Ex-congressman got millions in land deal

by: Christine Stapleton Updated:

Florida Agriculture Commissioner Adam Putnam

Adam Putnam — former congressman, current commissioner of agriculture and widely viewed as the future of Florida politics — became a very rich man in 2005 when taxpayers spent $25.5 million on 2,042 acres of his family’s ranch that had been valued at $5.5 million a year earlier, The Palm Beach Post has learned.

The South Florida Water Management District needed only 600 acres of the ranch in Highlands County for environmental purposes. But it bought all 2,042 acres and did it in a way that arranged for the Putnams a lucrative tax break, while allowing the family to continue grazing cattle on the land rent-free until the district needed the land. After paying the family’s attorney $3.9 million in legal fees, the total deal cost taxpayers nearly $30 million.

Seven years later the district has used only 150 acres and has no plans for the rest. The Putnam cattle graze on, courtesy of Florida taxpayers.

Putnam, a congressman at the time of the deal, said he was careful to not involve himself in it to avoid the appearance of a conflict of interest. Congressional ethics rules do not bar such real estate transactions as long as Putnam did not use his position to sweeten the deal. Records show Putnam was not on any committees that would have allowed him to do so. He said his older brother Will negotiated the deal for the family.

“I can’t speak to the details of the transaction because I deliberately stayed away,” Adam Putnam said. His financial disclosure reports show his income from the family business jumped from under $100,000 in 2004 to between $1 million and $5 million after the deal. “If there’s something else I could have done to further remove myself, I don’t know what it was,” he said.

Will Putnam denied any favoritism was shown the Putnams. He merely negotiated the best deal possible for land that was in the family for generations, he said. He attributed the family’s good fortune to a rising tide of real estate values.

“Nobody could have foreseen what was going on — we were fortunate,” he said. “Adam never could have struck this good a deal. It was the market.”

The $29.4 million deal was part of nearly $2 billion the district spent over the past 20 years on land for its restoration efforts, including the Everglades.

As the district negotiated deals, its inspector general repeatedly criticized its acquisition strategies. As early as 2001, Inspector General Allen Vann warned the district that if it paid more than the land was worth, the U.S. Army Corps of Engineers might not award full credit for the purchase. The Everglades restoration effort is a partnership that requires the state and federal government to split costs. To get credit for its spending, the district must submit expenses to the Corps for review.

“The District’s appraisal process lacks essential controls that resulted in a number of potentially questionable appraisals that federal partners have questioned and may not approve for project credit or reimbursement,” Vann wrote in a November 2003 report.

The audit also recommended appraisals be competitively bid and that the independence of the district’s own appraisers be protected by separating the appraisal section from the land acquisitions section. In other words, the people orchestrating the deals shouldn’t be able to influence appraisals.

Vann also criticized the district for letting landowners in the deals have a say in the district’s appraiser selections. All of those criticisms were ignored during the Putnam negotiations.

Vann, currently audit director at Florida International University, stood by his reports when contacted in April but declined further comment. Ruth Clements, the district’s land acquisitions manager who negotiated the Putnam deal, retired on May 22 and declined an interview.

Since the 1920s the Putnam family grazed cattle on land it owned between Lake Istokpoga and the Kissimmee River — about 25 miles northwest of Lake Okeechobee. Adam Putnam, a fifth-generation Floridian, grew up on the family farm. He participated in the 4-H Club and worked beside his grandfather, Dudley Adelbert Putnam, a member of the Florida Agriculture Hall of Fame.

The Putnams have been widely known in Florida’s agriculture industry for decades. Adam Putnam was elected to the Florida House of Representatives in 1996, rising to chair the body’s Agriculture Committee. He grabbed the national limelight in 2001 when, at 26, he became the youngest member of Congress.

In February 2006 he became chairman of the Republican Policy Committee. By the end of that year he was elected head of the Republican Conference, the third-ranking minority leadership position. In 2010, Florida voters elected Putnam the state commissioner of agriculture.

For years the district tried to buy the Putnams’ land to help restore the natural flow of the Kissimmee River. District engineers determined that about 600 acres were needed for the project.

But with land values soaring and the family unwilling to sell only 600 acres, Clements decided to purchase all 2,042 acres, hoping to trade excess land to adjacent property owners Lykes Bros. in exchange for land better situated for restoration projects. But no deal with Lykes Bros. ever took place.

An April 2004 appraisal valued the Putnam land at $5.5 million. A month later, the district offered that amount. The family rejected the offer.

In November 2004, the district was poised to seek another appraisal. This time, though — despite the inspector general’s criticisms a year earlier — the Putnams were consulted in the selection of appraisers.

The Putnams’ attorney, Prineet Sharma, strongly suggested the district hire two specific appraisers. Emails obtained by The Post show Clements also participated in the appraiser selection discussions — another practice criticized earlier by the district inspector general.

Of the three appraisers invited to bid on the job, Clements suggested Phil Holden, a Palm Beach Gardens appraiser with more than 30 years’ experience, who frequently appraised land for the district.

The Putnams agreed. However, in a single-spaced, full-page email, the Putnams’ attorney insisted upon the district using Richard Kluza as the other appraiser. Kluza had submitted the highest bid — about $15,000 more than Holden.

“If we can find a way to keep Mr. Kluza involved, I am confident it will help during the negotiation process,” Sharma wrote. “When considering all the factors in play, and also the importance of getting this process moving, I hope that we can come to this agreement rather than starting over from square one.”

After learning that Kluza was unavailable, the parties agreed on another appraiser.

In a written response to questions about the appraisal selection process, the district said a landowner is free to select any appraiser to complete a contrary appraisal and, under Florida law, the district must pay. The contrary appraisals are almost always substantially higher than the district-approved appraiser, the district said.

Since the prior appraisal in April 2004, when the land was valued at $5.5 million, there had been no improvements to the property and most of the land within a 10-mile radius remained agricultural. Commercial development in the remote, rural area was “virtually non-existent,” according to one of the new appraisal reports.

Still, the land’s appraised value had soared. Holden’s appraisal, dated March 2005 — the height of the real estate boom — came in at $17.4 million. Two months later, with land values around the state continuing to rise and negotiations under way, Clements sought an update from Holden.

“In that time period, numbers were useful for about three months,” Holden said in a recent interview, about using sales of similar properties to determine the value of land during the real estate boom. “Sales that were a year old were long past useful.”

In a letter to the district’s chief appraiser in June 2005, Holden estimated that land values were rising by 3 percent per month. The following month, Holden delivered his updated value of the Putnam land: $19.4 million.

But by then a deal had already been struck. The district would pay $25.5 million, or about $12,500 per acre.

In response to written questions posed by The Post, the district said the price was justified. In such a rapidly increasing market, prolonged negotiations and litigation “often resulted in higher land values and, ultimately, higher acquisition costs to the taxpayers.” In other words, pay more to cut a deal quickly or risk paying even more if talks dragged on.

The district, in justifying the price, said that the $12,500 per acre was below the average price of $13,946 that it paid for all the other land it bought that year. However, the $13,946 reflects all types of land — from a several hundred-acre park to thousands of acres of ranchland — from Orlando to Key West.

To the district’s governing board in 2005, Clements justified paying top dollar as a way to avoid costly condemnation lawsuits. Those lawsuits enable the government to take private property for public use under a legal theory called eminent domain. The government must pay “just compensation,” the law says.

In the only two condemnation cases that the district took to trial, both in 2003, juries had awarded “just compensation” far above the appraised value. After that, the district threatened condemnation in more than 200 cases but settled without a trial.

Not wanting to take the Putnam family to trial, the district arranged a “friendly condemnation” lawsuit, which ended with the Putnams getting 30 percent above the appraised value and other perks. Among them: a rent-free lease without an expiration date; and a tax break available to landowners under threat of condemnation, which gives them more time to buy new land to offset taxes that otherwise would be due on the sale of the old land.

The friendly condemnation also assured the Putnams’ attorney, Sharma, $3.9 million in attorney fees, calculated under Florida eminent domain laws. The friendly condemnation worked like this: The district filed the lawsuit on July 14, 2005, which left no doubt that the Putnams had been threatened with condemnation and qualified for the tax break. The next day, the district settled the suit and the deal was done.

“Do you think any reporters will pick up on the settlement?” Sharma wrote in an email to Clements several days before the friendly condemnation was filed. “The Putnam’s (sic) are pretty private people and I would like to give them a heads up if you think something might be in the paper.”

“No one has inquired on this end,” Clements responded. “Doubt if this will garner much attention.”

Will Putnam said the potential for the district to flood the land for water storage and restoration was the reason the family agreed to sell all 2,042 acres. The price was comparable to other land sales in the area, he said, adding that much of the $25.5 million was reinvested in their cattle and citrus operations or used to purchase more land.

And the cows graze on.

“It was an important part of the agreement for us,” Will Putnam said. “It was not a good time to sell cows.”