Disney court win could cost Orange County schools millions

A court ruling in Disney’s favor could force Orange County Public Schools to refund millions — and probably tens of millions — in property taxes to the entertainment giant.

The decision, handed down Monday by Judge Thomas W. Turner, followed an eight-year legal battle over claims the Orange County Property Appraiser’s Office improperly calculated the taxable value of the Yacht & Beach Club, a 1,200-room Disney-owned resort and convention hotel near the Epcot theme park.

But it could have implications far beyond the taxes paid on that single hotel — and local officials are reacting as if it will. Orange County schools are preparing to give back up to $80 million to the entertainment giant, and anticipating a loss of millions each year in expected future tax revenue.

The property appraiser’s assessment of the Yacht and Beach Club Resort for tax years 2015 and 2016 was “unconstitutional and invalid,” the judge said in a 43-page decision. “The appraiser substantially increased the amount of Disney’s tax bill by unlawfully including value attributable to Disney’s intangible property” — namely the value of the Disney brand, its managerial skiIIs and workforce.

The total refund has not yet been calculated but Orange County Tax Collector Scott Randolph said Walt Disney Parks and Resorts could be due $2 million for property taxes it paid on the Yacht & Beach Club in 2015 and 2016, the years that were the basis for the lawsuit.

But Disney could get a whole lot more — as much as $80 million to $100 million, if the ruling is applied to all its resorts, Randolph said.

“Technically the ruling only applies to the Yacht and Beach Club Hotel and only for those two years, but the disagreement on which it’s based upon, the valuation determination, is the basis for all their litigation on all the hotels of Disney since 2015,” he said.

Randolph, a party to the case in his role as the elected tax collector, said he alerted school officials a year ago that the litigation wasn’t going well and encouraged them to set aside money in case the ultimate decision favored Disney. “Luckily they did,” he said.

Scott Howat, the school district’s chief communication officer, said the district began holding some funds in reserve even before Randolph’s caution, concerned that its refund obligation was potentially compounding as the case dragged on through multiple appeals.

The district so far has put away about $80 million, an amount about equal to the cost of two new elementary schools, Howat said. But the true impact of the loss will fall on salaries, Howat said: Some of the tax money would have been invested in teacher salaries, noting $8 million “is like half-a-percent raise for teachers.”

Neither Disney nor its lead counsel, Robert E. V. Kelley, Jr., of Tampa, responded to a request for comment.

An appeal is under consideration, said Ana C. Torres, general counsel for Orange County Property Appraiser Amy Mercado.

Randolph said he now worries other hotel owners might try a similar strategy to cut their tax bill.

“Potentially other hotels are going to start calling, too,” Randolph said.

It is common for businesses to challenge their tax amounts, and Disney has squared off with the Orange County Property Appraiser in the past.

Disney lawyers filed this particular challenge in 2016 after the assessed value of the resort property jumped 118% from $154 million as of Jan. 1, 2014, to $336 million as of Jan. 1, 2015, “although there was no material renovation or expansion,” the judge noted in his ruling.

Disney sued then-Property Appraiser Rick Singh, who had lumped Disney among the “fat cats” he was fighting to force them to pay their fair share. Singh then lost in 2020 to Amy Mercado, who won a second term in August when the candidate challenging her re-election withdrew.

Mercado’s lawyers submitted a brief last month arguing that Disney had “enjoyed many years of artificially low assessments” and insisting that the increase in 2015 corrected that error going forward.

While other taxing authorities also might owe Disney a small tax refund, none would be as impacted as the school district.

Randolph said state law prevents taxes on a commercial property from increasing more than 10% a year unless the assessing authority is a school district. As a result, only Orange County schools enjoyed the full amount of the tax increase associated with the 2015 bump in the valuation of the Yacht and Beach Club Hotel, and only the schools would get hit with a big loss.

shudak@orlandosentinel.com