Dissolving theme park self-government won’t be so simple

In late April, a short special session of the Florida legislature voted to dissolve the Reedy Creek Improvement District, a previously little-known entity that functions as the private government of Disney Co. in central Florida.

For more than 50 years, the district has enabled Disney to oversee various services for 27,000 acres in central Florida that house the company’s theme parks.

The disbandment, widely understood to be part of a larger political row over the “Don’t Say Gay” law between Disney and Florida Governor Ron DeSantis, leaves a series of unresolved issues in its wake, experts said. bisnow this week.

One uncertainty is the fate of more than hundreds of millions of bonds issued by the district. In addition, there is the potentially longer-term question of whether Orange and Osceola counties will be permanently responsible for providing the services currently provided by Reedy Creek.

“I’m not sure there has ever been a case where a special district was disbanded without a specific plan in place on how the debt and services provided by the district would be distributed among the local governments,” they said. said Shepard, Smith, Kohlmyer & Hand. partner Jacob Schumer, who is based in Orlando.

That kind of uncertainty is a recipe for legal challenges, he added, and at this stage of the game any number of legal challenges are possible. This is especially true if the Florida legislature does not reinstate the district or devise another solution that would satisfy everyone involved.

Given the stormy political circumstances that prompted the Florida legislature to shut down Reedy Creek, finding such a solution could be problematic.

“It was a way for Governor DeSantis to appeal to his conservative base and gain more national attention, to get his name recognized among Republican voters across the country,” Aubrey Jewett said. , an associate professor in the Department of Political Science at the University of Central Florida, specializing in Florida politics.

The governor’s office did not respond to questions from bisnow On the question.

“About an hour before the start of the special session, the governor announced that he was expanding the session to include the dissolution [of] Reedy Creek,” Jewett said. “So there was no warning, and a few days later, bing-bang-boom, it was done, with virtually no research into the financial implications for the government. or whatever.”

The governor’s office released a statement shortly after DeSantis signed the bill stating that “in the near future, we will be proposing additional legislation to authorize additional special districts in a manner that ensures transparency and rules fair gaming under the law”.

No details were offered.

Legal challenges to the dissolution could come from multiple quarters, Schumer said.

Assuming there are no changes to the disbandment plan, Disney could have a First Amendment retaliatory lawsuit claiming the state punished him for exercising his free speech rights, a he noted. In such a case, the state could argue that it was within its rights, as the original creator of the special district, to dissolve it.

While possible, a First Amendment lawsuit is less likely than a lawsuit by Reedy Creek bondholders to stop the dissolution law from going into effect, Schumer said, and it’s possible some taxpayers in the county are also suing.

“It’s hard to guess what the private actors will do, but since every bondholder theoretically has the ability to sue, I would expect at least some of them to want to litigate. the cause – stepping in to say, it’s not OK,” Schumer said. “As it stands, the district’s debt is going to be dumped on Orange and Oceola counties.”

Currently, Reedy Creek has about $79 million in utility revenue and refund obligations and $766 million in ad valorem tax obligations, according to Fitch, which recently said the bill poses “significant risk.” for the credit quality of these districts, including Reedy”. Creek Improvement District.”

Reedy Creek did not respond to a question from bisnowBut the district issued a statement shortly after the legislature moved to dissolve it, attempting to reassure bondholders that Florida law requires that even in cases like this, they will be paid.

“In light of the State of Florida’s commitment to the District’s bondholders, Reedy Creek plans to explore its options while continuing its current operations, including…debt service payments on its ad valorem tax obligations and its utility revenue obligations, pursuant to its debt covenants and the operation and maintenance of its properties,” the statement read.

Reserved area

Bisnow/Dees Stribling

The Old State Capitol in Tallahassee

Although Reedy Creek is unique in that it is controlled by a major entertainment conglomerate, many of the powers granted to the district are found in other special districts in Florida, according to Jewett.

“For example, we have many community development districts, which are formed to finance, build and maintain infrastructure for new developments, and, like Reedy Creek, can issue tax-exempt municipal bonds to raise funds,” said Jewett.

The district also has the power “to issue general obligation bonds, revenue bonds, assessment bonds, or any other bond”, according to the 1967 charter.

Under Florida law, there are also fire protection districts, utility districts (water, sewer, electrical), drainage districts, mosquito control districts, transportation districts for roads and bridges, sanitation districts for solid waste and environmental districts to protect the land.

Most other states also provide this type of special districts.

“Yet the combination of powers given to Reedy Creek is not found in any other special district in Florida, and there are also a few powers that you won’t find anywhere else,” Jewett said.

More prosaically, these exceptional powers include Reedy Creek’s ability to have its own building code and building inspections, but Reedy Creek also possesses at least one very unusual power, at least by 21st century standards: the ability to develop a nuclear power plant.

In the 1960s, part of Disney’s plans for Reedy Creek included residential development, and it was seen at the time as a forward-thinking option for local power generation.

The ability to sue could be delayed, however, given the long delay – more than a year – before Reedy Creek is actually scheduled for bed.

“The biggest legal hurdle in my mind is that the dissolution doesn’t happen until June 1, 2023,” said Lewis, Longman & Walker shareholder Chris Lyon, who is based in Tallahassee and has represented special districts in as a lawyer and lobbyist for almost 20 years. “I’m not sure a court case on the debt issue is ripe before then.”

As for the argument that a referendum is needed to dissolve the district, Lyon said he doesn’t think that holds water, because the legislator made a specific exception to this law, which he is entitled to. to do.

During debate on the bill, Rep. Randy Fine, a Republican, said it replaces a requirement in Florida law that specifies that voters in a special district must approve its dissolution.

To which state Rep. Dotie Joseph, a Democrat, responded, according to CNN: “I think to change the law that’s there, you’ll repeal it, not just put in another one that violates it, but what the I know? I’m just a lawyer.”

A stakeholder vote on dissolution might be off the table, but that doesn’t mean the interested parties — Disney and the state — won’t negotiate, even though Disney has so far remained mum on its plans.

“Pragmatically, I imagine Disney/Reedy Creek would like to end this dispute and work with the Governor and Legislature to reinstate the District concurrently with the Dissolution Date – which the law allows – rather than to continue the fight by going to court,” Lyon said.

“What’s most likely to happen is a renegotiation,” said Eleanor Wilking, an assistant professor at Cornell Law School who studies tax policy.

“There are strong incentives on both sides that they come to an agreement and have Reedy Creek, or something very similar, reinstated,” Wilking said. “The political pressure is going to come from voters and representatives in Central Florida who don’t [want] a sudden property tax hike, no matter how big.”

There have been bottom-of-the-envelope calculations about how much ending Reedy Creek could cost the two counties, but no hard numbers yet, Jewett said.

“I think the governor and the legislature now realize that this looks bad politically, so I expect some sort of action on the matter shortly,” Jewett said.

“Dissolving Rey Creek is going to affect taxpayers no matter how they choose to do it,” said Sen. Linda Stewart, a Democrat who represents part of Orange County. bisnow. “It’s unavoidable. It wasn’t broken to begin with, so we don’t know why the state is changing it, other than the difference of opinion on a social issue between Disney and the governor.”

Stewart said the final numbers haven’t been worked out yet, but she thinks at least $1 billion is a useful shorthand. The Orange and Osceola county ratepayers bill will be at least as much, if not more, if Reedy Creek were really to be dissolved, she said.

“The amount of a property tax increase is of course based on the value of your home or commercial property,” Stewart said. “So for an Orange County homeowner, it could cost between $1,200 and $2,200 more per year, every year. It would probably be more for commercial owners.”

According to other calculations, the increases for landowners are considerably less than this.

Disney makes annual payments to the Reedy Creek Improvement District of $105 million for operations and $58 million for bond debt, or $163 million a year that would be passed on to local taxpayers, according to news outlet WESH.

Using that figure, a median-priced home in Orange County would pay $156 to $208 a year more if Disney’s government was ultimately dismantled, WESH estimates.

Teresa R. Cabrera

The author Teresa R. Cabrera