Here's why Disneyland and Anaheim are fighting like the end of 'Infinity War'

August 22, 2018, 10:36 PM · Buckle up for the wildest ride in the theme park business - negotiating with local governments!

Actually, most communities with a theme park have pretty smooth relationships with their parks. The parks employ a bunch of people. Their visitors pay a bunch of taxes. The parks provide the city with some free tickets (for politicians or for charitable causes). The local government approves new developments when the park wants them. And everyone is happy.

Well, until some citizens decide that they're not getting a fair deal from the parks and their elected representatives. That is what has happened in Disneyland's home of Anaheim, where newly elected officials have been questioning some of the deals that the city has made with Disneyland in the past. So when Disney moved the site of its recently announced fourth hotel, that change provided the city an excuse to back out of the tax deal it had made with Disney to allow the company to keep most the hotel taxes that the city would have collected from visitors.

And that, in turn, prompted Disney to freeze the hotel project.

In my Orange County Register column this week, I complained that no one looked good in this broken deal: the city for offering a tax subsidy on a luxury hotel then looking for an excuse backing out of its deal, and Disney for closing half of Downtown Disney then threatening not to build a hotel that it easily could afford even without the tax break. (Here is a link to my original [and non-paywalled] version of the column, since I updated it after the news I'm getting to in the next paragraph.)

A few hours after my column went up on the Register website and other newspaper websites in the region, Disneyland President Josh D'Amaro sent a letter to the City of Anaheim asking for what, essentially, seemed like a cease-fire. Disney provided a copy of the letter to me via email last night:

"Good friends will not always agree; however, the current level of animus is unprecedented and counterproductive. In light of this, we've come to believe that the Agreement Concerning Entertainment Tax Reimbursement and the Operating Covenant Agreement which Disneyland previously entered into with the City no longer serve the purpose for which they were intended and, in fact, have become a flashpoint for controversy and dissention [sic] in our community. Consequently, we are asking the City to join us in terminating both agreements."

The TL;DR? Disneyland wants Anaheim to rip up its tax breaks. Now, Disney didn't promise that it would proceed with the hotel plan if the city agreed. So why would Disney walk away from what could be hundreds of millions of dollars? I suggested a reason last week.

Anaheim voters will decide this fall whether to raise the city's minimum wage to $18 an hour for employees of businesses that receive tax breaks from the city. But if Disney is no longer getting those deals, it's conceivable that the company would not be subject to the wage increase, should it pass. (We will need a ruling from lawyers, and possibly the courts, to be certain.)

Disneyland recently agreed to raise its starting wage to $15 an hour next year, after a brutal PR fight with its unions. (The State of California is raising its minimum wage to $15 an hour for large employers in 2022 anyway.) An extra $3 an hour for thousands of cast members could cost the resort as much, if not more, than it would have gotten back from the hotel tax deal. That put Disney in a damned-if-you-do, damned-if-you-don't conundrum.

Which is exactly what the unions who pushed the $18 an hour ballot initiative wanted.

The irony? By killing the tax rebate for the planned luxury hotel, the City of Anaheim might have taken the first step toward giving Disney an escape from the unions' trap. If Disney isn't getting the luxury hotel deal, why not kill its other city tax incentives... to free it from the potential of paying $18 an hour?

Any elected official who wanted Disney to be held to the $18 an hour plan then would be put into the position of supporting the tax breaks for Disney that they'd previously opposed. This is the political equivalent of watching the last 10 minutes of any Marvel flick. It's just one punch and counter-punch after another.

So who wins? Anaheim politicians? Disneyland cast members? Disney management? Theme park fans? (If only!) Stay tuned. This fight ain't over yet.

Replies (16)

August 23, 2018 at 12:07 AM

Disney called the shots in Anaheim for a long time and now that the tide has turned and they are facing a very real possibility of $18 minimum wage, something that would have been unfathomable just a few years ago, I think it makes sense for them to go this route

Although it took a public spat to get here, personally I applaud both the city and the company for doing what should be done all over the country (assuming the city takes the deal). Anaheim stood up for themselves and Disney stood up for themselves, and ultimately they should both agree that Disney should not try to take advantage of the city and the city should not try to punish Disney. While I would consider myself relatively conservative when it comes to government spending and employment law, the tax breaks in this country have gotten out of control and companies have been taking advantage of it and hanging cities out to dry (look at the sports stadium fiasco's all over the country). Recently in Central Florida Deloitte got $1.7 million in tax incentives to create jobs, and Deloitte then went out and filled the jobs with H1B's. That was a shyster move no other way to describe it.

Governments cutting special deals with companies IMO should only be used when absolutely necessary if its a big employer that's been in the community for a long time to keep them in business if they are struggling, and if that happens there should be a plan to recover some of the money lost.

August 23, 2018 at 12:27 AM

Although it took a public spat to get here, personally I applaud both the city and the company for doing what should be done all over the country (assuming the city takes the deal). Anaheim stood up for themselves and Disney stood up for themselves, and ultimately they should both agree that Disney should not try to take advantage of the city and the city should not try to punish Disney. While I would consider myself relatively conservative when it comes to government spending and employment law, the tax breaks in this country have gotten out of control and companies have been taking advantage of it and hanging cities out to dry (look at the sports stadium fiasco's all over the country). Recently in Central Florida Deloitte got $1.7 million in tax incentives to create jobs, and Deloitte then went out and filled the jobs with H1B's. That was a shyster move no other way to describe it.

Governments cutting special deals with companies IMO should only be used when absolutely necessary if its a big employer that's been in the community for a long time to keep them in business if they are struggling, and if that happens there should be a plan to recover some of the money lost.

August 23, 2018 at 8:00 AM

Let's be clear and call this what it is: a cold, calculated political ploy to avoid the prospect of a $18 minimum wage the resort faces on the November ballot and create a lose-lose situation for the City of Anaheim. If Anaheim keeps the tax incentives, they'll be seen as supporting 'corporate welfare' but if they remove them, Disney won't be subject subject to the minimum wage increase.

August 23, 2018 at 10:27 AM

Disney backing out of the tax deals was a shocker for me. Does Disney have insight that the $18/hr initiative will pass or are they trying to be a better neighbor?

There has definitely been bad blood between the City, Disney, and residents for years and I think the Eastern Gateway project was a hard slap in the face to many local businesses.

It is interesting that this is happening under a new president for Disneyland Parks, Josh D'Amaro. Based on the Press Release, I am hopeful this is a new beginning for Disney and the City. More importantly, hopefully this means residents will begin to see improvements to the city that happen more than a one block radius from Disneyland.

August 23, 2018 at 10:58 AM

Disney must have a crystal ball that the ALWI will pass. If not, then the war between Disney with the current City Council will spill to the new City Council all because the previous City Council thought they had a deal that went no where. I can't feel bad for Disney or the City. The Unions has both in a vise. I'm sorry to say this is partially Disney's fault. Why can't they just build their parks without incentives? Why do they need favors? They are massively profitable yet only have 3 hotels to show for it. Downtown Disney is Deserted Town Disney. Parking is a mess. Despite Star Wars Land coming along, I'm horribly dissatisfied with The Last Jedi. Disney is messed up. It's like a rich guy woke up to find a dead horse in his bed sheets.

August 23, 2018 at 11:01 AM

I find the quid pro quo nonsense that happens at all levels of government plain repugnant. Everyone should play by the same rules and not be allowed to leverage size, tax breaks, or any other advantages to extract or hand out favorable treatment. Businesses should develop, improve, and enhance their properties because it makes good business sense, and governments rely on their people and attractiveness as a community to encourage businesses to locate and expand within their jurisdiction.

Disneyland is not moving out of Anaheim, so they should not need government hand outs to expand their operations. Similarly, the City of Anaheim is on the map partially thanks to the location of Disneyland within its borders, so they should not simply stick it to the Resort because they can.

In my neck of the woods (Washington DC region), there's a big hullabaloo about "Amazon HQ2", which is the current search and evaluation of cities and localities where the company's second headquarters would be located. Cities and states (most notably the Maryland suburbs of Washington DC) are fawning over the notion of having such a high profile company putting a major office building (and its estimated 10+k workers) in their area. Maryland, in particular, has offered tens of millions of dollars in tax incentives along with hundreds of millions of dollars in infrastructure improvements to convince Amazon to place HQ2 within its jurisdiction. Even the most thorough analysis of the pros and cons makes such bending over backwards a definitive losing proposition for the state, but they keep plucking away at it, as do many other cities in some type of ridiculous auction. It's complete madness with Amazon holding all the cards leveraging cities' offers against each other trying to get an even better deal (actually Amazon isn't even doing anything as cities are publicly releasing their offers trying to 1-up each other).

The same story plays out all across this country from theme parks, to major headquarters buildings, to sports franchises all in the interest of saving the businesses money and governments/localities "prestige" to say they're the home to "Corporation XYZ". However, it all starts with governments, who have established these incentives that so many businesses have come to expect. Until public officials can stop their greed and misguided sense of civic pride, this madness will never end.

August 23, 2018 at 11:28 AM

It's hard to say whether the ballot initiative would pass. Anaheim is decidedly less politically to the right than it used to be (as evidenced by this new council) and has very high rates of voter turnout. On the other hand, the percentage of residents that are registered voters is quite low, mostly as a byproduct of demographics, and of those residents that are registered, a majority of those live some distance from and see no impact, good or bad, from Disneyland (which is also evidenced in the new council's hostility).

August 23, 2018 at 11:39 AM

I find the battles between Disneyland and the city council just fascinating to read, especially given the shifts in political climate in California over the decades. The reason why the "WestCot" never went down are so complex and vast that it's incredible and just amazing to see how each side tries to bite the hand that feeds it.

August 23, 2018 at 1:12 PM

I love reading Disney blogs, especially the comments, and for that I want to thank all of the contributors. Here I can find contributions by people who have never run anything more complicated than their kid's birthday party and never had to confront financial analysis more complicated then their personal tax return happy to tell one of the biggest multinational companies in the world how to run its business. Heck, I pontificate too. I don't have to manage multiple levels of government on many continents and navigate mind-boggling levels of regulation but I do have to try to negotiate with my wife and family which maxes me out. So to all of you who could run a better theme park or make a better movie or handle a union better, or negotiate with governments better, thanks.

August 23, 2018 at 1:32 PM

I find the %15 hotel tax by Anaheim also to be greedy for the amount of impact a tourist generates.

August 23, 2018 at 1:46 PM

"and Disney for closing half of Downtown Disney then threatening not to build a hotel that it easily could afford even without the tax break."

Being able to afford the hotel without a tax break is irrelevant to whether to build it or not. Perhaps if Disney was owned by an Anaheim resident who viewed the attraction part of the greater-good of Anaheim itself, that would make sense. But since Disney is owned by shareholders from around the world, the decision to expand hinges on the shareholders geting a return on their investment within the allotted time expected. And even more importantly, the ROI needs to be better than its competitors, in order to prevent investors from abandoning ship.

August 23, 2018 at 2:04 PM

mallthus--actually the head guy (the mayor) in the anti Disney crusade used to hold political office as a conservative republican. I believe. He prob is really a libertarian, who is against all tax incentives for all purposes. Robert's guess is as good as anyone, but I don't understand why that would be in Disney's interest before the election. #1--why wouldn't Disney wait to see the results of the election. 2. election results always have a decent chance to be defeated/nullified by the courts with a lawsuit. many liberal interest groups have done it for other issues. why would Disney not see how those 2 options work out, before asking their customers to donate money to the Anaheim city counsel. that is the actual result of Disney giving up the moratorium on sales taxes for tickets. Because it is US the customer who will pay it. not disney

August 24, 2018 at 9:38 AM

Posted by Anaheim Mayor Tom Tait on his facebook page on Aug. 22:

"Yesterday I met with the President of the Disneyland Resort, Josh D’Amaro. He told me that Disney is formally canceling the $267 million hotel subsidy and the 30/45 year tax exemption with the City of Anaheim.

I applaud the Disney leadership for such a wise, bold ... and kind action. I deeply appreciate their recognition that these agreements are toxic to the relationship between Disney and our city. These agreements would have put a substantial strain on Anaheim’s long term financial health.

As we all hit the reset button, I look forward with excitement to everyone working together for the continued success of Disneyland and for the well being and prosperity for the people of Anaheim."

August 24, 2018 at 4:41 PM

If what's happening between Anaheim & Disney irks you, take the consumer's way out: Don't go there anymore! Both entities lose that way. Further, the employees and tax payer's lose. Everyone gets upset and then perhaps, just maybe, these so-called adults will start acting like professionals - and yes, I mean ALL OF THEM.

August 24, 2018 at 10:48 PM

Disney trying to get out of paying their employees a living wage, huh?
That's what I'm getting out of this more than anything.

August 25, 2018 at 1:34 PM

According to CryoFreezer33, Disneyland very glaring omission of excluding the city’s $108 million taxpayer-funded public subsidy deal for the Mickey & Friends parking structure in its request to cancel its other tax subsidy deals with the city shows its gesture for conciliation to give back Anaheim’s taxpayer corporate giveaways isn’t all that sincere.

The move was clearly done to help the resort avoid having to pay its workers a fair living wage should the “living wage initiative” (AKA Measure L) get approved by voters in November. But the website indicates there are other ways to keep Disney honest and on the hook to both the city and its own employees.

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