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Examining Florida’s Removal Of Disney’s Special Tax District



Tax Notes reporter Benjamin Valdez discusses the Florida legislation eliminating Disney’s special tax district, what led to its passage, and what to expect in the future.

David D. Stewart: Welcome to the podcast. I’m David Stewart, editor in chief of Tax Notes Today International. This week: the most magical tax break on earth.

In April, Florida Governor Ron DeSantis (R) signed legislation that will eliminate the Walt Disney DIS DIS Company’s special tax district. The move stems from the fallout over a separate Florida law that restricts discussions of sexual orientation in schools.

Here to talk more about this dispute and what it means for Disney and potentially other companies that stake out positions on social issues is Tax Notes reporter Benjamin Valdez. Ben, welcome to the podcast.

Benjamin Valdez: Thanks for having me.

David D. Stewart: Let’s start with some background. What are these special tax districts in Florida, and how many of them exist?

Benjamin Valdez: Florida has over 1,800 special districts, and they’re basically miniature local governments that can provide essential services and create their own infrastructure. They come in different shapes and sizes.


But the general idea is that they exist to bring something to the state, whether it’s recreation or economic development, without necessarily relying on local taxpayers from neighboring counties to fund what goes on in the district.

David D. Stewart: Now, specifically talking about Disney’s special tax district, the Reedy Creek Improvement District, when was it created? Why is it there? What does operating as a special tax district allow Disney to do?

Benjamin Valdez: The Reedy Creek Improvement District was created by lawmakers in the state in 1967 after Disney made a proposal to build a huge recreational site to contain Walt Disney World on roughly 25,000 acres of land on Orange and Osceola counties.

The district itself has the ability to levy ad valorem taxes at a higher millage rate than the neighboring counties and to issue bonds to fund construction and other kind of projects within the boundaries. This includes roads, utilities, even fire departments.

The district is also exempt from building codes and permit requirements that would be present in the counties next door.

David D. Stewart: Now, are these types of arrangements typical for companies?

Benjamin Valdez: I wouldn’t say typical in the sense that states are just handing out special districts to any large company that wants to move to the state. But I would say that they’re certainly a lot more common. There’s a lot more of them than people might realize, especially now that this one has been in the limelight.

I think people are just now realizing how many there are across the country, and that they’re something that states have been allowing for quite a long time.

David D. Stewart: Tell us a bit about this legislation that DeSantis signed in April. What led to its passage?

Benjamin Valdez: The bill itself came together very quickly. The governor called a special session to consider eliminating certain districts in the state April 19, and the bill was signed April 22.

The governor and some lawmakers have made it clear that the idea for the legislation stemmed from Disney’s public statement on the recent law that prohibits classroom discussion on sexual orientation and gender identity in public schools. They had clarified that their decision to take another look at these districts was in part because of Disney’s statement that they wanted to openly oppose the bill.

David D. Stewart: How will this law affect Disney’s operations in Florida?

Benjamin Valdez: Certainly it’s going to affect their Orlando operations if the district is dissolved as planned. I think it might take some time for us to see how it’ll affect Disney beyond that, if they’re going to feel it financially.

But one of the possible changes is that Disney will now have to go through the local counties to do things, to build projects, to pay for things that it normally would do on its own.

Disney will continue to pay taxes. Disney World has always paid state and local taxes. The district wasn’t a tax exemption for Disney in that sense.

David D. Stewart: How does the law change the surrounding counties and local governments?

Benjamin Valdez: That’s one of the bigger issues that’s come out of this. If the district is dissolved, Florida state law specifies that the assets and debt from the district will be transferred to neighboring localities. In this case, that would be Orange and Osceola Counties.

Some local officials, including Orange County Mayor Jerry Deming expressed concern that assuming control of the district’s assets might result in the need for additional taxes or tax increases.

Another potential issue is that the statute that created the Reedy Creek District specifies that the state isn’t allowed to eliminate it without paying off its bond debt, which is upwards of $1 billion.

This has created a bit of confusion around how the whole law will go into effect.

David D. Stewart: Now, you mentioned that the legislature was looking more generally at these special tax districts. Does it affect other districts?

Benjamin Valdez: While the bill appears to have been aimed at Reedy Creek, because it dissolves any districts created before 1968, it actually applies to five other independent special districts of Florida. They are now going to have to go through the same process as Reedy Creek if it all comes to pass.

David D. Stewart: When should we expect to see the changes from this law go into effect?

Benjamin Valdez: The official end of Reedy Creek is set to take effect in June 2023. This leaves some time for the DeSantis administration and lawmakers to gather a more formal plan on how they want it to take effect and then what might happen.

David D. Stewart: What kind of reactions have we seen on both sides of the aisle to this law?

Benjamin Valdez: While this has been a heavily partisan issue with Republicans generally celebrating the end of the special kind of privilege for Disney, I think there has also been a bipartisan sentiment in taking another look at these special districts and whether they’re always a good idea and whether or not they always work the way they’re intended to.

On the other hand, I think a lot of the criticism, particularly from Democrats and some lobbyists during the special session, was directed at the rushed nature of the process and the fact that it appears as a reaction from the state to a company’s opinion on legislation.

David D. Stewart: Well, I know in general, whenever legislation gets rushed, we usually see litigation soon after. Have we seen any lawsuits on this yet?

Benjamin Valdez: Yes. We’ve actually seen at least one federal lawsuit already that was filed on behalf of a few residents in neighboring Orange and Osceola Counties. The lawsuit was claiming that the dissolving of Reedy Creek will force local governments to raise taxes on the residents in those counties.

The lawsuit also claimed, on Disney’s behalf, that the company’s First Amendment right was violated when the bill to dissolve Reedy Creek was passed. A federal judge threw out the lawsuit very quickly citing that there were some jurisdictional issues with ruling over a state dispute like this.

The lawsuit had also alleged that given the contract of Reedy Creek requiring the state to pay off its bond debt that it wasn’t allowed to happen. The federal judge took issue with ruling on that sort of a state-level contract.

The judge also said that basically filing a lawsuit on behalf of Disney’s First Amendment rights isn’t really appropriate and that the company can do that itself if it wants to.

Basically, they refiled it in the state-level court and refocused it. They got rid of the First Amendment allegation and they added a little bit more of a state-level context to it to hopefully take it to that level.

I’m expecting that we’re going to see more lawsuits like this potentially even from Disney within the next year.

David D. Stewart: Now, this affects a local tax issue. Have we heard anything about removing corporate tax breaks for Disney or other big companies in Florida?

Benjamin Valdez: As of now, it seems that Disney’s other tax breaks in the state, which actually includes tax incentives for a new office complex, haven’t been targeted.

But DeSantis has said that he’s not interested in taking away what he sees as tax breaks that any corporation would be eligible for.

It seems like they are sort of considering these districts and Reedy Creek in particular to be a unique sort of benefit that doesn’t amount to the same kind of corporate tax break that we might see otherwise.

David D. Stewart: Looking out into the future, what should we be keeping an eye on in the near future regarding this law?

Benjamin Valdez: The main thing we want to watch for is a detailed plan regarding how the district’s going to break down and how this is going to affect local taxpayers.

DeSantis has said he and his administration are planning an extensive outline that they’re going to release at some point on how this is all going to pan out. It could involve more talks with legislators and maybe the public.

He’s also recently told reporters that it’s possible that the state will assume control of the district rather than the counties so that they can definitely make sure that there are no tax increases.

David D. Stewart: Well, this definitely seems like something worth keeping an eye on. Ben, this has been great. Thank you for being here.

Benjamin Valdez: Yeah. Thanks so much for having me.


Teacher, Police And Firefighter Pensions Are Being Secretly Looted By Wall Street



America’s severely underfunded public pensions are allocating ever-greater assets to the highest cost, highest risk, most secretive investments ever devised by Wall Street, such private equity, hedge funds, real estate, and commodities—all in a desperate search for higher net returns that, not surprisingly (given the outlandish fees and risks), fail to materialize. Transparency—public scrutiny and accountability—has been abandoned, as pensions agree to Wall Street secrecy schemes that eviscerate public records laws.

Our nation’s state and federal securities laws are premised upon full disclosure of all material risks and fees to investors: “Read the prospectus before you invest,” is the oft-cited warning by securities regulators. Nevertheless, teachers, police, firefighters and other government workers today are not allowed to see how their retirement savings are managed or, more likely, mismanaged by Wall Street.

For nearly a decade, the United States Securities and Exchange Commision has warned investors that malfeasance and bogus fees are commonplace in so-called “alternative” investments and, more recently, Chairman Gary Gensler has called for greater transparency to increase competition and lower fees.

Gensler has asked the agency’s staff to consider recommendations on ways to bring greater transparency to fee arrangements in private markets. “More competition and transparency could potentially bring greater efficiencies to this important part of the capital markets,” he said. “This could help lower the cost of capital for businesses raising money. This could raise the returns for the pensions and endowments behind the limited partner investors. This ultimately could help workers preparing for retirement and families paying for their college educations.”

Gensler has stated he would like to see a reduction in the fees these investments charge and has also commented on industry abuses such as ”side letters” which permit private funds to secretly give preferences to certain investors—preferences which harm public pensions.


But that’s not good enough to protect public pension stakeholders.

No one—including the pensions themselves—seems to care that the government workers whose retirement security is at risk are being kept in the dark.

The SEC needs to do more—actually alert public pensioners as to those abuses the Commission knows full well are rampant, at a minumum. Advise them, Chairman Gensler, to demand to see and read prospectuses and other offering documents related to their hard-earned savings.

Does the SEC think it’s kosher for Wall Street to conspire with public pension officials to withhold this information from investors—any investors?

Since my 2013 forensic investigation of the Rhode Island state pension exposing gross mismanagement by then General Treasurer Gina Raimondo which I accurately predicted would cost workers dearly; my 2014 North Carolina state pension investigation exposing that $30 billion in assets had been moved into secretive, offshore accounts and, most recently, my investigation of the State Teachers Retirement System of Ohio, I have provided my expert findings to the SEC staff for their review. Each and every public pension forensic investigation I have undertaken has extensively discussed Wall Street secrecy schemes that enable looting. In my book, How To Steal A Lot Money—Legally, I quote disclosures from SEC filings that detail industry abuses.

Join me, Chairman Gensler, in giving government workers a clue, a glimpse, a peek, at the alternative investment abusive industry practices that are carefully guarded by Wall Street and being hidden from them.

Teachers, police and firefighters deserve a fighting chance to protect their retirement savings.

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It Is Time To Buy Bonds



US 10-year note prices are likely to rise through August. The monthly histogram below shows that July and August have been the two strongest months for the note price.

Monthly Return- US 10-Year Notes

Blue: Average Percentage Change

Red: Probability of a rise on that day

Green: Expected Return (Product of the first 2)

These numbers are static in the sense that they change little over the years. This is only one cycle, the one-year cycle, whereas there are many cycles operative at any one time. In order to get a reading on such other rhythms, a scan is run to identify other profitable price cycles. The graph below reveals the most valuable cycles that are operative at any one time.

10-Year Note Monthly Cycle


These cycles reinforce the seasonal tendency for notes to rise. Prices have risen in 60% to 65% of the time in these summer months. With the dynamic cycle also in ascent, the probabilities rise to about 65% to over 70%. There are similar and supportive developments in the Japanese and German fixed income markets.

The cycle projection must be confirmed by market activity. The daily graph reveals that price broke through a downtrend line.

10-Year Notes Broke Through Resistance

Here is a helpful sentiment indicator that supports the bullish view. The cover page of this week’s Barron’s points to much higher rates. Applying contrary opinion, this suggests lower rates and higher note and bond prices. The first objective is 123.0.

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Will There Be War Over Taiwan – The Next Spy Thriller



I usually go through a rhythm of reading one or two serious books, followed by a few works of fiction and with summer on the way I wanted to highlight a few of both. In that regard I have just finished Laurence Durrell’s ‘White Eagles in Serbia’, an old-fashioned espionage thriller where the hero Colonel Methuen is dropped behind enemy lines in post war Serbia (he speaks excellent Serbo-Croat) and becomes embroiled in a violent plot to overthrow Tito.

The book is a warm-up to reading Durrell’s ‘The Alexandria Quartet’, a work that nearly won him the Nobel Prize. Durrell was part of an interesting Anglo-Irish family, who largely considered themselves Indian – his brother Gerald, the naturalist and writer, touches on this in ‘My Family and Other Animals’.


Though I am not an expert on these matters, I found ‘White Eagles’ a more realistic account of espionage than much of what we see in the media today (Mick Herron’s ‘Slow Horses’ is good), and overall it is a tale of derring-do that is more in keeping with the work of the founding fathers of the genre – Eric Ambler, John Buchan, Erskine Childers and Ted Allebury for example.

It also made opportune reading given what seems to be an epidemic of espionage – with reports of the Chinese hacking group APT40 using graduates to infiltrate Western corporates and notably the admission by the head of Switzerland’s intelligence that Russian espionage is rife in that country (notably in Geneva – for which readers should consult Somerset Maugham’s ‘Ashenden’ as background material).

These and other trends – such as the outbreak of a heavy cyber battle last week (against Lithuania and Norway for instance) and the increasingly public ‘clandestine’ war between Israel and Iran (they have just sacked their spy chief) point to a world that is ever more contested and complex.


Secret World

One of the new trends in the space is cyber espionage – both in the sense of stealing state and industrial/corporate secrets, influencing actors (such as the manipulation of the 2016 US Presidential election) and outright acts of hostility such as the hacking of public databases and utilities (i.e. healthcare systems). Here, if readers are looking for some serious literature I can recommend two excellent books – Nicole Perlroth’s ‘This is how they tell me the world ends’ and ‘Secret World’ by Christopher Andrew.

I am personally more intrigued by the difference between a spy and a strategist. A spy’s work could well be described as the pursuit of information about someone who is acting with a specific intent, as well as a sense of their reaction function. There are plenty of examples – from Christine Joncourt (‘La Putain de la Republique’) to Richard Sorge (see Owen Matthews’ ‘An Impeccable Spy’).

In contrast a strategist may try to plot trends and the opportunities, spillovers and damage they may cause. The US National Intelligence department is good in this regard, becoming the first major intelligence agency to publish detailed warnings on the side effects of climate damage.

Spies and strategists might work together, but history is full of examples (LC Moyzisch’s ‘Operation Cicero’) where intelligence fails to make it through the strategic process or is simply ignored for political reasons (might the early warnings on the invasion of Ukraine be an example).

Asia next?

In the spirit of the Durrells and Flemings of the world, what issues might be of interest in terms of digging into unknown knowns and unknown unknowns. Here are a few ideas, most of which are Asia focused (we might see an uptick in Asia focused thrillers).

On the diplomatic front, an interesting recent development was the visit of Indonesian president Joko Widodo to Ukraine, and then Moscow. It was a rare visit to Ukraine by an Asian leader and potentially marks the emergence or at least aspiration of Indonesia (population 273 million) as an emerging world diplomatic player. What has intrigued me so far is that there has been little coordination by the populous emerging (largely Muslim) nations (Nigeria, Indonesia, Pakistan) in the face of high energy and food prices, and that potentially Widodo could play a unifying role here.

Then, still in Asia, but on a more deadly footing, if the Western commentariat is to be believed, China is preparing an assault on Taiwan, and looking to learn from Russia’s military errors in this regard. Other countries are reacting, and I suspect that there will be much intrigue around Taiwan’s ability to acquire sufficiently powerful ballistic missiles that could strike the coastal cities of China, and relatedly how long might it take Japan to produce nuclear missiles (my sources say they could very ambitiously do it in five months!).

So, whilst the espionage literature of the 20th century has tended to be focused on Geneva, Berlin and London in the 21st century we may find ourselves reading about ‘behind the lines’ exploits in Jakarta and Tanegashima.

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