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Repealing Disney's special district could unintentionally increase taxes, Florida officials warn

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Tax officials and state legislators are warning that by stripping Disney of its self-governing privileges, Florida Republicans could be putting taxpayers on the hook for more than $1 billion in bond debt.

Florida Republicans on Thursday passed legislation in the state House that dissolves the Reedy Creek Improvement District — a special district given to the Walt Disney Company in 1967 for the Walt Disney World Resort.

For decades, Disney has held the right to tax and regulate itself, so long as whatever projects the company builds in the theme park follow building codes and other federal and state laws. Under this arrangement, Disney pays for public services within the area of the theme park, including local police, fire departments, and infrastructure such as public roads and bridges and takes on authority and responsibility similar to a county government.

But Republicans, upset with how the company has publicly opposed legislation that would keep sexual orientation and gender identity discussions out of kindergarten through third-grade classrooms, acted this week to remove Disney's special privileges. They say that private companies should not hold special privileges in law, and that once the law is repealed, local county governments will assume the power to collect taxes and govern Disney's theme park.

But tax officials from those counties warn that the repeal legislation could have unintended consequences, CNBC News reported.

Scott Randolph, a Democratic tax collector for Orange County, said that the Reedy Creek district collects an estimated $105 million annually in tax revenue, but those taxes won't automatically get transferred to Orange and Osceola counties — the local governments that would have jurisdiction over parts of Disney World should the Reedy Creek district be dissolved.

"If you dissolved Reedy Creek, that $105 million in revenue literally goes away, it doesn't get transferred," Randolph told CNBC.

He explained that Reedy Creek is an "independent tax district," which means that the tax revenues Disney generates from its property are in addition to local taxes the company already pays, not in substitution for them.

According to CNBC, Disney is the largest taxpayer in central Florida, paying over $280 million in property taxes to Orange and Osceola counties between 2015 and 2020.

If the Reedy Creek district goes away, the tax payments to Orange and Osceola counties would remain the same, while the counties would be forced to pick up the additional cost of operating the public services and infrastructure that Disney currently pays for, Randolph said.

The counties would also inherit Disney's debt in the form of Reedy Creek bond liabilities, which are valued between $1 billion and $1.7 billion, CNBC said.

Democratic state Senate Minority Leader Gary Farmer told CNBC that taxpayers in Orange and Osceola counties could be saddled with more than $2 billion in bond debt, as tax authorities are increasing their estimates of Reedy Creek's liabilities as they look into the issue.

"This is a very real impact, the extent of which we don't fully understand yet," Farmer said. He estimated that the debt could be worth as much as $1,000 per taxpayer.

"If the counties are left holding the bag, the state might have to come to their aid," Farmer said. "So it's not even just a tax issue for these two counties. It affects every taxpayer in the state of Florida."

Republicans insist that taxpayers will not be stuck with a bill if Disney loses its special privileges.

State Rep. Randy Fine, who fought for the repeal legislation, said tax revenue that Disney currently pays itself would be transferred to local governments and should cover the costs of added public services.

"Those taxes will continue to be paid," he told CNBC. "They will just be paid to Orange and Osceola county instead of this special improvement district. The taxpayers could end up saving money because you've got duplicative services that are being provided by this special district that are already being done by those municipalities."

Randolph said it's not so simple. In an interview with WFTV-TV, he said state laws prevent the counties from raising sales taxes or impact fees to cover the costs of assuming Reedy Creek's public services. Taxes levied by the county are required to be levied on everyone, so even taxpayers who don't live in the Reedy Creed district would have to pay increased taxes if the counties took that option.

Another option is to increase property taxes anywhere from 20% to 25% to cover the additional costs, Randolph said.

He criticized the legislature for repealing the Reedy Creek Improvement District without adequate time to consider the consequences.

“They’re dissolving something the size of the city of Orlando in 72 hours,” Randolph said. “This is not the way to run a state.”

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