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Disney’s special tax district pushes back against law that would dissolve it

Reedy Creek is pushing back after a clash with DeSantis over LGBTQ rights

A statue of Walt Disney and Mickey Mouse in front of the Cinderella Castle at the Magic Kingdom at Walt Disney World in January 2019. (John Raoux/AP)

Florida Gov. Ron DeSantis (R) scored a fundraising bonanza and public relations coup with GOP voters when he assailed the Walt Disney Co. for siding with the LGBTQ community over a controversial law. But if DeSantis is looking to reshape Disney’s operations and its uniquely powerful control in the state, he may come up short.

The details of the state’s dissolution of Disney’s Reedy Creek Improvement District in Central Florida are still being hashed out behind closed doors. The law to cancel the 55-year-old agreement was proposed, passed and signed within the space of four days last week, without a thorough legislative analysis or public comment or even much debate.

DeSantis spokeswoman Christina Pushaw said in an email that “the specific plan for Reedy Creek is being finalized and should be made public in the next few weeks.”

But Reedy Creek is not waiting. The special taxing district, which encompasses most of Disney’s Central Florida properties and allows Disney to effectively self-govern, is already pushing back, indicating it plans to fight the dissolution of a 1967 compact with the state that helped create the Magic Kingdom, and to keep practicing business as usual.

The Republican-led Florida legislature passed a bill on April 21 that would cancel the special tax district of Walt Disney World in the state. (Video: Drea Cornejo/The Washington Post)

“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,” Reedy Creek, which is controlled by Disney, said in a notice to investors last week.

The statement includes a reminder of Florida law: “the dissolution of a special district government shall transfer title to all of its property to the local general purpose government, which shall also assume all indebtedness of the preexisting special district.”

That’s what worries local government officials, who fear that $1 billion in Disney bond debt will be dumped on them. Some analysts say the new law could mean a 20 to 25 percent property tax hike in nearby Orange and Osceola counties, which local government officials said would be “catastrophic.”

Disney has otherwise remained publicly silent about the feud and did not respond to requests for comment for this article. Sources familiar with the negotiations, who requested anonymity to discuss private negotiations, say the company’s lobbyists and lawyers have been working behind the scenes to find a solution that would allow DeSantis “to save face” and continue to claim a victory over “woke culture,” while in reality doing very little to impede the company’s massive operations in Florida.

The bitter fight between DeSantis and the state’s largest private employer began when Disney chief executive Bob Chapek criticized a law championed by DeSantis that limits how educators discuss LGBTQ issues in the classroom. Detractors dubbed the Parental Rights in Education bill the “don’t say gay” bill, which DeSantis called a “false narrative,” because those words do not appear in the law. Disney used that language in a statement vowing to fight the law.

“For whatever reason, Disney got on that bandwagon,” DeSantis said last week when he signed the law to dissolve Reedy Creek. “They demagogued the bill, they lied about it, came out against it. You know what my view is? I was very clear about saying, ‘you ain’t influencing me.’ I’m standing strong right here. So it doesn’t matter.”

Disney’s special tax district in Florida, explained

DeSantis has brushed aside what local officials say could be calamitous consequences if Reedy Creek, which operates as its own county government, is eliminated. A statement from his office says “it is not the understanding or expectation” that the action will increase taxes. But DeSantis and his Republican allies in the legislature have not explained who will pay Reedy Creek’s $1 billion debt, or cover the $163 million in taxes it collects every year to pay for many of its theme park functions.

The law doesn’t take effect until June 2023 and could be repealed “with the stroke of a pen,” Republican state Rep. Spencer Roach said. If Disney refrains from commenting publicly between now and then, many in Tallahassee say the law could be revised in Disney’s favor.

“Disney won’t rock the boat,” said a lobbyist who does not work for Disney but is familiar with ongoing negotiations between the company and the governor’s office. “They’ll have private conversations with members and staff once things cool off a bit, and come up with a plan to get what they want. Part of the conversation is they won’t wade back into these issues, and DeSantis will move on to another topic.”

A person familiar with Disney’s operations in Florida who was not authorized to speak publicly said: “We are living in DeSantis’s world. When you take a public position against him, you become enemy number one. It’s not an easy position to be in, to have this type of conflict. None of this is ideal. But Disney has a top-notch legal team who is looking at this from all the angles and determining next steps. There’s a lot of time to negotiate and determine what’s in the best interest of the company.”

One possibility is that Reedy Creek will transfer its governing powers — and financial obligations — to the two cities within its 40-square-mile jurisdiction, which are functionally run by Disney. When the special district was created after Walt Disney set his sights on building an entertainment empire in Florida, the company also included two incorporated cities. Bay Lake and Lake Buena Vista have fewer than 60 residents between them — and they all work for Disney or retired from the company — but their city boundaries cover most of the theme park’s 25,000 acres and almost all of its attractions, with the exception of the Wide World of Sports.

A move like that would likely have little impact on Disney’s control and financial situation in Florida.

“Part of the reason they created these two cities is they knew that the state could eliminate the improvement district by a majority vote of the state legislature,” said Chad Emerson, an attorney and author of Project Future, a book about the creation of Reedy Creek. “They can’t do that with cities. There’s a much more extensive process. And so these cities were basically two safety valves for Disney in case a legislature did something to the improvement district, like they just did last week.”

With neither the governor nor Disney disclosing details of how the law will be implemented, local officials and residents are left guessing.

“Even if the legislature comes back and corrects it, or the courts come in and do something, the taxpayers are going to have to pay a lot of attorney’s fees, and pay all kinds of other people to do the work just to get ready in case it goes through,” said Jacob Schumer, an attorney in Central Florida. “You can’t just sit and wait for this train of complexity and debt to arrive without making preparations.”

Schumer wrote recently that the law targeted at Disney’s business also raises constitutional issues.

Disney is Florida’s largest employer, with nearly 80,000 workers who keep the world’s most popular theme park running. Among those employees are several hundred rescue personnel who worry that they may lose their jobs. Under the terms of the Reedy Creek Improvement District, Disney was responsible for providing all social services within its theme park, including garbage collection, road repair and fire and emergency responders.

At a monthly meeting in the Reedy Creek Improvement District on Wednesday morning, the president of the firefighters’ union stood up to question the district’s board of supervisors about the uncertainty facing his members.

“I ask you guys as the elected board, what reassurances can I bring back to my employees, as far as the future of their employment here?” said Jon Shirey, 37, who has been president of the union for two years. “What can I tell our retirees about the benefits they have earned by completing so many honorable years of service to the district?”

Board members did not answer.

DeSantis, who is seen as a strong potential candidate in the 2024 presidential election, used his fight against Disney to fundraise. His main political committee collected more than $7.2 million the month after he started criticizing the company, a monthly total the committee exceeded only three other times in the past 18 months, campaign finance records show. DeSantis’s reelection account collected another $1.2 million in March.

State Rep. Carlos Guillermo-Smith (D), whose district includes parts of Orange County, said eliminating firefighter jobs and raising taxes are not winning issues for DeSantis. He also said simply tinkering with the Reedy Creek district won’t mean much, and while going after corporate tax breaks could make a difference to Disney’s bottom line, neither DeSantis nor GOP lawmakers have suggested that.

“People understand that this is all just political performance,” Guillermo-Smith said. “In the end, what will he accomplish? So maybe Disney won’t be able to build a nuclear power plant. Is that really going to make DeSantis look like such a tough guy?”

He said that he has been in contact with Disney representatives who assure him that the company will continue to support LGBTQ rights.

“It’s obvious they’re laying low, possibly pursuing a legal strategy,” Guillermo-Smith said. “But when asked about whether they were changing their stance on the don’t say gay law, or whether they were backing out of their commitment to overturn it, the answer I get is absolutely not.”

Eric Adelson in Orlando contributed to this report.

Clarification: An earlier version of this story said that Disney was fighting efforts to dissolve its special taxing district. It is the Reedy Creek Improvement District, not the Walt Disney Co., fighting back.