Bond rating agency has warned about Reedy Creek debt risk


Disney World in Orlando Ron DeSantis publicly opposes the “parental rights in education” bill, also known as the “don’t say gay” bill.


Walt Disney World’s Reedy Creek Improvement District and its obligations to investors governments.

Fitch Ratings posted the alert late Thursday on its Fitch Wire web site, almost a week after Gov. Ron DeSantis signed into law the measure of dissolving the special taxing district that governs Disney property by June 1, 2023.

Reedy Creek Improvement District holds nearly $ 1 billion in bond debt and last week Fitch issued a “negative watch” about how much of that debt will be paid off.

The agency said the situation “reflects a unique and dynamic level of discord” and expects the state to “end up with a lot of stakeholders.

But it also added: “The failure to do so could alter our view of Florida’s commitment to preserve bondholder rights and weaken our view of the operating environment of Florida governments.”

A 1967 state law established the Reedy Creek Improvement District on 39 square miles of Disney property giving the district the power to issue bonds and tax itself to build roads, sewers and utilities, establish its police and fire departments, and regulate its construction. In exchange, the state pledged “it will not limit or alter the rights of the district … until all such bonds are together with the interest therein … they are fully met and discharged.”

The law does not address the issue of how the bonds will be paid, but DeSantis said: “We’re going to take care of all that.” Don’t worry. We have everything thought out. Don’t let anyone tell you that somehow Disney is going to get a tax cut out of this. They’re going to pay more taxes as a result of that. ”

The governor’s office then issued a statement indicating that “in the near future, we will propose additional legislation to authorize additional special districts in a manner that ensures transparency and an even playing field under the law.”

The repeat of the Disney special district was a surprise addition to the Florida Legislature, a congressional redistricting map approached by DeSantis. The Governor’s and Legislative Leaders added that it would seek a retrial for Disney’s outspoken opposition to the “Parental Rights in Education” law, also known as the “Don’t Say Gay” bill.

Fitch cites ambiguity in bond rating on ‘negative watch’

Fitch acknowledges that it “does not currently consider the state’s action as a precursor to similar dissolution measures or interference in other local governments.” The government’s “respect for property rights and bondholder security.”

Because Florida’s action “creates ambiguity around which entity or entities will ultimately repay bondholders,” Fitch put Reedy Creek’s bond rating on “negative watch.”

The designation is a signal to investors that the district’s debt ratings, which ranges from A to AA-, could be downgraded, are increasing the cost of the district’s capital, both debt and equity, and the impact of Disney’s share price.

Fitch said Thursday that it expects the state to “end up with a number of stakeholders who will be able to resolve the uncertainty in a timely manner.

However, municipal law experts have warned that untangling Disney’s taxing district would not be easy because state law requires that its debt obligations, tax revenues, assets and liabilities be transferred to Osceola and Orange counties. Lake Buena Vista and Bay Lake.

The district has about $ 79 million in outstanding utilities revenue and refunding bonds and approximately $ 766 million in outstanding ad valorem tax bonds, according to Fitch.

“Fitch is looking at the mechanics of implementation, including the transfer of revenue from bonded to bondholders, to be more complex, to RCID’s outstanding bonds for negative rating actions,” the alert said. “Furthermore, neither Orange nor Osceola County provides the complete suite of utility and emergency services provided by RCID [Reedy Creek Improvement District.]”

Fitch says dissolving district ‘likely impinges creditors’ rights’

Fitch warned that dissolving Disney’s district, the state “may impose creditors’ rights and may violate the state’s obligations to bondholders.”

If the Legislature reverses the course and re-ratifies Reedy Creek by June 1, 2023, or approves a “successor agency,” it “would likely result” in “preserving the operating and fiscal powers that underpin the creditworthiness of its outstanding debt,” ” Fitch said.

“Conversely, prolonged uncertainty with respect to dissolution procedures, litigation or other factors … could lead to a downgrade of the RCID ratings.”

DeSantis spokesperson Christina Pushaw said on Thursday that the state will have a special session on property insurance on May 23 when the state will address the uncertainty.

Pushaw wrote on Twitter, Before The Fitch Warning: “About the Reedy Creek special district: Disney will pay its fair share of taxes. Floridians, including residents of Orange and Osceola Counties, will not be on the hook. Another partisan political lie for not to be amplified by the media. More to come… ”

Mary Ellen Klas can be reached at and @MaryEllenKlas

This story was originally published April 28, 2022 8:23 PM.


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