Despite Disney’s Legal Moves, DeSantis Land Board Wields Power

When Florida took over Disney’s Reedy Creek Improvement District in February, renaming it the Central Florida Tourism Oversight District, its newly appointed board met with little fanfare. But Disney’s acceptance of the new order may have been thanks to the groundwork it laid to handcuff the new board.

At its March 29 meeting, the district announced that prior to the takeover, the Reedy Creek board—then controlled by Disney—had entered long-term contracts that restricted the new board’s influence. Board member Ron Peri said the move “essentially makes Disney the government,” while another described it as circumventing the board’s authority to govern. The district retained four law firms to evaluate a potential legal action, and the governor’s office described the contracts as having “significant legal infirmities.”

While this meeting triggered widespread coverage and a narrative that Disney had “quietly” taken power through extreme legal maneuvers, the contracts in fact are common kinds of local government agreements. The scope is what makes them extraordinary—the amount of land affected, the rights provided to Disney, and the degree of limitation to which the district agreed. And despite the broad scope of these agreements, the district still retains wide discretion either to be Disney World’s biggest ally—or its worst enemy.

The new board called out two long-term actions by the former Reedy Creek board as egregious: a development agreement and a declaration of restrictive covenants placed on its property, each entered with the clear intent of preserving the status quo.

The agreement freezes all development regulations on Disney’s properties for 30 years; Reedy Creek just finished amending its land use regulations to grant Disney the ability to build more parks and hotels. It also directs the district to spend hundreds of millions of dollars on roads and utilities over the next five years to prepare for Disney World developments. The agreement closely tracks Florida’s Development Agreement Act, which includes a provision allowing newly adopted laws and policies to apply when the district holds a hearing and finds that the law fits an exception.

The declarations of restrictive covenants—two largely identical agreements covering the district’s Orange County and Osceola County properties—freeze the district’s own use of its properties in place. The covenants last in perpetuity, or if perpetuity is declared illegal, until 21 years after the death of the last surviving descendant of King Charles III. The covenants restrict the district’s properties to their current use and include a long list of prohibited uses. The district also must seek Disney’s comment before altering the properties and can’t use Disney’s name or trademarks.

Are They Legal?

The board’s new attorneys argue that the contracts may be void because they subvert the intent of the new act, bind the new board, improperly delegate authority, and give away public rights without compensation for a private purpose. But assuming Reedy Creek followed all procedural requirements, it would require a major change in Florida law to render either of the agreements unlawful.

These agreements were clearly designed to hamstring the incoming board and prevent the district from changing course, but that’s not a legal argument against their validity. One of the main points of a development agreement is to shield a developer against changes stemming from government turnover.

If the contract had allowed Disney to violate existing regulations or to process regulations differently, that certainly could have been an issue. Requiring Disney’s approval before constructing any public works also could have been an issue, but the covenant only requires that the board seeks Disney’s comment—a procedure consistent with the legislative command to promote harmonious development.

Florida law has long recognized that encouraging private enterprise is a valid public purpose, and Reedy Creek’s command was specifically to assist harmonious land development for tourism. While Central Florida Tourism Oversight District attorneys pointed to the lack of consideration, Reedy Creek’s charter specifically authorizes real estate contracts without consideration.

Importantly, the statewide implications for development mean that Florida courts probably would hesitate to throw out the development agreement. But for the restrictive covenants, the opposite may be true.

It’s easy to imagine a horror story of a local government, politically captured by an unscrupulous player, entering a perpetual restrictive covenant on all its properties to benefit a single corporation to the detriment of all others in the community, forever and ever.

Here, because Disney is the sole meaningful owner, taking actions to benefit Disney is simply doing the district’s job. But imagining the implications in another government, a court may find a reasoning why the arrangement violates some provision of the Florida constitution or basic governing principle, such as the prohibition on lending taxing power to aid a corporation. The reasoning would have to be new to Florida law, but these extreme circumstances are the exact kind of situations that can breed new legal developments.

What’s Next

While the contracts limit the district’s reach, the new board still has plenty of power to regulate, control, and disrupt Disney World. Disney needs a competent, reliable partner to build and maintain the infrastructure supporting Disney World. The board could try to keep passing land use regulations, using the exceptions available under the law.

On the more extreme end, the district could use its eminent domain power to turn a chunk of the Magic Kingdom into a public works project. And Disney ultimately will pay for any legal battles with the board, as practically all the district’s funding comes from Disney’s tax dollars.

At least some of the board members have signaled they want to cooperate with Disney. And Disney has much more to gain from a positive relationship with the new district than it ever could win in court. The contracts weren’t a cure-all, but they placed Disney in a position of strength to define its relationship with its new government overseer.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Jacob Schumer is an attorney at Shepard, Smith, Kohlmyer & Hand in Maitland, Fla., with a practice concentrating on local government-related matters.

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