In the coming weeks, the Anaheim city council is expected to vote on yet another tax subsidy of $144 million for a so-called “luxury” hotel right across the street from the entrance to Disneyland, and then another hotel subsidy later in the summer. I will be voting against these subsidies because I believe they are unnecessary, they put the city on a dangerous path financially and they are a reckless giveaway of taxpayer dollars.
Back in 2013, when the Anaheim city council majority voted to give $158 million to a politically-connected hotel developer at the Gardenwalk properties (I voted against this action), we were told we needed to help shield the developer from the effects of the economic recession, and that if we didn’t subsidize this hotel “it would not be built.” In the 3 years since then, we have approved and celebrated the opening of 17 hotels in Anaheim, all without any subsidies. Our hotels serve the millions of tourists who come to our resort area each year, with beautiful amenities, spas, dining and entertainment.
By all accounts, the hotel market is thriving. Hotel experts suggest it’s the strongest hotel market in 25 years: Record revenues and record profits, combined with today’s low interest rates and a booming tourism industry create ideal conditions for investors.
So why does the city see fit to give a handout to a luxury hotel developer, to the tune of $144 million? We certainly can’t argue that nothing will be built without a subsidy, as the last three years have shown. You will hear that Anaheim needs and even “deserves” a luxury hotel. I would argue that, in these market conditions, if it makes sense to build a luxury hotel, then someone will build it with their own money.
Normally, a city takes its hotel bed tax revenues and places them in the general fund to improve and increase city services to residents, like better parks programs, graffiti-removal services and more police officers. Instead, our city is about to take 70 percent of this hotel’s tax revenues and write a check to a hotel developer for over $7 million a year, for the next 20 years. (The remaining 20 percent goes to a bond payment owed to fund the Resort district improvements, and only 10 percent can be used for general fund purposes.)
These tax revenues rightfully belong to the people of Anaheim; instead, the city council is poised to give it to a hotelier that doesn’t need the incentive at all. The value of the proposed luxury hotel when it’s completed will far exceed the cost of construction, resulting in a large profit to the developer. So even if one agrees with the concept of subsidizing luxury hotels to help a project financially pencil, it doesn’t make sense in this instance. Any tax subsidy from the city only adds additional windfall profit to the developer… to the tune of $144 million.
This project makes ample profit without any subsidy. So, why would we do this? The answer is simple…we shouldn’t. The $144 million is desperately needed to pay for essential city services and to pay down pension obligations for our first responders and other employees who depend on these funds for their retirement security. If the council votes for another developer giveaway, then future leaders will be forced to reduce services and put pensions at risk.
The vast majority of businesses in Anaheim are not subsidized by the city. They thrive – or don’t – based on a variety of factors: The demand for their product or service, the location of their business, their own private investment and their hard work. The city plays a role in their success by properly providing paved streets and sidewalks, police and fire response and quality of life services like nearby parks.
Giving away taxpayer money to developers and their well paid lobbyists is called crony capitalism, and is bad public policy. Rather, the best way to build our city economy is to create a level playing field by keeping taxes fair and equal across the board, and using those tax revenues for the benefit of the residents and businesses who call Anaheim home.