Disney Sues DeSantis

 by Ray Keating

News/Commentary

DisneyBizJournal.com

April 26, 2023

 

What a strange story. One of the world’s largest entertainment businesses, The Walt Disney Company, has been doing battle with the Republican governor of Florida, Ron DeSantis. And now that battle is spilling into the courtroom, as Disney has brought a lawsuit against Governor DeSantis, the Central Florida Tourism Oversight District’s Board of Supervisors and other state officials.

Keep in mind that Disney is one of Florida’s largest employers, and Disney World is the nation’s largest single-site employer. And DeSantis is prepping to run for president … again, as a Republican.

 

In the lawsuit, Disney asserts, “A targeted campaign of government retaliation—orchestrated at every step by Governor DeSantis as punishment for Disney’s protected speech—now threatens Disney’s business operations, jeopardizes its economic future in the region, and violates its constitutional rights.”

 

It later continues: “At the Governor’s bidding, the State’s oversight board has purported to 'void' publicly noticed and duly agreed development contracts, which had laid the foundation for billions of Disney’s investment dollars and thousands of jobs. This government action was patently retaliatory, patently anti-business, and patently unconstitutional. But the Governor and his allies have made clear they do not care and will not stop. The Governor recently declared that his team would not only ‘void the development agreement’—just as they did today—but also planned ‘to look at things like taxes on the hotels,’ ‘tolls on the roads,’ ‘developing some of the property that the district owns’ with ‘more amusement parks,’ and even putting a ‘state prison’ next to Walt Disney World. ‘Who knows? I just think the possibilities are endless,’ he said.”

 

And regarding motivations, it is asserted in the lawsuit: “Governor DeSantis and his allies paid no mind to the governing structure that facilitated Reedy Creek’s successful development until one year ago, when the Governor decided to target Disney. There is no room for disagreement about what happened here: Disney expressed its opinion on state legislation and was then punished by the State for doing so.”

 

Disney also puts forth: “It is a clear violation of Disney’s federal constitutional rights—under the Contracts Clause, the Takings Clause, the Due Process Clause, and the First Amendment—for the State to inflict a concerted campaign of retaliation because the Company expressed an opinion with which the government disagreed. And it is a clear violation of these rights for the CFTOD [Central Florida Tourism Oversight District] board to declare its own legally binding contracts void and unenforceable. Disney thus seeks relief from this Court in order to carry out its long-held business plans.”

 

How did we get here? As DisneyBizJournal has explained before:

 

[O]n Monday, February 27, … Governor Ron DeSantis (R) signed House Bill (HB) 9-B. The law renames the Reedy Creek Improvement District as the Central Florida Tourism Oversight District, and it replaces the governing board – from those appointed by the landowners, i.e., Disney, to those appointed by the Florida governor, with approval by the state senate.

 

Reedy Creek had been established in 1967, and it allowed Disney to self-govern development and assorted services within the boundaries of the land upon which Disney World sits. This long-established set up came under attack last year. 

 

Disney foolishly weighed in against a piece of Florida education legislation [the Parental Rights in Education Act] that had nothing to do with its business, doing so under pressure from various left-wing groups within and outside the company. DeSantis saw a political opportunity to gin up his base, and pushed legislation that would end Reedy Creek. 

 

The details eventually were hammered out. And as expected, the appointees put forth by DeSantis for the governing board of the Central Florida Tourism Oversight District are his political allies.

 

Incidentally, there are hundreds of special districts like Disney’s – though smaller. As DisneyBizJournal has noted, “By the way, DeSantis made his announcement about Disney’s special district at The Villages, which benefits from its own special district. But The Villages happens to be home to many DeSantis’ political supporters, so…”

 

But that wasn’t the end of it. Before it was renamed and reconstituted, the Reedy Creek Improvement District’s Board of Supervisors passed restrictive covenants and a development agreement. As Disney explained in the lawsuit: “Amid great uncertainty about the lengths to which the State would go to keep punishing Disney for its views, RCID and the Company gave public notice, in January 2023, that they would enter into contracts to secure future development for the District and Walt Disney World—contracts that implemented a comprehensive plan for the District that the DeSantis Administration itself had found compliant with Florida law months earlier.”

 

Regarding such development, Disney, which pays $1.2 billion annually in state and local taxes in Florida, has said that its Disney World resort expansion plans for the coming decade feature $17 billion in investment and the addition of 13,000 jobs.

 

But, today, as reported by The New York Times:

 

On April 26, the board appointed by Mr. DeSantis voted to nullify the two agreements that gave Disney vast control over expansion at the complex. Earlier, a lawyer for the board said Disney’s maneuvers relating to the development agreements were “improper and illegal” and that the company had failed to comply with a state law requiring it to notify the public before taking any actions.  

 

Immediately after the board nullified the agreements, Disney sued Mr. DeSantis, the board and other state officials in federal court, saying it was subjected to “a targeted campaign of government retaliation.” The company has maintained that its actions with the agreements were legal and were approved in open public forums.  

 

As for the judge and Disney’s lawyer in the case, the Times reported, “Daniel M. Petrocelli, a high-powered Los Angeles litigator, filed the lawsuit in Tallahassee on Disney’s behalf. Mr. Petrocelli was the lawyer Mr. Trump turned to in 2016 when dealing with a class-action fraud case against the defunct Trump University. Disney’s case was assigned to Mark E. Walker, chief judge for the Northern District of Florida. Judge Walker, known for stinging rulings and appointed by President Barack Obama, has experience with First Amendment cases.”

 

As for the DeSantis side, the Orlando Sentinel reported, “The Central Florida Tourism Oversight District has hired four outside law firms, including the politically connected Cooper & Kirk firm. Cooper & Kirk’s lawyers will bill $795 an hour, according to the firm’s engagement letter. The boutique firm’s roster of lawyers includes Adam Laxalt, who roomed with DeSantis when he was training at the Naval Justice School in 2005 and made an unsuccessful bid for U.S. Senate last year in Nevada.”

 

Regarding the timing of the lawsuit, the Times also noted, “Disney filed its complaint minutes after a board appointed by Mr. DeSantis to oversee Disney World nullified two agreements that gave Disney vast control over expansion at the resort complex,” including giving “Disney the ability to build 14,000 additional hotel rooms, a fifth theme park and three smaller parks.”

 

And finally, don’t forget that politics drives this entire issue for DeSantis. But politics can be fickle, and he is getting push back from others who want to be the Republican presidential candidate in 2024. For example, the Sentinel noted:

 

Nikki Haley, the former South Carolina governor and United Nations ambassador now running for the Republican presidential nomination, took a dig at her potential primary rival as she reacted to the lawsuit.

 

“My home state will happily accept your 70,000+ jobs if you want to leave Florida,” Haley tweeted at Disney on Wednesday afternoon.

 

South Carolina is “not woke, but we’re not sanctimonious about it either,” she added — an unsubtle reference to DeSantis, whom Trump has nicknamed “Ron DeSanctimonious” on the campaign trail.

 

In the lawsuit, Disney declares, “In America, the government cannot punish you for speaking your mind.” Well, I guess this case will put this fundamental principle to the test.

__________

 

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right? 

 

Consider books by Ray Keating…

 

• Pre-order The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist. Kindle edition here and signed books here. And don’t forget the first book in this growing series, i.e., The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon. 

 

• The Pastor Stephen Grant thrillers and mysteries. You can order the latest book in the series – Under the Golden Dome: A Pastor Stephen Grant Novel. Get the signed books here, or paperbacks and Kindle editions right here.

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

• Behind Enemy Lines: Conservative Communiques from Left-Wing New York  –  signed books  or at  Amazon.

 

•  Free Trade Rocks! 10 Points on International Trade Everyone Should Know is available at  Amazon  in paperback or for the Kindle edition, and signed books at  www.raykeatingonline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

 

DeSantis Signs Bill Ending Disney’s Reedy Creek District

 by Ray Keating

News/Commentary

DisneyBizJournal.com

February 27, 2023

 

A weird political moment for Florida and The Walt Disney Company came to a climax on Monday, February 27, when Governor Ron DeSantis (R) signed House Bill (HB) 9-B. The law renames the Reedy Creek Improvement District as the Central Florida Tourism Oversight District, and it replaces the governing board – from those appointed by the landowners, i.e., Disney, to those appointed by the Florida governor, with approval by the state senate.

Reedy Creek had been established in 1967, and it allowed Disney to self-govern development and assorted services within the boundaries of the land upon which Disney World sits. This long-established set up came under attack last year. 

 

Disney foolishly weighed in against a piece of Florida education legislation that had nothing to do with its business, doing so under pressure from various left-wing groups within and outside the company. DeSantis saw a political opportunity to gin up his base, and pushed legislation that would end Reedy Creek. 

 

The details eventually were hammered out. And as expected, the appointees put forth by DeSantis for the governing board of the Central Florida Tourism Oversight District are his political allies. And that will be the case with future governors, no matter the political party, as well. What these political appointees will mean for the operations, including costs, of running the district aren’t completely clear, but it’s safe to say that costs will increase.

 

The politics driving the situation aren’t exactly being hidden, as DeSantis was quoted by CNN saying the following at the signing on Monday: “Disney came out against something that was really just about protecting young kids, and making sure that students are able to go to school learning to read, write, add, subtract, and not having a teacher tell them that they can change their gender. And I think most parents agree with that. But you know, that was only a mild annoyance. I think that what we came to realize after that dust settled on that was you clearly had a movement within the corporation itself.”

 

Whether one agrees with DeSantis or not, the dangers of the government punishing a particular entity because it disagreed with what it had to say on a political issue should be obvious to all.

 

In fact, CNN noted: “While the move was celebrated by conservative media, several of DeSantis' would-be GOP rivals have been critical. Former Vice President Mike Pence said the conflict with Disney was ‘beyond the scope of what I as a conservative, limited government Republican would be prepared to do.’ And New Hampshire Gov. Chris Sununu said penalizing businesses for political speech set ‘the worst precedent in the world.’”

 

Apparently, the bill signing went even further for the politics. CNN pointed out, “Monday's bill signing event turned into a lengthy takedown of Disney that extended beyond its foray in Florida’s legislative activity. DeSantis featured speakers who assailed the company’s vaccine and mask policies, its treatment of firefighters and its more recent entertainment offerings.” 

 

The labor union representing various Reedy Creek workers has been onboard with this effort by DeSantis. After all, unions far prefer dealing with government than with a private business. A labor union and a Republican governor who touts himself as a conservative working together to undermine a leading business in the state? More weirdness.

 

In reality, the key troubling ability that Disney had via Reedy Creek was to issue tax-free municipal bonds to fund its projects. Long ago, that subsidy should have been tightened up considerably or eliminated.

 

However, what Disney was able to achieve via Reedy Creek in terms of reduced costs and delays than what normally would be imposed via local government, and the resulting economic benefits achieved for the company, its workers, and the overall region and state, should serve as a positive example of what limited regulation can achieve. One might think that this would be something that Republicans would want to find a way to capitalize on and expand to other businesses. A constructive question would have been: What could be learned from the Reedy Creek example that could be applied far more widely to businesses in Florida and elsewhere? Perhaps enterprise zones that reduce regulatory burdens?

 

But instead DeSantis declared, “Allowing a corporation to control its own government is bad policy, especially when the corporation makes decisions that impact an entire region. This legislation ends Disney’s self-governing status, makes Disney live under the same laws as everybody else, and ensures that Disney pays its debts and fair share of taxes.”

 

Of course, Disney always was paying its debt and taxes, and that only would have changed if state lawmakers had changed the law accordingly. 

 

In the end, many Republicans today seem far more interested in pushing a war on “wokeness,” rather than emphasizing policies that promote opportunity and economic growth, not to mention the idea of persuading others with sound arguments supporting your values, ideas and policies across the board.

 

__________

 

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right? 

 

Consider books by Ray Keating…

 

• The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon. 

 

• The Pastor Stephen Grant thrillers and mysteries. The latest in the series is Persecution: A Pastor Stephen Grant Novel. Get the signed books here, or paperbacks and Kindle editions right here.

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

• Behind Enemy Lines: Conservative Communiques from Left-Wing New York  –  signed books  or at  Amazon.

 

•  Free Trade Rocks! 10 Points on International Trade Everyone Should Know is available at  Amazon  in paperback or for the Kindle edition, and signed books at  www.raykeatingonline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

Disney Says Bye, Bye to Reedy Creek

 by Ray Keating

News/Analysis

DisneyBizJournal.com

February 13, 2023

 

Florida state lawmakers finished doing the bidding of Governor Ron DeSantis last week by establishing a new special district – the Central Florida Tourism Oversight District – replacing the Reedy Creek Improvement District. 

Reedy Creek was established in 1967, and allowed Disney to self-govern the land upon which Disney World sits. The renamed district now will have a board selected by the governor, with approval from the state senate.

 

As expected and based on a statement released on Friday, Disney is looking to work under the new system. Walt Disney World President Jeff Vahle released the following statement on February 10: 

 

“For more than 50 years, the Reedy Creek Improvement District has operated at the highest standards, and we appreciate all that the District has done to help our destination grow and become one of the largest economic contributors and employers in the state. We are focused on the future and are ready to work within this new framework, and we will continue to innovate, inspire and bring joy to the millions of guests who come to Florida to visit Walt Disney World each year.”

 

A page has been turned in the relationship between The Walt Disney Company and the state of Florida. The question is: What additional costs and uncertainties will Disney face going forward whether the governor is a Republican or Democrat?

 

__________

 

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right? 

 

Consider books by Ray Keating…

 

• The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon. 

 

• The Pastor Stephen Grant thrillers and mysteries. The latest in the series is Persecution: A Pastor Stephen Grant Novel. Get the signed books here, or paperbacks and Kindle editions right here.

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

• Behind Enemy Lines: Conservative Communiques from Left-Wing New York  –  signed books  or at  Amazon.

 

•  Free Trade Rocks! 10 Points on International Trade Everyone Should Know is available at  Amazon  in paperback or for the Kindle edition, and signed books at  www.raykeatingonline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

Iger’s First Post-Chapek Earnings Call Amidst Assorted Challenges

 by Ray Keating

News/Analysis

DisneyBizJournal.com

February 7, 2023

 

The Walt Disney Company’s earnings report and call for the quarter that ended in December of last year comes tomorrow (February 8) in the midst of a flurry of activity by and targeted at the company.

 

Of course, this is the first earnings call in the Iger II-post-Chapek period. Although, the quarter being reported covered both Chapek and Iger in the CEO driver’s seat, and Iger will be providing some forward-looking guidance.

As for the flurry of activity, there’s Nelson Peltz vying for a seat on the Disney board. Peltz’s Trian Partners has accumulated about $1 billion worth of Disney stock. But Trian’s campaign to get Peltz or his son a seat is opposed by the current Disney board. While Peltz has some points, there seems to be little excitement about his board campaign other than from Peltz.

 

Iger has challenges even beyond contributing to the search for his own successor. In a February 2 letter to shareholders, the Disney Board noted, “The Board is overseeing important strategic changes that our CEO Bob Iger is executing, such as putting more decision-making into the creative teams, implementing a cost reduction plan, prioritizing streaming profitability and improving the guest experience in our parks.” Cuts and restructuring promise to be painful, with the hope, of course, that the company is better positioned going forward. 

 

At the same time, Iger needs to deal with improving the experience of customers (or guests) at the parks, even as members of a key Walt Disney World union just overwhelmingly voted down a contract. 

 

Oh yes, and there are those uncertainties about whether or not the U.S. will slip back into recession in 2023.

 

For good measure, Florida state legislators are just about to fulfill Governor Ron DeSantis’s attack on Disney by turning over control of the Reedy Creek Improvement District, an entity that basically has allowed Disney to self-govern the land upon which Disney World sits since 1967, to a board selected by the governor, with approval from the state senate. That inevitably will slow development down and raise costs for Disney, and depending upon who sits on the board, could create additional headaches for the company.

 

Also, on the streaming front, The New York Times has reported, “Analysts polled by FactSet estimate that Disney+ will have 163 million subscribers, a slight erosion from the previous quarter.” However, as widely noted, the top focus across the streaming industry now has become profitability, with the question being which streaming platforms are dealing with costs so as to provide shareholders and consumers benefits now and into the future, and which ones are miscalculating due to short-run worries.

 

And as for Disney’s movie business, it’s a mixed story. There’s good news, of course, including the box office results from Avatar: The Way of Water, along with the company receiving 23 Academy Award nominations. However, Pixar is now floundering, and the Marvel superhero franchise has been seeing real chinks in the armor. While I expect Guardians of the Galaxy Vol. 3, coming in May 2023, to be a hit, there are obvious questions about Ant-Man and the Wasp: Quantumania (February 17) and The Marvels (July 28).

 

Much is expected from CEO Bob Iger’s first earnings call since returning, and he will need to ace it. Stay tuned.

 

__________

 

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right? Keating also is a Disney shareholder.

 

Consider books by Ray Keating…

 

• The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon. 

 

• The Pastor Stephen Grant thrillers and mysteries. The latest in the series is Persecution: A Pastor Stephen Grant Novel. Get the signed books here, or paperbacks and Kindle editions right here.

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

• Behind Enemy Lines: Conservative Communiques from Left-Wing New York  –  signed books  or at  Amazon.

 

•  Free Trade Rocks! 10 Points on International Trade Everyone Should Know is available at  Amazon  in paperback or for the Kindle edition, and signed books at  www.raykeatingonline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

6 Big Reasons Why the DeSantis Attack on Disney is a Disturbing and Costly Political Mess

 by Ray Keating

Commentary/Analysis

DisneyBizJournal.com

April 27, 2022

 

Hold on a minute. I’m confused. I thought Republicans were against debt relief. For good measure, I was under the impression that Florida Governor Ron DeSantis, a Republican, was less than thrilled with the Walt Disney Company.

 

But if that’s all true, then why have DeSantis and Florida Republican state legislators at least opened the door to massive debt relief for Disney, as well as a possible big tax cut for the House of Mouse? Hmmm, does this mean that DeSantis secretly loves Disney?

 

Well, let’s not get carried away. 

In reality, what DeSantis has done is lash out at the Walt Disney Company in the hopes of stirring up and ingratiating himself with parts of the Republican Party base. However, being governor of the third largest state in the nation means – or should mean – that you don’t irresponsibly treat businesses, residents and the Florida economy as your personal political playthings. But then again, DeSantis is trying to position himself as the next Donald Trump, so…

As a quick reminder, DeSantis and Disney disagreed on Florida’s House Bill 1557. And yes, it was incredibly dumb for Disney to stake out ground on this issue when it has nothing to do with its business. But Disney CEO Bob Chapek caved to some vocal activists in his company, and the result has been a mess for the company. (See DisneyBizJournal’s previous analyses on this here, here and here.) 

 

However, even if one disagrees with Disney’s decision on this – which I strongly do, by the way – that doesn’t in turn mean that one should support the charge led by DeSantis to use legislation to punish a company that he disagrees with on an issue. Nonetheless, that’s exactly what DeSantis along with Republicans in the Florida state legislature did when passing legislation that will dissolve Walt Disney World’s Reedy Creek Improvement District as of June 1, 2023.

 

Reedy Creek was created in 1967 and allowed Disney to effectively self-govern the 25,000 acres the company purchased to create Walt Disney World. That means that Disney, through the District, controls essential services like infrastructure, electricity, water, sewage, zoning, solid waste and recycling, building codes and approvals, and a fire department. It’s a unique set up pertaining to a unique situation. Reedy Creek covers two towns, Bay Lake and Lake Buena Vista, with about 50 residents today who own the land and actually elect their own mayors and city councils. These residents obviously are Disney employees.

So, let’s review the rather lengthy list of problems with this egregious act by DeSantis and GOP state legislators.

 

First, government punishing a company for the stance it takes on a political issue flies directly in the face of the First Amendment. You know: “Congress shall make no law … abridging the freedom of speech…” Indeed, this act is a deeply disturbing act by government that should outrage everyone, including all of those Republicans who used to talk about how much they loved freedom and abhorred big, abusive government.

 

Second, the U.S. Constitution also prohibits bills of attainder (Article I, Section 9, Clause 3). That is, legislative acts cannot be used to punish a particular individual or entity. As explained in the case United States v. Lovett, legislative acts are prohibited that “no matter what their form … apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a judicial trial…” Again, I remember when Republicans at least spoke about the need for separation of powers. Of course, the response is that this bill covers a few other districts created before 1968 as well. That, of course, is a farce, as the intent has been made clear by the governor and state lawmakers that this legislation is meant to punish Disney.

Third, contracts matter, but the law dissolving the Reedy Creek District ignores the binding contract that the state has with holders of Reedy Creek bonds. As explained in an analysis at Bloomberg Law:

 

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.”

 

As noted later in the Bloomberg piece:

 

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. As early as 1866, the U.S. Supreme Court held that once a local government issues a bond based on an authorized taxing power, the state is contract-bound and cannot eliminate the taxing power supporting the bond. The Florida Constitution provides even greater protection from impairment of contracts.

 

Fourth, this bondholder language points to a host of problems regarding bonds and taxes. As the Bloomberg piece, as well as other analyses, points out, “The bill dissolving Reedy Creek doesn’t say what should happen to these debts, but another statute does: By default, the local general-purpose government—the county—assumes the district’s debt, along with all of its assets. This means that theoretically, Orange and Osceola counties will inherit upward of $1 billion in bond debt.” Other reports put the amount of Reedy Creek debt higher.

 

Indeed, among the unknowns is the distinct possibility of hitting taxpayers in two local counties with big tax increases. 

 

Disney already pays both sales and property taxes to localities, such as counties and school districts. In fact, CNBC reported, “Public records show Disney is the largest taxpayer in central Florida, paying over $280 million in property taxes to the counties between 2015 and 2020.” Also, as noted, Disney effectively pays taxes to itself with the Reedy Creek District, with Reedy Creek collecting $164 million annually from Disney to pay for services like road maintenance, utilities, fire protection, and so on.

 

GOP state lawmakers claim that Reedy Creek taxes will get shifted to the counties. But Disney taxes itself at a much higher property tax rate than is allowed by the state constitution. In fact, three times higher, as noted above. So, if Reedy Creek were dissolved, a massive amount of costs would be shifted to the counties, but Disney would pay less than it is now in taxes. CNBC noted:

 

Tax experts say that in order for the counties to collect additional revenue from Disney to pay the bond debt, the counties would have to create a new special tax district of their own. Even if they created a new special “Disney” tax district, the tax rate would be capped below that of the current district rate, leaving Orange and Osceola counties with Reedy Creek’s debt service but with less revenue to pay it off.

 

For good measure, government has little ability to control costs, so the bill to local taxpayers promises to be rather substantial, though, again, no formal analysis has been done at this point.

 

Plus, if the dissolving of Reedy Creek goes this route, bondholders no doubt will sue, and that will prove to be a costly legal battle paid for by taxpayers in service of Governor DeSantis’ political desires.

 

Hmmm, remember when the top issue for Republicans was tax relief?

Fifth, the legislation was created in haphazard fashion, to say the least. At the last minute, it was crammed into a special session. Legislators got to look at the bill for two days before it was rammed through without any substantive analysis as to the effects of the legislation, such as on taxpayers and the economy, nor does it spell out how the dissolution would actually work. Indeed, no one seems to have a clue as to how any of this would work. DeSantis and legislators promise to get around to that down the road. According to the Orlando Sentinel, “Not even the bill’s sponsors – Sen. Jennifer Bradley, R-Fleming Island, and Rep. Randy Fine, R-Palm Bay – could provide the intricate details of how Reedy Creek would be dissolved, saying the matter will be hammered out in the next year.” Sure, right, let’s not spoil this political opportunity to pander with potentially messy details. So much for slowing the mechanism of government to consider the full implications.

 

Sixth, there’s also the fact that state law requires a voter referendum by residents or land owners in a special district in order to dissolve that district. Obviously, Disney isn’t going to vote for that. But according to the Sentinel, Republican lawmakers claim that the new law trumps the old law. That is in dispute, and would lead to another costly legal battle.

 

Of course, the key benefit that the Reedy Creek District offers Disney is to avoid costly meddling and delays that come with being regulated by local governments. Walt Disney experienced those problems firsthand in California, and sought to avoid such an outcome in Florida. And if the Reedy Creek district actually is dissolved, Disney not only will face costly regulations that create delays and raise costs, but also local governments running various services that Disney has been doing. Disney has operated such services efficiently, you know, like a business does if it wants to succeed. When was the last time you hit a pothole in Disney World? Turning such operations over to government would mean diminished quality of service, as government is wont to do, along with increased dollar costs.

 

One might think that Republicans, who used to care about the economy, would be trying to figure out how they can expand the opportunity for more businesses to be able to do what Disney has in terms of more efficiently running various services, rather than punishing the company who has shown that, yes, business can do most things better than government. And again, with Disney doing the work and paying for it, taxpayers don’t get hit with the bill.

Geez, it’s almost like Governor DeSantis and his fellow Republicans in the state legislature didn’t really think this through, or they didn’t really care to think about anything other than political pandering. Go figure.

 

As for Disney, company corporate affairs officer Geoff Morrell was quoted by the Hollywood Reporter back on March 2, 2022, saying: 

 

“Whatever Bob’s personal politics are, he’s not an activist and does not bring any partisan agenda to work. He sees himself first and foremost as the custodian of a unifying brand that for nearly a century has been bringing people together, and he is determined that Disney remain a place where everyone is treated with dignity and respect… He believes the best way we can help create a more inclusive world is through the inspiring content we produce, the welcoming culture we create and the diverse community organizations we support.” 

 

That’s spot on correct. Chapek and Disney (and its shareholders) would have fared much better in this situation and would be better positioned going forward when other hot-button topics inevitably crop up with activists trying to pressure the company, if they had stuck with what Morrell explained. But Chapek caved, and the company has been dragged into the muck of politics in an era when the hard Left and populist Right thrive on division and controversy.

 

__________

 

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

Two great ways to pre-order Cathedral: An Alliance of Saint Michael Novel, which is Ray’s sixteenth work of fiction, and the first in the Alliance of Saint Michael series. Signed paperbacks here and the Kindle edition here. 

 

Two great ways to order Ray Keating’s new nonfiction book – The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks here, and paperbacks, hardcovers and Kindle editions here.  

 

Get all of Ray Keating Pastor Stephen Grant thrillers and mysteries in paperback and for the Kindle at Amazon.com and signed books at www.RayKeatingOnline.com. 

 

Get more out of the rest of 2022 with The Disney Planner 2022: The TO DO List Solution! It combines a simple, powerful system for getting things done with encouragement and fun for Disney fans, including those who love Mickey, Marvel, Star Wars, Indiana Jones, Pixar, princesses and more. Also, “The Disney Planner 2022: The TO DO List Solution” comes with a handy spiral binding for easy use. It’s on sale and shipping is always free!

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.