Anaheim: Council Approves Three 4-Diamond Hotels Amidst The Usual Drama

On Tuesday, the Anaheim City Council voted 3-1 to approve three new 4-Diamond hotels that when completed will mark the most dramatic transformation of the Anaheim Resort since the opening of California Adventure.

Two of hotels will go up on the sites of existing hotels,, which will be demolished. The third is being built by Disney – only the second hotel it has built in the Resort (the other being the Grand Californian Hotel). All three are expected to be completed in two years.

What Was Approved
The Disney project (as yet unnamed) will be approximately 700-rooms on a 10-acre section of the Downtown Disney parking lot. The $624.7 million project will create 5,050 construction jobs and 1,150 permanent jobs, the large majority of which will be full-time.

The other two hotels are being built by the Hong Kong-based Wincome Group. One is a 580-room, 8-story hotel on the 8.8 acre site currently occupied by the 55-year old Anaheim Plaza Hotel & Suites – which will be torn down. It will cost an $330.7 million and generate 1,970 temporary construction jobs and 470 mostly full-time permanent jobs.

The other will be built where the 358-room, 3-star Ana Bella Hotel now stands: a $306 million, 634-room 4-Diamond hotel that will generate 1,968 construction jobs and 514 permanent jobs.

All three projects were approved for participation in Anaheim’s Hotel Incentive Program, under which the hotel owner receives tax rebate equal to 70% of the annual transient occupancy tax (TOT) tax for a term of 20 years. Of the remainder, 20% goes to pay Resort District bond debt and 10% goes into the general fund.

No 4-Diamond hotel has been built in Anaheim in more than 15 years, The program was created in 2015 to incentivize their construction; none of these projects would have been brought forward absent to TOT tax rebate program.

During the 20-year term of these agreements:

The Disney hotel will generate $381.5 Million in TOT revenue, while the incentive payments are estimated to amount to $267 million.

The two Wincome properties will generate a combined $418 million in TOT revenue, and the combined tax rebates total $292.8 million.

After adding in sales and property tax revenue, the net revenue (after subtracting the tax rebates) to Anaheim from these is $190.3 million over the 20-year term of the program. After that, the city collects 100% of the TOT revenue: it’s estimated these three hotels will generate $612 million in TOT revenue for Anaheim during the 10 years following the end of the tax rebates.

Drama But No Surprises
The council chamber and overflow room were predictably packed with the usual battling clans of Anaheim politics; anyone who has been to one of these civic cage matches in recent years would have had a strong sense of deja vu.

Most attendees belonging to the pro-hotel development camp: members of the business community, building trade unions, and local community activists.

Except for a few complaints during public comments that the Wincome hotels are not (at least yet) unionized, the militant hotel workers union UNITE-HERE and its symbiotic advocacy group OCCORD stayed on the sidelines. This hurt turn-out on the anti-tax rebate side.

UNITE-HERE already represents workers at the three current Disney properties and under its bargaining agreement, will represent workers at the new Disney hotel. Furthermore, since UNITE-HERE and OCCORD endorsed a hotel incentive program in Santa Ana (albeit one larded with forced unionization provisions), they lack moral standing to oppose TOT tax rebates in Anaheim.

Mayor Tom Tait used a PowerPoint presentation an an attempt to rebut claims by supporters of the three hotel projects.  It was a strange presentation: much of it was devoted to attacking Support Our Anaheim Resort (SOAR) – an organization of Resort businesses and boosters who support economic development there – and trying to downplay the importance of the Resort to city finances. Tait made the astonishing claim that three 3-star hotels would actually generate more tax revenue than 4-Diamond hotels, based on a flawed analysis based on non-existent 3-star hotels with 500 rooms and restricting the revenue comparisons to a 20-year horizon – as if the three proposed 4-Diamond hotels are going to vanish into thin air once the tax rebate period ends.

Most of the speakers against approving the hotel projects’ seemed to have internalized the false notion propagated by the mayor and others that the TOT tax rebate program diverts money from the general fund and existing city services – as if the estimated $550 million estimated to be rebated over 20 years was actually sitting in a vault somewhere waiting to be spent.  They sincerely believe approval of these projects would result in less revenue going into the general fund – which is not the case.

However, they were overshadowed by the bulk of speakers who voiced support for the three hotel projects, citing the jobs created, revenues generated and pointing out how these hotels will cement the Resort as a top-tier destination.

Councilwoman Kris Murray mounted a spirited defense, complete with her own PowerPoint presentation, that ably demolished the myths and distortions being advanced by opponents of these deals. She pointed out the Hotel Incentive Policy is in keeping with decades-old economic development strategy of public-private partnerships that has led to the Anaheim being the world-class destination that it is – that the “Anaheim Way” has worked well. Murray contrasted the city’s fiscal health with that of nearby cities seeking to bolster their budgets with regressive sales tax increases, noting that Anaheim’s approach is to generate revenues through greater economic activity rather than reaching into residents pockets.

Brandman v. Moreno
The meeting also served as a quasi-proxy fight between Councilman Jordan Brandman and his principal opponent for re-election in District 3, Jose F. Moreno. Although both men are Democrats, Brandman is more of your traditional Democrat with pro-business leanings, while Moreno is a progressive practitioner of racial identity politics who sees the world through Bernie Sanders’ eyes.

Each time he took a turn at the microphone, Moreno directed his fired at Brandman by name, attacking the hotel deals and reeling off his “imaginations” of how he would spend the hundreds of millions he imagines is being siphoned away.

For his part, Brandman would wrap up his comments after each vote approving the deals by leading union members in the audience in chanting “P-L-A” – a reference to project labor agreements each developer had signed with the building trades unions to mandate the use of union workers during the construction phase, with provisions for preferential hiring for veterans and Anaheim residents.

Obama Calling
One moment of drama came as the clock ticked closer to 10:00 p.m. and Mayor Tait would have to leave to catch a red eye to Washington D.C.: he’d been invited earlier in the day to join several mayors (such as LA Mayor Eric Garcetti), police officials and several dozen others to a roundtable discussion on the police and racial violence issues.

Prior to the council meeting, the mayor had unsuccessfully inquired about continuing the whole meeting. As the time to leave for the airport drew near, Tait made a motion to continue everything for two weeks, He was voted down 3-2.

Outside of the mayor’s most devoted acolytes, there was little apparent sympathy for requiring everyone re-organize themselves for another council vote mobilization in order to accommodate the mayor’s desire to participate in a presidential photo-op and later cast a negative vote so the hotel deals were approved on a 3-2 vote rather than a 3-1 vote.

In the end, the Anaheim Resort skyline will be altered in a stunning manner two years hence, attracting thousands more affluent visitors to stay and spend in Anaheim, bolstering the Anaheim Convention Center’s competitiveness and depositing greater TOT revenue in the city treasury in the coming decades.

The issue will remain alive politically for at least the next several weeks: the Mayor Tait’s effort to claim a council majority – through his four candidate slate and the  independent expenditures funded by Howard Ahmanson and the Tait Family Trust — will make these votes a centerpiece of negative mailers. It’s uncertain how effective that will be or if this issue is prominent on the list of Anaheim voter concerns.

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