by Ray Keating
August 16, 2018
One way or another, taxpayer subsidies tend to get messy. That’s even the case when it comes to an upscale hotel being built by the Walt Disney Company at Disneyland in Anaheim, California. Or, for now, not being built.
According to a report from the Orange County Register, the 700-room hotel was given approval by the Anaheim city council in 2016, and construction was supposed to begin last month. But Disney has put the hotel on hold indefinitely due to a dispute with the city. Disney’s plan changed a bit from the original proposal, with the hotel’s location being shifted, at least in part, to an adjacent location. After months of meetings, the city decided that this shift was not in accord with the original agreement, and as a result, Disney would lose a significant taxpayer subsidy if the company went ahead with building on the new location.
According to another report, from the VoiceofOC.com, “The city was going to give a 70 percent hotel tax subsidy to Disney. The subsidy for a four-diamond hotel proposed by Disneyland has the potential to be worth more than $200 million over two decades, which would make it the richest tax giveaway in the city’s history. It’s one of three proposed new hotels that would receive city subsidies.”
The city sent a letter to Disney dated August 6 explaining their position. Disney responded with an August 15 letter declaring that the construction of this hotel be put on “indefinite hold,” as “the Resort re-evaluates the economic viability of future hotel development in Anaheim” as well, while also highlighting “the ongoing challenging business environment in Anaheim.” Recent changes in the city council reportedly have resulted in less support for hotel subsidies.
But there’s more. Consider the following point made by the VoiceofOC report: “The hotel fight comes after the Disneyland Resort and four labor unions approved a three-year deal that will raise the hourly minimum wage for 9,700 employees to $15 by January 2019. Anaheim voters will decide on a ballot measure in November which, if passed, would raise the minimum wage to $18 an hour by 2022 for resort employees of companies that receive city subsidies.”
Getting into bed with government always comes with strings attached, and here is a glaring example.
For good measure, a wide array of economic studies, backed up by basic economic principles, make clear that such subsidies are unwarranted, distort economic decision-making, place political considerations over sound economics and consumer sovereignty, and obviously hike costs for taxpayers. At the same time, though, California is a very costly place to do business due to state and local taxes and regulations.
Ronald Reagan, not only the former president of the United States but also a California governor, once observed, “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Perhaps it’s time for politicians in California to learn the lesson here, and make the city of Anaheim and state of California a friendlier place to do business by taxing less, regulating less and swearing off subsidies.
Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels, with the two latest books being Reagan Country: A Pastor Stephen Grant Noveland Heroes and Villains: A Pastor Stephen Grant Short Story. He can be contacted at email@example.com.