Disney has put construction of its new luxury hotel at Disneyland Resort on indefinite hold as Disney “reevaluates the economic viability of future hotel development in Anaheim.” This comes after the Anaheim City Council advised Disney that the hotel no longer qualified for a $267-million tax break that the Anaheim City Council approved in 2016 for a 700-room hotel.
Since that tax subsidy approval 2 years ago, Disneyland Resort moved the location by ~1,000 feet, and expanded the footprint of the luxury hotel to replace part of Downtown Disney. In reality, the ‘change of address’ is Anaheim City Council’s way of denying a previously-approved tax break granted at a time when both the City Council and Anaheim’s residents were more amenable to Disney.
The change in address is material here only to the extent that it offers a (potential) legal window for Anaheim to nix the tax subsidy. The hotel’s ultimate impact on Anaheim’s finances is unchanged. This is being driven by a change in Anaheim’s political circumstances, which is ultimately what is making all the difference.
As outlined in-depth in another LA Times piece, recent rises in crime and poverty plus the results of the last election have changed the local dynamic. Another election is around the corner this November, and there are 3 City Council seats plus the Mayor’s office up for grabs. (We are not sufficiently-invested in Anaheim politics to have any insight as to how this will play out, but we’d love to hear from those who are!)
Disney spent $1.22 million in the last Anaheim election–in an overall “losing” effort–and is likely to spend big once again to shift the dynamic back in its favor. The outcome of the November 2018 election is pivotal on the issue of what the “indefinite hold” means for Disneyland’s hotel project, among other stalled Disneyland Resort projects.
Even prior to the project being placed on indefinite hold, there were extremely credible rumors that the luxury resort would be delayed by at least a year due to a petroleum brownfield being discovered under part of the site.
Apparently, underground storage tanks for a gas station were filled with dirt rather than removed decades ago, and now laws dictate that environmental remediation occur prior to further development. The brownfield remediation process can be long and tedious, taking years in some cases.
This could play a role in Disney’s stand-off with the city. If the hotel is going to be delayed regardless due to site cleanup, it would make sense for Disney to dig in and fight the city over the tax break. Even without the subsidy, it seems unlikely that Disneyland wouldn’t build this hotel. On its face, the notion that its “economic viability” needs to be reassessed appears implausible.
Hotel occupancy in Anaheim has grown year after year, and Disneyland’s current hotels have no trouble filling up with rates that are often over $500/night. With Star Wars: Galaxy’s Edge around the corner and the expanded Anaheim Convention Center drawing business clientele with the expense accounts to book pricey rooms, there is unquestionably the demand for multiple luxury hotels in Anaheim.
Somewhat ironically, that living wage initiative would not apply to Disneyland if the luxury hotel subsidy is denied. That ballot initiative is narrowly tailored to apply almost exclusively to those two companies, with verbiage that it applies to Anaheim Resort District businesses accepting city subsidies.
Although Disney has enjoyed favorable deals with Anaheim over the years, this luxury hotel subsidy is what would subject it to that living wage initiative. From that perspective, it would seem sensible for Disney to wait out this November’s election results before taking any action with regard to this luxury hotel project.
In addition to just flat-out not building the luxury hotel in Anaheim, it would seem Disney has a couple of viable solutions. The first would be reverting to the older plans, using the approved address. The second would be reworking the current plans so that the entrance is on the approved address. Either approach runs the risk of Anaheim finding another basis to deny the tax break. Again, waiting to see how things shake out in the November election is probably ideal.
If Disney doesn’t build this hotel in Anaheim, the city also misses out on the 15% Transient Occupancy Tax that would be generated by the hotel. Even with a large portion of this being retained by Disney (that’s the form of its tax break), this amounts of millions of dollars annually for Anaheim.
In past posts about the feud between Disney and Anaheim, it has been our general position that it behooves both parties to work together and find a middle ground. If anything, we’ve probably been a bit overly deferential to Anaheim, as Disneyland has historically received some sweetheart deals from the city.
That the two should reach a compromise remains our overarching position here, but we can’t help but think Anaheim is getting overzealous, and trying to overcompensate for decades of unfavorable deals all at once. Here, that’s manifesting itself in a very petty action, and one that is ultimately self-defeating if it removes Disneyland from the purview of the living wage initiative–or shifts development outside of the city limits.
While there’s undoubtedly a lot going on behind the scenes in Anaheim and Burbank, and this is a morass of political issues that go well beyond the public statements of each, that’s our taken based upon the information available. The end results of these disputes has already been bad for the community and for Disney, and that could get a lot worse if infrastructure needs aren’t addressed and the two don’t find a way to capitalize on the coming parks’ boom in mutually advantageous ways.
Ultimately, this stand-off between Anaheim and Disney is a lose-lose for all parties involved. It makes next to no sense for Disney (or Wincome…or anyone, for that matter) to build luxury hotels in Garden Grove while there are more desirable plots in Anaheim near the theme parks and Convention Center. And yet, that’s exactly what might happen if these companies view Anaheim as politically unstable or unreliable. The last couple of years this have involved a stubborn back and forth between the two with plenty of culpability on both sides, but we think things are pretty clear here. Anaheim is acting in bad faith by changing the terms of a deal after it has been materially agreed-upon, and that could have both short and long-term consequences–not just for Disney, but for the city, too.
Who do you think is to blame here–Disney or Anaheim? Do you agree or disagree with our assessment of the dispute? Disappointed about the luxury hotel being put on indefinite hold, or relieved that perhaps that’ll send Disney back to the drawing board on the design? Any questions? Hearing your feedback—even when you disagree with us—is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!