A Very Sweet Deal

Oops! Florida Governor Charlie Crist thought he was being environmentally conscious with the announcement on June 24 that he had negotiated a deal with U S Sugar to purchase the company for a cool $1.7B, but lawmakers in Washington see things in a different light than the promise of speeding up the goals of the Comprehensive Everglades Restoration Project.

It’s difficult to deem the acquisition of over 187,000 acres, a part of the 700,00-acre Everglades Agricultural Area established in 1950 to promote farming in the area, poor judgment for what could very well assist in saving the Everglades from pollution.

The problem that surrounds Crist is the way the deal was made, without involving the US Army Corps of Engineers and the Southwest Water Management District, the agencies who were commissioned in 1948 to address the effects of major hurricanes that occurred from the 1920s to the 40s and who continue to be fundamental overseers of restoring what is called “The River of Grass”.

Among the worst of these storms was the “Okeechobee Hurricane” of 1928 which devastated south Florida as it hit landfill in Palm Beach County and swept over Lake Okeechobee, killing more than 2,500 people. In 1933, there were two hurricanes that led to the evacuation of residents in the Lake area. The “Labor Day Hurricane” in 1935 is still considered one of the most intense to have made landfall in the United States.

The 1947 “Fort Lauderdale Hurricane” passed slowly over the state from Palm Beach to Fort Myers; a 20-foot storm surge nearly compromised a dike along the south shore of Lake Okeechobee. The devastation from flooding has put lives, and agriculture interests in the surrounding areas, in danger throughout Florida’s history.

[It wasn’t until 1953 that hurricanes and tropical storms were given names.]

Florida’s legislative representatives in Washington, the Corps and SWFMD feel the secrecy of the deal between Crist’s administration and U S Sugar has already created problems and resulting delays in proceeding with current restoration plans that would have to be reworked, taking into consideration the magnitude of the deal.

The affects on economies in Hendry, Glades and Palm Beach Counties would be devastating. U S Sugar employs 1700 but a total of over 10,000 jobs would be lost in related businesses, including transportation and manufacturing, and workers in the citrus operations of U S Sugar.

Pending real estate transactions are being cancelled because of the reported negotiations in a part of the state where unemployment figures are greater than any other area in Florida and where declining home values have become further depressed.

The deal would take away over $1.6B in annual revenues, including lost local, state and federal revenues of 127M and more than 370M in labor income.

The tentative agreement would allow a minimum of six years before U S Sugar would bring an end to its annual production of 600,000 tons of sugar 20 million boxes of oranges. Still, that allows a very short-term time period to resolve the economic instabilities that would be caused by the closure of the nation’s largest sugarcane grower. Layoff announcements would be frequent.

Independent analysts have priced the worth of U S Sugar at approximately half the offered $1.75M, taking note that a private offer would never consider such an exorbitant figure. Growing environmental concerns, reduced government subsidies (costing American consumers nearly $2B a year) and greater federal regulation put the industry at odds with the same degree of profitability as in the past. Recent years of drought have also eroded production numbers.

Tariff fees on sugar products from Mexico are set to expire at year’s end and other growing sentiments to ease restrictions on sugar imports have also put the future of domestic sugar in question.

Currently, American consumers pay about twice the amount of world sugar prices.

Sugarcane accounts for 75% of worldwide sugar production.

The deal won’t be done until the fat cats sing – or not – but the state must first get an appraisal of U S Sugar holdings before negotiations can proceed. Another aspect of the tentative offer would include a lease-back arrangement for a minimum of six years. Because of this clause the public is expected to have faith that the affect on other local businesses and workforces will be less immediate, perhaps giving unemployed workers opportunities at local competitors Florida Crystals and the Sugar Cane Growers Cooperative. These two corporations also jointly own American Sugar Refining and its Domino products.

In August 2007, Florida Crystals was selected by the University of Florida as the site for a $20M grant to do research in cellulose ethanol as an alternative energy source. The company already produces enough clean energy to run its own operations plus 60,000 homes.

The eventual goal of the acquisition of the properties on the south side of Lake Okeechobee would still maintain the need of the levies, canals and the Herbert Hoover Dike, whose current repair work won’t be complete until 2013, but it would also provide the opportunity to develop a freshwater reservoir instead of tapping into the Florida Aquifer. This would take no less than ten years to come to completion. The perception of the area becoming a “flow-thru” to the Everglades is misplaced because of the inherent needs to control such large volumes of water to limit flood damage.

No doubt, Governor Crist chose to announce the agreement with U S Sugar at a time when election campaigns are about to heat up at the Republican and Democrat conventions to finalize their presidential choices. The deal also keeps his name in the news for that possible position as running mate on the Republican ticket.

Actually, Crist is making points with a couple of very intense political interests. He’s promoting offshore drilling along the Florida Coast so patriotic Americans who value the price of oil more than conservation of pristine shorelines could conceivably provide backing for his vice presidency.

Ecologists are justly enthusiastic on the prospects of cleaning up the Everglades in a shorter time span than could otherwise be expected. They may view this as an antidote to the possibility of expanding offshore oil drilling. Besides, with sugarcane lobbyists having contributed tens of millions of dollars in campaign interests, there’s another powerful ally for Governor Crist.