What’s Happening with Reedy Creek? Fall 2022 Update
A few months ago, some Florida legislators went full Judge Dredd, declaring, “I am the law!”
In the process, they announced a plan to end a legislative agreement that had stood since the 1960s, the Reedy Creek Improvement District.
Since then, we haven’t heard much about the legally required replacement because, well, there isn’t one.
So, you’re right to wonder. What’s happening with Reedy Creek? Here’s what we know and can guess about its current status.
PS: Please remember that Reedy Creek technically doesn’t dissolve until July 1st, 2023.
Discussing this subject without mentioning politics is all but impossible. So let’s take a quick look at the timeline and go from there.
A federal circuit judge dismissed one of the lawsuits for lack of standing while encouraging a re-filing. So, the court sidestepped the legality for now.
For its part, Disney faced an impossible situation. It has spent the pandemic negotiating with federal, state, and local officials to keep parks running.
However, Disney wanted to do so safely in a matter that protected its employees. When this bill earned international headlines, Disney took a stand.
In the process, the company alienated the governor of Florida, whom it had previously offered political donations.
As an act of revenge, possibly an illegal one, the governor coerced other Florida politicians into rescinding the Reedy Creek Improvement District (RCID).
At the time, I and many others pointed out that the Florida government had done no vetting of this idea. That’s not a political statement. It’s the reality of the matter.
I mention this because the RCID has its roots in 1960s legislature. So, its tendrils interconnect a shocking number of aspects of Florida/Central Florida governance.
In short, what I suspected (and stated) at the time has proven correct. Unfortunately, nobody thought this one through enough. It was a successful attempt to snag headlines.
We’ve entered the next phase, which I call “Now what?”
So, Now What?
Have you ever replaced anyone on a job where nobody really knew what the last person did?
In those uncomfortable scenarios, your employment depends on performing myriad tasks of unknown origin. You’re flying blind as you try to figure things out.
Meanwhile, when you don’t do that one thing that you didn’t know to do that matters, people yell at you.
The fact that you were utterly unaware is irrelevant. Other people’s jobs depend on your completing this task.
Now imagine that happening hundreds if not thousands of times. That’s RCID in a nutshell.
Disney has effectively run a city for half a century. In the process, Disney has fundamentally changed the identity of Central Florida.
The former swampland now consists of a $5 billion tourist industry, possibly more, depending on who you ask. But, of course, none of that happens without Disney.
While critics deride Disney for every little thing it gets wrong, the reality is that the (unofficial) city of Walt Disney World runs like a well-oiled machine.
RCID is the process that keeps the trains running on time. Over the years, forward-thinking Disney officials have integrated RCID cleverly.
They presciently anticipated that some sloppy politicians might show up and try to wreck the place. So RCID has defenses in place to protect itself.
That’s the phase we’re in right now. The greedy folks were licking their lips at the thought of getting a slice of the Disney pie. They wanted more power and money.
What they’re discovering at this moment is a “death by a thousand cuts” scenario. That’s why nobody knows the answer to “What now?”
The Current Status of Florida and Reedy Creek
The worst one involves bonds, aka loans. Reedy Creek owes many people money as the cost of doing daily business.
Both Florida and Central Florida governments sign off on these bonds.
When Reedy Creek’s bond rating declines, so does theirs. Think of them as co-signers on a kind of mortgage. Guess what has happened!
That’s a link to Fitch, a bond rating service that has marked RCID and parts of the Florida government as a risk. In the process, bond rates have increased.
Yes, all Florida residents are paying (slightly) more taxes now because of this nonsense. And the timing is brutal. Here’s why.
The lingering impact of Hurricane Ian exists far beyond any minor political squabble. Recent reports suggest $67 billion in damage in Florida.
This hurricane represents the worst natural disaster in Florida’s history and one of the five most devastating ever in the United States.
Florida faces severe economic upheaval from this hurricane, which makes this a terrible time to have subpar credit ratings.
If Florida collapses Reedy Creek, something that may yet happen (but hasn’t yet), it’ll bear the onus of those bonds. Florida’s governor has stated that won’t happen.
However, finding a solution to place Reedy Creek under the state government’s thumb has become a less pressing matter. Instead, it needs to pay its bills.
Central Florida already lost $25 million in toll revenue last month. That’s tip of the iceberg stuff, but it also highlights how much tourist revenue Walt Disney World generates for its state.
You don’t kill the goose that lays the golden eggs. However, Florida’s state government still needs a win here.
They must find a way to maintain something eerily close to the status quo that they can still call a victory. That’s how politicians work (and think).
What Happens Next?
A recent Orlando Sentinel quote included this telling phrase: “The DeSantis group is trying to figure out how to look good. Disney is trying to protect the business model.”
Taking another approach, Ben Watkins is the money person in Florida. He is the Director of the Florida Division of Bond Finance, a job he has held since 1995.
Watkins suggested something this summer that aligns with what I had predicted when this story broke.
He believes Florida’s state government will dissolve Reedy Creek only to reinstate it in basically the same form. However, politicians will point out the ways they have nerfed Disney.
Specifically, you should expect that Disney loses its ability to build a nuclear power plant, something that was never happening anyway.
Remember all those solar farms that MickeyBlog has discussed? They’re Disney’s preferred source of power…but it sounds good to take away Disney’s nuclear arsenal.
Right now, more than ever, Florida needs Disney to generate massive amounts of tourist revenue. Even with that money, the state has entered a perilous financial condition.
So, Florida cannot afford to be feuding with its golden goose. However, the governor has political ambitions for the White House and can score cheap political points at Disney’s expense.
For this reason, I cannot rule out something ridiculous happening next spring, the time when this matter is most likely to resolve.
Based on all the money people I follow, the business world expects little to change behind the scenes with Reedy Creek, though. So everything happening here is just for show.
However, we have an election in three weeks. Therefore, everything will be up for reevaluation after we know the composition of Florida’s next state government.
Those elected officials will ultimately determine Reedy Creek’s fate. Unfortunately, they may care more about culture wars than credit ratings.
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Feature Photo Credit: https://www.worldofwalt.com/disney-private-government-disneys-reedy-creek-improvement-district.html