The Celebration Chronicles

by Andrew Ross, Ph. D.

  After hearing this skepticism from a number of quarters, I interviewed Charles Adams, formerly TCC’s director of business development. At the time he was recruited in 1990, for his expertise in residential development, Adams had actually been trying to buy Disney land for Trammell Crow, one of the nation’s largest property developers. By the late 1980s, Adams explained, the legal gains of the environmentalist movement had begun to take their toll on runaway growth and development. Large-scale developers were scrambling to find some way of satisfying the new legislative requirements. Adams described how Disney management used the Celebration project to obtain a permit for all the environmental impacts incurred by the expansion of its theme parks:

  Celebration was the one that carried the water on this. It was easier to have Celebration lead that effort because it was going to be adding homes and offices and economic development and more traditional real estate. It was a little harder for an agency to say, “Do we really need another water park with its impact on wetlands?”…At that time, the pendulum had swung over onto the side of the environmental community, and each year landowners throughout the United States were watching developable land get taken away to save one more plant species that got added to the list that year.… Well, by having that permit, it locked our long-term development rights in place, and that was of enormous value to the company.

  The “permit” in question was obtained through an environmental mitigation agreement on a massive scale, negotiated with the South Florida Water Management District and EPA head Carol Browner, at that time Florida’s top environmental official. In the customary practice of bit trading, five acres of land would have to be preserved for each acre of impact. Instead, the company did a wholesale swap. It purchased the entire 8,000-acre Walker Ranch in Osceola and turned it over to the Nature Conservancy to manage as the Disney Wilderness Preserve. In return, Disney won virtually blanket approval for twenty years of development rights on its landholdings. Given the likelihood of stiffer environmental policies down the road, this one-shot deal, negotiated by director of residential development Don Killoren, was immensely lucrative for the company, and Celebration had been the critical card to play in winning approval. However expedient, the Celebration plan would prove even more valuable to the company’s effort to adapt the region’s road network to its needs.

  Easing the way for Disney’s expanding transportation needs was Lewis’s most arduous assignment. The company embarked on an aggressive campaign that, if approved, would involve building several new interstate interchanges, diverting the Central Florida Greeneway (417), and throwing in a new parkway (Osceola Parkway) for good measure. This basically meant changing the traffic map of Central Florida. What stood in the way was the 1985 Growth Management Act that Lewis had helped to draft. Among other things, the legislation requires all developers to have infrastructure—water, sewage, roads—in place before land can be developed. Under this legislation, Disney was required, for the first time, to submit a comprehensive growth plan. This presented a problem. Disney’s plans for the new Animal Kingdom theme park could not have been approved because, in keeping with company policy, all details about the new park were being kept under wraps until late in the day. Estimates of the park’s traffic impact that were required by the legislation could not be provided at that time. “Once again,” Adams explained, “Celebration became the entity to carry the load because now we were showing a residential development that’s going to generate X amount of trips, and all of a sudden we tripped the meter then that said ‘Yes, now it makes sense to put in the Greeneway that comes from the airport, as well as the Osceola Parkway.’ The strategic value of getting the road network in place to accommodate the Walt Disney World resort’s future expansion was of tremendous value to the company.”

  Lewis got to work, enlisting the financial support of other large property owners whose interests were well served by paying to have the Beltway (the Southern Connector Extension of the Central Florida Greeneway) diverted south to pass through Celebration:

  It was complicated politically because you had the state, the local Department of Transportation, two different counties, and a number of large landowners, all of whom had their own agenda. The whole thing involved a 500-million-dollar public-private partnership. Tied to it was the Osceola Parkway, a new 14-mile roadway, which was the county’s number one priority. But the Beltway was the priority of the landowners. Everybody was saying, ‘Well, you help me with mine, I’ll help you with yours,’ and all of this stuff had to come together at one time when we signed six feet of documents.

  The subsequent agreements were unprecedented for the federal highway system, which does not usually approve new interchanges until they are about to be built. Disney got approval for three new interstate interchanges, some of which would not be built for ten years. The entire city of Orlando had only six interchanges, and now Disney would have five of its own. Between the creation of this “huge road system” and the development permits, the deal, as Lewis put it, “created an economic development area that’s probably unmatched currently anywhere in the country.”

  It didn’t hurt that Lewis was dealing with his former colleagues in office in Tallahassee. Rummell, he said, used to cajole him: “This is a classic case of a guy who shot himself in the foot. You went up there and wrote all these laws and now you’re down here trying to figure out how to get through them.” Nor was anyone surprised that Disney had made the earth move under legislators’ feet. In Florida, big landowners and developers dream about making this kind of sweetheart deal with local and state government. For Disney, however, it seems that nothing is impossible to fix politically, a perception that goes back to the special governmental powers obtained in the late 1960s through the Florida legislature for the multicounty Reedy Creek Improvement District (RCID). The creation of this special district gave the company sweeping fiscal and administrative powers over a virtually autonomous political unit. Through the RCID, the company won control over all planning, building, and water drainage codes, and preempted the tiresome business of asking repeatedly for permits from different agencies in two different counties. A handful of permanent residents, handpicked by the company, live in trailer parks in the two RCID municipalities of Lake Buena Vista and Bay Lake, and are required to vote on bond issues. To obtain initial approval for the RCID, however, the company had argued that the broad powers were necessary to serve “the needs of those residing there.”3 This reference was to the EPCOT population plan for 20,000 residents, never realized. In Celebration, at least, approval was secured on the basis of the guaranteed existence of a population of residents. Even so, the “needs” of these residents were still used to serve the larger needs of the company to expand its theme parks and swell its profit base.

  It has long been an act of faith among critics of Disney’s powerful reach that the RCID was a monstrous devolution of authority to the company’s own private state within the state. Ex-legislator Marshall Harris observed, “It was a bad law. It created a feudal district in the middle of Florida.”4 Straddling two counties (Orange and Osceola), and with planning, zoning, and law enforcement authorities usually commanded by large cities and counties, the RCID was a rather unique agreement, even for a state in love with special taxing districts. Its powers included the right to build an airport and a nuclear power facility, and run the company’s own criminal justice system, none of which have been fully exercised. In practice, of course, this forty-two-square-mile immunity zone, often referred to as Florida’s 68th county, earned itself a lifetime of local resentment for its tax-dodging reputation. Rigorous managers of its own tourist property, RCID’s regional impact took the form of a colossal tourist free-trade zone, as other attractions and theme park companies like Universal and Sea World moved in, escalating housing prices, jamming traffic routes, and delivering up the land and its lakes to blow-and-go developers. Despite its attempts at improving public relations, the company’s public profile was that of an arrogant, bad neighb
or that gave little prior notice of its development plans and stood aloof from community involvement.

  In Osceola, the company had not developed any of its RCID land and had generated no immediate fiscal gains for the county. “Orange County got the tax base, we got the traffic” was the perception of locals. Business and political leaders had long petitioned the company to share the benefits of their development activity more equitably. Despite two decades of county appraisers’ legally dubious attempts to collect assessments for commercial land use, Disney maintained an exemption for bona fide agricultural activities on its Osceola property, portions of which it leased out to cattle ranchers and timber companies. According to Mike Kloehn, director of the county’s planning department, “many locals wish Disney had never arrived,” and there was “a general mistrust of Disney as a large corporation that cared little for the county’s welfare.” When the Celebration site was surgically de-annexed from Reedy Creek and granted its own, much more limited, district authority under state law, Disney would be dealing with “the regular Joes,” as Stern put it, by respecting zoning codes and paying water, sewage, and impact fees to the county.5

  In the negotiations that followed, Kloehn describes how difficult it was for company officials to operate with the regular Joes in the public domain. They had to be educated: “The Disney decision makers were unaccustomed to following land-use regulations. Disney’s departure from RCID would be difficult. They winced at adjusting to our zoning requirements.” Detailed plans for Celebration had to be submitted for public review, and “if they changed their mind, an amendment and public hearing were necessary. This format ran counter to their preferred close-to-the-vest/one-stop-permitting way of doing business. They would have preferred to identify specific uses of property at the latest possible stage of plan review. However, after a few months of working with them on their [planning] documents, they finally understood that all developers are required to provide the same level of detail and that we could not make an exception.”6

  Above all, the county commissioners were hungry for ad valorem tax revenue from Celebration. When plans were first announced in the early 1990s, the town, had it been built out then, would have increased the Osceola property tax roll by 63 percent.7 But the county also wanted to attract the higher-income jobs generated by the town’s corporate campus, already sprouting twelve-story office buildings. As a result, Disney bargained a good deal. Estimates of county revenue measured against its costs, for services and the like, showed a net gain, and so the company negotiated a payback from the county, in the form of either a yearly check or an agreement whereby the county would put in a road that the company wanted. This deal, along with the earlier entitlements for roads and development, all added up to an enormous benefit to the company. As a result, the strategic value of Celebration was realized even before the first lots were sold. The rate of return over ten years on the town’s real estate would be about 20 percent, according to the business plan. But in the revenue stream of a $22 billion earnings-driven company, this was peanuts in comparison to high-volume videocassette sales of The Lion King. Celebration’s cash flow potential would always be tangential to Disney’s core earnings-driven business. But what Celebration made possible locally, as a convenient instrument of the company’s regional development plans, and what it generated internationally, in sheer prestige and cultural capital, was of immense worth to Disney. No single Disney project has ever generated so much press attention (and, by my calculation, 90 percent of it was positive).

  Few of the reporters who came to town ventured outside it, and yet one of the “reasons for Celebration” lay out there on the Beltway, currently a stunningly unclogged thruway, where you could whiz along past cow pastures and pine hammocks that will have metamorphosed into subdivisions before the next decade is out. Celebration itself may be a showpiece for traffic reduction, but it had served as a host for the road-and-development virus that now had a grip on the surrounding farmlands beyond the strip. In one of the more ironic twists of New Urbanist fate, this model town had helped secured an environmental seal of approval for a vast development zone, “unmatched,” as Lewis put it, “anywhere in the country.”

  THE BARE NECESSITIES

  Disney was not the only agent that had used the Celebration project to serve other purposes. The county’s business leaders hoped the town would act as the catalyst for a different kind of economic growth. Pro-growth interests in Osceola were angling for a greater share of the region’s sustained development boom that had been monopolized by the richer Orange County to the north. Indeed, permits were approved, in January 1998, for two large convention center complexes on route 192, with trade show buildings, mega-malls, and hotels. One of them—the World Expo Center—was so large, at 2.4 million square feet, that its developer (who later pulled out) claimed that “like the Great Wall of China, it would be one of the few manmade objects that could be seen from the moon.”8 Servicing visitors on corporate accounts would provide marginally better, and slightly more stable, jobs than the highly seasonal tourist trade, where business was flat on twenty-eight weeks of the year. In a county where 56 percent of the jobs were in tourism, the median wage hovered at the $20,000 mark.

  Osceola’s economic plight was most fully reflected in its affordable housing profile. To date, Celebration’s “good example” has not sparked any other mixed-housing plans, let alone anti-sprawl imitations, within the county. Its inflated price points made it an instant leader in regional housing sales and established the perception that New Urbanist homes were well beyond the range of most home buyers. The last time I visited in January 1999, the signs on route 192 still promised homes from $160,000, but no one knew of a house within Celebration that could be bought for that sum—already almost twice the price of an average home in Osceola County. Yet many locals I met in the course of the year clearly recalled that when the initial plans for Celebration were first shown around the county, low-income housing was a popular feature of the package.

  Because of the scale of the Celebration plan, TCC was legally bound to include some provision for affordable housing. This was a sensitive issue, given Disney’s recent record. In 1990, the company’s RCID governmental arm had snapped up all of the $57.7 million in tax-exempt bonds made available to local governments for reducing costs on housing and sewage infrastructure. Reedy Creek had beaten the housing authorities in six counties to the punch in filing for the bonds, issued on a first-come, first-served basis. Local administrators were outraged that money that might have gone to low-income housing in the region would now be used to expand Disney World’s sewage treatment plant. Facing a public relations nightmare, Disney elected to hand back some of the money in addition to paying out $1.5 million to Orange County to help provide home loans to families in the region. Nonetheless, the legacy in the public mind was the image of Disney as the Grinch that stole affordable housing, abusing its special powers of government to cheat revenue-strapped municipalities and their impoverished communities out of scarce public monies.

  In Osceola, the affordable housing shortage would be deepened by the company’s planned expansion, steadily sucking thousands of additional low-wage service workers into the county. By 1998, Disney World had become the biggest single-site employer in the United States, with over 51,500 workers on its payroll (almost 15,000 of them part-time), and its daily recruitment in Mexico and Puerto Rico supported a steady stream of migrants, swollen further by the ripple effect of additional development on the Kissimmee strip. The company’s first long-range growth management plan was rejected by state officials in January 1992 because it failed to provide adequately for affordable housing for these new employees. Faced with a building moratorium, Disney renegotiated and made its first foray into the rental development business by investing in apartment buildings in both counties (including Little Lake Bryan, the pocket to the north of Celebration that Adams tried to buy for Trammell Crow). I asked Lewis how the plan for Celebration answered the requirements of
the legislation. Osceola officials, he said, had made overtures to Disney: “Their initial reaction was, ‘If you’re going to do residential, we sure hope you’re gonna do that expensive stuff. We have plenty of that affordable stuff already in our county. What we need is some of that expensive stuff.’ That’s exactly what they said to us.”

  If such an appeal were formally made, it would have been illegal. Not surprisingly, no one I talked to in the county’s agencies would corroborate any request of this sort. In principle, the decision about where to locate the housing lay with the developer, and it chose to go the way of mitigation, subsidizing low-cost housing outside of Celebration. Disney agreed initially to hand over $100, 000 for each of three years for Osceola to provide assistance in down payments and closing costs to home buyers who qualified for affordable housing elsewhere in the county. Many of the recipients turned out to be Disney employees, unable to afford the dream of Celebration, not even its apartments, priced well above the local rental market value. It didn’t have to be that way. Former TCC officials were generally defensive when the topic came up. The exception, Todd Mansfield, recalled that he had pushed hard for the inclusion of state-assisted public housing, and had even marked out a location on the site plan. But the prevailing point of view on the development team was that this would dissuade buyers, and so it was decided to raise the price points on the initial Phase One offerings.

  While this outcome may have satisfied the county’s fiscal managers, hoping for housing that would be attractive to Fortune 500 company executives, it impaired the town’s public image among county residents. It did not help matters that Stern was quoted as joking to some journalists (whom he was showing around town) that low-wage workers in Celebration could “share apartments” and “have the time of their lives piling into one bedroom.” Nor was the county’s tax revenue from the town always in the clear. Locally, the novel nature of Celebration’s governmental status sparked a taxation brawl between TCC and the county, generating further friction. Celebration was not a fully fledged town, nor the kind of exurban zone that has no center and no name, like the amorphous quadrant just to its west (called Four Corners because its only distinctive identity is that it straddles Osceola, Orange, Polk, and Lake Counties). Under a recent Florida law, the state’s special tax districts, so long as their property is open to the public, are to be treated like municipalities and are thereby exempt from property taxes on their public works. Judging, to the contrary, that the Community Development District of Celebration was not a government entity, the county appraiser sent on the hefty property tax bills for 1997, and the district filed for an exemption. Local media harvested the story for all it was worth, building on the well-worn perception of Disney as a tax dodger. An Osceola News-Gazette editorial pointed out that the town “may hurt its image in a legal battle over taxes” and “add fodder to the argument that the Walt Disney Co. takes advantage of Osceola County.… As a provider of jobs, homes, attractive landscaping and upscale shops, Celebration should have a reputation as a quality development. Too bad that reputation may be tarnished by the town’s efforts to circumvent its tax obligations to a county that has welcomed it with open arms.”9 Recoiling from further corrosive press, Celebration backed down within a week. “I think we are bending over backwards to be good neighbors,” Tom Lewis said. “We are paying under protest.”10