Three Florida residents claim in a new lawsuit that Republican Gov. Ron DeSantis’ war with Disney over the state’s so-called Don’t Say Gay law is unconstitutionally raising their taxes.
The latest shot in that war happened in late April when DeSantis signed into law a bill dissolving Disney’s Reedy Creek Improvement District—a self-governing entity that gave the company the power to levy taxes and set their own land-use regulations on 25,000 acres in and around its Disney World theme park.
Those are some sweeping powers given to Disney by the Florida state government—powers DeSantis has argued are not justified given the company’s opposition to the law that limits discussion of sexual orientation in public schools.
“I’m just thinking to myself, you’re a corporation based in Burbank, California, and you’re going to marshal your economic might to attack the parents of my state,” said DeSantis when the bill eliminating the Reedy Creek district . “We view that as a provocation, and we’re going to fight back against that.”
The governor’s comments might be good culture war fodder. But the dissolution of Reedy Creek has presented some thorny fiscal and legal issues—in particular, the matter of who will have to pay off some $1 billion in the district’s debt.
Originally that debt was serviced by property taxes and other fees that Disney, through Reedy Creek, levied on itself. But with the district going away, that $1 billion now falls on the governments of Orange and Osceola counties. Property taxes could have to increase by as much as 25 percent to cover the new debt burden, according to one local official’s estimate.
Tuesday’s lawsuit, filed by Orange County and Osceola County residents Michael Foronda, Edward Foronda, and Vivian Gorsky in federal district court, argues that shifting this burden onto taxpayers is not just onerous, but unconstitutional. William Sanchez, the attorney who filed the lawsuit, is also a Democratic candidate running to replace Sen. Marco Rubio (R-Fla.).
“DeSantis and certain Republican lawmakers welcome a fight with Disney on this matter,” reads the complaint. But “they appear to not want to follow constitutional guidelines and previous legally enforceable agreements involving over $1 billion in bond issuances.”
Their lawsuit argues that the dissolution of Reedy Creek violates Florida promises made when it created the district in the first place, and as a result, taxpayers are being unfairly penalized.
The 1967 law creating Reedy Creek contained a commitment to bondholders that the taxing powers of the district would not be “limited” or “altered” until its debts had been paid off.
But by eliminating Reedy Creek, “the state of Florida has eliminated the government entity that backed the various bonds while violating its own explicit promise not to do so,” wrote Florida-based attorney Jacob Schumer for Bloomberg Tax last month. “It is hard to imagine a way that the state could successfully argue that this did not violate its own contractual obligations or unconstitutionally impair the contract between Reedy Creek and the bondholders.”
That would seem to give bondholders a good case for suing over the dissolution of Reedy Creek. Taxpayers face an uphill battle in challenging the abolition of the district, however, says Joe Bishop-Henchman of the National Taxpayers Union.
The plaintiffs in Tuesday’s lawsuit argue that they have standing because the law creating Reedy Creek is effectively a contract and they, as third-party beneficiaries of that contract, can sue to enforce it.
That will be a long shot, says Bishop-Henchman. They’ll be required to prove that they’re primary beneficiaries of the Reedy Creek district despite living outside of it. Their lawsuit, he notes, “quotes the statute [creating Reedy Creek] saying that its purpose is to benefit those within the District.”
Both the US and Florida supreme courts have also rejected “‘generalized taxpayer standing,’ the idea that any taxpayer can sue about a violation by a government they pay taxes to,” says Bishop-Henchman. Individual taxpayers will generally have to prove that they’re harmed in some particular way in order to have standing to sue, which will also be hard in this case, he says.
Bishop-Henchman says that other arguments raised in the lawsuit—for example, that Florida is violating the Contracts Clause of the Constitution, or that it’s violating Disney’s First Amendment rights by effectively punishing it for speaking out about legislation—might have some merit. But again, a court will wonder why taxpayers, and not bondholders or Disney, are suing.
There are also a few basic errors in the complaint that suggest it’s not entirely thought out. Reedy Creek is referred to as “Ready Creek” at one point. There’s also what appears to be a bolded note from the author marking a place where a missing DeSantis quote is supposed to be inserted.
The sloppiness of the lawsuit against DeSantis shouldn’t obscure the governor’s own willingness to forgo the details of policy in favor of a crusade against Disney.
The governor is representing himself as a defender of Floridians and conservative values. But the primary effect of his support for the dissolution of Reedy Creek is that some state taxpayers will have to pay out money to cover debts accrued by Disney.
A DeSantis spokesperson told the Los Angeles Times that taxpayers would not end up seeing their bills go up as a result of eliminating Reedy Creek. How exactly they’ll be spared some massive tax hikes has yet to be fleshed out, however.
In the meantime, central Florida taxpayers will have to depend on long-shot lawsuits to defend their interests.