Q: Seems reasonable-so why doesn’t this deal work?
A: If bankers are lending for the 3 star hotels currently about to break ground, but won’t lend on 4 star hotels, they may be telling us there isn’t a market for those high end lodgings. Why should we as taxpayers give money for an investment bankers won’t lend on?
O’Connell says even with the subsidy he will not be able to break ground for at least a year or two. A leading hotel expert argues that by waiting an additional year no subsidy would be needed, as the lending market will be friendlier.
Jack Corgell, a Professor at Cornell University of Hotel Administration stated, “The value of waiting an extra year could be substantial to the city, why would you do this now? What’s the urgency?” In addition, one of Orange County’s top hotel real estate consultants, Alan Reay, stated ,“The hotel market has recovered, and revenues continue to climb. Lenders have already stepped back into the market.”
Q: Why doesn’t the developer wait a year and secure traditional financing?
A: By waiting a year he wouldn’t benefit from free tax money, which makes the deal more lucrative for him and his investors. The developer appears to owe more than the land is worth. Many of us find ourselves “upside down” on our homes, why should one developer expect us to bail out his bad investment?
Q: Didn’t anyone stand up against the original giveaway?
Yes, Mayor Tom Tait and (former) Mayor Pro-Tem Lorri Galloway voted NO. City Manager Bob Wingenroth also opposed the deal, after having served years as Anaheim’s Finance Director, he could see this was a loser for our General Fund. Bob Wingenroth has now left the City of Anaheim, taking a six-figure cut in pay, rather than remain in this environment at City Hall.
Q: Why did the Mayor vote NO?
A: It isn’t fair. Mayor Tom Tait stated, “I’m in business, if I had a competitor, who didn’t have to pay taxes, I wouldn’t like that because it is a huge competitive advantage.”
In addition, Mayor Tom Tait rejected the argument that without subsidy the land would sit empty and unproductive, stating that, “…if you don’t build it, something will be built there, and all that tax revenue would come to the city.” Indeed we already see other sites being developed without taxpayers underwriting the costs.
Q: Why did Murray, Eastman, and Sidhu vote YES?
A: First, they claimed there was no cost to the city. Which is false. The $158 million is our money, collected from visitors who pay the tax, and then diverted to the developer instead of remaining in the General Fund.
If the hotel was built without the subsidy, all that revenue would be kept, funding police, fire, libraries, parks, and community services. Those costs are skyrocketing, since the same Council majority approved one of the most generous union deals in recent memory last summer-again over the objections of Mayor Tait, meaning we will have to increase General Fund revenues just to maintain the same level of service. Knowing we need to either increase funds or cut spending, the only expense the Council majority cut from the budget was the line item for Mayor Tait’s staff!
Plus, the Council claimed it was all about jobs. But the developer does not have an agreement to use local labor, so our taxes are likely to fund jobs for some other town’s workers. These jobs are not right away either. Construction on the first tower won’t start till 2015. The final tower won’t be completed until 2022. The permanent jobs they boast about are mostly in the hospitality industry, offering low pay and no benefits, so taxpayers end up subsidizing O’Connell twice when we also have to build affordable housing projects for his workers, or offer social services to cover their cost of living.
Lastly, the special interests behind this deal spent tens of thousands in campaign money to help elect the current Council majority. Money from the developer, Disney, OC Taxpayers Association, OC Business Council, and former Mayor Curt Pringle (also the lobbyist for the developer) helped boost Eastman, Murray, and Brandman into office.
