After ‘Don’t Say Gay,’ a Weakened Disney Hopes to Limit the Damage

On May 5, two Florida state officials traveled to Orlando to meet with the leadership of Disney’s self-governing district. Two weeks earlier, Gov. Ron DeSantis had abolished the district in retaliation for Disney’s opposition to a law that restricts classroom instruction on LGBTQ identity – known to critics as “Don’t Say Gay.”

The two officials – one of them the chief deputy counsel in DeSantis’ office — went to figure out what the state was getting into. The leaders of the Reedy Creek Improvement District showed them a PowerPoint detailing their responsibilities for a 54-megawatt power plant, 65 miles of canals, various roads and pedestrian bridges, and a fire department that handles 35,000 calls a year, largely for heat-related illness, at the Disney theme parks.

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With a stroke of a pen, DeSantis eliminated all of that without any roadmap for what would come next. The two state officials had not had time to come up with a plan, so they had nothing of their own to present. But one was already starting to take shape that would allow Disney to sustain its operations in Orlando while also cementing a political win for the governor.

The plan – as it has since come into focus – involves adding state appointees to sit alongside Disney’s representatives on the district’s governing board. The district will be recreated, with a few cosmetic changes, allowing it to function essentially unchanged.

Disney will soon have a decision to make: Can it live with that? Or does it want to fight? If it does fight, it will have to assess whether it is still powerful enough in Florida to win.

“When you have an empire that big you have so many vulnerabilities here,” said Peter Schorsch, the publisher of Florida Politics. “Reedy Creek can be undone, but so can a lot of other stuff.”

Six months after the “Don’t Say Gay” controversy, Disney has clearly been weakened by the fight while DeSantis’ profile as a conservative culture warrior has only grown. DeSantis has moved on to new controversies that have captured national attention, most recently shipping immigrants to Martha’s Vineyard.

But he has also kept up a steady drumbeat on LGBTQ issues. His administration has taken aim at youth who are gender transitioning, eliminating coverage for gender-affirming care for all ages in Medicaid, and investigating a drag brunch. And Disney, which prides itself on its support for the LGBTQ community, has stayed silent. The company is still engaged in a low-key way in Florida politics – underwriting organizations like Equality Florida – but has said almost nothing in public about Florida politics since vowing in April to help overturn the education law.

“Disney for whatever reason has gone quiet,” said Mike Kahane, of AIDS Healthcare Foundation, who organized a protest at Disney World in March. “I would speculate it has something to do with them trying to work out this bigger issue, which could have huge economic consequences to them.”

CEO Bob Chapek recently took credit for having “stood our ground” in the fight with DeSantis. But that was not the plan.

The “Don’t Say Gay” battle began with Steve Knox, a drag performer in Omaha, Neb., who goes by the stage name Nikki NuVogue. Knox had seen reports about the Parental Rights in Education law, which barred discussion of gender identity and sexual orientation in kindergarten through third grade. He thought about who could help stop it.

“When you think of Florida and you think of power, I immediately think of Disney,” Knox said. “They’re one of our biggest allies and they weren’t really doing anything.”

On Feb. 11, he tweeted a Disney Pride logo and noted that the company “sure has been quiet about Florida’s Don’t Say Gay Bill” — making him among the very first to link Disney to the issue.

Disney executives would later tell the Financial Times that executives were working with allies in the legislature to try to soften the bill. But the company chose not to say anything publicly, even after former CEO Bob Iger tweeted his opposition on Feb. 24.

AIDS Healthcare Foundation – a rabble-rousing non-profit group that often seeks to embarrass public officials – held its protest on March 3, generating TV news coverage that ratcheted up the pressure.

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 bill before reversing himself and opposing it, leading DeSantis to attack him while his LGBTQ employees prepared to walk out.

The conservative backlash intensified later that month. Journalist Christopher Rufo – who had made a name for himself by exposing anti-racist employee trainings – released leaked videos in which Disney employees spoke about “adding queerness” to content and having a “not-so-secret gay agenda.”

With the wind at his back, DeSantis signed the bill in April abolishing Reedy Creek, which the legislature had created in 1967 to give Disney sweeping power over nearly 40 square miles of swampland.

To observers, it was a brazen move. Disney is woven into the fabric of the state. Politicians of both parties coddled the company for decades. The message was clear: DeSantis – not Disney — was in charge.

“If you’re going to commit yourself to wanting gender ideology in elementary school, we’re not going to hold you up on a pedestal any longer,” the governor said in a recent speech. “Disney is no longer going to have its own government. They’re going to live under the same laws as everybody else. And they are going to pay their fair share of taxes in the state of Florida.”

In the wake of the dissolution vote, DeSantis’ critics offered several theories about how it would blow up in his face. The dissolution could be blocked in court by angry bondholders. Or, Disney would be forced to raise ticket prices to offset its extra costs. Or, Disney would actually benefit by shedding its debt onto Orange County homeowners, whose property taxes would jump 25%.

None of those scenarios is likely to come to pass, nor is the district going to be wiped off the map. Instead, the legislature is on track to create a successor agency that will lack some of the antiquated and unused powers of the original Reedy Creek district, like the ability to build an airport and a nuclear power plant.

This plan has emerged in public records obtained by Variety, and in interviews offered by Ben Watkins, the director of the state’s bond finance division.

As described by Watkins, the key difference would be the state-appointed board seats. Depending on who held the majority, the new board could be anything from a minor annoyance to a major headache. Park visitors and employees, though, might not notice any difference.

Either way, Disney – which has enjoyed sole control over the district for the last 55 years – would be sharing power with the state.

“Disney would take that happily,” predicted one Tallahassee insider.

Disney has its friends in the legislature and employs 38 lobbyists who can try to tilt the deal in its favor.

But if it can’t reach a legislative solution, the alternative is to file a First Amendment lawsuit. That could easily drag on for years, with no guarantee of success.

DeSantis is no stranger to such battles. Since taking office in 2019, DeSantis has made a series of cultural provocations that play well on Fox News, but either get blocked in the courts or have little substantive content to begin with. But he has also fought a series of genuine knife fights with local officials in which he enjoys the upper hand.

He ousted an elected prosecutor who said he would not pursue abortion cases. He overruled a cruise ship ban approved by voters in Key West. And he has sought to dissolve a Miami-Dade County agency that oversees toll highways.

The Disney fight bears as much – or more – resemblance to those battles as it does to the cultural fights. In the case of Miami-Dade, the legislature created a successor agency – much like what is contemplated for Reedy Creek. But the county refused to accept its legitimacy and went to court.

In an email obtained by Variety under the state’s open records law, Watkins suggested to DeSantis’ office that the Miami-Dade situation offered a “good template” for how to handle Reedy Creek’s debt obligations.

For Disney, it illustrates the risks of protracted warfare with the governor. The Miami-Dade agency has been in limbo for years, and 10 infrastructure projects have been delayed, as the county fights DeSantis over who is actually in charge.

“This guy is more dangerous than Donald Trump because he’s smarter and he has a better sense of how to use power as more than just a blunt instrument,” said Gene Stearns, an attorney who represents the county in the litigation. “Everything this guy does is the same. The power goes to him. It doesn’t matter the law. It doesn’t matter the constitution. In my view, he’s a thug. Two judges have viewed this from a constitutional perspective and made mincemeat out of it. But that doesn’t matter. Power is power.”

At one point, an appellate court ruled that the county agency didn’t have standing to contest its own dissolution. A court could likewise find that Disney has no standing to challenge the dissolution of Reedy Creek.

“These things are creatures of the legislature,” said William Spicola, who served as general counsel to DeSantis’ predecessor, Rick Scott. “The legislature can do whatever they want to them.”

The state does have to be careful not to unduly anger the business community at large – and especially the financial institutions that hold its debt.

“This issue is 100% political and 100% aimed at further bolstering the DeSantis Administration’s reelection campaign,” wrote Chase Savage, of Fidelity Investments, in an email to Watkins in May. “We do not find great comfort or solace in the Administration’s continued lurch towards increased state interference for political gains. This is a growing area of mistrust within the investor community, and the longer this is drawn out, the greater that mistrust may become.”

Watkins held a series of calls and meetings with bondholders over the summer to reassure them that $1 billion in Reedy Creek debt will be repaid without interruption.

Watkins and Chris Spencer, DeSantis’ budget director, met with a group of bondholders at a meeting at JPMorgan in New York in July. Howard Cure, a partner at Evercore Wealth Management, said the two officials “swore up and down” that the Reedy Creek dissolution had nothing to do with Disney’s position on “Don’t Say Gay.”

“If it’s a coincidence, it’s an unfortunate one,” Cure said. “It’s a bad precedent, what the state’s trying to do. In the past, you were focusing on the viability of Disney to make debt service payments. Now you have another element involved. It gets bondholders nervous.”

He said that the bondholders conveyed the message that they “don’t want this to be a pattern.”

On Aug. 30, Watkins gave an interview to the Bond Buyer podcast, in which he again sought to assure bondholders that their interests would be protected. He also said that he expected the board of the successor entity would be “appointed by state leadership with a broader interest across all citizens of the state, and not just Disney.”

Disney has not responded to that proposal and declined to comment for this story. Disney has focused in recent months on repairing its damaged relations with LGBTQ organizations. Last week, the Human Rights Campaign announced that it had accepted a contribution from the company, six months after rejecting it. HRC said that Disney had “stood firm in their commitments to our community.”

Brandon Wolf, a spokesman for Equality Florida, said the wider business community has kept its head down in recent months, even as the governor’s actions make it harder to compete for workers.

“The question is still before these companies – what are you willing to tolerate from a tyrannical leader in the governor’s mansion?” he asked. “It’s an open question, still, about just how much companies are willing to take before they take a stand.”

State Sen. Jason Pizzo, a Democrat, said that DeSantis followed an old playbook: “If you’re new at school, find the biggest kid on the playground and punch him. It obviously has a chilling effect on other companies.”

Not so long ago, Disney enjoyed friendships across the aisle, and freely dispensed donations regardless of party. Those donations are now on hold, and they don’t buy as much leverage as they used to.

“Ron DeSantis doesn’t need their money,” Schorsch said. “That’s changed the nature of politics. He can go to a hedge fund billionaire and get a $5 million check. If you’re not coming with a seven-figure check, it doesn’t matter. Ron DeSantis can call up some crypto bro CEO. And with that, the lobbying doesn’t matter as much anymore.”

DeSantis is favored to win reelection in November and is seen as a presidential contender in 2024, making him a potent adversary for the foreseeable future.

Disney has seen a lot of governors come and go in 55 years, but Schorsch thinks the company’s standing in the state won’t be restored any time soon.

“I think the strategy was to last DeSantis out,” he said. “But I don’t think that’s tenable for Disney. He’s so radicalized the rest of the Republican Party. They’ve got like a decade of problems at this point.”