Disney Strategy Is to Stay Silent to Soften Florida Gov. Ron DeSantis’s Blow

The company’s about-face, after initially enlisting sympathetic lawmakers to help it fight back and delay the passage of the bill, is a fresh reminder of the perils companies face when they weigh in on hot-button issues. Mr. DeSantis, one of the most popular Republican politicians in the country and a possible presidential candidate, proved surprisingly willing to go to the mat with a beloved consumer brand that is also one of his state’s biggest employers.

“This was shock and awe from the governor,” said

Jeff Brandes,

a Republican state senator from St. Petersburg who has opposed Mr. DeSantis in the past and voted against the Disney bill. “It just shows how big a challenge Disney faced in saying anything at all in the legislative process.”

Mr. DeSantis had clashed with Disney throughout much of March after the company, under heavy pressure from some of its employees, publicly spoke out against a separate Florida measure, the Parental Rights in Education law—known by its opponents as the “Don’t Say Gay” legislation. Disney said the bill—which prohibits classroom instruction about gender identity or sexual orientation through third grade—would “unfairly target” the LGBT community.

In response, the governor called Disney a “woke corporation” that was trying to impose liberal values on Florida parents and children, and sent fundraising messages to supporters criticizing the entertainment giant.

The fight escalated after March 28, when Mr. DeSantis signed the bill into law. The company released a statement saying the measure “should never have passed” and vowed to work for its repeal.

Immediately after Disney’s statement, Republican lawmakers in Florida began discussing the idea of ending the Reedy Creek Improvement District, which has effectively allowed Disney to govern itself in Florida for more than 50 years. Disney saves tens of millions of dollars each year by allowing the company to avoid red tape when building new hotels or expanding its theme parks, according to a person who reviewed the district’s finances for Disney over a decade ago.

Reedy Creek was the brainchild of Walt Disney himself and his brother Roy, who handled the company’s finances.

In 1967, Disney mounted a publicity campaign to get the Florida Legislature to establish the district, allowing the company to build Walt Disney World in record time on a massive plot of undeveloped swampland near Orlando. In the decades that followed, Disney’s investments in Florida have grown and its relationship with the state has deepened.

Disney operates four theme parks, dozens of hotels, shops, restaurants and other attractions in the Orlando area and has become one of the biggest political donors in the state. The company employs a team of about three dozen lobbyists in Tallahassee.

Disney’s government affairs staff is on a first-name basis with most of the state’s powerful lawmakers and has a direct line to the governor’s office, lawmakers said.

Bob Chapek,

who took over as Disney’s chief executive in 2020, owns a vacation home in the Florida Keys, according to people familiar with the matter.

Shortly after the idea of ending Reedy Creek was floated by Florida Republican legislators, Mr. DeSantis publicly embraced it.

A week later,

Christina Pushaw,

a spokeswoman for the governor, said in an interview that Mr. DeSantis was rankled by companies that come to Florida for its low taxes and limited regulation, but try to change the culture. “They try to take advantage of the friendly business environment in our state, but then try to impose a California radical agenda on us,” she said.

Legislative staff began drafting the language of a bill to dissolve several independent special districts including Reedy Creek around Saturday, April 16, according to people familiar with the matter. Disney’s benefits would be revoked in June 2023 under the bill.

Republican Sen. Jennifer Bradley was picked by GOP leaders to sponsor the bill. Some lawmakers consider her selection a punishment for having been one of two Republican senators to vote against the Parental Rights legislation. Ms. Bradley’s office didn’t respond to requests for comment.

Ms. Bradley said on the Senate floor that she saw the bill for the first time only the day before she filed it. “I did not draft the specific language of the bill,” she said.

The morning of April 19, Mr. DeSantis announced that he was expanding the scope of the special session to include consideration of the special-districts bill. He commended legislative leaders for “making sure that we make the sunset or the termination of those special districts happen, which I think is very important.”

The announcement sent Disney’s government affairs team, based in Orlando and Tallahassee, scrambling to figure out what was happening and how to react. Adam Babington, Disney’s top government affairs official in Florida, began working the phones to lawmakers from both parties who were seen as friends of Disney.

“We’re just as shocked about this as you are,” he told one lawmaker, according to a person familiar with the matter. “We’re finding out about this at the exact same time as you are.”

In conversations that morning, Mr. Babington urged allies in the Legislature to fight the bill and drag out debate, according to people privy to the exchanges. His message, one person said: “Make a stink.”

Shortly after the session began, Democratic Sen. Gary Farmer raised a procedural point that could have had the effect of delaying a vote on the bill an additional day because he said it was being rushed through. When the bill made a required stop in the community affairs committee later that day, he and other Democrats raised a host of objections to the measure, including the potential financial hit to nearby counties if the special district were dissolved.

But by the time the bill was returned to the floor that afternoon, Mr. Babington was calling lawmakers with a different message, according to people familiar with the conversations. “Cool it off. Let’s not make a big deal about this,” he said, according to one of the people.

Behind his about-face: Mr. Babington told lawmakers he had gotten reassurances from Republican legislative leaders that if Disney kept quiet and didn’t drag out the fight, it would benefit from future efforts to salvage or reconstitute a special district, according to the people.

Meanwhile, representatives for Mr. DeSantis and Mr. Babington were in frequent communication that day, according to a person familiar with the matter, but the exact substance of those conversations couldn’t be determined.

Later that evening, Democratic Sen. Jason Pizzo stopped by to check in with Mr. Babington at a lobbying firm’s office. Mr. Pizzo said he lamented the handling of the special-district issue.

Mr. Babington replied that he hoped people would understand the financial implications for nearby counties and the state if the special district is dissolved, according to Mr. Pizzo.

On April 21, the Reedy Creek Improvement District—which is the issuer of nearly $1 billion in outstanding bonds—posted a letter to bondholders on the website of a regulatory body that monitors municipal debt saying that the bill to end the district couldn’t be implemented until all outstanding bonds were discharged. Mr. Farmer, the Democratic lawmaker, said the issue presented a potential legal roadblock for the legislation. A representative of Reedy Creek didn’t respond to requests for comment.

Mr. Brandes, the Republican lawmaker, predicted that legal challenges by Disney would delay the implementation of the special-districts bill by a year or more, but said the company could accrue goodwill with the governor and work out ways to soften the impact of losing the district by avoiding public statements challenging Mr. DeSantis in the future.

“The bill will be a sword of Damocles over Disney’s head for at least the next year,” he said. But the speed with which the governor moved to punish Disney, which employs nearly 80,000 people in Florida, “sends a powerful message to other businesses that disagree with him: If they’re willing to take on Disney, they’re willing to take on anyone.”

Write to Robbie Whelan at [email protected] and Arian Campo-Flores at [email protected]