Nearly 55 years ago, Florida passed a law that created the Reedy Creek Improvement District, effectively giving The Walt Disney Company governmental control over the land in and around its central Florida theme parks.
Yet over the course of just a few days last week, Republican legislators – in response to Disney’s criticism of a law restricting discussion of LGBTQ issues in schools – drafted and passed a bill dissolving that special purpose district on June 1, 2023. Florida Gov. Ron DeSantis signed the legislation into law on Friday.
The new law is just two pages long and avoids any discussion of details about how to unwind a half-century of infrastructure deals, nor does it lay out the next steps in the complicated process.
The lack of a concrete plan surprised and frustrated state lawmakers in Orange and Osceola counties, who suddenly realized their taxpayers could be on the hook for funding basic services and paying off Disney’s nearly $1 billion of debt.
“They’re trying to unwind a whole municipal government in five days,” said Eleanor Wilking, an assistant professor at Cornell Law School studying tax policy. “The details are not trivial.”
CNN spoke to a handful of experts and lawmakers to try to understand what’s next for Florida, Disney and Reedy Creek. Their answers were wary and speculative because, they said, the law itself offered few clues. Disney, too, has been conspicuously silent over the past week.
Broadly, though, they suggested there were three potential paths ahead: One, inertia rules the day and local counties are stuck with a big tax bill; two, Disney files suit to stop the dissolution; or three, Disney and Florida renegotiate a new special district.
“It really just depends on what Disney does and what the legislature does,” said Aubrey Jewett, associate professor at University of Central Florida and co-author of the book “Politics in Florida.” “If neither of them does much, then it falls to the local governments to sort out this mess.”
Option 1: Orange and Osceola counties will pick up the bill
If nothing else changes, and Reedy Creek is dissolved in June 2023, then Orange and Osceola counties could be on the hook for significant cost increases.
Reedy Creek is important to Disney because it gives them greater control over their parks, said Richard Foglesong, the author of the book “Married to the Mouse: Walt Disney World and Orlando.” Reedy Creek, whose budget comes almost entirely from Disney, pays for its own fire department, water systems, roadways and building inspectors, and it can issue bonds and take on debt to pay for long-term infrastructure programs.
But if Reedy Creek is dissolved, those expenses and debt payments would be absorbed by neighboring Orange and Osceola counties. The Senate bill analysis noted that the new law will have an “indeterminate fiscal impact” on the counties.
Officials in Orange County said they’ll likely have to raise property taxes on their residents. Orange County tax collector Scott Randolph told CNN on Saturday that residents could be hit with a $163 million a year tax bill when the district is dissolved.
“All of that debt and obligation goes over to Orange County the minute that Reedy Creek is dissolved,” he said. He said paying that off could mean a property tax increase of 20% to 25% on homeowners. (Florida does not have a personal income tax.)
State Sen. Linda Stewart, a Democrat who represents part of Orange County, told CNN on Monday there was conflicting information about what this would mean for county taxpayers. Orange County is working on releasing a more realistic breakdown of the potential impact in the next few days, she said.
Still, she’s already hearing from frustrated constituents concerned that their property taxes will be going up.
“We’ve got inflation, we’ve got (high) gas prices, and now we’re gonna add in a huge tax bill too? No, that is not acceptable,” she said.
Option 2: Disney takes Florida to court
A second potential path ahead is that Disney sues to block the law from taking effect.
One line of argument may be that the dissolution does not follow state law. According to Florida Statute 189.072, dissolving a special district requires approval by a majority of landowners. The land of Reedy Creek is mostly owned by Disney.
The bill passed last week takes that into account, saying that, “Notwithstanding 189.072,” any special district established before 1968 will be dissolved next year. Does including the word “notwithstanding” mean that the prior law doesn’t apply?
In debating the bill last week, Rep. Randy Fine, a Republican, said the “notwithstanding” line passes legal muster.
“These are not constitutional requirements. These are statutory requirements. And this bill actually changes the law, which we’re allowed to do at any time, and says that we don’t have to do those things,” he said.
To which state Rep. Dotie Joseph, a Democrat, responded: “I think to change the law that exists you would repeal it, not just put another one that contravenes it, but what do I know? I’m just a lawyer.”
Another potential lawsuit could be on free speech grounds. Though the new law does not specifically mention Disney or Reedy Creek, Florida Republicans publicly said the law was in response to the company’s criticism of the “Parental Rights in Education” bill, which critics have termed the “Don’t Say Gay” bill.
That state legislation, signed into law last month, prohibits schools from teaching children about sexual orientation or gender identity “in a manner that is not age-appropriate or developmentally appropriate.” After an employee uproar, Disney stated that the company’s goal was for the law to be repealed or struck down in the courts, earning the enmity of right-wing lawmakers.
“They are a California company that is a guest in the state of Florida,” Fine said on CNN last week. “And they are a guest that has had special privileges that no other company has had. If you want special privileges, you’d better be on your best behavior.”
Disney could sue and argue that the law was an unconstitutional punishment for corporate political speech.
“All of this boils down to a spiteful Disney approach that (Republicans) didn’t like what Disney had the freedom of speech to say,” Stewart said. “People have freedom of speech, so do corporations. They’re not excluded from having freedom of speech.”
Finally, Disney might not even be the only one to sue the state. Tax attorney Jacob Schumer argued that Florida had promised Reedy Creek bondholders that the state wouldn’t interfere with the district’s bonds. Dissolving Reedy Creek would violate this contractual agreement, he argued.
“Florida simply cannot promise to prospective bondholders that it won’t interfere with Reedy Creek, and then dissolve Reedy Creek,” he wrote on BloombergTax.com.
Reedy Creek itself highlighted this issue in a statement to bondholders last week, prior to the law’s signing. Citing that aspect of the law, the district said it expects to continue business as usual.
“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,” Reedy Creek said.
Fitch Ratings, the credit rating agency, put Reedy Creek on “Negative Watch,” meaning that there is a potential for the rating on their debt to be downgraded. Analyst Michael Rinaldi told CNN the uncertainty of the law was to blame, as the two-page bill did not lay out the process of what happens to nearly $1 billion in debt when the district is dissolved.
“We’re in no man’s land with respect to where things go,” he said.
Option 3: Disney and Florida renegotiate a new special district
The final path ahead – and the one that most lawmakers and experts mentioned – is that Disney and Florida renegotiate terms on a new special district with more limited powers the day that Reedy Creek dissolves.
The law passed last week explicitly allows for just such an agreement. “An independent special district affected by this subsection may be reestablished on or after June 1, 2023,” the law states.
DeSantis said as much on Monday, saying that the dissolution bill passed last week is “the first step in what’s going to be a process to make sure that Disney should not run its own government.”
He insisted that Disney would still pay taxes and its debts.
“Trust me, under no circumstances will Disney not pay its fair share of taxes,” he said.
“Under no circumstances will Disney be able to not pay its debts. We will make sure of that,” he added.
Stewart said they could renegotiate on small things, such as ensuring Disney does not start fracking or build a nuclear power plant in the special district. That would allow Disney to keep most of its powers while also allowing DeSantis to maintain his right-wing credibility.
“I don’t think that anybody is going to go the full route of dissolving Reedy Creek,” she said. “There may be a couple of things we can do (to negotiate). Whether that will be enough for the governor to save face with, I don’t know. I can’t read his mind. Nobody can.”
Wilking, the tax policy expert, said that any negotiation on the special district misses the broader issues at play: The culture wars have come for big business.
“The bigger issue really is this idea that DeSantis and the Florida legislature are willing to really go head-to-head with these really large and locally significant businesses in order to prosecute their preferred cultural agenda,” she said. “That’s the real story in my opinion. The taxes are less important than the loss of control for Disney.”