Florida rating agency wary as DeSantis signs Disney Bill, put on negative watch Action News Jax

TALLAHASEE, Fla. — Florida Governor Ron DeSantis signed a bill to dissolve Disney’s tax district, which granted Walt Disney World unique self-governing powers for 55 years, even as a ratings agency leading bondholder warned investors against the proposed changes. .

Bill SB 4-C is designed to target the Reedy Creek Improvement District, which contains more than 25,000 acres in Orange and Osceola counties on properties in and around Disney parks and properties related. This district had authority over matters such as land use and performed traditional functions of local government, including fire protection, sewerage services and road management.

DeSantis, who is up for re-election and would be a potential GOP nominee in 2024, lashed out at Disney, which is one of Florida’s largest employers and a major tourist spot, after the company said that she would oppose the controversial law restricting sex education. orientation and gender identities in kindergarten through third grade.

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The governor added two Disney-related measures to a special session this week on congressional redistricting. The Republican-controlled legislature quickly picked up the bills and passed them in a vote along party lines.

During a Friday bill-signing ceremony at Hialeah Gardens, DeSantis acknowledged that the measures were aimed directly at punishing Disney for defying its passage of the education bill, which was officially titled the “Human Rights Act.” in Education” but has been dubbed by opponents as the “don’t say gay” bill.

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For context, according to popular.info, over the past two years Disney has donated more than $299,126 to “Don’t Say Gay” supporters such as members of the Florida legislature who were in favor of the bill, and $50,000 to the DeSantis campaign. Disney CEO Bob Chapek said the company would maintain public neutrality on the bill.

This statement resulted in major backlash outside of their company, and even within their own staff, with hundreds of people proposing a major walkout in response to the CEO’s decision.

As a result of this backlash, Disney officially said $5 million would go to various LGBTQ rights organizations and they would oppose the upcoming law.

“You needed me to be a stronger ally in the fight for equal rights and I let you down,” Chapek written in a statement to colleagues and the LGBTQ+ community published on March 11. “I’m sorry.”

In an immediate response, DeSantis said at a campaign-style event. “We signed the bill, and then incredibly they (Disney officials) say we’re going to work to repeal parents’ rights in Florida, and I’m just thinking to myself, you’re a company based in Burbank, California, and you are going to mobilize your economic power to attack the parents of my state? We consider this a provocation and we are going to fight against it.

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The measure affects the Reedy Creek District and five smaller special districts: the Bradford County Development Authority, the Sunshine Water Control District in Broward County, the Eastpoint Water and Sewer District in Franklin County, the Hamilton County Development Authority and the Marion County Law Library.

The law would dissolve those districts on June 1, 2023, although it would allow the Legislature to reinstate the districts before the stated deadline.

If the law has no legal opposition and the scheduled counties are dissolved, the debts, revenues and liabilities of the District of Reedy Creek would be transferred to Osceola and Orange counties and the small towns of Lake Buena Vista and Bay Lake.

The legislative action prompted credit rating agency Fitch Ratings on Friday to place “negative rating watch” on about $1 billion of outstanding district debt.

The district has about $79 million in utility revenue and refund bonds outstanding and about $766 million in ad valorem tax bonds outstanding, according to an alert issued by Fitch. The district’s various debt ratings range from A to AA-, Fitch said.

“The negative watch indicates that the ratings could remain at their current levels or potentially be downgraded,” Fitch said.

The negative watch “reflects the lack of clarity regarding the distribution” of the district’s assets and liabilities, “including the administration of pledged revenues of approximately $1 billion in unpaid debt,” following the district’s dissolution, said Fitch.

Fitch said the debt should be transferred to Orange County and, to a lesser extent, Osceola County.

“Fitch believes the enforcement mechanisms will be complicated, increasing the likelihood of negative rating action,” the agency said.

The Fitch alert, issued before DeSantis signed the bill later in the day, did not downgrade the district’s bond ratings, but warned investors against future action.

The post also touched on what are known as ESG principles, or environmental, social and governance principles, which the agency ranks on a scale of one to five.

Scores of one or two indicate “no impact on credit score”; a score of three reflects minimal risk; and scores of four and five “indicate that ESG risk is either an emerging risk or a factor contributing to the credit decision,” according to Fitch’s website.

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Fitch revised Reedy Creek District’s “general government” score on “rule of law, institutional and regulatory quality, control of corruption” from three to five “to reflect the state’s actions to disband the district, indicating a significantly reduced degree of independence from political pressure,” the agency said.

“These actions potentially diminish government effectiveness and could prove detrimental to bondholders, which negatively impacts credit profile and is highly relevant to the Negative Watch action,” Fitch said.

Meanwhile, ratings agency S&P Global Ratings did not issue a warning on Friday about the Reedy Creek district, but acknowledged the district’s impending disbandment.

The legislation did not provide a specific plan for how the district’s debts would be transferred.

During the debate on the measure this week, Democrats warned that central Florida taxpayers could be required to pay the tab of outstanding debt as well as utilities and other services.

Representative Andrew Learned, D-Brandon, told the News Service of Florida that Fitch’s warning translates to “real world consequences” for DeSantis and the culture wars of Republican lawmakers. He noted that the credit agency’s warning came before the district was even disbanded.

“It’s the main takeaway. We’re all going to pay more now, just because of the threat. Nothing should even change. The mere threat of a change will drive up prices and affect bond ratings. And that’s what’s happening,” Learned said.

But DeSantis brushed off those concerns on Friday.

“We’ll take care of all that. Do not worry. We have thought of everything. Don’t let anyone tell you that somehow Disney is going to get a tax cut. They are going to pay more taxes because of this,” he said.

DeSantis also signed a separate bill Friday targeting Disney that will remove an exemption for theme parks that was placed in a 2021 law aimed at punishing social media platforms that take users off the platforms or flag users’ posts. .

Last year, a federal judge issued a preliminary injunction preventing enforcement of the law, saying it was “riddled with vagueness and ambiguity.”

An Atlanta-based appeals court is set to hear arguments in the state’s appeal against U.S. District Judge Robert Hinkle’s ruling on Thursday.

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