Anaheim modeled its tourism marketing efforts after other cities in California, but following through with public oversight over the millions of dollars from hotel stays that would be raised was left out of the mix.
The city, working with hoteliers in 2010, created a tourism district that would charge vacationers an extra 2% on their nightly hotel rate. Most of that money, now more than $20 million a year, was then to be used by Visit Anaheim for marketing the city around the world and booking its convention center.
It’s a setup that’s common throughout Southern California: a city partnering with a tourism-focused nonprofit to market the city with money supplied by hotel stays. Huntington Beach, Newport Beach and San Diego are among the cities that have had similar arrangements, but unlike Anaheim, public boards have helped to monitor those millions of dollars.
When the tourism district was formed nearly 15 years ago, included was the option for the City Council to create an advisory board to assist with oversight of those tourism dollars, but it was never invoked. Now, Anaheim officials are looking to enhance oversight of those dollars after state auditors in a recently released report chided the city for not having a meaningful monitoring process in place “given the significant funding that Visit Anaheim receives.” Some of that tourism money ended up being used for political advocacy and influence, the auditors said.
“The safeguards in the contract were not being followed,” Mayor Ashleigh Aitken said. “I look at the oversight board as a way for city staff to make sure that we are following the procedures that are going to be in place. There are certain things in that contract that I look forward to renegotiating to make sure that we are true partners and not just a pass-through organization.”
Aitken added that the city has a duty to visitors and taxpayers to ensure policies surrounding the public funds are being followed.
Assistant City Manager Greg Garcia told the City Council at a Tuesday meeting that when the tourism district was established, city officials never saw it as public money.
“While we work very closely with Visit Anaheim on a lot of their marketing activities, having real specific oversight over these dollars, which we considered were their dollars, wasn’t something that we really thought twice about,” Garcia said.
Garcia said it wasn’t until having discussions with state auditors that the city came around to agree that it was public money.
Lorri Galloway, who was on the council in 2010 and voted to create the tourism improvement district, said the expectation then was the oversight board was going to be created. The idea was to make Visit Anaheim more competitive with competing markets in Los Angeles and Las Vegas, she said.
Huntington Beach, Newport Beach and San Diego each have tourism marketing nonprofits that are funded by similar assessments on hotel room stays (resorts participating in Newport Beach’s tourism district have asked to dissolve the program). All three have held regular public meetings to discuss the use of those tourism funds, with agendas for people to review and time for public comment.
In Anaheim, the main venue for public oversight and tracking the meeting of contract obligations has been a yearly report from Visit Anaheim and two city staffers acting as board members, which drew criticism from the state auditors for relying on just a pair of spots on the nonprofit’s board to monitor millions in tourism spending for over a decade and whether expectations were being met.
City Manager James Vanderpool in his official response to the state auditors’ findings said Anaheim will explore creating an advisory board to assist the city in oversight. City officials expect the council to consider an advisory board as early as this month and Garcia said the councilmembers will have the ability to determine who can be on it.
That 2% extra vacationers pay at 94 hotels in Anaheim brings in about $30 million a year; 75% of that goes to Visit Anaheim, and the rest goes toward transportation improvements.
Visit Anaheim has been around for decades and is governed by a 22-member board largely made up of hoteliers. Visit Anaheim has said it looks forward to greater transparency as the city renegotiates its agreement with it.
Orange County’s Surf City imposes a 4% assessment on hotel room stays to help fund Visit Huntington Beach – raising about $6 million per year. Visit Huntington Beach held 15 meetings last year under California open meeting laws with publicly posted agendas and time for public comment.
The San Diego Tourism Marketing District, a $27 million-a-year organization, held nine public meetings in 2023. The Newport Beach Tourism Improvement District has been holding about two meetings a year. Both have minutes and agendas available to review online.
For the transportation side of Anaheim’s tourism improvement district, there is a committee that meets publicly a few times a year.
State auditors said, “The city should not have relied only on two city employees acting as Visit Anaheim board members to monitor the contract.” Tom Morton, Anaheim’s tourism director, told auditors that he relied on Visit Anaheim’s externally audited financial statements as a check on spending.
The advisory board Anaheim creates, state auditors said, should have representatives from the assessed hotels, legal counsel and a person knowledgeable in government finance.
There seems to be little desire from city officials to get rid of Visit Anaheim’s role, with some declaring that it has the experts on staff for booking the convention center. Morton has told the City Council on multiple occasions that there are many reasons why you’d want a separate conventions bureau, and it’d be expensive for the city to do it itself.
“It’s a very unique operation,” Morton said Tuesday.
Before the tourism district was created in 2010, Visit Anaheim got about $6 million a year from the city’s general fund.
Visit Anaheim’s growth has been supercharged over the last decade, with it now receiving more than $20 million a year from the city’s tourism improvement district as the resort area has become more popular. In its lifetime, the 2% assessment has raised $111.2 million for Visit Anaheim.
Aitken said she doesn’t see the city going back to funding Visit Anaheim with the general fund. Visit Anaheim in a statement released on Feb. 1 said it looked forward to developing a plan with the city to ensure transparency and effective oversight.
Source: Orange County Register
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