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Land Resources / News / Florida
Florida $650 Million Land Bond Faces Financial, Legal Challenge
Source: Business Week, by Jerry Hart
March 9 (Bloomberg) -- Florida’s plan to borrow $650 million to buy private land for Everglades restoration faces political and legal hurdles amid warnings that water managers can’t afford it.
The South Florida Water Management District, which runs efforts to reclaim farmland and restore water flow to 1.4 million acres (566,788 hectares) of wetlands, will meet tomorrow on extending the deadline for an agreement to buy 72,500 acres from U.S. Sugar Corp. It must do so to accommodate an April 7 Florida Supreme Court hearing on challenges to the sale.
The hearings come as state lawmakers seek to bridge a $3.2 billion projected revenue gap for next fiscal year and after a financial adviser urged the district to reconsider its plans. Debt service for the land purchase would add to deficits of as much as $110 million in each of the next two budget years and could affect the district’s credit rating, the adviser said.
“We recommend that the district review its debt coverage and debt ratio policies,” Public Financial Management Inc., the Philadelphia-based adviser, said in a letter to the district on Feb. 17. “These policy changes will be carefully reviewed by the credit rating agencies.”
Conditions that led to an AA+ rating from Standard & Poor’s, its second-highest grade, on debt sold by the district in 2006 for land purchases have changed, the adviser’s letter said. The $546.1 million of bonds, called certificates of participation, are backed by a portion of property taxes in 16 counties from Orlando in the state’s center, south to the Florida Keys.
‘Muted’ Growth
“Taxable assessed values have declined and may drop further,” the adviser’s letter said. “Future growth in taxable value will likely be muted,” limiting the water district’s ability to absorb debt.
Water managers won’t have to decide on borrowing plans again until the state Supreme Court rules on the U.S. Sugar bond sale, said Eric Buermann, chairman of the district’s governing board. The extension of the land agreement is for six months, and the Supreme Court could take as much as a year to issue a final ruling, he said in an interview. The local economy may improve in that time, he said.
“When we sit down to look at the affordability, I want the very latest figures,” he said. “This is a changing economy and six or nine months is a very long time. We may see the trends start to come back in a positive way.”
‘Fiscally Irresponsible’
State Senator Paula Dockery, a Republican candidate for governor who opposes the U.S. Sugar deal, released the adviser’s letter. She characterized borrowing for the U.S. Sugar land as “fiscally irresponsible” given the state’s budget gap. S&P classifies Florida’s credit outlook as “negative” because housing prices have collapsed and unemployment of 11.8 percent in December topped the national average at 10 percent.
“Continuing to pursue this purchase is not just fiscally irresponsible, it is nothing short of reckless,” Dockery wrote to Buermann on March 5.
The land deal was scaled back twice since Governor Charlie Crist, a first-term Republican who’s running for the U.S. Senate, announced plans in June 2008 to buy 187,000 acres from U.S. Sugar for $1.75 billion. What he called one of the largest public land purchases for environmental purposes was reduced to 180,000 acres for $1.34 billion in November 2008 and to 72,500 acres for $536 million in April 2009.
The water district’s plan to borrow $2.2 billion even as the purchase was reduced was blocked in August by Palm Beach County Circuit Judge Donald Hafele, who limited the amount to $650 million.
Sugar Competitor
Challenging the bond sale before the state Supreme Court will be affiliates of closely held Florida Crystals Corp., a sugar producer based in West Palm Beach.
“There is no public project established for the proceeds,” said Gaston Cantens, vice president of Florida Crystals. “It’s just a land acquisition, which is distinguished from a construction project, which is what COPs were intended for,” he said, referring to certificates of participation.
The agreement would allow U.S. Sugar to farm the 72,500 acres under a seven-year lease that may be extended. The water district would have a 10-year option to buy another 107,500 acres.
Florida Crystals’ opposition is delaying the project, which should receive an expedited ruling from the court because of its public importance, said Judy Sanchez, U.S. Sugar’s director of communications in Clewiston, Florida.
“The delays have been primarily caused by one of our business rivals filing suit,” she said. “All the litigation expense and time delays can be placed at their door.”
Indian Opposition
The Miccosukee Tribe of Indians of Florida will also argue before the court, saying the district’s borrowing doesn’t achieve a public purpose and that it’s financially unable to meet the transaction’s terms.
The district “has no funds or bonding capacity to later purchase the option lands,” according to the tribe’s legal brief.
The New York Times and the Miami Herald, in articles on March 7 and 8, said Crist favored U.S. Sugar in the land purchase and that appraisals overstated the property’s value. Sterling Ivey, Crist’s spokesman in Tallahassee, the state capital, didn’t respond to a request for comment.
The state had to act when the land became available because its location fits with plans to restore water flow from Lake Okeechobee south into the Everglades, Buermann said.
“It’s not as if we could comparison-shop,” he said. “If we were getting into the sugar business, we could look at land in Hawaii. To use normal commercial terms isn’t really the standard.”
March 09, 2010 Read the complete article from Business Week » |
