Several people have questioned the prudence and the legality of the Port of Coos Bay’s option to purchase land on the North Spit from Weyerhauser. Negotiated in 2005/2006, the Port plans to lease part of the 1300 acres under option to the Jordan Cove LNG terminal. Beginning in 2009, letters challenging the appraisals done after the deal was made to justify a purchase price many times greater than assessed value of $25 million, have been written to the Port commission the governor and the attorney general to little effect and with zero response from the commission.
There are many peculiar aspects to this land option which will be addressed here over the next couple of weeks and one of these issues deals with the payment to Weyerhauser. The Port paid the full negotiated purchase amount, $25 million dollars borrowed from Umpqua Bank and the State of Oregon, to retain an option on the property. According to the Port website…
Initially Jordan Cove paid the Port $120,000 per month as an option payment. This option payment covered the interest and principal payments due on the property purchase financing during the option period. Since then, the Port of Coos Bay and Jordan Cove have executed the 6 month extension from June 2008 on the sell/buy agreement to December 2008. And a one year extension was negotiated to December 2009. The option payment from Jordan Cove increased to $160,000 per month during this period. A second one-year extension was negotiated to December 2010, with a six-month extension option with six months’ notice from Jordan Cove. Jordan Cove agreed to pay a quarterly option payment of $480,000, with an additional option payment of $100,000 per month for the first six months of the extension.
About a year ago Weyerhauser returned the $25 million to the Port which in turn repaid the loans to Umpqua and the State. The Port still retains an option to purchase the property at a price of $25 million.
Aside from the obvious question of why the Port would pay the full amount of a purchase agreement to hold an option what did Weyerhauser do with $25 million for three plus years? How did the company book the transaction? As income? As a short term liability? Why did they return it only to extend the option for monthly payments?
Remember how Enron and Lehman Bros, etc… manipulated their books to fool investors and the ratings agencies? Lehman borrowed funds and booked it as revenue to falsify quarterly returns (then they had to pay it back). Not suggesting Weyerhauser would do such a thing but am really curious how they would book such a transaction – revenue? short term debt? what?
This has to be one of the weirdest transactions I have ever heard of. Imagine if we all had zero interest loans, fred, things might be booming around here.
Who benefited? I didn’t! The local taxpayers didn’t. And, Mr. Port Man and Lady, if you will be handing out more 8 figure no interest loans, my needy neighbor and I wish to be first in line.