Squabble between Disneyland and the Anaheim City Council puts new Luxury hotel in jeopardy

The squabble between Disneyland and the Anaheim City Council continues; this time with Disney putting construction of its new luxury resort hotel on hold indefinitely. The issue this time is a $267 million tax break the city council had granted Disneyland for the hotel, but Disney moved the hotel 1000 feet and now the city council says the tax break is no longer valid.

The 700 room resort was slated to be constructed over the west end of Downtown Disney. All of the businesses in the area have already been closed (including the movie theater, espn zone, and rainforest cafe) to make way for construction that was supposed to start last month.

After a letter from the city of Anaheim attorney told Disneyland the relocation of the hotel from the Downtown Disney Parking lot to within Downtown Disney itself would invalidate an incentive plan for tax rebates (up to 70% off for 20 years) on hotel taxes, the company and the city entered into negotiations. A meeting on August 20th was supposed to resolve the issue.

However, it looks like the two parties were unable to come to an agreement. Yesterday, Disneyland’s own attorney notified the city of the decision to place the project on hold.

This is all part of a multi-year plan negotiated between Anaheim and Disneyland. Disneyland was supposed to spend $2 billion on the resort in exchange for tax breaks, while the city would work to increase hotel capacity with more AAA 4-star hotels for the large crowds expected with the addition of Star Wars: Galaxy’s Edge (opening early next year) and future projects like Marvel-land.

This luxury hotel project was approved prior to a recent election which filled the Anaheim City Council with members who are less inclined to give tax rebates to hotel developers and Disney.

It’s a crazy situation down in Anaheim. On one hand Disneyland is clearly the economic engine driving the tax base for the city. An expansion of the resort should be encouraged and nurtured by the City Council. One the other hand, Disneyland has other incentives to expand and doesn’t really need additional tax breaks to be profitable (the theme park division is a huge cash cow for the Mouse House) or competitive in the market. The resort has also played games with the city of Anaheim in the past (promising WestCOT and delivering an under-performing California Adventure).

Regardless of their differences in tax policies, this feud needs to end soon. Disneyland already cancelled the Eastern Gateway and to postpone the luxury hotel past its projected 2021 opening date will be a strain on the resort to absorb new guests expected to attend and see the new attractions. Other luxury hotels will be happy to host those guests. So the city of Anaheim will get their resort taxes anyway, Disneyland is the loser here.