Florida Supreme Court Ruling on U.S. Sugar Deal Brings Nuanced Victories
Around the State
A little more than a month after the nearly $200 million deal between Gov. Charlie Crist and U.S. Sugar Corp. closed, the tooth-and-nail battle the deal spawned may be in its final throes.
The Florida Supreme Court upheld a lower court's ruling Thursday that said the South Florida Water Management District could use certificates of participation (COPs), a type of bond, to purchase land from U.S. Sugar. But the high court overturned part of the ruling that would have allowed the district to finance an option to buy much more land from the sugar giant using COPs.
Over the past 2 1/2 years, the Miccosukee Tribe of Indians and the state's other two large sugar companies -- Florida Crystals Corp. and the Sugar Cane Growers Cooperative of Florida -- have been fighting against the deal saying it took money away from restoration projects already on the books. Several citizens, many of whom were organized as part of the tea party movement, also vocalized their opposition, calling the deal a corporate bailout at taxpayers' expense.
"We have over 11 percent unemployment," said Gaston Cantens, a senior executive at Florida Crystals Corp. "Instead of building projects and creating jobs, the governor is going out and spending money on land he doesn't even know what we're going to do with."
In mid-October, the deal for the district to pay more than $197 million for nearly 27,000 acres of land was finalized and the money transferred. But that deal, paid in full with all the district's cash reserves, was not the same deal the Supreme Court ruled on. SFWMD and U.S. Sugar wrangled last-minute negotiations to avoid COPs altogether. But that final deal was also significantly hacked down from the agreement U.S. Sugar originally wanted.
In the summer of 2008, Gov. Charlie Crist announced a sweeping $1.75 billion deal to buy out U.S. Sugar in the name of Everglades restoration -- $2.2 billion with interest and fees added. By April 2009, the deal had been downsized. With the worsening recession, the district chopped it to $650 million to purchase nearly 73,000 acres.
Finally, the two parties settled on a cash-only agreement to buy 27,000 acres.
Dexter Lehtinen, an individual plaintiff in the case against SFWMD, and former lead Miccosukee attorney, sees this as a victory.
"Two-and-a-half years ago, they were going for $2.2 billion in the bond market. But the lawsuits slowed them down, got them into a little more fiscal responsibility," said Lehtinen. "I'm hopeful we will, in fact, have won this."
A "win" for Lehtinen is somewhat nuanced. While he's happy the "cronyism bailout" is a lot smaller than it was, the district still has an option to buy roughly 46,000 acres from U.S. Sugar. Lehtinen says preventing that from happening would make it even better.
Now that SFWMD has spent all its cash, many doubt that they'll be able to take the option to buy the remaining land from U.S. Sugar, because they are still required to finance and build restoration projects.
"The ruling at the end of the day is somewhat irrelevant at this point," said Cantens. "They have no money to build any projects.
"They had one particular deal in mind, now the deal is much smaller." Cantens continued, "The question is whether they can go to the market and issue bonds to buy more land."
While Thursday's Supreme Court decision may have little effect on this particular deal, it could have a great impact on similar deals in the future.
In a response to the decision, Justice J. Lewis expressed serious concern at the loss of voter input:
"The Florida Constitution, as established by Florida citizens, contains highly questionable aspects, such as the creation of an excess land 'real property slush fund' referred to in the final judgment ... as 'valuable for future land swaps.'
"Additionally, the substance of this bond issue falls within article VII, section 12 of the Florida Constitution, which requires the approval of the voters in a referendum."
Opponents of the deal say SFWMD sidestepped the constitutional requirement for voter approval by creating a nonprofit leasing corporation to handle the financing. That leasing corporation, set up by SFWMD board members, could then do things the board could not, like set up long-term financing options without the public getting a vote.
"I absolutely agree with the court that using taxpayer money for an option serves no public purpose," said Sen. Paula Dockery, R-Lakeland. "[But] what I particularly enjoyed was how Lewis concurred with the results, but blasted his colleagues for issuing long-term debt without the voter-required approval."
Dockery and Lewis weren't the only ones concerned about the precedent this ruling may set for circumventing the constitutionally required voter approval for long-term debt. Lehtinen also says it puts future contracts in dangerous territory.
"The court seems to have advocated its responsibility as an independent judicial review and has instead granted carte blanche to agencies to merely claim they are acting in the public interest without any responsibility to demonstrate what they are actually going to do," he said.
While the Florida Supreme Court reversed the portion of the lower court's decision dealing with a $50 million option to buy U.S. Sugar land in the future, it sided with the lower court on the majority of the issues.
"The issue we were trying to get in front of the court is the economic issue of the deal," said Cantens. "They basically said, 'it's not our position to analyze it.'"
While many have criticized the deal as a lemon for taxpayers, the high court determined "economic feasibility is outside of its scope of review."
"The court acknowledged that the Tribe and [Florida Crystals] had made strong arguments that the project is economically impossible," read the decision. "The court also questioned the wisdom of seeking this large amount of COPs during current economic times."
U.S. Sugar praised the Supreme Court ruling as a victory.
“The Florida Supreme Court has ruled favorably and unanimously on the South Florida Water Management District’s legal authority to finance the acquisition of U.S. Sugar property for restoration,” said Judy Sanchez, director of corporate communications.
“This decision also affirmed once and for all that the acquisition of U.S. Sugar lands fulfills a valid and extremely important public purpose in providing land for water storage and treatment to benefit the Everglades ecosystem and the coastal estuaries,” she said.
Dockery laughed as she read Sanchez's statement. "The comments by the proponents were an incredibly good spin -- that they had won," she said.
Ultimately, the balance of Crist's U.S. Sugar deal may be stopped in its tracks. Incoming Gov. Rick Scott, who openly has shown contempt for the deal, will have the power to appoint new board members. Opponents say the sweeping change in the political climate since Nov. 2 is also working against the deal.
"The state Senate will not confirm anyone who went down this fiscally irresponsible road," said Lehtinen.
Cantens also agreed it was a political issue rather than a judicial one.
"It was one of the governor's only initiatives in the last four years, and the voters have rejected him so resoundingly," he said. "That's a referendum in and of itself."
While the high court has ruled that $50 million for the option to buy land has no purpose, legal experts say it is not clear what effect it will have on the future effort to buy the rest of the land.
Lane Wright can be reached at email@example.com or at (561) 247-1063.