In authorizing Reedy Creek to issue bonds, the Florida legislature included a remarkable statement—included in Reedy Creek’s bond offerings—regarding its own promise to bondholders: “The State of Florida pledges to the holders of any bonds issued under this Act that it will not limit or alter the rights of the District to own, acquire, construct, reconstruct, improve, maintain, operate or furnish the projects or to levy and collect the taxes, assessments, rentals, rates, fees, tolls, fares and other charges provided for herein … until all such bonds together with interest thereon, and all costs and expenses in connection with any action or proceeding by or on behalf of such holders, are fully met and discharged.”…

These difficult questions point to the basic contractual issue. By dissolving Reedy Creek, the legislature essentially rewrote the promises made in the district’s bond offerings. Instead of bonds backed by a special district with the power to levy up to 30 mills in taxes, the property tax bonds will be backed jointly by two governments that can only generate a maximum of 10 mills in taxes. Instead of a unified utility system with special powers to charge various fees, supported by special taxing powers, utility revenue bonds will be jointly managed by two counties subject to additional taxing and spending restrictions.

Both the U.S. and Florida constitutions place strict limitations on the government’s ability to impair its own contracts. Under the U.S. Constitution, a state can only impair an existing contract if the impairment is reasonable and necessary to serve an important government purpose.