Disney beneficiary of Enterprise Zone tax credits

From The OC Weekly: 

Anaheim's 'Enterprise Zone' (AEZ) has come under increasing public scrutiny in the first year after its implementation. The Weekly checked in on the program back in February to see how it was holding up to its supposed aim to create new jobs and spur economic development in distressed areas through tax break subsidies. Based on the data given at that time, a whopping 180 new jobs had resulted from the zone.

Disney lobbyist Carrie Nocella wants more tax credits.

Disney lobbyist Carrie Nocella wants more tax credits.

The lingering question as to what specific businesses had taken advantage of the AEZ remained unanswered...until now!

A six-page document obtained by the Weekly unsurprisingly shows that, as of August 20, 2013, Walt Disney Parks and Resorts as well as Wal-Mart have been the chief beneficiaries of the Anaheim Chamber of Commerce-administered AEZ gobbling up nearly half of all processed vouchers--two notorious poverty wage-paying all-stars there!

Nearly 250 companies have participated in the program with 181 of them claiming 10 hiring tax credit vouchers or less. By comparison, Walt Disney Parks and Resorts yielded 1,667 of the total 4,308 alone. Together with Wal-Mart's tally of 347, the two mega-corporations comprise 47% of those taking advantage of what the zone has to offer. Countless other big business interests are among the top 50 listed including Fed Ex, Angels Baseball, Starbucks, and Staples.

The AEZ became a hot button issue during the impending layoffs for hundreds of Honda Center concession workers. Anaheim Arena Management could have taken advantage of tax credits for new hires, but declined to do so. Ironically, Aramark, the company whose contract with the workers expired earlier this summer, appears on the list, but with only seven vouchers claimed.

The Anaheim Chamber of Commerce, amidst efforts by state legislature and Governor Jerry Brown to 'repurpose' Enterprise Zones, apparently has been trying to squeeze the program for all its worth before the end of the year or as councilwoman Kris Murray put it, gain "tremendous momentum." Back in February, city figures stated that roughly 1,800 vouchers had been received, a number revised down to 1,417 in the annual report that finally came out in May. Since that time, according to records obtained by the Weekly, that number has more than doubled.

The Anaheim Enterprise Zone came into being on January 24, 2012 by way of unanimous vote. The program appeared to enjoy consensus support from an otherwise fractured council. "I know that the governor is talking about making changes to the program," Mayor Tom Tait said during his 2013 State of the City address. "I just want to let you know that the city will work vigorously to keep this economic program in place."

Since that time, he became the lone voice on the dais that reasonably insisted on reviewing a performance audit that wasn't finished at the time before voting to increase the Chamber's five-year contract by $600,000. An additional amendment of $388,000 inflated to total terms of the deal to $2.75 million. Last month, Mayor Tait moved to modify and cancel it outright at the end of the year in another politically isolated move. The council majority, including Jordan Brandman's comment that the motion for termination upon termination date would be "reckless," argued for patience.

The Chamber is due another installment payment related to its work on the AEZ this month. The city informs the Weekly that no such transaction has taken place at this time, but that $112,334 is due by the end of September.

Recommendations for revisions for the implementation of the zone are slated to come by either the September 24 or October 8, 2013 meeting of the city council.

Anaheim Chamber of Commerce's Todd Ament.

Anaheim Chamber of Commerce's Todd Ament.

Audit: Anaheim Chamber of Commerce Tracking of City Funds Spotty

From The Voice of OC: 

A city performance audit critical of how the Anaheim Chamber of Commerce administers the city's enterprise zone found that the business group hasn't been adequately tracking expenses, with staff time-keeping methods that are “not reliable,” according to sources who have seen the audit and say its been held up for months.

Despite not documenting staff time in reliable ways, the chamber requested a $600,000 contract increase earlier this year, citing the need to hire more staff for day-to-day tasks.

Council members awarded the requested funds at their May 14 meeting, bringing the total contract amount to $2.9 million over five years.

Mayor Tom Tait, the only council member to vote against the contract increase, argued that the council shouldn't be granting the chamber more funds without first seeing the performance audit, which has yet to be released.

At the May council meeting, Planning Director Sheri Vander Dussen said the audit would be complete in June, but sources said chamber President Todd Ament has been delaying finishing the audit for months.

Ament did not return a call seeking comment.

Todd Ament

Todd Ament

Paying city funds to the chamber has been one of many political battles fought between Tait and the council majority, which is supported by the Disneyland Resort and other high-powered business interests.

Tait earlier this month pushed to have the contract terminated after news that the state would be eliminating the enterprise zone program – which grants tax credits to businesses that hire from economically disadvantaged areas -- by year's end, but the council majority argued that canceling the contract was premature.

According to City Hall sources who have seen a draft of the audit but would only speak on condition of anonymity, the chamber's four-to-five time keeping systems for its handful of employees are confusing, inadequate and not consistently used.

While the audit didn't find that enterprise zone funds were being inappropriately spent, it was also difficult to tell whether the chamber was using enterprise zone funds for other chamber expenses because of unclear time keeping, sources said.

Mayor Tom Tait said that such findings confirm that it was imprudent to award a contract increase before the audit was finished.

“Without an audit trail the council cannot know whether our funds were spent appropriately,” Tait said. “It was irresponsible to vote for a $600,000 increase without such verification.”

Other council members could not be immediately reached for comment.

An agenda staff report submitted by Vander Dussen for the contract increase in May downplayed the draft audit's findings. It said that city officials had received “positive feedback” and mentioned only “minor” internal controls issues. There was no mention of the difficulty in tracking chamber staff time.

“These observations have related to minor elements of the administration of the [Anaheim Enterprise Zone] and do not involve any significant issues,” the staff report states.

The chamber has implemented a new system that Ament says will better track staff time, sources said.

Meanwhile, the chamber has also engaged in political spending.

Considering the fact that it is unclear how the chamber is spending city funds, their political spending has raised eyebrows at City Hall.

“It is very concerning,” Tait said about the situation.

Matthew Cunningham, a blogger who promotes the council majority, has received between $10,000 and $100,000 from the chamber, according to a statement of economic interest he filed with the county. The business group earlier this year purchased an advertisement in the Orange County Register touting the council majority. And the chamber's website has promoted Councilwoman Kris Murray's June 25 fundraiser.

Matt Cunningham

Matt Cunningham

Cunningham didn't deny that he is being paid by the chamber to run his political blog, but he also declined to comment on his contract with the business group, or share it with a Voice of OC reporter.

“I'm a private business, and my contract is with a private organization... so no,” Cunningham said when asked for a copy of his contract.

The audit also found other issues, like a potential conflict of interest with having the chamber, which is controlled by businesses, awarding government tax vouchers to businesses, according to sources. And a chamber luncheon event that was supposed to achieve multiple goals under the program, like a youth networking event, appeared not to have fulfilled all those goals, a source said.

This isn't the first time a city commissioned audit has found problems with the chamber.

In 2007, auditors found that the chamber was facing “serious solvency concerns,” and a “potential inability to meet its short-term financial obligations.” In a 10-month period, the chamber only turned a profit during the three months it collected revenue for city events, according to the report, suggesting that the chamber had relied on city funds to stay afloat.

The business group was also not complying with generally accepted accounting practices, the report said.

That audit also found that the chamber was increasingly going into debt to sustain operations, including a $50,000 corporate loan and credit card debt. The review recommended, “monitoring the Chamber's progress through future contract audits.”

However, the draft performance audit did not review the chamber's finances.


The Story Behind Lucille Kring's Recent Flip-Flops

From The Voice of OC:

When Anaheim Councilwoman Lucille Kring was campaigning for office last year, she took the following positions on four issues that have dominated city politics:

  • No on a controversial $158-million hotel room tax subsidy.
  • Yes to a ballot measure for Anaheim residents to vote on all future hotel tax subsidies.
  • Yes to changing the City Council's at large election system to a system by which council members are elected by districts.
  • Yes to a civilian oversight review board of police.

Since being elected, Kring has changed her position on all four. She voted for thesubsidy and against district elections; she vocally opposed a civilian police oversight board; and she refused to second a motion by the mayor to place the hotel tax subsidy voters measure on a citywide ballot.

Campaign finance records show Kring received thousands of dollars in contributions from groups and businesses that lobbied for her change of heart. And because Kring loaned her campaign $75,000, some of these donations went toward paying off the debt and therefore straight into her pocket.

The donations include, among others, thousands of dollars from Support Our Anaheim Resort or SOAR, a Disneyland-funded group that lobbied for the subsidy and against district elections; the Anaheim Chamber of Commerce, which was also for the subsidy and against district elections; and hotel partnerships connected to Bill O'Connell, the recipient of the hotel tax subsidy.

Kring's actions have led some outraged supporters to state publicly that she betrayed them.

“You lied to me,” said resident Larry Larsen during public comments at the May 28 council meeting. Larsen had agreed to place a campaign sign promoting Kring in his yard after she told him she was adamantly against the hotel subsidy.

“Madam, you cannot be trusted or believed. You will say or do anything for a vote. How much was your integrity worth? Was all your campaign debt paid off?”

And it's not just residents who say that Kring broke promises.

Mayor Tom Tait said that he endorsed Kring for City Council because she changed her position from opposing an initiative, called "Let the People Vote," that would require a citywide vote on future hotel tax subsidies to supporting it. But when Tait proposed that initiative at a council meeting, she changed her mind again, remaining silent and allowing the motion to die for lack of a second.

In a brief interview, Kring denied that she changed her position in exchange for the campaign contributions.

She said the subsidy deal evolved into a package that was better for Anaheim. For one thing, the time the developer can collect room tax revenue was extended by five years so the city could share in 10 percent of the revenue as opposed to none. Critics counter, however, that it's a worse deal, because the developer's deadline to begin construction on one of the hotels isn't until 2019.

When asked why she didn't support the mayor's ballot measure, she insisted that it didn't come up for a vote. But at the May 14 council meeting during which the subsidy was approved, Kring refused to back the mayor's motion to put the "Let the People Vote" initiative on the ballot.

Kring said she couldn't recall favoring civilian oversight of police during the campaign, but she is on record as stating so at a Voice of OC candidates forum on Anna Drive. She said even if she had supported it at first, there are several layers of oversight already.

Kring also insisted that the contributions and votes are legal.

When questioned about the campaign contributions and votes, Kring said: “That's your impression. It's not true at all. If I get a check from you, it does not preclude me from voting on an issue for Voice of OC.”

But Kring is legally precluded from engaging in a quid pro quo, that is casting a vote with the understanding that she would receive money in return.

Curiously, Kring has in the past made statements implying that Disneyland and former mayor Curt Pringle, who is now the foremost lobbyist in Anaheim, finance campaigns with the expectation that they would receive the right policy votes in return.

In 2006 during Kring's last stint on council, Pringle refused to throw her a promised fundraiser because she “never voted his way,” she wrote in an Oct. 10 email to a former supporter.

“I told [Pringle] my vote was not for sale,” Kring wrote.

In another email to supporters on Oct. 26, Kring noted that Disney had dramatically increased its campaign spending by funneling cash through various political action committees and pondered whether the company was spending large sums in an effort to control the council.

“Why is Disney spending so much money on candidates that receive $18,000/year in salary? What do they expect from these candidates,” Kring wrote. “I never believed that Disney ran the city but I've changed my mind.”

A Case of Curious Timing

Fast forward to 2013, and Kring seems to no longer have such concerns about Pringle, Disney and the rest of the business establishment.

When confronted with the emails, Kring said that Pringle had never tried to buy her vote and that she once again has changed her mind about whether Disney runs the city.

“No, I don't believe that Disney controls the city,” Kring wrote in an email Monday to Voice of OC. “I don't believe that Curt tried to buy my vote. No one ever has or will.”

Yet the timing of a Pringle-organized fundraiser for Kring raises questions. Pringle was the lobbyist for O'Connell and his partner Ajesh Patel, the two hoteliers whose GardenWalk hotel project was the beneficiary of the $158-million subsidy.

In “mid-April,” Kring met with Pringle, O'Connell and Patel to discuss the tax subsidy, Kring wrote in an email obtained by Voice of OC.

Two weeks after the vote to approve the subsidy — and only one day after Larsen berated Kring publicly for betraying her campaign promise — Pringle held a fundraiser for her at The Catch restaurant near Angel Stadium, campaign finance records show.

Anaheim Park Place Inn, an O'Connell partnership that the hotelier claims is controlled by his son, contributed $1,000 to Kring's campaign May 29, the day of the fundraiser, records show. And on two occasions in February, Stovall's Inn LLC and Orangewood LLC — other O'Connell partnerships — contributed $300 and $250, respectively, according to the records.

By the end of the campaign finance filing period in June, Kring had repaid herself $37,500, records show.

Kring didn't deny that the contributions came from O'Connell and defended them. She said that she had received support from Pringle and O'Connell because she has known them for many years. And the May 29 fundraiser was originally set for April — around the time of her meeting with Pringle, O'Connell and Patel — but was moved because of a scheduling conflict, she said.

“There was nothing conspiratorial about it,” Kring said in an interview. “Bill and I have been friends for more years then you probably have been alive.”

Others said the circumstances at least strongly suggest a quid pro quo. City activist and blogger Jason Young, the former supporter whom Kring had emailed, said that the email and the fundraiser show that Pringle had successfully purchased her vote after previously failing to do so.

“It's clear,” Young said.

While the emails, campaign contributions and votes may give the public the appearance of an illegal quid pro quo, they don't constitute proof, according to Tracy Westen, CEO of the Los Angeles-based Center for Governmental studies. To prove it, there needs to be direct evidence of a vote-for-cash deal, like an email chain showing clearly that a council member asked for and received money in exchange for a vote.

The Kring emails, however, “generate exactly the kind of thing you get from that constituent: feeling a betrayal, feeling that they're selling votes,” Westen said. “Unless you've got a microphone in the room or somebody stupid enough to write it down, you'll never prove it.”

Nonetheless, the appearance is damaging to the public's confidence, Westen said. The circumstances surrounding Kring's fundraising has sparked a debate among good-government experts, a San Diego-based attorney and Kring over what is and isn't public corruption.

“These emails are kind of dynamite. They show why the public is suspicious,” Westen said.

Cory Briggs, a San Diego-based attorney who has called on the Orange County district attorney's office and the state attorney general's office to prosecute Kring and the council majority for violations of the California Political Reform Act, said that the circumstances surrounding Kring's vote on the hotel subsidy would likely persuade a jury on charges that she engaged in a quid pro quo.

“If I were Lucille Kring, I would hire a criminal defense attorney, and I would pray that I would never have to face a trial,” Briggs said.

Breaking The Law, or a Call for Reform?

Beyond the other circumstances, Briggs claimed in his correspondence to prosecutors that two $500 contributions from SOAR — whose advisory board includes O'Connell — to Kring's campaign before and after the vote are enough to indicate a quid pro quo.

Briggs' argument is that SOAR is essentially a shell corporation for O'Connell to launder campaign money. The Anaheim Chamber of Commerce, which also contributed to Kring's campaign before and after the vote, lobbied publicly for the hotel subsidy and against district elections.

SOAR itself might not actually make money off of [the hotel subsidy], but I don't think you can evade these rules to set up a shell corporation in order to put an extra bureaucracy between you and the politician,” Briggs said. “If you could, then people would just set up these shell corporations and there's no way to prove a bribe to a public official.”

Robert Stern, president of the center for governmental studies and the expert who helped write the political reform act, has cast doubt on such claims, saying that it has never been illegal in California to make contributions to elected officials who then vote on the contributor's projects.

Westen said that the circumstances surrounding Kring — her emails, contributions, fundraiser and flip-flopping — taken together are an example of a campaign finance system that desperately needs reform.

“That's why it's so hard to get good health care and good public education, but if you want to bail out the banks, that can happen in one day,” Westen said. “Because those are the people giving the money. … One percent of the people give well over 90 percent of the contributions in congressional and senatorial races.”

For one thing, some jurisdictions restrict fundraising to pay off candidates' campaign debt to themselves to a short time right after an election, Westen said. After that, the debt must be forgiven.

“I think personal loans are more problematical, because there's a greater danger that the elected official will feel even more charitable to the people paying their debts. … That is viewed as an especially pernicious problem,” Westen said. “There's a greater danger of a quid pro quo.”

Westen also advocates a switch to a public financing system. The New York City and Los Angeles, for example, match several times the dollars candidates raise, making it easier for candidates with less money to compete.

But selling a public financing system to the public can be challenging. Most residents would be unwilling to give taxpayer money to Kring after reading her emailed statements about city politics, Westen said.

“Most would say, are you kidding me? I wouldn't give those guys the time of day,” Westen said.

Please contact Adam Elmahrek directly at aelmahrek@voiceofoc.org and follow him on Twitter: twitter.com/adamelmahrek

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Anaheim Council Majority Ignores Reality – Enterprise Zones are Dead

From The Liberal OC

Periodically we find ourselves here at LiberalOC puzzled by our agreement with Libertarians on policy issues, particularly when it comes to spending taxpayer funds. We see such expenses as investments, while Libertarians see needles boondoggles of uncontrollable government overreach. But for the past couple years we find that Anaheim Mayor Tom Tait is more often the only person of reason on the Anaheim City Council. While we can understand the political policy disagreements with his colleagues over the $158 million in corporate welfare forhotel development as a matter of philosophy, the Anaheim Council majority’s refusal to recognize the end of enterprise zones in California has us mortified.

Only Mayor Tait is listening. Eastman, Brandman, Kring, and Murray are all tuned into Radio Disney.

Only Mayor Tait is listening. Eastman, Brandman, Kring, and Murray are all tuned into Radio Disney.

The convoluted rationale of the majority was that the details of “the end” are not determined. To accept that conclusion one would need to suspend reality, and time. The law is pretty clear that enterprise zones will end on December 31, 2013. The rationale that this irrational majority wants you to accept is more likely fueled by the same people who have funded their campaign coffers and independent expenditures to get them elected.While the legislation to end enterprise zones was being written, the council increase their funding to the Anaheim Chamber contract supporting them by more than $600,000 with no modifications of scope of work. On Tuesday, the council refused to decide to notify the Chamber that that contract would end in December, once the now signed legislation ending enterprise zones takes effect.

We can only surmise that the majority want’s more time to figure out how to continue to fund the Chamber, at the same level, when the enterprise zones go away.


The Anaheim Chamber's gravy train is in jeopardy.

Todd Ament is sounding the alarm that Anaheim's Enterprise Zone is in jeopardy. According to a press release by the Chamber "Today, the Senate Budget Committee is expected to meet and adopt Assembly Bill 93 – the Governor’s May Budget Revise plan that guts Enterprise Zones as we know them."

Todd Ament on the far left. Click to enlarge

This would mean a drastic reduction in the Anaheim Chamber's budget. Why? Because if you didn't know, the Anaheim Chamber is paid millions by the city to maintain the program. Here is an excerpt from the Voice of OC which shines some light on the subject:

The original sole-source contract, which started Feb. 1, 2012, was worth $1.8 million over five years and includes processing tax credit applications, contacting local businesses about the zone and marketing the program at trade shows and other events.

The council then voted last month to increase the contract to $2.9 million after city staff cited a need for the chamber to hire more staff to handle the workload and to assume sponsorship of some community events.

Mayor Tom Tait objected to the contract increase, questioning why his colleagues on the council couldn’t wait a few more weeks for an audit of the zone’s management to be completed.

“We’ve got this audit that we’ve paid for that’s about ready to come back, and now we’re going to extend the contract and increase it?” Tait asked. “It makes no sense to go forward with this at this time.”

Here is an excerpt from the CA Labor Fed which explains the issues with Enterprise Zones: 

The best independent research finds that California’s Enterprise Zone (EZ) program fails at creating new jobs and economic activity. Despite the damning evidence, the EZ tax break program has enjoyed unchecked growth of 35 percent annually—costing the state $3.6 billion since it started in 1986.

To make matters worse, companies do not have to create a single new job to get a tax break in an EZ. EZ credits are given for new hires, not new jobs, so companies are rewarded for high-turnover, low-skill jobs. The structure of the credit incentivizes churn rather than stable employment and the creation of job ladders.

The EZ program creates an additional incentive for low-wage jobs that pay so little workers still rely on public programs like food stamps. Since the EZ credit is only given up to a cap of 150% of the minimum wage, employers do not have to pay a living wage to get the credit. The EZ offers no reward for higher wage jobs.

Since tax breaks are only available within the Zone, communities are pitted against each other to attract roving businesses. The impact can be devastating on communities and a huge boon to unscrupulous employers that shift jobs around the state, while penalizing responsible employers that pay workers a decent wage with benefits.

 I hope Governor Brown is successful in shutting down yet another corporate welfare program. I'm especially pleased that one of Pringle's goons, Todd Ament, is on the losing end of this deal. 





Enterprise Zone nets Chamber of Commerce 1.76 million

Anaheim had been seeking to become part of the larger California Enterprise Zone program since September 2010. By that time a number of studies, including a 2009 report by the Public Policy Institute of California that concluded "the enterprise zone program...has failed to achieve its key goal: increasing jobs," were critical of its efficacy. 

Any such doubts were readily jettisoned by its local boosters. "The goal of the Enterprise Zone is to create new jobs and increase employment within the city by offering tax credits,"Planning Director Sheri Vander Dussen said at the onset of her January 2012 presentation to the council. All five members at the time were convinced of its supposed virtues, including Democrat Councilwoman Lorri Galloway, and voted accordingly to enter in an agreement with the Chamber to the tune of roughly $1.76 million dollars, with up to an additional $50,000 for processing related vouchers. 

Read the full story here: