Disney Gate Tax Dialogues, Part 4: Financial Cooking Lessons, and When Prophecy Fails

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[Editor’s note: There’s a lot for us to cover here before the Anaheim City Council votes next Tuesday on Disney’s “Gate Tax” proposal — so to make it go down more smoothly we’re presenting it as a play involving Orange Juice characters.  Substantive dialogue from Cynthia Ward.]

[In Part 1 of our story, taking place in in the secret Orange Juice Blog Headquarters overlooking the GardenWalk complex, Cynthia Ward explains to Vern Nelson and Greg Diamond how Disney was originally not bent on sucking as much money as possible out of taxpayers. In Part 2, she explains how and when (and why) Disney started to get nasty.  In Part 3, she explains what happened almost 20 years ago, the LAST time a gate tax was proposed.]

CW: Let’s go back to the Staff Report for Tuesday. Where’s Vern?

GD (looking around): I don’t see him.

CW: OK, I’ll read it.

“This significant investment created opportunities for economic growth in the City of Anaheim, the Southern California region and California. Specifically, the addition of a second theme park provided opportunities for new hotel and retail growth generating substantial direct and indirect tax revenues to the benefit of the City’s general fund, including sales tax, property tax and transient occupancy tax (TOT) revenues. TOT, the largest of the three critical tax streams, has nearly tripled from the $44 million in fiscal year 1996/97 to the projected $133 million for fiscal year 2015/16. Disney also remains the largest employer in the area providing over 23,000 jobs in 2014 and is the largest single property taxpayer in our City.”

GD: Actually, 44 to 133 is slightly more than tripled.

CW: Just let it go, Greg. Let it go. Focus.

GD: So what’s wrong with that. Tripling the TOT – that’s good, right?

CW: Here’s the thing: TOT, sales, and property taxes HAVE all expanded. But 100% of those tax streams generated on Disney property are diverted back out of the City’s General Fund, and back into paying off the previous improvements for the area. Like a black hole never permits light to escape, so the 1996 agreement does not permit funding to escape the Resort.

GD: They don’t go to the General Fund?

CW: Yes they do – which allows them to say truthfully that they go to the General Fund. And then they get TAKEN RIGHT BACK OUT OF the General Fund and used to pay off the bonds.

GD: So they aren’t used to benefit Anaheim’s communities?

CW: Let me put this way: the statement that funds from the Resort go to benefits communities for General Fund purposes is a flat-out lie. Anyone making this claim is either utterly incompetent and has no business leading a governmental decision, or is attempting to defraud the taxpayers.

GD: Could be both, right?

CW: Point well taken.

GD: I don’t see how you’d prove this to someone sort of dense and benefits from believing the lie.

CW: You mean Jordan Brandman?


CW: OK, let’s figure out how to explain it. If the City wants to claim that the 2nd Gate resulted in “generating substantial direct and indirect tax revenues to the benefit of the City’s general fund,” it would have to measure how much tourism provided to the General Fund prior to the 1996 investment of one and a half billion dollars in public funding, and what tourism offers to our General Fund today.

GD: Well, THAT’S never going to happen!

CW: For many years, it didn’t. But this year, the Staff finally calculated the cost and benefit of hosting the Happiest Place on Earth.

GD (brightening up): Is this because of CATER?

CW: And our fearsome Public Records Act requests and threats of litigation? That’s my guess.

(Greg and Cynthia both turn their heads to face outside of the computer screen, raise their hands while wiggling their fingers, and say in unison “EVERYONE SHOULD DONATE TO CATER! ANAHEIM-CATER.ORG!” Then they go back into character.)

CW: Staff determined in the City’s just-approved 2015/16 FY budget that tourism provides “just over 24%” or “just under 25%” depending on which line you read.

GD: Whoa. Stop. I’ve heard City Staff and the Council majority say at many Council meetings and in documents that Resort District tourism generates “well over half” of Anaheim’s General Fund money! That’s how they justify their subsidies!

CW: Yeah. So?

GD: Well, it can’t be both “just under 25%” and “over half”! It’s one or the other!

CW: Right. The “over 50%” figure is a lie. I thought you already knew that.

(Greg points toward the front of the computer monitor and silently mouths “It’s for Them!” Cynthia mouths back “OK!”)

CW: Let’s put that aside and get to how much that percentage has grown. To claim “substantial direct and indirect tax revenues to the benefit of the City’s General Fund,” the percentage of General Fund revenues generated by tourism prior to the 1996 public investment would need to be significantly below 25%, or today’s return on investment.

GD: How much growth did they predict?

CW: I’m getting to that. In 1996, the City claimed IN WRITING:

“Payment of any increased City operating costs (resulting from additional visitors) and net funds for Citywide programs will come from induced hotel room occupancies, sales and property taxes. Funds for Citywide use (e.g. police, fire, streets, etc.) are projected to increase 60% (from $10 to $16 million annually).”

GD: So, 60% growth predicted. Hey, here’s Vern. (To Vern:) I thought that you weren’t coming back!

VN: Well, I ran into one of our readers, who said that after I left the discussion got substantive.

CW: Here, read this report that Anaheim ordered.  The contract sought justification of the 1996 agreement.

VN: Oh, like they did with the –

GD: The CSL Report for the Stadium. Yes, we know.

CW: They do this a lot.

VN: OK, I’m emotionally prepared for this now:

“Fiscal Project Impacts Analyzed and Presented in Economic and Planning Systems report dated September 24, 1996.”

So these are the City’s own numbers. (Cynthia nods.)

Page 3

ARA base revenues and expenditures constant 1995 dollars

22.7% of General Fund comes from ARA tourism

So, 22.7% from tourism in 1995/96 to just under 25% from tourism in FY 2015/16. That’s an increase of: 2%!

CW: I guess it is in a way

GD: No, it’s not. But it’s no more than 10%. Remember, while you were gone, we said that an increase of 10% to 16% was a 60% increase? You use the smaller number as the base. So if it went from 22.7% to 25%, that would be an increase of 2.3% – or just under 10%. Given that an increase to 24.7% would be a 9% increase, and an increase to 24.5% would be about an 8% increase, you’d think that the report would be more specific about exactly what —

CW (interrupting): The important thing is that it’s not over 10%. Specifically, it’s not 60%., which is what they had predicted!

GD: Growth of 60% would have taken it from 22.7% to 36.3%.

VN (imitating William Shatner): Mr. Spock!

CW (to Greg): Shush!

GD: I’m just saying that –

CW (interrupting): These numbers (looks at Greg to make sure he has stopped), these numbers are not opinion. They are not up for debate. They came from the City’s own industry expert whose report was the basis for the October 1996 agreements, and the City 2015/16 budget just approved by the current City Council. Any claims that this information is “politically motivated and misinformed” will flip right back onto the City staff and consultants who generated the data.

VN: So these 1996 agreements were approved based on a prediction of a 60% increase in how much the Resort would contribute to the General Fund …

CW: Right.

VN: But the actual figure can be no more than 10% growth despite all the money that was spent on the resort.

CW: Right. They only reached 1/6 of their own benchmark for success.

VN: Wow. I’m glad I came back.

GD: I find the City’s position highly illogical.

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Identity suspected but unsure, Anaheim Insider is SOME slavish devotee of Curt Pringle and the Disney/Chamber kleptocracy in the OC's biggest city, and can always be counted on to spout their official line. [OK, he's a satirical character based on the anonymous "Anaheim Insider" who posts on Matt Cunningham's "AnaheimBlog.net", and is known for his tagline "Anaheim Insider here" and referring to Mr. Pringle as "The Great Man."] Oh, and of late, the editors have been using "Anaheim Insider" for non-satirical Anaheim-related pieces which are either collaborative or simple announcements.