Disney drops Anaheim development over lost tax break

Disney moved the location of the property in question to 1601 Disneyland Way within Downtown Disney. Photo credit: Getty Images/MarKord

Walt Disney Company is deferring plans for a new luxury hotel in Anaheim over $267 million in tax subsidies the city awarded to the company, before retracting the offer after Disney changed the location of the hotel.

“You have given us no other choice than to put construction of the hotel on indefinite hold as the resort re-evaluates the economic viability of future hotel development in Anaheim,” reads a letter dated Wednesday from David Ontko, chief counsel for Disneyland Resorts, to Anaheim City attorney Robert Fabela.

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.

Virtual Event

Hotel Optimization Part 3 | January 27, 2021

With 2020 behind us and widespread vaccine distribution on the horizon, the second half of the new year is looking up, but for Q1 (and most likely well into Q2) we’re very much still in the thick of what has undeniably been the lowest point of the pandemic. What can you be doing now to power through and set yourself up for a prosperous 2021 and beyond? Join us at Part 3 of Hotel Optimization – A Virtual Event on January 27 from 10am – 1:05pm ET for expert panels focused on getting you back to profitability.

The city of Anaheim is arguing that the tax break now cannot be honored because it was approved for different property than the one that is currently being built.

“It’s a matter of law, and legally the city cannot pay the subsidy because it’s a fundamentally different project,” Anaheim mayor Tom Tait said in a statement. “If Disney wants to build a luxury hotel they should build it with their own money.”

Ontoko’s letter to Anaheim claims the loss of the tax break will put at risk “more than 1,500 construction jobs and 1,000 new permanent jobs, as well as more than $25 million in incremental revenue to the city’s general fund in the hotel’s first five years of operation.”

The Anaheim City Council retains the ability to vote to amend the 2016 subsidy, or offer Disney a new tax break. However, city elections since 2018 have left the Anaheim City Council staffed with a number of lawmakers critical of the previously offered subsidy. Councilwoman Kris Murray is in support of the subsidy, and she told the Los Angeles times that the decision to amend the ordinance is “a political question, not a legal question.”