Wed 05/04/2022 16:41 PM
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Three residents from counties surrounding Disney World filed a lawsuit in the U.S. District Court for the Southern District of Florida against the state, Gov. Ron DeSantis and other Florida state officials, asserting that the recently passed law that will eliminate the Reedy Creek Improvement District next year is unconstitutional and in direct violation of a “written statutory commitment” that Florida entered into in 1967 when it created the special district.

Plaintiffs note that Reedy Creek has about $1 billion in outstanding bonds and that numerous experts have said the elimination of the special district will lead to increased taxes for the residents of the Orlando area. Plaintiffs say that they expect Disney and the state of Florida “to litigate this matter for a significant period of time” but that it is “legally appropriate” for them to be able to protect their interests through the lawsuit. Indeed, the dissolution of Reedy Creek will "lead to significant injury to taxpayers," and taxpayer lawsuits are one of the few mechanisms available to taxpayers in such matters, according to the complaint.

The docket is available on the Reorg site HERE.

The plaintiffs asserts four causes of action: (i) violation of the 1967 Reedy Creek Act establishing the Reedy Creek Improvement District, (ii) violation of the Florida taxpayer bill of rights, (iii) violation of Disney’s First Amendment rights, and (iv) a cause of action based on a “threatened wrongful proceeding” involving the “illegal disposition” of the funds of a municipal corporation.

The lawsuit asks the court to declare SB 4-C, the law dissolving Reedy Creek, unlawful and set it aside; issue permanent injunctive relief enjoining the defendants from enforcing the bill; and award plaintiffs costs and attorneys’ fees.

“Plaintiffs, who are property owners in the surrounding counties, fear that they will now have to assume the tax burden that Disney previously assumed under the special tax status,” the lawsuit states. The complaint cites a Washington Post interview with Orange County tax collector Scott Randolph, who predicted a “huge tax increase on the citizens of Orange County, that they will have to pay every single year." The complaint says the tax impact of this change “remains an issue for fact finders to make after a full trial.”

The complaint explains that under the Reedy Creek special district designation, Disney has essentially operated as its own municipality for decades. The designation provided Disney with exemption from certain building and other municipal codes, and the complaint contends that stripping Disney of this special designation “will move these major regulatory burdens onto the county.”

Plaintiffs argue that the elimination of Reedy Creek could leave Orange County responsible for not only its $1 billion outstanding debt but also for municipal services currently provided by Disney, such as fire-fighting services.

The complaint also asserts that the elimination of the special district “threaten[s] to take away thousands of jobs from Florida.”

The plaintiffs argue that Florida violated its “legal statutory and contractual obligations” through the 1967 Reedy Creek Act in which it pledged not to dissolve the district until its $1 billion in bond obligations and other debts were fully met and discharged. Bondholders expect to be paid back by Reedy Creek, “with its superior taxing powers, unstoppable revenue generator … and autocratic control,” the complaint adds.

The complaint also points to the recent statement by Reedy Creek to bondholders, citing the 1967 Reedy Creek Act’s pledge, in asserting that “DeSantis's attempt to dissolve the district is illegal unless the State pays the $1 billion first.”

The complaint argues that Florida violated its third-party statutory and contractual obligations to plaintiffs, asserting that standing should include taxpayers as third-party beneficiaries and those most likely to suffer. The plaintiffs say that under Florida law, the "doctrine of third-party beneficiaries provides that a person may sue to enforce a contract, even though the person is not a party to the contract."

The complaint quotes a portion of the Reedy Creek Improvement Act that declares that the purposes of the act cannot be realized “except through a special taxing district having the powers hereinafter provided” and that the authorities provided under the district “are necessary for the convenience, comfort and welfare of the District and all its inhabitants and landowners” and “will benefit all properties, persons and enterprises within the District.”

The complaint also asserts that the law violated the state’s taxpayer bill of rights legislation, which guarantees that the rights and property of Florida taxpayers are adequately safeguarded and protected during tax assessment, collection and enforcement processes. Under the law, taxpayers have the right to a “fair and consistent application” of state tax laws, and the complaint asserts that the law eliminating Reedy Creek “calls to serious question the proper application of tax laws to homeowners and other taxpayers in the Orlando area and very possibly other state of Florida taxpayers.” Removing Disney's special tax status “will unquestionably infringe upon Florida taxpayer's rights,” according to plaintiffs.

The complaint also asserts that the state violated Disney’s First Amendment rights, and as such, will harm plaintiffs. “It is without question that Defendant Governor Desantis intended to punish Disney for a 1st Amendment protected ground of free speech.” The lawsuit states that plaintiffs were also harmed by the unconstitutional violation of Disney’s state First Amendment rights and the resulting taxpayers’ 14th Amendment right to due process when deprived of life, liberty or property.

Count four of the complaint alleges that the plaintiffs, as taxpayers, have standing because they might be involved in a “threatened wrongful proceeding” that could “jeopardize the title of property.” The complaint cites 19th century case law for the proposition that taxpayers have the “right to invoke the interposition of a court of equity to prevent an illegal disposition of the [monies] of a municipal corporation.”
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