Thursday, May 14, 2009
U.S. Sugar Corp Purchase-Leaseback Approved
Good Deal For U.S. Sugar - Taxpayers To Buy 73,000 Acres With Option On 107,000 Later
CLEWISTON, FL. -- The South Florida Water Management District (SFWMD) Governing Board Wednesday approved a revised strategy to acquire huge swathes of land from the United States Sugar Corporation for Everglades restoration. The Board had sought ways to address current economic challenges while preserving the environmental vision of this historic purchase. The amended agreement, approved last week by U.S. Sugar's Board of Directors, provides for the initial purchase of approximately 73,000 acres of strategically located land south of Lake Okeechobee, with options to purchase another 107,000 acres when economic and financial conditions improve.
Under the approved agreement, which is subject to financing, the District would initially invest approximately $536 million for 73,000 acres of agricultural land, that would be $7342 per acre for what is basically low lying sugar cane land filled with drainage canals and old citrus groves. U.S. Sugar does not want the citrus groves but will lease back the sugarcane land at $150 per acre for seven years with an option for 20 more years, a meager 2% return on the taxpayers purchase of the cane lands.
It may cost taxpayers at least $11 million a year to manage the citrus grove land.
At nearly 112 square miles, the acreage represents a land mass nearly twice the size of Orlando and is the largest single acquisition of land in the District's history. The District also has options to purchase the remaining 107,000 acres from U.S. Sugar during the next 10 years, including an exclusive 3-year option to purchase the remaining property at a fixed price of $7,400 an acre.
Highlights of the amended acquisition
The District would take ownership of approximately 73,000 acres of land and its improvements for a purchase price of $536 million, including 33,000 acres of citrus lands and 40,000 acres of sugarcane lands. At slightly less than appraised value, the revised purchase reduces the immediate public investment by 60 percent, or $800 million, and annual debt service payments by an estimated $65 million.
U.S. Sugar would lease back the 40,000 acres of sugarcane lands from the District at $150 per acre for 7 years, with provisions to extend up to 20 years. The lease would generate a minimum of $40 million.
U.S. Sugar would be required to pay all property taxes and assessments, control the land for exotic and invasive plants and implement Best Management Practices to prevent pollution.
The District may terminate portions of the lease and begin using the acreage for restoration under a "takedown" schedule, including all of the citrus lands with twelve months' notice, and 10,000 acres of sugarcane lands with two years' notice within the first 10 years.
Should the District exercise the purchase option, all property would be available for approved and funded restoration projects. The amended agreements allow for the continued operation of the U.S. Sugar Corporation's mill and refinery, keeping 1,700 direct jobs for at least another decade and sustaining regional agriculture.
Today's action by the District's Governing Board is the culmination of close to a year's work since Governor Charlie Crist first announced on June 24, 2008, that the District would begin negotiations with the U.S. Sugar Corporation to acquire vast tracts of land south of Lake Okeechobee for Everglades restoration. After extensive deliberation, due diligence and public input, the District's Governing Board voted on December 16, 2008, to accept a proposal to acquire more than 180,000 acres of land for $1.34 billion, contingent upon financing and affordability.
In light of changing economic conditions, the Governing Board added a clause to the December contract to allow for review of the most current financial conditions including interest rates and revenue streams before closing to verify the District's capacity to finance the purchase and still meet its existing statutory and legal obligations. With continued economic uncertainty, the two parties on April 1, 2009, agreed to work on a revised framework that would allow for the completion of the transaction in affordable steps despite the economic downturn.
Under the revised contracts, closing on the 73,000 acres would take place in 2010, within 90 days after court validation of the bonds to finance the acquisition. In the coming months, the District will continue with its ongoing public planning process to determine viable configurations for constructing a managed system of water storage and treatment to support this ecosystem restoration effort.
Benefits from the acquisition according to the Water Management District and the Governor's office would include:
Increases in water storage to reduce harmful freshwater discharges from Lake Okeechobee to Florida's coastal rivers and estuaries.
Improvements in the delivery of cleaner water to the Everglades.
Preventing tons of phosphorus from entering the Everglades.
Reducing the need for "back-pumping" water into Lake Okeechobee.
Sustainability of agriculture and green energy production.
Managing Lake Okeechobee within a more desirable ecological range.
Not to mention a big chunk of change in U.S. Sugar Corp's pocket, huge fee to attorneys and consultants with a miniscule $150 per acre lease to U.S. Sugar to continue sugar cane farming for up to 20 years, subsidized by the taxpayers.