DeSantis vs. Disney Q&A

In late April, during a special legislative session, Florida Gov. Ron DeSantis hastily signed a bill abolishing several decades-old independent districts in the state, including the Reedy Creek Investment District, which is the self-governing home to the Walt Disney World Resort.

To some observers, the new law was a blatant act of retaliation by Republican lawmakers against the Walt Disney Co. Under pressure from its employees, the company had announced that it opposed, and would support efforts to repeal, Florida’s “Parental Rights in Education” law, which DeSantis signed in March and some critics have said is anti-LGBTQ.

But the law seeking to eliminate some of the state’s special districts — which does not include specifics about the implementation — has caused confusion and raised questions about whether the special districts can legally be dissolved by next year and, if so, what financial impact it would have on taxpayers in affected counties.

Here we review what we know about the ongoing conflict between the entertainment company and the Republican governor, who is up for reelection and considered a potential presidential candidate in 2024.

How did the DeSantis and Disney spat begin?

Initially, the Walt Disney Co. did not publicize its position on HB 1557, otherwise known as the “Parental Rights in Education” law, as it was being considered by the Florida Legislature. It was not until after the legislation had passed the Republican-led House and Senate — and after many Disney employees had pressured their employer to speak out against the bill — that Disney CEO Bob Chapek made the company’s opposition known at an early March meeting with shareholders.

Chapek reportedly said that Disney leaders were opposed to the bill “from the outset,” but chose to work quietly behind the scenes, “engaging directly with lawmakers.” He said he called DeSantis the morning of the shareholders meeting “to express our disappointment and concern that if the legislation becomes law, it could be used to unfairly target gay, lesbian, nonbinary and transgender kids and families.” 

Among other things, HB 1557, which DeSantis signed March 28, says, “Classroom instruction by school personnel or third parties on sexual orientation or gender identity may not occur in kindergarten through grade 3 or in a manner that is not age-appropriate or developmentally appropriate for students in accordance with state standards.”

While the law does not define the terms “classroom instruction,” “sexual orientation” or “gender identity,” some critics have interpreted that particular provision to mean “don’t say gay or trans.”

On the day the law was enacted, Disney issued a statement, saying: “Our goal as a company is for this law to be repealed by the legislature or struck down in the courts, and we remain committed to supporting national and state organizations working to achieve that. We are dedicated to standing up for the rights and safety of LGBTQ+ members of the Disney family, as well as the LGBTQ+ community in Florida and across the country.”

The company had previously announced that it was pausing all political donations in Florida while working on a new approach to advocacy and political giving.

A few weeks later, on April 22, DeSantis signed another bill introduced by Republicans, SB 4-C, terminating independent special districts that were enacted in Florida prior to 1968. That includes the Reedy Creek Improvement District, which effectively allows Walt Disney World to govern itself.

Before he made the bill law, DeSantis said of Disney: “You’re a corporation based in Burbank, California, and you’re going to marshal your economic might to attack the parents of my state? We view that as a provocation, and we’re going to fight back against that.”

What is the Reedy Creek Improvement District?

In 1967, the Florida Legislature established the Reedy Creek Improvement District so that the Walt Disney Co. could implement its proposal to turn 25,000 acres, or about 39 square miles, of land in Central Florida’s Orange and Osceola counties into what would later become the theme park destination known as the Walt Disney World Resort.

The district was given authority equivalent to that of a county government, including the ability to collect taxes and issue bonds to fund infrastructure projects, and the district’s landowners, primarily Walt Disney World, became responsible for paying the cost of providing for municipal services such as power, water, roads, and fire and emergency protection. Because of that stipulation, residents of Orange and Osceola counties do not pay taxes for those services unless they also are among the few residents of the district.

Under the new law, Reedy Creek and five other special districts that were created prior to 1968, but not reauthorized since, are scheduled to be dissolved, effective June 1, 2023 — although a provision in the law allows for the state Legislature to reestablish the districts on or after that date. 

There are more than 1,800 active special districts in Florida, according to the Florida Department of Economic Opportunity.

Will Floridians see their taxes increase if the Reedy Creek Improvement District is dissolved?

DeSantis has made multiple public assurances that Disney, not local taxpayers, will still be on the hook for all tax and debt payments if the Reedy Creek district is eliminated as intended.

“The bonds will be paid by Disney. They will be paying taxes, probably more taxes. They will follow the laws that every other person has to do, and they will no longer have the ability to run their own government,” he said at a Fox News town hall on April 28, for example.

But the process may not be as simple as he makes it out to be.

The two-page law that DeSantis signed does not explain how the districts will be dissolved, or which parties would assume the financial responsibilities in the absence of those districts.

There was no study done on the consequences of dissolution, but a state Senate analysis of the legislation said it will have an “indeterminate fiscal impact on residents and businesses currently served by a special district dissolved by the bill,” as well as an “indeterminate fiscal impact on those local general purpose governments that will assume the assets and indebtedness of an independent special district dissolved by the bill.”

Reedy Creek reportedly collects about $105 million annually in taxes and fees from Walt Disney World and other district residents to pay for the many public services it provides. It also is approaching $1 billion in outstanding bond debt, according to Fitch Ratings, a credit rating agency.

Orange County Tax Collector Scott Randolph, a Democrat, has said that doing away with the district could cause the county to increase property taxes for residents by 20% to 25% to cover any inherited costs.

“Until we have all of the specifics, it’s hard to say what the specific answers or impacts will be,” Jerry Demings, Orange County’s Democratic mayor, said in an April 21 press briefing. “We’re like everybody else trying to understand what the Legislature truly is trying to do in this case. I believe they have not adequately contemplated the ramifications of what they have proposed.”

Jacob Schumer, a Maitland, Florida, attorney who specializes in local government law, has said that Reedy Creek’s hefty bond debt is another issue that must be resolved.

Schumer wrote in Bloomberg Law in April that another state statute says that, if the district is dissolved, its debt would fall to the “local general-purpose government,” meaning Orange and Osceola counties. But then there would need to be discussions about how to divide the debt obligations between the counties.

Fitch Ratings put Reedy Creek on “negative watch” because of the “lack of clarity” on how the district will be dissolved and what will happen to the debt. “Fitch believes the mechanics of implementation will be complicated, increasing the probability of negative rating action,” the agency said.

A bigger legal issue, Schumer said, is that by dissolving Reedy Creek, the Florida Legislature would be going back on another state law that pledges to “not limit or alter the rights of the District … until all such bonds together with interest thereon … are fully met and discharged.”

“Florida simply cannot promise to prospective bondholders that it won’t interfere with Reedy Creek, and then dissolve Reedy Creek,” he argued. “If Reedy Creek is ever dissolved, it would be a monumental and complicated enterprise even on a years-long timeline. The district has a nine-figure annual budget for expenditures, and even ignoring its various debts, it has a plethora of other contracts that somehow would have to be assigned to and divided between Orange and Osceola counties. However, the dissolution will have to wait until all of its bonds are paid in full.”

He noted that a 2018 Reedy Creek utility revenue bond prohibits redemption until October 2029, suggesting that the district could not be dissolved until that date at the earliest.

Reedy Creek, which also has cited the state’s prior promise to the district, has said it plans to continue to operate as normal — until there is more clarity.

“In light of the State of Florida’s pledge to the District’s bondholders, Reedy Creek expects to explore its options while continuing its present operations, including levying and collecting its ad valorem taxes and collecting its utility revenues, paying debt service on its ad valorem tax bonds and utility revenue bonds, complying with its bond covenants and operating and maintaining its properties,” the district said in a statement last month.

Then, on May 3, a group of Florida residents filed a lawsuit in federal court, arguing that the law dissolving the special districts is unconstitutional and will lead to “significant injury to taxpayers.”

In response, the governor’s office has said: “The local residents of Orange and Osceola counties will not have to bear the burden of Disney’s debt, as the governor has stated. And, there is no scenario where the state would inherit Disney’s debt.”

DeSantis said the Legislature will draft additional legislation clarifying unresolved issues related to dissolving the special districts. The next regular legislative session is not scheduled to begin until March 2023, but DeSantis or the Legislature could convene another special session before then.

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