… even if refraining from destroying helps someone you disagree with.
Currently, Walt Disney Corporation has a special status in Florida that allows it to avoid many regulations and some taxes and fees. Because of its special status, the Reedy Creek Improvement District, which is a 38-square-mile plot of land that includes Walt Disney World has, according to the April 16-17, 2022 Wall Street Journal, “been exempt from many state and local environmental rules, building codes, and taxes.” Disney uses this freedom to set its own rules. Disney also provides fire protection, utilities, and more than 100 miles of roads.
Oh, the horror!
No one that I have found addressing the issue claims that Disney uses this freedom badly by, say, polluting the air and water more than corporations in other Florida counties do. Indeed, if we look at how private owners manage their own private property, we might conclude that Disney runs thing better than other Florida corporations, hamstrung by government rules, do. Care to bet which roads are better: roads in the Reedy Creek District or roads in surrounding counties? I’ll take the bet.
The explicit argument that Florida Republican legislators and Florida governor Ron DeSantis make is that Disney receives special treatment.
They’re right. It does.
But what if that special treatment works to produce good results? Many Republicans have favored deregulation on both ideological and pragmatic grounds. But when a corporation comes along and its executives say things that these Republicans don’t like, suddenly the Republican commitment to deregulation or, at least, lighter regulation, vanishes. We often hear Republicans and conservatives talk about what “snowflakes” people on the left are when people criticize them. Well, Florida Republicans have discovered their inner snowflake.
Last month, DeSantis stated, “As a matter of first principle, I don’t support special privileges in law, just because a company is powerful.” Fair enough. But then why did DeSantis suddenly discover this “first principle” only after Disney came out strongly against one of his favored pieces of legislation? And of course, there are two ways to get rid of special privileges. The way the Florida Republicans don’t seem to have considered is to make them less special by giving people in other counties the same flexibility.
Last year I had great hope for Ron DeSantis. I now have less.
Note: It shouldn’t have to be said, but I’ll say it anyway. My view has nothing to do with Disney’s opposition to a particular bill. I favor this bill and I think Disney’s chief executive Bob Chapek has been cowardly in letting himself be influenced by some Disney employees. In my view, his initial decision to stay out of it was the right decision.
READER COMMENTS
John C Goodman
Apr 22 2022 at 5:23pm
Disney has a private city. Because there is a private residual claimant, the externalities that you see in government run cities have been internalized.
Compared to any other cities of its size, Disney has shown that privatization at the city level works and it works really well.
Instead of dismantling this experiment, we ought to repeat it hundreds of times.
David Henderson
Apr 23 2022 at 10:40am
Exactly.
Michael Thomas
Apr 22 2022 at 5:52pm
Yes, agree with John.
I have very mixed feelings about the whole affair. I love Disney World, just because it’s fun. I think the bill is probably ok, and I think Chapek has been, as you say, “cowardly” in giving in to really irrational employees. I feel like if you’re going to ask for special favors from government, you’re going to have to deal with their whims and perhaps bite your tongue from time to time.
Still, this *has* been a remarkably successful attempt to merge the public interests with private interests. It shouldn’t be that Disney’s “special favors” are revoked, but rather that DeSantis looks for ways to extend the things that make it successful to other places around the state.
Scott Sumner
Apr 22 2022 at 5:55pm
Very good post. I read somewhere that this change will actually result in Disney paying less tax, and residents of nearby towns paying more. Can anyone confirm?
David Henderson
Apr 23 2022 at 10:41am
Thanks, Scott. An Orange County official, not named, was quoted in one of the pieces I read saying that taxpayers in his county would pay more.
Michael
Apr 27 2022 at 9:28am
The financial arrangement is… complicated. Here’s an example, though I am far from an expert in this stuff. There is about $1 billion in bonds outstanding.
https://emma.msrb.org/ES1346638-ES1049986-ES1454399.pdf
The state of FL has pledged to bondholders that it will not change the status of the district until outstanding bonds have been paid off – so this law breaks a pledge to the bondholders. (Or, at least, it would do so if allowed to take effect).
If the district is dissolved, the bonds become the obligations of the local governments that would govern the district in the absence of the special district. So, this bill could be viewed as a big financial giveaway to Disney.
Another issue: the property tax rate in the district is significantly (~30%) higher than the maximum allowed property tax rate in the state of FL. In the district , Disney is both the local government and the property owner, and it is allowed to charge itself a higher tax rate than other Florida jurisdictions could charge.
So: Dissolve the district and, in addition to getting out from under $1 billion in debt, Disney also receives (relative to status quo) a big tax break.
The purpose of the higher tax rate was to provide “Disney as government” a revenue stream to support issuance of bonds.
So, kill the district and Disney gets some cash benefits but loses control over how government services are provided and received.
Jeff
Apr 22 2022 at 7:42pm
You take DeSantis/ the GOP to task for being fair weather (or more likely mendacious) in their support for deregulation. But then you close by asserting your support for a bill that is surely nothing but nonsensical in its quest to use new regulation as a solution in search of a problem. Presumably you didn’t find this to be inconsistent- I wonder why that is.
Ryan M
Apr 26 2022 at 11:19am
The two are not really comparable. The bill does not use new regulation to address a nonexistent problem. It simply addresses a real problem in the only way it is currently able to do so. You might say that our system of public schooling is itself the bulk of that problem, and you would be correct – it does seem counterintuitive to solve what is essentially a bureaucratic problem with more rules, but unless you dismantle that system, your only option is to implement rules. Yes, a better solution would be school choice – but even then, you would still have public schools as the only option for many people (that is never going away, whether we want it to or not).
I agree with Mr. Henderson’s position that this is a distraction, as it has virtually nothing to do with his piece. However, your suggestion that support of the bill contradicts his position with respect to deregulation is simply false. Rules that limit the power of bureaucrats (teachers, in this instance), though not perfect, are far closer to deregulation than they are to, in your words, “more regulation.”
ee
Apr 22 2022 at 11:28pm
Why do you favor the bill?
David Henderson
Apr 23 2022 at 10:42am
I would answer, but it’s a side issue with respect to the point I’m making and I want to keep the discussion on topic.
AaronDEsq
Apr 23 2022 at 1:24am
I am consistently surprised by The Economists’ economist disregarding anti-trust and general corporate non-legible special interest. Of course, less regulation is good; and private cities might be even better.
What we have here is ONE corp. attaining a regulatory moat advantage, and using said advantage & resources to wage a social-religious-tribal war. That is the very signal that we are not in a competitive environment. Trade and commerce seeks to unite; so as to transfer value amongst the nodes; finding arbitrage and value added along those axis.
Or as MJ said : even conservatives by sneakers. Something NIKE and other companies are disregarding, but are ultimately exposed to market decisions.
So the simple questions is: How many other business have this arrangement? & As the poster above said, we should have a lot of it; until than, Disney ought to have none.
robc
Apr 24 2022 at 5:24am
I am no expert on this law (although I have been at DisneyWorld all week), but wouldnt the best solution be to eliminate the special taxing district AND allow Disney to still run things privately?
Why let the good be the enemy of the best? (As a contrarian, most common sayings are backwards)
On a related note, having just gone thru Orlando airport security, can we let Disney take over the TSA? Security interactions were better (and thorough) and their lines are more entertaining.
steve
Apr 24 2022 at 7:50am
This is true cancel culture. Disney voiced an opinion about a bill and real, tangible action was taken against them, not just a bunch of people saying mean things. There have been a number of financial analyses, including by the Orange County tax collector/assessor claiming this will cut Disney’s taxes, plus the Orange county taxpayer has to assume Disney debt, but in the long run this likely costs Disney money. Now every decision needs to run through the Orange county government. The delays alone will chew up the taxi saved. Likely also costs some Orange county jobs as Disney shifts jobs elsewhere.
Steve
Mark Z
Apr 25 2022 at 5:58pm
‘When you’re privileged, losing your privilege may feel like oppression.’
Thomas Lee Hutcheson
Apr 24 2022 at 8:04am
I’m exactly on the other side. I’m pleased with Disney’s stance on the bill (pure “do something-ism” assuming the best of intentions, which I do not) but I’m all in favor of eliminating selective deregulation/tax reductions for chosen corporations. Channel that corporate desire for better regulation/ taxation into improving policy in general.
This is the same argument as for not preferentially taxing capital income. Tax it as ordinary income to create pressure for a move to a consumption tax.
Jose Pablo
Apr 30 2022 at 10:48am
That’s not the point, I think.
The bill … whatever (this is another discussion)
The special regulation thing … whatever (this is another discussion)
Corporations expressing opinions on political matters … whatever (this is another discussion)
… but having a governor using the legislative to punish economically a “legal person” for having the “wrong” opinion on an issue … that’s so Hayekian!! (See Lemieux on that side of the story)
It shows how far we are down the road to serfdom
And whether the bill is right or wrong, whether the special regulation is right or wrong , whether corporations should express their opinion or not, DeSantis’ Hayekian stance on this matter is just tyranny, and we should not go an inch further on this road to serfdom.
MarkW
Apr 24 2022 at 11:22am
My hopes for politicians (especially those competing at the highest levels) are never high, so this did not particularly surprise or disappoint me.
Years ago, my wife had a colleague who was heavily involved in state politics and we had dinner with them. Since I was interested some of the current policy issues at the time, I thought we could have an interesting discussion. But it turned out that he had very little interest in policy — his concerns were with coalitions, allegiances, loyalties, how to garner the support of this or that party power-broker, etc. I guess it was one of my first direct experiences with ‘politics is not about policy’.
So probably, in addition to looking at this from an economic and policy perspective, we should probably take a peek through a political lens too. WWMD (What would Machiavelli do?) The CEO of Disney didn’t just express a personal opinion (and, of course, it probably wasn’t even his own opinion — almost certainly it was determined after a series of management team meetings), he also promised to work to repeal the law. And how else to do that but to provide support for opponents of the politicians who voted for the bill (going forward, how would Disney or any of its executives explain future campaign contribution Florida Republicans who voted for the bill)? So that’s pretty much a declaration of war against DeSantis’s coalition in Florida politics (in which, I understand, Disney has long been enmeshed — apparently they employ a decent sized standing army of lobbyists in Tallahassee).
I doubt DeSantis and the bill supporters in the legislature cared much one way or the other about Disney’s special district as as good or bad policy but rather only about whether or not it was good or bad politics to hit back with whatever means was most expeditious. That’s politics (of the brass knuckled variety).
Expanding the field of view, DeSantis appears to be Trump’s main rival for the 2024 nomination. So we also have to ask whether or not this fight increases or decreases DeSantis’s chances of winning the nomination?
David Henderson
Apr 24 2022 at 2:07pm
Well said, Mark W.
This accords with my own experience when I lived in Washington during the early Reagan administration for 2.5 years. At various dinner parties, it was even more trivial than what you describe: it was about who was up and who was down and who made a silly remark that week.
That’s why I’ve put almost all my political energy into working for or against ballot initiatives; you can read what they say and they mean what they say (although there are sometimes ambiguities.)
Craig
Apr 24 2022 at 2:21pm
“The explicit argument that Florida Republican legislators and Florida governor Ron DeSantis make is that Disney receives special treatment.
They’re right. It does.”
That should trigger an Equal Protection problem.
“But what if that special treatment works to produce good results?”
If it produces good results for Disney, it would produce good results for Universal, too. Favoritism breeds resentment.
“Many Republicans have favored deregulation on both ideological and pragmatic grounds.”
For all, not select recipients.
The motive is clearly sketch but the RCID isn’t just wrong, its MORALLY wrong.
Michael
Apr 24 2022 at 4:43pm
What exactly has Disney done to deserve to be punished – for those who think they should be, I mean? They have expressed an opinion on a political issue. Should all comapnies that express an opinion on a political issue be punished, or is Disney “special” somehow?
Florida is full of these “independent” jurisdictions, and they have not acted to revoke them all on principle. The bill, while not mentioning Disney by name, was narrolwy tailored to affect Disney and leave the vast majority of the other independent jurisdictions intact.
So there is no principled opposition to the type of arrangement Disney had, just a desire to punish them for holding an opinion deemed wrong by the Florida government.
zeke5123
Apr 25 2022 at 1:30pm
Disney hasn’t expressed views; Disney executives have expressed views using shareholder’s property to express said view.
Look, corporations engaging in political speech related to the corporation’s core business I think is more than fair game. Yes, it is possible some shareholders will disagree with that political speech (and thus that shareholder’s property is being used to further something that shareholder disagrees with). But it is a business decision made by the board trying to further business goals of making more profit.
But corporate management engaging in political speech that is only tangentially related to the core business goals (but align with the political goal of management) is morally wrong when management engages in this activism qua management because management is using shareholder property to achieve management’s goal primarily. I fully support management’s right to engage in political speech qua private citizen (i.e., not in role as management) and heavily oppose the idea of treating private actions of management as reflecting the company. But management needs to do it on its own dime; not the shareholders’ dime.
Michael
Apr 25 2022 at 2:33pm
If you are going to bring shareholder value into it, then you must answer 2 questions.
What is the impact on shareholders of Florida’s action?
By what right does Florida intercede on behalf of shareholders?
If you, for example, are a shareholder, then you would have standing to sue Disney for over financial losses related to their mismanagement. To win, you’d need a stronger case than anything that could be shown in this context, though – you’d need har numbers of financial losses.
As to whether Disney’s speech here was related to its core business: I think a case could be made either way.
As to whether corporate freedom of speech is limited to speech related to core business, I think Citizens United explicitly found otherwise. Or, at the very least, chose not to explicitly limit their findings that way. (The core purpose of the entity called Citizens United WAS to engage in political speech, but SCOTUS ruled in a manner applicable to all corporations.)
Also, if shareholders don’t like some of the speech emanating from corporate management, why is the correct answer limiting corporate speech rights and not “just sell you shares.”
zeke5123
Apr 25 2022 at 4:10pm
No, no I don’t. Florida’s reaction can be bad, but that doesn’t mean Disney executives weren’t acting poorly (i.e., deserving of punishment though I think from shareholders).
To be clear, I am not asking for legal punishment or a legal rule. I think relying on courts to determine what is and isn’t a core business is likely too far a path to go down. But that doesn’t mean as a matter of business ethics what I am saying is wrong. Executives should try to be honest with themselves. Yes, I am sure that what they believe is political good is good for business, but let’s not kid ourselves.
johnson85
Apr 25 2022 at 1:32pm
Well, they didn’t just express an opinion. They were dishonest about the contents of the bill, and dishonest in a way that I think merits removing special treatments for them.
First, what is their interest in wanting K-3rd graders to have any discussions about sex or sexual attraction with their teachers? That’s creepy and makes me concerned about them having any quasi-governmental power.
Second, how can they justify more or less claiming that members of the LGBQT have a particular interest (compared to straight teachers) in discussing sex or sexual attraction with K-3rd graders? How is that not slandering the LGBQT community? I am pretty sure if someone on the right came out and claimed that LGBQT teachers were more likely to want to talk about sex or sexual attraction with 5 and 6 year olds, they would have been labeled as hateful and homophobic and anti-trans. Disney say it, and people don’t bat an eye that it makes LGBQT teachers are just naturally more likely to want to discuss inappropriate sexual topics if not actually groom kids. Watching the lack of reaction makes me feel like I’m living in bizarro world.
But regardless, if a company lobbied against an anti-usury law and said it was an anti-jewish bill, I think that’s a bad enough position that at the very least, they shouldn’t be trusted with governmental or quasi-governmental powers, despite how responsibly or efficiently prior ownership may have handled them and even if the response of the jewish community was to more or less shrug. This seems like more or less the same thing to me.
Michael
Apr 25 2022 at 2:40pm
“First, what is their interest in wanting K-3rd graders to have any discussions about sex or sexual attraction with their teachers? That’s creepy and makes me concerned about them having any quasi-governmental power.”
The concerns of opponents of this bill, presumably including Disney, is about the vague wording, enforcement by private right of action, and obvious discriminatory intent (just going off of the statements of the bill’s proponents).
Johnson85
Apr 26 2022 at 10:16am
Except they aren’t talking about ways to tighten up the language or remove the private right of action. If they really had a problem with what you are claiming, that’s what they would be doing to fix it.
Instead, they are dishonestly calling it the “don’t say gay bill”. As if anybody’s concern is that it’s gay people talking with 5 year olds about sexual attraction as opposed to adults. And again, slandering LBGT members as having a particular interest in talking to children about sex and sexual attraction.
And for people that aren’t around kids, I’m not sure they understand just how weird it is that anybody would feel like that needs to be protected. I have children of my own, nephews and nieces, have helped with school events church events, coached tball, soccer, and basketball, and generally have been around a lot of kids from preschool through elementary, and not once have I have heard a child that age say anything that would “open the door” to a talk about sex or sexual attraction. If I had, I would not have discussed it with them, I would have reached out to a professional out of a concern that something bad had happened to them to have them thinking about or even aware of sex.
The closest thing I can even think of is young girls talking about marrying either their friends or relatives or dolls or pets or whatever, which for any non-sexual deviant, is not seen as an opportunity to educate a 5 year old on gender queer theory or whatever, but an opportunity to just let them continue playing and continue not being a creep with other people’s children.
Kent Lyon
Apr 26 2022 at 12:23pm
What has Disney done? Disney has taken a position in which it intends to use it’s corporate might to promulgate sexual indoctrination of young children. See the Rufo tapes. The experience for parents with small children who have patronized Disney, is like finding out that your son’s cub scout leader is a member of NAMBLA. Or that your priest is an active pederast. Would you continue to give special privileges and tax benefits to a drug company pushing oxycontin zealously, and ‘educating’ physicians claiming that addiction is a virtually non existent phenomenon? Would you like to give special rights to tobacco companies? Would you like to donate to Black Lives Matter for the tax write-off? (Major corporations would). Per Jason Riley, they are being scammed.
Why would you want to enable an organization that is targeting your children to sexualize them inappropriately? In particular a company that was established to market wholesome entertainment to children? I see things more like George Parry, who says that Disney has blown its brains out with its maneuvers. To me, the attitude of Mr. Henderson, and those of like mind, is suspect in that they give no value to the interests of parents trying to raise normal children. Are good roads an adequate recompense for inducing mental illness in children? That sexual identity indoctrination planned by employees of Disney seems to be a somewhat surreptitious type of indoctrination, done with the apparent hope that parents won’t really know what is going on. And, indeed, Disney appears to be attempting to circumvent the new law barring the sexual indoctrination of small children. Disney appears to have become a perverse and dangerous organization, dangerous particularly to those to whom they market their wares. I don’t quite see how Mr. Henderson thinks this is just fine.
Perhaps De Santis is being very kind to Disney. Perhaps his approach should be more like all those State AGs going after the Sackler family. Or the approach to getting settlements out of the Catholic Church for the behavior of priests.
zeke5123
Apr 25 2022 at 1:24pm
Interestingly, Disney was able to issue muni bonds for some improvements at WDW. Regardless of whether tax-free bonds should be permitted at all, I don’t think a small group of private entities should be able to issue them in the context of a taxing regime that generally taxes interest income.
Granted, flip side is Disney doesn’t get an interest deduction so who knows how the ultimate pricing comes out but Disney has an option most companies do not.
To me, this is somewhat different from the special regime that permits cutting red tape. I am very supportive of cutting red tape across the board. It is unfair to cut red tape for only one party, but the objection should not be “let’s add red tape for person XYZ;” instead, it should be let’s cut red tape for everyone else!
James Anderson Merritt
Apr 25 2022 at 3:36pm
IIRC, Disney sought and qualified for “special status” in large part because it actually was going to found a real town at the heart of DisneyWorld: the originally intended and designed EPCOT (Experimental Prototype Community of Tomorrow). But, after Walt’s death, that founding vision was abandoned, and EPCOT today bears only surface resemblance to any “future community,” much as Main Street USA is just a nostalgic homage to communities of the past, just a show for the tourists.
Because EPCOT is not a real town, and people do not actually live there, it is not a proper political subdivision that requires “special status.” I gather that Disney also wanted that status, in order to avoid the kinds of problems with local governance, with which Disneyland has long grappled in Anaheim. And I don’t at all like the idea that Florida voters and taxpayers will now have to bear additional burdens because the State government has stripped Disney’s district of its “special status.” But I can understand why the State might want to do so, apart from the unsavory element of DeSantis playing political hardball: from the State’s point of view, Disney pulled a bait-and-switch maneuver.
On the other hand, I agree with Henderson and others here, that perhaps the proper approach would be to create more “special status” districts. I say “perhaps,” because we never got to see how “the people of EPCOT” would fare, politically and economically, in Disney’s company town. What would have happened, for instance, had residents of EPCOT opposed Disney Corporate on one or more policies? There was a lot we could have learned from experience with the originally-planned EPCOT, which we unfortunately may never know.
Craig
Apr 25 2022 at 10:28pm
“Because EPCOT is not a real town, and people do not actually live there, it is not a proper political subdivision that requires “special status.”
Indeed Disney runs Bay Lake so that it never really becomes an actual town, the only people residing there are hand picked Disneycrats.
Of course Disney did do a kind of real life EPCOT with Celebration, FL and it was deannexed/detached from RCID to prevent dilution of Disney’s control of RCID.
dennis e miller
Apr 25 2022 at 6:13pm
I would like to set up a city-state of my own with like-minded people that run it the way we see fit. Where do I sign up?
Michael
Apr 26 2022 at 2:20pm
This article would suggest that if Florida goes through with this, Reedy Creek bondholders are going to have a strong legal claim aganst the state.
https://news.bloombergtax.com/tax-insights-and-commentary/the-contractual-impossibility-of-unwinding-disneys-reedy-creek?context=search&index=1
I figured the state of FLorida would get the better of this clash because Disney, rich and popular though it is, cannot just pick up its things and move to answer state.
But I don;t know how the state of Florida gets around its pledge.
Dan Mitchell
Apr 29 2022 at 8:35am
My two cents on the issue: https://danieljmitchell.wordpress.com/2022/04/29/disney-private-governance-special-districts-and-cronyism/.
Comments are closed.