Palm Beach Post

Water managers OK $1.34 billion sugar deal - but seek changes

December 16, 2008

Congratulations, South Florida taxpayers: You're buying an empire of sugarcane fields south of Lake Okeechobee nearly the size of New York City.

In a landmark but costly step forward for Everglades restoration, water managers agreed this afternoon to buy nearly all of U.S. Sugar Corp.'s farmland for $1.34 billion in what amounts to the priciest conservation land purchase in Florida history.

But they did it with a caveat: Water managers slipped in a clause that would let them back out of the deal if the massive expense threatens to cripple either their budget or their ability to fulfill their core mission of water management and flood control.

U.S. Sugar Corp., which had called today the final deadline for action by the board of the South Florida Water Management District, said it welcomes the change.

In a statement, Senior Vice President Robert Coker applauded the board's 4-3 vote and called the change a "non-material modification" to the contract, which has already been approved by the company's board.

"We believe this deal serves the best strategic, long-term objectives of the company and its stockholders," Coker said.

In a separate vote, the board unanimously rejected allowing U.S. Sugar to lease 7,000 acres just south of Lake Okeechobee to a rock-mining company.

Shannon Estenoz, the board's most vocal cheerleader for the deal, said the agency cannot risk its fiscal health.

"I think you guys have convinced me that we're probably not covered. I think the biggest risk to this deal is going to be the financial picture," said Estenoz, an Everglades activist from Broward County, as she asked for a vote on an amended contract. "I think over the next four months, we need to be able to slowly and carefully and with the input of the legislature decide whether this is affordable."

Estenoz joined board Chairman Eric Buermann of Miami in voting yes on the deal, along with Stuart environmental consultant Melissa Meeker and Walt Disney executive Jerry Montgomery.

Patrick Rooney Jr. of West Palm Beach, Mike Collins of Islamorada and Charles Dauray of Lee County voted no. Paul Huck, a Coral Gables lawyer, recused himself because of his firm's involvement in a lawsuit against U.S. Sugar.

The board's vote followed a flurry of last-minute questions about appraisals, arsenic pollution and attorneys' fees. Members also debated a controversial provision that would allow U.S. Sugar to lease land back from the state at below-market rates.

Buermann likened the U.S. Sugar contract, for all its flaws, to previous monumental land deals such as the Louisiana Purchase and the U.S. acquisition of Alaska.

"This is the one opportunity, maybe, that we have," said Buermann, a lawyer and GOP activist. "This is our moment in time and our moment in history. ... Do we want to acquire the land or not?"

"Vote with your courage," he told his colleagues. "We may only know from history whether we're right or wrong."

Dauray said water managers should "call the bluff" and refuse to let U.S. Sugar force a hasty vote, even at the risk that the company would walk away.

Buermann told him: "That's not Contract 101. That's poker."

"This is a game of poker," Dauray responded.

The decision came nearly six months after Gov. Charlie Crist announced the state's intentions in June. At the time, he called the proposed purchase as "monumental as the creation of our nation's first national park."

The honeymooning governor, who appointed seven of the eight board members, had taken the extraordinary step Monday of writing a public letter to the board members urging them to approve the purchase.

"Without question, today is a historic day," said Michael Sole, secretary of the state Department of Environmental Protection, who traveled to the district's suburban West Palm Beach headquarters to convey Crist's support for the land purchase.

During this morning's final round of impassioned debate, opponents and supporters disagreed on how the history books would record this deal: As a fiscally reckless, economically ruinous bailout for U.S. Sugar? Or as a crucial leap forward for the Everglades, South Florida's water supply and the region's future economic growth?

"This isn't just about snail kites and wood storks," said Jacquie Weisblum, a lobbyist for Audubon of Florida, one of a phalanx of major environmental groups that turned out to support the contract.

"The really risky vote is a no vote," said Thomas Van Lent, a senior scientist for the Everglades Foundation. "You can't afford not to do this deal. ... A no vote is for no future at all."

But Deborah Van Sickle, senior vice president of First Bank in Clewiston, choked back tears as she warned of the "economic Hiroshima" that would strike if the deal goes forward, potentially wiping out U.S. Sugar's 1,700 jobs.

She repeated a question from her customers: "How can the government tax us and use these same tax dollars to destroy our lives?"

"We're not trying to gain anything," Van Sickle said. "We're just trying to keep our homes, our jobs and our families intact."

Even some district board members said the lack of a state economic-development initiative for the Glades has made their decision even more complicated.

"This causes me great personal concern," said board member Meeker.

Besides the Glades' plight, opponents zeroed in on a controversial provision to lease land back to U.S. Sugar at below-market rates. And some said the mammoth purchase would mean even more delay for billions of dollars worth of the district's already stalled Everglades restoration projects.

"We think all you're going to accomplish with this is to buy this land for $1.34 billion and lease it back to U.S. Sugar to farm forever, because you don't have the financial capability to do anything with it," said Gabriel Nieto, attorney for rival sugar grower Florida Crystals Corp. "You're buying land to be a landlord to U.S. Sugar at subsidized prices."

The district also has faced warnings from some state lawmakers who have hinted at political consequences if the unelected, tax-levying board members - all but one of them appointed by Crist - moved ahead with the contract.

Some supporters maintained that part of the opposition was being spun by giant farming companies that have their own motives for trying to squelch the purchase. Those include Florida Crystals, which last week filed papers in Palm Beach County circuit court to challenge the district's ability to finance the deal.

"There are a handful of politically connected companies who want to see this land acquisition killed," Everglades Foundation CEO Kirk Fordham said. "They want this land for themselves. It's that simple."

Today's decision also arrived in the teeth of a continuing economic free fall that has led to ever more dire predictions for the district's finances. The district's staff told the board Monday that the purchase would saddle the district with a deficit in 2010 of more than $88 million, about one-fifth of the agency's "core" expenditures for the year.

"Every day we get worse news about how much we're going to have to operate on," board member Collins said this morning. "It's worse today than it was yesterday."

Collins, a fishing guide who is the deal's most outspoken skeptic on the board, also complained about the take-it-or-leave-it aspect of today's deadline. U.S. Sugar had vowed not to return to the negotiating table if the board failed to approve the deal today.

Crist and environmentalists hailed the 180,000 acres rimming the southern edge of Lake Okeechobee as the "holy grail" of restoration: Farmland that once was part of the Everglades could now be used to restore the southward flow of water from Lake Okeechobee.

Supporters say restoring the flows would replenish the Everglades, enhance the region's water supply and relieve the burden on the eroded Herbert Hoover Dike that protects communities around Lake Okeechobee.

A major southern outlet for Lake O's excess also could sharply reduce the need for the harmful dumping of lake water into the St. Lucie and Caloosahatchee rivers, where the runoff has frequently ravaged marine life and triggered toxic algae blooms.

Waving a 2-foot, taxidermied snook in the air this morning, Karl Wickstrom of the Rivers Coalition said undoing the "huge damage" wreaked on marine life in the estuaries demands restoration.

"Scientists agree: There's a critical need to flow the water south," said Wickstrom, founder of Florida Sportsman magazine.

But critics say touting those benefits is deceptive, as the district would max out its credit card on the purchase, borrowing against an unprecedented 30 percent of its revenues to pay a bill that could after three decades total $2.9 billion to $3.4 billion, including interest payments.

"This land acquisition in and of itself does none of the these," Collins said of the supposed ecological and hydrological benefits. "It gives us the opportunity somewhere down the line, if all the other things line up, to accomplish these goals. But it's going to require a whole bunch of other things to line up."

Even with the yes vote today, the deal still faces considerable legal, scientific and fiscal hurdles.

The district must obtain financing, despite shuddering credit markets and the court challenge from Florida Crystals. Meanwhile, U.S. Sugar has a chance to court other offers and defend itself against a hostile takeover attempt by The Lawrence Group.

Water managers said they would be able to close on the purchase no sooner than early May - and it will most likely take place later.

The district has said it would borrow as much as $2.2 billion on Wall Street by issuing certificates that are similar to bonds. Water managers would repay the bonds using the property tax money they collect in 16 South and Central Florida counties.