BRADENTON, Fla. — The South Florida Water Management District will consider a plan on Thursday to pay cash, instead of using debt, for a scaled-down version of the U.S. Sugar Corp. land purchase for Everglades restoration.
The district’s board of governors will be asked to purchase 26,791 acres of property for $197.4 million in cash. The transaction would include various options to acquire around 153,200 acres over the next 10 years.
If the plan is approved by the board, the district would abandon the strategy to finance the acquisition of 73,000 acres all at once with the sale of up to $650 million of certificates of participation.
Under the cash deal, the district would have an exclusive three-year option to purchase 46,800 acres or the remaining 153,200 acres at a fixed price of $7,400 per acre.
After the exclusive option period, there would be another nine years of non-exclusive options to purchase the remaining acreage at fair market value.
District officials said the sour economy, the loss of $150 million in revenues since 2008 due to declining property values, and uncertainty related to recent federal court orders on Everglades restoration prompted them to renegotiate terms of the U.S. Sugar purchase.
The district has known for several months that the original plan to sell up to $650 million of COPs was in jeopardy because it would strain its budget and possibly credit ratings due to projected deficits and difficulty maintaining debt-ratio policies.
“We’ve lost 30% of our ad valorem revenues over the last two years and that’s been a big hit — that’s what really killed the debt-service ratio,” board chairman Eric Buermann said Friday. “When we did the math on the [COP] deal, it didn’t give us all the financing that we needed.”
That prompted district officials to open negotiations with U.S. Sugar, he said.
“We could not afford the 73,000 acres,” Buermann said. “Our bonding capacity was limited.”
The district, which provides 17 counties and more than seven million residents with flood control and water quality protection, has seen a significant decline in property values the past few years.
The governing board has tentatively approved a $1.07 billion budget for fiscal 2011 that is predicated on maintaining the same millage rate as in the current fiscal year.
With a flat rate and property values still falling, the district’s upcoming budget will see a 13.2%, or $60.9 million, decrease in support from ad valorem taxes.
Adding to fiscal woes have been recent rulings by federal court judges overseeing implementation of the Comprehensive Everglades Restoration Plan that have created uncertainty about budgetary needs going forward, Buermann said.
Downsizing the initial U.S. Sugar acquisition would save the district more than $340 million over the current agreement to purchase 73,000 acres with COPs. It also eliminates the need for financing and issuance costs.
The district still has a request to validate the $650 million of COPs pending before the Florida Supreme Court, which heard oral arguments in the case more than four months ago but has yet to rule.
The validation case is before the high court because the district’s legal ability to issue COPs is being challenged, although it has sold validated certificates in the past.
At the end of fiscal 2009, the district had $41.35 million of 2002 and 2003 special obligation land-acquisition bonds outstanding, including principal and interest, through 2016. They currently are rated A by Fitch Ratings, A2 by Moody’s Investors Service, and A-plus by Standard & Poor’s.
The water district also had $979.8 million of COPs outstanding through 2037, which are rated AA by Fitch, Aa3 by Moody’s, and AA-plus by Standard & Poor’s.
