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Anaheim To Decide On Disney's Request To End Hotel Incentive And Entertainment Tax Policy

The Anaheim City Council will vote whether to approve The Walt Disney Co.’s request to terminate a pair of tax incentive agreements that put in jeopardy the construction of a planned four-diamond luxury resort next to the theme park and additional capital improvement investments to the Disneyland Resort and surrounding areas.

The council’s decision Tuesday will come a week after Disneyland President Josh D’Amaro asked the city to mutually agree to terminate the tax breaks.

Rendering of a new hotel coming to Disneyland
Rendering of a new 700-room hotel coming to Disneyland Resort

In a letter to the city council last week, D’Amaro wrote that the city’s awarding of the hotel incentive in 2016 that allowed developers of four-diamond hotels to get back 70% of the transient occupancy tax the hotel generates for 20 years, and the entertainment tax passed in 2015 that disallows the city to impose a tax on admission tickets for 30 years in exchange for Disney placing $1B in investments into the resort, have “created an adversarial climate where there should be cooperation and goodwill.”

“In Anaheim these policies have become divisive, leading to an unstable business climate and a difficult working relationship with the city,” D’Amaro wrote.

These agreements, D’Amaro wrote, “no longer serve the purpose for which they were intended and, in fact, have become a flashpoint for controversy and dissention in our community.”

The letter comes amidst intense scrutiny and public pressure from local unions and a majority city council seen as anti-business over the tax incentive agreements. 

In June, a coalition of unions representing Disney hospitality and theme park workers successfully placed a ballot measure for November that would require companies in Anaheim that receive city subsidies, tax rebates or are subject to an entertainment tax policy to pay their employees an $18/hour minimum wage by 2022.

Disney Hotel, Anaheim, CA
Rendering of Disney Hotel, Anaheim

In 2015, the city council extended an agreement that kept the city from levying an entertainment tax in exchange for Disney investing $1B in capital improvements to the theme park and surrounding areas.

A few months after the agreement, Disney announced it would build a Star Wars-themed land, which is slated to open next summer. 

In 2016, Disney was one of the developers awarded a tax rebate from the city to build a four-diamond hotel based on AAA standards in exchange for 70% of the transient occupancy tax. Disney was estimated to receive $267M in bed taxes in the span of the 20-year agreement. The city's share was estimated to be $133M. 

Wincome Group, which has broken ground on the Westin Anaheim, and a JV of Prospera Group and developer Bill O’Connell, which is building a JW Marriott, are the other developers that received the same or a similar agreement. O'Connell and his partner, Ajesh Patel, in 2013 received a $158M room tax subsidy from the city to build two luxury hotels near GardenWalk.

A spokesman for Wincome had no comment. The JV could not be reached. 

Disney has already placed on hold its four-diamond hotel project after the city found an inconsistency with the planned location. 

"It’s conceivable that if Disney does not have a hotel incentive or entertainment tax agreement, those provisions of the initiative could not apply to them," Anaheim spokesman Mike Lyster said. "But we do not have a definitive legal determination at this time." 

In a statement, Anaheim Chamber of Commerce President Todd Ament said Disney pulling out of the tax incentive agreements will hurt the city of Anaheim in the future.

“Anaheim will see a short-term bump because of Disney’s Star Wars investment, but we fear for Anaheim’s long term fiscal health if the city continues to turn its back on attracting future Disney investment,” Ament wrote in an email.