bureau’s reserves.

“Any good nonprofit has about 25% operating budget of reserves. We have $30 million. That’s about as much as you get every year,” Rubalcava said.

Christina Dawson, Visit Anaheim’s chief operating officer, said the amount was roughly $25 million, which includes $10 million allocated to subsidize convention center bookings and some is set aside for future events like the upcoming Olympics.

“We have to start building that up so several millions are allocated there and then the balance is to sustain the organization should anything happen again, like the pandemic,” she said.

Rubalcava said Disney is focused on the Olympics and the tourism bureau should be making investments to get people into local hotels – especially smaller, family owned lodging businesses who she says aren’t getting the proper attention from Visit Anaheim.

“I just want to make sure that you guys are working towards everybody,” she said. “I’m not just trying to beat you guys up for the heck of it. It is really a concern for me that we don’t have (hotel tax) revenue to pay our employees what they need to make, or that we have a budget gap for next year because our (hotel tax) revenue continues to consistently decline.”

“That’s a problem.”

Councilman Ryan Balius questioned how exactly they would measure Visit Anaheim’s success.

“What are we looking for, possibly to hold them to if they don’t book an extra 500,000 rooms a year. Do we say we want somebody else? I just don’t know what that looks like,” he said.

“All we want them to do is just, I hate to say it, but we want them to sell the heck out of Anaheim,” Balius continued. “People are coming to Disneyland no matter what. We want them to bring in that extra piece.”

Meanwhile, Rubalcava instituted what she considered a key performance indicator: hotel tax revenue.  

“That’s success for me, because that’s really the purpose of Visit Anaheim, is to make sure that you’re generating enough economic impact in our resort district to help generate revenue for our general fund,” she said.

Tuesday’s meeting comes as Anaheim’s Chamber of Commerce – another resort interest that was a central figure in the city’s most recent corruption scandal – announced they would be rebranding under new leadership and staying out of politics.

[Read: Disneyland Resort Interests Are Reorganizing in Anaheim After Corruption Scandal]

It also comes as local elected officials have met privately with tourism bureau executives this year to discuss Visit Anaheim and tourism tax dollars.

How Visit Anaheim Landed in a Corruption Probe Report?

Visit Anaheim wasn’t only named in a state audit.

City hired investigators found that  $1.5 million of a $6.5 million bailout was improperly diverted by Visit Anaheim to an Anaheim Chamber of Commerce-controlled nonprofit as part of a conspiracy.

Auditors would conclude months later that Visit Anaheim never needed the multi-million dollar bailout to advertise the Disneyland Resort when the tourism industry was shut down indefinitely at the onset of the COVID-19 pandemic.

The city’s own audit into the bailout found Visit Anaheim improperly spent $3 million of that money – most of which was used to cover normal operating costs after the city’s tourism economy bounced back to pre-pandemic levels.

Last month, tourism bureau executives agreed to pay the city $3 million back from the bailout after refusing to do so for years. 

They still maintained they properly used the bailout.

Editor’s note: Ashleigh Aitken’s father, Wylie Aitken, chairs Voice of OC’s board of directors.

​​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.