News Reedy Creek Improvement District and the Central Florida Tourism Oversight District

thomas998

Well-Known Member
That's the mechanism used to create the control and influence. That doesn't make Disney and RCID one thing.

The new law didn't try to take something away from Disney through asset seizure. If Disney and RCID were one thing, then the government dissolving RCID would be taking something from Disney. Because that's what we want to, government seizing assets when they don't like what you say.

Disney has a majority direct ownership stake in ESPN. The minority owners couldn't just take the rest of ESPN from then.

All these details matter. Disney has spent the last 50 years making sure that RCID and Disney were separate and distinct yet maintaining control through how RCID is structured.

If you're going to ignore all the details and just make stuff up and pretend it's real, better to visit WDW than discuss impacts of real actions. At least as a visitor, they'll cater to a fantasy world.
And as they are a separate entity that isn't directly owned by Disney then Disney has no real leg to stand on to stop Reedy being desolved, it is about the same as when a school district get gobbled up by another district.
 

ctrlaltdel

Well-Known Member
Fair enough. Let's say for the sake of argument that the state can pay off the bonds.

The state has also already said it can't dissolve the RCID while the RCID is party to a contract.

Let's assume the state tries.

In some cases, like where the counterparties are Orange or Osceola Counties and Disney's paying for things like fire and police service, wouldn't the counties argue impairment via lost jobs? I've heard RCID employs 2,000 police, firefighters, first responders, and the like.

Even if the state agrees to keep them employed (and Disney agrees to contract with the state), Disney's paying more than the state, with better benefits and retirement packages. The employees are impaired.

It seems like untangling this is like my dad's walk to school: uphill both ways and in miserable conditions.
I think RCID employs more like 300 some employees. These are mostly administrative for each department, fire/ems (I think by far the biggest department by number of employees), and they contract out for police services to the counties. My guess is that they mostly contract out for roads work. Obviously that revenue where they pay the counties for police is another source of revenue for the counties which they don't have to use taxpayer dollars for.
 

mikejs78

Well-Known Member
It seems that some have already decided that Disney has been wronged (I'm one of them), so there's a tendency to back into our preferred outcomes.

Not really. For whatever leeway exists under federal law, it doesn't exist under FL law. There's also the matter of the bond ratings. Regardless of the outcome of a contracts case, if the bond market isn't satisfied with the outcome it will make municipal borrowing in FL extremely difficult.

That is certainly one possible method to eliminate the debt. I suspect that the reason DIsney is so concerned with what is happening is that they can see that as a possible method the state will use and if they do it would certainly hurt Disney to have to cough up a billion.

How do you propose they create this new tax when it requires 2/3 of both houses and the Republicans don't have that number?

Disney has no real leg to stand on to stop Reedy being desolved

Yes they do. As a voting landowner they have standing in the form of government that exists around them. They can argue that the legislature removed it without due process.
 

peter11435

Well-Known Member
That is certainly one possible method to eliminate the debt. I suspect that the reason DIsney is so concerned with what is happening is that they can see that as a possible method the state will use and if they do it would certainly hurt Disney to have to cough up a billion.
That’s not a possible method.

And there you go again talking about Disney. Where has Disney indicated they are “so concerned.”

I’m not saying they aren’t but there has been no public indication of that
 

GoofGoof

Premium Member
Recalling the Supreme Court ruling that I cited:

It is competent for the States to change the form of the remedy, or to modify it otherwise, as they may see fit, provided no substantial right secured by the contract is thereby impaired.​

Thus, the State of Florida and local counties can alter bonds as long as those changes are not "substantial."

We've previously discussed on this thread that Florida Statute already states what would happen to existing bonds if RCID were to be dissolved:

Unless otherwise provided by law or ordinance, the dissolution of a special district government shall transfer the title to all property owned by the preexisting special district government to the local general-purpose government, which shall also assume all indebtedness of the preexisting special district.​

And that the new law even allows Disney to reconstitute RCID:

An independent special district affected by this subsection may be reestablished on or after June 1, 2023, pursuant to the requirements and limitations of this chapter.​

It seems that some have already decided that Disney has been wronged (I'm one of them), so there's a tendency to back into our preferred outcomes.

However, I'm trying to be open-minded about this. I'm trying to understand what legal maneuvering both sides might engage in. I'm trying to understand how existing case law might affect the outcome of that maneuvering. I'd much rather discuss where this might go, rather than argue the same points that have been argued on this thread for the last 100 pages.

IMO, prepaying a bond that cannot be paid early is a "substantial" impairment. But is reissuing those bonds (under the name of "RCID-Prime") with the exact same terms a "substantial" impairment?

Ultimately, contract law is about making sure bond holders get paid according to the terms in the bond, not about finding reasons for RCID to exist.

One approach to help us understand what might happen next is to find a case that better defines what it means to "substantially impair" a contract. This might tell us if the State of Florida can do what it did from a contracts perspective.

I really hope someone can find case law that helps us better understand what a substantial impairment is. It could be that changing the parties on a contract is considered a substantial impairment. But maybe if just one government entity is replaced by another, it's not.

I don't know. Hopefully, someone can find a settled case that provides us with some guidance, rather than us just speculating. :)
I’m far outside of my area of expertise with municipal bonds so I may be completely off base here as what I know more about is corporate debt so if someone knows more feel free to tell me what I’m saying is wrong, I won’t take any offense.

In corporate debt there are usually specific terms that define what happens with a change of control. So I may own corporate debt issued by a company that is then acquired by another company and the debt survives the transaction and I now own debt that is backed by the new owner. In other cases the change of control clauses explicitly state that If there is a change of control the debt holder can either put the bond back to the corporate issuer or the interest rate increases to adjust for added risk. Since municipalities rarely have changes in control I don’t know if a similar set of terms typically exist. I assume there are no defined change of control terms with the RCID bonds or we would have likely heard about it already.
 

JoeCamel

Well-Known Member
I’m far outside of my area of expertise with municipal bonds so I may be completely off base here as what I know more about is corporate debt so if someone knows more feel free to tell me what I’m saying is wrong, I won’t take any offense.

In corporate debt there are usually specific terms that define what happens with a change of control. So I may own corporate debt issued by a company that is then acquired by another company and the debt survives the transaction and I now own debt that is backed by the new owner. In other cases the change of control clauses explicitly state that If there is a change of control the debt holder can either put the bond back to the corporate issuer or the interest rate increases to adjust for added risk. Since municipalities rarely have changes in control I don’t know if a similar set of terms typically exist. I assume there are no defined change of control terms with the RCID bonds or we would have likely heard about it already.
Up until a year ago I was the proud holder of a Puerto Rican muni bond.
The issuer went bankrupt like most of PR and the insurer paid as agreed. I could have sold it sooner than maturity if I wished so if RCID is dissolved I expect something of the same to happen here with the insurer going after any entity they think they can get to pay the bonds.
I can't see a mechanism where the obligation is shifted to another city or state, it would have to be retired (paid) then reissued to those who wanted it with new underwriting. Very messy
 

GoofGoof

Premium Member
How do you propose they create this new tax when it requires 2/3 of both houses and the Republicans don't have that number?
I saw a movie once where a guy figured this out. He built a space station the size of a small moon that could destroy entire planets. Then he dissolved the Imperial Senate and the last remnants of the old republic were swept away. When asked how he would retain control the emperor responded "The regional governors now have direct control over their territories. Fear will keep the local systems in line. Fear of this battle station
 

GoofGoof

Premium Member
Up until a year ago I was the proud holder of a Puerto Rican muni bond.
The issuer went bankrupt like most of PR and the insurer paid as agreed. I could have sold it sooner than maturity if I wished so if RCID is dissolved I expect something of the same to happen here with the insurer going after any entity they think they can get to pay the bonds.
I can't see a mechanism where the obligation is shifted to another city or state, it would have to be retired (paid) then reissued to those who wanted it with new underwriting. Very messy
Messy for sure. Anything could be negotiated but the bondholders will ensure they get something. If part of the debt can be redeemed early maybe they could do this easier if a new district is created but for the debt that prohibits early redemption they have to make the bondholders a deal they can’t refuse. Money talks.
 

mikejs78

Well-Known Member
I’m far outside of my area of expertise with municipal bonds so I may be completely off base here as what I know more about is corporate debt so if someone knows more feel free to tell me what I’m saying is wrong, I won’t take any offense.

In corporate debt there are usually specific terms that define what happens with a change of control. So I may own corporate debt issued by a company that is then acquired by another company and the debt survives the transaction and I now own debt that is backed by the new owner. In other cases the change of control clauses explicitly state that If there is a change of control the debt holder can either put the bond back to the corporate issuer or the interest rate increases to adjust for added risk. Since municipalities rarely have changes in control I don’t know if a similar set of terms typically exist. I assume there are no defined change of control terms with the RCID bonds or we would have likely heard about it already.
I would suspect there is likely no change of control language because Reedy Creek was created "in perpetuity" and the legislature promised not to change it.
 

mikejs78

Well-Known Member
Up until a year ago I was the proud holder of a Puerto Rican muni bond.
The issuer went bankrupt like most of PR and the insurer paid as agreed. I could have sold it sooner than maturity if I wished so if RCID is dissolved I expect something of the same to happen here with the insurer going after any entity they think they can get to pay the bonds.
I can't see a mechanism where the obligation is shifted to another city or state, it would have to be retired (paid) then reissued to those who wanted it with new underwriting. Very messy

Messy for sure. Anything could be negotiated but the bondholders will ensure they get something. If part of the debt can be redeemed early maybe they could do this easier if a new district is created but for the debt that prohibits early redemption they have to make the bondholders a deal they can’t refuse. Money talks.
Messy and likely to effect FL's bond ratings.
 

GoofGoof

Premium Member
Messy and likely to effect FL's bond ratings.
Yep. For those who missed it:


From this write-up:
We expect the state will ultimately work with various stakeholders to resolve the uncertainty in a way that ensures timely repayment of RCID debt, with reconstitution of the district as one option specifically offered in the bill.

So even the rating agency is sorta saying they expect this to be resolved with a version of RCID in place.
 

Disney Glimpses

Well-Known Member
So even the rating agency is sorta saying they expect this to be resolved with a version of RCID in place.
Right. Everything seems to be pointing to that (that the state needs to create a new district). DeSantis has repeatedly said "Disney will not govern itself" so I am curious how he gets them to agree to a District that gives them all the costs and none of the ownership.
 

UNCgolf

Well-Known Member
One approach to help us understand what might happen next is to find a case that better defines what it means to "substantially impair" a contract. This might tell us if the State of Florida can do what it did from a contracts perspective.

Blaisdell is the case in question that created the substantial impairment test.

Thing is, conservative (and libertarian) legal minds tend to think Blaisdell was incorrect and no impairment whatsoever should be allowed, no matter how minor. Neil Gorsuch actually wrote a dissenting opinion to a case a few years ago arguing exactly that.

EDIT: Forgot that Gorsuch was the lone dissenter and Thomas/Alito joined the majority, so they're apparently still on board with Blaisdell. But that doesn't mean they'd be okay with this particular case, of course. It just means they're willing to potentially allow minor impairments and Gorsuch isn't.
 
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GoofGoof

Premium Member
Right. Everything seems to be pointing to that (that the state needs to create a new district). DeSantis has repeatedly said "Disney will not govern itself" so I am curious how he gets them to agree to a District that gives them all the costs and none of the ownership.
Yeah, that’s the rub. Why foot the bill without control? Shouldn’t a local Government be controlled by the local taxpayers? Why does it make sense for the state or the Governor to control a district? If the local taxing authority wants to raise taxes shouldn’t the taxpayers have the final say? That’s why it’s just political rhetoric to say Disney shouldn‘t govern themselves. If they are virtually the sole taxpayer in a district why shouldn’t they have control? It’s being portrayed that Disney is controlling the local government and paying less than their share of taxes to the detriment of the other taxpayers, but that’s so far from the truth. I know truth is mostly irrelevant in the “fake news” era but this is pretty clear cut and hard to argue.
 

lazyboy97o

Well-Known Member
Recalling the Supreme Court ruling that I cited:

It is competent for the States to change the form of the remedy, or to modify it otherwise, as they may see fit, provided no substantial right secured by the contract is thereby impaired.​

Thus, the State of Florida and local counties can alter bonds as long as those changes are not "substantial."

We've previously discussed on this thread that Florida Statute already states what would happen to existing bonds if RCID were to be dissolved:

Unless otherwise provided by law or ordinance, the dissolution of a special district government shall transfer the title to all property owned by the preexisting special district government to the local general-purpose government, which shall also assume all indebtedness of the preexisting special district.​

And that the new law even allows Disney to reconstitute RCID:

An independent special district affected by this subsection may be reestablished on or after June 1, 2023, pursuant to the requirements and limitations of this chapter.​

It seems that some have already decided that Disney has been wronged (I'm one of them), so there's a tendency to back into our preferred outcomes.

However, I'm trying to be open-minded about this. I'm trying to understand what legal maneuvering both sides might engage in. I'm trying to understand how existing case law might affect the outcome of that maneuvering. I'd much rather discuss where this might go, rather than argue the same points that have been argued on this thread for the last 100 pages.

IMO, prepaying a bond that cannot be paid early is a "substantial" impairment. But is reissuing those bonds (under the name of "RCID-Prime") with the exact same terms a "substantial" impairment?

Ultimately, contract law is about making sure bond holders get paid according to the terms in the bond, not about finding reasons for RCID to exist.

One approach to help us understand what might happen next is to find a case that better defines what it means to "substantially impair" a contract. This might tell us if the State of Florida can do what it did from a contracts perspective.

I really hope someone can find case law that helps us better understand what a substantial impairment is. It could be that changing the parties on a contract is considered a substantial impairment. But maybe if just one government entity is replaced by another, it's not.

I don't know. Hopefully, someone can find a settled case that provides us with some guidance, rather than us just speculating. :)
These new districts would not have the same powers as the existing district. A district created as called for in the dissolution. Not being able to generate the same revenue seems like an impairment to repaying the bonds.

The case highlighted by Mr. Schumer in his Bloomberg Tax article includes a number of references. These two paragraphs say a lot about how Florida courts have viewed contracts.

“Any legislative action which diminishes the value of a contract is repugnant to and inhibited by the Constitution.” In re Advisory Opinion, 509 So. 2d at 314. For example, “[a] statute which retroactively turns otherwise profitable contracts into losing propositions is clearly such a prohibited enactment.” Id. at 314-15. Indeed, it is a “well-accepted principle that virtually no degree of contract impairment is tolerable.” Pudlit, 169 So. 3d at 150 (quoting Coral Lakes Cmty. ’n v. Busey Bank, N.A., 30 So. 3d 579, 584 (Fla. 2d DCA 2010)); see also Citrus Mem’l Health Found., Inc. v. Citrus Cty. Hosp. Bd., 108 So. 3d 675, 677 (Fla. 1st DCA 2013) (“[A]ny legislation that detracts from the value of a contract is subject to the constitutional proscription . . . .”).​
The conclusion, however, that “‘virtually’ no impairment is tolerable necessarily implies that some impairment is tolerable,” though not as much impairment as would be “acceptable under traditional federal contract clause analysis.” Pomponio, 378 So. 2d at 780. “[S ]ome impairment” may be “tolerable” where the governmental actor can demonstrate a “significant and legitimate public purpose behind the regulation.” Searcy, 209 So. 3d at 1192 (quoting Energy Reserves Grp., Inc. v. Kan. Power & Light Co., 459 U.S. 400, 411 (1983)).​

The onus is very much on the state to demonstrate the public need for changing the bonds, even if they are substantially similar. Unfortunately for them they keep saying it’s about retaliation.
 
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UNCgolf

Well-Known Member
These new districts would not have the same powers as the existing district. A district created as called for in the dissolution. Not being able to generate the same revenue seems like an impairment to repaying the bonds.

The case highlighted by Mr. Schumer in his Bloomberg Tax article includes a number of references. These two paragraphs say a lot about how Florida courts have viewed contracts.

“Any legislative action which diminishes the value of a contract is repugnant to and inhibited by the Constitution.” In re Advisory Opinion, 509 So. 2d at 314. For example, “[a] statute which retroactively turns otherwise profitable contracts into losing propositions is clearly such a prohibited enactment.” Id. at 314-15. Indeed, it is a “well-accepted principle that virtually no degree of contract impairment is tolerable.” Pudlit, 169 So. 3d at 150 (quoting Coral Lakes Cmty. ***’n v. Busey Bank, N.A., 30 So. 3d 579, 584 (Fla. 2d DCA 2010)); see also Citrus Mem’l Health Found., Inc. v. Citrus Cty. Hosp. Bd., 108 So. 3d 675, 677 (Fla. 1st DCA 2013) (“[A]ny legislation that detracts from the value of a contract is subject to the constitutional proscription . . . .”).​
The conclusion, however, that “‘virtually’ no impairment is tolerable necessarily implies that some impairment is tolerable,” though not as much impairment as would be “acceptable under traditional federal contract clause analysis.” Pomponio, 378 So. 2d at 780. “[S ]ome impairment” may be “tolerable” where the governmental actor can demonstrate a “significant and legitimate public purpose behind the regulation.” Searcy, 209 So. 3d at 1192 (quoting Energy Reserves Grp., Inc. v. Kan. Power & Light Co., 459 U.S. 400, 411 (1983)).​

The onus is very much on the state to demonstrate the public need for changing the bonds, even if they are substantially similar. Unfortunately for them they keep saying it’s about retaliation.

That reads like the Florida courts are even stricter than federal courts regarding contract impairment.
 

GoofGoof

Premium Member
I want to start out by saying this is a pipe dream, but boy would I love Disney to give the Florida the middle finger and move to Texas.
I posted this earlier in the thread:
 

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