On Tuesday, writing for Bloomberg Tax, attorney Jacob Schumer walked through how the plan by Gov. Ron DeSantis, R-Fla., to strip the Walt Disney corporation of its special tax status could run into a brick wall.
The plan, passed as part of a special session bill in which legislators also approved DeSantis' plan to cut the number of Black congressional districts, would eliminate the Reedy Creek Improvement District, the special taxing district Disney uses to essentially run its own mini-government on the land used by the Walt Disney World resort complex near Orlando — a measure Florida Republicans openly admit is retaliation for Disney criticizing their so-called "Don't Say Gay" school legislation.
"Much ado has been made about the legality of Florida's Senate Bill 4C purporting to dissolve Disney's Reedy Creek Improvement District: whether it was retaliation prohibited by the First Amendment, whether it was passed with sufficient formality, and so on," wrote Schumer. "But there's a much more basic reason Florida can't dissolve Reedy Creek — it promised bond purchasers that it wouldn't."
Some observers have noted that dissolving the special district would result in taxpayers in Orange and Osceola Counties being on the hook for $1 billion in Disney's bond debt. But, wrote Schumer, it gets worse than that.
"Stating that the county assumes the debt is simple enough — actually figuring out what that means is a different story. Reedy Creek spans both Orange and Osceola counties, so how will the debt be divided? Would it be by taxable value of property or by the properties themselves? And how would that apply to the utility revenue bonds when there is no easy way to divide which county the utilities rest in?" wrote Schumer. "These difficult questions point to the basic contractual issue. 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."
"Florida simply cannot promise to prospective bondholders that it won't interfere with Reedy Creek, and then dissolve Reedy Creek," concluded Schumer. "If Reedy Creek is ever dissolved, it would be a monumental and complicated enterprise even on a years-long timeline. The district has a nine-figure annual budget for expenditures, and even ignoring its various debts, it has a plethora of other contracts that somehow would have to be assigned to and divided between Orange and Osceola counties. However, the dissolution will have to wait until all of its bonds are paid in full."
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