Bloomberg Tax
Feb. 16, 2023, 9:45 AM

Disney Avoids Political War By Giving Up Battle for Reedy Creek

Jacob Schumer
Jacob Schumer
Shepard, Smith, Kohlmyer & Hand

Since Disney’s Reedy Creek Improvement District was set to be dissolved last April, there’s been constant speculation as to what—if anything—would be done to modify or replace it. Legal realities ensured that something nearly identical to Reedy Creek would remain, and that the only major change would be who controlled the district. If any “deal” was made, Disney would likely stay in the driver’s seat.

House Bill 9B, which awaits Gov. Ron DeSantis’ signature, shows little evidence of a deal with Disney, keeping the district intact and leaving its most important functions practically untouched. Now named the “Central Florida Tourism Oversight District,” it keeps its extraordinary taxing powers and independence from local laws, its ability to overrule local cities, and more—though it loses more tangential powers such as the ability to veto state highway locations. The biggest change is that its governing board, previously elected by Disney as landowner, will be made up of governor appointees.

Once DeSantis signs the bill, as he has pledged to do, Disney World will go from being uniquely independent to uniquely under political control. The new board will have an exceptional ability to cause pain through high tax rates, public infrastructure obstinance, and restrictive permitting. The only direct avenue of influence will be through DeSantis’ office.

With Florida taking full control, the Walt Disney Co. has a strong legal argument that the bill amounts to unconstitutional retaliation against protected speech. Disney has chosen to accept this rather than fight for Disney World’s continued independence. As valuable as Reedy Creek has been, the political cost of preserving that independence may have simply been too risky for Disney as a whole.

The bill’s best challenge rests on the principle that an otherwise valid government action can be rendered unconstitutional due to improper motive. DeSantis and Florida’s legislature haven’t been shy about the passage of the original bill dissolving Reedy Creek being a direct response to Disney’s public statements regarding Florida’s enactment of the “Don’t Say Gay” bill.

While people often cite 2010’s Citizen United as the birth of corporate free speech, the US Supreme Court has long held that corporations also have First Amendment protections from government retaliation for political speech. Given that the drive to dissolve Reedy Creek started as part of a blowback from a constitutionally protected statement, and the clear line of causation between that bill and this replacement removing Disney’s voting powers, Disney would have a powerful case that this bill is retaliation for protected speech and thus prohibited.

The chief obstacle to Disney’s claim would be the court’s typical hesitance to look into the motives for legislation. The US Court of Appeals for the 11th Circuit has repeatedly held that the court won’t throw out facially valid legislation based on an alleged retaliatory motive. However, that rule doesn’t apply when the law singles out the specific party complaining of the retaliation. In this case, the bill never names Disney, but it does name Disney’s properties—the same properties that make up the district.

As valuable as winning Reedy Creek’s independence would be to Disney, it pales in comparison to the importance of relative political peace with conservatives and a repaired relationship with Florida government.

The greatest danger to Disney from the takeover is that the DeSantis’ appointees would use their position to extract political concessions—a potent threat considering that this series of events started because Disney didn’t want to enter the political arena. It was Disney’s initial avoidance of taking a position on the “Don’t Say Gay” bill that triggered an employee revolt, which then prompted Disney’s full reversal, which then triggered the backlash from the Florida legislature and DeSantis.

One of Disney’s most powerful assets is the feelings of childhood and nostalgia that its brand triggers. Few things are more counter to a relentlessly positive image than becoming a target in a vicious political environment. And this brand damage certainly isn’t confined to the district and Disney World.

While there’s political danger from being governed by political appointees, there may be more danger in the challenge itself. A lawsuit would mean keeping the political target on Disney’s back, potentially for years, as the case works its way through the court system. Disney could have to disclose records of sensitive, high-level political discussions that normally would never see the light of day, with no guarantees that those records would remain sealed. And maybe most importantly, to some, it would cement Disney as officially being hostile toward conservative goals, especially in Florida.

A view of fireworks, holiday lights and fanfare at Cinderella’s Castle on Nov. 05, 2017 in Lake Buena Vista, Fla.
Photographer: Todd Anderson/Disney Parks via Getty Images

Disney has a lot more to lose than Reedy Creek, especially in Florida, and its political independence may be a small price to pay for a relationship with Florida’s government that isn’t downright hostile. Even if Disney won Reedy Creek’s independence, the win wouldn’t necessarily be permanent—Florida could simply enact a new takeover a few years from now, when there’s no longer a clear retaliation issue.

While Disney would lose its independence with this bill, damage would come only if the replacement board is uncooperative. Since basically everything else about the district remains the same, in times when the newly branded board is friendly to Disney, there will be very little change at all. There have been questions, then, about whether this actually is part of a “deal” with Disney.

Though the legislation’s text has little hint that it is part of any sort of compromise, if Disney and the governor did reach a deal, it’s likely neither party would want that fact disclosed. Disney wouldn’t want to be seen as glad-handing a controversial governor to obtain a special privilege. At the same time, DeSantis is under political pressure not to give up ground and immediately pushed back an earlier report that he had “caved” to Disney.

Instead, the deal could be a matter of Disney agreeing to graciously lose the battle of Reedy Creek to stay out of a legal and political war. In ordinary times, its decisions are largely boring questions of infrastructure, contracts, debts, and other local government policy where there would be little good-faith reasoning for the board not to align with Disney’s interest in keeping a healthy governmental environment.

Disney has good reason to think that even without an explicit deal, business will return to normal, and DeSantis’ appointees will agree to Disney’s reasonable proposals. To do otherwise would be to undermine Disney World, a cultural powerhouse and the state’s largest employer. By simply submitting to this bill and the governor’s control, Disney would be sending an unspoken message to the state of Florida that it intends to play ball.

Reedy Creek helped Disney World become the money-making and cultural behemoth it is today. Ultimately, the district is just one small part of Disney World, which is itself just one part of an even larger corporation with tens of billions of dollars in revenue each year—a corporation that desperately wants to be seen as wholesome.

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 based out of Maitland, Fla., with a practice concentrating on local government-related matters.

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