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

[mikejs78]

The dissolution of RCID is the public need.

That doesn't qualify as a public need. The state would need to demonstrate how dissolving RCID served the public interest, given that the state guaranteed that it wouldn't.

 

[lazyboy97o]

The dissolution of RCID is the public need.

The state just wanting to do something does not constitute a public need.

 

[lentesta]

Okay, reading the RCID charter, it's not clear the state can take over RCID without violating the FL Constitution. For example, here's the RCID charter page 2:

providing authority to set rates, fees, rentals, tolls, fares and charges, subject to certain requirements concerning public hearings and the sufficiency of revenues, and to make agreements and contracts for services without public hearing and pledge the same as security for District bonds;

If the state took over those functions and did not hold public hearings, wouldn't that violate the state's Sunshine Laws?

The bond issue remains maybe.

This depends on what it means to "substantially" impair a contract. Ultimately, this will require a legal interpretation by sitting justices, if the bond issue makes it that far.

As a refresher, the bond issue originates from a statement released by RCID:

In light of the State of Florida’s pledge to the District’s bondholders, Reedy Creek expects to explore its options while continuing its present operations, including levying and collecting its ad valorem taxes and collecting its utility revenues, paying debt service on its ad valorem tax bonds and utility revenue bonds, complying with its bond covenants and operating and maintaining its properties.​

The relevant part of the Reedy Creek Act reads:

Section 56. Pledge by the State of Florida to the Bond Holders of the District and to the Federal Government.-The State of Florida pledges to the holders of any bonds issued under this Act that it will not limit or alter the rights of the District to own, acquire, construct, reconstruct, improve, maintain, operate or furnish the projects or to levy and collect the taxes, assessments, rentals, rates, fees, tolls, fares and other charges provided for herein and to fulfill the terms of any agreement made with the holders of such bonds or other obligations, that it will not in any way impair the rights or remedies of the holders, and that it will not modify in any way the exemption from taxation provided in the Act, until all such bonds together with interest thereon, and all costs and expenses in connection with any action or proceeding by or on behalf of such holders, are fully met and discharged.​

Let's consider what it means to impair a contract:

This term applies to any law that will lessen the value or decrease the enforceability of a contract or an agreement.​

Contract impairment is addressed by Art. I, § 10 of the U.S. Constitution:

no State shall pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts.​

Several have referenced a Bloomberg article written by Jacob Schumer. One of the cases referenced in his article is Von Hoffman v. City of Quincy. In brief, the City of Quincy passed a law in attempt to avoid paying bonds it had issued. The Supreme Court ruled against the City of Quincy, finding this to be a violation of Art. I, § 10.

From RCID's perspective, this means the State of Florida cannot pass a law to avoid paying RCID's bonds.

However, this same ruling also included the following statement:

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.​

From a Constitutional perspective, the State of Florida has a right to alter bonds issued by RCID, as long as "no substantial right secured by the contract is thereby impaired."

I find it interesting that one of the cases cited by Mr. Schumer in defense of RCID explicitly states that Florida can alter bonds, as long as those alterations are not "substantial".

As has been noted, some of the bonds cannot be paid off early. However, as noted in a separate Bloomberg article:

There are several ways of defeasing outstanding bonds including a tender, make-whole or refunding, the strategists wrote.​

For example, if a bondholder is paid off in full, including all due interest, does this result in a "substantial" impairment? What if the State of Florida simply assumes the bonds, using the exact same revenue source that RCID does to guarantee these bonds? Is this a "substantial" impairment?

The State of Florida has a Constitutional right to alter bonds in non-substantial ways. The Supreme Court says so. Also consider that a purpose of Art. I, § 10 is not to guarantee that RCID exists. It's to make sure that bondholders are paid in full.

Ultimately, this is a matter of legal interpretation. What does it take to "substantially" impair these bonds?

Off the top of my head, I'm guessing some of the bondholders traded derivatives based on those bonds. Those derivatives would have to be unwound in a similar manner if the bond was repaid in full. Just figuring out how to do that seems like a decent starting point for "substantial impairment", even if the net dollar amounts are the same. I mean, yeah, you'd think the derivatives would also have some sort of early-repayment-of-the-underlying-asset criteria too. Call me crazy, but I don't have that kind of faith that the derivatives market is that omniscient.

Beyond that, the bond's interest protects a bit against inflation. While it's rarely talked about, deflation is also a possibility, where future dollars are worth more than current dollars. It last happened in 2009 and we were thatclose in 2015. Hell, I'd probably try to minimize risk via opposite trade, just to reduce risk. So unwinding the bonds would have to unwind the opposite-trade-as-insurance-bets. If I'm a bondholder who wants Disney to continue to run the RCID, I'd be making this point too. (Von Hoffman v City of Quincy was argued more than 150 years ago, when things like derivatives and deflation were probably not well considered. Neither are mentioned in the SCOTUS ruling.)

Third, we know at least one of the bonds has a no-prepayment clause. I don't know why a bondholder would want that, because I don't know anything about bonds, but I assume if it's there, it's there because the buyer thinks its valuable.

As usual, I could be completely wrong.

 

[GoofGoof]

I agree with everything you wrote.

I simply am trying to understand how DeSantis can legally do what he says he going to do. I don't agree with it.

It's up to the voters of Florida to punish him if they think he's wrong.

Ultimately, I'm convinced Disney will win on First Amendment grounds, if it comes to that.

Yeah I agree. I think where I’m mostly disturbed is that people will turn a blind eye on this type of behavior. Politics has always been a dirty game but there were boundaries and if you crossed a line you did get punished. I don’t see that happening this time.

 

[LAKid53]

The dissolution of RCID is the public need.

That's quite a stretch of "public need"...

 

[flynnibus]

Is that something anyone really supports? When did so many people decide this extreme level of government overreach is OK.

Because people are being coached to believe in the end goal and care less about what it cost to get there. "Consequences" and the ideals of limited government are conveniently ignored as long as the 'cause' resonates with the audience. It's the exact same conditioning people used to buy support for many of Trump's crazed schemes that tried to just act above the law or that the law didn't apply to him. "You are getting what you want right? Don't sweat the details...". It's bad when people ignore 'how will you pay for it'.. but it's downright alarming when people turn a blind eye to our core architecture of separation of powers.

It's the same conditioning that gets people to focus on 'the good' of policies while completely dismissing the corruption, abuse of power, and other things that came along to get the results desired.

It's a really short-sighted mindset... one that preaches "like the results, ignore the methods" and really dangerously throws out so much of the principals that BY DESIGN made these kinds of things difficult and NOT within the power of a few to simply do as they please or deletes the checks and balances.

 

[LAKid53]

The bond issue remains maybe.

This depends on what it means to "substantially" impair a contract. Ultimately, this will require a legal interpretation by sitting justices, if the bond issue makes it that far.

As a refresher, the bond issue originates from a statement released by RCID:

In light of the State of Florida’s pledge to the District’s bondholders, Reedy Creek expects to explore its options while continuing its present operations, including levying and collecting its ad valorem taxes and collecting its utility revenues, paying debt service on its ad valorem tax bonds and utility revenue bonds, complying with its bond covenants and operating and maintaining its properties.​

The relevant part of the Reedy Creek Act reads:

Section 56. Pledge by the State of Florida to the Bond Holders of the District and to the Federal Government.-The State of Florida pledges to the holders of any bonds issued under this Act that it will not limit or alter the rights of the District to own, acquire, construct, reconstruct, improve, maintain, operate or furnish the projects or to levy and collect the taxes, assessments, rentals, rates, fees, tolls, fares and other charges provided for herein and to fulfill the terms of any agreement made with the holders of such bonds or other obligations, that it will not in any way impair the rights or remedies of the holders, and that it will not modify in any way the exemption from taxation provided in the Act, until all such bonds together with interest thereon, and all costs and expenses in connection with any action or proceeding by or on behalf of such holders, are fully met and discharged.​

Let's consider what it means to impair a contract:

This term applies to any law that will lessen the value or decrease the enforceability of a contract or an agreement.​

Contract impairment is addressed by Art. I, § 10 of the U.S. Constitution:

no State shall pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts.​

Several have referenced a Bloomberg article written by Jacob Schumer. One of the cases referenced in his article is Von Hoffman v. City of Quincy. In brief, the City of Quincy passed a law in attempt to avoid paying bonds it had issued. The Supreme Court ruled against the City of Quincy, finding this to be a violation of Art. I, § 10.

From RCID's perspective, this means the State of Florida cannot pass a law to avoid paying RCID's bonds.

However, this same ruling also included the following statement:

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.​

From a Constitutional perspective, the State of Florida has a right to alter bonds issued by RCID, as long as "no substantial right secured by the contract is thereby impaired."

I find it interesting that one of the cases cited by Mr. Schumer in defense of RCID explicitly states that Florida can alter bonds, as long as those alterations are not "substantial".

As has been noted, some of the bonds cannot be paid off early. However, as noted in a separate Bloomberg article:

There are several ways of defeasing outstanding bonds including a tender, make-whole or refunding, the strategists wrote.​

For example, if a bondholder is paid off in full, including all due interest, does this result in a "substantial" impairment? What if the State of Florida simply assumes the bonds, using the exact same revenue source that RCID does to guarantee these bonds? Is this a "substantial" impairment?

The State of Florida has a Constitutional right to alter bonds in non-substantial ways. The Supreme Court says so. Also consider that a purpose of Art. I, § 10 is not to guarantee that RCID exists. It's to make sure that bondholders are paid in full.

Ultimately, this is a matter of legal interpretation. What does it take to "substantially" impair these bonds?

Anything that affects the holder's right to principal and interest (coupon) payments could be construed as such.

 

[flynnibus]

As a Florida resident of 56 years, my opinion is:

1. Many Florida voters don't know the laws of the state...until it directly affects them, and even then they are clueless
2. They are ignorant of the taxing structure of the state in general
3. They are okay with government overreach, as long as it doesn't affect them directly. And even then, they think it will affect "others" more than them.

Describes pretty much most of america these days... Short-sighted FTW!

 

[flynnibus]

For example, if a bondholder is paid off in full, including all due interest, does this result in a "substantial" impairment?

Ask a CPA.. I bet they say 'yes'

 

[GoofGoof]

Okay, reading the RCID charter, it's not clear the state can take over RCID without violating the FL Constitution. For example, here's the RCID charter page 2:



If the state took over those functions and did not hold public hearings, wouldn't that violate the state's Sunshine Laws?


Off the top of my head, I'm guessing some of the bondholders traded derivatives based on those bonds. Those derivatives would have to be unwound in a similar manner if the bond was repaid in full. Just figuring out how to do that seems like a decent starting point for "substantial impairment", even if the net dollar amounts are the same. I mean, yeah, you'd think the derivatives would also have some sort of early-repayment-of-the-underlying-asset criteria too. Call me crazy, but I don't have that kind of faith that the derivatives market is that omniscient.

Beyond that, the bond's interest protects a bit against inflation. While it's rarely talked about, deflation is also a possibility, where future dollars are worth more than current dollars. It last happened in 2009 and we were thatclose in 2015. Hell, I'd probably try to minimize risk via opposite trade, just to reduce risk. So unwinding the bonds would have to unwind the opposite-trade-as-insurance-bets. If I'm a bondholder who wants Disney to continue to run the RCID, I'd be making this point too. (Von Hoffman v City of Quincy was argued more than 150 years ago, when things like derivatives and deflation were probably not well considered. Neither are mentioned in the SCOTUS ruling.)

Third, we know at least one of the bonds has a no-prepayment clause. I don't know why a bondholder would want that, because I don't know anything about bonds, but I assume if it's there, it's there because the buyer thinks its valuable.

As usual, I could be completely wrong.

The no pre-payment clause locks in a steady stream of interest payments at the set rate. In theory if rates drop and the bond issuer can call the bonds back early they can call them and reissue new debt at a lower interest rate. As the bond holder if I want to know the cash flows will continue for years to some I buy a bond without an early redemption clause. The trade off is I probably get a slightly lower interest rate because I’m reducing my risk.

Your analysis on derivatives and hedges is spot on. The only way these bonds can be paid off in full is if there is an agreement reached with the bondholders. Everyone has their price and there is nothing illegal about asking for an early termination. The bond holders could say no, but they aren’t likely politically motivated so if you make them an offer they can’t refuse it would get done. But in that case then does the state of FL just eat the billion dollars plus whatever you pay as a sweetener to get the deal done? There’s no mechanism to make Disney pay. Sticking the debt to all FL residents will go over great. No wonder they plan to resolve this “after the election”.

 

[Lilofan]

As a Florida resident of 56 years, my opinion is:

1. Many Florida voters don't know the laws of the state...until it directly affects them, and even then they are clueless
2. They are ignorant of the taxing structure of the state in general
3. They are okay with government overreach, as long as it doesn't affect them directly. And even then, they think it will affect "others" more than them.

They SHOULD be outraged that the homeowners insurance crisis has been ignored by the Legislature since the general session and subsequent special sessions.

Some will listen to their favorite one sided news media source or some get educated courtesy of Twitter

 

[LAKid53]

If the state took over those functions and did not hold public hearings, wouldn't that violate the state's Sunshine Laws?

Yes, it would be a Chapter 286 violation.

Third, we know at least one of the bonds has a no-prepayment clause. I don't know why a bondholder would want that, because I don't know anything about bonds, but I assume if it's there, it's there because the buyer thinks its valuable.

Because a no-prepayment clause means that interest payments will be based on the original, not reduced, principal.

 

[GoofGoof]

Because people are being coached to believe in the end goal and care less about what it cost to get there. "Consequences" and the ideals of limited government are conveniently ignored as long as the 'cause' resonates with the audience. It's the exact same conditioning people used to buy support for many of Trump's crazed schemes that tried to just act above the law or that the law didn't apply to him. "You are getting what you want right? Don't sweat the details...". It's bad when people ignore 'how will you pay for it'.. but it's downright alarming when people turn a blind eye to our core architecture of separation of powers.

It's the same conditioning that gets people to focus on 'the good' of policies while completely dismissing the corruption, abuse of power, and other things that came along to get the results desired.

It's a really short-sighted mindset... one that preaches "like the results, ignore the methods" and really dangerously throws out so much of the principals that BY DESIGN made these kinds of things difficult and NOT within the power of a few to simply do as they please or deletes the checks and balances.

I keep giving society the benefit of the doubt and I keep ending up disappointed This being just plain wrong is so blatantly obvious to me.

 

[LAKid53]

Ask a CPA.. I bet they say 'yes'

Interest payments on munis are generally free from federal income tax. Many may include a premium if retired early.

But..... The investor looses a guaranteed income stream over a specific period of time. And that premium payment for early retirement could be considered a capital gain.

 

[LittleBuford]

This is attention due to Disney putting their foot in their mouth.

So you acknowledge that Disney specifically is being targeted?

 

[ryguy]

I find it interesting that Disney has been mum on the whole situation. The only thing we have seen or heard is them firing a dude. It will be fun to see how this all shakes out.

 

[LittleBuford]

Regardless of what happens, this could have all been prevented if Disney didn’t completely botch PR.

This is deflecting the blame. You may not like Disney’s stance (I personally do), but they have a legally protected right to hold it and shouldn’t face politically motivated retaliation for doing so.

 

[Chip Chipperson]

Couldn't Disney just build corporate housing faster and move in loyalists to counter that?

I volunteer live in AKL as a DVC member. I work remotely now, so all I have to do is spend 183 days a year there to be a resident.

Disclaimer: My volunteering is conditional upon Disney not requiring me to purchase enough points to cover 183 days.

 

[Chip Chipperson]

The bond issue remains maybe.

This depends on what it means to "substantially" impair a contract. Ultimately, this will require a legal interpretation by sitting justices, if the bond issue makes it that far.

As a refresher, the bond issue originates from a statement released by RCID:

In light of the State of Florida’s pledge to the District’s bondholders, Reedy Creek expects to explore its options while continuing its present operations, including levying and collecting its ad valorem taxes and collecting its utility revenues, paying debt service on its ad valorem tax bonds and utility revenue bonds, complying with its bond covenants and operating and maintaining its properties.​

The relevant part of the Reedy Creek Act reads:

Section 56. Pledge by the State of Florida to the Bond Holders of the District and to the Federal Government.-The State of Florida pledges to the holders of any bonds issued under this Act that it will not limit or alter the rights of the District to own, acquire, construct, reconstruct, improve, maintain, operate or furnish the projects or to levy and collect the taxes, assessments, rentals, rates, fees, tolls, fares and other charges provided for herein and to fulfill the terms of any agreement made with the holders of such bonds or other obligations, that it will not in any way impair the rights or remedies of the holders, and that it will not modify in any way the exemption from taxation provided in the Act, until all such bonds together with interest thereon, and all costs and expenses in connection with any action or proceeding by or on behalf of such holders, are fully met and discharged.​

Let's consider what it means to impair a contract:

This term applies to any law that will lessen the value or decrease the enforceability of a contract or an agreement.​

Contract impairment is addressed by Art. I, § 10 of the U.S. Constitution:

no State shall pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts.​

Several have referenced a Bloomberg article written by Jacob Schumer. One of the cases referenced in his article is Von Hoffman v. City of Quincy. In brief, the City of Quincy passed a law in an attempt to avoid paying bonds it had issued. The Supreme Court ruled against the City of Quincy, finding this to be a violation of Art. I, § 10.

From RCID's perspective, this means the State of Florida cannot pass a law to avoid paying RCID's bonds.

However, this same ruling also includes the following statement:

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.​

From a Constitutional perspective, the State of Florida has a right to alter bonds issued by RCID, as long as "no substantial right secured by the contract is thereby impaired."

I find it interesting that one of the cases cited by Mr. Schumer in defense of RCID explicitly states that Florida can alter bonds, as long as those alterations are not "substantial".

As has been noted, some of the bonds cannot be paid off early. However, as noted in a separate Bloomberg article:

There are several ways of defeasing outstanding bonds including a tender, make-whole or refunding, the strategists wrote.​

For example, if a bondholder is paid in full, including all due interest, does this result in a "substantial" impairment? What if the State of Florida simply assumes the bonds, using the exact same revenue source that RCID does to guarantee these bonds? Is this a "substantial" impairment?

The State of Florida has a Constitutional right to alter bonds in non-substantial ways. The Supreme Court says so. Also consider that a purpose of Art. I, § 10 is not to guarantee that RCID exists. It's to make sure that bondholders are paid in full.

Ultimately, this is a matter of legal interpretation. What does it take to "substantially" impair these bonds?

At least 1 of the bonds has a provision prohibiting early redemption. Anything other than keeping that bond as-is through its maturity date would be a substantial harm as it would deprive the bondholders of their interest earnings.

 

[LAKid53]

I volunteer live in AKL as a DVC member. I work remotely now, so all I have to do is spend 183 days a year there to be a resident.

Disclaimer: My volunteering is conditional upon Disney not requiring me to purchase enough points to cover 183 days.

Those 183 days don't have to be consecutive. BUT you need to provide proof. Residing in a DVC property for 183 days out of a year won't cut it.