Consequences of Ending Disney Tax Incentive Agreements

Last week, Disneyland Resort President Josh D’Amaro informed the City of Anaheim the company wished to dissolve its tax incentive agreements with the city, specifically the 30-year gate tax moratorium that was part of its agreement to invest up to $2 billion in the Disneyland Resort (including Star Wars Land) and 2) and the TOT rebate agreement for the 4-Diamond hotel project it halted last week due to the hostile business attitude of the city.

D’Amaro said the agreements have resulted in an “adversarial climate” and lead to an “unstable business climate and a difficult working relationship with the City.”

At its August 28 meeting, the city council acceded to Disney’s request and voted unanimously to dissolve the agreements. Militant hotel workers union UNITE-HERE Local 11 vainly rallied on social media to block ending the gate tax moratorium – which it had previously and loudly opposed. Ending these agreements means the unions’ “living wage” initiative – Measure L – won’t apply to Disney. The union now faces the embarrassing reality its expensive and highly public effort to gain at the ballot box the wage increases it has failed to gain at the bargaining table is going up in smoke.

What does this mean for Anaheim?

The gate tax moratorium was part of an agreement with the city under which Disney pledged to invest up to $2 billion in the Disneyland Resort, including the development of Star Wars Land and an additional parking structure. It’s worth noting Disney has kept its end of the bargain.

The TOT rebate agreement was made according to a city policy established to attract 4-Diamond hotels to Anaheim, and open to anyone willing to do so. As a result, Disney was moving forward on a $700-million, 700-room luxury hotel – but halted the project in mid-August when the city threatened to use a minor siting issue to revoke the TOT rebate agreement.

Now Disney wants to cancel those agreements entirely.

Anaheim Mayor Tom Tait and his allies have greeted the decision rapturously.

“I applaud the Disney leadership for such a wise, bold … and kind action. I deeply appreciate their recognition that these agreements are toxic to the relationship between Disney and our city,” Tait said on his Facebook page. “These agreements would have put a substantial strain on Anaheim’s long term financial health.”

Tait acolyte and council candidate Patty Gaby exulted that Disney had “waved the white flag.”

Disney is being polite and the mayor disingenuous by ascribing the “toxicity” to the agreements themselves. The divisiveness is the direct result of the divisive political campaign waged by the mayor and his left-wing allies during the last several years, attacking anyone who benefited or even spoke in support of these agreements as cronies or special interests or lobbyists intent on plundering the public fisc. By deliberate action, they contributed mightily to the toxic environment they deplore and blame on others. The Anaheim Chamber of Commerce is assailed for doing its job of promoting business development and job creation. Bill O’Connell, a good Christian man, honorable business owner and long-time supporter of Anaheim civic and charitable causes, is vilified as some kind venal crony. The whole episode continues to make a mockery of the “City of Kindness” campaign.

What Are The Takeaways?
There are a number of short- and long-term consequences to this latest turn of events.

Anaheim Loses Jobs and Tax Revenues, Acquires Hostile Business Environment Reputation
For starters, there’s the loss of 5,050 construction jobs, 1,150 permanent and mostly full-time jobs due to the halting of the 4th Disney hotel – not too mention the city’s loss of $25 million in net TOT revenue during the next five years and $1 billion in TOT revenue over the next 40 years.

It also sends a powerful signal to businesses that Anaheim’s investment environment is a dicey one and the city government is a fickle and unreliable partner. Governments that rip up contractual agreements based on shifting political winds or ideological vendettas are characteristic of banana republics, and tend to discourage investment and job creation.

City Finances Will Suffer
Mayor Tait’s assertion the TOT rebates strain city finances is oft-repeated – but false. City Finance Director Debbie Moreno told the city council this May that the five-year budget forecast is predicated on the completion of the approved 4-Diamond hotel projects – including Disney’s. The city doesn’t earn tax revenue from hotels that don’t exist.

The Magical $267 Million Windfall
On that note, there are doubtless many Anaheim residents who share Patty Gaby’s belief that Disney’s decision suddenly puts $267 million into city coffers. Thanks to over-heated rhetoric from Mayor Tait, Councilman Moreno and their allies, a lot of Anaheimers will now be under the misapprehension the city is suddenly flush with cash to spend on pet projects – such as Moreno’s campaign promise to have the city pay college tuition for graduates from Anaheim high schools.

If they really believe their rhetoric, the Mayor and Moreno ought to call a special council budget workshop to discuss how their going to spend this magical $267 million windfall.

The “They’ll Build It Anyway” Myth
Equally magical is the belief, recently articulated by Tait acolyte Patty Gaby, that Disney will “build the hotel anyway.”

Really?

Disney had entitlements to build the fourth hotel for for decades – and didn’t. When the city established the Hotel Incentive Policy to incentivize luxury hotel development, Disney brought forward a 4-Diamond project. When the city used to excuse of a minor siting shift to pull the TOT rebate, Disney halted the project.

Where in all that is there any indication Disney is going to build this hotel absent the TOT rebate policy?

UNITE-HERE Local 11 and the Coalition of Resort Labor Unions (CRLU) Have Really Screwed The Pooch
From the beginning, they’ve pitched their $18 minimum wage to voters as forcing Disney to pay “a living wage” (even though it casts a much wider net of affected businesses). They’ve spent hundreds of thousands of their members’ dues dollars qualifying and promoting it.

Since then, Disney reached agreement with the Master Services Council – representing about a third of the Resort’s unionized workers – boosting their wages.

Then Disney announced in mid-August it’s raising the starting hourly wage of non-union workers to $15.75 beginning in January 2018.

Next, Disney announced it is halting the 4-Diamond hotel project – which would have created 1,000 new UNITE-HERE Local 11 members.

Several days later, Disney announced it’s withdrawal from the TOT rebate and gate tax moratorium agreements – rendering the unions’ “living wage” initiative inapplicable to the Disneyland Resort – and all the CRLU union members who work there.

In short, all Disneyland Resort employees are getting significant wage increases – except for those represented by most CRLU unions, which have spent huge sums of their members money on an initiative that won’t help their members.

The mayor and his allies may consider this a political win, but it’s a Pyrrhic one, at best. The city loses, as do the CRLU unions, the building trades, and the Anaheim Resort.

15 comments

  1. Bad decisions all around. The only winner is Disney. It seems this group seems to want its cake and to eat it too. This rebate should never have been approved. Disney may not have built a four star hotel without it, however Disney would have and is building Star Wars land. (Not a fan don’t need storm troopers walking around Dland) They would have built another hotel and I am sure they will. It will be attractive and a boon to the city. Maybe Unite here needs to get real and settle their issues for their members. That would be a first. Disney feeds this city and Orange County at large. I am not sure how many businesses have hearts. We live in a capitalist society and last I checked it is profits over personnel. Let’s see what this soap opera will bring next.

    • Typical Trumpist right-wing scare tactics supporting the needs of grossly undertaxed greedy businessmen and lawyer scum. These businesses only got tax breaks when we had the best city council money could buy. BTW, keep raising apartment rents and watch what happens when your pool cleaner, maid and gardener can no longer live here. OH! Here’s a riddle –

      What does the John Birch Society call itself nowadays? That’s right! The Republican Party.

      • So, what is your explanation of the 60 reign of the Dem party in Detroit, that took the silicone valley of it’s day and turned it into the shame that it is today? All my family had to leave Detroit in the 60’s and 70’s. Googling their former home addresses and found they are boarded up or vacant lots now. It may be hard to hear, but the truth is, facts don’t really care about feelings.

  2. VOTE NO ON: Jose Moreno, Ashleigh Aitken, Al Jabbar, Ryan Ruelas and Juan Gabriel Alvarez. They all are working together to have a stronghold on Anaheim. Do not be fooled those mentioned are BAD for Anaheim.

    They do not think for all people but rather for themselves. Moreno’s District 3 is a mess and he is everywhere but his district, ask the residents. Unite District 3 let’s not bee fooled again.

    Ashleigh Aitken is an unproved Tait endorsement that will carry in the direction Tait has taken us- enough said.

    Ryan Ruelas and Al Jabbar lie about our school’s test scores- the reality Anaheim schools have failing test scores. These two representatives spent our money fighting to make Palm Lane stay in the Anaheim School District DESPITE failing scores so low it qualified to be turned into a charter school. Fact: They fought to keep the school and its students failing.

    Juan Gabriel Alvarez campaigns with this group so he shares their viewpoints enough to stand along side of them.

    We must not be fooled by their rhetoric and empty promises.
    We must not be fooled for their slogans: forward together, they have NOT moved us in a direction that we want to go in,rather we are worse off with their representation.
    We must not be fooled by their lies of all the good they have done. They have not helped Anaheim’s residents. They have wasted time and money with foolishness rather than important issues.

    We must not be fooled by this groups movement and we can do so by NOT VOTING FOR ANY OF THEM.

  3. P: You can say what you want but we will vote how we want. No more hand outs just hand ups. You must not have lived here long. Anaheim is on the map because of Disney. If you had lived here that long you would know/respect that. Sorry, not sorry, most of us work very hard for what we have and do not wish to lose i

  4. New hotel construction will continue to focus on Garden Grove, where some well-known Anaheim figures will hypocritically get paid to help the hotel builders get city subsidies.

  5. Last time I checked, we had this called a constitution, which suggessts: “One Person, One Vote”. Which thankfully means: Greg Diamond, Jeff LeTournue, Mirevette Judah, Ryan Catnor, Ada Bricineo and Ahmed Zhari. CAN’T VOTE!

    So cry all you want but we live in ANAHEIM not Laguna Beach!

  6. How about a follow up story on how the family of Christian dropped their lawsuit. There is way more to this story, including the slow response to the neighborhood and Anaheim’s position.

  7. Why do residents of Anaheim have to pay $20 to park in a parking structure in Disneyland, if my tax money helped built it? I should at least get a discount. Glad the Disney hotel didn’t go through. The city needs to spend money helping with the homeless problem before it starts giving “discounts” to a company.

    • Araceli you know nothing about how this works. Your taxes did NOT pay for the parking structure. Disney paid to build it. On their own property. Why should you get a discount? The city has spent money helping the homeless. They dont want the help. You might just want to educate yourself.

    • Save the City of Anaheim

      Why the City needs to spend the $$ in homeless issues?, The City of Anaheim ‘s residents need street improvements , sewer upgrades, parks maintenance . These are a few priorities where the Council members need to work , the homeless are no the priority. Of course the homeless is an National issue and they need help but the residents and taxpayers of Anaheim need more attention first!

      • It’s helpful to make a distinction in this discussion between being homeless and transient. Transients just won’t take the hand up.

  8. Very well said. There was no logic to Tait’s council undermining the deals the previous council setup. It was an emotional move to fulfill a misguided campaign promise to end so-called Disney “entitlements” – the cost to the city be damned.

    Despite the large number of hotels being built locally, not a single company was building a four-diamond hotel project prior to the council’s TOT revenue rebate offer. It was an offer made to all comers – not hardly just Disney – and three companies took the city up on the deal. Surely the remaining four-Diamond projects must take pause at the Anaheim’s “good faith and fair dealing” tactics. This will definitely chill investment in the city. There are no winners here but some lost far more than others in this fiasco.

  9. By the way, not one dollar needed to borrowed for the Mickey and Friends Parking Structure, as it was paid for my Federal, State and County grants.

    https://www.yesterland.com/westcot2.html

    >>By the fall 1991, Disney’s PR machine started to get fired up. First, Disney went straight to the U.S. Congress to try and get $400 million to pay for carpool lane ramps and the parking structures. The claim was the garages would be demonstration projects of space age technology being applied to auto parking. The streetscape plan was unveiled. Campaign contributions were increased and more lobbyists were employed.<>The effort to get the Federal government to pay for the parking structures failed. The request was for $223 million but the Federal contribution was limited to $17.5 million. The state of California tossed in $60 million and Orange County paid $36 million. Disney was starting to get cold feet and the community’s opposition to the project was not helping.<>Seeking to allay worries about an extra burden on Anaheim taxpayers, the Walt Disney Co. and city officials on Monday said hotel bed taxes, sales taxes and state and federal grants would fully finance the $550 million needed to improve streets, landscaping and utilities for an expanded Anaheim Convention Center and a second Disney theme park.<<

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