Don't Like the VDH Transient Occupancy Tax? Blame Disney (Sorta)

[DonMacGregor]

A lot has been made of the difference between the $.51 per point TOT that is levied at VGC, versus the $2.73 TOT at VDH. I think it bears repeating that the previous hotel project (cancelled in 2018) enjoyed almost an identical TOT as VGC. The city dropped the subsidy at Disney's request, because the subsidy (and other tax breaks) carried with it the possibility that Disney would be required to meet certain minimum wage requirements.

Anaheim ends tax breaks for Disney — at Disney’s request

In a letter to Mayor Tom Tait and the city council dated Aug. 21, Disneyland Resort President Josh D’Amaro called for the termination of two agreements:

One prevents the city from imposing an entertainment tax if Disney (NYSE: DIS) invests $1 billion in the resort by 2024 — an obligation that will be met by the addition of a “Star Wars” land to Disneyland. Disney has also announced plans to build a Marvel-themed attraction at California Adventure.

The other incentive offers a refund on hotel taxes worth $267 million if Disney builds a luxury hotel — a project that has been put on hold over a disagreement whether plans to relocate the hotel negate the agreement.

Anaheim Ends Tax Breaks for Disneyland

Critics note there may be another motivation for Disney’s request: by eliminating tax agreements, the Burbank entertainment giant may be looking to shield itself from a November ballot measure that, if adopted by voters, would require the resort to pay a living wage.

The measure, which found a spot on the ballot after unions representing resort workers collected enough signatures, would require large hospitality businesses that accept a city tax subsidy to pay a minimum of $15 an hour, with a $1 hourly increase each January through 2022. Once wages reach $18 an hour, pay would be tied to the cost of living.

Disney drops Anaheim development over lost tax break

The subsidy consists of a 70-percent tax break on the city’s transient occupancy tax, and was approved for the 700-room hotel in 2016. At the time, the hotel was being developed at 1401 Disneyland Way. After the tax break was approved, Disneyland Resort shifted the development’s location to 1601 Disneyland Way, an area within Downtown Disney.

Had the subsidy been left in place, and the current $2.73 PP TOT been reduced by 70%, that would bring the VDH TOT down to $.81 PP.

Oh, what could have been...

 

[NorCalFanatic]

Interesting! I knew they asked for it after the big hotel was cancelled. I didn’t know about the minimum wage issue though. After years of screwing Anaheim on taxes though, I wonder if there was a little “make peace” with the city. We’ll scratch your back and you scratch ours (Disneyland forward).

 

[LAX]

Interesting! I knew they asked for it after the big hotel was cancelled. I didn’t know about the minimum wage issue though. After years of screwing Anaheim on taxes though, I wonder if there was a little “make peace” with the city. We’ll scratch your back and you scratch ours (Disneyland forward).

Not trying to start a debate on the topic, I am curious how Disney screws Anaheim on taxes.

LAX

 

[NorCalFanatic]

It's a long list going back years , but one is as part of a 1996 partnership agreement related California Adventure, Disney agreed to invest $1.95 billion in the expansion and other improvements to the resort. The city in turn issued $510 million in bonds to finance an expansion of the Anaheim Convention Center and the construction of a $108.2 million parking structure for California Adventure. After the city pays off the bonds and $1.1 billion in interest payments, Disney which pays to operate the structure and collects $30+ million a year in revenue from it, all while paying Anaheim $1 a year lease, will own the structure outright.

I can’t find the reference now, but Disney either negotiated or locked in a lower TOT rate for Grand Californian for something like 45 years. They also fought Anaheim on having a $1 gate tax for years claiming it would harm attendance at the park, but have raised ticket prices on a regular basis with no impact on attendance, which deflates that argument.

 

[take36]

They also fought Anaheim on having a $1 gate tax for years claiming it would harm attendance at the park, but have raised ticket prices on a regular basis with no impact on attendance, which deflates that argument.

Yeah the gate tax and then jacking up the prices was brought up at the council meetings before.

 

[DVCsloth]

Part of the fun for me is still the $0 balance during checkout. I do think VDH is still a pretty decent value if you plan on visiting DL regularly and staying in the bubble.

 

[DonMacGregor]

It's a long list going back years , but one is as part of a 1996 partnership agreement related California Adventure, Disney agreed to invest $1.95 billion in the expansion and other improvements to the resort. The city in turn issued $510 million in bonds to finance an expansion of the Anaheim Convention Center and the construction of a $108.2 million parking structure for California Adventure. After the city pays off the bonds and $1.1 billion in interest payments, Disney which pays to operate the structure and collects $30+ million a year in revenue from it, all while paying Anaheim $1 a year lease, will own the structure outright.

I can’t find the reference now, but Disney either negotiated or locked in a lower TOT rate for Grand Californian for something like 45 years. They also fought Anaheim on having a $1 gate tax for years claiming it would harm attendance at the park, but have raised ticket prices on a regular basis with no impact on attendance, which deflates that argument.

For many years after WDW opened, Disney would often fall back on the veiled "well, we DO have all of that land down in Florida now" threat when dealing with Anaheim. Disney has never been shy in reminding Anaheim why it's on the map, why the Angels moved here, etc., and the result has ALWAYS been preferential treatment compared to other hotel operators in the city.

When the City Counsel became a bit more "diverse" and representative of a demographic that didn't match that of the first 50+ years of the Anaheim/Disney relationship, things started to sour. There were a lot more "why DOES Disney not have to pay what the other operators pay" and "why ARE we giving this massive corporation such great tax breaks?" When Measure L was drafted in 2018, it included the condition that any resort business receiving tax rebates or breaks would be required to meet the minimum wage set in the measure.

Disney opted out of the existing tax agreements (including the TOT rebate) in order to argue that, since they were not receiving any tax breaks, they therefore weren't subject to the minimum wage requirements under Measure L. A group of employees sued, claiming that Disney still enjoyed preferential treatment, and still received assistance from the city (the Mickey & Friends Parking Structure, etc.), but lost in court:

Judge rules Anaheim’s living-wage law doesn’t apply to Disneyland

You also need to keep in mind that there ahs been some serious allegations of corruption within the City Council more recently, leading up to the resignation of mayor Harry Sidhu (who surprisingly went from being a public critic of Disney pre-pandemic, to an avid cheerleader standing in front of cameras on Harbor Blvd., begging Disneyland to reopen.

Disney power broker is part of a ‘cabal’ pulling the strings in Anaheim, FBI records show

So it's no surprise that Disney isn't too anxious to try to work any deals, given the current environment, so a $2.73 PP TOT it is.

 

[lpereira]

Disney pays 43% of Anaheims city budget by itself. It subsidies Anaheims public safety departments by another 10 million beyond that.
How much does one think they are short changing Anaheim?

 

[NorCalFanatic]

During/After the pandemic I think Anaheim realized how much Disneyland contributed to the local economy. Businesses that rely on DLR for bringing in people saw an 80% drop in business. I don’t think they’ll be as adversarial going forward. Disneys plan for Disneyland forward is also a win win for both with asking for no tax breaks and pledging to use local union labor.

 

[DonMacGregor]

During/After the pandemic I think Anaheim realized how much Disneyland contributed to the local economy. Businesses that rely on DLR for bringing in people saw an 80% drop in business. I don’t think they’ll be as adversarial going forward. Disneys plan for Disneyland forward is also a win win for both with asking for no tax breaks and pledging to use local union labor.

Oh they knew all along. The old guard just realized the relationship was symbiotic, and the status quo worked just fine. The "new" guard felt they could strong arm Disney into pumping even MORE into the city coffers (their "fair share") without risk of negatively affecting the local economy. That, and they decided to be more activist in tying wages to economic development.

I have a sneaking suspicion that if it wasn't for the recent corruption and pay-to-play scandals (which I don't think Disney was a part of, but that Arte Moreno was, 100%), Disney would have been a bit more aggressive in negotiating for a reduction in the TOT for VDH.

 

[NorCalFanatic]

Oh they knew all along. The old guard just realized the relationship was symbiotic, and the status quo worked just fine. The "new" guard felt they could strong arm Disney into pumping even MORE into the city coffers (their "fair share") without risk of negatively affecting the local economy. That, and they decided to be more activist in tying wages to economic development.

I have a sneaking suspicion that if it wasn't for the recent corruption and pay-to-play scandals (which I don't think Disney was a part of, but that Arte Moreno was, 100%), Disney would have been a bit more aggressive in negotiating for a reduction in the TOT for VDH.

Is this the recent scandal you were referring to?

https://www.latimes.com/california/...-power-broker-anaheim-cabal-fbi-records-shows

 

[DonMacGregor]

Is this the recent scandal you were referring to?

https://www.latimes.com/california/...-power-broker-anaheim-cabal-fbi-records-shows

Yup

 

[NorCalFanatic]

Do you think the new (cancelled) hotel would have had a lower tot tax? After reading several of those articles and others it looks like Disney still would have collected the tot tax and the City of Anaheim at the end of each year would rebate 70% of the amount back to Disney. I’m kinda glad that project didn’t go through. Looking at all the renderings and plans it just (to me) didn’t fit that space well. It completely dwarfed the DLH, and overwhelmed the existing space. The VDH tower definitely “fits” better into the existing area.

 

[DonMacGregor]

Do you think the new (cancelled) hotel would have had a lower tot tax? After reading several of those articles and others it looks like Disney still would have collected the tot tax and the City of Anaheim at the end of each year would rebate 70% of the amount back to Disney. I’m kinda glad that project didn’t go through. Looking at all the renderings and plans it just (to me) didn’t fit that space well. It completely dwarfed the DLH, and overwhelmed the existing space. The VDH tower definitely “fits” better into the existing area.

It seems to me it would be a hard sell for Disney to collect a municipal tax on behalf of the city, receive a rebate on that tax, then fail to pass that rebate back onto the persons actually paying the tax. IANAL, but Disney didn't pay the tax, the guest did, so I don't see how the city could collect a tax from one entity (the guest), then give it back to someone else (Disney) who didn't pay it in the first place. The TOT is on the guest, not Disney. But, again, IANAL.

I would assume that, like property taxes, DVC calculates what the TOT rebate will be from the city at VGC, and only charges the owners what the adjusted TOT will be. Or, the city simply applies the rebate up front, since it is a fixed number based on a finite number of points, rather than waiting until the end of the tax year to refund the difference.

 

[Chili327]

Had the subsidy been left in place, and the current $2.73 PP TOT been reduced by 70%, that would bring the VDH TOT down to $.81 PP.

Oh, what could have been...

Oh My.
I would have bought in already if that were the case... (easy to say now, after the fact. lol)

 

[tidefan]

Not that it matters much, but the TOT not only is (an albeit small) factor in our decision not to purchase VDH, but our recent stay at the Element Anaheim offsite has made us think we probably won't use points to stay there either. Element was extremely nice, I got it under $200 per night and it was an 11-minute walk to DL. Since we only go every 3-5 years to DL, it just didn't make sense for us to buy anyway, and with the TOT, I'm thinking that it's not a real beneficial use of our points there either.

Now, that is just specific to our situation and I realize that everyone else's situation is different, and in many of those DLT may make sense. It just didn't for our situation.

BTW, had a great meal at Storytellers Cafe...

 

[RoseGold]

Had the subsidy been left in place, and the current $2.73 PP TOT been reduced by 70%, that would bring the VDH TOT down to $.81 PP.

Oh, what could have been...

Eh, I guess? Bit it would have been called something else and put into dues. What we call "dues" includes a lot of taxes and costs, like property taxes and so on.

This one is interesting because of how it's charged, but if it had just been rolled in, it would have just been high dues, which would have surprised no one. Breaking it out allowed to DVC to sort of make the points look competitive and masked how high the costs are.

 

[DonMacGregor]

Eh, I guess? Bit it would have been called something else and put into dues. What we call "dues" includes a lot of taxes and costs, like property taxes and so on.

This one is interesting because of how it's charged, but if it had just been rolled in, it would have just been high dues, which would have surprised no one. Breaking it out allowed to DVC to sort of make the points look competitive and masked how high the costs are.

If the subsidy had been left in place, there would have been nothing to be called something else and nothing to be rolled in under any other name or guise. It would have been just like VGC, albeit higher, just not as high as it is without the subsidy.

The subsidy was underwritten by the city. It wasn’t being paid for by Disney like the dues at Vero or Aulani.

 

[RoseGold]

The subsidy was underwritten by the city. It wasn’t being paid for by Disney like the dues at Vero or Aulani.

I mean, I guess? But property taxes in Orange County are just called Dues in DVC. Florida locals increase those, dues increase. When Anaheim increases its cut, it's in this weird broken out tax and "dues" stay the same.

This is better for DVC, esp in active sales, because it looks like costs are lower or more competitive instead of just rolled into "dues." This is true for a whole, whole lot of charges with a lot of names in Florida. That's nothing new. It's the breaking it out that is new. It wouldn't surprise me to see charges broken out at Poly2, if DVC can pull it off.

 

[DonMacGregor]

I mean, I guess? But property taxes in Orange County are just called Dues in DVC. Florida locals increase those, dues increase. When Anaheim increases its cut, it's in this weird broken out tax and "dues" stay the same.

This is better for DVC, esp in active sales, because it looks like costs are lower or more competitive instead of just rolled into "dues." This is true for a whole, whole lot of charges with a lot of names in Florida. That's nothing new. It's the breaking it out that is new. It wouldn't surprise me to see it at Poly2, if DVC can pull it off.

But it's not the same. VDH "dues" include OC property taxes, due to property ownership. The TOT is a use tax imposed by the city, and is applied only when the room is actually occupied by the owner/renter (regardless of how it's paid for). If you don't use those points at VDH, you don't pay the TOT. With the exception of a handful of remaining hotels in the city, any and every person who rents an Anaheim hotel room pays that TOT.

If Orange County increases property taxes, then dues will increase proportionally. If Anaheim increases the TOT, dues will not increase (and the TOT hasn't budged off 15% since 1995 so it's not likely to be moving anytime soon). Last year they amended the TOT through Measure J to apply to "online travel companies, and other room sellers and resellers", and had the perfect opportunity to increase the TOT % (I mean they added Measure J specifically in order to increase TOT revenue), but they STILL left it at 15%. Had Disney remained opted in to the subsidy, then it's highly doubtful VDH dues would increase for anything other than the normal property tax and other internal increases any other DVC resort experiences.

Per the city:

For the privilege of occupancy in the City of Anaheim, each transient is subject to and shall pay a transient occupancy tax of 15% of the rent charged by the operator. The 15% tax MUST be separately stated from rent pursuant to Chapter 2.12 Subsection 2.12.020.010 of the Anaheim Municipal Code.

The TOT (at the full 15%) is also charged on other timeshares as well.