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.
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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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Breaking News

Anaheim, CA - A prominent California attorney alleged that members of the Anaheim City Council violated state law when they voted on behalf of a $158 million hotel subsidy, after accepting contributions from a PAC tied to the project's developer. Attorney Cory Briggs urged California Attorney General Kamala Harris and Orange County District Attorney Tony Rackauckas to prosecute the council members in a letter sent Thursday. Briggs’ request for prosecution was made on the behalf of a community organization, Orange County Communities Organized for Responsible Development and a private Anaheim resident named in the letter.

click to enlarge

The letter alleges that Anaheim City Council members Lucille Kring and Jordan Brandman had an illegal conflict of interest when they voted for the Garden Walk Hotel subsidy in May, within months of accepting donations from the political action committee formed by Support Our Anaheim Resort (SOAR.) Hotelier Bill O’Connell, who benefited from that subsidy, sits on the SOAR Advisory Committee. The letter also names council members Gail Eastman and Kris Murray, who voted in favor of the subsidy and are SOAR Advisory Committee members. Eastman and Murray did not disclose their business relationships with SOAR and O’Connell at the time of the vote, as required by law.

The request for prosecution issued by Briggs is a required legal step before the filing of a private lawsuit. A potential filing would result in another in a recent series of lawsuits faced by the city council on behalf of residents. Last month, a judge ordered a trial in a case brought by the ACLU on behalf of Anaheim voters, alleging that the city’s election system violates the California Equal Voting Rights Act.

The Garden walk subsidy caused controversy, even before the allegations made last week. The subsidy was first passed in January 2012, but that vote was voided after a Superior Court Judge ruled that it violated the Brown Act, California’s open government law, because the public did not receive proper notice.

Lucille Kring - TRAITOR of Anaheim - Part 1

During council members Lucille Kring's campaign she promised residents she would oppose the $158 million GardenWalk Hotel Giveaway

Not only would she oppose it, but she would back Mayor Tait's initiative to Let the People Vote on the issue of hotel subsidies.

Unfortunately, since taking office and attending a SOAR/Disney fundraiser, council member Kring has voted in favor of the $158 million GardenWalk Hotel Giveaway and remained silent when Mayor Tait called for the people to vote on subsidy deals.

Anaheim resident, Larry Larsen (seen in the video below), had this to say about council member Kring's lies: 

 "You lied to me. Just like you lied to countless others prior to last Novembers election. Last October, prior to the election, on a Sunday afternoon. You stood in my driveway for almost an hour. . . .I told you, in this election, I was a one issue voter.  I told you I was against the $158 million money grab. You told me that you also were absolutely against it and that there was no was you'd support it or vote for it. I took you at our word. . . So tonight, I want to tell the citizens of Anaheim that Madam you cannot be trusted or believed. That you will say and do anything for a vote. How much was your integrity worth? Were all of your campaign debts paid off?"

Anaheim Council Agreed to Another Developer Subsidy

From The Voice of OC:

Anyone who's read the public agenda for tonight's Anaheim City Council meeting knows that a vote on a controversial $158-million room tax subsidy for developer of two planned four-star hotels at the GardenWalk outdoor mall is expected.

But known to only a few is that in recent weeks the City Council quietly approved a legal settlement that in essence grants another large subsidy – this time to the owners of the mall.

The settlement, which the Council voted on in closed session, calls for the mall owners, Anaheim Capital Partners, LLC, to receive up to 50 percent of the city's portion of sales tax revenue generated by the mall for the next 25 years. This fiscal year, the owners get 30 percent, and going forward the subsidy could be worth tens of millions of dollars.

In exchange for the sales tax revenue, Anaheim Capital Partners dropped a claim on the room tax revenue generated by the hotels, effectively clearing the way for that money to be handed over to the developers of the hotel, which include hotelier Bill O'Connell.

Read the full story here:

http://www.voiceofoc.org/oc_north/article_bd149a84-bcaa-11e2-9d5b-0019bb2963f4.html

Tripling Down on Stupid: The Gardenwalk Giveaway

From the OJ Blog:

A developer in Anaheim wants to build two four star hotels on the Gardenwalk parcel near Disneyland in the Anaheim resort district.  The developer claims the market economics makes the project not feasible.  To assist in making the project feasible, the city will provide economic assistance in the form of $158 million in rerouted tax proceeds after construction of the hotel(s).  This equates to roughly $46.6 million in today’s dollars as the total assistance package is expected to run over twenty years (a dollar collected tomorrow isn’t as valuable as a dollar collected today.)

Save Anaheim PAC ran this ad in response to an ad placed by Kris Murray in the OC Register during the last election.

The city’s analysis claims the $46.6 million is roughly 16% of the development cost, which puts the capital required to execute the project at roughly $300 million. That’s quite a bit of money for the private sector to invest in the resort area.  From the $300 million, construction jobs will create permanent hospitality jobs including chefs, housekeepers, waiters, valets, office staff, receptionists, engineers, craft persons, salespersons, and of course—management.  The investment provides clear and demonstrative public benefit, including increased property tax and sales tax collections, which are all very good things.

The construction will also place additional burden on the public electric utility, the water system, create substantial traffic in and out of the resort district, increase pollution, place additional burden on emergency services, and divert land from alternative uses and taxation (i.e. if you build two hotels you can’t build a Walmart.)  All of these items incur a public cost that must be covered by taxes.

Who defines project feasibility and how the term is used is something of an art.  The city’s analysis states the project is $63.1 million (today’s dollars) short.  The package proposed ($46.6MM) still leaves a gap of $16.5 million.  There’s no mention as to how that $16.5 million will be closed.

There’s the first dose of stupidity, right there.  Based on what the public has in front of us, we’re being told that someone wants to pony up almost $300 million for a project, even with public assistance, will return 18% below what’s acceptable.

Bill O'Connell as the "Master of the House" from Les Miserables.

Think about that for a second.

According to the city’s analysis, after construction, the two combined hotels will produce a profit of $27 million a year.  Apparently, that’s not good enough.

Why it’s not good enough is a bit of a complicated question, but it has to do with alternative opportunities for capital.  Based on a bunch of assumptions, the city’s consultant concludes that a reasonable investor would be willing to pony up $220 million to build this project . . . not the near $300 million our current estimate is.  Our public assistance isn’t what’s required to break even . . . it’s what’s required for the investor to get his 13% return.

Read the full story here:

http://www.orangejuiceblog.com/2013/05/tripling-down-on-stupid-the-gardenwalk-giveaway1/

Anaheim council hears opposition to hotel subsidy

From The OC Register (with Save Anaheim commentary):

ANAHEIM – Several hours of debate continued late Tuesday night over a revised $158 million bed-tax subsidy to assist the developer of two new luxury hotels at The Shops at Anaheim GardenWalk.

As of 9:30 p.m., the City Council had not reached a decision about the tax incentive, mostly due to the dozens of residents who spoke against the plan. If the plan is approved, developer Bill O'Connell Sr., will receive 70 percent of the project's room taxes from when the first hotel opens in 2016 through 2042, or until he has been paid $158 million. Ten percent of the occupancy taxes generated by the anticipated four-star-caliber hotels would be placed in the city's coffers, while the remaining 20 percent would pay off bonds that funded improvements to Anaheim's resort district in 1997.

"Handing over $158 million is not only unfair to other hotel operators that are paying the bed tax, it is especially unfair to the residents of Anaheim," Rick Skinner of Anaheim told the council during public comment.

Other opponents, such as Yesenia Rojas of Anaheim, said any bed-tax revenues raised by the two hotels should be spent on helping the residents of Anna Drive, where a police-involved shooting last summer sparked days of unrest downtown.

"We have been told there are not enough community programs to help our Anna Drive neighborhood, but you have $158 million of our money to give away without helping out the poorest area of Anaheim," Rojas told the council.

An Orange County Superior Court judge ruled in December that the council violated the state's open-meeting law when it narrowly approved a $158 million subsidy that would have allowed the GardenWalk hotel developer to keep 80 percent of the project's bed taxes for up to 15 years, with the remaining 20 percent going toward the resort-bond debt and nothing set aside for the city's general budget.

"I would not have voted for it last year, but this plan is different," Anaheim City Councilwoman Lucille Kring said. How is this plan different? It is the same $158 million GIVEAWAY with no community benefits.

O'Connell and city staffers said the subsidy is needed so that Anaheim can compete with surrounding cities that lure high-spending tourists wanting to stay in luxury hotels.

"The people who are opposed to this act like the city is writing a check to me," said O'Connell, who plans on spending $283 million to build the hotels. That is a lie Mr. O'Connell. The City of Anaheim will write a check over the duration of the agreement directly to you.

"This is a completely different plan that I believe is win-win for the project and the city because no revenue is coming out of this until the hotels get built," O'Connell said. "We want to move forward, build these hotels, create some jobs and generate some revenue for the city." This is the same plan Mr. O'Connell.

Mayor Tait's message to Anaheim residents

This robo call went out today from Mayor Tom Tait:

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At tomorrow's City Council meeting, special interests and lobbyists are returning to ask taxpayers to subsidize two luxury hotels.  If passed, our city will be forced to pay one developer 158 million dollars over the next 29 years, taking away money meant for vital city services such as police, fire protection and libraries.   If you oppose this as I do, please call City Hall at 

714-765-5247

to express your views.  Thank you.  My committee Tom Tait for Mayor 2014 has paid for this call.

GardenWalk Hotel HISTORY: $158 million Giveaway RETURNS

Next Tuesday, May 14th the city council majority led by Kris Murray is going to try and reinstate this outrageous giveaway. Please take the next 6 minutes to view the video below from the initial council vote in January 2012.

Check back daily for updates on the upcoming reinstatement of the $158 million GardenWalk Hotel GIVEAWAY scheduled for this Tuesday, April 30th.

SOAR = Sucking Out Anaheim Resources

SOAR claims that "Anaheim residents and neighborhoods and residents are the biggest beneficiary of tax revenue generate by visitors to the Resort District."

From www.soaranaheim.com - click to enlarge

The truth is that over 50% of the TOT revenue generate goes back to the Resort to pay off debt obligations. Now they want to suck $158 million in future TOT revenue to help former Mayor Curt Pringle's client Bill O'Connell build two luxury hotels at the failed GardenWalk mall. A move OC Supervisor Shawn Nelson opposes:

GardenWalk Hotels - 7 years behind schedule

From the OC Register (Save Anaheim comments in bold):

ANAHEIM – A developer may wait up to two years to begin construction on a pair of luxury hotels at a Disney-area mall with the final project slated to wrap up by mid-2022 -- seven years behind schedule.

Bill O'Connel as the Master of the House

The Anaheim Planning Commission is scheduled Monday to consider whether to split two proposed GardenWalk hotels into separate phases. If approved, construction of the first hotel wouldn't begin until May 2015, while work on the second hotel would be pushed back to November 2019. Why is the planning commission even considering this when the developer has no financing or subsidy deal in place?

A developer plans to build hotels at the Anaheim GardenWalk property, seen in 2010.

Concurrent construction of the hotels was initially scheduled to begin this May and completed by November 2015.

The postponement is needed "because current economic conditions have made securing financing for the construction of the hotels extremely difficult," wrote Ajesh Patel, manager of GarenWalk Hotel LLC, in a letter delivered in February to Anaheim's planning department. Funny, Larry Lake was able to secure financing without taxpayer funded subsidies. Also, where is the study that shows financing is still difficult to obtain? Are we just to take Mr. Patel's word on it?

Patel said his company remains committed to the project, but that it would be "impossible" to meet the current schedule.

An Orange County Superior Court judge ruled last December that the Anaheim City Council violated the state's open-meetings law when it approved a tax subsidy of up to $158 million for the developer of the GardenWalk hotels.

The deal was advertised only as a "discussion" item on the council's agenda in January 2012. Opponents called the plan a "giveaway," while supporters said it was needed as a way to lure high-spending tourists wanting to stay in four- to five-star quality hotels.

A proposed subsidy plan is expected to come back before the City Council later this month, according to a planning commission report.

The Planning Commission meeting is set for 5 p.m. Monday at Anaheim City Hall, 200 S. Anaheim Blvd.

Save Anaheim PAC - GardenWalk Giveway returning soon.

On March 21st in anticipation of the return of the $158 million GardenWalk Giveaway, the Save Anaheim PAC ran this full page ad in the OC Register.

Special thanks to Brian Chuchua for partially funding the ad.

Click to enlarge

2 Hotels without a subsidy coming to Disney area!

From the OC Register:

ANAHEIM – Two new hotels will rise up soon from a key intersection near Disneyland.

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The Planning Commission this week unanimously approved two hotels, each with a drugstore, on Harbor Boulevard and Katella Avenue. No City Council approval is required, unless there are appeals on the Monday night decision.

A 172-room Springhill Suites by Marriott with a CVS Pharmacy on the ground floor would be built on a parcel that included a vacant lot where a service station used to run. The neighboring Jolly Roger hotel property would shrink. The back of the project would sit next to the Convention Center's parking lot.

Across Harbor Boulevard, the commission supported a scaled-back plan for a hotel on the southeast corner: a five-story, Hyatt House would include 252 rooms, designed with kitchenettes for longer stays. A Walgreens, coffee shop and restaurant would be on the ground floor.

Previously, the developer proposed a nine-story, Las Vegas-style hotel with a nightclub that was approved in 2009. But the developer was unable to get financing.

The Hyatt is expected to break ground within a year; it is unclear when construction will begin on the other.

Anti-Anaheim Blog

Many of you know that another Anaheim centric blog exists. I won't point you in their direction unless you enjoy reading fiction. But I would like to share something a commentator wrote in response to this:

Bill O'Connell

Bill O'Connell

"I have supported this agreement from the beginning as something that will generate job, economic growth and increased city revenues in the long-run. Even those who oppose subsidies or “picking winners and losers”  on principle can admit that the economic return of the GardenWalk agreement exceeds the cost to taxpayers. I’d go further and argue there is no cost to taxpayers because if this agreement isn’t approved, the GardenWalk project dies and there won’t be any TOT revenue to share. If it is approved, the GardenWalk TOT being shared is revenue that hadn’t been going into city coffers and so nothing is being “taken.” Furthermore, a permanent, long-term stream of additional TOT revenue will be established."

The commentator Biff responded with:

I'd go further and argue there is no cost to taxpayers because if this agreement isn’t approved, the GardenWalk project dies and there won’t be any TOT revenue to share.

Right, because if McConnell’s project fails, certainly nobody will ever attempt to build something on these empty parcels that just happen to be a block away from one of the most-visited tourist attractions in the world. It’ll be the haunted elephant graveyard of abandoned building sites!

I’ve never understood project backers’ behaving as though this particular project, with this particular financial arrangement, is the only shot this property has (or their lionization of Bill McConnell for bringing it to the table; it’s not like the guy is risking his family fortune to build a hotel on a reclaimed brownfield site in Chowchilla. He’s asking the city to throw in its oversized share to make his sure thing even surer). If another builder comes along who can do the deal without the city support that McConnell requires, it could be a net win for Anaheimers even if it took several years for someone new to come on the scene, as the city would then take in all of the TOT revenue, rather than leaving it encumbered for years as it would be under the McConnell scheme.

Clearly Biff has brain between his shoulders unlike Sandy Day, Matt Cunningham, Curt Pringle, Kris Murray, Gail Eastman, Harry Sidhu, Todd Ament, Jill Kanzler, Reed Royalty, and Jordan Brandman.

Are Tax Dollars Still Needed for Anaheim GardenWalk Hotels?

From The Voice of OC:

Two planned four-star hotels near Anaheim’s GardenWalk mall could be built without taxpayer subsidies in one to two years, according to hotel financing experts, calling into question subsidy supporters’ central argument that the hotels can’t be built without the controversial incentives.

Council members in a 3-2 vote last year approved a room-tax subsidy, which caused a contentious split on the City Council and within the community. For 15 years, the subsidy would have diverted 80 percent of the hotel's room-tax revenue back to a development partnership involving Bill O’Connell, a politically connected hotelier and frequent City Council campaign contributor. The room tax is the city's largest source of revenue.

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The developer could have collected up to $158 million in diverted tax revenue under the agreement. It allowed the project’s investor to receive a 16 percent rate of return on the hotels, according to a city staff report.

City Council members favoring the deal said the subsidy would have kick-started construction of the hotels and generated thousands of much needed jobs.

Last month, an Orange County Superior Court judge voided the subsidy on grounds that it violated the state's open meetings law, known as the Ralph M. Brown Act. Judge Steven L. Perk ruled that the subsidy approval was not adequately described as a possibility on the council meeting agenda.

For O'Connell to get his subsidy, City Council members must approve it again. He requested that the subsidy be placed on the Jan. 29 council meeting agenda, but that didn’t happen.

Supporters often argue that the subsidy costs nothing to taxpayers because the money for the subsidy can’t be generated unless the hotels are built and trigger new revenues.

But that argument now has a major flaw, argue experts.

The hotel market is rapidly improving, and a subsidy soon won’t be necessary to secure investment for the project, said one of Orange County’s top hotel real estate consultants and a professor at the country’s top hotel financing school.

“The hotel market has recovered, and revenues are continuing to climb. Lenders have already stepped back into the market and with values of existing older hotels rising rapidly,” wrote Alan Reay, president of Atlas Hospitality Group, in an email to Voice of OC.

Jack Corgell, professor at Cornell University of Hotel Administration, said that subsidies don’t make sense when they won’t be necessary to begin construction.

By waiting an additional year, $158 million in potential room-tax revenue would go to the city’s general fund, Corgell argued.

“The value of waiting an extra year could be substantial to the city,” he said. “Why would you do this now? What’s the urgency?”

Anaheim Chamber of Commerce President Todd Ament, a strong supporter of the subsidy, did not return a phone call seeking comment.

Read the full story here:

http://www.voiceofoc.org/oc_north/anaheim/article_4c9917ea-69e3-11e2-8043-0019bb2963f4.html