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.