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Florida mulls reversal of Disney special tax district revocation

Florida lawmakers could possibly reverse the state's decision to strip Disney (DIS) of its special self-governing status.

According to a report from the Financial Times, state lawmakers are working on a compromise that would "allow Disney to keep the arrangement largely in place with a few modifications." The report added that Bob Iger's return as CEO is fueling sentiment around a resolution.

Republican lawmaker Randy Fine, who drafted the bill, told the FT that Chapek's ousting suggests "something will get sorted out."

"It’s easier to shift policy when you don’t have to defend the old policy,” Fine said. “Chapek screwed up, but Bob Iger doesn’t have to own that screw-up."

Disney CEO Bob Iger speaks next to the character of Minnie Mouse at the unveiling of her star on the Hollywood Walk of Fame in Los Angeles, January 22, 2018. REUTERS/Mario Anzuoni
Disney CEO Bob Iger speaks next to the character of Minnie Mouse at the unveiling of her star on the Hollywood Walk of Fame in Los Angeles, January 22, 2018. REUTERS/Mario Anzuoni

In late April, Republican Florida Governor Ron DeSantis signed a bill into law that would revoke Disney's special district status as of June 2023. The move was largely seen as a response to Disney's reaction to the so-called "Don't Say Gay" bill, which states: “Classroom instruction by school personnel or third parties on sexual orientation or gender identity may not occur in kindergarten through grade 3 or in a manner that is not age appropriate or developmentally appropriate for students in accordance with state standards.”

At the time, then-CEO Bob Chapek, who initially decided not to speak publicly on the matter, opted to work behind the scenes in a failed attempt to soften the legislation.

The executive eventually reversed course following intense backlash, publicly denouncing the act during the company's annual shareholder meeting on March 9 in addition to directly apologizing to employees in a company memo.

'A Vatican with mouse ears'

Walt Disney World Resort sits on a 40-square mile area known as Reedy Creek, which is a special tax district that has allowed Disney to operate as a self-governing entity since its inception.

Disney, in addition to paying property taxes to Orange and Osceola counties, pays taxes directly to Reedy Creek. In turn, the district uses that money to fund Disney's various theme park projects and operations, including infrastructure upkeep.

That means Disney controls all of its utilities and infrastructure, sets building codes, operates its own police and fire departments, and can expand and grow whenever it wishes — all without local or state government interference.

ORLANDO, FLORIDA, UNITED STATES - 2019/07/17: Urban skyline of resorts at Walt Disney World's Magic Kingdom amusement park. (Photo by Roberto Machado Noa/LightRocket via Getty Images)
Urban skyline of resorts at Walt Disney World's Magic Kingdom amusement park. (Photo by Roberto Machado Noa/LightRocket via Getty Images)

The arrangement also comes with certain tax advantages as Reedy Creek can issue tax-free municipal bonds to finance certain projects.

"I call it a Vatican with mouse ears, because it's essentially the same kind of authority that the Vatican has in Rome in the state of Italy," Richard Foglesong, Disney historian and author of the book "Married to the Mouse: Walt Disney World and Orlando," previously told Yahoo Finance.

The bill from DeSantis would strip Disney of that immense control and flexibility in addition to throwing Reedy Creek's $997 million worth of bond debt and some $163 million in annual tax payments into question. Those payments could fall on the citizens of the surrounding counties, who would be forced to bear the cost of the various services Disney previously paid through Reedy Creek.

It is currently unclear what the long-term financial implications would be for the "happiest place on earth" if the bill is not reversed.

Republican Florida Governor Ron DeSantis speaks during his 2022 U.S. midterm elections night party in Tampa, Florida, U.S., November 8, 2022. REUTERS/Marco Bello
Republican Florida Governor Ron DeSantis speaks during his 2022 U.S. midterm elections night party in Tampa, Florida, U.S., November 8, 2022. REUTERS/Marco Bello

On Monday, Iger spoke to Disney employees for the first time since stepping back into the CEO role, directly addressing the special tax district fiasco.

"I was sorry to see us dragged into that battle, and I have no idea exactly what its ramifications are," he reportedly told employees during the meeting, adding: "The state of Florida has been important to us for a long time, and we have been very important to the state of Florida."

DeSantis responded to Iger's comments on Tuesday, telling Tucker Carlson: “We didn’t drag them in… they went in on their own, and not only opposed the bill, threatened to get it repealed. These are parents' rights... They brought this on themselves."

Yahoo Finance reached out to DeSantis' office for comment, but has yet to hear back.

In a statement provided to NBC News, a spokesperson said the governor "does not make U-turns."

"The governor was right to champion removing the extraordinary benefit given to one company through the Reedy Creek Improvement District," the governor's office said. "We will have an even playing field for businesses in Florida, and the state certainly owes no special favors to one company. Disney’s debts will not fall on the taxpayers of Florida. A plan is in the works and will be released soon."

Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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