The Economics of Revenge

This is what happens to the property tax rates, up 25%, when you pass a law just for revenge: First, the likelihood that Florida’s repeal of Disney’s Reedy Creek will materialize in the way the legislation envisions next year is minimal. Beyond the crushing 20 to 25 percent increase in property taxes one local official estimated Orange County could have to impose on residents, the transition of emergency and social services, animal control, road maintenance and even the distribution of power to local authorities is unlikely to be complete in a year’s time.

https://www.msnbc.com/opinion/msnbc-opinion/desantis-aims-di…

OTFoolish

This is what happens to the property tax rates, up 25%, when you pass a law just for revenge: First, the likelihood that Florida’s repeal of Disney’s Reedy Creek will materialize in the way the legislation envisions next year is minimal. Beyond the crushing 20 to 25 percent increase in property taxes one local official estimated Orange County could have to impose on residents, the transition of emergency and social services, animal control, road maintenance and even the distribution of power to local authorities is unlikely to be complete in a year’s time.

Again, all of this ignores the relatively easy fix available to the Legislature in the next session. The simplest one is to just keep the district in place, but strip it of every power except the ability to levy taxes to pay off the bonds - and then convert it from an independent special district to a dependent one. That means that instead of Disney picking the district board, the Orange County Commission would serve as the board.

You avoid the tax consequences of the transferred debt, and the GOP doesn’t have to do any kind of climb down. All of the negative impacts to the taxpayers and the GOP discussed in that article vanish, without the need to give anything valuable back to Disney.

Of course, Disney is still a powerful player and has access to the best lobbyists money can buy - so it would hardly be shocking if they managed to dull the negative impact of this move in a quieter, lower-temperature legislative session. But the idea that the GOP will be forced to do an embarrassing walkback or face negative consequences to the taxpayers is simply not true.

Albaby

And why would Disney want to pay on bonds for infrastructure they no longer own? These outstanding bonds were issued to build and maintain roads, power grids, plus drainage etc… So, if the ownership of these assets switches to the counties, which it does under the current bill, than the costs of these also switches to the counties.

You can’t charge someone a tax on something they no longer own.

Walt

And why would Disney want to pay on bonds for infrastructure they no longer own? These outstanding bonds were issued to build and maintain roads, power grids, plus drainage etc… So, if the ownership of these assets switches to the counties, which it does under the current bill, than the costs of these also switches to the counties.

You can’t charge someone a tax on something they no longer own.

Disney doesn’t own them now.

All that infrastructure is owned by the Reedy Creek Improvement District, which is a distinct legal entity from Disney. The RCID is actually a special-purpose unit of government, so all that stuff is publicly owned - which is why they were able to issue tax-free bonds to finance it, and why they can use tax revenue to pay down the bonds.

[As an aside, as part of my practice representing developers on land use issues here in Miami, I’ve created a number of ‘ordinary’ independent special districts under Chapters 189 and 190 of the Florida Statutes. Reedy Creek is special in a lot of ways, but the core principles are similar.]

As I noted upthread, the easiest fix is to keep the district in place as a legal entity, but strip it of every other power apart from paying down the bonds. Switch the district from independent to dependent, so Orange County (and not Disney) gets to ensure that the ad valorem tax gets imposed at a sufficient rate to service the bonds. Ownership of the assets would devolve to Orange County, but they would remain public - or if you want, just keep ownership in the hands of the district but let Orange County run it.

Remember, the bonds aren’t being paid down with taxes on the roads (which are public and therefore exempt from property taxes). They’re being paid down with taxes levied against all of Disney’s private property - the parks and hotels and offices and whatnot.

Albaby

And Reedy Creek Development is the Target which DeSantis has attacked with his bill. And as Reedy Creek Development is an entity whose sole purpose is to enable and support the WDW resort it is disingenuous to say that Disney does not own them. If Reedy Creek will not own the roads, power, water, and maintenance faclities then Disney will not own them and the surrounding counties will assume all the associated costs.

This ia has been mentioned by Bloomberg, CNBC, CNN, MSNBC, ABC, CBS, NBC, NY Times, and the Washington Post. If Fox is telling you otherwise well that is fake news.

The only thing not fake will be the bill for between $1 & $2 billion dollars because someone has to pay and it WON’T be Disney.

Walt

Walt,

The only thing not fake will be the bill for between $1 & $2 billion dollars because someone has to pay and it WON’T be Disney.

The “it WON’T be Disney” part of your statement is not exactly accurate. The dissolution of the Reedy Creek Development District means that Disney (NYSE: DIS) will have to pay real estate taxes to the respective counties within which those properties are located. That’s a LOT of valuable development that suddenly will be subject to county tax, the rate of which probably is considerably higher than the present Reedy Creek tax rate to cover the bonds and not much else. I have not crunched the numbers, but this might be a major net windfall for the affected counties.

Norm.

And Reedy Creek Development is the Target which DeSantis has attacked with his bill. And as Reedy Creek Development is an entity whose sole purpose is to enable and support the WDW resort it is disingenuous to say that Disney does not own them. If Reedy Creek will not own the roads, power, water, and maintenance faclities then Disney will not own them and the surrounding counties will assume all the associated costs.

This ia has been mentioned by Bloomberg, CNBC, CNN, MSNBC, ABC, CBS, NBC, NY Times, and the Washington Post. If Fox is telling you otherwise well that is fake news.

It’s not disingenuous to say Disney does not own them. They don’t. Reedy Creek Improvement District is an independent special district created by a special act of the Florida Legislature, whose board of directors is elected by the landowners of the property lying within the boundaries of the district. This is not coming from Fox, but from reading the statute - and having worked with similar independent special districts over the last fifteen years. These districts often end up being the alter ego of a landowner when only one entity owns all the land within a district - but the district is a legally separate entity. You can read the text of the act here, and the wikipedia entry on it is surprisingly accurate:

http://edocs.dlis.state.fl.us/fldocs/leg/actsflorida/1967/LO…
https://en.wikipedia.org/wiki/Reedy_Creek_Improvement_Act

The district owns the public facilities that service the WDW resort - the roads, water and sewer systems, fire department, and several other elements of infrastructure. Disney does not legally own them. It is utterly common for property owners to be taxed for the construction and maintenance of facilities they do not own, and this is no exception. Indeed, that’s the whole point of special districts in most cases - they create a public taxing mechanism to fund services that are used for a discrete area within a larger city or county. Here in Miami-Dade County, nearly every new residential subdivision that gets platted also comes with separate special assessment district that covers the installation and costs of street lighting and drainage systems.

Under the existing bill that was passed, ownership of the infrastructure and assumption of the outstanding debt would pass to Orange County. I am merely pointing out that there is a relatively easy ‘glitch bill’ fix to prevent the County taxpayers from getting stuck with the bill. Keep a ‘rump’ version of the RCID in place with no power or authority except to pay off the outstanding bonds, and transfer control of that district to the County Commission. Problem solved - the taxpayers are off the hook, the bondholders are protected, and Disney still has to pay the costs of the public infrastructure servicing their development.

What all those news sources are talking about is what would happen if the Legislature did nothing during the next session. I think that’s exceptionally unlikely, and that the Legislature will certainly (at a minimum) tweak what they just passed so that Disney doesn’t walk away with a billion dollar windfall.

Albaby

…but this might be a major net windfall for the affected counties.

And it might be that this would be a pipedream because even the Washington Examiner is saying that this would be a disaster for all the theme park area taxpayers. Which I guess the all new GOP no longer cares about along with the ending of free speech.

OTFoolish

From Wikipedia:

He used multiple shell companies to buy up land, at very low prices, that eventually became the district. These company names are listed on the upper story windows of what is now the Main Street USA section of Walt Disney World, including Compass East Corporation; Latin-American Development and Management Corporation; Ayefour Corporation (named for nearby I-4); Tomahawk Properties, Incorporated; Reedy Creek Ranch, Incorporated; and Bay Lake Properties, Incorporated.[7]

A map showing the Walt Disney Company’s land holdings and the boundaries of the District
On March 11, 1966, these landowners, all fully owned subsidiaries of what is now The Walt Disney Company, petitioned the Circuit Court of the Ninth Judicial Circuit, which served Orange County, Florida, for the creation of the Reedy Creek Drainage District under Chapter 298 of the Florida Statutes. After a period during which some minor landowners within the boundaries opted out, the Drainage District was incorporated on May 13, 1966, as a public corporation. Among the powers of a Drainage District were the power to condemn and acquire property outside its boundaries “for the public use”. It used this power at least once to obtain land for Canal C-1 (Bonnet Creek) through land that is now being developed as the Bonnet Creek Resort, a non-Disney resort.[8]

Improvement district and cities
Walt Disney knew that his plans for the land would be easier to carry out with more independence. Among his ideas for his Florida project was his proposed EPCOT, the Experimental Prototype Community of Tomorrow, which was to be a futuristic planned city (and which was also known as Progress City).[9] He envisioned a real working city with both commercial and residential areas, but one that also continued to showcase and test new ideas and concepts for urban living.[8] Therefore, the Disney company petitioned the Florida State Legislature for the creation of the Reedy Creek Improvement District, which would have almost total autonomy within its borders. Residents of Orange and Osceola counties did not need to pay any taxes unless they were residents of the district. Services like land use regulation and planning, building codes, surface water control, drainage, waste treatment, utilities, roads, bridges, fire protection, emergency medical services, and environmental services were overseen by the district.[8]

OTFoolish

Exactly. Disney owns all the land within the district, either directly or through subsidiaries. The district itself is a governmental entity, and is not Disney. Disney completely controls that entity, because there are no residents within the district other than a handful of trusted company employees that don’t own any property, so Disney gets to handpick the Board of Supervisors. But the district is a separate entity from Disney. Which is why the state can mess with it so readily - it’s de facto controlled by Disney, but legally it’s another unit of local government subject to state statute for its powers and existence.

Albaby