BRADENTON, Fla. — The South Florida Water Management District unanimously approved a plan Thursday to pay nearly $200 million in cash, instead of using bond financing, to purchase U.S. Sugar Corp. land for Everglades restoration projects.
The district had planned for nearly two years to use certificates of participation to buy the land. But deteriorating economic conditions, particularly declining property values, previously caused its Board of Governors to downsize the purchase contract twice to avoid increasing property taxes.
The current plan, to purchase 26,791 acres of property for $197.4 million in cash, does not require the district to raise property taxes. And the purchase price includes various options to acquire another 153,200 acres over the next 10 years.
The cash will come from land and capital project reserves set aside in the district budget for such purposes, said assistant executive director Tom Oliff, who stressed that the expense would not touch operational reserves set aside for contingencies.
The deal would save the district from paying financing and carrying costs, officials emphasized. But it does come with a $10 million termination penalty if closing does not occur on or before Oct. 15.
Several board members were concerned about acting on the U.S. Sugar contract at a time when two federal court rulings are pending that address issues related to the Comprehensive Everglades Restoration Plan, or CERP. Judges in those cases could order the district to spend funds on other projects, which could quash the U.S. Sugar transaction, board members said.
If that happens, the termination penalty would not apply.
Board member Jerry Montgomery said he believed the termination penalty was too high compared to a $5 million penalty in previous iterations of the purchase contract. He suggested reducing the amount to $1.8 million and delaying the closing date until after the federal judges ruled.
In a recent conversation with U.S. Sugar, board member Glenn Waldman said it was clear to him that the company would not accept a modification of the latest contract.
“The risk is we lose the only willing seller we have for a transaction, for a scope, we may never see again,” Waldman said.
Several other board members had similar conversations with U.S. Sugar, including chairman Eric Buermann, who said, “I think they are at end of train as far as dealing and modifying.
The board said it may schedule a meeting Oct. 8, prior to closing on the deal, to review court rulings and update the public on the status of the project.
The acquisition is expected to help the district reduce pollutants from agricultural activities, such as sugar cane and citrus farming, and stormwater flowing into the environmentally sensitive Everglades, which is a major goal of the CERP.
There was no detailed discussion Thursday about another pending court ruling — the district request to validate $650 million of COPs before the Florida Supreme Court. The court heard oral arguments in the case more than four months ago but has yet to rule.
The validation has been legally challenged by the Miccosukee Tribe of Indians of Florida and New Hope Sugar Co., a competitor of U.S. Sugar.
The district has known for several months that the current plan to sell COPs was in jeopardy because it would strain the budget and possibly credit ratings due to projected deficits and difficulty maintaining debt-ratio policies.
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 are rated A by Fitch Ratings, A2 by Moody’s Investors Service, and A-plus by Standard & Poor’s. The district also had $979.8 million of COPs outstanding through 2037 rated AA by Fitch, Aa3 by Moody’s, and AA-plus by Standard & Poor’s.