How Disney manoeuvred to save its Florida kingdom, leaving DeSantis threatening retaliation

Florida Gov. Ron DeSantis speaks after being sworn in for his second term during an inauguration ceremony at the Old Capitol on January 3 in Tallahassee. (Lynne Sladky/AP)

In his yearlong battle with Disney, Florida Gov. Ron DeSantis has repeatedly leaned on the element of surprise in his attempts to outmanoeuver the entertainment giant and its army of executives, high-priced lawyers and politically connected lobbyists.

"Nobody can see this coming," DeSantis told a top Republican legislative leader as they planned a move against Disney last year, he recalled in his new book.

But when Disney finally struck back and thwarted, for now, a DeSantis-led state takeover of its long-standing special taxing district, it was the Republican governor who was seemingly caught off guard. The same February morning Disney pushed through an agreement with the district's outgoing board that secured control of its development rights for decades to come, DeSantis had declared to cameras and supporters, "There's a new sheriff in town."

Now, weeks after DeSantis signed legislation intended to give the state power over Disney's district, the company appears still in control of the huge swaths of land around its Orlando-area theme parks. Newly installed DeSantis allies overseeing the district are gearing up for a protracted legal fight while the governor has ordered an investigation. DeSantis on Thursday disputed that he had been outflanked by Disney and vowed further actions that could include taxes on its hotels, new tolls around its theme parks and developing land near its property.

"They can keep trying to do things, but, ultimately, we're gonna win on every single issue involving Disney. I can tell you that," the second-term governor said during an event at the conservative Hillsdale College in Michigan.

The unlikely fracturing of Florida's relationship with its most iconic business started during the contentious debate last year over state legislation to restrict certain classroom instruction on sexuality and gender identity. Disney's then-CEO, Bob Chapek, facing pressure from his employees, reluctantly objected to the bill, leading DeSantis to criticize the company. When DeSantis signed the legislation into law, Disney announced it would push for its repeal. DeSantis then targeted Disney's special governing powers.

For DeSantis, who has built a political brand by going toe-to-toe with businesses he identifies as "woke," the latest twist threatens to undermine a central pillar of his story as he lays the groundwork for a likely presidential campaign. An entire chapter of his new autobiography is devoted to Disney, and the saga is well-featured in the stump speech he has delivered around the country in recent weeks.

In Florida's capital of Tallahassee, some veteran Republican operatives, exhausted by DeSantis' high-profile cultural fights, are tickled that Disney appears to have one-upped the governor, a GOP source said. Meanwhile, allies of former President Donald Trump, the front-runner for the 2024 GOP nomination, have seized on the move to poke holes in DeSantis' narrative, with MAGA Inc. PAC spokesman Taylor Budowich tweeting that the governor "just got out-negotiated by Mickey Mouse." Other potential GOP contenders and Republicans have publicly raised objections to DeSantis' targeting of a private business.

"Disney gave him a lot of rope," said John Morgan, an influential Orlando-area trial lawyer and Democratic donor who is often complimentary of DeSantis. "They obviously tried to resolve it, but there was no stopping him because DeSantis wanted the fight. Disney always knew it had that trump card."

Morgan's legal career was inspired by his family's failed attempts to sue the special district after his brother was paralyzed while working as a Disney lifeguard. But Morgan learned through that episode the difficulties of challenging a corporate titan.

"In the end, they were never going to lose this," Morgan said.

Chess vs. checkers

What remains unanswered is how DeSantis appeared unaware of Disney's manoeuvering after spending the past year fixated on punishing and embarrassing the company.

As DeSantis plotted in secret, Disney moved in the open.

Its development agreement was approved over the course of two public meetings held two weeks apart earlier this year, both noticed in the local Orlando newspaper and attended by about a dozen residents and members of the media. No one from the governor's office was present at either meeting, according to the meeting minutes.

"You spend all that energy and attention on Disney, and then no one minds the store?" said Aaron Goldberg, an author and Disney historian. "Disney was playing chess, and DeSantis was playing checkers."

DeSantis' office told CNN in a statement that it was first alerted to Disney's efforts to thwart the state takeover of its special taxing district on March 18 by the district's lawyers. Yet, the governor remained quiet until March 29, when his new appointees to Disney's oversight board first made the public aware of the arrangement, drawing national attention and an outpouring of snickering from his detractors.

According to DeSantis' office, Disney was pushing for silence. In a statement to CNN, Ray Treadwell, DeSantis' chief deputy general counsel, accused Disney lobbyist Adam Babington of petitioning the governor's office to help keep its agreement under wraps when the new board met on March 29.

"I made quite clear to him and the other Disney representatives that the validity of any such last-minute agreement would likely be challenged," Treadwell said in the statement.

Disney and Babington did not respond to multiple requests for comment. In a previous statement, the company said, "All agreements signed between Disney and the District were appropriate, and were discussed and approved in open, noticed public forums in compliance with Florida's Government in the Sunshine law."

The episode is illustrative of the potential pitfalls of seeking to score political points against a big corporation fighting on its home turf. Addressing the controversy during a call with shareholders Monday, Disney CEO Bob Iger signaled he wouldn't back away from the fight, calling DeSantis' actions "not just anti-business, but it sounds anti-Florida."

"A lot of us anticipated Disney would strike back and not allow its powers be taken away without some kind of response," said Richard Foglesong, author of "Married to the Mouse: Walt Disney World and Orlando."

"It must have been ticklish on Disney's part that it wasn't noticed initially," he said.

When DeSantis first clashed with Disney last year, Foglesong signed a copy of his book that a DeSantis political ally intended to hand to the governor. Through an unvarnished lens, the book chronicles the Reedy Creek Improvement District -- the special government body that state lawmakers created in 1967 to give Disney the power to develop and then control nearly every facet of its theme park empire -- and the local officials who paid a political price for challenging the House of Mouse.

DeSantis' office wouldn't say if he had read the book. Foglesong said there's a message in its pages that DeSantis should have heeded: "Simply don't count Disney out."

Public and private moves

Last May, as DeSantis began to feature his battles with Disney in political speeches, two state officials quietly met with top administrators at Reedy Creek.

By then, DeSantis had already enacted a new law that would eventually eliminate the special taxing district. But it was also clear that the law wasn't a tenable long-term outcome. It was possibly illegal, unless the state wanted to pay off the district's outstanding debt, estimated at $1 billion. Meanwhile, bond rating agencies were threatening a downgrade, and nearby local governments expressed little interest in taking on the maintenance and services for the district's 25,000 sprawling acres around Disney's Orlando-area theme parks.

The visit by Treadwell and Ben Watkins, the state's seasoned bond director, lasted about an hour. From the Reedy Creek side, the meeting was a positive step toward an amicable stalemate, according to sources with knowledge of the meeting, one that would largely continue Disney's unique powers with some concessions while still allowing DeSantis to claim victory.

But the DeSantis administration broke off communications after the meeting, the sources said.

DeSantis' office for months declined to say what would come next, but Watkins, in an August appearance on "The Bond Buyer" podcast, laid out a proposed framework for taking over Reedy Creek. It involved stripping the district of longstanding but never-used authorities, such as to build a nuclear power plant and to acquire property through eminent domain. But he hinted at a takeover of Reedy Creek's board, which throughout its history had been occupied by people with close ties to Disney.

"The other thing that I would expect is a reconsideration of how the board of Reedy Creek is appointed and qualified to serve, to be appointed by state leadership with a broader interest across the spectrum of interest, across the state," Watkins said.

The timing of the next move remained secret until January 6, when DeSantis' office posted on the Osceola County government website its intent to seek legislation to overhaul Reedy Creek. In Florida, changes to a special district must be published for the public to see at least 30 days in advance. Disney was on the clock.

The company then prepared a draft developer's agreement for Reedy Creek board members to approve that would guarantee Disney's development rights for the next 30 years, a source with knowledge of the arrangement said. Twelve days after the state's notice was published online, Reedy Creek published its own notice in the Orlando Sentinel for a meeting to consider the Disney draft. The board intended to vote, the notice said, on an agreement that would affect "a majority of the land located within the jurisdictional boundaries of Reedy Creek Improvement District."

The Reedy Creek board held two public hearings on the development agreement, as required by Florida law, on January 25 and February 8.

DeSantis appeared in Central Florida just as the board gave final approval to the agreement on February 8. At the same time, state lawmakers were meeting in Tallahassee in a special session to pass DeSantis' takeover of Reedy Creek, which included a provision that gave him the power to pick all five of the district's board members. Neither DeSantis nor the Republican lawmakers advancing the legislation made statements indicating awareness of the votes taking place inside the district.

Instead, DeSantis, speaking an hour after the Reedy Creek board handed Disney the requested powers, declared that the company was "no longer going to have self-government" and teased that the new board might push for more Disney World discounts for Florida residents.

Goldberg, the author of several books on Disney, said the company in its history has repeatedly demonstrated that it knows its special arrangement better than the government that gave it to them. Indeed, the morning after Florida state Rep. Randy Fine introduced DeSantis' bill to sunset Reedy Creek last year, the Republican legislator instructed staff to order Goldberg's book "Buying Disney's World" and directed them to "Read today," according to emails obtained by CNN.

"With Disney, there is always a Plan B, something in the works from the jump in case things went wrong with the state," Goldberg told CNN.

On February 27, DeSantis signed the bill giving him the power to pick all five members on the Reedy Creek board and named his appointees, including an influential donor, the wife of the state's GOP leader and a former pastor who has pushed unfounded conspiracies about gay people.

Historically, the Reedy Creek board oversaw a fire department, water systems, roadways and building inspections around the Disney theme parks and could issue bonds and take on debt for long-term infrastructure programs. But DeSantis suggested that the new board could also influence Disney's entertainment offerings.

"When you lose your way, you know, you gotta have people that are going to tell you the truth, and so we hope that they can get back on," DeSantis said at the signing. "But I think all these board members very much would like to see the type of entertainment that all families can appreciate."

However, a month later, the new board revealed it was effectively powerless.

"This essentially makes Disney the government," new board member Ron Peri said during the March 29 meeting.

In addition to giving away oversight of Disney development, the outgoing board also agreed not to use any of Disney's "fanciful characters" like Mickey Mouse -- until "21 years after the death of the last survivor of the descendants of King Charles III, king of England," according to a copy of the deal included in the February 8 meeting packet.

The reference to the British monarch is a contracting tactic known as the "royal lives clause," intended to avoid rules against perpetual agreements. While relatively common legalese, its inclusion raised eyebrows. In the halls of the Florida Capitol, people have murmured "God save the king" to each other in passing, the GOP source said.

In a letter ordering the state inspector general to investigate the agreement, DeSantis accused the outgoing board of "inadequate notice" and a "lack of consideration."

"These collusive and self-dealing arrangements aim to nullify the recently passed legislation, undercut Florida's legislative process, and defy the will of Floridians," DeSantis wrote.

But it's unclear how DeSantis can regain the advantage against a company with unlimited resources at its disposal and a seemingly ironclad legal agreement. Iger, in his remarks to shareholders this week, said the company "always appreciated what the state has done for us" and reaffirmed its commitment to growing its massive footprint there over the next decade with plans to invest $17 billion in Disney World.

"Disney looked at this and said, 'We have the law on our side, we can protect ourselves, and we're going to do it,'" said Danaya C. Wright, a University of Florida law professor. "It's perfectly reasonable to do it. There might be a desire to take on larger issues. But you start messing with one of the major economic engines of the state, they're going to circle the wagons."

Since the March 29 meeting, DeSantis' administration has also stripped Reedy Creek -- now called the Orange County Tourism Oversight District -- of its authority to inspect Disney's 600 pools, a source told CNN. A spokeswoman for DeSantis didn't respond to a CNN inquiry about pool oversight, but DeSantis said Friday that state agencies would conduct inspections on Disney's properties.

Speaking in Michigan on Thursday, DeSantis suggested more retribution is coming.

"All I can say is that story's not over yet," he said. "Buckle up."

The-CNN-Wire

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