Anaheim Council GOPers Approve Tax Subsidy For Luxury Hotels
Posted by: Jubal | 04/23/2008 8:54 AM
Last night, the Anaheim City Council voted 3-1 to approve a policy of providing tax subsidies to to developers of luxury hotels in the Anaheim Resort District and Platinum Triangle.
Mayor Curt Pringle, Mayor Pro Tem Bob Hernandez and Councilwoman Lucille Kring voted "yes."
Councilwoman Lorri Galloway voted "no."
Councilman Harry Sidhu abstained -- no doubt unwilling to provide fodder for a hit piece against him in the SD33 GOP primary.
So the depressing irony here from a GOP perspective is the only vote against this corporate welfare was the Anaheim Council's lone Democrat. Nice.
Readers can watch the council discussion and vote on Anaheim's website (it starts at about the 1 hour and 23 minute mark).
I was most struck by a comment made by Councilman Hernandez: "I don't know how to argue against this."
Let me help the councilman out: Republicans are supposed to be against government interference in the market place. Republicans are supposed to be against the use of subsidies to favor one type of business over another. Republicans are supposed to be against subsidies, period.
Principle has been obliterated by false practicality.
Let's boil this proposal down to its essentials. City planners want fancier, four- and five-star hotels built in the resort district and the Platinum Triangle. The problem is, they won't pencil out in the marketplace. So in order to ensure its goal of glamorization of the Resort District, the City of Anaheim will step in to support with 10-15 years of subsidies, business enterprises the marketplace will not support.
Aren't we, as Republicans, continually lecturing Democrats that just because an outcome is socially desirable isn't justification for government intervention to make it happen, that we should leave it to free markets and free people?
Anaheim's city planners -- honorable and well-intentioned people -- assured the council the subsidies will ultimately be recouped when the luxury hotels at some point become "feasible." What if they don't? Is the city going to pull the plug? More likely the subsidies will continue for as long as these luxury hotels claim they are necessary to make their operations pencil out.
10-15 years from now, and these luxury hotels will be well established, have lobbyists on retainer and memberships in the Anaheim Chamber of Commerce. The current council and responsible staff will be termed out or retired, replaced by folks who didn't vote on the original proposal and won't necessarily feel bound by the assurances of long-departed councilmembers and staff.
It's claimed this tax subsidy isn't really a subsidy, because the bed tax being rebated is only that portion of what a luxury hotel produces over-and-above what a mere three-star establishment would generate. Since there are currently no four- and five- star hotels in the designated areas, then the city really isn't giving up anything.
To which, in response, the same result could be achieved by just not providing the subsidy and leaving it to the marketplace to determine whether luxury hotels belong in the Resort District and the Platinum Triangle. The "it's not a subsidy" contention highlights that this is really government planners micro-managing the marketplace.
In principle, is this Hotel Development Economic Assistance Program different than promising some kind of tax subsidy to rich people to encourage more of them to move to targeted areas of Anaheim? Rich people spend more money and spruce up an area with expensive re-modeling, better landscaping and fancy cars. The increased property values and more dollars spent in Anaheim help city revenues.
I understand the temptation to vote for this luxury hotel subsidy: it promises to bring really cool hotels to Anaheim while not really (hopefully) costing the city anything, and possibly , hopefully increasing bed tax revenues years down the line.
And I think it stems, at least in part, from the what Claremont Professor Charles Kesler called "the old Republican fantasy that if only Washington could be run as efficiently as a private business, all would be well."
Government should set the table for a prosperous free market. At the local level that means providing infrastructure, public safety, streamlining approval processes, and keeping taxes, fees and regulations to a minimum. Anaheim has been blazing a trail in this regard with flexible zoning, streamlining government and emphasizing customer-service and a business-friendly policy mindset.
In this case, however, I think mis-guided civic pride and visions of an Anaheim resort area studded with luxury hotels have led the city beyond being market-friendly and into the realm of trying to direct the market.
Mayor Curt Pringle, Mayor Pro Tem Bob Hernandez and Councilwoman Lucille Kring voted "yes."
Councilwoman Lorri Galloway voted "no."
Councilman Harry Sidhu abstained -- no doubt unwilling to provide fodder for a hit piece against him in the SD33 GOP primary.
So the depressing irony here from a GOP perspective is the only vote against this corporate welfare was the Anaheim Council's lone Democrat. Nice.
Readers can watch the council discussion and vote on Anaheim's website (it starts at about the 1 hour and 23 minute mark).
I was most struck by a comment made by Councilman Hernandez: "I don't know how to argue against this."
Let me help the councilman out: Republicans are supposed to be against government interference in the market place. Republicans are supposed to be against the use of subsidies to favor one type of business over another. Republicans are supposed to be against subsidies, period.
Principle has been obliterated by false practicality.
Let's boil this proposal down to its essentials. City planners want fancier, four- and five-star hotels built in the resort district and the Platinum Triangle. The problem is, they won't pencil out in the marketplace. So in order to ensure its goal of glamorization of the Resort District, the City of Anaheim will step in to support with 10-15 years of subsidies, business enterprises the marketplace will not support.
Aren't we, as Republicans, continually lecturing Democrats that just because an outcome is socially desirable isn't justification for government intervention to make it happen, that we should leave it to free markets and free people?
Anaheim's city planners -- honorable and well-intentioned people -- assured the council the subsidies will ultimately be recouped when the luxury hotels at some point become "feasible." What if they don't? Is the city going to pull the plug? More likely the subsidies will continue for as long as these luxury hotels claim they are necessary to make their operations pencil out.
10-15 years from now, and these luxury hotels will be well established, have lobbyists on retainer and memberships in the Anaheim Chamber of Commerce. The current council and responsible staff will be termed out or retired, replaced by folks who didn't vote on the original proposal and won't necessarily feel bound by the assurances of long-departed councilmembers and staff.
It's claimed this tax subsidy isn't really a subsidy, because the bed tax being rebated is only that portion of what a luxury hotel produces over-and-above what a mere three-star establishment would generate. Since there are currently no four- and five- star hotels in the designated areas, then the city really isn't giving up anything.
To which, in response, the same result could be achieved by just not providing the subsidy and leaving it to the marketplace to determine whether luxury hotels belong in the Resort District and the Platinum Triangle. The "it's not a subsidy" contention highlights that this is really government planners micro-managing the marketplace.
In principle, is this Hotel Development Economic Assistance Program different than promising some kind of tax subsidy to rich people to encourage more of them to move to targeted areas of Anaheim? Rich people spend more money and spruce up an area with expensive re-modeling, better landscaping and fancy cars. The increased property values and more dollars spent in Anaheim help city revenues.
I understand the temptation to vote for this luxury hotel subsidy: it promises to bring really cool hotels to Anaheim while not really (hopefully) costing the city anything, and possibly , hopefully increasing bed tax revenues years down the line.
And I think it stems, at least in part, from the what Claremont Professor Charles Kesler called "the old Republican fantasy that if only Washington could be run as efficiently as a private business, all would be well."
Government should set the table for a prosperous free market. At the local level that means providing infrastructure, public safety, streamlining approval processes, and keeping taxes, fees and regulations to a minimum. Anaheim has been blazing a trail in this regard with flexible zoning, streamlining government and emphasizing customer-service and a business-friendly policy mindset.
In this case, however, I think mis-guided civic pride and visions of an Anaheim resort area studded with luxury hotels have led the city beyond being market-friendly and into the realm of trying to direct the market.
"So the depressing irony here is the only vote against this corporate welfare was the Anaheim Council's lone Democrat."
Especially since I'm pretty sure she voted no for the wrong reason. Depressing for everybody. Except the city staff.
Harry, why abstain.....you were elected to the Anaheim City Council to vote and represent the people. Why is it when some with alitte heat comes along you hit the middle button.
I would hate to see you in the Senate, when a real issue comes up...how can the party rely on a run for the hills kind of guy.
These guys are so in love with the Resort District they'll snap at these "economic incentives" like cats at cat-nip.
And what's with Harry Sidhu hiding behind an abstention?
Good analysis Jubal, and your last sentence says it all, something even Greenhut would certainly agree upon.
But you forgot one very important part. It was done with Curt Pringle's blessing. Apparently some consevatives are only conservatives when it suits their political purpose. But the rest of the time......Sounds a little familiar about a certain politician from Corona. And this is why eventually the Obamas and Hillarys are going to inherit the earth.
To me this abstaining is as good as casting a yes vote. It is a shame that with these "Conservatives" on the council and only the Dem votes against it....
Perhaps, things are truly changing....is Harry a liberal?
Spineless Sidhu. Shame on him.
This really goes to show you: when the tough gets going, Sidhu steps aside.
The State Senate is in a very precarious position right now. Only two votes are needed on the Republican side to get to 2/3rds.
I don't know how anyone could possibly put their trust in Sidhu to hold the line on taxes and tough budgetary votes if he can't even hold the line on something as straightforward as subsidized resorts in his own little city.
How does Curt Pringle reconcile conservative credentials with his support of this kind of legislation?
I went to the Anaheim website link in this post and watched the discussion. Sidhu wanted a continuance to get more info on this thing. Then the other 3 Republicans, Pringle, Hernandez and Kring push it to a vote. What was their rush on this? So Sidhu abstains wanting more info and a continuance. Stop the spin and watch.
Jubal:
Maybe I am missing something (and not that I support "welfare" for big business) but what is the difference between a rebate of TOT for meeting a certain level of hotel service and the home mortgage interest deduction that most of us take on our income tax returns? That is also a "rebate" sponsored by the govnerment to socially engineer home ownership. That scheme also is anti market in that it provides a government incentive to help people afford homes they otherwise may not. So, Jubal, are you opposed to the home mortgage interest deduction? Should we abolish that?
If Sidhu disagreed with the other three putting it to a vote, he should have voted no. He could have explained he was voting no on a motion, not on an issue. Instead, he was nowhere.
This issue should have been a no brainer for anyone who styles oneself "conservative."
Pringle is not up for re-election...
Kring is lost...
Hernandez doesn't understand most issues before him...
There are your three votes...
Anaheim is screwed up, it was screwed up over the original disney issue and its once again screwed up. Maybe everything within this area should go to voters. Clearly this council is unable to discuss and understand the issues of their mostsignificantly profitable district in the city.
Anybody been to LA Live? Beautiful project that only works with the 5 star hotels and residences paid in part with pre-development and other enticements to the developers that were underwritten by the last STATE budget.
So, in essence, you and I behind the Orange Curtain flat out paid for LA's new Ritz Carlton, JW Marriott, and Nokia Theatre.
Wow, so why not create a competing incentive that does not involve using existing tax dollars. Up, hold on, I think Curt did.
So Curt is using tax cuts and policy to not only incent the high end development that will help hoist Anaheim up another rung on the economic ladder, but he is competing head to head with LA using this incentive to bring projects and benefits here.
Following the lead of the Democrats in LA and the Legislature is a tough argument to make. "We should be just like them, only better or more self-sufficient." Yikes.
What about using the incentive model that the whole Platinum Triangle was based on?
How about instead of rebating an existing too-high bed tax, reducing it or eliminating it entirely as an incentive for platinum-style hotels to come to the Platinum Triangle.
There are two words in tax rebate: A tax is still imposed, placing a negative effect on the market, and; a rebate is given by father government, who will use the rebate to pick the winners and losers in the market.
Yep, sounds like regular Democrat policy to me. Something we don't need more of in Orange County.
"Wow, so why not create a competing incentive that does not involve using existing tax dollars"
Because it's still a discriminatory subsidy; it sequesters future tax revenue - as well as even potential tax revenue at a given location.
Fed Up With This: listen to Fed Up With That.
"Ah, I see. It's all about paying to City Hall and your ticked that if somebody risks $500 million in Anaheim, they may not have as much of their reward confiscated by the government."
Blow, that sentence (like the rest of your comment) is pretty obscure. But I think it means that you like it that some lucky hotel developers are given some of the tax revenue they generate. But how come Mom & Pop's Motel down the street doesn't get the same consideration?
That's discrimination, isn't it? Taxes are discriminatory if some folks have to pay them and some don't: presumably the tax rebate kickback will be kicked back in some form to the guests who are paying it at the 5-star hotel. That doesn't seem fair to me - maybe it does to you.
As far as your "profit is potential tax revenue" comment: that, too is quite opaque; I have no idea what you're trying to criticize, but let me be succinct: if one guy gets a bed tax rebate, than everybody who runs a hotel ought to get one too. Clear enough for you?
Unless Harry Sidhu had a conflict of interest this vote would have represented his position on supporting or opposing corporate welfare. You cannot ask to be my state Senator and go AWOL on a vote of this magnitude.
This is but one reason I have endorsed Mimi Walters for this seat.
Larry Gilbert OC Co-Director Californians United for Redevelopment Education CURE,
I appreciate all of the Anaheim talk on the Blog over the last few days about our incentives for four/five star hotel properties. I would like to share my perspective on this.
It is always interesting that some wish to immediately be negative about what they hear on one issue, and from that, seek to claim that their interpretation of the situation defines conservatism or proper government management. I know there are opposing views, but one point of non-agreement does not define an entire political philosophy.
The city of Anaheim takes great pride in its Resort district. It is an important economic engine to our city. We have fought hard this year to preserve it!
Even with 20,000 hotel rooms in our city, new hotel development is vigorous in Anaheim. At this moment in time, nearly 1500 new hotel rooms are under development in Anaheim. Many other developers are coming to the city expressing interest in developing hotels.
So we have seen in managing for our city’s future that many additional hotels are necessary. But in all cases, except the current construction of the 250 room expansion of the Disney Grand Californian, all of the new hotels are three star properties.
The current market conditions allow for the development of three star properties in our city, even with their current high property and construction costs.
But in planning for the future of Anaheim, we have considered how we could grow the Resort district, both in number of rooms and the average nightly rate.
We do not need to do anything to encourage three star properties. But four star properties and the additional construction costs that are required to get these properties to that level are much higher and they may not be built at the current cost of construction.
Four star properties can add to our opportunities to bring additional conventions to Anaheim and can assist in the growth of the Resort area.
On Tuesday’s agenda, we voted to provide a potential tax reimbursement to hotel developments if they seek to build four star properties. Our plan would be to require the full 100% of the bed tax be collected on the three star property equivalent rates. But we would consider, based on need, if we would reimburse for the first 10-15 years, the additional amount of taxes collected from the three star rate equivalent to the four star rate.
We are not reimbursing what the market will provide – in this case a three star property. But we see the value in growing the Resort for the long term. And a mix of high end hotels, even with higher construction and development costs, will insure that we have the mix of properties that will continue to grow the Resort.
At the council meeting, I respect that Councilmember Harry Sidhu wanted to delay this discussion for a few months in order to get more information.
And I also respect that Councilmember Lorri Galloway joined with HERE (Hotel Employee/Restaurant Employee Union) in opposing this plan. The HERE representatives were the only ones who spoke against this proposal.
I see a similarity in the council action on Tuesday, to when, in the Legislature, we provided a manufacturer’s tax credit on the purchase of new manufacturing equipment or when we provided an R&D tax credit to encourage more high tech research firms to locate to California. Some people didn’t like any type of tax credit or incentive programs. And I can respect that.
But with these incentives in Anaheim, I feel we are taking steps today to prepare for the long-term fiscal health of our city.
Sometimes planning for the long term is not seen by everyone in the short term.
But I will hold Anaheim’s fiscal position up as an example of a fiscally responsible and secure government even in these economic times. This year we have made a mid-year budget reduction of 2 ½%; we have maintained a 13% general fund reserve and are truly in a strong budget position.
I will proudly match our city’s planning and budget position to any other local government from Rancho Santa Margarita to Riverside.
Sorry - the post above was authored by me.
sounds like Mr. Mayor. LOL!
Curt's explanation sounds like the same convoluted justifications offered by the big-government types in Garden Grove. Say it ain't so, Curt!
Rancho Santa Margarita's General Fund reserve stands at around 100% Curt. So be careful about comapring reserve fund status. In fact, the city council is even considering giving some of it back to the constituents because it is so high. If you want to talk about well managed government, that doesn't have to provide giveaways to business, then aybe you should visit that city some time.
I agree with Steven Greenhut's comment above.
Having a big reserve only means that your taxes are too high.
Offering to cut someone's taxes if they build
No one's taxes are being cut. Anaheim is taking a portion of the bed tax paid by hotel guests and giving it to the hotel.
That is most definitely not a tax cut. If anything, it is using the bed tax as a mechanism for re-distributing income from hotel guests to the hotel.
Having a big reseve with limited revenue means your government is managed well. Something that can't be said about a certain city in a neighboring county that raises taxes and fees like a drunken liberal.
I can't believe that an RSM councilman is on a blog bragging about having 100% more than you need of the taxpayers money to run your city! (First bragging about an IE effort and now this) It should have been returned yesterday. I guess you will think about returning the money....maybe pass a resolution. Consult with the HOA management company. Lord spare us.
I'm looking through you, where did you go
I thought I knew you, what did I know
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Why, tell me why, did you not treat me right?
Love has a nasty habit of disappearing overnight
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The only difference is you're down there
I'm looking through you, and you're nowhere
Why, tell me why, did you not treat me right?
Love has a nasty habit of disappearing overnight
I'm looking through you, where did you go
I thought I knew you, what did I know
You don't look different, but you have changed
I'm looking through you, you're not the same
Yeah! Oh baby you changed!
Aah! I'm looking through you!
Yeah! I'm looking through you!
You changed, you changed, you changed!