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.”
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.