Agenda 01/27/2009 Item #10I
Patricia L. Morgan
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bodinejudi [JudiBodine@colliergovnet]
Monday, January 26,200912:42 PM
Klatzkow, Jeff; Patricia L. Morgan; Yon kosky, John
Brock, Mary
Executive Summary Replacement for Item 10-1
Executive Summary Item 10-1 replacement.pdf
This is a replacement executive summary for Add On Item 101.
All backup material remains the same.
Judi
EXECUTIVE SUMMARY
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Request that the Board of County Commissioners provide direction with respect to whether the County should
close on the Pepper Ranch transaction, In light of the proposed easement throngh the Pepper Ranch and whether
the County should reduce the purchase price to reflect the bond carrying costs and the reduction In valne to the
Pepper Ranch due to the access.
OBJECTIVE: To obtain direction from the Board of County Commissioners ("Board") with respect to whether the
County should close on the Pepper Ranch transaction, in light of the proposed easement through the Pepper Ranch and
whether the County should reduce the purchase price to reflect the bond carrying costs and the reduction in value to the
Pepper Ranch due to the access.
CONSIDERATIONS: On November 18, 2008, the Board approved an Agreement for the Sale and Purchase of the
Pepper Ranch in the sum of $32,525,080.02. The Agrecment provided that closing for the transaction was to occur on or
before December 31, 2008, and a closing date was scheduled for Monday, December 29, 2008. On or about
December 24, 2008, the County Attorney was advised by staff that an issue had arisen with respect to this transaction. A
letter dated December 17, 2008, from Barron Collier Investments Ltd. ("Barron Collier"), had been forwarded to the
County. The letter states in relevant part as follows:
"Over the last several years, we have discussed Collier Companies' access over the Pepper Ranch property to
Barron Collier lands. Barron Collier Companies and their tenants have used the access road that runs though
the Pepper Ranch property for access to their lands. This road is the only access to the Barron Collier
property west of Lake Trafford. We requested that the owner of the property specifically grant Barron Collier
an easement for ingress and egress. At present this has not been formally recorded.
Now that the owner is in negotiations with Collier County to sell the Pepper Ranch property, it is critical that
Barron Collier's prescriptive and statutory rights over the Pepper Ranch road be fonnally recognized in the
Public Records. Our hope is that we can quickly resolve this matter by the recording of an access easement
without the need for Barron Collier to take any action to involve Collier County. Please understand that the
road in question is Barron Collier's only practicable access to its lands and, therefore, of vital importance. If
this issue cannot be resolved quickly, Barron Collier will need to seek to protect its rights to access over the
road and will need to make sure the County is formally noticed regarding this issue. I hope that this will not
be necessary. Please let me know by December 24, 2008, if the owner of the Property will agree to grant
Barron Collier Companies an easement."
By this letter, Barron Collier claimed both an unrecorded prescriptive easement and a statutory right of necessity over the
Pepper Ranch. A prescriptive easement is a right to use another person's property that is acquired by use without
permission of the owner over a period of at least 20 years, similar to acquiring property through "squatter's rights." A
statutory right of necessity (Florida Statutes Sec. 704.04) occurs when land is considered "landlocked," requiring access
through another's land, the location and type of which access a Court will determine and then fix compensation for (the
process is akin to a private cause of action for eminent domain).
The Jetter also claimed that the owners of the Pepper Ranch were aware of this issue. This issue was never disclosed to
the County.
The County Attorney, along with Alex Sulecki, met with the Owner's representatives on Monday, December 29th. The
result of this meeting was that the County requested a letter to be signed by Barron Collier withdrawing their claim as a
precondition to the County closing on this transaction, which closing could occur up to December 31, 2008. The owner
and Barron Collier were unable to resolve the issue, and the parties mutually agreed that (1) the closing would not occur;
(2) the issue would be brought to the Board for direction; and (3) the issue would be presented to the Conservation Collier
Land Acquisition Committee (CCLAAC), which was scheduled to meet January 12, 2009, for review and
recommendation for the Board. Both the owner and Barron Collier were asked to attend both meetings to answer
questions. But for this last minute issue, the County was ready, willing and able to close on this transaction.
The following approaches were considered by the CCLAAC on January 12,2009 (Agenda item IV.E.) and by the Board
on January 13, 2009 (Agenda Item 12.A.).
(1) Proceed with the transaction as is, and deal with Barron Collier if and when they assert the issue.
(2) Proceed with the transaction, however, as a precondition to closing, require the Owner to provide the County with a
defend and hold harmless agreement, in a form acceptable to the County Attorney, which would indemnify the
County from all costs associated with any claim brought by Barron Collier. This approach would eliminate any
litigation costs to the County should Barron Collier elect to enforce its claimed rights, but would be otherwise
ineffective if a Court ultimately held that Barron Collier was entitled to some form of access over the Ranch. If the
Court concluded that Barron Collier had a prescriptive easement over the Ranch, the County would receive no
compensation. If a Court were to conclude that Barron Collier was entitled to a statutory right of necessity (Florida
Statutes Sec. 704.04) because their property is otherwise landlocked, the Court would award the County fair market
compensation. To help insure against a decision that Barron Collier had a prescriptive easement over the Ranch, as
a further precondition to closing, the County could have an additional sum placed in escrow, with all costs of
escrow paid by the Owner, in an amount reflecting the estimated fair market value for the prescriptive easement, as
determined by an appraisal.
(3) Before proceeding with closing, attempt to eliminate the issue by directing staff to enter into discussions with both
the Owner and Barron Collier, bringing back any proposed resolution to the Board. One approach for these
discussions would be Barron CoIlier agreeing to purchase an access easement in the estimated fair market value for
such an easement, as determined by an appraisal, and reducing the purchase price accordingly. Since these are
conservation lands, any access for Barron Collier would have to be expressly limited with respect to type and
frequency, with Barron Collier agreeing on behalf of themselves and their successors not to seek expansion of such
access rights. Discussions of this nature are currently being held, with the hope that a proposed resolution will be
presented to the Board.
(4) Direct the County Attorney to exercise the County's legal rights and rescind the transaction. From a litigation
standpoint, if the owner was in fact aware of Barron Collier's access claim and did not disclose this claim during the
negotiations, and if this access issue is considered to be material to the transaction, the County would have a claim
against the Owner for the damages it incurred, and continues to incur, with respect to this transaction. With respect
to any claim that the Owner might have, paragraph 11.02 of the Agreement provides for the County paying
$100,000 in liquidated damages should it fail to close on the transaction as Owner's sole remedy.
The recommendation of the CCLAAC was to prefer option #3. However, if#3 were not possible, to proceed with option
#2, adding indemnification for the County, involvement of the County in all negotiations, no utilities in any easement and
no hardening or paving of the trail. On January 13, 2009, the Board elected to pursue option #3, making sure that
whatever easement is granted did not diminish the County's ability to obtain the maximum number of Panther Habitat
Units otherwise available from United States Fish and Wildlife Services, and to address a reimbursement to the County of
carrying costs for the transaction incurred by the County from the original scheduled date of closing, December 29, 2008,
to the date of actual closing. Parties were to conduct negotiations with all possible speed, with a goal of returning to the
Board with a resolution to the issue in 2 weeks. To that end, on January 22, 2009, Barron CoIlier, Lake Trafford Ranch
and the County participated in mediation at no cost to the County. As a result of the mediation, the attached easement is
being proposed to Collier County which meets the Board's requirements with the exception of a reduction in purchase
price for the access easement.
Real Property Management staff estimates the value of a 30-foot wide access easement to be approximately $225,000 and
estimates the value of an easement over the existing trail to be approximately $ 168,750. However, the existing trail is
physical 15 feet wide in some areas and 30 feet wide in others. The Board will need to determine what size easement is
acceptable.
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This access easement contains language that was previously requested by United States Fish and Wildlife Services
("USFWS") so as not to diminish the COImty's ability to obtain the maximum number of Panther Habitat Units. On
January 23, 2009, USFWS was provided a copy of the proposed easement and responded that, as written, the easement is
expected to result in "little loss of panther habitat value." In order to quantify the loss and provide a more
definite opinion, USFWS will need to review the specifics of the road location and existing condition. Staff will
update the Board at the January 27, 2009 meeting as to any further USFWS opinion.
Staff recommends that the Board close on the transaction after an easement over the existing trail or a 30 foot wide
easement is properly executed and recorded in the public records. If this recommendation is followed, it is requested that
the Board decide whether the purchase price should be reduced for the diminution in value of the property due to the
access easement. If the County ultimately closes, the County has not incurred an additional carrying costs other that it
otherwise would have if the transaction closed on December 29, 2008. The County's in house appraiser has estimated that
the value of the Pepper Ranch would be reduced by $225,000 if the proposed access easement was recorded.
FISCAL IMPACT: On November 21, 2008, Collier County closed on $13,244,204 in Bank Bonds under an agreement
with Sun Trust Equipment and Financing Lease Corp. This financing was pursuant to Board of County Commission
action on November 18, 2008 (Agenda Item 1 OF), and was implemented as a means to purchase the Pepper Ranch
property (Companion Agenda Item IOE). This Bond, known as the Series 2008 Bond, is scheduled to be repaid in annual
principal and biannual interest payments through January 2013.
In order to procure this financing the County incurred approximately $44,204 in fees and closing costs; the total cost of
interest payments to be made throughout the life of the debt is $1,462,419.53 ($50,428 is the average monthly interest
accrual). In order to acquire an interest rate of 4.138%, considering the relatively short life of the Bond, the County
agreed to the inclusion of certain pre-payment penalties, described below, within the Bond Resolution.
With the unanticipated postponement of this property acquisition and considering language within the Bond agreement,
financial implications include:
1. Should the sale not occur and CoJlier County decide to pre-pay the $13,244,204 Bond, the County would be
responsible for approximately $397,300 in prepayment penalties representing 3% of the total financing. In
addition, the County would be responsible for any unpaid interest accrued to the date of pre-payment.
2. The County could opt to use the funds in connection with other Conservation Collier land purchases and not incur
pre-payment penalty charges. Under this option the funds are available for current spending and interest
payments would become due and paid over the life of the indebtedness.
3. Should the County decide to spend the Bond proceeds on other land purchases, there are arbitrage requirements
regarding the timeliness of expending these funds. Other land purchases using the Bond proceeds would require
an amendment to the current financing resolution.
LEGAL CONSIDERATIONS: Dependant upon Board direction. This is a non-quasi judicial matter requiring simple
majority vote. JAK
GROWTH MANAGEMENT IMPACT: None.
RECOMMENDATION: That the Board of County Commissioners provides direction with respect to whether the
County should close on the Pepper Ranch transaction, in light of the proposed 30 foot wide access easement through the
Pepper Ranch and whether the County should reduce the purchase price to reflect the bond carrying costs and the
reduction in value to the Pepper Ranch due to the access.
Prepared Bv: Jeffrey A. Klatzkow, County Attorney
Jennifer B. White, Assistant County Attorney
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Alex Sulecki, Sr. Environmental Specialist.
Fiscal Imnact Prenared Bv: John Y onkosky, Director, Office ofManagernent and Budget
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