By Scott Chinn, Faegre Drinker Biddle & Reath LLP
On April 22, Florida Governor Ron DeSantis signed into law a bill revoking the Walt Disney Company's special taxing district status in the state. Since 1967, Disney has been operating under the establishment of the special district, known as the Reedy Creek Improvement District, which allows Disney in its Walt Disney World Resort area to provide for its own police and fire protection, roads, utility infrastructure and other matters traditionally reserved for local governments. The district is huge – nearly 40 square miles. It sits in Orange and Osceola counties, which have not had to provide those services and capital improvements for all those years.
The revocation, which has passed into law but does not by the terms of the statute go into effect until June 2023, was done on the heels and reportedly in response to the Disney Company's public positioning against another recently passed Florida law that restricts discussion about sexual orientation and other LGBTQ+ issues in public schools. Disney made its criticism public in part based on strongly held views of its workforce against the public school law, including a massive employee walk out. The sometimes bitter feud among Disney, Governor DeSantis and various state legislators on both sides of the issue has been much publicized and promises to stay in the public sphere for months as it is used to fuel political aims and recriminations.
But, putting politics aside for a moment, it is hard to avoid seeing this as a great law school exam fact pattern. Let’s spot the issues:
- Has the State of Florida retaliated against Disney in violation of the First Amendment’s free speech and association clauses for the company's public position against the public school law? What are the content of the Disney's First Amendment Rights in light of the U.S. Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission, 558 U.S. 310? Can you argue that Disney has free speech rights in this case and still be against the holding in Citizens United that corporate spending on political positions is free speech?
- Although the law that revoked the Reedy Creek Improvement District was passed mere days after its legislative introduction, some had argued that most or all of Florida's special districts should be under scrutiny. But Florida has about 1800 special districts, and the law passed last week affects one. Any equal protection problems with that?
- If the revocation law actually goes into effect in 2023, Orange and Osceola counties will have to start picking up the tab (ostensibly through massively increased taxes) for police and fire protection and the host of other government services that Disney would ostensibly have to cede to those local governments. Does Florida law allow for the size of the tax increases that would be required – reportedly $105 million per year? Will those governments be successors to any pending litigation involving Disney's former quasi-governmental activities? If so, do those jurisdictions have any different defenses or immunities?
- Disney also has more than $1 billion in bond debt associated with its infrastructure in the district. Would the local governments be required to assume that debt and the annual $60 million in debt service (necessitating more tax increases?) How many bond covenants and exclusions will be at issue as lawyers and financiers try to unpack who owes what to whom?
- What other issues haven’t we spotted here?
Many speculate that the revocation law will be repealed or drastically modified before the effective date in June 2023. If not, it might take that long to finish this exam question.
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