DeSantis Ends Disney’s Special Status in Reedy Creek

The fraught political move also raises some practical questions. Like, who will pay to run the town?

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In the span of 72 hours, the Florida legislature introduced, passed and signed a bill stripping Disney’s hometown, the Reedy Creek Improvement District, of its status as a special tax district. 

The bill goes into effect in June 2023 and ends Disney’s self-governing status, which allows the company to manage all municipal matters in the 25,000-acre district surrounding the Walt Disney World Resort, such as sewage, transportation, zoning and security. 

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It’s widely believed that Gov. Ron DeSantis made the move in retaliation for Disney’s opposition to Florida’s “Don’t Say Gay” bill, which passed in March. Disney had initially been quiet about the bill, aimed at curbing sex education in lower elementary grades, but proclaimed its opposition after employees staged a walk-out once the bill had already passed.

While the move to end Disney’s special status has political implications that reverberate far beyond Florida, it also leaves some very practical questions unanswered. For one, with Disney’s status dissolved, its property, duties and debt all transfer to the two counties in which it is located, Orange and Osceola counties, without adding any additional tax revenue — potentially leaving the residents of those counties with an overwhelming tax bomb. 

Reedy Creek is an independent special tax district, which means it must pay taxes to the county government in addition to paying itself to run the town. Between 2015 and 2020, Disney paid an average of $45 million in property taxes to Orange and Osceola counties, and in 2021, it paid itself $105 million for local services, according to Scott Randolph, tax collector in Orange County. Once Reedy Creek is dissolved, the $105 million doesn’t transfer, but the counties will be responsible for all municipal services. 

Second, Reedy Creek has about $1 billion in outstanding municipal bonds, which would also be transferred to the “local general purpose government” if the district were dissolved, according to Florida’s Uniform Special District Accountability Act. It’s not immediately clear what this means for bondholders, or the government that would assume the debt. 

That said, the bill stands on questionable legal ground. The Reedy Creek Act, the act that gave Disney its special status, appears to be clear about the state’s limits in dissolving Reedy Creek’s designation at all, according to a note Disney sent to bondholders, making it highly likely DeSantis’ move will be challenged. “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,” Disney wrote.

In addition, Florida law dictates that special districts can only be dissolved with a majority vote from the district’s landowners, which in this case is Disney itself. “It is not expected that Disney would vote to end the current arrangement unless there was a financial benefit to the company,” wrote Joseph Krist, author of Muni Credit News. 

“[The bill] has all has the makings of an extended litigation process as the counties, Disney, bondholders and bond insurers all face uncertainty as the details of the law emerge,” Krist wrote.

Given the likely legal hurdles, the move should be considered simply a political stunt, he added.

It should be noted, too, that Florida has close to 2,000 active special tax districts, though few of Reedy Creek’s size and economic power. The law DeSantis signed was written to dissolve any district created before November 1968, which applies to just four districts out of 1,844. One other well-known special district is The Villages, a retirement community in Central Florida that’s famous for its support of Donald Trump, and was created in the 1990s. 

However, the vast majority of the special tax districts are primarily bureaucratic and related to development. Over 800 are what’s known as Community Development Districts, which are special-purpose government units with particular tax implications, and another 200 are Community Redevelopment Agencies (known as CRAs), or especially established zones where development proceeds are reinvested. 

DeSantis called a special session to review the issue of Disney’s designation on Tuesday, and identical bills to strip its status were introduced and passed in the House and Senate by Thursday. DeSantis then signed it into law Friday afternoon. 

Also on Friday, DeSantis signed into law a new congressional map that critics say disenfranchises Black voters. The Republican-controlled legislature had passed the authority of creating the maps to DeSantis after he vetoed the lawmakers’ earlier, less gerrymandered, version.

Chava Gourarie can be reached at cgourarie@commercialobserver.com.