Dis­ney tax break up for re­newal

For $ 1- bil­lion in­vest­ment, the park would be spared Ana­heim levies.

Los Angeles Times - - BUSINESS - By Emily Fox­hall and Hugo Martin

A lit­tle- known pact that for years has spared Walt Dis­ney Co. from pay­ing en­ter­tain­ment tax on its Ana­heim amuse­ment parks may be ex­tended for three decades if the en­ter­tain­ment gi­ant agrees to in­vest at least $ 1 bil­lion in its re­sort prop­er­ties in the com­ing years.

While sup­port­ers say they are en­cour­aged that Dis­ney will con­tinue to ex­pand in a city where Dis­ney­land opened 60 years ago, crit­ics say Dis­ney is get­ting a spe­cial break that could put res­i­dents at risk if the city’s f inan­cial cir­cum­stances take a down­turn.

The cur­rent agree­ment that ex­empts Dis­ney from pay­ing an en­ter­tain­ment tax ex­pires in 2016. The City Coun­cil will hold a hear­ing on the new pact July 7.

The is­sue arises as the city pre­pares to switch next year to a dis­trict- based coun­cil elec­tion, which could dra­mat­i­cally change the face of a coun­cil that has typ­i­cally had a cozy re­la­tion­ship with Dis­ney.

Un­der the new pact, the re­sort would be guar­an­teed re­im­burse­ment for any fu­ture en­ter­tain­ment tax levied in the next 30 years, so long as Dis­ney in­vests at least $ 1 bil­lion in the re­sort by 2024. If Dis­ney in­vests an ad­di­tional $ 500 mil­lion, the agree­ment could be ex­tended 15 years.

No in­sti­tu­tion in Ana­heim cur­rently pays an en­ter­tain­ment tax, but the agree­ment would pro­vide an “eco­nomic cer­tainty” for Dis­ney as it weighs how and where to make its in­vest­ments around the world, said Kristine Ridge, the city’s in­terim as­sis­tant city man­ager. The com­pany is pre­par­ing to open a $ 4.4- bil­lion Dis­ney­land in Shang­hai next year.

Dis­ney of­fi­cials said they ap­proached Ana­heim about ex­tend­ing the tax break so that ex­ec­u­tives could be­gin to dis­cuss the fu­ture of Dis­ney­land and Cal­i­for­nia Ad­ven­ture. Po­ten­tial in­vest­ments in­clude traf­fic-flow im­prove­ments, a new 5,000space park­ing garage and added at­trac­tions at the parks.

The move does not sig­nify im­me­di­ate plans for an ex­pan­sion of ei­ther park, nor the ar­rival of a hoped-for third theme park in Ana­heim’s re­sort dis­trict.

Since Dis­ney ac­quired Marvel En­ter­tain­ment Inc. in 2009 and Lu­cas­film in 2012, fans have spec­u­lated that an ex­pan­sion may in­clude Marvel su­per­heroes or “Star Wars” char­ac­ters. But Dis­ney of­fi­cials have re­mained tight-lipped about their plans.

“Ana­heim has been an eco­nomic suc­cess story thanks to its poli­cies and ini­tia­tives that al­low busi­nesses to in­vest and thrive,” said Michael Col­glazier, pres­i­dent of Dis­ney­land Re­sort.

“We are ask­ing city lead­ers to con­tinue with a pol­icy set two decades ago that has driven un­prece­dented job cre­ation, growth and pros­per­ity and en­abled the city to in­vest in vi­tal ser­vices that ben­e­fit ev­ery Ana­heim res­i­dent.”

Ridge said Dis­ney’s in­vest­ment would gen­er­ate more rev­enue long-term for the city than a tax, though the city did not have a es­ti­mate of what an en­ter­tain­ment tax might gen­er­ate.

Mayor Tom Tait said Dis­ney shouldn’t get a break at the ex­pense of res­i­dents’ fu­ture fi­nan­cial se­cu­rity. Mak­ing a deal with Dis­ney, the mayor said, would pre­vent fu­ture city lead­ers from im­pos­ing an en­ter­tain­ment tax, even if the city faced fi­nan­cial des­per­a­tion.

“This is more than the City Coun­cil bind­ing fu­ture City Coun­cils,” Tait said. “It is the City Coun­cil bind­ing fu­ture gen­er­a­tions from even vot­ing for a tax.”

Tait served on the City Coun­cil in 1996 when the orig­i­nal agree­ment was struck. He said he was wary of it then, and finds if even harder to swal­low now.

In its state­ment, the city said that that agree­ment “pro­vided Dis­ney the con­fi­dence to un­der­take sig­nif­i­cant in­vest­ment” by open­ing Cal­i­for­nia Ad­ven­ture, the Grand Cal­i­for­nian Ho­tel and Spa and Down­town Dis­ney.

Fol­low­ing Dis­ney’s ex­pan­sion be­gin­ning the late 1990s, the city’s rev­enue from ho­tel stays nearly tripled, ac­cord­ing to the city’s state­ment.

Since1996, the re­sort also dou­bled its work­force, and at­ten­dance in­creased by nearly 60%. In the com­ing fis­cal year, city of­fi­cials es­ti­mate that more than half of its gross gen­eral fund rev­enue will come from the re­sort’s ho­tel, sales, prop­erty and busi­ness li­cense taxes.

The re­sort ac­counts for 4% of the city’s to­tal acreage, but Dis­ney busi­nesses there are ex­pected to pro­vide $148 mil­lion to the city’s gen­eral fund rev­enue, ac­cord­ing to the city’s bud­get for its 2016 fis­cal year, start­ing Wed­nes­day. Ex­clud­ing city ser­vices pro­vided, the bud­get ex­pects $67 mil­lion will be left over.

“They al­ready are the largest tax provider in the city,” Coun­cil­woman Kris Mur­ray said. “Not to tax them fur­ther in ex­change for more than $1 bil­lion in new in­vest­ment is a good deal for the city.”

There is prob­a­bly no doubt that Dis­ney plans to spend $1 bil­lion on its theme parks in the near fu­ture, so the tax ex­emp­tion is sim­ply a way for the city to show its sup­port for Dis­ney, said Dennis Speigel, pres­i­dent of In­ter­na­tional Theme Park Ser­vices in Cincinnati.

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