Wednesday, April 9, 2008

Sterling should offer to buy Wekepeke at Nestle's price

There is a solution to the brewing dispute over the Wekepeke parcel in Clinton: Sterling should buy the parcel for exactly the same terms that Nestle proposed.

It could be a win-win for everyone: Clinton gets the same payments that they would receive if they contract with Nestle, Sterling gets the land, and no one gets to spend months and months in court.

OK, maybe not a win-win for everyone. Nestle wouldn’t get anything, but they can probably afford the status quo.

Nestle’s proposal would pay Clinton approximately $280,000 per year for 30 years. It also includes an additional $100,000 in year one for dam repairs and $20,000 in years 2-6 for dam maintenance. Over the course of the contract, Nestle would pay Clinton $8.6 million. That’s apparently the value of the land to Clinton over the next 30 years.

Sterling should offer to purchase the land from Clinton for $8.6 million, with the payments spread out over 30 years. Essentially, Clinton would hold a 30-year zero-interest mortgage on the land, with Sterling making payments to Clinton. Sterling should propose to make those payments along the same schedule at Nestle would:
$380,000 in year 1
$300,000 in years 2-6
$280,000 in years 7-30
But the land also comes with a liability. Clinton is required by state law to repair and maintain the reservoirs’ dams. The cost of repairing those dams is estimated at $1.5 million. Under the simple proposal above, Clinton would still be responsible for dam repair as they are under the Nestle plan. If Clinton wanted to pass the cost and responsibility of the dam repairs back to Sterling, it could be done by lowering the price to $7.1 million. A different pay schedule would have to be negotiated; here are a couple of ideas.

Since the Nestle proposal assumes that the dams would be repaired in the first six years of the project, Sterling could argue that the $1.5 million rebate should be given in years 1-6, which would essentially result in low or no payments to Clinton over the first six years, followed by full payments over the final 24:
$ 0 in years 1-4
$100,000 in year 5
$280,000 in years 6-30
In this scenario, there is no financial gain for Clinton in the short term, except that Clinton relieves itself of the liability associated with the potential failure of the dams.

Another scenario might have Sterling making 30 equal payments of $236,666, but that would leave Sterling with the problem of trying to come up with the money to repair the dams on top of the payments to Clinton.

A compromise scenario to allow Sterling the flexibility to raise money for dam repair and still provide some revenue to Clinton might be negotiated to look something like this:
$100,000 in years 1-5
$264,000 in years 6-30
There are still other issues to be decided. The Conservation Restriction that Clinton negotiated with the state is still waiting to be signed. If Clinton were to sell the land to Sterling, I would expect that it would sign the CR and claim the $350,000 grant the state has promised for the purchase of the Rauscher Farm. It might be in Sterling’s best interest for the CR to go unsigned if the land were sold, so Sterling could negotiate its own CR with the State and perhaps receive grant money to help repair the dams. Either way, Clinton should demand that a CR be part of the deal so that Sterling didn’t then turn around and try to develop the land for itself (which would be wrong and would likely touch off a brutal fight in town).

Also, where would Sterling get the money? I don’t know, but if the town were to enter an agreement to buy the land from Clinton, I would hope that the Sterling Land Trust and other environmental and recreational organizations would help raise money to purchase and preserve the land.

But those are all details that could be worked out. The Sterling and Clinton Boards of Selectmen should seriously consider this proposal and make a deal that would serve both towns’ interests.

Previous coverage of the Wekepeke:
April 6: Sterling selectmen to oppose Wekepeke plan, but to what extent?
April 4: Vermont looking to restrict Wekepeke-style projects
March 27: This can't be helpful
March 25: Tough decision ahead for Clinton
March 21: Nestle's proposal could change everything
March 21: Nestle nominated for "Corporate Hall of Shame"
March 19: Sterling Selectmen disappoint at Wekepeke forum
March 16: Sterling should oppose Nestle...the right way

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