The price isn't right in farm buyout fight

Five Zellwood farmers have filed a lawsuit to force the state to buy them out, and if a judge rules in their favor it could cost taxpayers $11 million more than the $91 million already set aside for the purchase.

The suit, filed Sept. 4 in Florida Circuit Court by Long Farms, Robert Potter and Sons, Grinnell Farm, Hickerson Flower and Living Carpet Sod & Nursery, asks for a judgment interpreting the buyout law in their favor. The farmers also have asked Friends of Lake Apopka, the citizens group that has worked to clean up the lake, to back their suit.

These developments illuminate an end game as the farmers seek to squeeze the state and the St. Johns River Water Management District tries to fulfill its mandate at the lowest cost. So far, only the area's two largest farms -- the 3,800 acre Duda and the 5,000 acre Zellwin farms -- have agreed to sell. The buyout law sets a Sept. 30 deadline; by late July it was clear that many of the 12 remaining farmers in the Zellwood Drainage District were asking for more money than St. John's was offering. The difference hinges on the method of the farms' appraisals.

Duda and Zellwin respectively accepted about $5,000 and $6,000 per acre, including equipment. These values were based on appraisals of the assets of each farm: the land, tractors, trucks, and vegetable processing facilities and buildings. The remaining buyout money would yield a payout of about $6,600 per acre for the remaining farms, but the farmers are seeking about $8,800.

The smaller farmers say their farms are worth much more than the sum of their parts. Their asking prices include the value of the business itself, sometimes called "goodwill." This value is often reduced to a formula which multiplies the net profits or income in a given year by five or more years. Many companies, including newspapers, use this method to put a price on their business.

"We're certainly taking this complaint seriously," says Tom Maurer, a lawyer handling negotiations on behalf of the St. Johns district. "But we don't think it has any merit. There is a finite amount of money on the government side."

At the base of the farmers' argument is an extraordinary conundrum. In part, the income generated by these farms is attributable to their ability to pollute freely. Indeed, the farmers' contention that they cannot operate profitably inside the law is what spurred the buyout. Yet the income method of determining value presupposes continued pollution. In effect, the farmers are asking to be paid a premium for the efficiencies they were able to generate by polluting the lake.

The farmer's request for declaratory judgment also aims to eliminate the St. Johns District's best bargaining chip: the threat of a partial buyout that would strand the remaining farmers in an unprofitable situation -- squeezed by environmental regulations on one side and reduced economies of scale on the other.

At the Friends of Lake Apopka (FOLA) meeting on Sept. 4, the directors of the group declined to take a position on the farmers' request that FOLA intervene. "We've always said that it's not our place to insert ourselves in the negotiations," said FOLA President Jim Thomas. If FOLA intervenes on the side of the farmers, it would mean switching sides in the buyout debate. FOLA has backed St. Johns generally in the battle that led to the buyout, and Maurer resigned from FOLA's board only last Friday as the potential for conflict of interest loomed.

The group decided to encourage mediation at its meeting with St. Johns officials on Sept. 10 (which St. Johns has opposed), and study the legal proposal pending a vote later this week.


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