The prospect of putting behind a strained relationship between Anaheim and Disneyland held potential to be a momentous occasion. At Disney’s urging, both sides agreed to mutually end two subsidy agreements at the heart of contentious political battles in recent years. By the time Anaheim council members cast a unanimous vote last week to put the past behind them, only a lackluster applause echoed through mostly empty chambers. By ending $267 million in luxury hotel subsidies and a decades-long entertainment tax ban, many believed Disney also escaped a living wage ordinance based on such agreements before voters in November.
But the past isn’t past and the fight is far from over.
Attorney Richard McCracken, the principal author of the living wage initiative, is unconcerned with last week’s vote. He points to a Disneyland expansion deal passed by council in 1996 to argue that the ordinance, known as Measure L on the ballot, still very much applies to the corporation. Two decades ago, another unanimous vote by Anaheim council members laid the foundation for the resort as tourists and locals know it today. To get there, the city issued $510 million in bonds for area improvements and projects, including expansion of the Anaheim Convention Center and construction of the enormous Mickey & Friends parking structure. In exchange, Disney invested $1.4 billion in opening California Adventure, the Grand Californian Hotel, and Downtown Disney.
“This was not a second look or a revisiting of the question,” McCracken tells the Weekly. “When the initiative was drafted, the 1996 agreement had been studied. We fully intended that the 1996 agreement by itself, without regard to the other agreements, was more than enough to cover Disney. It’s a subsidy of great magnitude.”
The city continues to pay off the massive bonds through hotel, sales and property taxes generated by the Disneyland Resort until 2037–it also skims a percentage of bed-taxes throughout the city. That’s the same year Anaheim turns over ownership of the Mickey & Friends parking lot it spent $108 million building and rents to Disney for $1 per year. “Bonds bear interest,” reminds McCracken. Oh, do they ever. According to projections on the city’s website, the total debt service (principal plus interest) from the overall deal tops $1.1 billion by 2037.
Disney deferred the Weekly‘s questions to the city regarding its legal standing under the proposed living wage ordinance after last week’s vote. “Reading the initiative, it calls out tax rebates and the entertainment tax policy but doesn’t appear to directly call into question the public-private partnership of the 1996 agreement,” says Mike Lyster, Anaheim spokesman. “But we do not have a definitive legal determination at this point.”
A previous council approved the entertainment tax moratorium in 2015 for an initial 30-year period. It extended the original 20-year gate tax embedded in the ’96 Disneyland expansion deal. Before its termination, the policy promised to rebate any future revenues in full should future councils or a ballot initiative impose such taxation. Disney promised a billion-dollar investment in return. The moratorium allowed for a 15-year extension if the corporation invested another $500 million. The following year, council also approved a subsidy agreement for a planned Disney luxury hotel as part of the city’s short-lived Four Diamond Hotel Incentive Program. It promised 70 percent bed-tax rebates over 20 years, a value worth $267 million in total.
In the living wage ordinance, a “city subsidy” is defined as “any agreement with the city pursuant to which a person other than the city has a right to receive a rebate of transient occupancy tax, sales tax, entertainment tax, property tax or other taxes, presently or in the future, matured or unmatured.” The hotel subsidy and entertainment tax policy both had Anaheim ready to write checks to Disney, but does the bond financing of the ’96 deal qualify as a tax rebate? “Disney is paying the same amount of taxes it would without the agreement but a large part of those taxes is going back to Disney in the form of payments on the bonds issued by the city to finance the construction of the Disney’s California Adventure,” says McCracken. “That is a rebate because Disney is getting the economic value of that part of the taxes, not the city. ”
With that, it comes down to just three simple questions. “Was there a tax rebate?” McCracken asks. “Yes. Was that tax rebate for the purpose of subsidizing its private enterprise? Yes, it was. Is that tax rebate to subsidize the private enterprise still in effect. The answer is yes.”
The San Francisco-based attorney knows a thing or two about how living wage ordinances work. He first heard the term “living wage” from former Baltimore mayor Kurt Schmoke, a progressive Democrat who signed into law one of the first such measures in 1994. Three years later, McCracken helped author a living wage ordinance for Los Angeles that passed into law and applied to government contractors. “That was a groundbreaking one,” he says. “That drew a lot of attention.” Various other municipalities began to follow suit. McCracken’s been involved in the drafting of a dozen or so like-minded efforts, including a state constitutional amendment in Nevada providing a minimum wage higher than the federal rate.
Anaheim’s living wage measure being tied to subsidies in a targeted industry is no outlier. In 2000, Berkeley amended its ordinance to include the city’s Marina zone where private businesses profit on public trust lands and receive forms of financial assistance from a local government that commits resources to maintaining the recreational area. RUI One Corporation, which operated Skates on the Bay, sued Berkeley a month after the amendment claiming a breach of contract. The Ninth Circuit Court of Appeals upheld the expanded living wage law by a 2-1 vote in 2004.
Whether the ’96 Disneyland expansion deal is as legally binding as the recently cancelled subsidy agreements is a question that may end up in court should Anaheim’s living wage measure pass in November, as polling suggests it’s poised to do. The Disneyland Resort could choose not to honor the wage scales during litigation but the Master Services Council contract it settled this summer boosts thousands of cast members to $15 an hour on Jan. 1, 2019, the same hourly rate and effective date as the ordinance first proposes. The corporation also decided to raise pay up to $15.75 an hour next year for non-union workers.
The living wage measure increases base pay by a dollar per year until reaching $18 an hour by 2022 for Anaheim Resort corporations with subsidy agreements. Cost of living adjustments follow a scale that outpaces the settled contract’s terms for nearly a third of its workforce. “What I would hope is that Disney goes ahead and pays a living wage,” says McCracken of the ordinance’s mandate. “If they have objections to this law on various different grounds, and I imagine they’ll come up with a laundry list, they should go ahead, implement and pay so that they don’t penalize the workers in the process.”
If Disney decides to forgo the living wage measure’s mandate and ultimately loses in any future legal battle, a rebate check of another kind would come in the form of back pay due to workers.
Gabriel San Roman is from Anacrime. He’s a journalist, subversive historian and tallest Mexican in OC.