Anaheim Determines Minimum Wage Initiative Would Not Apply to Disneyland

The City of Anaheim has determined that Measure L, an initiative that would raise the minimum wage for employers in Anaheim that recieve city subsidies would not apply to the Disneyland Resort, as it currently stands. The Disneyland Resort and Anaheim recently terminated two agreements they had for city subsidies.

Proponents of the measure have claimed that the Disneyland Resort would still be subject to the law if it passes, so Councilmember Murray requested the City Attorney do an analysis to determine the result.

The City Attorney also was asked how this proposed minimum wage increase would compare to other cities in California that have minimum wages higher than California’s requirements. HE noted that the affected employees would have a higher minimum wage than any other state in California. He also points out that the wage would increase at a higher rate than other oridinicines as most are tied to the Consumer Price Index while Measure L increases are based on the Index or 2%, whichever is higher. Since CPI has been less than 2% over the years, the gap between Anaheim and other California cities such as San Francisco, San Jose, and Los Angeles will grow.

Here is the City Attorney’s analysis on why Measure L will not apply to the Disneyland Resort:

The drafters of Measure L have asserted that, despite the termination of the two agreements referenced above, Disney would still be subject to the provisions of Measure L. Specifically, they have asserted that the1997 Bond Transaction (“Bond Transaction”) in which the Anaheim Finance Authority issued lease revenue bonds to help fund public improvements that resulted in Disney’s construction of California Adventure amounts to an “agreement to receive a tax rebate,” and thus invokes Measure L coverage.

The City Attorney’s Office has studied this issue, and does not believe that to be the case. As stated above, Measure L applies to larger hospitality industry employers in the Disneyland or Anaheim Resort Zones who have an agreement to receive a tax rebate from the City. Certain elements of the Bond Transaction include agreements between Disney, the City, and the Anaheim Finance Authority in which Disney guarantees to pay any debt service shortfall and is entitled to reimbursement if it does so, but that does not amount to a “tax rebate” as that term would most reasonably be interpreted.

“Rebate” is not defined in Measure L and it is not a fixed term in the law. However, the best definition of rebate (supported by legal interpretations as well as dictionary definitions) is that it amounts to a discount, most commonly one given retrospectively, such as a partial refund of money paid. The City Attorney’s Office has found no evidence that the Bond Transaction discounts the taxes that Disney must pay, or that Disney receives a tax refund as a result of the Bond Transaction, as explained below.

The Bond Transaction is complicated, but can be summarized as follows: The Anaheim Public Financing Authority (“Authority”) issued its initial series of Lease Revenue Bonds in February 1997. The proceeds of the 1997 Bonds were used to finance the acquisition and construction of certain public improvements, including the addition, improvement and betterment of the Anaheim Convention Center, various electrical, public safety, landscaping, storm drain, park and recreation, and street improvements, and certain public parking facilities located west of Disneyland and south of Interstate 5 (“Public Parking Facilities”). The Public Parking Facilities are managed by Disney and provide public parking for Disneyland Resort, the Anaheim Convention Center, and other day uses within the Anaheim Resort Area.

As part of the Bond Transaction, the City entered into a lease with the Authority, making payments for the use and occupancy of various public facilities, including the Anaheim Convention Center, Anaheim Stadium, the Anaheim Main Library, and the Public Parking Facilities, among others. Lease payments are payable from any legally available funds of the City (i.e., its general fund), but the amount of each lease payment to be made by the City under the Lease Agreement is measured by Lease Payment Measurement Revenues. “Lease Payment Measurement Revenues” generally are (a) incremental transit occupancy taxes, sales taxes, and property taxes from Disney properties above such amounts received by the City in Fiscal Year 1995, subject to a 2% annual increase on the baseline index, and (b) 3% out of the 15% City-wide Transit Occupancy Tax. Lease Payment Measurement Revenues are not actually pledged to the payment of the lease payments under the Lease Agreement but, rather, as the name suggests, are the measurement mechanism through which the amount of lease payments owed payable is determined.

Payment of debt service on the Bonds is guaranteed pursuant to municipal bond insurance policies. The Bond Transaction includes arrangements under which Disney is required to advance money to the bond insurer if the bond insurer is required to make payment on the 1997 Bonds, and Disney is entitled to be reimbursed from lease payments. This reimbursement is not a refund of any taxes paid by Disney and, therefore, would not amount to a “tax rebate” under Measure L. A more detailed description of these arrangements can be found in Attachment 3.

In summary, although there are many moving parts to the Bond Transaction, it does not appear to incorporate a direct City subsidy; that is, an agreement in which Disney is entitled to a “rebate of transient occupancy tax, sales tax, entertainment tax, property tax or other taxes, presently or in the future, matured or unmatured.” Therefore, it is the City Attorney’s opinion that Measure L would not apply to Disney by virtue of the Bond Transaction.