Disney Sues Florida Gov. Ron DeSantis Over Control Of Special District, Alleging Retaliation

Last year, Gov. Ron DeSantis (R) made waves in Florida when he took steps to eliminate the Reedy Creek Improvement District, a special services tax district that includes Disney World. The fight between DeSantis and the Walt Disney
DIS
Company is now headed to court.

Background

On April 22, 2022, DeSantis signed a bill into law that dissolved special districts that were “not reestablished, re-ratified, or otherwise reconstituted by a special act or general law after November 5, 1968.” That date was not considered coincidental—the law establishing the Reedy Creek Improvement District was signed into law in 1967.

The idea behind Reedy Creek was to give the district the same authority and responsibility as a county government. Disney had purchased 25,000 acres of property—about 40 square miles—in Central Florida to create what would eventually become Walt Disney World. But the resources to make that happen—and maintain it—would be considerable. Reedy Creek was given the sole responsibility of paying for the kinds of services that would usually be provided by the local government, like water, trash management, road maintenance, fire protection, and emergency medical services (EMS). Key to the plan—local residential taxpayers in Orange and Osceola Counties would not be on the hook for the costs.

Since then, Reedy Creek—one of about 1,800 special districts in Florida—has paid for and maintained services in the district, which receives about 250,000 visitors daily. Businesses in special districts, also referred to as special services areas or community improvement districts, pay to fund projects, services, and maintenance typically otherwise covered by state and local governments. Funding for special districts is generally determined by a tax assessment on the value of commercial properties. In 2022, Disney-owned land constituted 87.7% of the total taxable assessed value within the district.

Disney claims on its website that it is the “largest single taxpayer in Central Florida.” Walt Disney World paid and collected, they say, $1.146 billion in state and local taxes during 2022.

The Fight

In March of 2022, DeSantis signed the controversial “Parental Rights in Education” bill—called “Don’t Say Gay” by critics—bill (SB 4-C) into law. Among other things, the law prohibits instruction or classroom discussions about gender identity and sexual orientation and requires schools to notify parents when children receive mental, emotional, or physical health services unless educators believe there is a risk of “abuse, abandonment, or neglect.”

Initially, Disney remained silent, angering many of the company’s employees. Eventually, Bob Chapek, then Disney’s CEO, announced that the company had been opposed to the bill “from the outset,” explaining that they “chose not to take a public position because we felt we could be more effective working behind the scenes directly with lawmakers on both sides of the aisle.” When that didn’t work, the company officially criticized the law and also said it would put an end to political donations in the state.

The new law—which largely took effect in 2023—was signed into law, despite criticisms. One of the concerns? With Disney’s money out of the picture, residents were worried about a tax increase. DeSantis stated, “It is not the understanding or expectation for SB 4-C, abolishing independent special districts, to cause any tax increases for the residents of any area of Florida.”

This year, the governor took control of the oversight board for the district. But Disney was, some observers believed, a step ahead of DeSantis, pushing through agreements with the former board that appeared to hand power back to Disney. The agreements, including a Declaration of Restrictive Covenants, extended Disney’s powers until “21 years after the death of the last survivor of the descendants of King Charles III, king of England.” That 21 years is purposeful—it’s a nod to a legal principle called the “Rule Against Perpetuities,” which states that no interest is good unless it must vest, if at all, no later than 21 years after some life in being at the creation of the interest. It’s intended to put an end to dynasties, tying the end of a legal right to the lifetime of a real person plus 21 years. If that sounds confusing, it is—just ask anyone who went to law school—which is why many states have modified or abolished it. Florida, however, still has one. (You can read all 151 pages of Disney’s Declaration of Restrictive Covenants here.)

Not surprisingly, DeSantis was not happy with the agreements. In a press conference earlier this month, he suggested he could take several actions against Disney in response, including raising taxes and establishing “another state prison” near Disney World. What ultimately happened was this: on April 26 (the date of this article), the current board appointed by DeSantis voted to nullify the former board’s agreements. In return, Disney filed a lawsuit.

Lawsuit

The lawsuit, filed in the Northern District of Florida, is, according to Disney, in response to a “targeted campaign of government retaliation—orchestrated at every step by Governor DeSantis as punishment for Disney’s protected speech,” which “now threatens Disney’s business operations, jeopardizes its economic future in the region, and violates its constitutional rights.”

The complaint filed by Disney directly references DeSantis’ comments that he planned “to look at things like taxes on the hotels,” “tolls on the roads,” “developing some of the property that the district owns” with “more amusement parks,” and even putting a “state prison” next to Disney World. “Who knows? I just think the possibilities are endless,” DeSantis said, according to the court documents.

Disney says, in its filings, that it “is left with no choice but to file this lawsuit to protect its cast members, guests, and local development partners from a relentless campaign to weaponize government power against Disney in retaliation for expressing a political viewpoint unpopular with certain State officials.” It is, they say, “as clear a case of retaliation as this Court is ever likely to see.”

The complaint suggests that the actions of the state are not in the interest of taxpayers, alluding to another lawsuit, Foronda v. DeSantis, filed last year by residents and taxpayers in Osceola County against Governor DeSantis, alleging that the dissolution of Reedy Creek would lead to $1 to $2 billion in increased taxes for residents of Central Florida. That suit was dismissed largely on procedural grounds, including problems with jurisdiction and standing. Standing is the right for a party to sue—the fact that the complaint was filed before the law took effect meant that “the challenged law does not apply to them, they do not allege direct harm as a result of the challenged law, and they do not plausibly allege any credible threat of direct harm in the future.”

Referencing the agreements signed earlier this year—the ones with the rule against perpetuities language—the complaint notes that “Much has been mischaracterized about the intent and effect of the Contracts.” It then provides a quick laundry list of what the new board can still do, including imposing ad valorem—meaning based on value—taxes, maintenance taxes, and utility taxes, as well as the power to enforce collection of taxes by tax liens and foreclosure. And Disney disputed the suggestion that the activities related to signing the agreements were secretive, explaining that the related meetings followed public notice—in the Orlando Sentinel—and public hearings.

On April 17, the complaint reports, a press release on the governor’s website proclaimed, “Disney’s corporate kingdom is over – despite their repeated and futile attempts to circumvent the Legislature and the will of the people.” He added, “I look forward to the additional actions that the state control board will implement in the upcoming days.”

“Having exhausted all other options,” the complaint reads, “Disney is left with no choice but to bring this complaint asking the Court to stop the State of Florida from weaponizing the power of government to punish private business.”

What Disney Wants

The relief Disney is seeking includes a finding that the actions of DeSantis and the board are unlawful and unenforceable because they are an unlawful taking of Disney’s property rights without payment of just compensation, are arbitrary and irrational, and were enacted in retaliation for Disney’s speech in violation of the First Amendment. Disney is also seeking to have the earlier contracts signed by the previous board blessed as in effect and enforceable.

Response

When asked for comment about the suit, Taryn Fenske, Communications Director for Gov. DeSantis, said, “We are unaware of any legal right that a company has to operate its own government or maintain special privileges not held by other businesses in the state. This lawsuit is yet another unfortunate example of their hope to undermine the will of the Florida voters and operate outside the bounds of the law.”

The lawsuit is Walt Disney Parks and Resorts U.S., Inc., v. Ronald D. DeSantis et al. You can read the complaint, courtesy of Orlando News 6, here.