Deciphering Hillsborough's Cone Ranch fiction
January 10, 2010
Hillsborough County is poised to spend several hundred thousand dollars of taxpayers' money to obtain costly appraisals to sell to itself property that it already owns.
The water department insists that the county's Environmental Lands Acquisition and Protection Program (ELAPP) must pay a market price for Cone Ranch. Yet Hillsborough County already owns Cone Ranch, and the transaction is simply a transfer from the books of one county department to another.
The water department is required to operate as a business enterprise in a closed accounting system. This means it must generate its own revenue and pay its own expenses from the services it sells to its customers. On the other hand, ELAPP is funded by taxpayers through property tax revenue. Thus, when ELAPP acquires Cone Ranch from the water department, it will use taxpayers' money to do so. The more ELAPP has to pay the water department to acquire Cone Ranch, the more debt will be absorbed by taxpayers.
In effect, taxpayers will be footing the bill for expensive water department projects that are supposed to be paid for by revenues from the sale of utility services.
County officials and bond attorneys argue that the water department's utility bond covenants require any sale or disposition of Cone Ranch to be in an arm's length transaction, for fair market value, based on highest and best use of the land, which can only be determined by comparing several appraisals that would cost around $200,000 each.
But this is not an arms' length sale because Hillsborough County already owns the property. This is a transfer of an asset and debt from the books of one county department to the books of another. In fact, this is not the first time the county has made such a transfer involving Cone Ranch. In 1991 the county transferred Cone Ranch from a general real estate asset to a water department asset and replaced the corresponding tax revenue bond debt with utility revenue bond debt. No expensive appraisals or market price were required to make the transfer at that time.
I have studied the water department's bond covenants, and they contain no provision requiring costly appraisals or payment of a market price for Cone Ranch. I have met with Utilities and Commerce Administrator Mike Merrill and have spoken with bond attorney Mark-David Adams; but neither was able to show me bond covenant language requiring a market price for disposition of water department assets. The covenants require only that Hillsborough County will not sell or dispose of water utility "system" property having a fair market value that exceeds $500,000 unless a procedure is followed to determine that the property is no longer "necessary, useful, or profitable" in the operations of the system. No costly appraisals are necessary to determine the market value of the Cone Ranch property is more than $500,000.
The county's bond attorneys do not even seem to agree on interpretation of the bond covenant language. For example, a 1993 Holland & Knight law firm opinion says a lease of the property to a cattle rancher would not trigger the bond covenant provision. However, a 2008 Edwards Angell Palmer & Dodge opinion says lease of the property to Lowry Park Zoological Society for less than market value would trigger the bond covenant provision. Moreover, it is not even clear that Cone Ranch is a property of the water utility "system," because the bond covenants define that term to include only properties used to supply, distribute and treat water and wastewater. Cone Ranch is not used for those purposes.
This fiction boils down to a scheme to raise money for water department projects by tapping the equity in Cone Ranch and placing the debt on the backs of taxpayers. Instead of allowing the water department to exploit the public trust in this way, the county should follow its own 1991 precedent and simply transfer Cone Ranch to ELAPP at book value.
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