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Disney Could Save Millions on Wages by Giving Back Hotel Subsidy

Disney sought to ease tensions with the city of Anaheim last week by agreeing to give back a hotel subsidy worth $267 million over 20 years. But the conciliatory gesture could also save Disney many times that amount by exempting it from a voter-mandated wage hike.

A measure on the city ballot in November would require Disneyland and surrounding hotels to pay workers at least $18 an hour by 2022. The initiative, sponsored by a coalition of labor unions, is widely expected to pass. It would apply to any large hospitality business within the city’s resort district that “has a right to receive a rebate of transient occupancy tax, sales tax, entertainment tax, property tax or other taxes.”

Disneyland benefited from two such policies. The first is the $267 million discount on hotel taxes for a new 700-room luxury hotel slated for Downtown Disney. The amount of the subsidy represents a 70% rebate on the tax over 20 years. The second rebate is a city policy that would exempt Disneyland from any “entertainment tax” on theme park tickets that the city might choose to impose.

In a letter to the city on Aug. 21, Disneyland Resort president Josh D’Amaro asked the city to cancel both rebates. The Anaheim City Council complied on Tuesday night, voting 7-0 to terminate the agreements. The city has not weighed in on whether ending those subsidies will exempt Disneyland from the wage initiative, and is not expected to clarify the issue before voters go to the polls on Nov. 6.

“It is conceivable that if they do not have a hotel tax incentive agreement or an entertainment tax policy agreement, those provisions would not apply to them,” Anaheim spokesman Mike Lyster told Variety. “But we do not have a definitive legal determination at this time.”

The company also benefits from a 1996 deal under which Anaheim agreed to construct a $100 million parking garage for the Disney theme parks. Disney leases the garage from the city for $1 a year, and collects all of the parking revenue. But it does not appear that the arrangement qualifies as a “tax rebate” under the minimum wage initiative.

Subsidies have become a source of conflict with the city, as a new council majority has been critical of the agreements. The city recently told Disney that a change in the location of the planned luxury hotel would require a reauthorization of the tax rebate, which seemed in doubt.

Disney declined to say whether it believes that disclaiming the subsidies will exempt it from the wage initiative, and referred that question to the city.

“These tax incentive policies, which are successfully and widely used across the country to stimulate economic growth and development, unfortunately became counterproductive in Anaheim, prompting our decision to step away from them,” the company said in a statement.

If Disney is exempt from the initiative, it could save more than $100 million a year, according to a rough analysis by Daniel Flaming, president of the Economic Roundtable. That benefit would dwarf the $13.4 million a year that Disney would have saved had it accepted the hotel tax rebate. The city has not conducted its own economic study on the ballot initiative, and Disney declined to comment on the economic effects.

Flaming co-authored a report in February, commissioned by the Coalition of Resort Labor Unions, that found the median Disneyland worker made just $11.15 per hour in 2017. The report raised alarms about the difficulties Disneyland workers face in affording basic necessities. Disneyland has challenged the report’s methodology and conclusions.

About 30,000 people work at the theme parks and the three Disney hotels. The company reached a deal in July with 9,700 of its workers to increase the minimum wage to $15 an hour starting in January, and to $15.50 in June 2020. The company says it has made a similar offer to Unite Here Local 11, which represents another 2,700 workers. About 7,000 non-union workers will see wages increase to $15.75 on Dec. 30.

Ada Briceno, co-president of Local 11, said that 10,000 workers — including cooks, dishwashers and room attendants — have yet to reach an agreement and are still making close to the state’s $11 minimum wage.

“Subsidies or no subsidies, Disney has a responsibility to lift their workers,” Briceno told Variety. “They gave back the subsidies, but that’s not enough. They must take care of their workers and make sure they’re not jumping from couch to couch.”

The union has also not reached a determination on whether it believes Disneyland will be exempt from the wage initiative. If it is exempt, that would negate almost all of the initiative’s effect. It appears that the only other employers that would be compelled to pay the increase are a pair of nearby hotels now under construction, which have also been granted tax rebates.

Todd Ament, the president and CEO of the Anaheim Chamber of Commerce, said the cancellation of the incentive agreements and the wage initiative indicate that the city has become a “hostile business environment.”

“As the council and the union continue to drag their brand through the mud, they may decide it’s not worth the investment,” he said.

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