Harvard Law's Ron DeSantis Flunks Disney's Contract Issue Spotter

I guess Mickey went to Yale.

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(Photo by Joe Raedle/Getty Images)

You’ve undoubtedly heard about Ron DeSantis’s attempted power play vis-à-vis Disney. The Florida governor has signed into law Senate Bill 4C which dissolves Disney’s Reedy Creek Improvement District. But while most have contextualized the matter as the latest salvo in our nation’s culture wars, there’s another problem with the political machination.

And it has everything to do with the basics of contract (and constitutional) law.

As Jacob Schumer points out in Bloomberg Tax, Reedy Creek has been able to finance itself by issuing bonds, backed by the district’s ability to tax at a rate three times higher than other cities or counties in Florida. And more to the point, the legislature has made some promises to bondholders in the process:

In authorizing Reedy Creek to issue bonds, the Florida legislature included a remarkable statement—included in Reedy Creek’s bond offerings—regarding its own promise to bondholders: “The State of Florida pledges to the holders of any bonds issued under this Act that it will not limit or alter the rights of the District to own, acquire, construct, reconstruct, improve, maintain, operate or furnish the projects or to levy and collect the taxes, assessments, rentals, rates, fees, tolls, fares and other charges provided for herein … until all such bonds together with interest thereon, and all costs and expenses in connection with any action or proceeding by or on behalf of such holders, are fully met and discharged.”

Rut-roh. Seems like Florida is doing… pretty much the opposite of what they promised. And, yup. That’s a big no-no.

Both the U.S. and Florida constitutions place strict limitations on the government’s ability to impair its own contracts. Under the U.S. Constitution, a state can only impair an existing contract if the impairment is reasonable and necessary to serve an important government purpose. As early as 1866, the U.S. Supreme Court held that once a local government issues a bond based on an authorized taxing power, the state is contract-bound and cannot eliminate the taxing power supporting the bond. The Florida Constitution provides even greater protection from impairment of contracts.

With this law, the state of Florida has eliminated the government entity that backed the various bonds while violating its own explicit promise not to do so. It is hard to imagine a way that the state could successfully argue that this did not violate its own contractual obligations or unconstitutionally impair the contract between Reedy Creek and the bondholders. Florida could theoretically get rid of some of these contractual issues by writing a giant check to prepay or “redeem” the bonds, but that’s prevented by at least one of the outstanding bonds—2018’s utility revenue bond prohibits redemption until October of 2029.

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Never mind the First Amendment concerns. You know, even the least civil-rights-minded judges tend to take a dim view on retaliation for protected speech. And, that seems to be pretty much EXACTLY what’s going on here.

So, what are we to think about the mounting legal issues with Senate Bill 4C?

Maybe Harvard Law just let a dumb-dumb slip by when they gave a J.D. to Ron DeSantis. Perhaps…. But maybe he’s dumb like a fox. It’s been reported that, even absent the wild issues above, there’s a real possibility that local taxes on residents will go up, while Disney’s taxes actually go down. If that economic reality is pushed off until 2029? Well, DeSantis sure hopes he has a different address by then — and an animatronic version of himself permanently ensconced in Liberty Square.

See, the actual impact on Floridian taxpayers or Disney itself is besides the point — DeSantis cares more about creating a national brand, fighting “wokeness” hiding in every shadow. Even conservatives know what’s up: talk radio host Erick Erickson said the move was “probably theater” that lets DeSantis “win[] with the base and Disney wins with the courts.”

But man, it’s a bad look for a lawyer.

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