Finding a solution to Cone Ranch riddle
December 28, 2009
The effort to preserve Cone Ranch has become a muddled debate about bond covenants, fair-market value and the transfer of assets from one county agency to another.
But this much has become clear: If Hillsborough commissioners want, they can make the land a wilderness park - and at a reasonable price, too.
The 13,000-acre parcel of pastures and woodlands in northeast Hillsborough, once slated to become a drinking-water wellfield, is owned by the county's Water Resource Services Department. It's not open to the public.
Earlier this year a group of investors sought to market the ranch as wooded estates to a few wealthy landowners. They promised to preserve the land, but the proposal triggered a campaign by conservationists to make the ranch a park.
But this was not as simple as transferring the land from the utility to the parks department. County officials maintain the water agency is obligated to sell the property at a price that reflects its "highest and most profitable use," which could be more than $40 million, more than the county could afford under its Environmental Lands Acquisition and Preservation Program.
The restricting covenants are found in the bond issue that has funded the utility's expansion and maintenance, including the acquisition of Cone Ranch. The debt is paid back by utility ratepayers, not with tax dollars.
The fair-market restriction applies to the county itself, says Assistant County Administrator Mike Merrill. Giving the land - a valuable asset - to another department would violate the agreement with bondholders.
But conservationists, working rigorously on the issue, reviewed the bond language and found no specific prohibition of a transfer.
Merrill agrees the language is unclear. But bond lawyers have consistently found the fair-market requirement applies. Merrill is the architect of Hillsborough's outstanding bond ratings, which lower the county's interest rates. We trust his expertise.
Still, since the language is fuzzy, the county could seek a court judgment on the matter. If the fair-market provision does not apply, ELAPP would then only have to pay the "book" value of the tract, the roughly $11 million the county paid for the land.
Merrill says there is a risk that going to court could prompt a bondholder lawsuit, but that seems unlikely, given the ranch's scant impact on bond payments.
But if the county fails in such a court case, Merrill offers an appealing alternative.
The county will issue new utility bonds next year. It could include language in the bond issue that after the portion of the debt that includes Cone Ranch is paid off in 2015, the property would be excluded from the fair-market covenant. Making this clear to new bondholders would free the county from any liability.
The county could then buy the land for book value.
Until that purchase, the utility could lease the land - as it does now to a cattle operation - to the parks department. Merrill says such a lease, unlike the sale, could be given at less than market value.
The bond lawyers are going to need to sort this out. And the conservationists are going to have to remain eagle-eyed. But it appears that commissioners - one way or another - can commit to making Cone Ranch a wilderness park.
They should do so.
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