Share

Disney's Land

How Disney uses its special district status to create a world of magic.

When people hear magical movies, television shows, theme parks and toys, the first company that usually comes to mind is Disney ($DIS). But what many people don’t realise is Disney’s real magic is its unique position as one of the only companies in the U.S. to act like a government.

To be clear, Disney only has governmental powers in an area of Florida called the Reed Creek Improvement District, better known as the land that occupies Disney World. So for Disney World the real magic is the power of its ‘special district’, as its creation by the state of Florida granted the company unprecedented municipal powers. The question remains, why did Florida grant Disney such a large amount of control over its corner of the state?

In 1963 as Walt Disney was flying over Orlando he spotted an intersection between two major highways. Approximately 70km2 of swamp and marshes, the land would soon become the home of his new theme park.

After Walt Disney built his first theme park in California in 1954 (Disneyland), he was frustrated by the amount of legal red tape and outside businesses that were allowed to ‘leech’ off his development. For this new project, Walt Disney wanted as much autonomy and control as possible so he could limit both dealing with bureaucrats and companies benefiting off his customers.

After Disney purchased the mostly swamp land for US$5m (~US$40m today). Walt Disney set out to convince the state government of Florida to give his company full municipal control of the space. He demanded the district be granted the authority to issue municipal debt, have control over all municipal services, and the ability to draft building and environmental codes and permits. Foglesong, a county attorney, said he was “kind of shaken by the degree of control” being requested by Disney. However, seeing the impact Disneyland had on the local Californian economy, Florida’s state government acquiesced, creating the Reed Creek Improvement District.

The concept of a ‘special district’ is not uncommon with thousands existing across the U.S. today. In Disney’s case this allowed greater control of the land and business functioning, whilst other benefits include the right to issue municipal debt for the construction of public utilities and roads. The benefit of the right to issue municipal debt is this type of debt is often free from income tax. This means that investors are willing to accept (often) significantly less interest from their investment. For example, a bond paying 6% interest annually, would be roughly the same equivalent as a tax-free municipal bond at 4%.

Still, despite an explosion in special districts in the U.S., Disney’s district power is not heading for a happily ever after. On 1 June 2023, all Florida special districts created before November 1968 are slated to be dissolved. What this means for Disney World’s municipal magic remains to be seen.

For more information on Disney, check out our Under the Spotlight.


Related


Want more?

You know what to do

Insights, trends and company deep dives delivered straight to your inbox.


Stake logo
Over 7,000 5-star reviews
App Store logoGoogle Play logo

Subscribe to our free newsletters

By subscribing, you agree to our Privacy Policy.

Stakeshop Pty Ltd, trading as Stake, ACN 610 105 505, is an authorised representative (Authorised Representative No. 1241398) of Stakeshop AFSL Pty Ltd (Australian Financial Services Licence no. 548196). Stake SMSF Pty Ltd ACN 648 283 532 (‘Stake Super’) is not licensed to provide financial product advice under the Corporations Act. This specifically applies to any financial products which are established if you instruct Stake Super to set up a self managed super fund (‘SMSF’). When you sign up to Stake Super, you are contracting with Stake SMSF Pty Ltd who will assist in the establishment of a SMSF under a ‘no advice model’. You will also be referred to Stakeshop Pty Ltd to enable your trading account and bank account to be set up in order to use the Stake Website and/or App. For more information about SMSFs, see our SMSF Risks page. The information on our website or our mobile application is not intended to be an inducement, offer or solicitation to anyone in any jurisdiction in which Stake is not regulated or able to market its services. At Stake and Stake Super, we’re focused on giving you a better investing experience but we don’t take into account your personal objectives, circumstances or financial needs. Any advice given by Stake is of a general nature only. As investments carry risk, before making any investment decision, please consider if it’s right for you and seek appropriate taxation and legal advice. Please view our Financial Services GuideTerms & ConditionsPrivacy Policy and Disclaimers before deciding to invest on or use Stake or Stake Super. By using our website or service in any way, you agree to our Privacy Policy and Terms & Conditions. All financial products involve risk and you should ensure you understand the risks involved as certain financial products may not be suitable to everyone. Past performance of any product described on this website is not a reliable indication of future performance. Stake and Stake Super are registered trademarks in Australia.

Copyright © 2024 Stake. All rights reserved.