I have attached my name to a letter supporting the proposed extension of the City’s Entertainment Tax Reimbursement Agreement with Disney, which is an agreement that would refund any tax revenue the City might collect from the sale of Disneyland admissions tickets to Disney. While this is not a planning issue, this is a matter of public debate that I’ve decided to lend my support to, so I thought this was a good opportunity to follow through with my plan for this site by explaining why I support extending the Entertainment Tax Reimbursement Agreement.
The current Entertainment Tax Reimbursement Agreement was adopted when the City approved Disney’s California Adventure and the related improvements to the Resort. The Agreement is between the City and Disney in which the City agrees that, in the event the City levy a specific tax on tickets to the City’s entertainment venues (i.e. Disneyland, Angel Stadium, and the Honda Center), the City would refund the tax revenue collected on the sales of Disneyland admission to Disney. This agreement expires in 2016.
In broad strokes, the current agreement up for adoption between the City of Anaheim and Disney at Tuesday’s Council meeting provides for two extensions to the current Entertainment Tax Reimbursement Agreement. The first extension would extend the Agreement for thirty years, from 2016 until 2046. In exchange for the City agreeing not to collect additional taxes from tickets to Disneyland, Disney would commit to investing $1 billion into Disneyland and California Adventure by the end of 2017. The second extension would extend the Agreement for an additional fifteen years, from 2046 until 2061. In exchange, Disney would commit to investing an additional $500 million into the parks by the end of 2045. Combined, this is an amount greater than what Disney invested when they remodeled California Adventure and built Cars Land a few years ago.
If the City of Anaheim levied a tax on admission to Disneyland, it could raise millions of dollars for the City every year. My best guess is about $20 million per year, in current dollars at current park attendance levels.
On the other hand, we’ve seen what an investment of this magnitude can do to the demand for Anaheim’s tourism industry. Already, due to Disney’s investment in Cars Land and California Adventure, the City has seen its receipts from Transient Occupancy Tax (TOT) increase by about $15 million. We are also seeing a building boom in the Resort with eight hotels currently under construction, which will further increase the TOT. Once this building boom is done, I expect we will see a total increase of tax revenue to the City greater than the revenue we could get by taxing admissions tickets. This is the direct result of the type of investment Disney is committing to make again.
In order to make such an investment, Disney needs to have as much assurance as possible that they will see a return on the investment greater than they would get if they invested elsewhere. The extension of the Entertainment Tax Reimbursement Agreement is one such assurance that they will be able to get the full value of the increased demand their investment will create. I do not believe Disney will make a $1.5 billion investment in Anaheim without the extension of the Entertainment Tax Reimbursement Agreement, if the Agreement isn’t approved, Disney can be more sure of the return on their investment if it happens at one of their other parks.
Additionally, I do not believe the City will levy a tax on Disneyland tickets for the foreseeable future. While council districts might change that (and let’s be honest, that’s what Disney fears), I would expect Disney could successfully counteract any push for an additional tax in the future. So I don’t think the City is giving up much with this new agreement.
I trust that Disney will use their newly acquired properties, Star Wars and Marvel, to do something spectacular in the Resort. I expect they will not wait until 2045 to invest the additional $500 million, but instead will invest it in the next few years. This way, the City will have 45 years of benefitting from the additional tax revenue this investment will bring to the City. An additional $20+ million a year in TOT, sales, and property taxes for 45 years is of greater benefit to the City than reserving the right to levy a tax on tickets at some point in the future, on the off chance that such a tax would be approved. And that increased tax revenue due to Disney’s investment is the reason I’m supporting the extension of the Entertainment Tax Reimbursement Agreement.