Anaheim Ends $267 Million in Disney Theme Park Subsidies

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Disneyland in Anaheim, California.

The city and the entertainment giant have been at odds recently because some local leaders have complained that the company receives too many benefits at the expense of taxpayers.

The Anaheim City Council and Walt Disney Co. took a step closer to settling an ongoing feud by agreeing to cancel about $267 million in subsidies that the entertainment conglomerate would be entitled to if it built a luxury hotel at the Disneyland Resort in California.

While seven members of the city council, including Mayor Tom Tait, voted late Tuesday to honor Disney's request to terminate two agreements from 2015 and 2016, they may also have encouraged Disney to scrap plans for what would have been its fourth hotel servicing Disneyland and Disney California Adventure Park.

Disney and Anaheim have been at odds recently because some city leaders complain that the company receives too many benefits at the expense of taxpayers, and Disneyland Resort President Josh D'Amaro acknowledged in an August 21 letter that economic incentives had created an "adversarial climate" and had become "a flashpoint for controversy."

"Consequently, we are asking the City to join us in terminating both agreements," D'Amaro said in his letter, which spurred Tuesday's vote.

One of the agreements would have given Disney 70 percent of the occupancy taxes it collected at a four-diamond hotel it was planning to build, while another agreement prevented Anaheim from introducing a tax on theme-park tickets for at least 45 years if Disney invested $1.5 billion at its parks there. There are no such taxes on tickets now, but Tait acknowledges that with the latter agreement now defunct, there's nothing to stop such a tax if it is warranted in the future.

Disney initially planned a 700-room hotel at the site of a parking lot on Disneyland Drive and its economic impact report suggested it would have created 1,500 construction jobs and 1,000 permanent jobs while not causing any loss of jobs.

Disney, though, changed the location of the hotel, moving it about 1,500 feet to a spot within the Downtown Disney shopping district, causing the closure of the Rainforest Cafe, ESPN Zone, an AMC Theatre and Earl of Sandwich. 

When Tait and the rest of the council informed Disney it would need to conduct a new economic study, Disney instead fired off the August 21 letter renouncing its own incentives.

"The new location took out 130,000 square feet of retail, taking out 450 jobs, so the jobs analysis was completely flawed," Tait told The Hollywood Reporter.

"I've been opposed to these subsidies for some time now. We need every penny of taxpayer money to pay for vital services," Tait said. "So it really is great of Disney to have done this. They hit the reset button in our relationship."

Some have suggested that Disney was motivated to get rid of the subsidies so that it could avoid a potential hike in the minimum wage it must pay its employees in Anaheim. Disney will pay its employees at least $15 an hour beginning in January, but a ballot measure dictates that companies receiving subsidies will have to pay $18 an hour by 2022. 

Disney recently said that its plans for a new hotel are on hold indefinitely. After Tuesday night's vote, a Disney spokesperson said: "These tax incentive policies, which are successfully and widely used across the country to stimulate economic growth and development, unfortunately became counterproductive in Anaheim, prompting our decision to step away from them."

Tait said Disney is free to build a hotel "with its own money" and that if it chooses not to, the city won't lose much revenue because tourists will simply stay in one of the 20,000 existing rooms — none of which are subsidized by taxpayers — that are available near the theme parks.

"Disney did the right thing," said Tait, a Republican. "These agreements had become toxic. I'm very pro-business, but I'm also fiscally responsible with the people's money."

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