Deutsche Bank analysis: Reedy Creek dissolution won’t hurt Disney

Getting rid of Disney World’s government isn’t likely going to hurt the Mouse, Deutsche Bank analysts wrote in a new research note published Tuesday.

“We don’t see a material negative outcome from this situation for Disney; and financially speaking, we think it could end up being a positive development,” analysts Bryan Kraft, Benjamin Soff and Connor Murphy wrote.

Last week, the Legislature voted to eliminate the special tax district which allows Disney’s government to provide its own roads, utilities, fire services and other infrastructure needs at the massive theme parks and resorts. Reedy Creek is set to be eliminated by June 2023.

State Republicans wanted to punish Disney after company CEO Bob Chapek voiced opposition to Florida’s Parental Rights in Education measure, dubbed the “Don’t Say Gay” law by critics. Disney also announced the company was pausing campaign donations in Florida. Chapek was already under pressure from the Left and LGBTQ+ activists for not speaking out against the controversial bill sooner.

Now, Orange County property owners could face tax increases of 15% to 20% on average, and the county would need to absorb Reedy Creek’s financial obligations, including a $1 billion bond, the note said.

“That is an enormous tax burden to suddenly put on residents when the system in place today has Disney bearing all of the costs,” the analysts wrote. “One could conclude that if the Reedy Creek Improvement District is absorbed into the Orange County municipal government and the government has to begin providing these services to Disney World, then Disney World would likely see an improvement in its bottom line and its balance sheet.”

The analysis warned, “The detriment to Disney from the new law is that the company would no longer have full autonomy in managing Disney World’s infrastructure and services. This could impact the overall quality of the experience Disney can deliver to its guests.”

But even that wasn’t likely to hurt the Mouse too much.

Disney’s other parks, like Disneyland, don’t have their own government structure like in Florida. “Those locations seem to be doing just fine,” the analysts pointed out.

But the analysts also stressed Reedy Creek isn’t set to expire until June 2023 so “a lot can still happen.”

The note hypothesized different scenarios.

“While we don’t know how this will play out, it seems to us that both Orange County and Disney are highly motivated to maintain the status quo, more or less. We think that maintaining the status quo could be accomplished by replacing the Reedy Creek Improvement District with an agreement between the County government and Disney,” the analysts wrote.

“Alternatively, we could see subsequent legislation at the state level that revisits the topic. Or there could be lawsuits challenging the legality of the new law, which could lead to it being overturned.”