Tuesday, March 09, 2010

Everglades Land Purchase Not Going According to Plan

Two years ago the state of Florida made national headlines by announcing that it would purchase the moribund U.S. Sugar company and its assets, including 187,000 acres in the Everglades, for $1.75 billion. Major environmental groups praised the move because it had potential to help restore the natural flow of the Everglades from Lake Okeechobee south to the Gulf of Mexico (for example). At the time, I worried about the financing of the plan, which was left rather vague in the initial announcements. The state of Florida has financial problems almost as severe as California's, and taking money out of the water district's budget would impede other necessary restoration projects that had already begun.

The problems were worse than I imagined. The state has since scaled back the deal, so that it will now purchase only 72,800 acres for $536 million. Meanwhile, U.S. Sugar will retain the rest, including its production facilities, and remain in operation for the foreseeable future. In fact, this deal may do more to revitalize U.S. Sugar than the Everglades.
Negotiations favored United States Sugar from the start, when the state accepted two outside firms’ appraisals of the company’s land that used figures from the height of the real estate market, according to documents.

When a “fairness opinion” commissioned by the state found that those appraisals had overvalued the land by $400 million, Florida officials orchestrated a public relations campaign to discredit the findings, internal e-mail showed. Appraisers from the Florida Department of Environmental Protection, which was required to sign off on the deal, were also cut out of the process after raising concerns, e-mail messages showed.

When it came time to decide which land to buy, state officials acknowledged that United States Sugar was, as one official put it during an interview, “pretty much in the driver’s seat.” The water district overseeing the restoration will end up with six large disconnected parcels under the current deal, including all of United States Sugar’s citrus groves.

State officials acknowledged that some of that land, which has been ravaged by canker, a plant disease, is useless for restoration.
Some elements of this case ought to be scandalous. Why were terms of the purchase so favorable to U.S. Sugar and why were key parties – like a rival company, federal agencies, and the Miccosukee Indian tribe – shut out from the process? Part of the reason is that U.S. Sugar has close ties to Charlie Crist:
United States Sugar had an unusually powerful advocate in Gunster, a West Palm Beach law firm that had represented it since 1990. Gunster’s chairman, George LeMieux, was Governor Crist’s chief of staff when the deal was first conceived. Mr. LeMieux, who began working at the law firm in 1994, returned to it in January 2008 as the deal was being renegotiated.

He and Mr. Crist are confidants, and the governor referred to Mr. LeMieux as the “maestro” of his 2006 election victory. When a United States Senate seat was vacated in 2009, Mr. Crist appointed Mr. LeMieux to fill it. The governor is now campaigning for that post and has often described the United States Sugar purchase as a crowning achievement of his administration.
While LeMieux claims to have recused himself from the deal, his close ties with Crist would have given U.S. Sugar an inside edge on negotiations. Even if LeMieux did not talk to Crist about the deal, he did advise U.S. Sugar during the process.

Another reason the terms were so favorable is that Crist's negotiators chose to accept the land appraisal most favorable to U.S. Sugar, even though other independent appraisers and the state's own environmental agency thought that the land was overvalued, even at the time. Since then the land's market value has declined due to the crash in the real estate market. According to some estimates, the state agreed to pay $7,000 an acre for land that is now worth $4,000 per acre. Much of the remaining land in the deal is heavily contaminated with copper, DDT, selenium, and arsenic. Cleaning up that mess will cost even more. Some areas to be purchased by the state, such as the company's citrus groves, are too elevated and dry to be suitable for wetlands restoration.

This would be just another corrupt land deal if it were for for its potential to set back restoration efforts in the Everglades. Already completion of a giant reservoir costing $800 million – a key piece in the system of canals and reservoirs to restore the natural flow – has been stalled indefinitely because of the purchase. The cancellation of construction contracts cost the state $25 million in fines, on top of the $282 million it had already spent on the project. Whether other projects will need to be canceled remains to be seen. The U.S. Sugar deal may still turn out to be worthwhile, but for now it is an obstacle to completing the original restoration plan.