Florida lawmakers have approved a bill that would strip Disney of its special tax district, setting the stage for what might be a protracted battle to undo a taxing authority that has acted as a county government for decades.
S.B. 4-C passed the Senate April 20 on a vote of 23 to 16 and was approved by the House April 21 on a vote of 70 to 38. It would dissolve some special tax districts created in the state before November 5, 1968, including Disney’s Reedy Creek Improvement District.
The bill now goes to Gov. Ron DeSantis (R) who, having called on lawmakers to address the issue in a special session, is expected to sign the bill.
However, much remains to be done.
According to a legislative analysis of the bill, active independent special tax districts that were created by a special act — as Reedy Creek was — can only be dissolved by the Legislature if approved by a "majority of the resident electors, or for districts in which a majority of governing body members are elected by landowners, a majority of the landowners voting in the same manner the independent special district’s governing body is elected."
The bill could also be subject to legal challenges.
Reedy Creek, which effectively acts as a county government, has the ability to levy ad valorem taxes and issue bonds to fund projects in the territory that includes Walt Disney World and its related theme parks. Under the bill, which was filed by Sen. Jennifer Bradley (R), the district would be eliminated June 1, 2023, and the district’s assets and debt would be transferred to the local governments of Orange and Osceola counties.
Critics of the proposal have expressed concern for the fiscal impact this would have on the local governments as well as on local taxpayers, who have been shielded by the district from financing infrastructure development and other projects within its boundaries.
Nathan Jensen, a government professor at the University of Texas at Austin who specializes in tax incentives, told Tax Notes in an April 21 email that while he thinks removing special tax districts would be a step in the right direction to improve Florida’s economic development landscape, rushing the process sets a dangerous precedent.
“What is highly troubling is that this isn’t a case of a policy reform informed by an audit, economic development analysis, or an admission that the state has wasted taxpayer money using poorly targeted economic development programs. This bill seems motivated at punishing a company for voicing their opinions about public policy,” Jensen said.
The threat to the special district comes at a time of ongoing friction between DeSantis and Disney after the corporation publicly criticized a new law (H.B. 1557) restricting discussions on sexual orientation and gender identity in kindergarten through third grade.
“Florida’s reputation as a business location for firms, including firms that do not seek incentives, could be harmed” by the decision to dissolve the district, Jensen added.
But Jensen said he doubts that dissolution of the district would have serious implications for Disney, in part because “for most companies, tax incentives amount to a small percentage of total costs.”