The Stadium Land Lease
Arte Moreno Likes What He Sees
Every Anaheim resident owns an equal share in the land surrounding Angels Stadium. The 155-acre property lies in the heart of Orange County, a burgeoning metropolitan area. It is situated at the intersection of three freeways and is adjacent to the Anaheim Regional Transportation Intermodal Center, known as ARTIC, a principle transportation hub opening in 2014. The surrounding area is dominated by major attractions, including: Disneyland, California Adventure, the Anaheim Convention Center and the Honda Center. Such a disposition makes the property, with or without the Stadium, prime real estate and a major potential source of revenue for the city.
Currently, the land is leased to Arte Moreno, owner of the Los Angeles Angels of Anaheim. The lease limits Moreno to the use of the stadium and parking lot until 2029, with an opt-out clause held by Moreno until 2016. Moreno must maintain the stadium in top-notch condition, an obligation amounting to an estimated $130 – $150 million over the next twenty years. Moreno has no plans to move the Angels and it is highly unlikely that he will before the opt-out option terminates in 2016.
The Anaheim City Council recently voted to change the terms of Moreno’s lease. The city was not obligated to renegotiate and the public was given little notice of the decision. In sum, the amended lease: 1) allows Moreno to remove Anaheim from the Angels’ name; 2) extends Moreno’s opt-out clause through 2019; 3) provides a 20-years lease of the stadium for minimum rent; and 4) leases the surrounding 155-acres to a separate entity owned by Moreno for a mere $1 per year for a minimum of 66 years. Incredibly, Moreno can develop the 155-acres and keep 100% of the resulting profits, even if he decides to move the Angles before the extended opt-out date in 2019. For a more detailed assessment of the new lease, see Martin Wisckol’s in-depth article.
Mayor Tom Tait, up for reelection next year, opposed amending the lease. His challenger, Councilwoman Lucille Kring, embraced the less-favorable deal and has argued that the city must make concessions to keep the Angels in Anaheim. But as stated above, there is no credible danger of Moreno moving the Angels. In fact, Kring’s bad deal gives Moreno an additional three years to coordinate a move for the team. Mayor Tate reaffirmed his opposition to the deal arguing that as steward of the tax-payer’s money, he must protect future revenue “for Anaheim residents, our children, and our children’s children”. In making the point, he may have been thinking of another epic bad deal in Anaheim’s history.
The Publicly Financed Disneyland Parking Structure
It’s So Big
Upon its completion in 2000, the six-level, 10,250-space Mickey Mouse and Friends parking structure at Disneyland was the largest in the United States. Longer in length than the Chrysler Building is tall, the developers set out to build in ”the tradition of great public works”. Unfortunately, the only public dimension to the project was its financing. The behemoth structure was a $90 million gift to the Walt Disney Corporation courtesy of the Anaheim taxpayer.
The money originated in a $545 million bond Anaheim issued in 1997 to remake the city’s resort district under then-Mayor Tom Daly. The annual payments on the bond are approximately $28.1 million. $150 million was used to expand and upgrade the convention center, while the remainder went towards numerous aesthetic and infrastructure improvements around Disneyland. Much of the latter went toward projects mutually beneficial to the city and Disney. A number of projects, however, benefited Disney exclusively. In addition to the $90 million for the parking structure, Anaheim payed $13 million for the “flyover” that connects the parking garage to the highway and $5 million for the pedestrian bridge over Disneyland Drive.
In return, Disney let Anaheim use its AAA credit rating in order to obtain favorable interest rates on the bond. In addition, Disney promised a $36 million increase in tax revenue by 2008. In theory, this was sufficient to cover the bond payments. However, a number of factors were left out of the equation, principally, the infrastructure and environmental costs of hosting significantly more visitors and employees. Moreover, the city failed to obtain common-sense concessions that would have minimized its financial burden. For example, Disney currently charges $16 per car for use of the parking structure, a sum amounting to tens of thousands of dollars every day. Despite financing this so-called public works project, Anaheim has no share in the parking revenue.
The Elephant in the Room
Then, as now, the city failed to play hardball with its corporate partner across the table. Perhaps the city naively assumes that corporate counsel is payed to draft a balanced deal that is fair to the city. Or maybe Anaheim is dominated by a lobbying organization that prevents meaningful push-back on the part of City Hall. In any event, Anaheim’s history of negligent negotiations comes at a high price, “for Anaheim residents, our children, and our children’s children”. After leading Anaheim through the negotiation with Disney over the bond, Tom Daly went on to assume higher office and the taxpayer was left to foot the bill. Mayor Tait, to his credit, has returned as a force to end the city’s disturbing track-record for bad deals.
When you talk to Anaheim residents, we hear the same thing over and over…if Anaheim has this fabulous economic engine, why does our City look so bad? Really, why are we not nicer than surrounding areas without those job/tax generating centers?
It took many years of research, some of it from within the belly of the beast itself, but after digging I found some interesting numbers related to our economic engine…
Did you know that the taxpaying public gets NOTHING directly from the improvements on Disney property related to our enabling those expansions? Downtown Disney and all that sales tax from those shops and restaurants? Nada for us, baby. The bed taxes from the Grand Cal Resort and Vacation Club wing expansion. Same deal. Cal Adventure and the property tax on those improvements? Nope, none for us. The bond deal in ’97 froze tax increments at 1995 levels, those improvements constructed after ’95, including all the property I just described, it all goes bye-bye. It was sold with the argument that at least we don’t LOSE anything in paying for the bonds because we still take in the same money as before, it is the revenue generated by the additional improvements that are paying for the bonds. (shades of Gardenwalk anyone?) 100% of taxes, including TOT, property taxes, sales taxes, above what was generated on Disney property in 1995, goes into the General Fund (and is therefore counted by groups like SOAR as “revenue” to benefit the City) but is then diverted back out again to pay for bonds. That number is not adjusted for inflation, beyond an increment increase of 1 or 2% (same as Prop 13 would allow) and yet, how much more do those additional visitors COST us in infrastructure stress, and subsidizing the low income jobs needed to serve those visitors.
The deal was SUPPOSED to be that we would lose the revenues from Disney properties, but we would benefit from the revenues generated by SURROUNDING businesses serving visitors drawn into Anaheim by the expanded Disney park offerings made possible by our “investments.” Well now the next generation of elected leaders, most being newcomers to the city and lacking the institutional knowledge of past deals and previous promises to taxpayers, are giving away the taxes generated by those businesses, to the businesses themselves. (See Gardenwalk, taxes rebated on BOT hotel AND shopping center, for prime examples of a closed system feeding itself without letting money leak back into the surrounding community.)
Now of course we are also asked to fund a $319 million streetcar (designed by Disney, benefitting Disney, that is funded in no way by Disney, and skips Disney property to exempt Disney from the extreme liability of these systems that are dangerous in mixed traffic, and ensuring someone else’s property is “taken” for the Resort Station, God forbid we use Disney’s property for the use of Disney’s customers!) Because hey, it is the duty of the public to mitigate traffic impacts of visitors to highly profitable private businesses from whom we draw precious little tax revenues after paying off the campaign buddies of our elected leaders.
Don’t get me wrong, in my heart of hearts I still love Disney, despite the greedy behavior of a select few executives who failed to learn how to play nice with others in grammar school, their parents and teachers apparently permitting them to hog ALL the toys in the sandbox without reprimand or reprisal. Nope, I don’t blame Disney, it is their job to score the best deal for Disney. I blame the elected leaders who are SUPPOSED to score the best deal for taxpayers, and instead bow to Disney in exchange for campaign dollars.
Oh yeah, the same politicians who approved THIS deal….also approved the previous Stadium lease with Disney, which Arte Moreno is now renegotiating. The only upside to that deal is public pressure seems to be forcing the Council to back off, or at least slow down and appear to think twice before committing the ultimate example of “gift of public funds” (which is technically legal in a Charter City, as long as they find “intangible benefits” to offset the gift. Not sure a team named for a city competing with Anaheim for convention business is the “benefit” they claim, but we shall see.) Maybe this time we will listen to Tom Tait, who made the SAME arguments during the 1990s deals on the Resort and Stadium as he is arguing now. The closed system needs to open and include the taxpayers, with a dividend for the investments we have been making for decades while the private sector reaps the benefits of our tax support.