When you buy shares in a company expecting dividends and hopefully capital gains, you do not really expect the company to wade into politics of the day. However, all companies appeal to a wide range of people and from a strict marketing point of view, companies have a very good idea how many of their consumers are in every segmented range. The segments are both income and family status and companies will tailor their marketing strategies to fit the various demographics of people, particularly if they are in the consumer or retail side of business. It is the reason -if you want to take a Disney cruise do your want Mickey Mouse or Star Wars or Marvel action characters?
In Florida, the Governor Rod DeSantis who is a Republican is passing various bills that make some of the public feel at unease and as a big consumer company, Disney was under pressure to say something. Disney said all people are important, the Governor disagree and a bill was presented to take away the self governing area of Reddy Creek Improvement Area.
According to books about Walt Disney, when Walt Disney had the dream of a new Disney World but unlike the relatively small area around in Anaheim, California where outside of the Disneyland , the company does not control the real estate, Walt wanted greater control. He essentially bought over 25,000 acres of swamp land and made an agreement with the Florida representatives to control that piece of land as any town or city would control their land. The agreement was the Reddy Creek Improvement Area, the local counties would benefit, if Disney was successful, but they would pay no money for services such as road, water and sewers or infrastructure inside Disney lands. Disney was responsible for infrastructure and buildings. It was wonderful when the park opened there were miles of people trying to get in and Disney World has been successful ever since opening day.
The Reddy Creek Improvement Area has allowed Disney to grow over the years and all the development inside was financed and paid for by Disney and its guests. The counties had to enlarge the airport as Disney World became the number one tourist spot in Florida bringing in 20 million visitors a year. The park employs 77,000 people which makes it Florida’s largest employer. It seems from the outside, both Florida and Disney benefited from the Reddy Creek Improvement Area.
The Florida legislature decided to punish Disney by disbanding the Reddy Creek Improvement Area in June 2023, however there are consequences which apparently the Republicans did not think about or are not concerned about. Reddy Creek Improvement Area has over a $1 billion dollars worth of development planned financed by bonds. When the Improvement Area is dismantled, the liabilities will be transferred to the two local counties, and the Florida assembly passed a law which says all taxpayers must be taxed equally. Disney saves tax money ($163 million a year) and the liabilities will be transferred to municipal tax payers. The Orange County Treasurer estimates that means a 25% increase in taxes for every homeowner in Orange County.
In terms of logistics for Disney, it will mean going through the 2 counties to improve the park which voters will have a say over budgets. Will Disney slow down its expansions? It is hard to believe they would move, but they could look for other locations – the Governor of Colorado has offered Disney land in the state. The other wrinkle in the works, is according to the agreement and Reddy Creek Improvement Area, to change the structure, the state has to pay off any debts of Reddy Creek, will Florida put up $1 billion?
Linking to dividend paying stocks, as an investor you have your opinions about the issues of the day and that is good and the way it should be. When you company has opinions, whether they are right or wrong according to you, as a shareholder you may want to either buy more shares or sell them. What should be the corporate viewpoint outside of trying to be a reasonable good citizen while making a profit and paying you dividends?
There are more questions than answers, till the next time – to raising questions.