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An Exhausted Disney Aims to Contain the Fallout From ‘Don’t Say Gay’

Two representatives from the Sunshine State met with Disney’s self-governing district’s executive team on May 5. In retribution for Disney’s objection to a statute that bans classroom education on LGBTQ identification known to opponents Disney Aims to Contain the Fallout From ‘Don’t Say Gay’ Governor Ron DeSantis disbanded the district two weeks earlier.

Disney Aims to Contain the Fallout From 'Don't Say Gay'

One of the officials was the chief deputy counsel in DeSantis’ office, and the two of them proceeded to investigate to see what the state was getting itself into. The district’s leaders showed them a PowerPoint outlining the district’s responsibilities, which include maintaining a 54-megawatt power plant, 65 miles of canals, various roads and pedestrian bridges, and a fire department that responds to 35,000 calls annually, most of which are heat-related illnesses, at the Disney parks. DeSantis erased it all with a signature, but he hasn’t laid out a plan for what comes next. There was no original thinking on the part of the two-state officials because they had not been given enough time to formulate a strategy. A plan, however, was already taking shape that would ensure Disney’s continued presence in Orlando while simultaneously securing the governor’s reelection. In light of new information, it is now clear that the plan calls for state appointees to join Disney’s representatives on the district’s governing board. Rebuilding the area will involve mostly superficial alterations that will not affect the district’s functionality.

The day is now approaching for Disney to decide whether or not it can accept that. Alternatively, does it seek conflict? If it goes to war, it will need to determine if it still has enough influence in Florida to prevail. “When you have an empire that huge, you have so many vulnerabilities here,” said Peter Schorsch, publisher of Florida Politics. Many things are more permanent than Reedy Creek, but many things are also reversible. Disney’s position has certainly been undermined by the fight over the “Don’t Say Gay” incident, while DeSantis’ status as a conservative culture fighter has only grown in the six months since the dispute began. DeSantis is now embroiled in a fresh controversy that has captivated the nation’s attention; this time, he shipped immigrants to Martha’s Vineyard. Yet he has also maintained a constant drumbeat on behalf of the LGBTQ community. His government is targeting transgender youngsters by removing Medicaid funding for gender-affirming care for all ages and opening an investigation into a drag brunch. And Disney, which has often spoken out in support of the LGBTQ community, has been mute on this issue. While the firm is still involved in Florida politics (via funding for groups like Equality Florida), it has remained relatively silent on the subject since April, when it publicly committed to working to repeal the state’s education law.

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For some unknown reason, “Disney has gone quiet,” as AIDS Healthcare Foundation’s Mike Kahane put it after leading a protest at Disney World in March. I think they’re probably trying to solve a larger problem that could have far-reaching economic ramifications for them. Recently, CEO Bob Chapek claimed victory in the battle with DeSantis because the company “stood our ground.” However, that was not the intention. Omaha, Nebraska’s Steve Knox, better known as Nikki NuVogue, started the “Don’t Say Gay” war. Knox was aware of the Parental Rights in Education Act’s prohibition on teaching about sexual orientation and gender identity to students in grades kindergarten through third. He pondered who might be able to put a stop to it. The Walt Disney Company quickly comes to mind whenever I think of Florida and the word “power,” as stated by Knox. One of our most important allies, yet they weren’t even helping us out. He was among the first to link Disney to the issue when, on February 11, he tweeted a Disney Pride emblem and said, “Sure has been silent about Florida’s Don’t Say, Gay Bill.”

The Financial Times reported afterward that Disney officials had been in contact with friends in the legislature to try to water down the legislation. Former CEO Bob Iger tweeted his disapproval of the deal on February 24, but Disney still decided not to issue a public statement. Protests were conducted on March 3 by the AIDS Healthcare Foundation, a nonprofit with a history of trying to shame public authorities through publicity.

By the end of the following week, one of the worst in recent Disney history, Chapek had doubled down on not taking a position on the measure before reversing himself and opposing it, prompting attacks from DeSantis while his LGBTQ employees planned to walk out. Later that month, the conservative backlash grew more violent. Leaked tapes showed Disney employees talking about “adding queerness” to programming and having a “not-so-secret gay agenda,” and they were disclosed by journalist Christopher Rufo, who had previously made a name for himself by revealing anti-racist employee training.

In April, DeSantis signed a bill repealing Reedy Creek, a body of law passed in 1967 to grant Disney complete control over an area of swampland covering over 40 square miles. It seemed like a bold approach to onlookers. Disney is deeply embedded in the culture of Florida. The corporation enjoyed bipartisan support from politicians for many years. DeSantis, not Disney, was in command, as was made quite obvious. The governor recently made a public statement to the effect that “if you’re going to commit yourself to want gender ideology in primary school, we’re not going to hoist you up on a pedestal any longer.” Disney World will no longer function as an independent nation. Just like everyone else, they will be subject to the law. Furthermore, they will be contributing their portion to Florida’s tax coffers. After the dissolution vote, DeSantis’ detractors speculated on several ways in which it could backfire on him. Bondholders who object to the dissolution could successfully stop it in court. Otherwise, Disney would have to charge more for admission to cover the cost of inflation. If Disney were to dump its debt on Orange County residents, their property taxes would increase by an average of 25%.

There is little chance that any of those things will happen, and the district will be erased from existence. The legislature is instead on track to establish a replacement organization that will not have an airport and nuclear power plant building authority, among other functions, that the original Reedy Creek district had. Variety has learned of this scheme from public documents and discussions with Ben Watkins, the state’s director of bond finance. According to Watkins, the state-appointed board seats are the main distinction. The new board could be anything from a mild inconvenience to a serious problem, depending on who held the majority. However, park visitors and workers may not even notice a difference. Disney, which has had uncontested authority over the district for the past 55 years, would then be required to share authority with the state. Someone in Tallahassee confidently predicted that Disney would accept the offer.

Disney employs 38 lobbyists and has many connections in the legislature, so it may try to influence the outcome of the deal in its favor. Legal action under the First Amendment may be pursued instead if a legislative fix is not possible. That might take years to do, and even then there’s no certainty. DeSantis has been in many fights like this before. Since entering office in 2019, DeSantis has made several cultural provocations that go over well on Fox News but ultimately fail to advance due to judicial obstruction or a lack of real content. On the other hand, he has engaged in several real knife fights with local officials, and he has consistently come out on top. He fired a prosecutor who had been elected but had sworn he would not investigate cases involving abortion. Voters in Key West had voted to prohibit cruise ships, but he disregarded their wishes. And he has tried to get rid of a Miami-Dade County department that regulates toll roads. Disney’s conflict is just as similar to past wars, if not more so. What is being considered for Reedy Creek is similar to what the legislature did in Miami-Dade. The county, however, did not acknowledge its legitimacy and filed suit.

According to an email from Watkins to DeSantis’ office that was obtained by Variety under the state’s open records legislation, Watkins argued that the situation in Miami-Dade County provided an “excellent blueprint” for how to handle Reedy Creek’s financial responsibilities. Disney saw it as an example of the perils of waging a protracted conflict with the governor. Miami-Dade County and Governor Ron DeSantis have been at odds for years, leaving the agency in limbo and delaying 10 major projects. Gene Stearns, the attorney representing the county in the litigation, described the defendant as “more dangerous than Donald Trump because he is brighter and he has a greater knowledge of how to wield power as more than simply a blunt instrument.” “This guy’s actions are always the same. He now holds all the cards. The law has no bearing on this. No constitutional protections apply. The way I see it, he’s a lowlife. From a constitutional standpoint, two judges have already made short work of this. However, that is irrelevant. Strength is strength.

The county agency lost a bid to reverse its dissolution at the appeal level. Disney’s appeal to Reedy Creek’s dissolution may also fail if the court rules that the company has legal standing to do so. “These things are creatures of the legislature,” said William Spicola, who worked as general counsel for DeSantis’ predecessor, Rick Scott. Whatever the legislature decides to do is up to them. State officials should be cautious about upsetting corporations and banks that own the majority of the government’s debt. In a May email to Watkins, Chase Savage of Fidelity Investments said, “This problem is 100% political and 100% targeted at further strengthening the DeSantis Administration’s reelection campaign.” The Administration’s steady march towards more state meddling in the economy and societal institutions for partisan benefit is not something that gives us much cause for optimism. Investors are becoming increasingly wary about this area, and that wariness could expand if the situation drags on.

Over the summer, Watkins communicated with bondholders via phone and in person to convince them that the repayment of Reedy Creek’s $1 billion in debt will go without a hitch. In July, bondholders and Watkins met at JPMorgan in New York. Also, there was Chris Spencer, DeSantis’ budget director. Evercore Wealth Management partner Howard Cure reported that the two officials “swore up and down” that Disney’s stance on “Don’t Say Gay” had nothing to do with the collapse of Reedy Creek. Cure remarked, “If it’s a coincidence, it’s an unfortunate one.” What the government is trying to accomplish sets a terrible example. Before this point, you have been preoccupied with Disney’s capacity to pay its bills. You must now take into account another variable. Bondholders are understandably concerned. They don’t want this to become a pattern, he continued, referring to the bondholders’ statement.

Watkins gave an interview on the Bond Buyer podcast on August 30 in which he reaffirmed his commitment to safeguarding bondholders’ interests. He said that the replacement entity’s board will likely be “selected by state leadership with a broader interest across all citizens of the state, and not just Disney.” Disney has yet to respond to that suggestion and refuses to provide a comment for this article. In recent weeks, Disney has made it a priority to mend fences with LGBTQ groups. Six months after first rejecting the company’s gift, the Human Rights Campaign revealed last week that they had accepted it. Disney “remained steadfast in their promises to our community,” HRC stated. Brandon Wolf, a spokesman for Equality Florida, said that despite the governor’s efforts to make it difficult to compete for workers, the business community has kept its head down in recent months. He questioned whether or not businesses would be willing to put up with a dictatorial governor. Still up in the air is how much pressure businesses can withstand before finally speaking out.

Democratic state senator Jason Pizzo claimed that DeSantis used a tried-and-true strategy: “If you’re new at school, find the biggest kid on the playground and punch him.” This sends a chill across the industry as a whole. The Disney Company used to have bipartisan friendships and give generously to causes of all stripes not too long ago. Donations of this nature have been put on hold, and they no longer have the same clout as before. Schorsch argued that DeSantis did not require financial support from the group. That has altered politics forever. A billionaire in the hedge fund industry can write him a cheque for $5 million. Nothing you say or do will be taken seriously until you bring a seven-figure check. Ron DeSantis can get in touch with some crypto dude CEO. Since that time, lobbying has become less effective.

In the immediate future, DeSantis will be a formidable opponent because he is expected to win reelection in November and is a potential presidential candidate in 2024. Even though Disney has been around for 55 years and has survived the tenures of several different governors, Schorsch is not optimistic about the future of the company’s reputation in the state. Keeping DeSantis in office as long as possible was likely the plan, he concluded. That being said, I don’t see how Disney could ever live with that. His extremist views have spread throughout the Republican Party. “They’ve had issues for what seems like a decade.”

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