In 1996 and 1997, the Anaheim Public Financing Authority, the City of Anaheim, Walt Disney related entities, and a bond trustee signed several contracts. Under the Finance Agreement, Disney, the City, and the Authority agreed “to combine resources on the terms and conditions hereof to bring about a revitalization of the entire Anaheim Resort and to finance the public improvements needed for the Anaheim Resort, the expansion of the Convention Center, and the Disneyland Resort Project.”

The Anaheim Resort spans about 1046 acres. The Disneyland Resort is located within the Anaheim Resort and includes all the theme parks, hotel rooms, retail establishments, and other facilities located on Disney property. In the Finance Agreement, Disney agreed to build a new theme park (California Adventure), a pedestrian bridge, additional hotel rooms, as well as new retail, dining, and entertainment facilities (Downtown Disney). The Authority agreed to issue municipal bonds to raise money to help pay for the project.

In 2018, Anaheim voters approved Measure L, a Living Wage Ordinance (LWO). (Anaheim Mun. Code, § 6.99 et seq.) The LWO applies to hospitality employers in the Anaheim or Disneyland Resort areas that benefit from a “City Subsidy.” Affected employers were required to pay their employees a minimum of $15 per hour under the LWO starting in 2019, with annual increases of $1 an hour. In 2023, the wage would then be tied to the consumer price index.

In 2019, Kathleen Grace and other employee plaintiffs filed a class action complaint against the Walt Disney Company, Walt Disney Parks and Resorts, U.S., Inc. and Sodexo, Inc., and Sodexomagic, LLC alleging a violation of the LWO. Sodexo operates restaurants in Disney’s theme parks. The Employees alleged they were employed by either Disney or Sodexo, and they were not paid a living wage, beginning on January 1, 2019.

It was undisputed the Employees were not being paid the required minimum hourly wage under the LWO. However, Disney argued it was not covered under the LWO as a matter of law because it is not benefiting from a “City Subsidy.”

Disney and Sodexo filed a motion for summary judgment. The Employees argued the City issued municipal bonds in 1997, which gave “Disney over $200 million dollars to help finance the construction of California Adventure and a parking garage to serve the new park.” The bonds issued under the Finance Agreement will not be paid off until 2036.

The trial court granted the motion for summary judgment.  It concluded that “A ‘rebate . . . of taxes,’ as that phrase is used in the [LWO], refers not only to a refund of taxes already paid, but also to an abatement of taxes yet to be paid, an exemption from taxes, etc.” Nonetheless, the court concluded “there is no evidence that the Finance Agreement somehow lessens [Disney’s] tax obligation. Therefore, the public benefit conferred . . . by the Finance Agreement does not create a City Subsidy.”

The employees appealed, and the Court of Appeal reversed in the published case of Grace v. The Walt Disney Company – G061004 (July 2023).

Pursuant to Anaheim Mun. Code § 6.99.110 “A ‘City Subsidy’ is any agreement with the city pursuant to which a person other than the city has a right to receive a rebate of transient occupancy tax, sales tax, entertainment tax, property tax or other taxes, presently or in the future, matured or unmatured.”

The word “rebate” is not defined within the LWO. Generally, a “rebate” means “a return of a part of a payment.” (Webster’s 11th New Collegiate Dict. (2003) p. 1037.) This definition is consistent with California statutes, in which a “rebate” ordinarily means any kind of “retroactive abatement, credit, discount, or refund.”

Here, under the Finance Agreement, the City agreed to issue municipal bonds through the Authority. The bondholders were to be repaid based on the incremental increases in the City’s transient occupancy tax (paid by hotel guests on Disney property and other properties in Anaheim), sales tax (paid by consumers in businesses located within Disney owned property), and property tax (paid directly by Disney).

Under the Enhancement Agreement, Disney agreed if there was any year in which the City’s tax revenues in the debt service fund failed to meet its bond obligations to the bond trustee, Disney would then make up the shortfall. And under the Reimbursement Agreement, the parties agreed Disney would then be reimbursed by the City for any of its shortfall payments in those years when the City’s incremental tax revenues rebounded and were sufficient to meet its bond obligations

“We find that under these three agreements, particularly the Reimbursement Agreement, Disney has the right to receive a rebate – a return – of a portion of the incremental transient occupancy tax (paid by hotel guests), the local sales tax (paid by consumers), and the local property tax (paid by Disney) in those “rebound” years when the City’s incremental tax revenues exceed its bond obligations.”

“In short, we hold Disney receives a “City Subsidy” within the meaning of the LWO and is therefore required to pay its employees a living wage. Thus, we reverse the trial court’s order granting the defendants’ motion for summary judgment.”

1996 Finance Agreement Binds Disneyland to a 2018 Living Wage Ordinance