A movie theater and three restaurants were displaced to make way for the 700-room luxury hotel, which now is on ‘indefinite hold.’
Tourists walked past empty, shuttered restaurants at Anaheim’s Downtown Disney Thursday, seemingly oblivious to the fact that, under different circumstances, they wouldn’t even be there.
If everything had gone as planned, businesses such as the popular Rainforest Cafe – which in the summer would typically have lines out the door – would already be bulldozed, in preparation for a posh new Disney hotel to be built in their wake.
Instead, the storefronts of the formerly vibrant western end of the outdoor entertainment mall, which included the former cafe, ESPN Zone sports bar and restaurant, AMC Theatres, Earl of Sandwich restaurant and more, stand empty, waiting until it’s determined whether the hotel project will go forward or be permanently shelved.
“We were doing great,” bemoaned former Rainforest Cafe server Tyler Ryan of La Palma, one of hundreds of workers who lost their jobs in June. “Every weekend, there were two-hour waits and 150 names on the list. Kids loved it, and we all loved working there so much.”
For years, Disney had been moving forward with plans to build a 700-room luxury hotel at Downtown Disney, creating the fourth hotel within the Disneyland Resort. However, the plans were put on hold Wednesday, after a dispute with the city of Anaheim over whether the company is entitled to an expected $267 million in tax rebates for the project over the next 20 years.
At issue was whether the new hotel would still be eligible for an already-agreed-upon 70 percent rebate of city hotel taxes, because Disney development officials decided to shift its location from the Downtown Disney parking lot to the western end of the existing mall.
In 2015, the city of Anaheim created an incentive program to encourage developers to build more luxury hotels in Anaheim. Hotel developers were required to commit to spending $225,000 per guest room on construction and $30,000 on furnishings to be eligible for a 70-percent kickback on the city’s Transient Occupancy Tax for a period of 20 years.
Disney was one of three companies that applied for the program, and signed contracts with the city in July 2016 to build a hotel on the 25-acre parking lot north of Downtown Disney, in exchange for the tax rebate.
Subsequently, however, Disney revised the development to comprise a total 31 acres, including the existing Disneyland Hotel and the west side of Downtown Disney – requiring closure and demolition of numerous businesses. City officials were aware of the planned changes for months, as the businesses were given notice and eventually vacated.
The project was scheduled to go before the Anaheim Planning Commission for final approval on Aug. 20.
On Aug. 6, the Anaheim city attorney wrote to Disney, stating that due to the location change, “it is the City’s position that Disney would not be entitled to the tax rebate were it to move forward under its current hotel construction plan” and asked Disney to respond by the scheduled planning commission hearing date of Aug. 20.
In response, Disney lawyer David Ontko wrote back that the city had “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.”
Ontko complained about city officials’ “inexplicable delay in raising the hotel’s location as an issue despite knowing about the location for more than eight months….
“Accordingly, we have advised our hotel construction teams to suspend all efforts on our 4th hotel and cancel all scheduled planning meetings with the City,” Ontko wrote in the letter.
Behind the scenes, the dispute highlighted the new political climate in Anaheim, in which elected officials are less likely to favor tax rebates as tools to fund economic development, especially for the Walt Disney. Co.
Since the original agreement was signed in 2016, the Anaheim City Council shifted its majority position away from providing such developer subsidies. Disney argued back that the hotel will still be located in the approved hotel zone, as allowed by the city in its specific plan that governs the Disneyland Resort, and the design change only moves the project 1,000 feet.
On Thursday, Anaheim Councilman Jose Moreno argued that the city had no legal option other than to send the letter to Disney, because the site change invalidated the old agreement.
“Certainly the response was quite disproportionate to the legal memo we sent,” Moreno said.
It remained unclear Thursday whether the stalemate would be resolved and work resume on the hotel project, or what would in fact happen to some of the most valuable real estate in the region.
Anaheim could back off and agree to reinstate the tax rebate, although that could require a new economic impact report and amendment to the original agreement. Or Disney could wait until November’s election and see if the new City Council will be more favorable to its interests.
Meanwhile, Disney is resorting to bringing in food trucks such as BrewWings, Habit Burger and Afters ice cream onto the plaza at 3 p.m. every afternoon to feed hungry guests, due to a temporary shortage of restaurant seats in the mall. Ongoing construction will result in new dining and brewpubs but, for now, an unusual number of businesses on the site are closed or under construction.
The elaborate Mayan-themed exterior of the Rainforest Cafe remains intact, but the interior fixtures were removed, as were those at the ESPN Zone, making it difficult if not improbable that they could be reopened until the hotel dispute is resolved.
“People are saying they should reopen it, or retheme it to Indiana Jones, although all the animatronics and fish and tables are gone,” said former Rainforest Cafe server Ryan, who wishes he still had his job.
Ryan estimated that servers could make $120-140 per night – making it one of the better-paying jobs at the Disneyland Resort. He said that restaurant employees knew at least six months in advance that the new hotel was coming, and he was expecting it to be built to serve “all the people coming in for Star Wars land.”
The hotel had been projected to open in 2021, two years after the new Star Wars: Galaxy’s Edge is expected to open in summer 2019, bringing huge crowds to an already overcrowded park. It would be Disney’s fourth hotel at the resort, in addition to the Disneyland Hotel, Paradise Pier Hotel and the 5-star Grand Californian.
