South Florida Sun-Sentinel (Sunday)
Political clout restricts hotel-tax use
Orlando tourist taxes don’t pay for roads, housing like other cities
From the Florida Keys to Portland, Oregon, cities are increasingly turning to tourist taxes as one way to solve problems that come with being a top travel destination.
In the Keys, a portion of the taxes paid by hotel guests have built more than 1,000 affordable housing units. Portland is tapping into similar funds to help the homeless. Las Vegas uses part of the money for schools and transportation. And Honolulu is building a 20-mile rail system with some of the funds from its tax.
But in Orlando, home to the most iconic theme parks in the world and more than 129,000 hotel rooms, elected officials and industry leaders have preserved nearly all of the $300 million from a 6% levy on hotel rooms to aid the industry.
When Florida lawmakers have attempted to loosen the restrictions on the tax, they’ve run into major roadblocks.
Former state representative Matt Gaetz tried in 2015, asking the state to let counties use hotel tax dollars to pay for lifeguards, police officers and ambulances — public services stressed in his home district by big crowds that flock to the beaches.
But Gaetz, now a U.S. representative, said he was forced to rewrite his bill so it only applied to Okaloosa, Walton and Bay counties in Florida’s Panhandle.
“There’s a saying in Tallahassee that your bill is dead if it has a rodent problem,” said Gaetz, referring to the Walt Disney Company’s vast influence in Florida politics. “In the end, I punted for a very parochial outcome … so I got mine.”
And when state lawmaker Randy Fine wanted to ease the tourism industry’s grip on the same coveted pot of public money, lobbyists for theme parks, hotels and restaurants argued that Fine’s plan threatened the “integrity” of the tax designed to sell
Florida to more tourists. Fine wanted to use some of the money collected on hotel rooms to clean up the ailing Indian River Lagoon and other projects, such as roads.
Ultimately, Fine’s bill passed in 2018, but with limits pushed by lobbyists representing Orlando tourism executives that continue to restrict how and when local governments can use the tax for projects outside of vacation promotions and big venues like sports stadiums.
“It was not easy,” said the Republican House member from Palm Bay.
In Orange County, the hotel tax brings in more money — a record $277 million last year — than anywhere else in the state and remains closely guarded by the industry.
That amount has increased every year for the past six years and is more than triple the next highest county, Broward in South Florida, which brings in about $80 million, according to the Florida Department of Revenue.
A deal this fall between county leaders and tourism executives will continue to grow the amount of public dollars used to advertise theme parks and other attractions to an estimated
$100 million a year by 2023. That agreement — and a pledge from the county to help build a road to Universal Orlando’s newest theme park — are the latest signs of the influence tourism leaders hold in Central Florida even as the industry’s tens of thousands of low-paying jobs intensify pressure in the region caused by an affordable housing crisis and a chronically underfunded public transit system.
Disney, for example, was the biggest political spender in the state last year, contributing $28.3 million to candidates and committees across Florida, spending the company says is necessary to weigh in on issues that might affect its 77,000 local employees.
Universal Orlando, meanwhile, just secured
$125 million for a road that will benefit its upcoming park and is seeking $350 million in state corporate tax breaks over three decades in exchange for building a new theme park and hotel design headquarters in Central Florida.
Just one day before it won the money for the road, the theme park company said it would donate 20 acres of land to build affordable housing and an undefined mass transit hub after facing opposition from people who live nearby and union leaders. Universal CEO John Sprouls provided few details about the project at a press conference.
He said the company spent “months” on the housing component and that there were “a number of people that [he] had to convince that this was the right thing to do for this community.”
SeaWorld and the Central Florida Hotel & Lodging Association declined to comment for this story.
Tourism leaders say the hotel tax money is needed to support the industry and the 280,000 jobs it provides along with hundreds of millions of dollars Disney, Universal, SeaWorld and other attractions pump into the area in the form of property taxes and other fees.
The type of deal Universal struck with the county this week to dedicate land for housing is rare among local theme parks and a first for the theme park company buoyed in recent years by its successful Harry Potter lands.
But the challenges that come with a workforce concentrated with lowwage and low-skill jobs were predicted long ago. It’s been nearly 50 years since a local government planning group issued a prophetic warning soon after the opening of Disney’s Magic Kingdom.
“A large number of tourist industry employees remain out of sight, occupied as kitchen help, chambermaids, maintenance workers, janitors, watchmen and the like,” said the East Central Florida Regional Planning
Council in 1972. “Many of these workers are not highly paid. They can remain invisible at a tourist attraction, but they must reside in the community and, as residents, they are not invisible.”
The tourist tax
After payments for the Orange County Convention Center and venues like Orlando’s NBA arena, the biggest slice of Orange County’s tourist tax goes to Visit Orlando, a nonprofit group overseen by a board of tourism executives that markets vacations and business meetings here.
Visit Orlando received
$66 million this year in tourist tax money, up from
$56 million in 2018. The group, led by a former Disney executive, spends most of its budget on advertising, according to financial records.
A Milwaukee-based firm is its biggest contractor at
$14.3 million, up from $13.4 million a year before, according to the group’s tax filings. Birdsall Voss & Associates created an ad campaign for the nonprofit that features glossy images of families making memories at some of Orlando’s biggest attractions — Disney’s Cinderella Castle, SeaWorld’s Discovery Cove and Universal’s minions from “Despicable Me.”
The group also paid $4 million to Google in 2018, twice what it paid the year before, according to tax filings.
Salaries at the organization also jumped, tax records show. Chief Executive George Aguel, a former senior vice president at Disney, has a total compensation package valued at
$676,831, up almost 50% from five years ago. When Aguel was hired in 2013, Visit Orlando paid five people salaries and benefits that totaled higher than
$200,000. Last year, at least
10 people earned that much, including four higher than $300,000.
“Visit Orlando is the only entity that is responsible for globally branding, marketing and selling the Orlando region in its entirety,” Aguel said in a statement. “… We cannot take our success and growth for granted.”
This fall, Visit Orlando requested the county commission increase its share of tourist tax dollars to about $100 million annually by 2023, arguing in a statement to the Orlando Sentinel that it needs the money because the tourism industry “recognized that current levels of marketing are insufficient to remain competitive in the future.”
In October, the agency’s three-part measure passed unanimously after just 12 minutes of deliberation. Commissioners stumbled over each other to be first to second motions in favor of the changes. After the vote, applause broke out from tourism leaders in the audience.
Owen Beitsch, an economist at GAI Consultants in downtown Orlando, said it’s “perfectly appropriate” for the tourist tax to go back in the hands of tourism executives who know how to market the region. But he questioned why some of the dollars can’t be used for other needs in the community.
“The notion that it can’t be used for other things in a pretty material way, I think is equally silly,” he said.
Tourism leaders and local politicians argue they are hamstrung by state law, which narrowly defines how tourist tax money can be spent.
As it stands, the six pennies of Orange County’s bed tax are divided like this: The first four cents go to Visit Orlando for marketing and advertising, the convention center, stadiums, arenas and museums. The fifth cent is spent on debt payments for the expansion of the convention center and the sixth cent is spent on sports projects and tourism promotion.
Orlando Mayor Buddy Dyer, a longtime supporter of the industry, said he “can’t complain too much” about the hotel tax because it helped fund the Dr. Philips Center, the Amway Center and renovations of Camping World Stadium.
Those facilities, part of a deal championed by Dyer a decade ago and heavily supported by the local business community, were also sold, in part, on the idea that they would draw outof-town visitors for events such as college football bowl games at Camping World Stadium. The venues also largely provide low-paying, often part-time jobs, though the city notes temporary higher-paying jobs came with their construction.
Bill Peeper, the first CEO of Visit Orlando, defended
the venues as a benefit for the local community.
“The stadium is not a tourist attraction, the performing arts center is not a tourism attraction. Orlando’s Amway Center is not a tourist attraction. Those were 100% paid for by the tourism industry,” Peeper said, referring to the taxes paid by hotel guests. “My question is, [has] the tourism industry not engaged in the community by supporting the development of those three wonderful facilities that have benefited the social fabric and lifestyle of our community?”
Dyer said he has instead advocated for a seventh cent to be added to the tax to be used “for different specific purposes, whether it be homeless, transportation, law enforcement, whatever it may be.”
He added, however, that the measure hasn’t received much support.
Since Fine, the Brevard lawmaker, pushed his change through in 2018, the hotel tax can technically be used for road projects. One of the caveats, however: To apply, counties have to spend at least 40% of their bed tax dollars promoting tourism.
Orange County appears to meet that threshold — the county spends more than 50% of the tourist tax on Visit Orlando and the convention center, according to the comptroller’s office.
But Orange County has argued it actually only uses about 30% of the money for tourism promotion — the convention center, it told the Sentinel in October, is viewed “as one of the engines for Central Florida businesses rather than a tourism attraction” even though one of Visit Orlando’s roles is to market the convention business.
As a result of that reasoning, the county will tap a special trust fund, rather than the tourist tax, to help pay for the road extension into Universal’s upcoming park, Epic Universe.
The Reedy Creek Improvement District
The tourism industry has been leveraging influence in Central Florida since Disney first arrived here more than 50 years ago.
In 1967, the entertainment giant reached an unprecedented agreement with the Florida Legislature to create its own government, allowing it to exercise authority usually reserved for cities and counties over its 27,000 acres of land. The property spans an area about twice the size of Manhattan in Orange and Osceola counties.
Known as the Reedy Creek Improvement District, the agency is able to sell tax-exempt bonds, write building codes, condemn property, develop and maintain its own infrastructure and offer fire and emergency services. It can levy taxes. And it can build whatever it wants — whether a theme park or an airport — most of it without the typical local oversight that encumbers regular developers.
Reedy Creek is made up of two cities, Bay Lake (population: 20) and Lake Buena Vista (population: 24). Disney owns most of the property and, as a result, controls who is appointed to run the district.
There is also another important benefit for Disney tucked inside Reedy Creek’s 92-page charter. Construction inside the district is exempt from certain taxes and fees added by the county governments after Reedy Creek was created.
That means Disney doesn’t pay impact fees. Those are the one-time payments developers make to offset the cost of public services like roads. The district pays for many of its own services, like fire and maintenance for the roads inside its boundaries. But if Reedy Creek didn’t exist, Disney would pay the fees, like any other developer, to Orange and Osceola counties.
At one point, Disney’s exemption from paying impact fees raised eyebrows
from officials in Orange County.
In the 1980s, county officials threatened to sue Disney over the constitutionality of its Reedy Creek charter.
Then-commissioner Lou Treadway put it this way: “Without question, Disney is the largest taxpayer in Orange County. Without question, Disney is the largest employer in Orange County. And without question, Disney causes some of the greatest impact in Orange County.”
Ultimately, the company and the local government came to an agreement in
1989 and Disney paid about
$13 million for road improvements outside its property. In exchange, Orange County agreed not to challenge Reedy Creek’s charter for seven years.
When the agreement ended, Disney stopped paying the fees. And Orange leaders haven’t pushed the issue since.
Disney is also immune from a tax that other property owners pay to fund law enforcement.
If the company was required to pay the tax, it would total about $21.1 million in fiscal year 2020, according to an analysis by the Orange County comptroller’s office. Instead, Reedy Creek will pay about
$10.5 million in a contract with the Orange County Sheriff ’s Office.
That means Reedy Creek — and Disney by extension — nets a savings of about
$10.6 million a year thanks to the tax exemption.
Disney notes it pays other taxes that offset the benefits built into its charter.
Disney paid more than
$120 million in taxes to Reedy Creek in 2018. The company and its Disney Vacation Club segment also pay 85% of the utilities for the district. Reedy Creek owns the utilities system and provides its own sewage treatment, road management and fire rescue forces, as well as security officers in addition to services it pays the sheriff ’s office to provide.
“Because of the taxes paid annually to Reedy Creek Improvement District, Central Florida taxpayers are not burdened with additional costs of maintaining our infrastructure,” said Disney spokeswoman Andrea Finger.
Disney is also the largest property taxpayer in Orange County. It paid about
$141 million in property taxes to the county last year. The company pays more than the next eight highest taxpayers combined.
The entertainment giant also says it makes other contributions to the community, including $34.5 million in cash and in-kind donations to local nonprofits last year. It donates thousands of meals and blankets annually to the homeless, hundreds of thousands of pounds of unserved food and thousands of dollars in school supplies. Disney’s Aspire education program has enrolled about 11,000 employees so far at network schools, like the University of Central Florida, paying 100% of the tuition.
In all, tourism businesses will bring in an estimated $412.8 million in property taxes between the theme parks, hotels, golf courses and businesses on International Drive this year, according to the county property appraiser’s office. That’s money that goes to fund public education and other services.
And the industry as a whole generated $5.1 billion in sales tax paid by consumers in 2017 — nearly a tenth of the total collections.
Money and power
State Rep. Anna Eskamani, D-Orlando, said she’s often asked: “Why is tourism so powerful? Why don’t we see the financial benefit of this tax base as much as other cities?”
Eskamani, whose father worked as a customer service representative at Disney World when she was a child, said, “the reality is that these groups have exerted their influence for a very long time. I mean, it sounds cliche, but you can just look at financial contributions, and it kind of speaks for itself.”
In the 2018 legislative cycle, Disney, Universal, SeaWorld, Marriott International, the timeshare industry’s American Resort Development Association and the Florida Restaurant &
Lodging Association gave about $10.8 million to lawmakers, political action committees and state parties.
Disney accounted for more than 70% of that amount. And that doesn’t count another $20.6 million Disney spent to support Amendment 3, which makes it harder to expand casinos in Florida. The amendment passed with an overwhelming 71% of the vote.
“We believe we have a responsibility to engage in issues that could directly impact the more than 77,000 cast members who work at Walt Disney World, and the well-being of our community,” said Finger, the Disney spokeswoman. “We take this responsibility seriously and do this by taking an active role in finding solutions to important matters in our region.”
Last year, Universal gave about $2 million to candidates and committees.
Disney brought in a record profit of $12.6 billion in fiscal 2018 across its theme park, media, movie studio and product segments. Universal parent Comcast Corp. turned a profit of more than $11.7 billion last year.
The strength of Disney’s financial contributions is also seen in Anaheim, where Disneyland is located. Former Mayor Tom Tait, who left office in December 2018 and was a vocal critic of the company, voted against two hotly debated tax incentives that passed in 2015 and 2016.
“[Disney] literally floods out any other message because it’s such a disproportionate amount of money that they spend compared to everyone else,” said Tait, a Republican.
The two measures, immunity for as many as 45 years should Anaheim enact an entertainment tax and an estimated $267 million subsidy for a luxury hotel, were so contested that Disney ultimately pushed to scrap the deals in 2018 saying via a letter by then-Disneyland Resort President Josh D’Amaro, now the head of Orlando’s Walt Disney World Resort, that they “created an adversarial climate where there should be cooperation and goodwill.”
In Florida, Disney and Universal regularly flex their political muscle in Tallahassee.
Disney won concessions on a bill to allow human trafficking victims to sue hotels.
Last year, in the final hours of the session, the bill, which had seemed poised to pass, was suddenly dead in the water.
Disney and the Florida Restaurant & Lodging Association’s lobbyists, “were opposing it behind the scenes and we were aware of that,” said Richard Slawson, a Palm Beach attorney who sits on the board of Florida’s Children First, which helped propose the measure. Their influence, he said, helped kill the bill.
A version of the bill passed this year, though a key provision Disney opposed was stripped. The company did not respond to a question for comment on the measure.
Universal has also raised its political profile.
Even before deals for roads and corporate income tax breaks related to Epic Universe, which will be the company’s third main gate when it opens in four years, Universal tapped into a little-known pot of public dollars through its joint venture with Loews Hotels.
The Universal venture has claimed $17.1 million in tax credits over 20 years through Florida’s “Urban High Crime Area Jobs Tax Credit Program,” which was designed to incentivize businesses to move to troubled areas.
Orlando drew its highcrime area to include Universal, allowing the company to draw public subsidies from the program despite the revitalization that has occurred there in the past two decades. Universal and Loews are the most avid users of the program, accounting for about half of all the tax credits ever awarded across the state.
Universal declined to answer questions the Orlando Sentinel sent regarding its role in the community, including about the highcrime tax credit program, saying the Sentinel’s questions seem “intentionally and unfairly skewed toward requiring us to offer a detailed defense of our business and our industry.”
“Instead, we would share that we have launched tens of thousands of careers, done business with hundreds of local companies, contributed millions of dollars in charitable contributions, paid hundreds of millions of dollars in taxes and contributed billions of dollars in direct and indirect economic benefit to our community,” Universal spokesman Tom Schroder said via email.
What’s next?
Business leaders and industry supporters argue that ongoing public support is necessary for Disney, Universal and the smaller attractions to keep Orlando No. 1 in tourism.
Critics say it’s time for the industry to support itself and for the community to turn its focus to some of the challenges that come with a growing, and largely low-wage and low-skilled, workforce.
Richard Foglesong, author of “Married to the Mouse,” a 2001 book that chronicles Disney’s rise to power in Central Florida, argues local politicians should push for more leeway on how to spend the hotel tax at a time when the county is seeking solutions to the affordable housing crisis and a bus system with hours-long commutes.
State and local politicians, he said, should have plenty of leverage because the theme park giants are unlikely to pick up and move their investments elsewhere.
“It should not be difficult for county and state leaders to change our tourist development tax to allow the proceeds to go for education and transportation. It should not be difficult for Orange County to adopt a living wage policy whereby you have to pay a living wage in order to get any kind of infrastructure support,” Foglesong said. “It should not be difficult because Disney is dug in. Disney is not leaving and Universal’s not leaving.”
Recently, there’s been some movement on the wages front. Disney agreed to increase its minimum wage for about 40,000 unionized employees to $15 an hour by the fall of 2021. Universal and SeaWorld responded by also announcing pay raises. Universal’s minimum will rise to $13 in 2020 and to $15 by 2023. SeaWorld increased its minimum to $11.
There’s no single solution for some of the community’s biggest challenges like housing and transportation, said Eric Gray, executive director of United Against Poverty Orlando.
But, he said, solutions start with business and government leaders who are willing to make them a priority.
“People in leadership positions care when they’re made to care about issues that may not be part of their core agenda,” he said. “We need to stand up on the world stage, raise our hand in front of a world audience and say, ‘We have problems. As the most popular city in the world, we’d like you to watch us fix them and hold us accountable.’”