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What’s the Effect of Disney Exiting Its Anaheim Tax Deals?

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Sep. 11 2018, Updated 10:41 a.m. ET

Disneyland had secured tax breaks

Walt Disney (DIS) recently exited the tax incentive agreements that its Disneyland Resort arm had inked with its host city of Anaheim, California. The company noted that it decided to terminate the agreements to improve its relationship with the city.

In 2015, Disney struck a deal preventing Anaheim from imposing an entertainment tax on Disneyland as long as the resort invests at least $1.0 billion in the city by 2024. In 2016, Disney secured a deal that required it to build a luxury hotel in Anaheim in exchange for $267.0 million in hotel tax breaks from the city.

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Resetting its relationship with the city

While Disney had already lined up plans to keep its side of the bargain, the company realized that the agreements had become divisive, resulting in a difficult working relationship with Anaheim. As a result, Disney felt it should end the agreements to reset its relationship with the city.

On August 28, Anaheim’s city council voted 7–0 to endorse Disney’s decision to terminate the divisive tax incentives deals.

Parks and Resorts segment: Revenues jumped 6%

The Disneyland business falls under Disney’s Parks and Resorts segment. In August, Disney reported its fiscal third-quarter results for the period ended June 30. The Parks and Resorts segment’s revenues rose 6.0% YoY (year-over-year) to $5.2 billion in that quarter, lifting Disney’s overall revenues 7.0% YoY to $15.2 billion.

Comcast (CMCSA), SeaWorld Entertainment (SEAS), and Six Flags Entertainment (SIX) increased their revenues by 2.1%, 4.9%, and 5.5% YoY, respectively, in the June quarter. Cedar Fair’s (FUN) revenues fell 3.2% YoY in the June quarter.

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