Aug. 12 (Bloomberg) -- Florida’s two-year-old plan to buy private property for Everglades restoration was approved unanimously today at one-seventh its original size after a flagging economy and lawsuits thwarted the project’s bond financing.
The South Florida Water Management District agreed to a $197.4 million cash purchase of 26,800 acres (10,846 hectares) from closely held U.S. Sugar Corp. After an initial leaseback to the company, the farmland will be used in the district’s plan to restore water flow from Lake Okeechobee in the state’s center to the Everglades, a 100-mile-long (161 kilometer) wetland to the south known as the River of Grass.
“I haven’t done a deal yet that’s perfect,” Eric Buermann, chairman of the water district’s board, said during a hearing that took comments from supporters and opponents. “There’s always something that somebody doesn’t like.”
Governor Charlie Crist hailed the purchase as one of the largest-ever U.S. environmental deals when he announced plans to buy 180,000 acres for $1.75 billion in June 2008. The acreage was scaled back twice as the longest economic slump since the 1930s cut Florida property values and the real-estate-tax revenue intended to back debt financing for the acquisition.
“Going out for bonds, given our forecast and revenue situation, is just not feasible,” Paul Dumars, the district’s chief financial officer, said in a telephone interview yesterday.
$2.2 Billion Sale Planned
The district, one of five in the state that manage flood control and water quality, will use cash for the purchase, according to its website. It had planned to sell as much as $2.2 billion of bonds for the original acquisition, which was renegotiated in November 2008 to $1.34 billion. It was cut again in May 2009 to $536 million for about 73,000 acres.
The plan may still be scuttled before it closes in October. The Miccosukee Tribe of American Indians filed a motion on Aug. 10 to prevent today’s vote, saying the money should be spent on a previously planned reservoir, meant to remove phosphorus from Everglades water, which the board is under orders to complete. The motion is pending before the Southern District Court of Florida.
“While someday, buying the sugar land may be a great idea, your commitment now is to build the reservoir,” Gene Duncan, water resource director for the Miccosukee Tribe, said at today’s meeting.
Dried Up Funds
Using cash for the U.S. Sugar purchase will leave the district with about $90 million in its capital-reserve fund, Dumars said, drying up funds for the reservoir.
The outcome of a separate case dealing with Everglades water quality could also stall the deal.
One obstacle to bond financing for the U.S. Sugar purchase was a decline in the district’s share of property-tax revenue in the 16 counties it manages. That source of funds will fall 23 percent in the year through September 2011 compared with last fiscal year, according to the district’s proposed budget.
Property values in Florida, the fourth-most populous state, fell 22 percent from the second quarter of 2008, when Crist first proposed the land purchase, to the first quarter of 2010, according to the Federal Housing Finance Agency.
Other setbacks were lawsuits from the Miccosukee Tribe and Florida Crystals Corp., a West Palm Beach-based rival to U.S. Sugar. They say the project won’t serve a public purpose because the district can’t afford the reservoirs and drainage work needed to restore the land after purchase. That case is now before the Florida Supreme Court.
“We can’t issue bonds until we know exactly what the ruling is going be there,” Dumars said.
The water district sold $546 million of revenue bonds in 2006 for Everglades restoration, its first long-term sale, Dumars said. Securities from the largest part of that issue, $153.5 million of 5 percent bonds due in 2036, were originally priced at 104.27 to yield 4.46 percent. They traded today as high as 103, according to data compiled by Bloomberg, after selling at par yesterday.
Some opponents of today’s deal said it could cost jobs in a state whose unemployment rate in June, at 11.4 percent, was the fifth-highest among states.
“As we continue to take sugar-producing lands off of the books, we reduce the prospects for jobs,” said Corey Alston, city manager of South Bay, a farming community south of Lake Okeechobee.
Kirk Fordham, executive director of the Everglades Foundation, said the unanimous vote “was a triumphant victory for the people.”
“It’s been two years in the coming,” he said. “We can’t afford to wait any longer.”
The scaled-down acquisition is a “win-win” for Crist, a first-term Republican governor now running for the U.S. Senate as an independent, said Kevin Wagner, who teaches politics at Florida Atlantic University in Boca Raton.
“Since it’s smaller, he gets to show he’s financially responsible,” Wagner said. “And he’s still demonstrating his environmental bona fides.”
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