According to media reports, Disney is putting its 4-Diamond hotel project on indefinite hold due to a hostile and volatile business climate in the Anaheim Resort.
The 700-room, $625 million luxury project, located next to Downtown Disney, would have been Disney’s fourth hotel in the Disneyland Resort and included a large parking structure (which is separate from the 5,500 space structure under construction). It would have created 5,050 construction jobs and 1,150 permanent jobs, the large majority of which will be full-time. The hotel was projected to generate $25 million in net incremental Transient Occupancy Tax revenues for the city during the first five years of operation, and more than $1 billion in TOT for the city’s general fund during the next 40 years.
In July 2016, the Anaheim City Council approved the project and its participation in the city’s Hotel Incentive Policy, which provided economic assistance in the form of a TOT tax rebate to qualifying 4-Diamond hotels. This economic assistance policy’s purpose was to attract 4-Diamond hotels to the Anaheim Resort, in order to enhances its competitive edge as a convention destination and also harvest greater TOT revenue in the long run.
Disney’s decision isn’t surprising. The company had already stated it was talking to adjacent Garden Grove about possible future hotel projects and other developments.
Businesses need predictability in order to invest in new projects and expand existing ones. In this case, you have a a mayor and mayor pro tem doing everything they can to undermine Disney’s project – in this case exploiting an eminently fixable technicality in order to score a political win by blowing up an agreement approved only two years ago by a duly-elected city council.
That is the epitome of arbitrary government.
Compounding the situation is the possibility of a another Disney critic – Ashleigh Aitken – becoming the next mayor. Add in the uncertainty of whether the next council majority will be pro- or anti-Resort and ask yourself why Disney would want to continue moving forward with the hotel project when it could invest that money elsewhere where the business environment is more stable and predictable, and local government supportive rather than hostile?
If the indefinite hold on the fourth hotel becomes a permanent cancellation, Disney can find other ways to invest the nearly billion dollars somewhere else and earn a return – but Anaheim will not only lose jobs, but its budget will take a hit in the form of losing an ocean of TOT revenue.
Sowing uncertainty and demonizing employers is a lousy strategy for encouraging economic development and job creation. It frightens investors away, rather than attracting them. That’s just common sense at this point in history.