Disney reassures investors: Don't worry, Florida can't cancel our special district

(AP Photo/John Raoux, File)

If you read yesterday’s post, you already know why they’re confident. DeSantis’s lawyers may not have read the fine print on the Reedy Creek Improvement District’s bond obligations but Disney’s lawyers did. The state of Florida pledged to bondholders that it wouldn’t “alter” the status of RCID until the district’s debts were paid. It’s now broken that promise.


“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,” said Disney in a statement to investors posted several days ago.

Which means the universe of potential good outcomes for Ron DeSantis from this fight continues to shrink. The best outcome for the governor remains Disney and DeSantis going to court and Disney winning, which would allow DeSantis to preserve his “he fights!” reputation while sparing him from the fiscal consequences of rescinding RCID. But even that looks less rosy than it did a week ago. If DeSantis loses because he and his attorneys overlooked the RCID debt issue, that’s evidence of incompetence. And his opponents in a potential presidential primary will remind him of it. “Yeah, he fights. But what good is that if he’s too dumb to win?”

The other potential outcomes, in which Florida succeeds at rescinding RCID, are also fraught with danger. The $1 billion that Reedy Creek owes to bondholders will need to be dealt with somehow. Maybe Orange and Osceola counties will end up on the hook for it, now that they’re in charge of RCID. Or maybe the state will assume the obligation, putting DeSantis in the awkward position of essentially bailing out Disney. Or Florida could simply try welshing on the bonds, triggering lawsuits and making this banana-republic gambit look even shadier.

The Miami Herald interviewed two key experts for its story today about the legal tangle. One is Orange County’s tax collector, who says he sees no way in which his county doesn’t end up responsible for an extra $163 million in costs per year once it assumes jurisdiction over Reedy Creek, a de facto budget hike of more than 25 percent. (“Catastrophic” is the word used by Orange County’s mayor to describe the effect.) Of that amount, $105 million is the cost of providing services to RCID and the other $58 million is owed to debt servicing. On top of that, Disney pays $14 million per year to Orange County for assistance from its police force. That revenue goes up in smoke as well.


Reedy Creek’s bondholders will be irate if and when a county that’s suddenly struggling to pay its bills takes over responsibility for Disney’s debt. As noted yesterday, Orange County may have difficulty raising taxes high enough to cover the debt servicing even if it’s willing to do so since RCID was empowered to tax property at a far higher rate than other counties are. If you own a bond backed by Reedy Creek, you never had to worry that payments would be made. If that bond is now backed by Orange County, you do.

Which brings us to potential solutions. Jacob Schumer, the tax attorney who wrote yesterday’s piece about RCID’s bond obligations, told the Herald that there’s no good option for Florida in dealing with the debt. They could try to welsh by arguing that the state never had the legal power to guarantee not to alter Reedy Creek’s district when it backed the district’s bonds, but “states usually aren’t in the business of arguing that their own promises are bad,” said Schumer. Imagine the panic among investors, and not just Reedy Creek investors, if Florida took the position that it’s not bound to honor its own fiscal promises.

Another possibility is for Florida to get crazy with the eminent-domain cheez whiz and use the revenue from Reedy Creek’s assets to pay off the bonds, another banana-republic flourish. But that has problems too, per the Orange County tax collector:

By giving Disney a year to resolve this, the company could shed its assets by giving its power plant and its water utility to Lake Buena Vista and Bay Lake. Without those assets, Disney reduces its tax bill when the state dissolves Reedy Creek, he said.

“Disney has more power now to determine its tax bill than it did a week ago,’’ he said. “That’s what’s crazy to me. They want to punish Disney, but this is the furthest thing from that. You literally put them in the driver’s seat of how much they want to pay.”


So not only might Florida not be able to reach the assets, it may end up encouraging Reedy Creek, i.e., Disney, to give itself a tax break in the process.

The last option is to create a Municipal Service Taxing Unit to raise revenue from Reedy Creek, an option already being considered by Florida Republicans. But state law requires that the municipalities subject to the unit approve of the arrangement, which means Disney would have to okay it. So Republicans will have to change state law to eliminate that “veto power” first and it’s anyone’s guess if they can do that lawfully under the Florida Constitution. Probably — but who would bet on DeSantis’s lawyers over Disney’s at this point?

Ross Douthat argues today that it doesn’t seem fair that Florida can create a special privilege for Disney in the form of Reedy Creek and then be hamstrung in trying to take it away. That may be, but there are bigger fish to fry here in terms of fairness:

All of these institutions enjoy First Amendment protections from being discriminated against, this line of argument suggests. But forms of discrimination that work in their favor — meaning all their privileges, immunities and tax breaks — are political fair game if they enter the culture-war arena.

“U.S. economic policy is not neutral toward business in any kind of pure, Adam Smithian sense,” Domenech writes, “but a gigantic, convoluted network of special treatment for special interests. So, when elites who run such special interests launch a smug, moral crusade against the same American people who have showered them with special treatment … that abused, insulted public is well within its rights to withdraw some of its munificence.”

I don’t know if this argument is constitutionally convincing when applied to something as crudely retaliatory-seeming as the DeSantis move. But it’s convincing at some level of distance.


It’s not convincing, any more than it’d be convincing if the state created a special improvement district for a black-owned company and later decided to rescind that district specifically because the owner is black. If states don’t want to create special districts as a rule, great. If states want to rescind a special district for neutral reasons, whether because the district has become a fiscal hardship or simply as part of a broader policy of rescinding all special districts, also great. But motive counts. Courts look dimly at viewpoint discrimination because they don’t want a state getting into the habit (or more of the habit, I should say) of rewarding and punishing private actors because of their politics. If righties are tired of being lectured by woke corporate hypocrites, the sort of goons who harrumph about the “don’t say gay” law before opening a new factory in Xinjiang, the solution is to stop granting special benefits for corporate America altogether. Stay off the slippery slope of “For my friends, everything. For my enemies, the law.”

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