Business & Economy

Disneyland gets no admissions tax for 30 years. Is Anaheim getting a good deal?

“Theme parks are considered genuine economic development opportunities,” said Dave Swenson, an economist at Iowa State University, before adding that the issue of economic impact and admissions taxes are somewhat unrelated.
“Theme parks are considered genuine economic development opportunities,” said Dave Swenson, an economist at Iowa State University, before adding that the issue of economic impact and admissions taxes are somewhat unrelated.
Justin Brown/flickr via Creative Commons

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By a vote of 3-2, Anaheim's city council voted Tuesday night to promise Disneyland Resort it will not levy an admissions tax at the theme park for the next three decades in return for a $1 billion investment from the company. 

Economists say Disney undoubtedly has a huge economic impact on Anaheim and Southern California, though that doesn't necessarily mean it should not be subject to an admissions tax. 

A recent Disney-commissioned report showed the Anaheim theme park contributes $5.7 billion dollars in annual economic activity and supports 55,000 jobs in SoCal.

Victor Matheson, a professor of economics at the College of the Holy Cross, is usually wary of such rosy studies when it comes to sports facilities, but in this case, he says the numbers don’t seem far off the mark because mega theme parks like Disneyland and Universal Studios attract people to Southern California who wouldn’t come here otherwise.

“If you can draw new people into your economy, you have a really do have a shot at drawing economic activity that’s not just going to Disney,” said Matheson.

Stadiums vs. theme parks

Admissions taxes are much more common for sports stadiums than they are for theme parks; Inglewood plans to charge a 10 percent tax on every ticket sold if an NFL stadium gets built there.

That might be how it should be. Most economists agree that sports stadiums have little impact on the community in which they're built.

As for mega-theme parks like Disneyland? Iowa State University economist Dave Swenson said most do clearly benefit the surrounding community. He said it helps that theme parks are active 365 days a year.

“Theme parks are considered genuine economic development opportunities,” said Swenson, adding that the issue of economic impact and admissions taxes are somewhat unrelated. Those who argue that the park contributes to the local economy are right, said Swenson, as are those who say Anaheim would benefit from an admissions tax. 

"It's an apples to oranges comparison," he said.

Matheson agreed, adding that Disney does as much as it can to keep visitors from going into the surrounding neighborhood because it wants people to spend away in its own hotels and restaurants.

“Essentially every business generates economic impact and every individual generates economic impact, but yet we still have government services that need to take place,” said Matheson.

Even though there’s no ticket tax, Disneyland does generate hotel-bed taxes, sales and use tax, and property tax. It paid $56 million to Anaheim last year, according to Disneyland spokeswoman Suzi Brown. She added Disneyland also paid an additional $5 million to Anaheim’s general fund for police and fire department services used at its theme parks and hotels.

No theme park in Southern California charges an admission tax, according to John Robinson, President and CEO of the California Parks and Attractions Association. (Universal Studios Hollywood and Six Flags Magic Mountain declined to comment. Knott’s Berry Farm didn’t respond to a request for comment.)

“We’re talking about a special industry-focused tax which would be focused on only one business in the city,” said Robinson. “Admissions taxes are of great concern to us. It raises the cost of doing business.”

The impact on park-goers

So even if Disney has a significant economic impact, would anyone notice a couple more bucks being added to a ticket that’s already $99?

They would, according to Scott Smith, an assistant professor of hospitality management at the University of South Carolina who studies theme parks.

“In terms of large-scale macroeconomics a price of $2 or $3 leads to a significant drop in demand, especially if we look at price points right around $99,” said Smith.

Smith points out when Disney came to Anaheim, the city consisted of a patch of orange groves, something Disney will never let Anaheim forget.