SPECIAL PACKAGE TRANSIENT OCCUPANCY TAX AGREEMENT
(City of Anaheim, California)
THIS SPECIAL PACKAGE TRANSIENT OCCUPANCY TAX AGREEMENT (this “Agreement”) is made and entered into as of this ___ day of January, 2023 (the “Effective Date”) by and between Walt Disney Travel Co., Inc., a Florida corporation (“WDTC”), and the City of Anaheim, a California municipal corporation (the “City”). WDTC and the City may hereinafter be referred to individually as “Party” or collectively as the “Parties.”
RECITALS
A. Pursuant to Chapter 2.12 of the Anaheim Municipal Code, as amended (including, without limitation, the Code Update (defined below)) (the “Code”), the City imposes a Transient Occupancy Tax (“TOT”) on operators of hotel/motel rooms. By vote of its electorate on November 8, 2022 (Measure J-Anaheim Hotel Tax) and by subsequent Code revisions made by the Anaheim City Council which became effective on December 17, 2022 (collectively, the “Code Update”), the Code has been updated to require online and other travel companies such as WDTC to collect and remit TOT in a manner that ensures the City receives TOT on the full amount of Rent (as that term is defined in the Code) charged to guests for hotel accommodations.
B. Walt Disney Parks and Resorts U.S., Inc. (which is, along with WDTC, a wholly-owned subsidiary of The Walt Disney Company), owns and operates certain property in the City’s boundaries commonly known as the Disneyland® Resort (“DLR”), including the operation thereon of hotels and timeshare resorts.
C. WDTC is a vacation sales and marketing company that sells to the public travel-related packages consisting of multiple components (e.g., hotel room plus shuttles, rental cars, theme park tickets, insurance, and/or other amenities), the composition and pricing of which vary from time to time based on market and other conditions. For each travel package sold by WDTC, WDTC purchases components from DLR and/or various third parties (e.g., shuttle providers, non-Disney hotel owners, rental car companies, insurers) that will be combined into a single package, generally offered for sale to retail customers for a single (i.e., non-itemized) price. WDTC packages that include accommodations at a Hotel (as that term is defined in the Code) located in the City fall within the Code’s definition of “Special Package” and are subject to TOT under the Code. Subsequent references to Special Packages in this Agreement pertain to these Special Packages sold by WDTC involving Hotel stays in the City.
D. Under the Code Update, WDTC is obligated (i) absent other arrangements, to file and obtain City approval of Special Package Forms (as that term is defined in Code Section
2.12.020.011), and (ii) to collect and remit TOT to the City with respect to the Rent component of its Special Packages. Because the Special Packages differ and change frequently in their components and pricing, and because WDTC sells high numbers of Special Packages, WDTC falls within the category of operators described in Code Section
2.12.020.015, which allows for different reporting methodologies in order to avoid extensive filings and associated processing by the City. The Parties have arrived at a process that meets these goals, and wish to document their agreement concerning this
process as contemplated by Code Section 2.12.020.015, including those supporting the City’s related audit rights under the Code, all as set forth below.
NOW, THEREFORE, in consideration of the recitals, covenants, agreements and stipulations contained herein, and other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties do hereby agree as follows:
AGREEMENT
1. Application of the Code. The Parties hereby acknowledge the following:
a. Following the Code Update, WDTC is an Accommodations Intermediary and Operator under the Code with respect to its Special Packages.
b. For any Special Package WDTC sells for a single (i.e., non-itemized) price, WDTC is subject to the obligations set forth in Code Section 2.12.020, including the general obligation to remit TOT to the City under the Code in the time and manner set forth therein, based on the amount by which the Rent collected by WDTC for the Special Package exceeds the Rent paid by WDTC to an Accommodations Supplier(s) (whether DLR or a third party) for the Special Package element(s) which are subject to TOT (i.e., the “Rent Differential”). c. Notwithstanding anything to the contrary set forth in this Agreement, the provisions of the Code shall apply to this Agreement and shall govern and control if there is any unresolved inconsistency between this Agreement and the Code.
2. Special Package Sale Authorization; Reporting and Payment Methodology. a. WDTC Authorization to Sell Special Packages Using In-Lieu Procedures. The methodology for reporting and paying TOT established in this Agreement has been developed to ensure WDTC can provide the City with the information it requires, and can meet its obligations under the Code, while minimizing administrative burden on both the City and WDTC. As provided for in Code Section 2.12.020.015, this methodology is intended to serve in lieu of the process set forth in Code Section 2.12.020.012. For so long as this Agreement remains in place and WDTC meets its obligations hereunder, WDTC shall be authorized to sell Special Packages without filing Special Package Forms or standardized reporting forms, and without obtaining unique Special Package numbers in advance of sale as otherwise contemplated in Code Section 2.12.020.012.
1) Filing Fee. In lieu of the per-filing Special Package filing fees required under Code Section 2.12.020.013, WDTC shall pay to the City an annual fee in an amount established by resolution of the City Council.
b. Assignment of Values; Recordkeeping. WDTC shall, in developing and selling any Special Package, maintain records detailing:
1) all components of the Special Package, with reasonable detail provided as to purveyor and terms;
2) the amount paid by WDTC to third party providers for each component of the Special Package, whether or not those components are an element of Rent;
3) the amount paid to WDTC by consumers for each component of the Special Package, whether or not those components are an element of Rent; and 4) any other information reasonably requested by the City License Collector or City Auditor from time to time in order to facilitate City audit.
WDTC shall preserve all such information in its accounting records in a manner that facilitates (i) calculation of the associated TOT due to the City on account of the resulting Hotel stay and (ii) City audit. This obligation shall continue until the date that is five years after the date of each Special Package Hotel stay.
The Parties acknowledge that the pricing of the room accommodations component in a Special Package may vary significantly from time to time depending on, among other things, the particular Hotel, room type and season. Nonetheless, WDTC represents that the value it attributes to the room accommodations component of each Special Package which involves DLR Hotel stays will not be materially lower than the rates being charged (at the time of the Special Package sale) to consumers for such DLR Hotel accommodations on a standalone basis.
c. Reporting and Remittance of TOT.
1) Monthly Reports. No later than the last City business day of each month, WDTC shall file a return with the City’s License Collector covering all Special Packages sold by WDTC that included Hotel stays with arrivals in the preceding month (“Monthly Report”). This Monthly Report will contain a summary accounting of TOT due for the preceding month in the format prescribed by the City, along with a separate accounting worksheet for each Hotel associated with a Special Package which is included in said report and reporting period. Monthly Reports will include:
A. Base Amounts Paid to Accommodations Suppliers. A report of the amount paid by WDTC to each Accommodations Supplier to purchase a Special Package component, including both the Rent and the associated TOT paid by WDTC to the Accommodations Supplier. This item shall be for reporting only, with each involved third party Accommodations Supplier (including DLR and/or other corporate affiliates) being, in turn, responsible for payment of said TOT to the City under the Code.
B. Rent Differential. All Rent Differentials paid to WDTC in the reporting period, along with the TOT due to the City thereon.
2) Remittance. In conjunction with each Monthly Report, WDTC will remit to the City the TOT due on the reported Rent Differentials.
d. Confidentiality. The City shall keep all information provided by WDTC pursuant to this Agreement, including detail provided to the City on audit, strictly confidential as required by 2.12.030.030 of the Code, except as otherwise required by applicable law.
3. Intent of Parties re TOT Obligations. This Agreement is not intended, and shall not be construed, to expand WDTC’s legal obligations to pay TOT to the City beyond those set forth in the Code.
Similarly, nothing herein is intended, and shall not be construed, to reduce WDTC’s obligations to pay TOT to the City to less than what is required by the Code.
4. Term. Unless amended, terminated pursuant to Section 6 below, or otherwise modified, this Agreement shall continue in full force and effect for a term (the “Term”) of two years which begins on the Effective Date and ends on the second anniversary thereof (the “Term Expiration Date”), at which time this Agreement shall expire; provided, however, that the Term shall automatically be extended for an additional five (5) year period unless, not less than 60 days before the Term Expiration Date (as it may have been previously extended pursuant to this Section 4), either Party delivers written notice to the other Party confirming that the Agreement shall expire on the then- scheduled Term Expiration Date. The Term will be automatically extended for additional five (5) year periods at each subsequent Term Expiration Date unless and until either or both Parties opts to confirm that the Agreement will expire on the Term Expiration Date by providing written notice to the other Party within the time period set forth above. After the Term expires for any reason, WDTC shall have a grace period of four (4) months to transition from the reporting and remittance process set forth in Section 2 above to compliance with the Code provisions as the same may exist at such time, unless another special package transient occupancy tax agreement is executed by the Parties and/or their successors or assigns.
5. Audit.
a. City Audit Rights. The City reserves the right to audit all records relating to any Special Package necessary to determine the accuracy of any Monthly Report filed with the City and amounts due and payable under this Agreement during the Term. All records shall be made available in Anaheim, California, and the City shall keep the information disclosed therein strictly confidential pursuant to Code Section 2.12.030.030. If such records are not available for audit in Anaheim, then DLR will be responsible for travel costs pursuant to Chapter 2.12 of the Code. Except as set forth in Section 5(b) below, the City Auditor shall use good faith efforts to schedule and conduct an audit of Monthly Reports or other records relating to Special Packages sold during the Term no later than five (5) years after WDTC provided such information to the City. b. Initial Audit. Without limiting the foregoing, the City Auditor will undertake an audit of the TOT reporting and remittances provided under this Agreement on or promptly after August 1, 2023 for Special Packages involving arrivals for Hotel stays from the Effective Date through June 30, 2023 (the “Initial Audit Period”), and shall endeavor to complete such audit no later than October 1, 2023. The City Auditor and WDTC shall meet and confer promptly afterward to review the audit results and determine whether any additional information or change in reporting presentation is required in the Monthly Reports provided under Section 2(b)(4) above for the remainder of the Term. No additional audits relating to the Initial Audit Period will be conducted by the City during or after the Term.
6. Events of Default by WDTC; Termination for Breach.
a. Default. In the event (i) an audit under Section 5 above results in a finding by the City Auditor that the aggregate Rent collected by WDTC for Special Packages in any month is
more than five percent (5%) greater than the amount reported by WDTC as the aggregate taxable Rent component for said month, and WDTC has neither (a) appealed the City Auditor’s finding under Code Section 2.12.060.020 nor (b) submitted a corrected report and remitted TOT due on the audited total to the City within ten (10) days after receiving the City’s written audit results, or (ii) WDTC does not perform any material obligation under this Agreement, then in each case the City shall be entitled to submit a written notice of default to WDTC in the manner prescribed in Section 8 below, identifying with specificity those WDTC obligations which have not been performed. Upon receipt of the notice of default, WDTC shall promptly commence to cure the identified default(s) at the earliest reasonable time after receiving the notice of default and shall complete the cure of such default(s) not later than thirty (30) days thereafter, or such longer period as is reasonably necessary to remedy such default(s), provided that WDTC shall continuously and diligently pursue such remedy at all times until such default(s) is cured. b. Termination for Default. If after the relevant cure period has elapsed, the City License Collector finds and determines that WDTC remains in default and that the City should terminate this Agreement, the City License Collector shall make a report to the City Council and then set a public hearing before the City Council in accordance with the notice and hearing requirements of the California Government Code. If after public hearing the City Council finds and determines, on the basis of substantial evidence, that WDTC has not cured its default pursuant to this Section 6, then the City may terminate this Agreement effective as of the date of its determination, in which event WDTC shall be required to comply with the Code’s requirements relating to Special Packages as stated therein, including without limitation those in Code Section 2.12.020.012. The City shall not have any right to modify this Agreement without WDTC’s consent. c. Nothing in this Section shall be deemed to relieve WDTC of any Code provisions imposing penalties and/or interest due to unpaid TOT.
7. Assignment by WDTC. WDTC and any assignee thereof shall have the right to assign all or any portion of its obligations hereunder (including, without limitation, its obligations to pay TOT or other amounts hereunder) to any successor owner of the general business in which WDTC is currently engaged or any portion thereof with the City’s written consent, which shall not be unreasonably withheld, conditioned or delayed; provided, however, that no prior written or other approval of the City shall be required in connection with WDTC’s assignment of this Agreement and its obligations under this Agreement to any wholly-owned subsidiary of The Walt Disney Company, which would also inherit WDTC’s assignment rights under this Section. In connection with any assignment by WDTC (or by a successor or assign to WDTC) to any assignee pursuant to this Section, said applicable assignor shall be released from all obligations under this Agreement arising from and after the date of such assignment but not any obligations arising prior to the date of such assignment. In connection with any such assignment by WDTC or any successor thereof, the assignor shall use a form of assignment agreement reasonably approved by the City; provided, however, that the City shall not require in such assignment agreement or otherwise that any assignee or successor party assume or otherwise take on any obligations or liabilities that are not initially applicable to WDTC hereunder.
8. Notices. Any notice or communication required hereunder between the City or WDTC must be in writing, and may be given either by hand delivery or by nationally reputable overnight courier. If personally delivered or delivered by courier, a notice shall be deemed to have been delivered
when received by the Party to whom it is addressed. Any Party hereto may at any time, by giving at least ten (10) days’ written notice to the other Party hereto, designate any other address in substitution of the address, or any additional address, to which such notice or communication shall be given. Such notices or communications shall be given to the Parties at their addresses set forth below:
If to City: With copies to:
License Collector
City of Anaheim
200 South Anaheim Blvd., # 136
Anaheim, California 92803
City Attorney, City of Anaheim
City of Anaheim
200 South Anaheim Blvd., Suite 356
Anaheim, California 92803
If to WDTC: With copies to:
Walt Disney Travel Co.
190 Center Street Promenade
Anaheim, CA 92803
Attention: Director of Travel Operations
General Counsel
The Disneyland Resort
700 Ball Road, 4th Floor
Anaheim, California 92803
and
The Walt Disney Company
500 South Buena Vista Street
Burbank CA 91521-7841
Attention: Corp. Legal – Real Estate
9. Miscellaneous.
a. Headings and Captions. The headings and captions in this Agreement are for convenience only and shall not be referred to in the interpretation of this Agreement. b. Waiver. The failure of any Party to exercise any right or any power given it hereunder or to insist upon strict compliance with the terms of this Agreement shall not constitute a waiver of that Party’s right to demand exact compliance with the terms hereof. Waiver by a Party of any particular default by the other shall not affect or impair its rights with respect to any subsequent defaults of the same or of a different kind; nor shall any delay or omission by a Party to exercise any rights arising from any default affect or impair its right as to such default or any future default.
c. Severance. Should any part of this Agreement be declared invalid or unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the Parties’ intent. If such part is determined to be invalid and/or unenforceable any remainder of such provision, and of the entire Agreement, shall remain in full force and effect. d. Governing Law. This Agreement shall be construed under the laws of the State of California and the City of Anaheim.
e. Entire Agreement. This Agreement contains the entire agreement between the Parties.
Any and all verbal or written agreements made prior to the date of this Agreement are superseded by this Agreement and shall have no further effect. No modification or change to the terms of this Agreement will be binding on a Party unless in writing and signed by an authorized representative of that Party.
f. Modification. This Agreement may not be modified except by written instrument executed by the Parties.
g. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same Agreement.
h. Authorization. Each Party hereby warrants that it has the authority and is duly authorized to execute this Agreement.
i. Recitals. The recitals set forth above are true and accurate and incorporated herein by this reference.
j. Successors and Assigns. This Agreement shall be binding upon the respective permitted successors, assigns and legal representatives of the Parties and shall inure to the benefit of and be enforceable by the Parties and their respective permitted successors, assigns and legal representatives.
[REMAINDER OF PAGE BLANK]
IN WITNESS WHEREOF, this Special Package Transient Occupancy Tax Agreement has been executed as of the day and year first above written.
WALT DISNEY TRAVEL CO., INC.,
a Florida corporation
CITY OF ANAHEIM CALIFORNIA,
a California Municipal Corporation
By:________________________________
Title:________________________________
By:________________________________
ATTEST:
By:________________________________
City Clerk:
APPROVED AS TO FORM:
ROBERT FABELA, CITY ATTORNEY
By:
Kristin Pelletier
Chief Assistant City Attorney, Civil Division