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Q&A Of the Day – Disney vs. Florida – What's Really Going On
Each day I feature a listener question sent by one of these methods.
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Today’s entry: Brian, Disney losing its self-governing and tax exempt (status). Does this mean that they will have to pay their fair share In Florida tax? They're a huge corporation. If so. Shouldn't liberals be happy Disney will be paying their fair share. I would love to know if they contribute to the local school system in their property tax? Or even if they pay any? Just a curious question.
Bottom Line: Yes, Disney pays property taxes at the same rate they would without the Reedy Creek Improvement District. Yes, Disney pays significant taxes in Florida. $780.3 million last year to be exact. Beyond that however... You’re familiar with the saying, the blind leading the blind. That’s what taking in most coverage of last week’s special session felt like to me. Having your traditional news media, rife with their own agendas and biases, cover something as involved as the financial impact of the Reedy Creek Improvement District has been as sad as it's been comical. Having been on vacation last week, and watching as opposed to covering the special session, was something special unto itself. Yes, laws can be difficult to digest. Yes, there’s a lot to account for with Disney’s loss of “protected status”. But to the point of your question. Will Disney have to pay more in taxes within the state of Florida? Will this economically benefit its communities? The beauty of a public company like Disney being involved, is complete transparency into their financials. Additionally, the Reedy Creek District is likewise publicly disclosed. This is what made so much of the reporting on this issue last week – so remarkably pathetic. There is no ambiguity here. As I say, there are two sides to stories and one side to facts. If the law remains intact, surviving legal challenges, here are the facts.
- Disney benefits from the Reedy Creek Improvement District
- The debt held by the District doesn’t automatically transfer to local governments
- This law can be an economic lift to Orange & Osceola Counties'
- Property taxes will only rise for owners in those counties if local officials choose to raise their taxes – not out of necessity
All related reporting to the contrary, which has been the norm, operates on three assumptions. The District’s debt will be automatically transferred to local governments, no additional revenue will be sent to local governments from the dissolution of the District, and local governments will operate with the same level of services Disney currently provides itself. In operating on those assumptions – you've likely heard stories of huge property tax increases for Orange and Osceola residents and a debt bomb being assumed by local governments in the form of the bonds issued by Disney under the District. It’s true the burden of services will be transferred to local governments should this go through. However, should this law take effect as currently constructed, it’s the decisions made by local governments which would determine the outcomes in their communities. I’ll break it down for you, but here’s where common sense provides a crystal-clear answer. If the Reedy Creek carve-out for Disney wasn’t of benefit to them economically, wouldn’t they have sought to end it a long time ago? It’s funny, despite the extensive one-sided coverage of this issue, how that detail was missed.
The law we’re talking about here – Independent Special Districts – is barely more than a page long. What’s the over-under on how many people who’ve reported on it have read it? Anyway, let’s get down to the brass tax. The first key to the law is that while it’s “in force” as of July 1st of this year – the dissolution of the District doesn’t take effect until July 1st of next year – so none of this is set to happen overnight and there’s plenty of runway for changes via legal challenges, new accompanying laws, etc. That said, as of the most recent financial fillings here’s the financial scorecard of the Reedy Creek Improvement district.
- $977 million in debt
- $169 million in tax revenue Disney assesses through a special tax on the District to pay for services
- $178 million in expenses
So basically, for the level of service you’re accustomed to seeing at Disney’s properties, they operate at near net neutral and enjoy the ability to self-govern. Not bad, right? So, here’s the deal. I mentioned the debt doesn’t just automatically transfer to the government, that’s key here. The dissolution of the District is step one. There are two other musts which have to be addressed through additional public policy both at the state and local level. How financial obligations are transferred from the District to governments.
Under state law there’s the option for local governments to create/use what are called Municipal Service Taxing units. Under state law here’s what it is... In any county which, through a municipal service taxing unit covering a specific area of the county not within the boundaries of any municipality, provides services or facilities of the kind or type commonly provided by municipalities, there may be levied, in addition to the millages otherwise provided in this section, against real property and tangible personal property within each such municipal service taxing unit an additional ad valorem tax millage not in excess of 10 mills to pay for such services or facilities provided with the funds obtained through such levy within such municipal service taxing unit.
Orange and Osceola can choose to impose this tax, to replace Disney’s self-imposed tax – with the ability to raise up to 10 mils on Disney in excess of what they already pay in property taxes. This is where it’s a choice. If local governments decide to do this, they not only could cover all costs of the dissolution of the District, but they could also provide for the services at a significant net profit – actually lowering the tax burden on residents in those communities. It’s all about choice. The mechanism is right there for them to do it within state law. And that, as the late great one would have said, is the rest of the story.
The merits of all of this can be debated. The facts of the matter can’t. It’s unfortunate, though predictable, news reporting has largely provided an incomplete picture of reality. There remain two sides to stories and one side to facts. What I’ve presented are the facts.