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Disney bond agreements show obstacles to Florida dissolving special district

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TAMPA, Fla. (WFLA) — Pledges made by the legislature when establishing Disney’s Reedy Creek Improvement District in Florida prevent the state from interfering with the special district, complicating the implementation of the new law passed last week that dissolves the district in 2023.

Reedy Creek posted a notice to bondholders during the special session, first reported by WESH 2 News, that “in light of the State of Florida’s pledge to the District’s bondholders, Reedy Creek expects to explore its options while continuing its present operations,” which includes levying taxes and paying its debt.

The notice referred to the original act establishing the Reedy Creek Improvement District (RCID) during the Florida Legislative Session of 1967, which included a pledge by the State of Florida “that it will not limit or alter the rights of the District…until all such bonds together with interest thereon…are fully met and discharged.”

Section 56. Pledge by the State of Florida to the Bond Holders of the District and to the Federal Government.-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 and to fulfill the terms of any agreement made with the holders of such bonds or other obligations, that it will not in any way impair the rights or remedies of the holders, and that it will not modify in any way the exemption from taxation provided in the Act, 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.

Florida Statutes, Chapter 67-764

These pledges made in the founding of Disney’s special district could complicate Florida’s plan to dissolve it.

“With this law, the state of Florida has eliminated the government entity that backed the various bonds while violating its own explicit promise not to do so,” said Jacob Schumer, a Maitland attorney who practices local government law, in a piece for Bloomberg Tax. “It is hard to imagine a way that the state could successfully argue that this did not violate its own contractual obligations or unconstitutionally impair the contract between Reedy Creek and the bondholders. Florida could theoretically get rid of some of these contractual issues by writing a giant check to prepay or “redeem” the bonds, but that’s prevented by at least one of the outstanding bonds—2018’s utility revenue bond prohibits redemption until October of 2029.”

As journalist Sarah Rumpf noted in a piece for Law and Crime, the dissolution of Disney’s special district would transfer the debts and obligations of RCID to “the local general-purpose government” per Florida law, which in this case would be Orange and Osceola counties.

Additionally, Florida law states in order for the legislature to dissolve a special district created by special act it “must be approved by a majority of the resident electors of the district,” or a majority of the landowners in specific cases. Rumpf noted that Disney/Reedy Creek officials are unlikely to do that.

Florida lawmakers are split largely along party lines over whether Disney should keep its special district.

“No, I don’t think it was the right thing to do because this decision was made in haste,” said Fla. Rep. Fentrice Driskell, D-Tampa. “Now you’re putting Orange and Osceola taxpayers in a position where they may foot the bill.”

“I think looking at the special districts is something we should have done anyways,” said Fla. Rep. Jackie Toledo, R-Tampa. “It’s been over six decades before they’ve changed those special districts. And they had self-governing powers no other corporation in the state has.”

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