Why DeSantis May Not “Fundamentally Alter” Disney’s Business in Florida, Despite Claims

Florida Governor Ron DeSantis’ ongoing feud with The Walt Disney Company has led to much speculation about the future of the Reedy Creek Improvement District (RCID) and the millions of dollars of bond debt associated with the RCID.

After Disney spoke out against Florida’s Parental Rights in Education law (commonly called the “Don’t Say Gay” law by critics), Gov. DeSantis signed a law to dissolve the RCID. This district, which essentially allows Disney to function as its own county government, is set to be dissolved in July 2023. So what will happen once the district is dissolved, and who will have to absorb the bond debt? Not all of these questions have been answered, but we have an update here.

If you’re not caught up on all the latest drama surrounding Gov. Ron DeSantis, Disney, and the RCID, you can check out our latest update on the situation here.

Click here to get up to speed on all the latest drama.

Essentially, Gov. Ron DeSantis signed the law to dissolve the RCID without sharing a plan for what will happen once the district is gone.

It’s been over 6 months since this action, and DeSantis’ office still has not provided any update as to the future of the RCID and the nearly “400 direct and indirect workers at the Reedy Creek Improvement District” (Orlando Business Journal).

What Does the Future of the RCID and Disney Look Like Now?

Apparently “conversations are happening in Tallahassee” now about the RCID’s future, and the topic could be part of “a planned special session after the November election,” according to David Ramba (executive director with the Florida Association of Special Districts Inc.). Disney currently employs 38 lobbyists in Tallahassee.

There are a few different options for what could happen to the RCID and Disney World. Here’s a look at the different options, according to the Orlando Business Journal:

1. The state could delay the June 2023 dissolution date.
2. The state could merely “amend certain powers of the Reedy Creek district” instead of dissolving it entirely.
3. The state or local governments could attempt to “change the wording in the district’s charter or completely replace it,” which would require “a 30-day public notice, discussions, and approvals by delegations in the affected counties.”

Ramba said, “I don’t think [the state] will allow anything to implode … I don’t think anyone should be nervous about it.”

Another likely possibility is that the details will be discussed and decided on during the next state legislative session, which begins in March 2023. According to the Orlando Sentinel, State Senator Linda Stewart said that “Disney doesn’t want to relinquish control of the district but may consent to state representation on the board.”

Stewart also said, “The DeSantis group is trying to figure out how to look good. Disney is trying to protect the business model.” She believes the most likely end will be that “Republican lawmakers will make some superficial changes to Reedy Creek, allowing them to declare victory, but they won’t fundamentally alter how Disney does business in Florida.”

DeSantis’ previous comments indicate that he would like the state to take control of the RCID in a more involved capacity. He previously said, “The path forward is, Disney will not control its own government in the state of Florida.”

One of the main concerns of citizens of Orange and Osceola counties (where Disney World is located and the RCID operates) is what will happen to the nearly $1 billion in bond debt that the RCID currently possesses.

What’s Going On With the Bond Debt?

Some people who live in the Orange and Osceola counties have been concerned that the debt will fall to county residents, and a few lawsuits have been filed against the state because of those fears. Some of those lawsuits have been dismissed, but others are still pending.

Ben Watkins (director of the Florida Division of Bond Finance) has said, “Our objective is to do this in a way that has no impact to the bondholder” (Orlando Sentinel). Watkins recommended that RCID be reinstated so that “revenue streams stay the same, ensuring Reedy Creek’s outstanding debt is repaid.” The Sentinel reported that “he also envisions the new district essentially performing the same governmental functions as Reedy Creek, which wouldn’t burden local taxpayers.”

Fitch Ratings (a New York-based bond rating agency) released a report that shows that RCID’s “issuer default rating bonds and ad valorem tax bond both remain on ‘Negative Watch,’ indicating a possible downgrade in rating” (Orlando Business Journal). Having a good bond rating makes people more likely to invest in a company, whereas a negative rating might cause people to reconsider.

According to the report, Fitch Ratings “expects to review the IDR and ad valorem tax bond rating again once the uncertainty is resolved.” The agency expects “that legislative action will be introduced during the next general session, which is scheduled to run from March 7, 2023, to May 5, 2023, that will resolve the uncertainty and ensure the timely repayment of RCID debt.”

If the legislative action points to a plan that will ensure payment capacity of the bonds, the negative watch warning could be removed. However, if the legislation seems it could harm the repayment possibilities, the rating could go down.

We’ll have to wait until the next legislative session to see what happens with the bonds.

Some investors have shown impatience with the feud between Disney and DeSantis. Chase Savage (a research analyst with Fidelity Investments) said, “This issue is 100% political and 100% aimed at further bolstering the DeSantis Administration’s reelection campaign.” Savage went on, “This is a growing area of mistrust within the investor community, and the longer this is drawn out, the greater that mistrust may become.”

We’ll continue to watch for more updates about the Reedy Creek Improvement District’s future and report about them here at AllEars, so stay tuned.

Click here to see how the RCID is preparing for dissolution.