https://www.tampabay.com/news/florida-politics/2022/04/28/di… One of the nation’s leading bond rating agencies warned Thursday that if the state of Florida doesn’t resolve a conflict over its decision to repeal Walt Disney World’s Reedy Creek Improvement District and its obligation to investors, the move could harm the financial standing of other Florida governments.
Fitch Ratings posted the alert late Thursday on its Fitch Wire website, nearly a week after Gov. Ron DeSantis signed into law the measure dissolving the special taxing district that governs Disney property by June 1, 2023.
The Reedy Creek Improvement District holds nearly $1 billion in bond debt, and last week Fitch issued a “negative watch” because of the uncertainty around how that debt will be paid and by whom.
The Reedy Creek Improvement District holds nearly $1 billion in bond debt, and last week Fitch issued a “negative watch” because of the uncertainty around how that debt will be paid and by whom.
I have been participating in regular pilgrimages to Walt Disney World since my first visit as a child in 1972. As an adult, I have long thought that the Reedy Creek Improvement District was a form of corrupt Florida politics from the 1960s. A benefit like “self-governing, self-zoning, and self-policing” by a private company should have had a 20-year sunset provision or a restriction against new Reedy Creek debt issuance without the direct involvement of Orange and Osceola County representatives, due to the burden Disney World traffic and operations place on the counties.
The Florida Constitution prohibits the state from interfering with contract rights, including the rights of bondholders holding Reedy Creek debt. As a result, I expect the Florida courts to either completely invalidate Florida’s precipitous attempt to dissolve the Reedy Creek District or, alternatively, to declare that the dissolution law cannot take effect until Reedy Creek’s existing bond obligations mature and/or are paid in full if prepayment occurs.
Ideally, the courts will strike down the retaliatory legislation as unconstitutional. In such an event, I expect the lawmakers to pass the law again, but to include provisions protecting bondholders against impairment or disadvantage. In addition, the Reedy Creek dissolution legislation ought to include provisions protecting Orange and Osceola Counties against Disney’s intentional sabotage of Reedy Creek infrastructure assets leading up to the handover of the district’s property to the county governments.
Real property law requires a Life Tenant (holder of an interest in real estate for life) to maintain and preserve the improvements, infrastructure, and structures in as good condition as when they received them, ordinary wear and tear excepted.
Assuming the Florida legislature eventually corrects its errors and passes a Reedy Creek dissolution statute that protects existing bondholders along with Orange and Osceola Counties, it ought to include language obligating Reedy Creek to continue maintaining all physical assets in compliance with state & federal laws (including environmental laws) in the same manner as a Life Tenant must use and maintain improvements for the benefit of the Counties which will accede to ownership and control when the Reedy Creek District succumbs to an arguably long-overdue death.
Disney bought lots of undeveloped, agricultural, and misc land–which they then developed into the money-making businesses on the land. Thus, if Disney was to abandon the land totally, it would still be improved far beyond what Disney originally purchased.
I would want Disney to CHARGE THE STATE the “replacement cost new” for everything they have done–which would be FAR MORE than anything DeathSantas and his minions could do in 1000 lifetimes.
The author points out that Reedy Creek’s contractual taxing power through FL’s enabling legislation (which in turn drives its bond prices) is exceptional in allowing it to assess much higher rates than any other municipal or county government and that Orange and Osceola counties could not make those same current assessments. This would put the bonds in default. So , yes, FL would violate several constitutional provisions were this law to go into effect.
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.”
The Florida Constitution prohibits the state from interfering with contract rights, including the rights of bondholders holding Reedy Creek debt. As a result, I expect the Florida courts to either completely invalidate Florida’s precipitous attempt to dissolve the Reedy Creek District or, alternatively, to declare that the dissolution law cannot take effect until Reedy Creek’s existing bond obligations mature and/or are paid in full if prepayment occurs.
Ideally, the courts will strike down the retaliatory legislation as unconstitutional. In such an event, I expect the lawmakers to pass the law again, but to include provisions protecting bondholders against impairment or disadvantage. In addition, the Reedy Creek dissolution legislation ought to include provisions protecting Orange and Osceola Counties against Disney’s intentional sabotage of Reedy Creek infrastructure assets leading up to the handover of the district’s property to the county governments.
Lawyers across the State of Florida are cracking champagne and giving each other high fives.
As an adult, I have long thought that the Reedy Creek Improvement District was a form of corrupt Florida politics from the 1960s.
Based on results, I would say this “corruption” has produced one of the highest revenue returning assets in Florida history out of pretty much nothing, with all infrastructure paid for by the tenant, not the taxpayer, and ongoing costs of maintenance and renewal also paid by the tenant, not the taxpayer, and with ongoing growth and improvement every year under multiple CEO’s and expansion of the corporation.
Moreover, it has served as a magnet for other similar enterprises, raised asset values of real estate for a hundred miles in every direction, and produced 80,000 direct jobs and hundreds of thousands indirectly across the state and around the country.
If that’s “corruption”, bring it on.
protecting Orange and Osceola Counties against Disney’s intentional sabotage of Reedy Creek infrastructure assets leading up to the handover of the district’s property to the county governments.
Why would they do that? They’re going to have to continue to live right there with all those officials overseeing their every move. It’s not as though they can pick up the park and relocate it to Georgia, can they?