Disney, inflation worries, and spending on consultants
Happy finance Friday! This week’s issue of LSS looks at the credit impact of Florida meddling in Disney’s business, how inflation is affecting state revenues, and state spending on engineering consultants.
Saddling Florida taxpayers with Disney’s debt
Florida Gov. RonDeSantis fulfilled his promise to punish the Disney company for its stances on social and education issues when he signed a bill last Friday that would dissolve its "independent special district," as well as five others. But Florida taxpayers and counties will really be the ones paying the price.
“If Reedy Creek goes away, the $105 million it collects to operate services goes away,” Orange County Treasurer Scott Randolph tweeted April 20, before DeSantis signed the bill which passed in the Legislature’s special session. “That doesn’t just transfer to Orange County because it’s an independent taxing district. However, Orange County then inherits all debt and obligations with no extra funds.” That amounts to an estimated $53 million per year in debt obligations, increasing his county’s debt obligations by nearly one-third to $163 million per year.
Special districts in Florida and elsewhere ballooned following the rapid expansion of suburbs and roads following WWII. They operate largely out of the public eye and self-fund special purposes such as mosquito abatement, fire control or mitigating beach erosion.
While the legislation is aimed at Disney, analysis by the Florida Association of Counties has found a number of special districts that would be affected by the dissolutions, including Franklin County’s Eastpoint Water and Sewer District, the Hamilton County Development Authority, the Marion County Law Library Independent Special District, the Sunshine Water Control District in Broward County and the Bradford County Development Authority.
The takeaway: While it’s likely that officials and the company will be able to reconstitute the district before the law goes into effect on June 1, 2023, this retaliatory action has created uncertainty for bondholders holding debt associated with any of the affected districts. This week, Fitch Ratings warned that failure to reconstitute Reedy Creek “could alter our view of Florida's commitment to preserve bondholder rights and weaken our view of the operating environment for Florida governments.”
In other words, it’s one thing if the law had been based on sound fiscal reasoning. But this politically-motivated move could have a chilling effect on the credit quality of other special districts.
Is Inflation Skewing State Revenues?
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