$158 million Giveaway - Coming Soon

From The OC Register:

ANAHEIM – A hotel developer is expected to bring back a controversial tax-incentive plan for two Disneyland-area hotels, while another nearby developer is walking away from a somewhat similar subsidy.

 GardenWalk Hotel developer Bill O'Connel in a scene from Les Mis called Master of the House- click image to enlarge -

The City Council will likely reconsider a plan for a pair of Anaheim GardenWalk hotels after a judge voided its previous approval of a tax subsidy of up to $158 million.

An Orange County Superior Court judge ruled in December that the council violated the open-meetings law by approving the plan when it was advertised only as a "discussion" item in January 2012.

At the same time, another nearby hotel, which got a smaller tax deal, plans to give up its subsidy and scale back the development.

Under a 2008 city program, developers of a hotel can apply to keep some of the bed-tax money paid by its guests, only after a high-end hotel is built. Tourists pay a 15 percent room tax that generates the biggest chunk of Anaheim's budget.

The GardenWalk developer got approval for up to $158 million, virtually all of the project's bed taxes for 15 years, in a deal that deeply divided residents: Some called the deal a "giveaway"; others said it was necessary to lure high-spending tourists.

Now, developer Bill O'Connell and city administrators are discussing a plan that could come back within a month, said City Manager Bob Wingenroth in a meeting with the Register's editorial board last month.

It's unclear if any deal would be different than the original.

The council makeup has changed since last year's decision; two new council members were sworn in the day after the December court decision. Still, the current council majority appears to support a GardenWalk plan.

"I ran on an agenda (of) economic development, and we need to keep moving the city forward," said Councilman Jordan Brandman, who took office in December.

"I think that the issue will come back, and I look forward to considering it."

Mayor Tom Tait remains against a subsidy.

Councilwoman Lucille Kring, who also took office in December, said she opposes the full $158 million subsidy but might support a smaller amount.

Also, she suggested the developer could build a lower-end hotel and do without any city help.

"It was very divisive," said Kring, who has served previous terms on the council. "I don't want to see the city go through that again."

Some council members say the tax support is needed to bring a four- or five-star hotel into the tourist area, which mostly has family-style lodging. The only four-star hotels are on Disney property. Some convention-goers leave Anaheim to stay at more upscale hotels near the beach, taking with them the hotel taxes, officials said.

But one Disney-area hotel developer said he was unable to get financing to construct a four-star hotel, even with the city's financial help.

Instead, Larry Lake of Lake Development Group is turning away from a tax subsidy worth about $24 million and instead plans to build a lower-end family-friendly hotel at Harbor Boulevard and Katella Avenue.

Lake said he tried for five or six years to launch the fancier hotel, spending millions of dollars on plans before giving up.

"Anaheim is perceived as a market that has a multiple of three-star hotels, and we wanted to put in a four-star hotel," Lake said at a January Planning Commission meeting.

"The capital markets didn't want to come into a marketplace that only had one four-star hotel."

Councilwomen Kris Murray and Gail Eastman said Lake's decision is tied to the difficulty of getting financing, even with city help. There is indeed a need for luxury hotels, they said.

Tait, however, said the city should stay away from such tax deals.

"I think that's common sense. If there's not a market for a four-star (hotel), maybe a four-star shouldn't be built," Tait said.

"I don't think any subsidy makes sense."