Posted Friday, August 17, 2018 12:51 PM | Contributed by Jeff
Walt Disney Co. is disputing a $267-million tax break deal that the Anaheim City Council approved in 2016 for a 700-room hotel. Since the tax break was approved, Disney has changed the location of the hotel. The city now says the subsidy applies only to the project as it was proposed at the previous address.
Read more from The LA Times.
Disney says the project may not be financially viable without the tax break.
I get the frustration on both sides. Disney thought they had a deal and the city is essentially using a loop hole to wiggle out of it. And from the city's side, this seems like an awful deal. 70% tax break up to $267 million sounds beyond absurd. I have to wonder if that would allow them to recoup 100% of their construction costs. There is no way the city comes out on top in that investment.Last edited by bigboy, Friday, August 17, 2018 1:56 PM
From what I understand, they had a deal, but Disney altered it by changing from the originally proposed site.
That is precisely what the article states.
And that's awful for people visiting, too. They closed Earl of Sandwich and started site prep. They also closed Rainforest, too - good riddance to that.
Over 20 years, assuming the 700 rooms are occupied 250 nights a year (seems like they would do better than that), its about $76/room/night. Based on the cost of everything Disney it doesn't seem like that should be enough to kill the deal. Maybe they reach a middle ground and reduce the tax incentive.
They’re just puffing their chests at this point, IMO. That’s all this is about, because it’s not like they don’t have the cash flow, for sure.
Disney won't be pulling the plug on the hotel. There are plenty of hotels within walking distance of the Disneyland resort, not to mention those within a bus ride on the OCTA. Disney needs those hotel rooms for the expected increase in crowds with the Star Wars and Marvel expansions. I predict that will be in negotiations with Anaheim.
Disney changed the plans for the location of the hotel from a parking lot to its current location. The original location of the hotel was approved with the understanding that it would create 1100 jobs. Moving the hotel closed the AMC, ESPN Zone, Rainforest Cafe, and Earl of Sandwich. The city estimates that this will cut 400 jobs. That's a 36% reduction in the number of jobs created. That changes the calculus and is certainly not a loophole.
This begs the question, knowing that the location of the hotel had changed and some businesses would now close, did Disney verify with the city of Anaheim that the tax break was still on? If not that is a colossal mistake.
Sometimes it makes more sense to ask for forgiveness rather than consent. Ask before they close the other businesses and the city may have said no. In that case, you cannot change the location, close the other businesses and still get the tax incentive. Going the forgiveness route at least allows you to seek the tax incentive even though the location of the hotel has changed. And they can argue the location moved all of 1500 feet. At that point the City has the choice of being job negative (assuming the hotel isn't built) or changing its approval to give the tax incentive for the hotel at the new location.
At that point the City has the choice of being job negative (assuming the hotel isn't built) or changing its approval to give the tax incentive for the hotel at the new location.
Or somewhere in the middle. The mayor and a few councilmen do not support the project. Things could change in November when Anaheim will have a new mayor and a few seats on the city council are up. It's in the best interest of Disney and Anaheim to have this hotel built. However, this situation has the feel of Disney doing whatever the hell they want to do because they're the biggest game in town.
Companies that often garner tax incentives are the ones who least need them. Communities fall all over themselves trying to outdo each other in terms of offering tax incentives to land Amazon HQ2 (a company with a market cap of about $1 trillion). Doesn't always make economic sense but what community leader wants to be the one who passed on the opportunity to bring in a darling of business.
Amazon is a different story. Disney is already established in Anaheim. It's not like they are going to close up shop and move to another town.
In my view Disney has more incentive to get this deal done than Anaheim does. There are 13 4-star hotels in Anaheim, Disney owns two of them. The new hotel is / was slated to be a four star hotel as well. If you expand your search a little further down to 3-star hotels you now have 75 choices. Many of the hotels in the Anaheim area have shuttle service, access to public transportation, or are close enough to Disneyland to walk. When the Star Wars and Marvel expansions are done tourists are going to have plenty of rooms available, whether the new Disney hotel is built or not.
I still think they figure this out and the hotel gets built. Disney may not get the full 70% or for 20 years. It may not happen until after November at this point either.
Lots of crazy comments (because I'm not riding coasters this weekend) so take all with the idea that this is to generate discussion:
1) yes, this tax abatement is a horrible idea for a "Disney Resort" property hotel. The incentives were initially approved as a way to spur development on currently under-utilized/non-utilized (green or brown field) areas around Anaheim. The City getting only 30% of a huge number is bigger than 100% of zero. How Disney qualified in the first place is a testament to Disney taking advantage of every opportunity they are entitled to. Any parcel within the Disneyland Resort (DLR) wouldn't normally be considered in need of taxpayer support, but apparently it met all of the criteria. Shame on the city for not better outlining what areas were deemed in need of assistance and thus eligible.
2) it's not like the location moved by miles, it's essentially a football field away from the original site.
3) it's a huge stretch for the city to bitch about the site being moved, as neither were disadvantaged in the first place.
4) Didn't Disney modify the plans/location for this hotel as a result of the fiasco of the Eastern Gateway issue? See #5 below.
5) Perhaps that's one reason why the Anaheim mayor/council perhaps pulled the plug. Does this delay/hinder Disney's ability to work up that grand and glorious Western Entrance (and thus perhaps wall off the east side, Harbor Blvd, from pedestrian access)? "Sorry, only DLR buses enter on Harbor. Everyone else has to walk all the way around the property to the new and ONLY DLR entrance". That would certainly screw over the Harbor area hotels that put up a stink about the Eastern Gateway overpass in the first place. Maybe someone on Council is trying to throw a spanner in Disney's works.
6) the City continues to screw with the biggest revenue generator in the area. Not a good plan for the long run for either group.
7) Isn't this new design essentially going to incorporate larger Food/Bev outlets than the hotel alone would normally have, as replacements for the lost F&B from ESPN/Rainforest/Earl were to be part of the lower level? Essentially the entire first floor is thought to be a pedestrian "arcade", with food and retail, (see Disneyland Hotel at DL Paris). Thus replacing a majority of the F&B jobs lost, and then add-ing on the requisite 4* dining options etc, that the hotel would have had in the original parking lot parcel. Probably still a net loss from the original idea of the hotel F&B jobs being in addition to the existing Downtown Disney outlets, but it's not like it's complete eternal wipe-out of the DTD jobs.
8) And if you believe in conspiracy theories: Is this Disney's way to save face (while also extracting concessions from the city), while covering up the fact that the project was already rumoured to be stalled due to the existence of gasoline storage tanks from a prior gas station built on the site decades ago? Stories were running rampant locally that the project would be delayed while removal and remediation efforts would need to be done. Something that was perhaps known but not addressed when the whole DCA/Downtown Disney project was under construction. Another example of kicking a can down the road from the Eisner era?
9) There will be some type of resolution. That piece of property is already too valuable to be left unresolved. Perhaps it might even accelerate item #5, if Disney really wants to play hardball.Last edited by CreditWh0re, Saturday, August 18, 2018 4:16 PM
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