At least until 2029, anyway.

Analyzing tax law is far above my pay grade but the argument from tax attorney Jacob Schumer in this piece is straightforward. One of the many powers Disney enjoys by virtue of its special improvement district, Reedy Creek, is the power to issue bonds to help finance its projects. Interest payments on those bonds are financed in different ways; one class of bonds draws from property tax revenue, another draws from utility revenue. Notably, another power Reedy Creek enjoys is exemption from state law capping the rate at which property can be taxed, which means Disney can raise taxes (on itself) more or less as needed to make sure that the bonds are paid, making them an unusually safe investment.

Here’s the kicker. Per Schumer, the bonds include a pledge to investors from the state of Florida that the state won’t “limit” or “alter” Reedy Creek’s power to raise revenue to make payments until they’re paid in full. Which DeSantis and the state legislature just did by rescinding the district.

Two problems, then. First, under the terms of the rescission, Orange and Osceola counties inherit Disney’s obligations under the bonds despite having no way to make the payments. Even if they wanted to jack up property taxes sky high, infuriating their residents, they could only raise them so much before the state cap kicked in. Second, various constitutional provisions prevent the state of Florida from amending its own contractual obligations after the fact. Even if DeSantis and Florida Republicans could figure out a way to relieve Orange and Osceola of their new debt, in other words, they’d still be in violation of the pledge made in the bonds not to “alter” Reedy Creek. Schumer:

By dissolving Reedy Creek, the legislature essentially rewrote the promises made in the district’s bond offerings. Instead of bonds backed by a special district with the power to levy up to 30 mills in taxes, the property tax bonds will be backed jointly by two governments that can only generate a maximum of 10 mills in taxes. Instead of a unified utility system with special powers to charge various fees, supported by special taxing powers, utility revenue bonds will be jointly managed by two counties subject to additional taxing and spending restrictions.

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.

Is Schumer wrong, tax lawyers? Or did DeSantis not have his own attorneys read the fine print on Reedy Creek’s obligations before nuking it from orbit?

It seems to me there are three potential solutions on the table now. One is to rescind the rescission and give Disney back its district, but for reasons I explained last night, DeSantis isn’t going to do that. Once you pick a fight to impress populists, you can’t quit without doing yourself damage. Another is for Florida to pay off Reedy Creek’s bonds, including all future interest owed, to eliminate the contractual problem. But that would be expensive — and illegal, again according to Schumer, who says Reedy Creek’s utility bonds contain a provision preventing redemption before 2029. Presumably the state could get bondholders to waive that provision if it’s willing to pay some sort of premium but how much will that end up costing Florida taxpayers?

Maybe Republicans don’t care. Charlie Sykes wrote this morning that the new hallmark of populist purity is being willing to do economic damage to your own constituents in the name of standing on principle. If DeSantis decides that Florida needs to cough up a billion dollars to pay off Reedy Creek’s bonds so that he can win this fight, plenty of righties will be willing to do that on the theory that we should bear any burden in prosecuting the culture war.

The final option is to go to court and (quietly) hope to lose, which is what I think DeSantis will end up doing. What choice does he have? He can’t back down and sheepishly admit that his team didn’t give due deliberation to Reedy Creek’s various legal entanglements before acting. That would amount to admitting incompetence. So he has to carry out this fight until a court tells him it’s over, which seems increasingly likely since each day seems to bring the discovery of a new legal landmine from the Reedy Creek move — First Amendment problems, property rights issues, now tax complications. Team DeSantis is going to step on one before a judge eventually.

Which will be a fine and familiar outcome for them. Noah Rothman notes today that some of DeSantis’s most crowd-pleasing populist initiatives (the “anti-riot” bill, the Big Tech legislation) have already run afoul of courts yet DeSantis has suffered no diminution in his “he fights!” cred as a result. “If a simple gesture of hostility in the general direction of a particular problem satisfies … right-leaning critics of cultural progressivism, then they are only in the market for theatrics,” Rothman argues. Relatedly, yesterday DeSantis signed a new bill creating an “election police” unit in Florida even though his state’s elections have been run exceptionally well and efficiently since the 2000 debacle and no one, including Democrats, questions the results there in 2020. The creation of election police is also “theatrics,” a small nod to “stop the steal” truthers that he sympathizes with their paranoia.

I think he’s counting on the same phenomenon recurring if a court throws out his hasty and apparently poorly vetted Reedy Creek bill. He’ll still get tons of credit from righties who appreciate his willingness to fight whether or not doing so produces any results in this case. And meanwhile an adverse ruling will spare him and the state the headache of being sued by Reedy Creek bondholders who want to know why Florida’s promise to them wasn’t kept. The theatrics are the important thing.