Adventures In Corporate Giveaways: The Curious Case Of Anaheim, CA

Inspired by the Dalai Lama, Anaheim Mayor Tom Tait created the "City of Kindness" initiative. The goal is as simple as the initiative's title: people should be kind to each other, because, as Mayor Tait asks: "Who wouldn't want to live in a city of kindness?"

While for the past 5 ½ years Mayor Tait has been trying to instill kindness as a core value of his city, others on his Council seem to be installing a completely different set of values. Now I don't know for certain if kindness and greed are completely mutually exclusive, but I would tend to think so.

And so last night, the Anaheim City Council was faced with a decision about whether to give hundreds of millions of tax money to well-heeled developers. Call me Nostradamus, as I predicted the outcome a couple of weeks ago: the corporate giveaway passed, with Mayor Tait and Councilmember James Vanderbilt opposing corporate greed, all to no avail against a Council majority which has itself gotten generous campaign support from the putative beneficiaries of this bounty.

Oh, sure, this could lead to a prolonged discussion about the pernicious role of money within our political system. We could discuss Citizens United and Buckley v Valeo. We could discourse on how there is nothing close to a level playing field within our system and how in a true democracy, the best idea wins the day, not the hack with the biggest megaphone. In fact, "fairness" and "decency" are values which would seem to be more closely related to "kindness," so we might discuss how if life oftentimes is not fair, it is our duty, our mission, as kind and decent people to try to do whatever we can to make it so. This, at least, is how I envision the Dalai Lama as addressing the issue.

But rather than philosophizing, let's look at the nuts and bolts of hotel taxes, along with the rationale for taxpayer subsidies of private businesses. A "bed tax," also known as "Transient Occupancy Tax" or TOT is a tax added to the price of a hotel room. In California, it's generally seen as a tax which is very beneficial to cities. It's a tax which generally goes to directly fund municipal services and seems to be one of the few taxes which cannot be plundered by the state government of California. And it's a tax which is not paid directly by the businesses, i.e. the hotels directly, but which is paid by the hotel guests.

In Beverly Hills, our standard TOT is 14%, with newer hotels such as the Montage or the Waldorf Astoria, which is scheduled to open next year, paying an additional 5%. TOT is a significant source of income to Beverly Hills, providing roughly 25% of our General Fund revenue.

Similarly, TOT is an important source of municipal revenue in Anaheim. On May 15, Anaheim mayor pro tem, Lucille Kring, wrote an op-ed entitled, "When hotels come, Anaheim's residents benefit." Well, at least some of Kring's council majority colleagues seem to benefit, as they have - unsurprisingly - gotten significant campaign donations from the prospective beneficiaries of the corporate giveaway. Ah, yes: money in politics. Citizens United. Buckley v. Valeo. Back to square one...

Writes Kring: "Revenue from hotels makes up the largest part of our general fund, Anaheim's main funding source for public safety and community services."

And yet if the state government suddenly told Anaheim that it was going to take 70% of the TOT, my guess is that the Council majority would be up in arms. How strange, then, that they are willing to give away 70% of the hotel revenue to developers. Ceding the money to the state treasury - in theory, at least - would presumably have some public benefit in mind; a corporate giveaway only benefits company executives and shareholders.

Kring's justification for the largesse is as follows:

The notion that the hotel program is "giving away" revenue that could go to city services fails a simple test: You can't give away what you don't have.

Giving away something the city doesn't have? She voted last night to approve an agreement which will give the city of Anaheim only pennies on the dollar of something she doesn't have. The developer doesn't have the money either. It comes from the hotel guests and is a way to help fund city services which also benefit the developer and its guests. Rebating such a tax is very different from lowering tax rates to remain competitive, since the tax is being paid by the hotel guest, not the corporation.

Of course, there's also an unfortunate disconnect from reality in the sentence, "You can't give away what you don't have." Cities throughout California are doing it all the time, including Anaheim. Just look at the unfunded liability of cities throughout the state. Just look at Anaheim's. It's $568 Million - and growing day by day. We municipalities and governmental agencies are giving it away today like it's going out of style and until we institute sensible pension reform which creates fair and sustainable public employee salaries and benefits, we should never, ever utter the words, "You can't give away what you don't have" without having a scarlet "H" for "Hypocrisy" painted on our chests.

Another "justification" for the corporate giveaway, which Mayor Tait estimates at a shocking and staggering $600 Million, i.e. greater than the city's entire unfunded liability, is that Anaheim needs to be able to compete with other cities. Writes Kring:

Anaheim isn't playing on a level playing field with other cities offering far more generous incentives.

I guess Mayor pro tem Kring never heard the same sage advice I got from my mother: "Just because everyone else jumps off a bridge, doesn't mean you have to."

For the record, Beverly Hills offers no fiscal incentives to hotel developers. Nothing. Zero. Nada. Bupkes. In fact, if we exercise any discretion in approving a hotel, we generally execute a development agreement, which provides for public benefits above and beyond the TOT.

Because here's the thing: tax rebates are not the only factor which determines where developers want to build luxury hotels. As everyone who is in real estate knows, the critical factor is: location, location, location. And Anaheim has that in spades. And the residents of Anaheim deserve to share in the success their city has helped to create. In short, a new Disneyland luxury hotel will not - cannot - be built somewhere else if Anaheim decides it is unwilling to play the corporate welfare game because it can use the revenue generated by TOT more than the developer.

No, Ms. Kring, the Disneyland Ultra Luxury Resort Hotel will not move to Tustin. Not going to happen. In fact, "The Disneyland Ultra Luxury Resort Hotel of Tustin" sounds even more off the wall than "The LA Angels of Anaheim." Have a little more faith in your own city, some civic pride and some common sense about why Anaheim locations are so attractive for hotels of all price ranges, including luxury hotels. And, trust me, your city can use the tax money which comes out of the pockets of the hotel guests far more than the developers.

Tom Tait's vision of Anaheim is as a "city of kindness," a city of decency and a city of fairness. A city which focuses on quality of life, which attempts to make itself more livable and which understands that it takes more than bureaucracy to make a house a home. A city which puts its residents first.

Other councilmembers in Anaheim clearly believe in a different kind of city: a city in which Machiavellian corporate interests rule the day and the residents need to content themselves with the scraps and breadcrumbs dusted off the corporate table; a city in which the meaning of the Golden Rule is (as was made famous in "The Wizard of Id" comic strip): "whoever has the gold makes the rules."

A city of kindness or a city of greed...

I'll take Mayor Tait's vision -- which I share for my own City -- any day of the week.