Florida taxpayers could face a $1 billion Disney debt bomb if its special district status is revoked
- The Florida legislature on Thursday cleared a bill that would dissolve Disney's special improvement district, effective June 2023.
- If the special district is eliminated, Orange and Osceola counties would have to provide the local services currently provided by the special district.
- Legislators and tax experts warn the bill creates an even larger potential problem for taxpayers in the form of bonds totaling more than $1 billion.
A repeal of Disney's self-government status in Florida could leave local taxpayers with more than $1 billion in bond debt, according to tax officials and legislators.
The Florida House of Representatives on Thursday passed a bill that would dissolve Disney's special improvement district, escalating Gov. Ron DeSantis' attack on the company over its opposition to Florida's Parental Rights in Education bill, dubbed by critics the "Don't Say Gay" bill.
The state Senate passed the bill Wednesday, after it was first introduced Tuesday. It will now go to the governor for his signature.
Disney's Reedy Creek Improvement District was created in 1967 and gives the Walt Disney Company full regulatory control over Disney World as well as government services such as fire protection, emergency services, water, utilities, sewage and infrastructure.
Tax experts and legislators say elimination of the district, which would take effect in June 2023, could have unintended consequences for county taxpayers.
Reedy Creek spans 25,000 acres in Orange and Osceola counties and includes Disney's four theme parks, two water parks and sports complex. It also includes the two small cities of Bay Lake and Lake Buena Vista, which had a combined population of 53 people in 2020, all either representatives or employees of Disney.
To fund the government services of Reedy Creek, Disney effectively taxes itself. While the precise tax flows of Reedy Creek are unclear, Scott Randolph, the tax collector for Orange County, said the Reedy Creek district collects roughly $105 million annually in general revenue.
On top of the $105 million, Disney also pays local property taxes. Public records show Disney is the largest taxpayer in central Florida, paying over $280 million in property taxes to the counties between 2015 and 2020.
If the special district is dissolved, Orange and Osceola counties would have to provide the local services currently provided by Reedy Creek. And, the $105 million in revenue would disappear, meaning county and local taxpayers would be on the hook for part or all of the added costs.
"If you dissolved Reedy Creek, that $105 million in revenue literally goes away, it doesn't get transferred," Randolph said.
The reason: Reedy Creek is what's known as an "independent tax district" meaning the tax revenues it generates are in addition to its local tax obligations, rather than a replacement of them. If the district is eliminated, the tax payments to Orange and Osceola counties would not increase, Randolph said.
Florida state Rep. Randy Fine, R-Palm Bay, who has helped champion the bill, told CNBC on Thursday that local taxpayers would not pay more — and could actually benefit from Reedy Creek's elimination. Fine said the tax revenue that Disney pays would be transferred to local government and could more than pay for the added services.
"Those taxes will continue to be paid," he said. "They will just be paid to Orange and Osceola county instead of this special improvement district. The taxpayers could end up saving money because you've got duplicative services that are being provided by this special district that are already being done by those municipalities."
But legislators and tax experts warn the bill creates an even larger potential problem for taxpayers in the form of bonds totaling more than $1 billion.
Reedy Creek has bond liabilities of between $1 billion and $1.7 billion, according to the district's financial filings. Under Florida statute, if Reedy Creek is dissolved, those liabilities are transferred to the local governments — either Bay Lake or Lake Buena Vista, or more likely, Orange and Osceola counties.
State Senate Minority Leader Gary Farmer, D-Fort Lauderdale, tried to amend the bill to include further study of the bond debt, but the amendment failed on a voice vote.
Farmer said the bond debt could total more than $2 billion and that tax authorities are increasing their estimates as they learn more about Reedy Creek's outstanding liabilities.
"This is a very real impact, the extent of which we don't fully understand yet," Farmer said.
If the liabilities of $1.7 billion or more are transferred to Orange and Osceola counties, he said, the debt could amount to $1,000 per taxpayer.
"If the counties are left holding the bag, the state might have to come to their aid," Farmer said. "So it's not even just a tax issue for these two counties. It affects every taxpayer in the state of Florida."
Fine argued that if the bonds are transferred to the counties, the tax revenue that currently funds the bond payments would also be transferred.
"The Reedy Creek Improvement District is a local government right now," he said. "So the taxpayers of that district already owe that money. Yes, the bonds would go to other municipal governments in the same place. But the revenues go along with it. Disney is taxed by this improvement district. Those taxes are used to pay that debt."
Tax experts say that in order for the counties to collect additional revenue from Disney to pay the bond debt, the counties would have to create a new special tax district of their own. Even if they created a new special "Disney" tax district, the tax rate would be capped below that of the current district rate, leaving Orange and Osceola counties with Reedy Creek's debt service but with less revenue to pay it off.
"We shouldn't be moving at warp speed on something that can have such far-ranging economic impacts," Farmer said.