MouseBucks: If Reedy Creek Dried Up

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There has been a lot of talk about the Florida Governor’s threat to revoke the authority, granted in 1967 by the Florida legislature, to the Reedy Creek Improvement District. Passed and signed into law by Governor Claude Kirk in the wake of Walt Disney’s passing, the RCID gives The Walt Disney Company the ability to establish and manage its own business codes, land use codes, environmental protections, taxes and essential public services (fire, security, pest and animal control, flood control, waste collection, etc.).

At the time, the surrounding counties did not have the resources to support the scale of project that the Disney company was proposing. So the Florida Legislature created the cities of Bay Lake and Reedy Creek (now City of Lake Buena Vista) and established the improvement district to manage their governance. Effectively, Disney World is its own county, except for the authority to arrest and prosecute violations of its codes.

There are consequences to the state if this authority is revoked. For one thing, Florida tax payers would become responsible for the infrastructure within the Disney property. The roads interconnecting the resorts and parks would be considered public. Further, revocation of the improvement district would again split Disney World into two separate counties (Osceola and Orange Counties), forcing both counties to assume responsibility for what Disney has built up over the last 50 years.

It should be noted that it is national and state GOP interests that are driving this effort; it is not supported locally. If the RDIC is effectively repealed, it will be a legal, logistical, financial, administrative and governing burden on the two counties. And both are quite happy not having that responsibility.

The practical impacts of a repeal in the short term would likely be a pause in construction while the two counties figure out what to do. In addition to planning, permitting and infrastructure issues, there are also certain tax and fee exemptions that could disappear. Or, there could be a transition period during which Reedy Creek continues business as usual while the two counties figure out how to proceed.

Remember, the counties and the state benefit greatly from the tax revenue Disney World brings in, so politics aside, there is a significant financial incentive to keeping the parks and resorts humming and guests happy and spending. Disney is the largest property tax payer in Orange County and is a significant source of funding for Osceola as well.

Regardless of the intent or actions by the state government, Disney still has quite a lot of leverage in its dealings with Osceola and Orange County. It will be difficult, and likely uncertain for shareholders, but Disney works with Orange County (coincidence) and the city of Anaheim to operate Disneyland Resort, so if it has to adjust, it will adjust.

https://allears.net/2022/04/16/what-would-repealing-the-reed…

Fuskie
Who still thinks Florida as a state doesn’t want to open this can of worms, but the story will have to play out…

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Very interesting and informative. I wonder it the governor has thought this through thoroughly and gotten input from the local authorities affected, or if it is a another shot from the hip like a lot of action being taken recently by some politicians. - Ned

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MSNBC reported that the initial taxpayer bill for the surrounding counties would be 1 billion dollars just in outstanding bond debt.

I can hear the taxpayers howling up here in New Hampshire.

Walt

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You a correct, Walt, and no, Ned, there has been no study or research as to the effects of the move on Florida’s economy or impact to taxpayers. Lawmakers supporting the move have openly admitted it is retaliatory because a company had the gall to exercise its free speech rights to protest a law that impacts its employees. It is a chilling idea that companies could be punished for opposing political power. It is anti-American in my book. The goal is to intimidate and bully corporate America into supporting or at least not opposing the governor’s march to the White House.

Here’s more on the story:

https://www.cnn.com/2022/04/19/politics/florida-disney-speci…

Fuskie
Who notes the repeal would essentially give Orange and Osceola counties a year to figure out how they are going to assume all the roles and responsibilities currently governed by the RCID without bankrupting taxpayers…

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It’s done, passed by both Florida House and Senate. DeSantis sure to sigh it into law.

Florida lawmakers have stripped Disney of special tax status

On Thursday, at the urging of Republican Governor Ron DeSantis, the state House passed a bill that would rid the company of its near-total power over the special district where its theme park is based. It had already passed the Senate.

https://www.bbc.com/news/world-us-canada-61179262

Steve

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The state of Colorado has already offered help if Disney wants to move any operations to their state. I am sure other states will also be lining up offer deals to Disney if they want to move any future plans out of Florida.

It would be very easy to move the cruise line to someplace up the coast or to some other state on the Gulf. They could even move the ships to the Bahamas.

I believe you will now see all future expansion plans at Disney World put on hold.

OTFoolish

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I believe you will now see all future expansion plans at Disney World put on hold.

I doubt that. Disney has so much invested in Florida that it would be corporate suicide to walk away. DeSantis is probably making that same calculation: he can make political points by beating up on “a California company”, with impunity, because of the fixed assets Disney has in the state.

And where would Disney go? A while back I was proposing DIS build another park in the US, as the response to crowding, rather than trying to regulate attendance by raising prices repeatedly. As an alternate location, I was thinking Texas. Saw a cartoon recently, Florida and Texas in a race to be the most extreme wrt repressive laws. Outside of California, I don’t see a state in the southern tier, with the sort of weather Disney needs for an outdoor park, that will not offer obstacles to a company with inclusive policies.

Steve

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Asked on the Disney Premium Board but I am copying my response here as well:

Does Disney pay County property taxes to the two counties where it’s located in Florida?

I am not an expert on this stuff, but I believe when you look at it as there being multiple entities involved. The theme parks and resorts are land owners that live and operate within the Reedy Creek Improvement District. They pay property taxes to the Improvement District that Reedy Creek then uses to pay for services provided.

Technically and legally, they are different entities. Reedy Creek operates as a government and the Disney properties are the residents. It’s not that they are all part of a single company, even though the elected leadership of RCID are basically company representatives. It provides a significant administrative convenience and financial advantages, but it’s not like Disney World would cease operations without it.

Because RCID does exist in Orange and Osceola Counties, and there are services that the counties provide to RCID and its residents. For example, Disney security has the authority to detain but not arrest. It has no judicial system, and while it provides its own utilities and services, it is still bound by county and state laws and regulation. So RCID does pay taxes and fees to the counties for these services. But it is all the things Disney does for itself through RCID that would become the responsibility of the two counties that would be most costly.

Much has been made of the $2b in debt that RCID carries. Reedy Creek is constantly making improvements, whether it be updating signage, maintaining or building new roads, upgrading utilities or watershed management, or even managing alligator and mosquito populations. Just the construction of the Halcyon resort next to Galaxy’s Edge required major redesign and construction of roads and intersections.

Because of the relationship between RCID and Disney’s properties, the Improvement District’s debt is financed by the permits and property taxes of the parks and resorts. Those costs are factored into Disney World’s operating budgets to service RCID’s operation on their behalf.

So from a taxation and cost perspective, while the mechanics would change, the general nature of how the parks and resorts relate to their governing authority would not be radically different. What Disney loses is a lost of control and the freedom to avoid the government bureaucracy that can slow projects down and increase costs. Believe me, neither Osceola nor Orange Counties want to add the headache of this burocracy.

But they do have experience working with entertainment vacation resorts, including Legoland, Universal Studios Florida, and many more that have grown up around Florida, lured by the volume of guests drawn to the area by Disney World. These operations too could be hit with tax increases to cover the costs of replacing RCID’s operations and services.

There is also the issue of thousands of contracts Reedy Creek has with 3rd party companies, providers, contractors, which would all have to be renegotiated with county authorities under terms that could be significantly different between counties responsible to tax payers from an improvement district responsible to a corporate overlord.

In fact, there’s some talk that it might be possible for the counties to create their own municipal authority to allow Reedy Creek to re-form under county authority without state permission. This could potentially allow Disney World to continue operating structurally much as it does currently. But this is complicated by the fact that Disney World lives in two different counties.

An argument is surfacing that while Disney World benefited from the Reedy Creek Improvement District as it brought forth magic from what was largely unwanted swampland in the 60’s, the operation has grown so large that there could be benefits from spinning it off (as well as the debt) and allowing the company to focus on the business of operating the parks and resorts themselves.

The question is whether the loss of autonomy is worth it.

https://www.bizjournals.com/orlando/news/2022/04/21/these-pr…

Fuskie
Who doesn’t know where this is going to go, but he is confident that Disney can survive it and that if there is any pain for shareholders, he believes it will be short-lived and the result of uncertainty, not any long-term fundamentally detrimental change to company’s operations…

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The state of Colorado has already offered help if Disney wants to move any operations to their state

There was a time that Disney considered building a ski resort but at the time, the limitations of weather and access sidelined the project. But with Disney, no idea is ever truly eliminated, just parked until its time comes.

What Disney could do, which would also make a number of its cast members happy, end its plan to move operations from California to Florida. The intent was to go from California’s high tax values to Florida’s lower cost of living and zero income tax. Many cast members have not been happy to have their lives uprooted even if there are financial benefits. I mean, California may have fire and earthquakes, but it doesn’t have hurricanes and flooding.

Disney had just announced the construction of housing that could potentially accommodate cast members, either local or moving in from California, but construction hasn’t started yet and the project could easily be pulled of the company decides to reverse its decision. Or move its operations to Colorado.

As for Disney Cruise Line, this is harder. Disney is already building a second terminal on the east coast of Florida in addition to its private terminal at Port Canaveral. Disney also rents port space in Galveston during the winter for more Western Caribbean itineraries. When you move north up the east coast, you start to run into more industrial marine traffic, starting with the Port of Savannah. It’s more about where you locate the port terminal - you have to be able to navigate your ships in and out as well. Plus, the operating costs to fuel longer travel as well as the additional time it could add to get to various ports of call.

Fuskie
Who notes the ships are already registered out of the Bahamas, but it’s hard to take on American guests when you’re base of operations is already in one of the most popular destinations…

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Walt,

The state of Colorado has already offered help if Disney wants to move any operations to their state. I am sure other states will also be lining up offer deals to Disney if they want to move any future plans out of Florida.

I think that Colorado’s winters – think, “lots of snow” – would interfere with year-round operation of Disney’s theme parks.

It would be very easy to move the cruise line to someplace up the coast or to some other state on the Gulf. They could even move the ships to the Bahamas.

Yes, it’s possible to relocate a cruise ship, but not so easy.

  1. Disney’s newest cruise ships carry thousands of passengers, so their turn-around ports need to be near major airports with flights to accommodate that many passengers.
  1. The states on the Gulf Coast are not exactly “blue states” that would be more hospitable than Florida to companies that engage in “woke” politics. The same is true of the southern states on the Atlantic Coast. Ports further north have colder climes and rougher seas that are considerably less appealing to prospective passengers for cruises to the Caribbean or the Bahamas, especially in the winter.
  1. Some of Disney’s cruise ships operate seven-night cruises, but some operate shorter cruises out of Port Canaveral that Disney sells as part of a package that also includes a stay at Disney World. These combined packages require that the ship operate from a port near the resort.
  1. Docking and terminal facilities in the turn-around ports usually are reserved a couple years in advance. It might not be so easy to find a new port with available facilities.

So the bottom line is that such a move would take a while and might hurt the company’s bottom line pretty badly.

I believe you will now see all future expansion plans at Disney World put on hold.

That’s certainly a very real possibility.

Norm.

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I don’t see a state in the southern tier, with the sort of weather Disney needs for an outdoor park, that will not offer obstacles to a company with inclusive policies.

I would add that the ability to covertly acquire the land as cheaply as Disney was able to do in Florida could never be replicated, making the construction of any new theme park or resort from scratch prohibitively expensive.

Disney isn’t leaving Florida but that doesn’t mean they will roll over either. That’s not in Mickey Mouse’s character. As far back as Mickey’s debut in Steamboat Willie, Mickey became an American icon by making the best out of a bad situation.

Fuskie
Who notes already some conservative media have have taken the Florida governor to task for his war against Mickey Mouse…

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The thing most people forget is that WDW has more than just theme parks and resort hotels. There are production facilities for both TV and movie projects. There are corporate training centers for front line and management personnel. There are construction facilities for the manufacturing of attraction and entertainment sets and backdrops. There are product design offices where various ideas are generated for Disney merchandise.

These and many other overhead functions, with the attending personnel, could be moved back to California. Arizona is now another state that has approached Disney about moving some company functions to their state.

And while Disney does have fixed in-place existing assets it does not mean they have to build anymore in FL.

OTFoolish

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Fuskie,

I would add that the ability to covertly acquire the land as cheaply as Disney was able to do in Florida could never be replicated, making the construction of any new theme park or resort from scratch prohibitively expensive.

There’s actually a LOT of open land in the eastern half of the state, and most of it is pretty flat. A very large plot just east of Denver International Airport (DIA) would be pretty cheap, and would have ready access to transportation. Another plus is that DIA has plenty of room for a LOT of expansion – enough room to double in size and number of flights.

Of course, there are also reasons why this land is not densely populated. Most of it is pretty arid, being in the lee of the Rockies, so there’s vegetation only where people actively water it, and water supply for a large resort would be a major issue.

There’s also plenty of undeveloped land in the western half of the state, but transportation would be problematic due to the rugged terrain of Rocky Mountains. There’s not much room to widen the winding two-lane roads through the mountains and not much flatland to build a new airport.

Norm.

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Walt,

The thing most people forget is that WDW has more than just theme parks and resort hotels. There are production facilities for both TV and movie projects. There are corporate training centers for front line and management personnel. There are construction facilities for the manufacturing of attraction and entertainment sets and backdrops. There are product design offices where various ideas are generated for Disney merchandise.

Sure, many of these functions could move most anywhere – but not without some cost. My guess is that Disney probably envisions relocation of some of these functions, such as the movie studios, when they need the space at Disney World for new theme parks and resort facilities, but that is clearly several decades, or even a century or two, from now. In the meantime, the company retains control of the land and using it for these purposes saves the cost of procuring land elsewhere.

There are also little “gotchas” in the cost factor. If the product design offices are near the parks, the staff can take prototypes into a park to gauge reaction of park guests fairly easily. If they are not collocated, that’s a much more expensive proposition requiring employees to travel to the park at the company’s expense. Flights, local transportation, lodging, and per deim for meals and incidentals easily add up to a couple thousand dollars per trip.

Norm.

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OTFoolish, much of Disney’s production facilities, once a feature of Disney-MGM Studios (now Disney Hollywood Studios) have been shut down. Most of the design and construction on property is focused on live performances staged on property (Nemo, Beast, Lion King, etc.). But you are right on the administrative and human resources facilities. Disney remains the largest employer in Florida and does still carry political weight, though it might not seem so at the moment.

And yes, a number of states are making overtures to lure Disney’s operations but there’s no indication at this stage that Disney is considering such a move. It would be costly and would not change the situation in Florida. And moving Disney World itself is just not practical.

Fuskie
Who wonders if Disney stopped growing the Disney World resort, who would be punished most, the state government or the company itself as the parks stagnated and attendance dropped off…

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Norm, Denver is a great place to visit, but I wouldn’t want to live there. Seriously, I have cousins who do live there and have visited many times. While they are acclimated to the climate, for most, the high altitude and thin air would be hard to live in.

And the ski industry would lobby heavily against Disney building an entire theme park at the base of the Rockies because it would compete with their rocky mountain operations.

Fuskie
Who notes any state that has potential land for a Disney resort and multiple theme parks today had the same if not more land available 58 years ago when Walt selected Orlando as the location for his EPCOT…

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Norm,

The answer to your concerns can be two-fold. One, combine more work back to California and second expand production in Toronto for TV and movies. Both locations have existing facilities and could be expanded at a lower cost than building new.

Also, Imagineering is based in Burbank so if you want to try a new attraction you have Disneyland.

OTFoolish

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And 58 years ago do you think Walt imagined parks in Japan or China? There have been incredible changes in access to inexpensive air flights plus changes in the world and US population centers.

Another fly in the DeSantis ointment according to CNBC is the effect this new law will have on Universal Studios in Fl. They stated that Universal also has a similar agreement to Disney’s with regards to their taxes and they will also lose their benefits under this new law.

Walt

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Another fly in the DeSantis ointment according to CNBC is the effect this new law will have on Universal Studios in Fl. They stated that Universal also has a similar agreement to Disney’s with regards to their taxes and they will also lose their benefits under this new law.

That seems unlikely. The bill only applies to districts created before 1968 and which have not been re-authorized. According to media reports, there are only five other such districts (besides RCID) in the state. Given that Universal is newer than 1968, I would be very surprised if it was affected:

https://www.cnbc.com/2022/04/21/florida-set-to-dissolve-disn…

Disney may re-think some of their non-tourist facing investments in Florida, but I doubt that will be much affected by the RCID bill. Rather, Florida has been getting much more “red” politically over the last several decades - which might make it hard for Disney to attract the kind of labor force it wants/needs for many of its projects. Regardless of whether the GOP ‘makes nice’ with Disney or not, Florida is a red state and getting redder.

That said, the ironic thing is that Orlando has been getting much more “blue” politically over the last several decades, as the metro area morphs from a sleepy southern town (that happened to have Disney) into a much larger urban area, and a Democratic stronghold with a very large LGBTQ population. There’s probably less of a cultural gap on LGBTQ issues between living in Burbank and living in Orlando today, even with that red-state shift, than there ever has been before.

Albaby

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Fuskie,

Who wonders if Disney stopped growing the Disney World resort, who would be punished most, the state government or the company itself as the parks stagnated and attendance dropped off…

That, indeed, is a very good question!

Norm.