Readers may have read the very slanted Los Angeles Times articles on whether Disney pays its fair share in Anaheim. The stories painted a distorted picture primarily due to the omission of context and key facts. Robert Niles, the editor of The Theme Park Insider blog, fills in gaping holes in the LAT series with this corrective analysis:
Is Anaheim getting a fair deal from the Disneyland Resort?
Is Disney paying its fair share to the Anaheim community? That’s the question the Los Angeles Times raises in a two-part series it ran this week. [Part One and Part Two] Of course, to answer that question, you have to start by defining what “fair” is. If you define fair as paying its legal obligation in taxes to the city, then there is no evidence in the LA Times report — or from any other credible source — that Disney is evading its legally obligated tax bills.
But I think most people would define “fair” more broadly than “legal.” And that’s where anyone looking to define “fair,” well, fairly, needs a wide range of context to understand what’s happening with Disney in Anaheim. As well reported and extensive as the LA Times report appears on first read, it lacks much of the context that I think is needed to understand the situation.
The LA Times report reflects a classic trope of political journalism — bought-off elected officials doing the bidding of the donors who funded their campaigns. To support this view, the LAT offers three main examples: that Anaheim built the Mickey and Friends parking garage for Disney but is getting only $1 a year in return, that Anaheim offered Disney a fat tax incentive to build a luxury hotel, and that Anaheim voted down an admission tax on Disneyland tickets.
Before I proceed, allow me to reveal my belief about communities offering financial incentives to business. I hate them. They generally privatize profits while socializing risk. They’re welfare for corporations whose leaders and shareholders don’t need the public’s help to eat or have a roof over their heads. But as much as I don’t like cities building stadiums, headquarters, or parking garages for private businesses, I also don’t like seeing communities going backsies on a deal.
Let’s look back at why Anaheim decided to build the Mickey and Friends parking structure for Disney, because the LAT ignored that context in its story. When former Disneyland President Jack Lindquist starting prodding Disney for a second gate in the 1980s, there was no consensus within the company that it needed to be built next door to Disneyland in Anaheim. Disney looked at buying Knott’s Berry Farm in the years after Walter Knott’s death, to convert the park into a modified version of its Disney’s America concept. When Disney finally gained control of the Disneyland Hotel following the death of Jack Wrather, the company also came into possession of Wrather’s lease to operate the Queen Mary in Long Beach. That prompted Disney to draw up plans for a second gate built around the retired ocean liner — a DisneySea to Anaheim’s Disneyland. (Yes, those plans eventually became the Tokyo DisneySea park in Japan.)
Walt Disney famously hated the hodgepodge of development around Disneyland in Anaheim, which is why he bought so many acres and fought for his own government control for what became the Walt Disney World Resort in Florida. So when Disney decided to make a commitment to expanding its theme park presence in Southern California, it had options outside of Anaheim — a community that hadn’t exactly endeared itself to Disney over the years.
That left Anaheim in a somewhat weak position as Disney basically opened the bidding for the second gate. Anaheim offered to pay for the parking structure and create a comprehensive planning and zoning policy for what would become the Resort District around the Disneyland property in order to secure Disney’s commitment to build its second park in the city.
I haven’t heard a single convincing argument that Anaheim would have been better off had Disney not built California Adventure and expanded the Disneyland Resort, instead of building the DisneySea project in Long Beach. Now, was getting the second gate, Downtown Disney, and the Grand Californian hotel worth what Anaheim paid to build a parking garage? Argue all you want, but I’ll vote yes on that one. Could Anaheim have gotten Disney to commit to expand in the city without giving up so much? Maybe, but that’s an irrelevant hypothetical at this point.
Let’s look at the other two issues, starting with the hotel deal. The LA Times story in one part ignores and in the other glosses over the very relevant fact that this deal was not exclusive to Disney. Three other companies also claimed the deal, which Anaheim offered in an attempt to get companies to build more expensive hotel rooms in the city.
Why would Anaheim want to pay for that? Because Anaheim reaps millions of dollars in hotel taxes each year, and the more expensive the room, the higher the tax revenue. Higher room rates also tend to attract wealthier, more free-spending guests, which means more money for local sales taxes, too.
Communities offer variations on this deal all the time: In order to attract the development of a business that will elicit more tax revenue for the community, offer the owners of that business a cut of that extra tax revenue up front in order to give them an extra incentive to develop that hotel, factory, warehouse, shopping mall, etc. It’s a risk for taxpayers. If the business doesn’t succeed and start generating extra tax revenue, then the taxpayers spent a bunch of money up front for no return. But Anaheim thought that this would be a good deal for the city, then Disney — and other hotel developers — took them up on it.
I wrote before about the admission tax proposal, which was an act of political theater — Anaheim agreed not to impose a tax it had never collected before, in exchange for Disney building expansions (including Star Wars Land) that it was going to build anyway. Both sides agreed to the status quo.
How is this a giveaway to Disney? Well, it meant that Anaheim would forgo an opportunity to collect more tax revenue via the Disneyland Resort. But that didn’t mean that Anaheim wasn’t looking to raise more money in taxes. It simply decided instead to go with increased collections of an existing tax — the hotel tax. (See the luxury hotel incentive, above.)
(And let’s not overlook that it ain’t Disney paying these taxes — the hotel tax or the hypothetical ticket tax. It’s us, the visitors to Anaheim.)
Thanks perhaps in part to Anaheim switching from electing its city council members at large and instead electing them by geographic districts, as the LAT reports describe, the ideological make-up of the council has changed and now features a majority that is publicly more skeptical of Disney. Will that mean that Anaheim residents and taxpayers will get a better deal from the city’s largest employer?
Not necessarily. Because the relationship between Disney and Anaheim is not a zero-sum game. Opposing what Disney wants does not necessarily help the people of Anaheim, or vice versa. The LAT article cites a recent decision not to tie the resort district into a larger mass transit plan as a strike against Disney. But that’s actually a short-sighted decision that hurts the people who work at and visit the Disneyland Resort, as it limits options to get to and from the resort without suffering through what can be nasty traffic in the community.
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