It was just a promise made to settle negative publicity. There are plenty of municipal facilities in the state that charge for use.
The explicit phrase used in the legal documentation between the parties defines the garages as properties
"upon which Licensor [the District] operates the free public parking structures commonly known as...".[]
The foundational mechanisms that establish this free parking rule are codified through the following legal frameworks:
1. The Federal "Private Business Use" Test (Internal Revenue Code § 141)
The bonds used by the Reedy Creek Improvement District (RCID) to fund the garages were
tax-exempt governmental bonds. Under Section 141 of the Internal Revenue Code, a bond loses its tax-exempt status if it meets the
Private Business Use Test.
- The Rule: No more than 10% of the bond proceeds can be used for any "private business use."
- The Application: If RCID or Disney charged a fee to park, or if Disney controlled who could enter, the garage would be legally classified as a private commercial parking lot serving Disney's private businesses (its tenants and stores).
- The Language: To keep the tax exemption, the bond covenants mandate that the project serves a "general public purpose." Under federal tax rules, a municipality providing standard infrastructure (like a public road or a public park-and-ride lot) cannot restrict it or monetize it for a specific private entity.
2. The Interlocal and License Agreements
Because the district owns the land and structures, but Disney operates the surrounding theme parks and shopping complexes, specific operational agreements had to codify this arrangement. In the district's board packets and property agreements, the structures are contractually bound to this exact public
What happens if they try to charge?
If the Central Florida Tourism Oversight District (CFTOD) or Disney decided to start charging for parking tomorrow, it would immediately trigger a
"remedial action" or tax event under IRS regulations. The IRS would retroactively declare the multi-million dollar bond issue to be "taxable private activity bonds."
This would force the district to pay staggering financial penalties, refinance the debt at significantly higher taxable interest rates, or force investors to pay back-taxes on the interest they earned—effectively violating the legal promises (covenants) made to bondholders when the debt was sold.
Key Terms and Conditions of the Garages Bonds
| Bond Feature | Terms & Covenants |
|---|
| Public Purpose & Free Parking | To maintain federal tax-exempt status, the garages must serve a valid "public purpose" (such as easing public traffic congestion). Consequently, the bond covenants include restrictions that prevent the district or Disney from charging the public for standard self-parking, keeping it complimentary. |
| Financing Structure | The infrastructure was financed through tax-free municipal bonds. Using a government entity allowed Disney to bypass paying sales tax on construction materials and secure lower interest rates. |
| Debt Backing & Repayment | The obligations are Ad Valorem Tax bonds, secured by an irrevocable lien on the property taxes collected within the district. Because Disney owns the vast majority of the land, Disney effectively pays the taxes that service this debt (roughly $58 million annually across total district bond debt). |
| State Covenants & Dissolution Protection | Under the original 1967 Reedy Creek Act and the bond agreements, the State of Florida pledged not to alter or limit the district’s powers or impair the rights of bondholders until all debt and interest are fully paid off and discharged. |
