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Florida’s Bond Chief Sees Disney District Being Re-Established

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(Bloomberg) -- Florida’s head of bond finance said lawmakers will likely re-establish the embattled Walt Disney Co.’s special district after the state passed a law that would dissolve the governing body next year.

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Ben Watkins, director of the state’s division of bond finance, said legislators are likely to create a successor district, one that will assume many of the powers that Reedy Creek Improvement District, the agency that allows Disney to preform certain municipal functions at its resort properties like emergency services, garbage collection and infrastructure funding, currently has. The new district won’t have some of the powers previously granted that were never used such as operating a nuclear power plant.

“I’m confident that Reedy Creek will get addressed in a more meaningful way,” he said Thursday. Lawmakers will likely restore a limited version of the special district in the next legislative session, Watkins said. He added that Governor Ron DeSantis’s office has been “supportive” of the successor district approach, though lawmakers ultimately have the final say in how legislation will be drafted.

The state legislature, urged by DeSantis, abruptly passed legislation in April that will dissolve Reedy Creek in 2023 without further action. The law was seen by critics as retribution for Disney’s critique of a DeSantis-backed law that restricted discussion of gender identity and sexual orientation in public schools.

Related: What Florida’s Action Against Disney Means: QuickTake

Reedy Creek has about $1 billion of municipal bonds outstanding, a bounty of debt that was thrown into flux during the dissolution debate and the fate of which is still unclear. DeSantis said that the debt burden wouldn’t be passed onto the local governments surrounding the district.

“The debt will be transferred and assumed by -- with the same terms and conditions -- the successor entity,” Watkins said. He elaborated that the new district will have identical powers to collect revenue and levy taxes, so the bonds wouldn’t be impacted.

Rating companies were stumped by the Florida law. Moody’s Investors Service and S&P Global Ratings changed their outlooks on the property tax bonds sold by the Reedy Creek Improvement District to “developing” -- a rare designation that didn’t give bondholders much insight on how their investment will fare. Municipal Market Analytics, a research firm, harped on the unusualness of Florida’s political fight with one of its localities. Still, the state had promised in offering documents that it wouldn’t impair the bonds.

“It is one thing for Florida to threaten one of its local units with rapid dissolution for purely political reasons,” wrote MMA’s Matt Fabian and Lisa Washburn in an April research note. “It would be a very different thing for the state to knowingly walk away from or violate its own non-impairment pledge to bondholders.”

Watkins said that isn’t going to happen.

“We understand what non-impairment is, we are not going to do anything that adversely affects the credit,” he said. Watkins proactively called major bondholders and investment firms to talk through the situation as it was unraveling this spring, saying the legislature left an “information void” by passing the law so quickly.

“Our reputation in the credit market is extremely important to us,” he said. “We don’t want to jeopardize that.”

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