When Florida enacted its bill to dissolve Disney’s Reedy Creek Improvement District, problems with the move were immediately apparent. Simply dissolving a fully functioning, comprehensive local government unit not only would create massive logistical problems but also result in the local counties and cities taking on over $100 million in annual expenses and over $1 billion in outstanding debt—a fact that likely rendered the bill unconstitutional.
Gov. Ron DeSantis quickly promised that the legislature would fix the issues before the 2023 dissolution deadline, and articles have emerged indicating some kind of compromise has been reached. While any legislation remains under wraps, legal realities are pressuring Florida to keep Reedy Creek essentially identical to its current form.
Florida almost certainly wants to make a deal with Walt Disney Co. to avoid prolonged litigation with one of the state’s most important employers. No “deal” can be made with Disney unless Florida satisfies the claims of everyone other than Disney who could stop it, which means either canceling the dissolution or replacing Reedy Creek with a substantially identical district.
That leaves only one major item for negotiation: how far Florida goes in taking over control of the district. And because Disney’s legal case becomes stronger the more control Florida tries to take, Disney likely will continue to have fundamental control over the district.
The Other Parties
There are four main parties who could independently sue to upend any legislation resolving the Reedy Creek matter: district bondholders, the federal government, taxpayers, and Disney. To ensure that any deal with Disney goes through, the state will have to satisfy everyone else’s claims as well.
First, the district will have to remain essentially identical to eliminate the claims from the bondholders and federal government. As I mentioned in my previous article, Reedy Creek’s outstanding debt prevents it from simply being dissolved due to constitutional protections against a government passing laws impairing its own contracts. Its enabling act makes an explicit promise to bondholders that the state wouldn’t alter or interfere with the district’s powers to carry out and maintain its projects or to collect its fees and taxes.
The act makes a very similar promise to the federal government that the state wouldn’t interfere with the district’s powers to carry out and maintain its projects and perform its federal contracts. Any law that reins in any of these core functions would hand the federal government and anyone holding a Reedy Creek bond a strong case to put a stop to the state’s legislation.
For the same reasons, the district will have to continue to exist in some form to ensure taxpayers don’t face tremendous financial stress. Reedy Creek has a nine-figure annual budget and over $1 billion in debt, and when it goes away, all those costs, debts, and responsibilities have to go somewhere.
Right now, the law provides that the surrounding counties and cities will automatically take on the district’s debts and responsibilities. Taxpayers’ case to stop the dissolution is relatively weak—no law prohibits states from placing their local governments into financial jeopardy—but a lawsuit has already been filed and could delay any resolution that fails to account for taxpayer impacts.
Florida republicans have indicated that, consistent with these realities, any deal will either keep Reedy Creek in place with minor changes or create a Reedy Creek 2.0. DeSantis has promised that taxpayers won’t absorb the costs or debt from the district, and his bond chief stated that a functionally identical district will take its place. The question then is what changes are on the table for any final legislation.
Dealing With Disney
Florida could probably remove some of Reedy Creek’s more outlandish and unused powers—such as the ability to establish power plants that use nuclear and other “experimental” forms of power—without drawing rebuke from the courts or resistance from Disney.
But the real major item for negotiation is control of the district. While the special act creating Reedy Creek protected its powers, the act made no explicit promises about how it would be run. Florida Republicans have said that they want the state to take control, with DeSantis noting that Disney “will not control its own government in the state of Florida.”
The legal problem for Florida is that to take away Disney’s control of Reedy Creek is to take away the voting power of the landowners within the district. Reedy Creek’s enabling act places it under the direction of a board of supervisors, which are elected by owners of property within the district on a “one acre, one vote” method of election—a standard method of electing a special district’s governing body. The reason Disney controls Reedy Creek is because the district was drawn to contour the land owned or controlled by Disney.
If Florida attempts to place Reedy Creek under state control, Disney will have a much stronger court case than if the state simply dissolved the district. Depending on who you ask, Disney already had a claim that dissolving the district was unconstitutional retaliation for protected speech in violation of the First Amendment. However, that claim was not entirely clear, as it would be unusual for a court to step in to say a state cannot dissolve one of its own subdivisions based on an alleged improper motive.
Disney’s right to elect its representatives is much stronger than its right to have Reedy Creek exist at all. Disney, as property owner, was granted the statutory right to elect the district’s board of supervisors. If Florida tried to replace it with state political appointees, the situation would go from the state managing its own subdivisions to the state taking away a landowner’s right to vote for its local representatives—an action courts are much more accustomed to stepping in to prevent. Florida cannot avoid this control issue by simply creating a new district with a different governing body, as the state Constitution would require Disney to approve any special district with taxing powers like Reedy Creek.
That’s not to say Florida can do nothing to rein in Disney’s control. There have already been discussions that Florida might add one or more governor-appointed seats to the board without taking a majority. Florida could also require that Reedy Creek’s major decisions be approved by the state, similarly to how other local governments have their comprehensive plans and building and fire code amendments vetted by state agencies. But the chief direction of the district will most likely remain with the representatives elected by Disney.
Conclusion
Reedy Creek or something similar to it will almost certainly be in place for the foreseeable future, either by court intervention or legislation. Whatever changes may come, taxpayers and bondholders will stand mostly unaffected. The question for Florida—and for Disney—is how much oversight the state will enjoy over this uniquely powerful and corporate-controlled district. Disney faces the threat of going from a unique level of independence to being uniquely under the control of political appointees.
While Disney could throw in the towel, and while the state and one of its most important employers could get into a drag-out legal battle testing the limits of various doctrines, public reporting points to the parties coming to a compromise. That compromise will likely involve state involvement in—but not complete control over—Reedy Creek decision-making.
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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