Hotel Incentive Policy Deserves Approval

In the mid-1960s, Anaheim made a deliberate decision to build on the success of Disneyland and establish itself as a national and international tourism, vacation and entertainment destination.  City leaders built Anaheim Stadium to bring the Angels to town, and built the Anaheim Convention Center to establish the city as a convention and conference destination.

It is clear that, midway through the second decade of the next century, this strategy has paid off. It has done so in large part because the city has been able to work in partnership with Disney and other resort Area businesses and enterprises, and because the city has continually invested in maintaining the Resort’s competitive edge and securing its status as a top-tier destination. This isn’t a prestige enterprise; the Resort is vital to Anaheim’s well-being.

The proposed Hotel Incentive Program is squarely within the continuum of prior initiatives such as the massive re-making of the Resort area launched in the mid-1990s and the ongoing expansions of the Convention Center. The city has a legitimate public policy interest in encouraging economic development, especially in the economic heart of the city — and the building of luxury hotels in the Resort certainly qualifies as such.

The proposed policy is standardized and city-wide. New luxury hotels will receive incentive payments for 20 years equal to 70% of Transient Occupancy Tax generated by the project. For existing establishments that upgrade into luxury hotels, the incentive payments will be equal to 50% of the incremental TOT generated by the project.

Contrary to the mantra chanted by critics, it is not available only to the “politically well-connected.” It is open all comers, and is predicated on success: it only kicks in once the first guest pays his or her hotel bill.  It is useful contrast this with the approach of Garden Grove, which has successfully profited from Anaheim’s investment in improving the Resort Area by luring higher-end hotels with incentives that make the proposed Hotel Incentive Policy look miserly by comparison. Garden Grove gave hotel developers free city-owned land and generous financing underwritten by taxpayer-backed bonds. If any of those projects flopped, the taxpayers of Garden Grove were on the hook. There’s no such exposure for Anaheim taxpayers under this policy: if a participating hotel closes, the incentive payments end.

Luxury hotels generate greater tax revenue and attract more affluent, higher-spending guests than 3-star, limited service hotels. They provide more and better jobs. The GardenWalk Hotels will generate 3,200 construction jobs and 1,500 permanent jobs. Luxury hotels do more to enhance the attractiveness of Anaheim to bigger, more lucrative conventions and conferences, something that is manifestly in Anaheim’s interest.

Critics of this policy say they don’t oppose the building of more luxury hotels in Anaheim, but trying to claim the high ground of principle for their opposition, saying the city shouldn’t “pick winners and losers” or provide economic assistance as in the proposed Hotel Incentive Policy or the Automobile Dealer Assistance Policy. In reality, the high ground on which they stand is more like quicksand. If their opposition to premised on principle, it is very selectively applied.

If the city shouldn’t “pick winners and losers” or guide the city’s economic development in this or that direction, then what are we to make of the city-sponsored “Brew City” campaign to lure a particular industry – craft brewing – to Anaheim with special rules and streamlined regulations not available to other businesses? How is that not “picking winners and losers”? Craft breweries may have a higher hipster quotient than luxury hotels, but in principle there is no real difference between the Hotel Incentive Policy and the Brew City Initiative.

Some critics of subsidizing luxury hotel development simultaneously lavish love and praise on the Anaheim Packing District for injecting new energy and activity into downtown Anaheim – which is ironic since the Packing District is operated by a politically-connected developer and super-saturated with city subsidies. If that model were to be exported to attractive luxury hotels to the Resort, it would involve City Hall buying the property, paying for hotel construction and then letting a private party operate the hotel (with an exclusive option to buy) — in return for sharing the revenues once they exceeded a certain benchmark. And yet, one never hears these critics denounce the Packing District for “crony capitalism” and refuse to patronize it out of principle. Apparently, coolness trumps cronyism.

Anaheim has many policies that “pick winners and losers,” encouraging certain business practices and discouraging others. The Anaheim Public Utilities has a raft of economic incentive programs available for businesses.

If, as critics of the Hotel Incentive Policy claim, adherence to absolute neutrality in the marketplace is to be a central organizing principle of Anaheim city government, they should aim their fire at any and all city programs intended to promote certain types of economic activity. If it is wrong in principle to provide economic incentives to locate a luxury hotel in Anaheim, then it is also wrong in principle to provide economic incentives to locate a craft brewery or any other favored or selected enterprise in Anaheim.

As stated before, the Hotel Incentive Policy is squarely in the mainstream of the economic development traditional which Anaheim has successfully pursued for decades, and it merits approval by the Anaheim City Council.

One comment

  1. Socialism.

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