Okay, we’ve had a couple of weeks to allow the situation to cool down some.
Now, analysts can and have performed calmer evaluations of what comes next with the Reedy Creek Improvement District.
Specifically, legal experts have published several beliefs about how Disney could proceed next.
How may Disney approach Reedy Creek? Well, they have several great options.
Let’s speak in finite terms. If Disney sues, it’s likely to win.
Here are five different links that all draw the same conclusion. I could have added many more. There’s a race to judgment on this with a logical endpoint.
Frankly, you won’t catch Vox and National Review agreeing on topics often. That’s how obvious this one is.
In fact, let’s just evaluate Vox’s headline: “…attack on Disney obviously violates the First Amendment. This isn’t a close case.”
This article references a Supreme Court ruling from 2006 that irrefutably establishes what the government cannot do with free speech, which is to punish the speaker for saying something.
You may not realize this, but Florida’s governor doesn’t care. This individual has implemented several laws and mandates that haven’t held up in court.
In fact, during the Reedy Creek dissolution discussion, Florida also removed Disney’s protections from a different law from next year.
Why isn’t that story making headlines? A federal court threw out that law as unconstitutional.
If/when Disney takes this to court, it’s likely to turn into a protracted battle full of wins and losses. Ultimately, Disney wins under current federal laws.
By the way, I’m only discussing one specific lawsuit angle here. Legal analysts suggest Disney’s options are plentiful.
Using Financing as a Defense
Here’s the one that has already come up a lot, and that’s because governments operate based on funding.
In 1967, when lawmakers signed Reedy Creek into existence, they promised to honor various bonds.
I don’t want to take you deep into the weeds here. So, let’s just say it’s like you owing for a mortgage. You’ve promised to pay it back over the next 30 years.
Now, you’re trying to say that you’ve changed the laws in your house and no longer need to pay the mortgage as promised.
You’re guaranteeing that you’ll make good in other ways, though.
If you made that call to your mortgage company, they would hear the second part of that conversation as lip service, right? They would NOT believe you.
Well, that same logic applies to city, state, and federal governments. Once an entity takes out a loan, ie, a bond, it must honor the agreed-upon terms.
By dissolving Reedy Creek, Florida would change the terms of its bonds, which has already led to a lowered Fitch Rating about repayment reliability.
Here’s the text that proves vital to this discussion:
“We expect the state will ultimately work with various stakeholders to resolve the uncertainty in a way that ensures timely repayment of RCID debt, with reconstitution of the district as one option specifically offered in the bill.
The failure to do so could alter our view of Florida’s commitment to preserve bondholder rights and weaken our view of the operating environment for Florida governments.”
Friends, in financial terms, that’s a veiled threat. Fitch is saying that it expects Florida to do the right thing, but it’ll cut off the state if needed.
You’ve heard, “It’s the economy, stupid.” This is that premise in action with government bonds.
You never mess with other people’s money. Florida just did that. For this reason, the people who supported this bill will play defense for the next year.
Disney can just sit back and let the money people press Florida on how this will work. Eventually, it could become more aggravation than it’s worth.
I’m ending with two seemingly controversial possibilities. However, I think that both of them are almost as likely as anything I list here.
The first is that Disney should do absolutely nothing for a year. After all, much of this issue stems from politics.
Specifically, one Tampa Bay conservative political operative described the whole thing as Florida’s governor making a local move to cause a stir on the national political stage.
By the first quarter of 2023, we’ll know how the 2022 election has played out in Florida. A reset of current political power in the state appears unlikely.
However, nobody ever really knows until after the vote occurs. Also, if the move does elevate the governor to the national stage, he’ll have bigger fish to fry than Reedy Creek.
As such, the whole thing may blow over. Remember the Joe Rogan/Spotify story in mid-February? Nobody is talking about it now.
Despite the backlash, Spotify saw its paid memberships increase, and the platform now has 182 million premium subscribers — up from 180 million in the previous quarter and 15% higher year over year. Total revenue was up 24% over last year. https://t.co/ICz6dtNbX8
— CNN (@CNN) April 27, 2022
We’ve since had a crisis in Eastern Europe, a gas price surge, and several other matters that have distracted away from it.
Political theater is all about generating headlines. This one could, at least theoretically, stop becoming a story.
Allow Reedy Creek to Dissolve
You may have read headlines here and on other sites that suggested Disney will save money through the dissolution of Reedy Creek.
That’s absolutely correct. Yes, the governor has since threatened to find ways to make Disney pay for everything. No financial analysts see that as likely, though.
As we speak, Disney has its financial analysts weighing the benefits of allowing Reedy Creek to dissolve without a fight.
Many analysts, myself included, have wondered for years now whether it still serves a purpose.
The reality of in-state governance, especially on the local level, is that money talks anyway.
Disney could accomplish much of what it needs without having to pay for its own local municipal services. The company could just as easily allow taxpayers to do so.
Disney actually pays an outsized amount in local and state taxes. The number is roughly $780 million annually, and that’s before we include sales tax.
Florida’s entire economy relies on Disney’s taxation. In the wildly unlikely event that the company closed its parks and left, Florida would wither economically.
So, Disney could feasibly choose to let Reedy Creek dissolve and then cut a better deal for itself locally with Orange and Osceola County.
Those two counties will need to negotiate since they’re the ones left holding the bag if this happens.
For this reason, the dissolution of Reedy Creek provides Disney with a surprising level of negotiating power.
Feature Image: WKMG ClickOrlando