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ANAHEIM INCENTIVES WORK AND RESIDENTS BENEFIT WITHOUT TAXES

Have you noticed what’s happening lately in some Orange County cities?  Stanton passed one.  Now Fountain Valley, Laguna Beach and Westminster are considering them:  a one cent sales tax hike on goods sold in their communities to cover millions of dollars in growing costs of providing city services we depend upon, adding to the burden of federal and state taxes.  Our own home towns are proposing to tax us more! Anaheim, however, hasn’t needed to do this.  For decades, Anaheim valued its strong relationship with the tourism industry formed around the Disney Resort, creating innovative partnerships and financial incentives to grow that relationship.  Over one-half of the city’s general fund can be directly attributable to revenue from the Resort.  That general fund pays for important services for Anaheim residents such as police, fire, public safety, libraries, parks and youth activities.  Further, Disney is Orange County’s largest employer, contributing to a robust unemployment rate of 3.6%, the lowest since the Great Recession.

In 2015, the Anaheim city council approved another innovative program when it determined that it could attract more visitors seeking “four-diamond” or luxury hotel experiences.  Anaheim has plenty of two and three-diamond hotels, with 17 built in the last three years alone.  But, to meet the high-end demand, Anaheim approved an opportunity city-wide to any hotel builder for luxury hotel construction:  the city would share transient occupancy taxes (TOT) paid by luxury hotel guests for 20 years, 70% to the luxury hotel builder and 30% to the city.  After 20 years, 100% of TOT would remain with the city.

As a result, Anaheim received three proposals for luxury hotels in just under a year.  This is very good news for Anaheim residents.  The more expensive the hotel room, the larger the tax paid by visitors to the city’s general fund for residents’ benefit.

Unfortunately, Anaheim’s mayor is not in favor of this already-approved program for at least three reasons.

First, he claims that these four diamond hotels would be built anyway.  Not true.  The last luxury hotel built in Anaheim was over 20 years ago.  It wasn’t until the TOT sharing program was offered did any new proposals appear.

Second, he claims that this program is tantamount to taking money out of the city’s general fund.  Not true.  If the hotels aren’t built, no TOT is paid and no money goes into the city’s general fund.  100% of zero is still zero.

Third, he says 20 years of sharing TOT between the city and luxury hotel builder is too long.  Not true.  A luxury hotel is a long-term profit generator and should be regarded as such.  For example, a three-diamond hotel can generate $350 million to the city over 40 years; a four-diamond luxury hotel—even with the incentive program and TOT sharing—can generate $783 million over the same 40 years—more than double!

That’s a great forward-thinking plan for Anaheim, a real incentive for creating new jobs, and a surety for city residents that funds will be there well into the future for the parks and libraries they love without new taxes other OC cities are now exploring. If only those other cities would consider creative incentives, instead of defaulting to taxation of their residents.

And the mayor surely recognizes the benefits of incentives in job creation.  His own company, Tait & Associates, was retained for work in neighboring Garden Grove on the Great Wolf Lodge and Resort, which received similar significant financial incentives from the city but also public land at no cost upon which to build.   Incentives were also used to develop Huntington Beach’s four-diamond resort, The Strand, which Tait & Associates helped to successful complete.  It’s hard to argue that Anaheim shouldn’t benefit from the same tools others use.

Anaheim succeeds where others do not because of its entrepreneurial incentive programs, making it an attractive place to live, work and play.  We urge that Anaheim continue that track record of success and approve those hotels.


Posted on July 12, 2016

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