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Florida faces a big obstacle as it moves to strip Walt Disney World of its semi-autonomous status in the state: what to do with the special district’s nearly $1 billion in bond debt.

The resort complex’s governing board says that when Florida created the Reedy Creek Improvement District decades ago, the state pledged to protect the district’s debt holders — and not to alter its status unless all debts are paid off.

The Disney district pulled out receipts from the 1960s

The debt pledge is in the Reedy Creek Act the state enacted in May 1967, the district said in a statement filed with the Municipal Securities Rulemaking Board.

Reedy Creek says the state made several promises to bondholders when it adopted the act, including:

• Not to limit the district’s ability to “fulfill the terms of any agreement made with the holders of any bonds or other obligations”;
• Not to impair bondholders’ rights, or modify the arrangement until all bonds, costs and expenses “are fully met and discharged”

Because of those pledges, the district said, it will “explore its options while continuing its present operations,” despite the plan to revoke its standing.

Moody’s Investors Service also cited the pledges as it affirmed its solid investment-grade ratings for Reedy Creek on Tuesday — although the agency did also change its outlook from “stable” to “developing.”

An Orange County attorney who specializes in local government and property litigation says the state’s move wouldn’t hold up under a lawsuit, as member station WMFE reports.

Attorney Jacob Schumer said the state has several options to address the situation “and maybe make the case not so clear cut. But as the law stands, I can’t see any way it holds up against a challenge.”

The dissolution bill quickly triggered cascading questions

Gov. Ron DeSantis signed a controversial bill on Friday to dissolve Disney’s “independent special district” in June 2023, widely seen as retaliation for Disney and its CEO, Bob Chapek, taking a public stance against Florida’s Parental Rights in Education Act — or as it’s called by critics, “Don’t Say Gay.”

Florida’s Legislature introduced and approved the dissolution bill in just three days last week, abruptly opening a new phase in the relationship between Florida’s politicians and the state’s most famous tourist attraction.

The issue was a hot topic when the district’s board of supervisors met on Wednesday: The Associated Press reports that numerous concerns were raised about the state plan’s impact on Reedy Creek, from financing a solar project to potential changes in benefits and security for its current and retired firefighters.

Reedy Creek operates as its own county government

For almost 55 years, the Reedy Creek arrangement has given Disney near-total control over nearly 40 square miles of land in Central Florida. It operates as a de facto county government, issuing bonds and levying taxes to provide necessities such as water and roads, as well as fire and emergency services.

As the state moved against Disney, the district’s bond debt quickly became a worry— particularly in Orange and Osceola counties, which the district straddles. That’s because the Florida Senate’s own financial impact analysis of the bill found that in most cases when a county takes over a special district, it “shall also assume all indebtedness of the preexisting special district.”

County officials have been airing their own concerns about suddenly becoming responsible for providing essential and emergencies services to the area.

“If Reedy Creek goes away, the $105 million it collects to operate services goes away,” as Scott Randolph, a Democrat who is the Orange County tax collector, said via Twitter.