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T H E C A B I N E T
S T A T E O F F L O R I D A
_____________________________________________________
Representing:
DIVISION OF BOND FINANCE
DEPARTMENT OF REVENUE
DEPARTMENT OF LAW ENFORCEMENT
DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES
BOARD OF TRUSTEES
STATE BOARD OF ADMINISTRATION
The above agencies came to be heard before
THE FLORIDA CABINET, Honorable Governor Bush presiding,
in the Cabinet Meeting Room, LL-03, The Capitol,
Tallahassee, Florida, on Thursday, June 26, 2003
commencing at approximately 9:40 a.m.
Reported by:
SANDRA L. NARGIZ
Registered Professional Reporter
Registered Merit Reporter
Certified Realtime Reporter
ACCURATE STENOTYPE REPORTERS, INC.
100 SALEM COURT
TALLAHASSEE, FL 32301 (850)878-2221
2
APPEARANCES:
Representing the Florida Cabinet:
JEB BUSH
Governor
CHARLES H. BRONSON
Commissioner of Agriculture
CHARLIE CRIST
Attorney General
TOM GALLAGHER
Chief Financial Officer
* * *
3
I N D E X
DIVISION OF BOND FINANCE
(Presented by J. Ben Watkins, III)
ITEM ACTION PAGE
1 Approved 30
2 Approved 31
3 Approved 31
4 Approved 31
5 Approved 32
6 Approved 34
7 Approved 34
8 Approved 40
9 Approved 41
DEPARTMENT OF REVENUE
(Presented by James A. Zingale)
ITEM ACTION PAGE
1 Approved 41
2 Approved 42
3 Deferred 42
DEPARTMENT OF LAW ENFORCEMENT
(Presented by James T. Moore)
ITEM ACTION PAGE
1 Approved 43
2 Approved 43
3 Approved 50
4
DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES
(Presented by Sherman Wilhelm)
ITEM ACTION PAGE
1 Approved 52
2 Approved 52
3 Approved 52
BOARD OF TRUSTEES
(Presented by Eva Armstrong)
ITEM ACTION PAGE
1 Approved 75
2 Deferred 76
3 Deferred 102
4 Deferred 103
5 Approved 104
6 Approved 104
7 Approved 144
8 Approved 145
STATE BOARD OF ADMINISTRATION
(Presented by Coleman Stipanovich)
ITEM ACTION PAGE
1 Approved 146
2 Approved 146
3 Approved 146
4 Approved 147
5 Approved 147
6 Approved 147
7 Approved 148
8 Approved 148
9 Approved 148
10 Approved 149
11 Information 149
12 Approved 150
13 Approved 150
CERTIFICATE OF REPORTER 151
5
1 P R O C E E D I N G S
2 (The agenda items commenced at 9:40 a.m.)
3 GOVERNOR BUSH: Division of Bond Finance.
4 The next meeting is August 12, 2003. I am sorry,
5 not only that; where is Kevin, Kevin McCarty,
6 before we start the agenda. I am sorry, Kevin, I
7 was going back to my childhood.
8 MR. McCARTY: It made me reach for the agenda
9 because I didn't know where I was on the agenda at
10 that point.
11 GOVERNOR BUSH: I thought it would be
12 appropriate for you to give us an update on the
13 insurance legislative activities, particularly
14 medical malpractice since --
15 MR. McCARTY: Certainly, Governor. Thank for
16 the opportunity to provide an update regarding the
17 activities of the legislature concerning insurance
18 and insurance-related activities.
19 Despite a very challenging agenda before
20 the legislature this year, with very vexing and
21 complex problems from class size to budget
22 woes, we had a number of very important
23 legislative initiatives dealing with insurance
24 and that affected the consumers of Florida.
25 Despite a very busy agenda, the
6
1 legislature enacted 12-plus bills affecting
2 insurance, four of which were very significant
3 in terms of affecting the lives of Floridians,
4 but also enhancing competition; one of which we
5 mentioned at a former Cabinet meeting,
6 Governor, is the out-of-state group regulation
7 which did provide -- protect 59,000 Floridians
8 from predatory rating practices. But they also
9 dealt with a very complex and challenging quest
10 to solve the workers' comp dilemma in Florida,
11 Florida having one of the -- among the highest
12 rates in the nation and among the lowest
13 statutory benefits, the legislature did enact a
14 very comprehensive reform promising rate relief
15 for the employers of the State of Florida.
16 They continue their struggle with PIP
17 reform to provide the tools for the Attorney
18 General's Office and the fraud offices to
19 continue to combat fraud in Florida which
20 affects the rates of all Floridians.
21 And furthermore, the legislature really
22 wrestled with a very difficult and
23 controversial issue of credit scoring, which
24 has really risen as a merging issue. So the
25 legislature recognized the importance of credit
7
1 scoring as an underwriting tool, at the same
2 time provide consumer protection from potential
3 abuse.
4 I think there are a number of other
5 issues, unfortunately, that the legislature did
6 not get to address this session, one of which
7 was one very important to the Office of
8 Insurance Regulation, which is our Solvency
9 Enhancement Bill which provided the Office of
10 Insurance Regulation with greater tools to
11 protect consumers against future insolvencies.
12 I know Governor Bush has been very
13 supportive of our efforts with that, and we
14 appreciate that; and hopefully as part of our
15 package next year we'll be able to continue to
16 address that issue.
17 Certainly the bill that -- I sent a letter
18 to the legislature as well as to you, Governor
19 Bush, hoping that we would be able to enact
20 legislation to expand the capacity of the CAT
21 Fund which would bring greater stability and
22 certainty in the marketplace, particularly in
23 south Florida which is an area of greater
24 concern in terms of risk of hurricane loss.
25 And, of course, as we now we are currently
8
1 in a special session with probably the most
2 vexing problem to date, and the legislature is
3 dealing with both in the House and Senate. The
4 Office of Insurance Regulation has worked with
5 the Governor's Commission and Task Force with
6 regard to recommending changes to the system
7 for medical malpractice and will hopefully be
8 able to come up with some solutions to address
9 that problem, because not only does it affect
10 the cost of insurance, but it will affect the
11 availability of health care for all Floridians.
12 We have provided testimony most recently.
13 Mr. Roddenberry testified before the Senate on
14 the 16th addressing some of the issues of
15 concern of our office that have to do with --
16 actually a lot of it has to do with education
17 and debunking some of the myths that are out
18 there.
19 And I was fortunate to be on National
20 Public Radio a few weeks ago, and one the
21 callers called in and says: Well, you know, we
22 are just tired of insurance companies recouping
23 their losses from Wall Street, giving an
24 opportunity for me to say that there are very
25 important provisions in the Florida Insurance
9
1 Code that protect against just those kinds of
2 recoupments from consumers.
3 First of all, insurance companies are very
4 limited in what they can invest in in the
5 securities market. And it's to protect against
6 the vagaries of the stock market. Furthermore,
7 there is specific language within --
8 GOVERNOR BUSH: What percentage, what's the
9 limit?
10 MR. McCARTY: No more than 15 percent of
11 admitted assets can be invested in stocks; no more
12 than 10 percent of the admitted assets can be
13 invested in a common stock, and no more than
14 3 percent of any admitted asset can be invested in
15 any one stock.
16 Florida, along with the rest of the
17 nation, has very conservative requirements so
18 that we can prevent those kinds of fluctuations
19 in the markets and equities market from
20 affecting the long-term solvency of insurance
21 companies. And these have been on the books
22 for a number of years.
23 Not only that, Governor, but you are
24 prohibited under Florida law, under 627 of the
25 Insurance Code, you are prohibited from loading
10
1 that in your rates.
2 If I could, if you would just bear with me
3 for a second, 627 provides in relevant part,
4 "that rates shall be deemed excessive if the
5 rate structure provides for replenishment of
6 surplus from premiums when the replenishment is
7 attributable to investment losses."
8 So that's already prohibited in Florida
9 and we have, I am proud to say, in our office
10 one of the most vigorous reviews of rates in
11 the country when it comes to these issues. And
12 the issue is not a matter of economic losses
13 from investments. What's driving the rising
14 costs of insurance in Florida is the loss ratio
15 and the loss ratio is attributable to higher
16 settlements, which are much higher than the
17 national average.
18 GOVERNOR BUSH: Treasurer.
19 CFO GALLAGHER: You might touch base on the
20 risk base capital that exists also, Kevin, where
21 the two have to match, and I think that's of
22 interest because that's more of a modern way of
23 doing the capitalization of insurance companies
24 and risk.
25 MR. McCARTY: Yes, Treasurer. In addition to
11
1 limitations, specific limitations on investments,
2 there are various ratios that are put into place
3 by the National Association of Insurance
4 Commissioners in order to maintain your
5 accreditation.
6 These are monitoring tools to ensure that
7 whatever investments that companies are
8 investing in that have a higher risk of loss
9 will be reflected in that, which would put them
10 on an action, a company action list, which
11 would prevent them from writing any new
12 business.
13 So there are many tools in place on both
14 in the solvency analytical basis as well as
15 statutory provisions which Florida has in
16 combination with the other states to prevent
17 that.
18 In addition, as I already stated, even
19 without the investment portfolio prohibitions,
20 rates are made prospectively. You cannot
21 recoup or retrospectively build in those
22 investment losses.
23 So we feel comfortable that a lot of
24 attention and a lot of -- has been paid to Prop
25 103 in California, and they are saying that
12
1 Prop 103 may have played a role in reducing the
2 rates.
3 Well, Florida law is not that much
4 different than Prop 103. The standard for
5 review of a rate filing in California and the
6 standards in Florida are the same. The rates
7 cannot be excessive, inadequate or unfairly
8 discriminatory.
9 As I said to you before, I am very proud
10 we have a staff that really scrubs these rate
11 filings before they are approved. We have
12 approved fairly significant increases in
13 Florida, as they have around the nation, but
14 those rates have been justified, not based on
15 investment, but based on the losses due to
16 claims.
17 GOVERNOR BUSH: How would you -- give me the
18 two or three ways, best ways to measure the
19 strength of an insurance market, whether it's
20 medical malpractice or any of the other products
21 that are sold.
22 MR. McCARTY: There are a number of ways to
23 measure the strength in the insurance market, and
24 many of those are very similar to any economic
25 model you are to look at.
13
1 Certainly can be the number of entrants
2 into the marketplace; certainly the more
3 entrants, the more people that are
4 participating, the more insurance company is an
5 indicator of a healthy market.
6 The more products that they are putting
7 out is an indicator of a healthy market.
8 GOVERNOR BUSH: How many in the medical
9 malpractice insurance arena, how many companies
10 are writing insurance now, and how many were three
11 years ago, four years ago?
12 MR. McCARTY: Well, there were at least 15
13 companies in the mid 1990s. Mr. Roddenberry in my
14 office recently completed a survey of companies
15 doing business in Florida, and just to -- of the
16 remaining 12 companies that have more than
17 9 million in premium, six have said they are not
18 writing any new business, four responded they are
19 writing business but on a limited basis, and only
20 two are really writing. There is another two that
21 are leaving the market.
22 So there is definitely evidence of
23 contraction of primary insurance companies
24 doing business in Florida. And we also have
25 noticed a fairly significant increase in the
14
1 losses which is indication that the market is
2 no longer very competitive.
3 CFO GALLAGHER: I think it might be worth
4 noting that the largest writer in the country was
5 St. Paul, and they have left the market
6 nationwide. But their last year they were writing
7 here, their loss ratio was 2.29 to 1, which means
8 they lost $2.29 for every dollar of premium they
9 took in.
10 That, on top of not -- if they had doubled
11 their investment money, they might not have
12 been so bad. But this is in a down market, was
13 their last year, and so that's rather
14 significant, because they were the largest
15 writer in the country and a huge writer here in
16 Florida. And they left a huge void when they
17 pulled out of the marketplace. And they left
18 it because they had tremendous losses, and they
19 didn't have enough premium to cover it.
20 That would mean that they would -- if they
21 stayed, they would have had to double their --
22 more than doubled their premium to break even.
23 GOVERNOR BUSH: That is just breaking even
24 and they have expenses and other things as well.
25 CFO GALLAGHER: Right. That's just pure
15
1 out-of-pocket, pay-out-cash compared to pure
2 premium come in.
3 Now there is some investment income that
4 should be figured in that, but that's obviously
5 why they are not writing any more business.
6 And I guess when you look at them today, they
7 still have losses. They are still covering the
8 tail that exists; it's got a long tail in
9 medical malpractice.
10 Right now they are not taking any
11 premiums. So their losses would be out of --
12 you can't even figure them because one side is
13 zero. But that's why we have a very
14 unfortunate market for people who have to buy
15 the product.
16 GOVERNOR BUSH: If you assume for a moment,
17 which I think is a safe assumption, that our
18 doctors are as good or better than doctors in
19 others states -- I think that's a fair assumption,
20 I would say they are better because they are from
21 Florida, but I have a bias towards my state. But
22 we are no worse.
23 So clearly, if that's the case then, the
24 claims, the volume of claims and the size of
25 the claims is disproportionately higher here
16
1 than other places. What would be the factors
2 that drive that?
3 CFO GALLAGHER: I just want to mention one
4 thing, and I am not going to say it still exists
5 today, but we did have a little problem when I was
6 over at the Department of Professional Regulation
7 with -- we have a tremendous number of doctors
8 that move to Florida and they don't start here, a
9 lot of come when they are in the mid of their
10 practice.
11 A percentage, I am not going to say it's
12 huge, but a percentage move here when they are
13 having a problem back in their home state and
14 they come in here before they actually get
15 adjudicated guilty of something. And the case
16 already gets dropped where they were because
17 some states are rather lazy in their pursuit of
18 those; and when the person leaves, they just
19 sort of forget it.
20 And they would slide themselves on in
21 here, and obviously they are going to be a
22 problem here, too, and become one. And then
23 only in retrospect you -- in retrospect you go
24 back and realize: Well, there really wasn't
25 anything we could have done about it because it
17
1 wasn't -- you can only do something if they had
2 been convicted of something back in the other
3 jurisdiction or lost their license or something
4 like that.
5 So there is a percentage of that that
6 probably still goes on; and so that may add a
7 little bit to some of our problem. I am not
8 sure I have an answer to fixing it, but I can
9 tell you it's an anecdote as to what may be
10 contributing to it.
11 MR. McCARTY: The Governor's Commission and
12 Governor's Task Force came up with 60 plus
13 recommendations, and I think it would be
14 irresponsible of us to think that there is just
15 one silver bullet that fixes this. It is a
16 comprehensive fix that looks at the quality of
17 health care to ensure that there are adequate
18 safeguards in place to ferret out doctors that are
19 malpracticing.
20 Over three-quarters of the doctors have
21 never had any issue or had a case filed for
22 malpractice. There are doctors out there that
23 are malpracticing, and certainly most everyone
24 who's testified, it is preferred public policy
25 that we take whatever disciplinary action is
18
1 necessary against malpracticing doctors.
2 GOVERNOR BUSH: One of the ways to do that is
3 that you change the standard for burden of proof
4 for discipline, which right now is higher than it
5 is for a lawsuit. So we have it backwards.
6 We are not -- you have to have a burden
7 that is higher for these egregious acts for the
8 Board of Medicine to act and they are required
9 by statute to sit on the side lines. And
10 meanwhile, victims hire lawyers, and they are
11 seeking many times -- what they want to do is
12 make sure that that doctor is punished, not
13 seeking some kind of economic gain; and we
14 can't do that.
15 That, there is no problem at least in the
16 House and Senate versions and what we propose,
17 I think everybody is in sync on that.
18 CFO GALLAGHER: To me, one of the issues, at
19 least in the hospital-based problems of
20 malpractice, is that the peer review process works
21 backwards. Most doctors don't want to do a true
22 peer review on their colleagues because, one, they
23 get sued by their colleagues when they, in fact,
24 try to remove them from their practice.
25 So they don't want to get in the middle of
19
1 that.
2 Two, I think we ought to be working the
3 other way around and that is every quarter or
4 every six months you have to be approved to
5 continue to operate in a hospital in a
6 proactive way and that you couldn't be -- you
7 couldn't sue if you weren't given that
8 permission on an automatic basis; in other
9 words, it wasn't an automatic right, it was
10 something, a privilege you would have to get
11 renewed every six months through a peer review
12 that way, so it's proactively, you can stay
13 because you haven't been doing things wrong or
14 we do like your practice and we do want you
15 there.
16 I think that that would make it much
17 easier for -- if you know doctors that are
18 there in the hospital and there are people that
19 are operating in that hospital, that they would
20 not allow their family to be worked on by that
21 particular professional, and they tell you
22 that, and so your question would be: Why are
23 they even allowed to operate on anybody?
24 Well, you know, nobody really wants to say
25 anything. To turn that burden around the other
20
1 way, I think that would save a lot of
2 malpractice lawsuits, to eliminate people that
3 are operating when their colleagues know they
4 shouldn't be, but yet nobody wants to stand up
5 to the plate because they get sued.
6 And so that I think would help at least on
7 the hospital-based malpractice suits. But I
8 think those are probably 50 percent of the
9 suits now because now we are getting into
10 diagnostic lawsuits, into, you know, someone
11 didn't tell me last year when I got a mammogram
12 that I had a problem; the guy told me this
13 year, so therefore, I am suing the guy who
14 didn't tell me last year. So now doctors don't
15 want to read mammograms any more.
16 So we are ending up with insurance
17 companies don't want to insure people that read
18 mammograms, so they charge a lot of money for
19 it. The thing keeps snowballing.
20 GOVERNOR BUSH: Our bill -- I don't know if
21 the Senate, House bill -- Kevin, you may know --
22 they may not have taken this up, but we added a
23 second -- some hospitals do prospective peer
24 review, they do peer review for prospective
25 action, which I think your point is a good one.
21
1 But the boards of directors or boards of trustees
2 of hospitals around our state have a
3 responsibility for this as well, and they are not
4 empowered to take independent action. And our
5 bill proposed that they would have that ability,
6 because that takes it once removed away from the
7 medical community and the peer pressure that might
8 inhibit more self-regulation.
9 So that's another element of this, but the
10 problem right now is recruiting doctors to be
11 on staff. It's not kicking them off, some
12 specialties you can't -- in my travels around
13 the state recently, just story after story
14 where specialists, particularly, are pulling
15 back; so you have one pediatric neurosurgeon in
16 then all of West Palm Beach; for example, with
17 400, 500,000 people, we have one person, 24/7
18 that's available within a 10-mile radius.
19 That's not -- that's very dangerous and it
20 creates worse outcomes than the combined effect
21 of medical malpractice. So access to care now
22 is being imperiled, and we've got to get this
23 done.
24 One of the frustrating things, Kevin, is
25 your world, and Tom's, this insurance world is
22
1 foreign, its language is different. The data
2 on the medical malpractice side is different
3 than say workers' comp where you can call up
4 NCCI or whatever and say, Here's the
5 circumstance, what do you think this will do?
6 We don't have an independent place to go to get
7 data that everybody can say, Here's the
8 information that everybody can agree on and we
9 don't have a place to say if you do this --
10 CFO GALLAGHER: Right. That's because the
11 rates are based on the individual company's
12 experience. So a company that wouldn't write high
13 risks, there are some companies that say, Look, we
14 only write general practitioners; we aren't going
15 to write anything else, and that's their choice.
16 They would have a rate that would be driven by
17 that particular book of business. Other ones
18 might say, We write the high risk guys and, of
19 course, their rate is going to be driven on that,
20 and that makes it very hard to say an individual
21 thing; whereas workers' comp, everybody is writing
22 the exact same risk because the law says what the
23 risk is and says what the benefits are, and there
24 is a -- the thing about insurance is
25 predictability. And that's what we are missing in
23
1 markets that have trouble.
2 And we have a troubled market in medical
3 malpractice, we had trouble markets in
4 homeowners and it's not exactly the most level.
5 We have a PIP automobile insurance problem.
6 And the planets have lined up, for every
7 problem that could happen in insurance happened
8 in Florida this year. And most of those
9 problems are driven by the lack of
10 predictability, which is what actuaries work on
11 to make rates stable. And that's been a
12 problem.
13 MR. McCARTY: I would agree. Clearly there
14 has been a number of markets in Florida in
15 distress as they have been in the nation, and a
16 number of things have to be done to return
17 stability and predictability to the marketplace;
18 because until you have some kind of a certainty in
19 the marketplace, you are not going to attract the
20 capital. If you don't attract the capital, you
21 won't have the competition. If you don't have the
22 competition, you won't have availability and
23 affordability of products. It's pretty axiomatic
24 to the doctrines of a free market system.
25 GOVERNOR BUSH: Any other thoughts?
24
1 MR. McCARTY: No. We continue to remain
2 available to the Financial Services Commission and
3 House and Senate to provide education and data and
4 input as appropriate. And we certainly look
5 forward to a positive resolution of this issue for
6 the long-term benefit of Floridians.
7 GOVERNOR BUSH: One last concern I have had.
8 I basically laid -- created some parameters for a
9 final deal without giving enough room for
10 everybody to negotiate to get to the place where
11 we need to get. But one of the things that I am
12 completely opposed to is a government capitalized
13 solution to this, kind of the easy way out for us
14 since we have got the taxpayers' monies in all
15 these nooks and crannies around here, is to say,
16 Since there is no private market, we'll just
17 create our own mutual fund, capitalized by us and
18 the losses will be paid for by some appropriation
19 or we'll take the surplus from -- what's the name
20 of that baby --
21 CFO GALLAGHER: NICA. I saw that floating
22 through --
23 GOVERNOR BUSH: It's a cash surplus, but not
24 actuarial surplus to the same amount, and we'll
25 just take it from there, we'll capitalize it, we
25
1 won't reform, and then we'll have the huge losses
2 shifted over to the Governor once the doctors
3 rebel, I guess; I don't know what they would do.
4 So I just want to be on record again
5 saying that the best indication to me is -- the
6 best indication of whether reforms are going to
7 work is whether private capital moves back into
8 the state to take the risks in a robust kind of
9 way so that there is an alternative for
10 doctors. Without that --
11 CFO GALLAGHER: They will do it when, in
12 fact, the industry has a predictable loss.
13 MR. McCARTY: That may come many years after
14 the enactment of reform. We have to be able to
15 manage our expectations in this because when
16 California enacted MICRA, its reform package in
17 1975, the final court litigation really wasn't
18 completed until about 10 years later. Hopefully
19 we won't have to wait 10 years to get rate relief,
20 and they did not have to wait 10 years to start to
21 get relief in California. But you have to
22 understand there has to be some return of -- that
23 the law you put in place is, in fact, going to be
24 in place.
25 GOVERNOR BUSH: Sure, but the benefit that we
26
1 have, ironically, I guess is that many of the
2 insurance companies that would come back, may not
3 have a book of business, may not have a tail, so
4 they would start fresh, and would have a greater
5 chance of seeing those reforms work. If we don't
6 bring in new insurance companies, then we are in
7 for a long, long haul.
8 MR. McCARTY: You are right.
9 CFO GALLAGHER: There is a battle here and
10 that is for whatever is passed to be believable
11 reform. And that's our job, when it's finished,
12 is to hopefully have two things.
13 One, that it is true reform and that it's
14 perceived to be true reform so that capital
15 will come back. And I don't know how we get
16 over that except we got to work it. It's not
17 easy because nobody is going to commit to
18 something that they think is going to be
19 predictable, but they don't believe it will.
20 And we have three entities right now that
21 are public entities doing malpractice issues.
22 We have NICA, which handles the neurologically
23 impaired children which are low-birth babies
24 which, through no fault of any doctor, these
25 children have a problem, and they are covered
27
1 so that these are things that aren't a
2 malpractice, they are an outcome. And doctors
3 were getting sued and it was a -- huge things
4 we're doing and what was ended up happening is
5 you got the finest baby hospital in the world
6 and each baby that's a problem, they want to
7 re-invent that for that particular baby as
8 opposed to getting them to the finest place.
9 And so NICA has gotten them to the finest
10 place, making sure every one of these babies
11 are taken care of without a lawsuit.
12 So it's been a positive effect for those
13 fine things that are not by somebody doing
14 something wrong, but it's because of an outcome
15 that's nobody fault; it's not the parents',
16 it's not the doctors', it's not the hospital's,
17 it's nobody's fault. So that's what NICA takes
18 care of.
19 We have a Patients Compensation Fund,
20 which is still in run off for the last 10 or 12
21 years, that was a failed attempt of government
22 to run an insurance company that didn't work.
23 And so I would like to point that out and
24 before they re-invent it, just say, Look, we
25 have been there.
28
1 The third one is the Joint Underwriting
2 Association, which exists today and has existed
3 for a long time; it's expensive, but it is a
4 last resort for doctors that would like to have
5 the coverage that they can go into the JUA.
6 And it has obviously picked up quite a bit of
7 business over the last year or so because of
8 the market crisis that exists.
9 So I am not certainly an advocate to set
10 up another government program. If we can fix
11 what is a perceived and a real instability in
12 the ability to predict losses, then we will
13 have -- and it doesn't matter what the level
14 is. Once it's predictable, high or low, the
15 companies will come in and participate because
16 they can get a return on their money.
17 GOVERNOR BUSH: The last element of this
18 that's important, really doesn't relate
19 necessarily to the medical malpractice insurance
20 issue, relates to the cost issue though, because
21 hospitals end up now paying hundreds of millions
22 of dollars in claims and many of them are
23 self-insured; and any of the reforms that we are
24 talking about, structured the right way, would
25 yield significant benefits for hospitals as well.
29
1 At a time when we have these reimbursement
2 challenges, where reimbursement rates for
3 Medicare, Medicaid, private insurance are
4 either flat, in some cases declining -- we went
5 up a little bit in Medicaid this year for some
6 procedures -- if they have these uncontrolled
7 costs, ultimately we are going -- it shifts
8 back to us, it shifts back to us and so there
9 is another element of this that doesn't get the
10 attention, but actually probably is a higher --
11 I am speculating here, but I think it's
12 probably a higher outflow in terms of payments
13 of these lawsuits related to hospitals and
14 doctors perhaps.
15 CFO GALLAGHER: It's interesting because
16 workers' comp was one of the receivers of the cost
17 shifting, workers comp, hospital --
18 GOVERNOR BUSH: Yes, it was higher --
19 CFO GALLAGHER: -- reimbursement than most
20 any other reimbursement that had gone on and
21 that's one of the things that --
22 MR. McCARTY: I think both Treasurer
23 Gallagher and the Governor have alluded to, the
24 issue it's not really who is paying it. It's the
25 amount of the lost cost. And until you are able
30
1 to get a check on the ultimate settlement on the
2 payouts, it doesn't really matter whether you
3 shift it to the taxpayers or you shift it to the
4 private sector or to some facility or joint
5 underwriting association. There is no free lunch.
6 It has to be paid. You either rein in the costs
7 or you are going to continue to have a crisis of
8 availability of health insurance.
9 GOVERNOR BUSH: Thank you, Kevin. Any other
10 comments or questions?
11 The next Cabinet meeting, if I didn't say
12 this, is Tuesday, August 12. We have a month
13 of no Cabinet meetings.
14 Division of Bond Finance.
15 CFO GALLAGHER: Motion on the minutes of
16 May 28.
17 GENERAL CRIST: Second.
18 GOVERNOR BUSH: There is a motion on item 1
19 and a second. Without objection, the item passes.
20 MR. WATKINS: Item number 2 is a resolution
21 authorizing the competitive sale of up to
22 $363,400,000 in PECO bonds, which is the remainder
23 of the current fiscal year's appropriation of
24 613 million.
25 CFO GALLAGHER: Motion on 2.
31
1 COMMISSIONER BRONSON: Second.
2 GOVERNOR BUSH: Moved and seconded. Without
3 objection the item passes.
4 MR. WATKINS: Item number 3, a resolution
5 authorizing the issuance and the competitive sale
6 of up to $210 million in PECO refunding bonds.
7 CFO GALLAGHER: Motion.
8 GENERAL CRIST: Second.
9 GOVERNOR BUSH: Moved and seconded. Without
10 objection, the item passes.
11 MR. WATKINS: Item number 4 is a multiple
12 part resolution authorizing the competitive sale
13 of up to $24,045,000 in Housing Facility Revenue
14 Bonds for Florida Atlantic University as well as
15 the issuance and competitive sale of $14,850,000
16 of refunding bonds.
17 COMMISSIONER BRONSON: Motion on 4.
18 GENERAL CRIST: Second.
19 GOVERNOR BUSH: Moved and seconded. Without
20 objection, the item passes.
21 MR. WATKINS: Item number 5 is a resolution
22 authorizing the competitive sale of up to
23 $350 million in Turnpike Refunding Bonds.
24 COMMISSIONER BRONSON: Motion.
25 GENERAL CRIST: Second.
32
1 GOVERNOR BUSH: Moved and seconded. Without
2 objection, the item passes.
3 MR. WATKINS: Item number 6 is a resolution
4 authorizing the issuance of up to a billion
5 dollars in right-of-way acquisition and bridge
6 construction bonds.
7 The purpose for this is the authorization
8 initiates the validation which gives us
9 authorization for -- this is anticipated to
10 fund DOT's Work Program over the next five
11 years or so.
12 We will bring back to you sale resolutions
13 in pieces as these bonds are sold, driven by
14 the need to fund DOT's work program. So you
15 will see this again when we get ready to sell
16 the bonds. This is just to get authorization
17 to get the validation out of the way.
18 GENERAL CRIST: Maybe it's happened, I just
19 don't recall it, where we have done a billion
20 before. Is that customary?
21 MR. WATKINS: It is only unusual in the sense
22 that it doesn't occur very often.
23 GENERAL CRIST: That's another way of saying
24 it.
25 GOVERNOR BUSH: That's a clear definition.
33
1 GENERAL CRIST: That's what I am talking
2 about.
3 MR. WATKINS: But we are going to bring it
4 back in pieces. We have done it before. We have
5 done it this way before. And the real reason for
6 doing it is just to get the legal proceedings out
7 of the way so that we don't get held up when we
8 need to sell the bonds, having to go through a
9 legal proceeding to get the authorization.
10 We just get the broad authorization today
11 for a large amount so we don't have to
12 duplicate the same effort every time we want to
13 sell a small piece of bonds. So it's one step
14 of the two-step process.
15 GOVERNOR BUSH: You are not seeking authority
16 for something that the legislature hasn't
17 authorized?
18 MR. WATKINS: That's correct. This hasn't
19 even been built into the budget yet. So we'll get
20 it approved ahead of time. As they authorize it
21 included in the budget, then I bring the pieces to
22 you to sell the bonds to fund the appropriation.
23 So it's a long way to go before actual bonds get
24 issued from an authorization standpoint.
25 GOVERNOR BUSH: Okay. Is there a motion?
34
1 CFO GALLAGHER: Motion.
2 GENERAL CRIST: Second.
3 GOVERNOR BUSH: Moved and seconded. Without
4 objection, the item passes.
5 MR. WATKINS: Item number 7 is a resolution
6 authorizing the redemption prior to maturity of
7 bonds issued on behalf of the Jacksonville
8 Transportation Authority.
9 CFO GALLAGHER: Motion on 2.
10 GENERAL CRIST: Second.
11 GOVERNOR BUSH: Moved and seconded. Without
12 objection, the item passes.
13 MR. WATKINS: Item number 8 is a report of
14 award on the competitive sale of $157,140,000 of
15 Florida Forever Refunding Bonds.
16 The bonds were awarded to the low bidder
17 at a true interest cost of approximately
18 2.53 percent, generating gross debt service
19 savings of 18.2 million, or on a present value
20 basis, 15.9 million, assuming that the
21 refunding bond proceeds are invested at the
22 bonds yield.
23 CFO GALLAGHER: You want to talk a bit about
24 how we are doing that now?
25 MR. WATKINS: We have encountered -- because
35
1 of unusual market conditions and extraordinarily
2 low short-term interest rates, these bonds won't
3 be called for one year. Our normal methodology on
4 the refunding is to lock down both the borrowing
5 costs as well as the reinvestment rate at the time
6 we execute the transaction.
7 So the economics of the transaction are
8 locked down at a single point in time. Because
9 we are borrowing at 2.53 percent, and our
10 reinvestment rate on those monies over the next
11 year would be about 1 percent, there is
12 economic, negative economic consequences; it
13 reduces the amount of savings that we would
14 otherwise realize on this transaction.
15 So in order to address that particular
16 dynamic in the market, what we have done is
17 rather than reinvest it at 1 percent, locking
18 in a loss, which reduces the savings on the
19 refunding, we are investing the money with the
20 treasurer, because the treasurer's yields, they
21 take all monies for the state and invest those
22 pursuant to investment policies, and the yields
23 on those monies are significantly higher than
24 we could get in the open market on treasury
25 securities on a one-year investment.
36
1 So that's the technique that we are using,
2 which is a bit unorthodox, in implementing
3 refunding transactions but in my judgment, a
4 very reasonable risk to take, reinvestment
5 risk, over a relatively short-term period of
6 time in order to avoid locking in a loss today
7 which reduces the savings to us.
8 GOVERNOR BUSH: What's the anticipated
9 investment, the reinvestment return?
10 MR. WATKINS: Under federal tax law, we can
11 only earn the bond yield; so if we can earn 2.53
12 percent over the next year --
13 GOVERNOR BUSH: Is that what you expect?
14 MR. WATKINS: Yes, we expect to earn in
15 excess of that. The return last month, for
16 example, Governor, it changes every month but the
17 blended rate on the entire portfolio of the
18 treasurer was 4.32 percent.
19 CFO GALLAGHER: But if they don't want any
20 more than the minimum, we'll be glad to give them
21 the minimum, the two-point, whatever it is.
22 GOVERNOR BUSH: What do we do with the rest
23 of the money?
24 CFO GALLAGHER: Actually all of it is
25 invested and we put this in what we call our
37
1 special purpose fund. This is any government or
2 quasi-government pot of money, the university
3 systems can keep their money with us if they
4 choose to or they can put it somewhere else and
5 most of them have chosen to put it with us because
6 they can't even come close to anywhere else to the
7 yield we have.
8 GOVERNOR BUSH: If you have a prohibition for
9 a positive arbitrage, I guess that would be
10 arbitraging the money, and the benefits don't go
11 to the bond transaction, they go to another entity
12 of government, do the Feds allow you to do that?
13 CFO GALLAGHER: It's how much he gets back.
14 GOVERNOR BUSH: Say he stays higher than the
15 2.3 or whatever the bond rate is, he can't go
16 higher than that; what do you do with the surplus
17 earnings?
18 CFO GALLAGHER: We are just doing this first
19 one. I don't know what -- he has the authority to
20 do what he wants with it.
21 THE WITNESS: We will actually under federal
22 tax law have to pull the money out. We will
23 monitor the reinvestment rate on a monthly basis,
24 and we have to roll it in with the Bureau of
25 Public Debt with the Federal Reserve and earn
38
1 0 percent to blend down the yield.
2 CFO GALLAGHER: Take it out of low yield when
3 he needs to so that it breaks even, that's what he
4 wants to do.
5 GOVERNOR BUSH: What time does all this
6 refinancing yield a better debt service ratio in
7 terms of our -- it looks like our general revenues
8 numbers may be a little bit higher, and it looks
9 like our debt service numbers are dropping because
10 of interest rates. Next time you show us your
11 data affordability, are we going to see a little
12 bit better --
13 MR. WATKINS: Slightly better, Governor,
14 because we've refinanced, just in the six-month
15 period, from January through June 30, we have
16 executed a billion seven in refinancing. And
17 that's against total debt outstanding in the state
18 of about 20 billion. And we saved the state on a
19 gross basis about $210 million in foregone --
20 avoided interest costs over the duration of the
21 loan.
22 So it will be an incremental help when we
23 look at the numbers at June 30, because we'll
24 run the numbers off the June 30 numbers; when
25 we do the data affordability study next fall
39
1 the savings resulting from these refundings
2 will be included in those numbers. We will
3 reduce our future anticipated debt service cost
4 by the amount of the refunding and the reduced
5 debt service requirements.
6 CFO GALLAGHER: By the way, I just take
7 advantage to mention that last year, last fiscal
8 year, the treasury returned on the $13 billion
9 that we had invested 5.33 percent. That was way
10 above any other state in the union.
11 GOVERNOR BUSH: How did you do it?
12 CFO GALLAGHER: Magic. No. We have a pretty
13 good manage process we go through. And as a
14 matter of fact, we just lost a fellow that was
15 with us for 39 years -- we had a resolution at the
16 last meeting; the fellow started as a clerk typist
17 and did the first -- other than buy a CD or
18 treasury into the things that we do, and part of
19 it is that -- and it will come down, already this
20 part of the year it's down a little bit, quite a
21 bit -- because we bought things when they were up
22 and we are still holding them and we have a large
23 enough pot of that so that everybody, like these
24 refundings, that continues to have cash to put in
25 and it's totally liquid to them, can continue to
40
1 work with us on that. And it's basically a carry
2 back that we have had. But that's $400 million
3 plus, in excess of $4 million that basically is
4 money available to be spent instead of taxing
5 people.
6 GOVERNOR BUSH: Well done. Where are we
7 here?
8 MR. WATKINS: Motion on 8.
9 GOVERNOR BUSH: That's what I thought.
10 GENERAL CRIST: Move 8.
11 GOVERNOR BUSH: Is there a second?
12 GENERAL CRIST: Second.
13 GOVERNOR BUSH: Moved and seconded. Without
14 objection, the item passes.
15 MR. WATKINS: Item number 9 is a report of
16 award on the competitive sale of $315,525,000 of
17 PECO bonds. The bonds were awarded to the low
18 bidder at a true interest cost of 4.03 percent.
19 The transaction had two components, new
20 money bonds of approximately $112,600,000 and a
21 refunding piece of approximately $203 million.
22 The refunding piece generated gross debt
23 service savings of about $41.2 million, or on a
24 present value basis 28.3 million.
25 GENERAL CRIST: Motion on 9.
41
1 CFO GALLAGHER: Second.
2 GOVERNOR BUSH: Moved and seconded. Without
3 objection, the item passes.
4 Thank you, Ben.
5 GOVERNOR BUSH: Department of Revenue.
6 CFO GALLAGHER: Motion on the minutes of
7 May 28.
8 GENERAL CRIST: Second.
9 GOVERNOR BUSH: There is a motion on a second
10 on item 1. Motion passes. Jim, good morning.
11 MR. ZINGALE: Good morning.
12 GOVERNOR BUSH: How are you doing?
13 MR. ZINGALE: Granddad, so it's a great time.
14 GOVERNOR BUSH: Oh, don't bring that up
15 again.
16 CFO GALLAGHER: It will be a long time before
17 I am one, I can tell you that. I hope I am still
18 around to see it happen. You got a lot more
19 chance than I do. Mine is four and a half years
20 old; I got a long way to go.
21 MR. ZINGALE: But when that time comes, just
22 remember: All needs and wants are met with a
23 single cry. It's an amazing experience. You just
24 huddle around that little communication.
25 CFO GALLAGHER: If the Governor could only do
42
1 that. If he could only do with that with medical
2 malpractice, one cry.
3 MR. ZINGALE: Item number 2 are some rule
4 changes, primarily dealing with incorporating 2002
5 law changes, deleting some unnecessary
6 provisions -- it's part of our normal review --
7 providing some clarity and guidance to taxpayers.
8 Uncontroversial rule changes.
9 CFO GALLAGHER: Motion on 2.
10 GENERAL CRIST: Second.
11 GOVERNOR BUSH: There is a motion and a
12 second. Without objection, the item passes.
13 MR. ZINGALE: Item number 3 requires no
14 action. We are delaying it until the August 26
15 Cabinet meeting.
16 CFO GALLAGHER: Motion to delay until the
17 26th on 3.
18 GENERAL CRIST: Second.
19 GOVERNOR BUSH: Motion to delay or defer?
20 There is a motion to defer/delay.
21 CFO GALLAGHER: Either way; hold off until
22 the 22nd.
23 GOVERNOR BUSH: The item passes.
24 MR. ZINGALE: Thank you.
25
43
1 GOVERNOR BUSH: Department of Law
2 Enforcement.
3 CFO GALLAGHER: And the final for
4 Commissioner Moore.
5 Motion on the minutes.
6 COMMISSIONER BRONSON: Second.
7 GOVERNOR BUSH: Item 1, there is a motion and
8 a second. Without objection, the item passes.
9 Item 2.
10 COMMISSIONER MOORE: Item 2 is a quarterly
11 report, Governor, for the second quarter of the
12 fiscal year. It's in your package with the
13 details highlighted there.
14 CFO GALLAGHER: Motion for approval.
15 GENERAL CRIST: Second.
16 GOVERNOR BUSH: Moved and seconded. Without
17 objection, the item passes.
18 COMMISSIONER MOORE: Item 3 is the quarterly
19 report for the third quarter.
20 CFO GALLAGHER: I move that, but we are sort
21 of in a DNA lab technician crisis, sort of, aren't
22 we? They seem to outsource them now because you
23 can't keep up with --
24 COMMISSIONER MOORE: We are beginning to see
25 another spike in the loss of our DNA scientists.
44
1 You recall, Governor -- you had this three years
2 ago with the pay increase but the army lab right
3 now among others is offering upwards of 50 percent
4 pay increases for our expert DNA scientists, and
5 they are going in a workload where there is no
6 pressure. Our scientists are handling huge
7 workloads, testifying as expert witnesses, are
8 getting easier work and higher pay. But the
9 retention package --
10 GOVERNOR BUSH: Kind of like what you are
11 going to be doing?
12 COMMISSIONER MOORE: Hypothetically, in a
13 green world, yes, I hope so.
14 CFO GALLAGHER: Are you an example of the
15 problem that's happening in the rest of your
16 organization?
17 COMMISSIONER MOORE: It's only unusual in
18 that we have not done it often in the past, to
19 quote Ben Watkins.
20 On the question of outsourcing, Treasurer
21 Gallagher, we are outsourcing principally and
22 only at this point in time the nonsuspect rape
23 cases, which is critically important. That
24 constitutes a large percentage of our backlog.
25 If the local agencies don't have a suspect in a
45
1 rape case, often times that gets put on a lower
2 wrung in some of the police agencies. We are
3 seeing that, frankly, in Miami-Dade County
4 right now.
5 What we have done in Florida, and unlike a
6 lot of other states, is we approach nonsuspect
7 rape cases with the same degree of importance,
8 with the same sense of urgency. So we have
9 outsourced a large percentage of the nonsuspect
10 rape cases and let our scientists then work on
11 cases where there are suspects.
12 CFO GALLAGHER: I need to get, I guess,
13 informed here. Whose DNA do you do in a
14 nonsuspect rape case?
15 COMMISSIONER MOORE: Well, you don't know who
16 it is, but you know from body fluids left at the
17 scene of the crime, either blood, semen or saliva,
18 so you know you have a suspect. But unless you
19 know who that is, first thing we do is search it
20 against the database.
21 CFO GALLAGHER: When you say nonsuspect, I
22 thought you meant there wasn't any. That's why I
23 asked the question.
24 COMMISSIONER MOORE: You don't know who the
25 suspect is. You know there is one, you don't know
46
1 whose --
2 CFO GALLAGHER: You don't know whose you got,
3 but you got somebody.
4 COMMISSIONER MOORE: Exactly.
5 COMMISSIONER BRONSON: Evidence, but no
6 people.
7 COMMISSIONER MOORE: That's exactly right.
8 And often you have to link what's happening in
9 Miami, you will link the evidence from several
10 scenes; you know it's the same person, you just
11 don't know who that person is.
12 GOVERNOR BUSH: What happened down in Miami
13 with their -- they had some problems internally in
14 their crime lab?
15 COMMISSIONER MOORE: They did. As you know,
16 Florida's crime lab system is -- we run seven
17 regional labs that handles a ton of evidence every
18 year but there is a system of local labs in Dade,
19 Broward, and Indian River Counties that operate on
20 their own. Good labs, I need to be clear on that;
21 very good labs.
22 GOVERNOR BUSH: Does the city have a separate
23 one from Miami-Dade?
24 COMMISSIONER MOORE: The city of Miami
25 collects a lot of their samples, DNA and other
47
1 evidentiary samples, and the Dade County lab
2 processes most of them.
3 What was happening is if the police agency
4 did not have a suspect in a rape case, that
5 didn't get sent over immediately to the
6 laboratory or if it did, as I understand it,
7 Dade County lab didn't immediately process that
8 on a par with the other cases where they did
9 have a named suspect. That's not unusual.
10 That happens in every state in this country.
11 I am proud of the fact, though, because of
12 the funding you helped us get, we were able to
13 move out a large portion of those nonsuspect
14 rape cases to private providers and are getting
15 a huge turnaround time on them now.
16 What that means is work has to be done on
17 that sample to get it loaded into the DNA
18 database. So you obviously want to get that
19 sample in that database as soon as you can and
20 not have it sitting over there unworked on the
21 bench.
22 But the short answer, we are beginning to
23 have a concern about losing our DNA scientists.
24 We are working with that on our existing
25 resources to keep it from happening as best we
48
1 can. And we are continuing to outsource to add
2 value to what we do.
3 COMMISSIONER BRONSON: Governor, the one
4 thing that probably I would think Tim is running
5 through right now is the same thing we are running
6 through in the Department of Ag with some of our
7 DNA people and all. And we actually do run DNA on
8 citrus canker and everything else to find out
9 where it came from and how it got there.
10 But some of the schools and universities
11 and other people, other states that are trying
12 to get into the DNA programs, are coming to the
13 states that already have scientists, that have
14 been working on this for quite sometime and
15 then they pull them out from under us by
16 offering them pretty exorbitant increases; and
17 it's hard for them to turn down and they end up
18 leaving us. And I would assume you are running
19 into the same thing we are running into.
20 COMMISSIONER MOORE: We are. We really try
21 to be smart about this in a business sense. If a
22 scientist is offered a 10 or $15,000 pay raise to
23 leave and that scientist has been with us for 10
24 years or so and getting someone to replace them
25 would cost us $50 or $75,000, the best we can, we
49
1 try to meet that because that's a good business
2 decision. We can't meet a 50 percent increase
3 though.
4 CFO GALLAGHER: It seems to me that -- I
5 don't know if you do it with the DNA scientists,
6 but if you bring in somebody into law enforcement,
7 you run through certain training that you all have
8 at FDLE, even though they may have been certified
9 before. And you make them sign that if they leave
10 within a period of time, they've got to pay the
11 money back it costs to train them. Do we do the
12 same thing --
13 COMMISSIONER MOORE: We do. We are doing the
14 exact same thing with the scientists. In fact, it
15 was the scientists that prompted that policy,
16 where they signed a contract with us saying they
17 got to stay with us at least two years beyond
18 their designation as an expert witness or they
19 have to pay us back.
20 CFO GALLAGHER: But my understanding is we
21 are not doing real good on chasing after them and
22 collecting on that.
23 COMMISSIONER MOORE: Well, we haven't had a
24 lot of them since we put that in place. It will
25 take a year or so for a scientist to get in and
50
1 get expert status and be real productive, and they
2 satisfy the year, and most the people leaving are
3 more senior people. They are not the green
4 scientists. But we'll get over that.
5 CFO GALLAGHER: So we are losing senior
6 people because other states want senior people to
7 open their DNA program?
8 COMMISSIONER MOORE: Absolutely. That's a
9 good problem to have, because they want to mirror
10 the effort that we put forth over here. It's
11 not -- I don't want to overstate it, it has not
12 got us on our knees, but it's something I think
13 we'll have to deal with in the future.
14 CFO GALLAGHER: Sounds like great opportunity
15 for promotions for people.
16 COMMISSIONER MOORE: Yes, it is that.
17 CFO GALLAGHER: Hopefully they have the
18 experience to take on the job.
19 GOVERNOR BUSH: There is a motion.
20 COMMISSIONER BRONSON: Second.
21 GOVERNOR BUSH: And a second. Any other
22 discussion? Without objection, the item passes.
23 Thank you, Tim.
24 COMMISSIONER MOORE: Thank you, Governor.
25 GOVERNOR BUSH: Come on back and visit us
51
1 once in a while.
2 COMMISSIONER MOORE: I will, sir.
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
52
1 GOVERNOR BUSH: Department of Agriculture.
2 CFO GALLAGHER: Motion on the minutes.
3 COMMISSIONER BRONSON: Second.
4 GOVERNOR BUSH: There is a motion and a
5 second. Item 1 passes without objection. Item 2.
6 CFO GALLAGHER: Motion on 2.
7 MR. WILHELM: Item number 2 is, we are
8 seeking authority to issue a 10-year, 1-acre lease
9 to raise limerock in Wakulla County.
10 CFO GALLAGHER: Motion on 2.
11 COMMISSIONER BRONSON: Second.
12 GOVERNOR BUSH: There is a motion and second.
13 Without the objection, the items passes.
14 MR. WILHELM: Item number 3 is we are seeking
15 approval to renew a 10-year lease for clam in St.
16 Johns County for 2.31 acres.
17 CFO GALLAGHER: Motion on 3.
18 COMMISSIONER BRONSON: Second.
19 GOVERNOR BUSH: Moved and seconded. Without
20 objection, the item passes.
21 MR. WILHELM: That is all. Thank you very
22 much.
23
24
25
53
1 GOVERNOR BUSH: Board of Trustees.
2 MS. ARMSTRONG: Eva Armstrong in for the
3 Secretary this year.
4 Item number 1 is an easement for
5 Georgia-Pacific. And I have Mario Taylor who
6 is the new district director for DEP in
7 Jacksonville with us this morning to walk you
8 briefly through the item.
9 Mario comes to us by way of the City of
10 Jacksonville. He ran their regulatory program.
11 So with that, Mario.
12 MR. TAYLOR: Good morning, Governor, Members
13 of the Cabinet. Eva, thank you for that
14 introduction.
15 On behalf of the Secretary I am here to
16 present the applicant's request for this
17 easement which is a component of the existing
18 administrative order.
19 The vice president, Mr. Ted Kennedy, is
20 here to make a presentation to you, and I
21 believe he also has a couple of speakers for
22 you as well.
23 He will also address several issues of
24 concern about the item, including the timing
25 and the why now and those sorts of things as
54
1 well.
2 If I can present the applicant to give you
3 specific information.
4 GOVERNOR BUSH: Please. Mr. Kennedy.
5 MR. TAYLOR: Excuse me, Governor, I think we
6 were surprised the agenda moved faster than
7 anticipated, getting it here.
8 Ted Kennedy.
9 MR. KENNEDY: I apologize for that entrance.
10 Commissioner Bronson, Treasurer Gallagher,
11 Attorney General Crist, and Honorable Governor Jeb
12 Bush, I am Ted Kennedy, vice president of
13 operations for Georgia-Pacific Palatka Pulp and
14 Papermill and general manager for our Kraft Paper
15 Division.
16 To begin with, I would like to publicly
17 recognize your staff for the time, energy and
18 efforts spent to understand this issue.
19 Their patience and professionalism had
20 been outstanding and has given us a positive
21 impression of the Florida government system.
22 On behalf of the 1200 workers at the
23 Palatka Pulp and Paper Mill and the executive
24 leadership of Georgia-Pacific, I would also
25 like to thank you for your service to the
55
1 citizens of Florida in reviewing our urgent
2 need for a submerged lands easement.
3 Georgia-Pacific needs a submerged lands
4 easement to, one, ensure compliance with
5 Florida water quality standards and the
6 execution of the administrative order as
7 outlined in our current NPDS permit; and two,
8 to provide assurance that the investment of
9 $74 million into the Palatka facility will meet
10 Georgia-Pacific shareholders' objectives while
11 providing secure jobs for generations to come.
12 The packet before you describes in detail
13 the history and the plan to solve this issue.
14 I would refer to the packet from time to time
15 for better understanding.
16 Georgia-Pacific is a multinational
17 consumer products and building products company
18 with operating facilities worldwide, many of
19 which manufacture the same products that we do
20 in Palatka.
21 Georgia-Pacific's Palatka operations is an
22 integrated paper and pulp facility located in
23 the Putnam County, Town of Palatka. We began
24 operations in Palatka in 1947 as Hudson Pulp
25 and Paper, manufacturing pulp and craft paper.
56
1 Georgia-Pacific purchased the operation in
2 1979 and expanded manufacturing of the consumer
3 towel and tissue products. Today we
4 manufacture more than half a million tons of
5 paper products and 18 million cases of consumer
6 products a year using local fiber resources and
7 local talent.
8 Our products include grocery bags, butcher
9 paper and multiwall sack craft papers as well
10 as bathroom tissue and paper towels and
11 napkins.
12 GOVERNOR BUSH: Mr. Kennedy, can I -- we are,
13 at least I am a huge fan of what you are doing in
14 Palatka County. I appreciate the fact that you
15 make all this stuff.
16 Maybe we can just get right to the
17 easement question, why it's important and what
18 the agreement was between the department and
19 the company several years ago that initiated
20 this.
21 MR. KENNEDY: Absolutely. I have a little
22 history.
23 GOVERNOR BUSH: All I need to look at is you
24 got 1200 employees and the average hourly wage is
25 $20.12 cents in 2001. Good for the Putnam County.
57
1 Case closed.
2 CFO GALLAGHER: When the Governor stands up,
3 that means hurry up.
4 GOVERNOR BUSH: Absolutely. We love
5 Georgia-Pacific from that perspective and I know
6 you are great in the community, and you got great
7 workers; I met quite a few of them.
8 But the issue is in this complex water
9 quality -- help us with the importance of this
10 easement and how it relates to your hundred
11 million dollar plus investment in improving the
12 water quality in the tributary which hopefully
13 will allow -- will make the easement not even
14 relevant.
15 MR. KENNEDY: Absolutely. It stems from our
16 interest in renewing our NPDS discharge permit in
17 1993.
18 In 1993 an interpretation was made
19 regarding tidal influence in Rice Creek, which
20 is where we discharge, a small tributary of the
21 St. Johns River, that we would not meet water
22 quality standards at that time. At that time
23 both the Department of Environmental Protection
24 and Georgia-Pacific proposed a relocation of
25 our discharge to the St. Johns River through a
58
1 4-mile pipeline, costing at that time roughly
2 $15 million.
3 However, recognizing that there was a
4 better way to do that, the DEP, EPA and
5 Georgia-Pacific got together and developed a
6 plan which included an investment of
7 $74 million in in-plant technologies which
8 would, in essence, reduce load, pollutant load
9 coming from Georgia-Pacific into Rice Creek.
10 The hope, of course, was that it would meet
11 water quality standards in Rice Creek and avoid
12 the need for relocation.
13 Frankly, Georgia-Pacific has no interest
14 in relocation, and a new pipeline into the St.
15 Johns River is at a cost of roughly
16 $20 million; so that's added to the $74 million
17 we talked about before.
18 So in order to meet or comply with our
19 NPDS permit, we entered into an administrative
20 order with the Department of Environmental
21 Protection which called for these new
22 technologies being implemented over a
23 seven-year period of time to end in 2008.
24 And if you would like to refer to your
25 handout, which I see you are doing, the
59
1 spending schedule for that -- and actually, the
2 history is listed on page 12, and the spending
3 schedule is listed on page 21.
4 If you look at page 21, the spending
5 schedule for the administrative order elements
6 is listed there.
7 Being in 2003, as you can see, we have not
8 reached the significant load of spending that
9 we expect to do in order to attempt to meet
10 water quality standards in Rice Creek.
11 However, as part of the administrative order,
12 the DEP, EPA and Georgia-Pacific agreed that
13 post installation of the technologies and
14 subsequent optimization and testing period of a
15 year each, we would test as to whether we could
16 meet water quality standards in Rice Creek.
17 And if we could not, as a backup plan we would
18 be allowed to construct a pipeline relocating
19 our discharge into the St. Johns River.
20 GOVERNOR BUSH: As I understand it, there
21 is -- at least maybe the department can answer
22 this -- there is 80 percent, you believe, based on
23 current technology and based on the plans that
24 Georgia-Pacific has embarked on, that there is a
25 80 percent chance this will be self--- that water
60
1 quality standards will be met at the current
2 discharge location in Rice Creek?
3 MR. TAYLOR: That is correct.
4 GOVERNOR BUSH: And in the event that the
5 20 percent kicks in, then the need for
6 construction of a pipeline would become necessary.
7 And in that case, you need the easement now, even
8 though that's down the road 10 years or whatever
9 it is so that you can have the certainty for
10 investment?
11 MR. KENNEDY: That's correct.
12 GOVERNOR BUSH: Because if you can't invest,
13 if you don't have that, then you can't make the
14 necessary investments which will hopefully yield
15 the 80 percent result which is that we won't need
16 the pipeline at all?
17 MR. KENNEDY: That is correct.
18 As you see the spending schedule, the
19 mother load starts in 2004, which the approval
20 process for that is late this year.
21 So I will be venturing to our board of
22 directors in an attempt to get approval, gain
23 approval for funding for the bulk of the 74
24 million dollar expenditures which is roughly 66
25 over the next two years.
61
1 GOVERNOR BUSH: Can you comment on the St.
2 Johns water quality issues? Assume for the moment
3 you make the 75 million-dollar investment or plus,
4 up to 95 I guess; you still can't get to where the
5 law requires, where the agreement requires you.
6 So a pipeline is built. You are discharging
7 still, I assume it's less polluted waters than
8 today whether it's discharged into Rice Creek or
9 into St. Johns.
10 MR. KENNEDY: That's correct.
11 GOVERNOR BUSH: What's the environmental
12 impact of discharging in that larger body of
13 water?
14 MR. KENNEDY: Two things to keep in mind.
15 One, this whole project results in a reduction of
16 pollutants to St. Johns River, as what we
17 discharged to Rice Creek at the moment eventually
18 goes to the St. Johns River.
19 Additionally, because of the mixing zone
20 opportunities that exist in the St. Johns River
21 that do not exist in Rice Creek there will
22 actually be a benefit, if we were to get an
23 environmental benefit, if we were to get to the
24 pipeline option because of better mixing in the
25 St. Johns River where the diffuser will be
62
1 located.
2 So if we were to get to the pipeline
3 option, not only would we have the benefit of
4 the 74 million-dollar investment improvements;
5 we would also have the benefit of better mixing
6 as a result of the relocation.
7 I don't know if that answered your
8 question.
9 GOVERNOR BUSH: It did. Mixing, you mean
10 there is a larger volume in which to mix
11 because --
12 MR. KENNEDY: Higher velocity, where the
13 discharge would be from the diffuser pipe in the
14 St. Johns.
15 GENERAL CRIST: The Governor hit on my
16 question.
17 How do you define a mixing zone? You said
18 the St. Johns would be a better mixing zone.
19 Could you elaborate on that a little bit?
20 MR. KENNEDY: If I could ask, actually, one
21 of my employees, Myra Carpenter, an environmental
22 manager, to answer that, she would have a better
23 technical explanation than I would. Myra.
24 GOVERNOR BUSH: Do we have any other speakers
25 here that are in opposition? You all are here
63
1 for? How many people are here from Palatka?
2 Welcome to the Capitol.
3 CFO GALLAGHER: How many don't work for
4 Georgia --
5 GOVERNOR BUSH: I see one that doesn't.
6 MS. CARPENTER: The St. Johns River flow
7 patterns are quite different than they are in Rice
8 Creek. There is a lot more flow in general in the
9 river.
10 The differences between the two discharge
11 locations is the fact that Rice Creek is a very
12 small, low-flow stream, so when the water comes
13 out of the creek, it kind of hugs along the
14 western shoreline because it just sort of
15 sloshes back and forth because it, too, is
16 tidal.
17 So the opportunity for mixing because of
18 just the flow in the river and the way -- and
19 the fact there is a higher base flow in the
20 system means that there is a better opportunity
21 for the effluent to mix much quicker than it
22 does in Rice Creek.
23 And the fact that Rice Creek is a very
24 small stream, at times, particularly in the
25 spring, it's an effluent dominated system, so
64
1 it's more effluent than it is natural flow.
2 COMMISSIONER BRONSON: Governor, also, I was
3 going to remind you also that the system that is
4 being used here is similar to the system that's
5 being used in the Everglades, and that is
6 settlement ponds to pull out the heavier
7 materials; they settle out and they take the
8 cleaner water that's at the top of these ponds to
9 be released in the future, not straight out of the
10 system.
11 It is going to be a system of settlement
12 and clarification areas. And then the water
13 would be released. It's not all at one time.
14 MS. CARPENTER: That's correct. There is a
15 thousand acres of settling ponds and treatment.
16 GOVERNOR BUSH: General?
17 GENERAL CRIST: So I guess mixing means
18 greater volume creates a better mix?
19 MS. CARPENTER: And flow; it moves quicker,
20 just the velocity as well as the volume. It's how
21 quick the water moves and disburses.
22 GENERAL CRIST: Thank you.
23 CFO GALLAGHER: Governor, I move this item
24 with the understanding that the easement will not
25 take effect unless and until the required process
65
1 improvements are completed; and after those
2 improvements, the effluent still does not meet the
3 quality standards.
4 With that understanding, I recognize the
5 importance of Georgia-Pacific to Palatka and
6 the surrounding communities, and view the
7 easement and the pipeline as the last resort to
8 ensure the continued function of Rice Creek and
9 the St. Johns River as well as Georgia-Pacific
10 Palatka.
11 COMMISSIONER BRONSON: Question on the
12 motion?
13 CFO GALLAGHER: Yes.
14 GENERAL CRIST: Do you have a copy I can look
15 at it?
16 COMMISSIONER BRONSON: I am trying to
17 remember in my mind everything you just said and
18 how the progression would go.
19 Will that motion cover the fact that
20 Georgia-Pacific is going to have to go to their
21 leadership with some type of guarantees that if
22 they spend an extra 74 million for these
23 improvements, which could be 94 million by the
24 time they come to -- if they do have to put the
25 pipeline in, is this -- I need to ask
66
1 Georgia-Pacific this.
2 Is this going to give you time under these
3 conditions to get all of that done with
4 potential approvals from your board rather than
5 closing down your operation here to move it
6 into Georgia, which is going to be really
7 costly for Florida?
8 GOVERNOR BUSH: That's not going to happen.
9 COMMISSIONER BRONSON: So I want to find -- I
10 want to get the full knowledge of what's going to
11 happen if this motion takes full effect.
12 MR. KENNEDY: Absolutely. I would actually
13 appreciate seeing the words in the motion and
14 reviewing it, if I could, for a second.
15 CFO GALLAGHER: The motion reflects the staff
16 recommendation.
17 MR. KENNEDY: Reflects the staff
18 recommendation? If that's the case, then I
19 believe that would provide the certainty to the
20 board of directors to say we do have a backdrop to
21 the administrative order if those elements do not
22 work to meet water quality standards in Rice
23 Creek.
24 CFO GALLAGHER: I just wanted to hear that.
25 GOVERNOR BUSH: Thank you. There is a
67
1 motion.
2 COMMISSIONER BRONSON: Second.
3 GOVERNOR BUSH: Any other discussion?
4 Questions?
5 GENERAL CRIST: Does it address -- and only
6 because I haven't had a chance to look at it. I
7 am concerned about the pollution level, and there
8 is a distinction to be made between the
9 standards -- and I love Georgia-Pacific, it's a
10 great company. I love Palatka, I love Putnam
11 County, glad you are here.
12 Representative, I returned your call
13 yesterday. I am sorry we didn't have a chance
14 to chat, but you are a great man. But anyway,
15 having said all of that --
16 CFO GALLAGHER: You can tune it on the
17 Internet, replay it, if you want.
18 GENERAL CRIST: If you are really bored some
19 day. At any rate, the issue for me is not to
20 increase the level of pollution here.
21 And I understand if you mix it in a bigger
22 pot, it dilutes, the standard is easier to
23 meet.
24 My only concern is that there not be an
25 increase in the pollution as a result of a
68
1 bigger pipe going into the St. Johns.
2 Treasurer, if you could explain your
3 motion, which I think is along the lines of
4 what I anticipated making, I would appreciate
5 it.
6 CFO GALLAGHER: What happens is they have
7 agreed to change with the 73 plus million dollars
8 to be spent to use present known ways to clear up
9 the effluent and have it clean enough to pass the
10 test.
11 This allows them -- if by chance, if they
12 spend all this money, all in good faith, to get
13 this done, and it doesn't meet it for the
14 creek, then we allow them to take this clean
15 water that just doesn't meet it and run it into
16 the St. Johns which can take it a lot easier
17 than the Rice Creek can.
18 GOVERNOR BUSH: So in no circumstances would
19 there be increased pollution over the next eight
20 years or whatever?
21 CFO GALLAGHER: It's got to be less because
22 what was running down Rice Creek right now is
23 going into St. Johns, and a heck of a lot worse
24 than it will be down the road.
25 GENERAL CRIST: Why is there a need for a
69
1 pipe?
2 MR. KENNEDY: Again, because of the size of
3 Rice Creek and mixing capability versus the size
4 and mix capability of the St. Johns.
5 GENERAL CRIST: With all due respect, that's
6 where you lose me, because if it's the same
7 amount, if it's not any more pollution, why do you
8 need to affect the mixing capability issue, if all
9 you are going to do is do the same stuff? And
10 maybe not at all; if the treatment part in the
11 permit that's in litigation right now works out
12 and you guys are able to address it, which I have
13 great confidence in -- but trust but verify is
14 important to me.
15 So my concern is why would you need to
16 have -- what's the difference? If you are not
17 going to increase the flow of what you are
18 putting out of the plant, why are we here?
19 MR. KENNEDY: If I could ask the department
20 to answer that question, that would be --
21 MR. TAYLOR: General, there was a staff
22 person who was with this from the beginning that
23 can explain the NPDS requirements and your
24 question goes to whether or not water quality --
25 GENERAL CRIST: If you could not use
70
1 acronyms.
2 MR. SIEBOLD: Thank you. My name is Vince
3 Siebold, administrator of industrial waste water
4 section for DEP. And I think your issue boils
5 down to meeting water quality standards.
6 They are unable to meet it in Rice Creek
7 at this time, so we asked for the
8 administrative order and the process changes.
9 If they still can't attain water quality
10 standards in Rice Creek, that's where the
11 pipeline comes in.
12 GENERAL CRIST: You hit my issue, my issue
13 is, I understand there is a difference between
14 water quality standards and the load, or in other
15 words, the bad stuff that goes out of a plant, to
16 put it in laymen's terms. Is that accurate? Is
17 there a difference? Is there a distinction?
18 MR. SIEBOLD: Yes.
19 GENERAL CRIST: I am concerned about the bad
20 stuff coming out of a plant more than I am about
21 it being diluted in St. Johns which I care about
22 deeply.
23 MR. SIEBOLD: When we reviewed this
24 application and for the pipeline as well, we went
25 through the extent of engineering and modeling to
71
1 assure we had reasonable assurances they could
2 meet water quality standards in the St. Johns with
3 the pipeline.
4 So those assurances have been provided.
5 But we said, let's go through everything we can
6 to see if they can attain water quality
7 standards in Rice Creek.
8 The pollutant loading is not changing.
9 Actually they are decreasing their average
10 daily flow and maintaining the same loading, so
11 they are not going to be increasing pollutant
12 loading at all.
13 GENERAL CRIST: Okay.
14 GOVERNOR BUSH: General, this may help as
15 well, that the '93 solution was to put a pipeline
16 in the St. Johns. New guys come into town, new
17 Department of Environmental Protection, trying to
18 seek a better solution, and Georgia-Pacific steps
19 up to the plate and says, Okay. We will change
20 our plans to invest $75 million to lower the
21 amount of pollutants leaving the plant, which is
22 your concern.
23 So we have gone from early 1990s pipeline
24 into St. Johns to the company making a major
25 investment to clean the water quality
72
1 irrespective of whether it goes into Rice Creek
2 or to the St. Johns River.
3 And in the case of the St. Johns River, it
4 meets water quality standards the way that the
5 alternative that we hoped doesn't have to
6 happen comes in.
7 So to me, and the 20.15 jobs an hour
8 stays, I think this is -- we have the three big
9 paper pulp plants in north Florida, none of
10 which were meeting EPA and DEP requirements.
11 And by just not acting in the past we were
12 allowing the pollution to go in.
13 Georgia-Pacific was the first company of
14 the three to come up with a creative solution,
15 and I appreciate the fact they are doing it.
16 GENERAL CRIST: Me, too. Maybe I can offer a
17 friendly amendment that might satisfy me and get
18 me to yes as well, which would be to add on to
19 what Treasurer Gallagher added so long as the
20 load, pollutant, doesn't increase too. Then I am
21 a happy guy.
22 GOVERNOR BUSH: From today? Mr. Kennedy.
23 MR. KENNEDY: Let me answer that. First of
24 all, the pollutant load is regulated by the
25 Department of Environmental Protection, and
73
1 frankly this whole process will actually reduce
2 the pollutant load over time.
3 In the event that the pollution load or
4 pollutant load would need to be increased for
5 whatever reason, we would have to, as a
6 corporation, go back to the Department of
7 Environmental Protection and ask for a permit
8 change in order to make that happen.
9 So it would be regulated by the
10 department.
11 GOVERNOR BUSH: It would come to us.
12 MR. KENNEDY: No, it would not, it would have
13 public -- it would be open to the public and be
14 available for public input.
15 COMMISSIONER BRONSON: If I could clarify
16 too. Mr. Kennedy, isn't this also going to be --
17 it's not just DEP that you are going to have to
18 satisfy in the end; you got to satisfy EPA, the
19 Federal Corps of Engineers and our own water
20 management district for that area, so you are
21 having to meet the criteria of four different
22 state and federal agencies to be able to do it
23 anyway; isn't that correct?
24 MR. KENNEDY: That's correct. I think, again
25 speaking to the certainty, we want to be sure that
74
1 there aren't more openings for input that could
2 lead to more hearings and more time delays for us
3 to get on with this environmental improvement
4 effort.
5 So four, these four have taken us 10 years
6 to do. If we add more, then it will take 10
7 more years, and 10 more years and that's a very
8 difficult position to put a business in for a
9 long-term future.
10 GENERAL CRIST: Understood. But I want to
11 offer my friendly amendment so long as the load
12 design doesn't increase. And you can vote it up
13 or down.
14 GOVERNOR BUSH: That will require three
15 votes, just as the agenda item will as well.
16 There is an amendment to the motion. All in favor
17 say aye.
18 GENERAL CRIST: Aye.
19 GOVERNOR BUSH: All opposed?
20 CFO GALLAGHER: No.
21 COMMISSIONER BRONSON: No.
22 GOVERNOR BUSH: The motion does not pass.
23 Now we are back to the agenda item. There is a
24 motion and second. Any other discussion? All in
25 favor say aye.
75
1 CFO GALLAGHER: Aye.
2 COMMISSIONER BRONSON: Aye.
3 GOVERNOR BUSH: All opposed.
4 GENERAL CRIST: No.
5 GOVERNOR BUSH: Thank you all very much.
6 Representative, thank you; Mayor, Commissioners,
7 all of you.
8 MS. ARMSTRONG: Also, my apologies,
9 Representative Pickins was also here. He wanted
10 to say thank you.
11 REPRESENTATIVE PICKENS: No, I know when to
12 waive my time in support of something that already
13 passed.
14 GOVERNOR BUSH: Good lesson learned.
15 REPRESENTATIVE PICKENS: I have a resolution
16 from the Putnam County legislative delegation
17 which is proof that Senators and Representatives
18 can agree on something. So that's of the record.
19 CFO GALLAGHER: Thanking us for our vote?
20 MR. TAYLOR: Governor and Cabinet, you do
21 have a resolution from the City of Palatka, and on
22 behalf of the mayors' office, thank you so much.
23 GOVERNOR BUSH: Thank you. Item 2.
24 CFO GALLAGHER: Move to defer to August 12.
25 MS. ARMSTRONG: Correct.
76
1 GOVERNOR BUSH: No problem. There is a
2 motion to defer. Is there a second?
3 COMMISSIONER BRONSON: Second.
4 GOVERNOR BUSH: There is a second. Without
5 objection, the item is deferred until when?
6 CFO GALLAGHER: August 12.
7 I would like to defer item 3 also to
8 August 12, so we can get them done at the same
9 time.
10 MS. ARMSTRONG: We have a series of speakers
11 and we are ready to move forward. It's your call,
12 sir.
13 GOVERNOR BUSH: People have come up to talk
14 about it?
15 MS. ARMSTRONG: Yes, we have at least one
16 from out of town, perhaps more.
17 GOVERNOR BUSH: We got our guy with the
18 cowboy tie, too, I know he wants to speak.
19 MS. ARMSTRONG: Yes, sir, he is always ready
20 to speak.
21 This is our telecommunications rule, the
22 fiberoptic rule that we have been working on
23 now for quite some time. I have Mike Sole who
24 is prepared to lay out the issues as it has
25 developed for final adoption. If you are
77
1 prepared or we can defer.
2 GOVERNOR BUSH: I am ready. One of the
3 questions I have is, why would we have to do the
4 teleport one if the general rule is approved? If
5 they comply with the rule, then do they come back
6 and -- why do we have a rule?
7 MS. ARMSTRONG: You want to explain it? I am
8 going to let Mike Sole explain why we are
9 deferring number 2 and then moving forward on
10 number 3.
11 MR. SOLE: Again Mike Sole, Department of
12 Environmental Protection. Governor, I think the
13 question is why bring Florida teleport forward --
14 GOVERNOR BUSH: Before the rule.
15 MR. SOLE: -- before the rule. And that was
16 actually a suggestion made by several others, and
17 that it would probably be best if we talk about
18 the rule, let's lay the framework of the rule out
19 first and subsequently bring items for
20 consideration.
21 GOVERNOR BUSH: Very good. Thank you. You
22 want to discuss what this rule is?
23 MR. SOLE: Yes, sir. Again this item
24 requests consideration to adopt amendments to
25 Chapter 1821, Florida Administrative Code,
78
1 regarding offshore telecommunications lines.
2 As you may recall, the Board of Trustees
3 approved publication of notice of proposed rule
4 making in December 2002. Subsequent to that we
5 had a rule hearing workshop or hearing in West
6 Palm, got some input from folks in
7 February 2003, made a few amendments. Those
8 have been published and based upon those, we
9 bring the current rule form to you.
10 In general, the rule provides for the
11 creation of special consideration or gaps as
12 areas to bring and encourage telecommunication
13 lines to come through on the southeast reach.
14 Can we get the overhead?
15 Thank you.
16 GOVERNOR BUSH: That's not going to work.
17 This works but you got to be 12 years old to read
18 it.
19 MR. SOLE: The rule establishes five of these
20 gaps in the southeast part of the state. This is
21 primarily gaps where, or excuse me, where
22 telecommunications lines have landed in the past.
23 These gaps were created, you may recall a colorful
24 discussion Dr. Ray McAllister provided us in
25 December, the gentleman went out and helped us
79
1 identify these gaps.
2 We've also gone through and done some
3 validation diving from the district staff. If
4 we can get the next image, it gives you a feel.
5 This is data which is basically the bathymetry
6 of the region. You can see the very clear and
7 distinct gaps in the reef.
8 And the concept of establishing these
9 corridors or these special consideration areas
10 is to facilitate protection of this reef
11 resource. By identifying these gaps, we are
12 saying, hey, here is a safe place to land in
13 Florida without adversely affecting this
14 offshore reef.
15 The other thing that is important to note
16 is we are not mandating the use of the gaps.
17 We are encouraging the use of the gaps and we
18 are doing that encouragement through three
19 incentives.
20 One of them is to allow the additional
21 placement of spare conduits if you use a gap
22 and I will explain the conduits in a second.
23 The other incentive is to allow an applicant to
24 come in with a sketch of their proposal instead
25 of full-blown survey, so it should save them
80
1 some money up front.
2 And finally, the third incentive was to
3 allow delegation to the Department of
4 Environmental Protection to act on behalf of
5 the Board of Trustees as long as we provide the
6 Board of Trustees notice of the action and the
7 Trustees obviously have the ability to request
8 that the item be brought to them.
9 Those are the primary incentives for these
10 gaps.
11 GOVERNOR BUSH: Is there anybody here
12 representing the companies that -- I'd just like
13 to get a sense on how proscriptive the department
14 has gotten.
15 It seems to me that in my reading of it,
16 maybe I am wrong -- you can comment as well --
17 it appears that the department may have kind of
18 gone back to the old way of environmental
19 regulation, which is input focussed rather than
20 outcome results oriented.
21 In other words, I would hope that the
22 objective here isn't to try to prescribe how
23 people do their business, like the number of
24 conduits and the number of this and that; but
25 the focus is we want to protect the coral reefs
81
1 and we want to make sure that this is done in a
2 way that, in terms of engineering, is sound, to
3 avoid what may have occurred with the examples
4 with AT&T cable in the Bahamas or some place
5 where the movement destroyed coral reef and we
6 wanted to avoid that.
7 MR. SOLE: Yes, I believe the answer is yes.
8 We are not trying to proscribe to industry, here
9 is how you do your business. We are trying to lay
10 out a framework on how the resources can be
11 protected.
12 Again, one of the ways that we have done
13 this is identified these gaps. We acknowledge
14 there are potentially other gaps out there that
15 are available and viable. And if industry
16 wants to use those, that's great. And if
17 industry has other ways to ensure protection of
18 the resources, that's fine too.
19 GOVERNOR BUSH: Here's my concern. The one
20 specific place, and I guess it related to what
21 would have been the applicant on the agenda item
22 before this.
23 This notion of building in anticipation of
24 a business plan or business market, I don't
25 know what the plan was, but to have a cable
82
1 that would have conduits or subconduits, if you
2 will, so that you can run different lines
3 through one delivery, one pipe if you will.
4 And we were starting, however, installations
5 using subconduits within a conduit shall be
6 allowed up to six conduits and one additional
7 conduit. Why do we care how many conduits are
8 inside of a pipe when the objective is to make
9 sure the coral reef isn't hurt?
10 MR. SOLE: That's a good question. Let me
11 try to touch on that and kind of bring you there.
12 The conduit concept is, the rule requires
13 as it stands today, based upon technology, that
14 when you do a landing in Florida, you have to
15 drill under the first reef resources. And you
16 can see there is, on the drawing there is a
17 reef resource nearshore.
18 Horizontal -- you can't see my pen.
19 Horizontal directional drilling technology can
20 only go so far out. So right now there is a
21 scenario where we request or are requiring --
22 GOVERNOR BUSH: Which gap is this?
23 MR. SOLE: This is the Sea Turtle or Lake
24 Worth gap. So they are required to drill under
25 the reef from the landing site.
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1 GOVERNOR BUSH: Can you point where you are
2 talking about. The first reef is the one -- thank
3 you.
4 MR. SOLE: Right. And they will punch out in
5 between the first reef and second reef probably
6 under normal circumstances.
7 You can see the second reef as well. That
8 drilling is a bore. And what they do is they
9 install a conduit in that bore. That way they
10 can pull the line when it comes in. So that's
11 the conduit, when we talk about conduits that
12 we are discussing.
13 To get to your direct question, why does
14 the department specifically establish in this
15 rule how many subconduits an applicant can
16 have?
17 There's two other provisions in the rule
18 that we're somewhat concerned about, and that's
19 how many cables are coming into this landing
20 site upfront?
21 As you might be able to tell, there is a
22 lot of resources in the area. The rule says
23 look, for each landing site, there should only
24 be six telecommunication lines coming in on a
25 normal basis.
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1 The rule --
2 GOVERNOR BUSH: Okay. Why would you care
3 what lands?
4 MR. SOLE: To address the resources. As you
5 might -- I always like to draw on these drawings
6 if you don't mind.
7 COMMISSIONER BRONSON: I have a question,
8 too, while you are going to go ahead and answer
9 this, and that is with new science and technology
10 developing every day, the conduit pipe could be
11 this big now, but you are saying you can only have
12 six; but they may develop ways of doing this, it
13 may even be better than what they have today, they
14 could put a pipe in this big, which means it has
15 the capability of holding a whole lot more
16 telecommunications equipment in there going
17 through one pipe.
18 So why -- the Governor's question is right
19 on the money. Why are we telling business how
20 to run their business rather than worrying
21 about protecting the resources, which is what
22 we are really here to talk about?
23 MR. SOLE: I understand the question,
24 Commissioner. The issue of why we establish a six
25 subconduit limit --
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1 GOVERNOR BUSH: Write on your little picture
2 there.
3 MR. SOLE: If the landing site is here and
4 they do a bore here, the analysis that the
5 department anticipates reviewing is if you come
6 in -- I got one line and I am going to do a
7 conduit as well. We are going to look at the
8 individual run that they go through the gap.
9 And we need to evaluate that run to make
10 sure it is able to avoid the resources here or
11 minimizes impacts to the resources and the
12 second reef and resources even within the gap.
13 GOVERNOR BUSH: Keep going.
14 MR. SOLE: The concept of looking at limiting
15 a landing site to generally six lines is that the
16 capacity here is envisioned to automatically be
17 able to hold six lines on an environmental basis.
18 Additionally, there is a concern about how many
19 preemptions we are going to authorize somebody
20 automatically.
21 GOVERNOR BUSH: Why do you say preempt? That
22 shouldn't be your business. We have five -- it
23 would be your business -- assume presumption means
24 that --
25 MR. SOLE: -- protecting other submerged
86
1 lands.
2 GOVERNOR BUSH: -- that other people couldn't
3 come -- you are not worried about -- I hope you
4 are not worried about the telecommunications
5 market.
6 MR. SOLE: Preemption of sovereign submerged
7 lands.
8 GOVERNOR BUSH: We have five different entry
9 points, so it seems to me if you could create a
10 system that is technologically feasible where you
11 have a broader number of conduits that would come
12 in one, that you would lessen the environmental
13 impact.
14 So by using your term preemption, I am not
15 sure that's preempting, but you are actually
16 creating more, a greater chance. If you have
17 to bore under a reef more than once, there is a
18 greater chance of a problem, isn't there?
19 MR. SOLE: Absolutely. Again, I think we
20 have written the rule to actually encourage what
21 you just said; in that if you can drill one hole
22 underneath the reef, which has an environmental
23 risk, and bring in six lines, that's great. I
24 think that's fantastic.
25 GOVERNOR BUSH: Why limit to six?
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1 MR. SOLE: The limit to six, again, codifies
2 to how many lines are we looking at upfront? Not
3 just the conduit in the bore, but there is two
4 impacts we are talking.
5 GOVERNOR BUSH: Are you saying -- if the
6 conduits only exists underneath when they are in
7 the boring portion of the easement?
8 MR. SOLE: I apologize, say that again.
9 GOVERNOR BUSH: I am envisioning that you
10 would have six subconduits in an -- I am going to
11 call it a pipe -- and that from the point that you
12 bore to the shoreline, it would be in a pipe.
13 That's not accurate?
14 MR. SOLE: That's accurate.
15 GOVERNOR BUSH: How many lines you have
16 doesn't matter. Where does it matter?
17 MR. SOLE: This is where I am going to show
18 you why the lines matter. The issue of how many
19 lines matters as it relates to the point from the
20 boring in the ocean as you go out.
21 Suddenly, if I have got more than six
22 lines -- and we are looking at an application
23 right now for one line, we are going to say,
24 yeah, you can have six subconduits just as a
25 general feature with your one line.
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1 I can reasonably conclude what the impact
2 is going to be. If suddenly it's 25, like
3 Treasurer Gallagher pointed out or Commissioner
4 Bronson, I am sorry, if it is suddenly 25, but
5 they only have one line, then am I technically
6 saying yes, this can take 25 lines throughout
7 this area.
8 GOVERNOR BUSH: We got your point.
9 MR. SOLE: That is the basis for why we said,
10 look, upfront let's limit it to six because that's
11 what we envision the capacity of the resources can
12 handle. It doesn't say it will limit it in the
13 future. It merely says as an upfront review, six
14 is a number that we envision we can handle.
15 GOVERNOR BUSH: If you want to go past six,
16 the applicant can show -- can justify it? That's
17 in the rule as well.
18 MR. SOLE: The answer to that question is
19 yes, because right now what we are suggesting is
20 the conduit itself -- I don't tell them how many
21 individual subconduits per conduit. The answer is
22 if you are coming in with one cable, you can have
23 up to six spare subconduits. But if you come in
24 with six cables, then you have obviously the need
25 and capacity for more subconduits and they can add
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1 on to it.
2 GOVERNOR BUSH: But they can justify it so as
3 not to jeopardize the outer reef?
4 MR. SOLE: Absolutely, yes, sir, and it does
5 provide that opportunity.
6 CFO GALLAGHER: Here's another thing. Each
7 time these people are asking for two lines or two
8 main conduits, right? And the reason is -- you
9 don't want to put 25 in one because if it gets
10 cut, somehow you lose them all.
11 So we want to have a backup to be a
12 separate one; if one gets cut, you got a whole
13 different one going through and they are all
14 applying for at least two of those, and that's
15 the max we are going to let them do or can they
16 have more than that?
17 MR. SOLE: Say the last part again.
18 CFO GALLAGHER: Two big conduits coming in,
19 you have the subs inside; that's what we are
20 allowing now, right?
21 MR. SOLE: What the rule provides for now,
22 you mean what we are proposing in the rule?
23 CFO GALLAGHER: Right.
24 MR. SOLE: What the rule provides for now is
25 if you come in with one line -- and we'll use
90
1 Florida Teleport as an example since that's one we
2 recently looked at.
3 If they come in with one line, one real
4 line, they can install one conduit that have
5 six subducts, and they can install another
6 conduit as that backup spare but doesn't have
7 any subducts. It's empty right now. If they
8 have capacity demands in the future, sure, they
9 can pull those subducts back in. So they have
10 the capacity to modify and increase that.
11 CFO GALLAGHER: The theory of this, at least
12 the way I see it is, when you have all the
13 equipment out there to be drilling these holes,
14 it's a heck of a lot cheaper to drill two of them
15 than it is to bring them all out there again to
16 drill another one. So you give them a second one
17 there, say don't use it until something goes wrong
18 with the other one, then it's already drilled.
19 MR. SOLE: That's correct.
20 GOVERNOR BUSH: Would anybody like to speak
21 against the rule, or express concerns, however you
22 want to say it, a different way?
23 MR. BRIGHTMAN: Or somewhere inbetween,
24 Governor.
25 Good morning, Governor, Members of the
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1 Board, I am Richard Brightman, from Hopping,
2 Green and Sams. I am here today on behalf of
3 NASCA, North American Submarine Cable
4 Association.
5 It's a trade association of companies who
6 are actually engaged in the business of
7 installing and operating these international
8 cables.
9 I think all of you will recall that this
10 has been a long and occasionally bumpy road to
11 develop this rule. And the one thing that I
12 would like to remind you is that the Governor
13 has always said don't hurt this industry.
14 GOVERNOR BUSH: It has enough problems as it
15 is.
16 MR. BRIGHTMAN: That's whole other story,
17 Governor. There is one thing that is in this rule
18 today that hurts the industry, and it's exactly
19 the issue that you are talking about, the number,
20 the limitation on the number of conduits that can
21 be installed.
22 It's difficult to discuss this in the
23 context of subducts because subducts is an
24 entirely new technology, one that has never
25 been used before in Florida nor anywhere in the
92
1 world that we are aware of, that the
2 traditional technology has not been to use
3 subducts largely for the security reason that
4 Treasurer Gallagher mentioned; you don't want
5 to have all of your cables in one place.
6 The traditional technology has been to
7 install a smaller conduit and put one cable in
8 one conduit. And then you install the series
9 of additional conduits; the practice over the
10 past 10 or 15 years has been approximately six
11 spares for every cable, that allows not only
12 for the repairs in an emergency situation
13 should there be a disruption, but also allows
14 these companies to plan into the future for
15 growth of capacity.
16 You have the ducts already -- the conduits
17 already in place.
18 And it does make environmental sense, if
19 you are going to go out there and mobilize to
20 install a single conduit, to go ahead and
21 install the spares at the same time rather than
22 coming back in the future and remobilizing with
23 all that expense, and so forth.
24 So the limitation on the number of
25 conduits themselves, I am not talking about
93
1 subducts, I am talking about the pipe yourself
2 as you referred to it; currently the rule says
3 you can only have two spares if you are in one
4 of the special consideration areas, and you can
5 only have one spare if you are somewhere
6 outside of the five recognized special
7 consideration areas.
8 GOVERNOR BUSH: This very detailed scientific
9 depiction of what happens on this picture right
10 here, you disagree with that, that visual --
11 MR. BRIGHTMAN: I think it's a little
12 overblown. I don't think any company would intend
13 to install that many cables that close together
14 for the very security reasons we discussed.
15 That's why over history there has been
16 approximately -- it has varied some --
17 approximately six spare conduits for every
18 actual cable that has been installed; not the
19 25 that you see in this marvelous rendering.
20 By limiting the number of spare conduits,
21 the way it hurts the industry is it prevents
22 the industry from doing the kind of long-term
23 planning for these major capital projects that
24 you would expect a responsible company to do.
25 Because they can only install a single
94
1 spare. They can't plan for 10 years into the
2 future and predict what the capacity is going
3 to be and construct one time to accommodate
4 that capacity.
5 What the industry is asking, and I
6 circulated some draft language to the staff, we
7 are not asking that you authorize a larger
8 number at this time. What we are asking is
9 that you reserve to yourselves the discretion
10 in a proper case in the future upon a
11 demonstration by the applicant that more is
12 appropriate, so you don't limit yourselves to
13 the maximum of two in a special consideration
14 area and one outside of a special consideration
15 area.
16 There is a little quirk of administrative
17 law that you are probably aware of but let me
18 remind you. Because the Trustees act in their
19 proprietary capacity, the normal ability to
20 come to -- to petition for a variance or a
21 waiver of a rule requirement is not available.
22 There is a recent court case that decided that.
23 So if you limit yourself to two and there
24 is a project that comes around in five years,
25 then it is clear to everybody that five are
95
1 justified, you wouldn't be able to improve it
2 because you couldn't grant a waiver.
3 So what we are suggesting is to add some
4 additional language to the rule to preserve
5 your discretion in a proper case in the future
6 to authorize additional conduits.
7 I suggested some language both to staff
8 and to the Cabinet aides which we think will
9 accomplish that, and that's what we would
10 request that you do, is to amend the proposed
11 rule to preserve that discretion.
12 GOVERNOR BUSH: Any questions or comments?
13 COMMISSIONER BRONSON: I do have, Governor.
14 I am trying to get my hands around this.
15 Now there is nothing in the proposed rule
16 that I have seen yet that would indicate at
17 some point in time -- I know there has been
18 some mention of giving discretion to DEP on
19 some issues, which I am -- not that I don't
20 have -- I don't have anything against DEP,
21 but --
22 GOVERNOR BUSH: I hope not, Commissioner.
23 COMMISSIONER BRONSON: -- things that are
24 supposed to come to the Cabinet for approval, I
25 would like to kind of take a look at those things
96
1 myself if the Cabinet is supposed to approve those
2 issues.
3 However, I want to make sure that there is
4 no implication here that there would be -- if a
5 company comes in and -- this is the reason for
6 my banner here, is the whole purpose of these
7 types of programs, just like we have now where
8 we hook up different hookups underneath bridges
9 that go across rivers and everything else is
10 for the public good, is that correct?
11 This is usually a public -- for the public
12 good process of bringing in, whether it's cable
13 or water lines or power lines or whatever it
14 is, it's in the public interest, public good,
15 even though private companies may do the actual
16 application to run the lines.
17 I just want to make sure that we don't
18 have this potential for six lines in this
19 sleeve that we are talking about and then all
20 of a sudden, you have a company that wants to
21 go in at Point A here, because that's where
22 their location is for their business, but yet,
23 they say just up the road here, 20 miles there
24 is a sleeve, and you can run your line through
25 there. I want to make sure there is not a
97
1 forcing of a business to have to reroute their
2 whole process. That's one thing I want to be
3 clear here.
4 MR. SOLE: Commissioner Bronson, that's a
5 legitimate question. And the answer is no, there
6 is not a forcing of, encouraging one private
7 entity to use another entity's spare. That would
8 be an economic decision that that private entity
9 would need to make, whether it was worthwhile to
10 bore their own hole or use one that is existing.
11 GOVERNOR BUSH: Any other discussion? How
12 far along are you?
13 MR. SOLE: Governor, there is one issue on
14 this issue of how many spare conduits should be or
15 should not be authorized. I want to present one
16 more piece of information.
17 When we looked at -- when we wrote this
18 rule, we did look at industry practice and what
19 transpired over basically the last several
20 years. And while we acknowledge that AT&T's
21 activities, where they installed two lines and
22 a total of seven empty conduits would not meet
23 the rule, I do want to point out that the
24 subsequent three projects built in Florida
25 would all meet the rule if they are in a
98
1 special consideration area or, at a minimum,
2 one of them would not meet it if they were
3 outside a special consideration area.
4 So this demand for six spares is something
5 that's -- it's been a consistent voice from
6 industry, so I don't want to say it's a new
7 concept. But looking at trying to ensure we
8 minimize the impact of those resources on
9 speculative ventures is the one thing that we
10 are trying to do.
11 GOVERNOR BUSH: We are back now to what your
12 role here is. Is your role to determine what is
13 speculative and what's market oriented, all that
14 stuff, or is your role to protect the reefs?
15 MR. SOLE: I believe the role is to protect
16 the reefs. And the reason why I bring up the word
17 speculative, sir, is that each time we do drill a
18 hole under the reef, it is a risk to that reef,
19 there are threats to the reef.
20 And while we acknowledge industry needs
21 spare conduits to be able to provide service,
22 timely repairs, at what point do we say it's
23 okay to drive six holes under the reef for this
24 one line?
25 GOVERNOR BUSH: With all due respect to -- by
99
1 the way, you are one of the best presenters that
2 we have, so this is not personal, don't take it
3 that way.
4 I am not sure I want the Department of
5 Environmental Protection determining what is
6 speculative in a market. It's not your job.
7 The skill sets are the resource itself. And
8 that's what you guys are very good at.
9 And so I think that it costs money to bore
10 under a reef; it sounds like to me it costs a
11 lot of money. And the determination ought to
12 be, when you do it, here are the specifications
13 and here's the cost and here's the penalty if
14 you do it poorly, which I assume is all part of
15 the contract, all part of the easement.
16 And if you are doing it just to be
17 speculative, you are probably going to lose
18 money. That's their decision, it's not yours,
19 is it, so long as the resources are protected.
20 There is a point past which you have to
21 say no. And there is another point to this,
22 which is the -- how long have we been doing
23 this rule thing here? It's been going on for a
24 while, and the objective was to try to create
25 an inducement for the companies to go to the
100
1 places we want them.
2 And the more -- so the more you induce,
3 the greater chance they will do it. Because
4 Commissioner Bronson is right; a lot of the
5 determination on the telecom side, or whatever
6 the user is, is where you land, how you connect
7 to whatever the infrastructure is you are
8 trying to expand. And so there could be other
9 considerations way beyond the sovereign
10 submerged lands part of this.
11 MR. SOLE: Yes, sir.
12 GENERAL CRIST: The Governor brings up a good
13 point.
14 Are there any other ways we can
15 incentivize going to the gaps other than just
16 speeding up the process? Is there any economic
17 incentivizing we can do, or is that only a
18 legislative thing? That's what I am talking
19 about, is money.
20 MR. SOLE: I think the decision on the
21 economics is yours as it relates to the amount of
22 fees that are applied. Those are established in
23 this rule itself.
24 GOVERNOR BUSH: They are?
25 MR. SOLE: They are not incentives. The
101
1 actual fees for these projects are established in
2 this rule making. And the fees currently do not
3 provide an incentive to use the special
4 consideration areas.
5 GENERAL CRIST: I have an idea. Maybe as an
6 amendment to what we do here is to those companies
7 who go through the gap, not have to pay a fee. We
8 are trying to encourage good behavior and sound
9 environmental support and to do it with economics
10 and speed in the process.
11 I throw that out for discussion among my
12 colleagues.
13 CFO GALLAGHER: In the discussion here, we've
14 got about two or three or fourth issues. We have
15 delegation of the authority issue, we have how the
16 many conduit issue, we have a fee issue.
17 And rather than sit here all afternoon
18 trying to work each one of those out, I think
19 it would be better off to put it behind us
20 until the next meeting and let them all work
21 with us and come up with a -- take care of
22 those issues in a tiny little Cabinet work
23 group, instead of us trying to work -- I think
24 each one of those needs to be looked at. I am
25 not -- I don't know exactly where I want to be
102
1 on every one of them, and I don't know that
2 everybody else does. And I just assume do it
3 for the next -- that's where I started, if you
4 remember.
5 GOVERNOR BUSH: I think there is a motion to
6 punt and a second until August 12. Any other
7 discussion?
8 The motion to defer to August 12 passes
9 unanimously. I would just voice my opinion on
10 the fee issue.
11 I concur I think with General Crist that
12 either a very, very low fee or no fee would be
13 the dominant inducement that you could come up
14 with, I would think.
15 Now in my opinion that's only for the
16 linear foot grant, or whatever we are calling
17 it, not the application fee which probably -- I
18 assume is to cover the costs of determining the
19 viability and feasibility of the --
20 MR. SOLE: That is correct, yes, sir.
21 GOVERNOR BUSH: 15,000, if that's costs for
22 you, then that would be fair.
23 CFO GALLAGHER: Better keep it coming, we are
24 using up all the general revenue.
25 MR. SOLE: Thank you.
103
1 GOVERNOR BUSH: Thank you all very much.
2 By the time I finish my tenure as
3 Governor, we'll have some system in place for
4 sovereign submerged lands.
5 CFO GALLAGHER: I would like to take item 4
6 and also defer it until August 12. Load up
7 August 12.
8 GOVERNOR BUSH: There is a motion to defer.
9 Is there a second.
10 GENERAL CRIST: Second.
11 GOVERNOR BUSH: Moved and seconded. Without
12 objection the item is deferred until August 12.
13 MS. ARMSTRONG: On items 5 and 6, they are
14 both sale of Murphy Act Land. I wanted to point
15 out on these that in both instances, while these
16 normally we will just get an apprising value and
17 sell them individually, because there is not a lot
18 of value to these, there was interest ahead of
19 time in both and we bid them and sold them to the
20 highest bidder on both of these.
21 I know this is of specific interest to
22 Treasurer Gallagher, so I wanted to point it
23 out. In one we got another third higher above
24 appraised value and then the second one we got
25 three times the -- two times the appraised
104
1 value.
2 So item 5 is in Nassau County and
3 item 6 -- they are both in Nassau County.
4 CFO GALLAGHER: Motion on 5 and 6.
5 GOVERNOR BUSH: There is a motion on 5 and 6.
6 Is there a second?
7 GENERAL CRIST: Second.
8 GOVERNOR BUSH: Moved and seconded. Without
9 objection, both items pass.
10 MS. ARMSTRONG: Item 7, I think we have
11 actually come to an agreement on this issue of
12 statutory way of necessity.
13 This item has been before you several
14 times. The last time we deferred it was about
15 a year ago. Mr. Andress owns several lots in
16 Cayo Costa State Park. They are landlocked and
17 he is entitled to a statutory waive of
18 necessity, and the issue is where that the
19 access should occur.
20 The state's position is that it ought to
21 go across already disturbed roadway and what is
22 actually kind of an ATV trail. He in the past
23 has argued for a way that would go across a
24 totally undisturbed area of land.
25 He is here today with his attorney. I
105
1 thought I would let them speak first because I
2 think we've come to an agreement where that
3 access ought to be.
4 GOVERNOR BUSH: All right. Can you get a map
5 out.
6 MS. ARMSTRONG: Mr. Bill Hyde.
7 CFO GALLAGHER: If you all have agreed, I
8 would like to move the agreement. And if it works
9 out, great; and if it doesn't, then you will have
10 to come back.
11 MR. HYDE: Well, I think there is a
12 third-party objector that may want to speak
13 against our proposal, so I would like to briefly
14 outline what we are here for today.
15 CFO GALLAGHER: Then we are going to hear
16 from them, too. I am sorry. I am ahead of myself.
17 MR. HYDE: By way of introduction, my name is
18 William Hyde. I am a long-time environmental
19 attorney here in Tallahassee, Florida. And I
20 represent the applicants in this case, Noel and
21 Karen Andress, who are in the audience here today,
22 if they could stand up briefly.
23 GOVERNOR BUSH: Good morning.
24 MR. HYDE: I just wanted to establish the
25 Andress's bona fides in appearing before you
106
1 today.
2 Mr. Andress has personally sold to the
3 state some 26 lots on Cayo Costa Isle at below
4 market prices as part of the state's
5 acquisition on lots of that island. They
6 several years ago also donated to Lee County a
7 4-acre gulf front tract for a public park.
8 They have been in this process for two
9 years almost. They have spent literally
10 thousands of dollars in consultants and
11 attorneys fees trying to work this process out.
12 In fact, we were about to come before you last
13 fall on this easement when we were persuaded by
14 the objectors and by the staff to consider a
15 proposed land swamp for some other lands in
16 Cayo Costa.
17 That did not bear fruit. We did not think
18 we were getting value for value. And we also
19 thought that the lands being proposed had their
20 own access problems. But in any event we were
21 delayed by some five to six months.
22 I think that Ms. Gallagher has stated it
23 very clearly -- not Ms. Gallagher, Eva
24 Armstrong, I apologize. Ms. Armstrong.
25 GOVERNOR BUSH: What did you call her?
107
1 MR. HYDE: You did work for him at one point,
2 didn't you?
3 MS. ARMSTRONG: I did.
4 GOVERNOR BUSH: But I don't think they are
5 married.
6 MR. HYDE: My mistake.
7 We are clearly entitled to some statutory
8 waive of necessity because absent an easement,
9 there is no practical means of access to our
10 property.
11 We have sought a shorter easement of about
12 375 feet, direct east/west easement, that would
13 connect to an existing platted easement. The
14 staff has opposed that for environmental
15 reasons that we don't necessarily think are
16 valid. But we are here today willing to accept
17 the staff's option, which is about, for our
18 practical purposes, about half a mile long.
19 There is one problem with it that I want
20 to bring to your attention. There is a deed
21 restriction on one of the lots. It's lot 30.
22 And lot 30 basically says it can't be used as a
23 way of access to a road. The state's
24 attorneys, that is the DEP attorneys have
25 offered the opinion to me that this is not
108
1 something that would necessarily -- could not
2 create a problem for us.
3 I am not so sure that that's the case. I
4 have asked that if we do get stuck with this
5 particular easement that goes over the platted
6 lot that has this deed restriction, which by
7 the way you own, that we not be required to
8 agree to any attorney's fee reimbursement
9 provision in the easement document itself.
10 Our long-time preference has been our
11 option which is the straight east/west one,
12 it's about 1/6th the length. The staff has
13 said there is environmental objections. We
14 think they are invalid, but we are trying to be
15 conciliatory here, we tried to be conciliatory
16 in the past.
17 We agreed to consider a land swap; it
18 didn't work out.
19 This easement that we have before you
20 today, the staff is proposing for you today, is
21 supported by case statutory law. It's
22 supported by your own consistent policies over
23 the years.
24 And there are some objectors to it, but I
25 consider these objections to be in the nature
109
1 of drawbridge environmentalism. The objectors
2 are other lot owners on Cayo Costa Island who
3 have their own private place in the sun and
4 they want to preserve that private park. And I
5 understand where they are coming from.
6 GOVERNOR BUSH: The American way.
7 MR. HYDE: Yeah, that is the American way
8 these days, but they have leveled some historical
9 and inaccurate charges about my clients.
10 My clients are not big developers; they
11 own two lots on Cayo Costa Island. They sold a
12 lot of lots to the state at below market
13 prices. They donated a 4-acre gulf front tract
14 to Lee County.
15 I think they are entitled to reasonable
16 access and I hope you will agree today. Thank
17 you, unless you have any questions.
18 GOVERNOR BUSH: I don't think so. We have
19 other speakers. We would love to hear from them.
20 MS. ARMSTRONG: Terrell Arline.
21 MR. ARLINE: Good morning, Governor Bush, I
22 am glad to be here.
23 My name is Terrell Arline, I represent a
24 woman named Carol Sellers who, yes, she lives
25 on the island. She will be 90 years old on
110
1 Monday, and she has lived there for 30 years.
2 GOVERNOR BUSH: We wish her a happy birthday.
3 MR. ARLINE: It is her request these
4 easements not be granted and explain to you sort
5 of the background.
6 You've never granted an easement on Cayo
7 Costa. This will be the first one. And I know
8 that you will consider this very carefully.
9 And in a sense what I hope to convince you
10 today is that your decision to authorize either
11 one of these easements makes it easier to
12 develop these properties. And is that a policy
13 that you want to do?
14 And I will explain to you that it's not
15 necessary to grant the easements.
16 Cayo Costa is the largest undeveloped
17 barrier island in Florida. It's located in Lee
18 County on the gulf. It's further from the
19 mainland than most any other barrier island.
20 GOVERNOR BUSH: How far is it from -- I know
21 I have flown over it.
22 MR. ARLINE: It's about three or four miles
23 as the crow files. It's beyond Ucipia, if you've
24 been to Ucipia; it's west of Ucipia. It's about a
25 mile and a half wide, seven miles long. There are
111
1 no homes on the beach right now. There is a park
2 campground on the north end of the island. Pretty
3 significant archaeological and environmental
4 resources.
5 The area that we are talking about is in
6 an area of the island that is pristine and
7 undeveloped. Cayo Costa has no bridges, no
8 public roads, no water, no sewer, no
9 electricity, no paved roads, it's a COBRA
10 island.
11 GOVERNOR BUSH: What?
12 MR. ARLINE: Coastal Barrier Resources Act
13 Island, if there ever was one. And the state has
14 had a long commitment in Cayo Costa of making it a
15 state park. Since the '70s, the state has spent
16 $27 million under Environmental Endangered Lands
17 Program, the Coral Program and now Forever
18 Florida, which has resulted in about 97 percent of
19 the island being acquired now in state ownership.
20 There is 176 privately-owned parcels out there.
21 We believe that this easement, either one
22 of them, could potentially add 10 residences to
23 the island.
24 This is the part of the island that we are
25 talking about, this lot here is Mr. Andress'.
112
1 This lot is Mr. Andress' partners, his name is
2 McKenzie. This lot is owned by -- Mr. Andress
3 is a realtor, and he arranged to sell -- to
4 acquire this lot to a fellow named Mr. Floyd,
5 who is his client, and we believe he has a
6 listing on one of these two lots here.
7 There is nothing in this part of the
8 island. You can see it's just an overlay of
9 lot, paper plat over the terrain and there is
10 nothing there.
11 GOVERNOR BUSH: Are there any houses on the
12 island now?
13 MR. ARLINE: There of 25 houses scattered
14 around the entire island. Most of them tend to be
15 at the south end of the island right near Captiva
16 Island, the pass down there. There is seven --
17 some of them are not really houses, they are
18 really structures, but some are houses in the
19 middle of the island to the north of here.
20 But in this part of the island -- this is
21 about five or 600 acres that is untouched, and
22 we think that your decision here could lead to
23 a house on the beach and some of these other
24 homes being added to the middle of the site.
25 Mr. Andress, I attached in my materials
113
1 here a listing in which he is proposing to sell
2 one of the lots on Cayo Costa fronting the gulf
3 for $285,000. So there is serious money
4 involved in this, and I think this is what is
5 probably going on behind this easement request.
6 Ms. Sellers sold her land to the state
7 years ago, she moved out there 30 years ago
8 with her husband.
9 GOVERNOR BUSH: Where is her home?
10 MR. ARLINE: You can just barely see it.
11 It's up here in the subdivision to the north,
12 which is called LaCosta Isle; it's back against a
13 little canal that's there. She took back a life
14 estate, and it is her request that you not grant
15 the easement.
16 Let me give you two reasons why you
17 shouldn't.
18 One, is that I believe -- and this opinion
19 is also that Mr. Andress' attorney -- not
20 Mr. Hyde, but another attorney name Ken
21 Jones -- there already is an easement for all
22 of these lots in this subdivision that's called
23 Isle of Grove.
24 First, let me locate you a space if I
25 might. This is the Island Grove subdivision,
114
1 Mr. Andress' lot is about right here. This is
2 a subdivision to the north, it's just a paper
3 plat, but you can see the lots and this is
4 Carol Sellers' lot is over here.
5 So I am going to show you a blow up of
6 this Island Grove subdivision. This is the
7 plat for Island Grove subdivision. And it
8 is -- you can tell by looking at the legal
9 description for all the lots, each lot has a
10 30-foot easement on the north side or south of
11 the parcel, so there is roads, paper roads
12 running through the entire subdivision. That's
13 how it's platted.
14 And there is an easement here for 66,
15 30-foot wide easement, and the survey for
16 Island Grove subdivision shows this line
17 extends to the beach.
18 And I have previously provided your staff
19 with the opinion of Mr. Jones which attaches
20 some sales brochures from the '50s when the
21 subdivision was originally sold, showing that
22 that, in fact, was the access point to the
23 beach and there was a dock and there was going
24 to be a beach and beach house and all this
25 stuff.
115
1 The point of that is that the law on
2 easements by necessity are that you only give
3 them if there is no other access by common law
4 implication or by expressed grant.
5 There is an expressed grant in this
6 subdivision. And I think that is enough to say
7 we don't have to give you an easement. Now
8 what has been requested --
9 CFO GALLAGHER: I can see how lots 62, 4, 5
10 6, 71 and 72 and 71A -- is there something moving
11 back and forth this way, all the way at the end,
12 far end or where?
13 MR. ARLINE: Let me explain to you.
14 Essentially what you have got is all the lots in
15 the subdivision have a 30-foot easement either on
16 the north or south lot, so there is roads running
17 east and west. They connect to this long skinny
18 rectangle here, which the state bought and paid
19 $500,000 for this rectangle, and it is an
20 easement. So essentially the way this sub--
21 developer of the --
22 CFO GALLAGHER: You are telling me the state
23 went and bought the road, and we did it to make it
24 an easement?
25 MR. ARLINE: It was an easement.
116
1 CFO GALLAGHER: So now we own it, and it's
2 not an easement any more.
3 MR. ARLINE: I think it still is an easement
4 because it was an easement and the property owners
5 in this subdivision, including Mr. Andress, have
6 the same rights that they had previously; even
7 though you are the owner, you didn't extinguish
8 their easement rights.
9 CFO GALLAGHER: Has it got a road on it?
10 MR. ARLINE: No, it's a paper road.
11 CFO GALLAGHER: Does anybody know why we
12 bought this thing, why we bought one long strip?
13 When did we do that?
14 MR. ARLINE: You acquired several pieces.
15 CFO GALLAGHER: From who? The original
16 developer?
17 MR. ARLINE: Various property owners. What
18 you see here in the Island Grove, the yellow dots
19 are the only private parcels left; you bought
20 everything else. When you bought a piece of
21 property that had an easement on it, you're
22 subject to the rights of the easement.
23 CFO GALLAGHER: So your argument at this
24 point, these are the only ones that are owned.
25 Where is our applicant's property?
117
1 MR. ARLINE: Right here.
2 CFO GALLAGHER: So your argument is that he
3 walks out his -- he walks down south on his
4 property -- I don't know what's north and south
5 here -- and he heads down there to the state land,
6 and he goes down the road there, makes a left and
7 heads on out to a thing; is there a dock out
8 there?
9 MR. ARLINE: No.
10 CFO GALLAGHER: You feel that he has a right
11 to build a dock out there?
12 MR. ARLINE: No, I don't.
13 CFO GALLAGHER: Who gets to build one out
14 there?
15 MR. ARLINE: I don't think the easement by
16 necessity on an island means you have a right to a
17 dock. I think it means you can get to the water.
18 GOVERNOR BUSH: Can we get the department
19 back?
20 CFO GALLAGHER: Are you going to swim over or
21 what?
22 MR. ARLINE: The statute that you are
23 operating under speaks to ferries. Actually
24 that's how people are brought back and forth, they
25 are dropped off right on the beach.
118
1 CFO GALLAGHER: A ferry with a front end that
2 drops down and let's you off on the beach?
3 MR. ARLINE: The boats will drive up and
4 allow people to get off and on. Now there is a
5 dock to the north, up here, that is, to be honest,
6 there is a canal right here; Mr. Andress has an
7 easement agreement with the owner of that dock to
8 use it personally for himself. Mr. Andress, in
9 fact, owns --
10 CFO GALLAGHER: Slide that down a little bit.
11 MR. ARLINE: There is a canal right here
12 called Sellers Canal, and there is a private dock
13 in there. Mr. Andress has an agreement with the
14 property owner to use that dock. It's personal to
15 him, and Mr. Andress, for point of clarification,
16 owns that lot.
17 GOVERNOR BUSH: Ms. Gallagher, can you --
18 MS. ARMSTRONG: Emphatically, no.
19 GOVERNOR BUSH: What is the department's
20 position regarding the contention that there is
21 already an existing easement?
22 MS. ARMSTRONG: The one that he is referring
23 to --
24 GOVERNOR BUSH: The first --
25 MS. ARMSTRONG: Down here, there is no
119
1 easement; it does not exist. It was a line on a
2 sales brochure and our title staff says there is
3 no easement down there.
4 GOVERNOR BUSH: Okay.
5 CFO GALLAGHER: Was there an easement down in
6 the other property we bought?
7 GOVERNOR BUSH: The one we bought for
8 500,000?
9 CFO GALLAGHER: Yeah, is that an easement?
10 What's our staff say on that?
11 GOVERNOR BUSH: The long --
12 MS. ARMSTRONG: Yes, the other areas we can,
13 in fact, we do have easements on. The other
14 easements that are in place, we do have. We don't
15 distinguish --
16 CFO GALLAGHER: The only one is that one that
17 does go down to lot 66; it just doesn't go further
18 than that, are you saying? It's got to be behind
19 66?
20 MS. ARMSTRONG: Correct. I am looking at the
21 numbers here.
22 GOVERNOR BUSH: Look at the map.
23 CFO GALLAGHER: Look at your map on the
24 screen.
25 MS. ARMSTRONG: Right. It just doesn't go
120
1 outside of that to the water. They clearly made
2 the distinction between the lots on paper inside
3 and getting to the edge of the water. For
4 whatever reason, they did not, when they platted
5 it, they didn't take it to the water.
6 CFO GALLAGHER: Who is they?
7 MS. ARMSTRONG: The original developer who
8 platted those lots.
9 CFO GALLAGHER: They platted, but it's not
10 recorded?
11 MS. ARMSTRONG: Correct.
12 CFO GALLAGHER: So you are saying -- all it
13 means is they did or didn't draw some lines there
14 at this point.
15 MS. ARMSTRONG: Correct, there is no legal
16 easement. He has it come in for a right of
17 access.
18 CFO GALLAGHER: Somebody says they do have
19 lines there, and you are saying they don't.
20 MS. ARMSTRONG: I am saying -- I am telling
21 you Mr. Arline is incorrect in his assertion that
22 there is an easement there.
23 CFO GALLAGHER: Okay.
24 GOVERNOR BUSH: Eva, the purchase of that --
25 this is a little off the beat and path, but the
121
1 purchase of an easement, the 500,000-dollar
2 purchase of a long skinny piece of property that
3 was an easement, when we buy easements that we
4 don't want them to -- I assume the strategy here
5 is to turn as much of this -- for the state to
6 own, to operate a state park here?
7 MS. ARMSTRONG: Correct.
8 GOVERNOR BUSH: So when we buy an easement,
9 don't we extinguish-- I am confused about how --
10 why would we keep that easement available to
11 property owners as a matter of course? Wouldn't
12 it be part of the strategy to --
13 MS. ARMSTRONG: -- extinguish them when we
14 don't need them?
15 GOVERNOR BUSH: Why do we buy it? If it's
16 going to be an easement, why would we need to buy
17 it?
18 MS. ARMSTRONG: Well, when we go in to buy a
19 large piece of property like this, if we are the
20 owner, we will extinguish whatever we don't need.
21 For example, for Southern Goldengate Estates,
22 think of those road, right; as we are getting the
23 public out of there, we'll get rid of those roads.
24 GOVERNOR BUSH: In this case we have private
25 property owners; but is the intention to buy the
122
1 entire island?
2 MS. ARMSTRONG: That is our goal. We have
3 not been totally successful in buying. You see
4 the map; there are owners in there. Until you get
5 rid of all those other owners, we would not go
6 after extinguishing all those roads.
7 Now these are not publicly dedicated
8 roads. So there is not something for us really
9 to extinguish. They are coming into us and
10 saying, I own property here; you own everything
11 around it. I have a statutory right to get to
12 my property. So that's a little different from
13 a public road.
14 CFO GALLAGHER: You want to use the one
15 that's already established as opposed to have them
16 just drive anywhere they want.
17 GOVERNOR BUSH: If the strategy is to buy --
18 to create this fully integrated state park, I
19 would -- the last purchase I would make is the
20 easement since --
21 CFO GALLAGHER: I agree, except if it was
22 available.
23 GOVERNOR BUSH: Of course, it's available.
24 We are just paying for something that property
25 owners already had the right to use. Hello.
123
1 Anyway, that's not the subject here.
2 MS. ARMSTRONG: That's not the subject at
3 hand.
4 GOVERNOR BUSH: I hope for the future --
5 CFO GALLAGHER: For fun, do you know when we
6 bought the easement? Was it part of another big
7 purchase or something from the developer?
8 MS. ARMSTRONG: '83 I am told.
9 CFO GALLAGHER: None of us were here in '83,
10 not even me.
11 MS. ARMSTRONG: It was part of a bigger
12 acquisition, to be clear.
13 MR. ARLINE: If I may, I will conclude. If
14 the idea is to go the northern route, to take the
15 path that staff is recommending, which is
16 essentially to connect from north of the easement
17 up to this subdivision, you go through a lot
18 called lot 30. And lot 30 has this deed
19 restriction on it: This lot shall never be used
20 for road or street right-of-way, to connect with
21 or to any road or street right-of-way in any
22 adjoining property, provided that this restriction
23 may be released by the grantors herein, their
24 heirs and assigns.
25 CFO GALLAGHER: It said can be released?
124
1 MR. ARLINE: Can be released.
2 CFO GALLAGHER: We now own the lot, right,
3 the state?
4 MR. ARLINE: But not -- all of the other
5 property owners in that subdivision I believe has
6 some rights and interest in that restriction
7 because that's in their subdivision. I think the
8 intent of the developer of that subdivision was to
9 operate those two subdivisions.
10 CFO GALLAGHER: I am sure that was his
11 intent, but when he sold it to the state, the
12 state now has the rights he gave the person that
13 owned it and the future owners which you just
14 read.
15 MR. ARLINE: That's a point of --
16 CFO GALLAGHER: If the state wants to give
17 them, based on what they are doing, the access to
18 it, then somebody, other landowners around there
19 can take a shot at suing, but I don't think they
20 are going to get very far.
21 GOVERNOR BUSH: Wait until we find out.
22 MR. ARLINE: That's what lawyers get to
23 complain about.
24 Let me just close in saying that Cayo
25 Costa is an extremely special place. The state
125
1 has a lot of investment out there, and we would
2 highly recommend that you not make it real easy
3 and more advantageous to develop out there than
4 it currently already is. There currently
5 already is an opportunity to get to that
6 property, and you don't need to do this. Thank
7 you.
8 COMMISSIONER BRONSON: Governor, if I can
9 ask, and I happen to be one person who has land
10 that's landlocked. And we actually have to get an
11 easement from our neighbor to get on to our
12 property, which by Florida law -- I can't remember
13 exactly how that law is written, it does say that
14 a person who buys property, titled, and so forth,
15 that has a proscriptive right to get on to their
16 property at some point. Now it doesn't have to
17 be the one that you want; it has to be a
18 legitimate -- and the courts have ruled many
19 times, you can't make somebody drive 45 miles to
20 get to his property that he could get to within a
21 mile or two from a main road.
22 So there are some court cases hanging out
23 there that has been adjudicated that has said
24 you have to give people rights to their
25 property.
126
1 So what is the legal aspect of -- you are
2 telling me there is no formal access easement
3 on this island, that everyone that's shown here
4 you are saying really is on paper, that doesn't
5 exist, is that correct?
6 MS. ARMSTRONG: He has a right to get a way
7 of access, absolute legal right to get access.
8 Mr. Arline's -- to be fair, Mr. Arline's client
9 would like to find a way to delay to give somebody
10 time to buy the property.
11 The county is looking at perhaps
12 condemning; that's their business. I am here
13 to tell you it's only fair, this man is a
14 property owner. We have a statute that says we
15 surround his property, we have to give him a
16 way to get to his property.
17 GOVERNOR BUSH: Did we try to buy his
18 property?
19 MS. ARMSTRONG: We have tried. We tried to
20 swap. We weren't able to work it out. So in my
21 mind, he's agreed to the route we proposed. We
22 say it's the least intrusive to the natural
23 resources out there.
24 I would suggest to you that if he has
25 agreed to our option two, which is outlined in
127
1 the staff's recommendation, in the staff item,
2 that that is the way to go. And that's in
3 fairness to him; it's the shortest distance
4 between two points, pardon the pun.
5 COMMISSIONER BRONSON: Governor, on this map
6 that I am seeing here, that means that that line A
7 will go all the way out to the water where they
8 are going to be unloaded from whatever carrier
9 they have to bring them over, so that that is a
10 direct line easement.
11 MS. ARMSTRONG: Yes, sir. He also has an
12 easement in that canal for a boat. He has an
13 easement there. He has access there already.
14 COMMISSIONER BRONSON: Okay.
15 CFO GALLAGHER: If he already has access,
16 then he is not going to get very far in the legal
17 aspect of it.
18 MS. ARMSTRONG: He is okay there with A.
19 CFO GALLAGHER: He is asking us, based on
20 some legal standard that he has to have access to
21 his property; and if he's already got it, how is
22 he going to get more?
23 MR. HYDE: He has access to a dock that's in
24 this existing canal. And this easement we are
25 requesting would basically run west and then south
128
1 down to the property.
2 We proposed a different proposal where our
3 lot is just to run straight in from the bay
4 which would be considerably shorter. But the
5 state doesn't like that option.
6 GOVERNOR BUSH: You can see why we wouldn't,
7 because that is probably the one that maximizes
8 the value. And since we are ultimately I guess
9 the purchasers of first and last resort here, as a
10 strategic --
11 MR. HYDE: My client, he is willing to go
12 this longer route. He can live with it. He can
13 use the dock in the canal, and then he can get
14 access to his property in an area that the state
15 believes is already impacted.
16 I just wanted to clarify for you, there
17 are six houses on the beach out there, one new,
18 one built within the last year. To say that
19 there are no houses on the beach is misleading.
20 The listing that was supposedly in my
21 client's benefit for a gulf front lot, first of
22 all, he doesn't own it and he doesn't have the
23 listing for it.
24 I just wanted to make those
25 clarifications.
129
1 We are willing to go with the state's
2 preference here. I would ask you if you do
3 that, to waive the requirement that we pay the
4 state's attorneys fees, if we get into
5 litigation over it, because I do think there is
6 a distinct possibility that we will get in
7 litigation over it. And I would prefer not to
8 have to saddle my clients with that cost, too.
9 That's within your discretionary.
10 CFO GALLAGHER: What you are saying is we go
11 make a decision that gives you an initial access
12 point and we get sued, and you want to make sure
13 that you don't pay the fees that you basically
14 caused us to have?
15 MR. HYDE: No. I think that if you went our
16 route, you wouldn't have any worry about a
17 lawsuit. And I don't believe the lawsuit would be
18 successful as you suggested earlier,
19 Mr. Gallagher.
20 What I am concerned about -- and this
21 isn't a big point, but I just don't think it's
22 fair to have us pay our fees, and then your
23 fees too, if litigation ensues. That's all.
24 We hope it won't ensue.
25 GOVERNOR BUSH: We are not going to sue you.
130
1 Isn't that the point? So we are not going to sue
2 you, so the only reason litigation would start is
3 if it's started by somebody else. Not by the
4 applicant, but by somebody else you are saying?
5 MR. HYDE: Right.
6 GOVERNOR BUSH: That's different.
7 CFO GALLAGHER: But other people are going to
8 sue.
9 MS. ARMSTRONG: Let me be clear. What we are
10 now recommending instead of denial of his request,
11 which was option one, is that you would approve
12 option two which is just line B, this, line B
13 would be the easement.
14 GOVERNOR BUSH: There already is an easement
15 going east/west?
16 MS. ARMSTRONG: Correct, that is a road in
17 there which is a big -- he has an easement on the
18 canal.
19 GOVERNOR BUSH: Is there a motion? I think
20 we discussed this.
21 CFO GALLAGHER: I am almost at the point, I
22 have been around and around a little on this. I
23 am almost at the point where I believe there is
24 access already. He already has it. And my gut is
25 to deny putting an additional --
131
1 GOVERNOR BUSH: Where does he have access?
2 CFO GALLAGHER: To the canal.
3 GOVERNOR BUSH: But he doesn't have the
4 north/south.
5 MS. ARMSTRONG: He needs north/south, he
6 needs B.
7 CFO GALLAGHER: That's the land we own;
8 that's already an easement.
9 MS. ARMSTRONG: He doesn't have the legal
10 easement that he needs on B.
11 MR. HYDE: There is an existing east/west
12 easement. This section labeled B on this map is
13 what you would technically be granting to us here
14 today.
15 MS. ARMSTRONG: He needs that.
16 MR. HYDE: He needs that. There is no other
17 way to get from our property or to our property.
18 COMMISSIONER BRONSON: He has a 30-foot
19 easement that goes from his property back to B,
20 but he does not have legal easement from A down to
21 B.
22 MR. ANDRESS: Let me clarify some
23 misconceptions that have been thrown out here
24 today.
25 CFO GALLAGHER: I can believe that.
132
1 MR. ANDRESS: What we have is at one time we
2 had a gentleman name Mr. Philip Rasmussen, he is
3 about 85, 86 years old. He developed this
4 subdivision.
5 In the late '70s and early '80s, the state
6 and Lee County placed a moratorium on any
7 building on Cayo Costa. During that frame of
8 time, that time period, the state went to
9 Mr. Rasmussen and said, We know you have got
10 this hundred lot subdivision called Island
11 Grove. But none of these lots are buildable.
12 So, therefore, why don't you sell us all the
13 property 360 degrees around this subdivision,
14 including all of the easements.
15 And Mr. Rasmussen said, sure, I will do.
16 So that's what he did.
17 All these people that he had sold property
18 to, he did not reserve any easements whatsoever
19 for them to get to their property. This
20 50-foot strip of land, they didn't pay $500,000
21 for that. The state bought all of the
22 beachfront and all of the other seven parcels,
23 360 degrees around this subdivision, and did
24 away with all of the easements.
25 There is no easements recorded, period.
133
1 When they purchased that land, there were no
2 easements reserved. So that's why this
3 subdivision now, you have people out there that
4 have owned this property for 40, 50 years, they
5 bought these properties back in the '50s. They
6 still think to this day they have, the other
7 owners, that they have access because
8 Mr. Rasmussen represented that they did.
9 There is no access to this subdivision.
10 We proposed something we thought would be very
11 reasonable, is to come in from where it was
12 originally. We only have to go 370 feet to get
13 to the boundary line of the subdivision from
14 the bay.
15 That has less impact than anywhere out
16 there. But we paid $7,500 for a study to --
17 because some of the people, the park service,
18 they have been overzealous here in terms of
19 this whole issue, and they didn't want us to
20 come in from the bay. The only way you can get
21 there is by boat.
22 So as a compromise, we offered the first
23 two compromises, the first that we would trade
24 the property, but the park services said we
25 don't want to trade the property in an area
134
1 where all the greatest conveyance of lots are
2 that are still privately owned.
3 There is an area of LaCosta Isle
4 Subdivision, which is this subdivision right
5 here, all almost all of the lots out in this
6 area, probably 20, 30 lots, are still privately
7 owned.
8 So we offered to trade in that area where
9 we could cluster the development and reduce the
10 impact.
11 I am a fifth generation Florida native. I
12 don't want this island destroyed. And I made
13 that commitment financially by giving millions
14 of dollars worth of property out there to the
15 state.
16 But the park service has their set mind.
17 And after we spent all this money, we withdraw
18 from the agenda, spent almost a year now with
19 appraisals and everything; no, the only thing
20 we are willing to trade you for is something
21 north of your lot. My lot is over here in this
22 area. And so, therefore, they trade me
23 something over in LaCosta Isle subdivision
24 where the state owns a hundred percent of the
25 property. Makes absolutely no sense
135
1 whatsoever.
2 But that's the position that the state has
3 taken in terms of a trade.
4 CFO GALLAGHER: Can we ask Eva how come
5 that's the trade instead of over there in that
6 place where there is a bunch of other houses?
7 MR. ANDRESS: We don't understand.
8 CFO GALLAGHER: Let her try to tell us why.
9 MS. ARMSTRONG: Actually I think we were
10 swapping for anything -- we were going to swap for
11 anything we own which is pink.
12 GOVERNOR BUSH: We can't see that. Come on.
13 CFO GALLAGHER: Put it on the thing because
14 we can't see colors here. Al Gregory, I want
15 people talking that know about it.
16 MR. GREGORY: I am Albert Gregory. We made a
17 great job making this --
18 GOVERNOR BUSH: You need to be a little
19 louder.
20 MR. GREGORY: We've done a marvelous job of
21 making this a very complicated issue. Let me see
22 if I can simplify it.
23 GOVERNOR BUSH: Get closer to the microphone
24 if you could.
25 MR. GREGORY: This is the central portion of
136
1 Cayo Costa State Park. You saw the large map that
2 puts you in geographical context. Mr. Andress,
3 this is Mr. Andress' property right here.
4 Mr. Andress --
5 GOVERNOR BUSH: Get back on the chart.
6 MR. GREGORY: This is Mr. Andress' property
7 right here. Mr. Andress presently accesses his
8 property by way of this canal, called Sellers
9 Canal, down a public road right-of-way called
10 Costa Drive, down to roughly this point at which
11 the interstate lands are an existing Jeep trail,
12 dirt road. He comes down roughly there, and then
13 over land on state land, he reaches this property.
14 All that we are suggesting is to give
15 Mr. Andress an easement over the route which he
16 presently uses, rather than to create a whole
17 new access in an undisturbed area through
18 mangroves, through hammock, through an
19 archaeological site.
20 CFO GALLAGHER: We got that.
21 MR. ANDRESS: And that's not even a correct
22 statement because this 2600 feet of road does not
23 even exist; it's through a pristine area; there is
24 no trail there. We never accessed through that
25 way.
137
1 GOVERNOR BUSH: How do you access your
2 property?
3 MR. ANDRESS: We don't.
4 CFO GALLAGHER: He doesn't have anything --
5 GOVERNOR BUSH: Do you ever go see your
6 property?
7 MR. ANDRESS: When I go there, I land a boat
8 right here, at this point right here, and go
9 370 feet from the bay over to the property where
10 the old easement used to be.
11 CFO GALLAGHER: Is there a structure?
12 MR. ANDRESS: No, structure.
13 CFO GALLAGHER: The reason why we got you up
14 here -- I am glad you told us that, but where is
15 the trade deal you offered them?
16 MR. GREGORY: We offered to explore and comb
17 Cayo Costa Bay Park for lots to trade. These pink
18 shaded areas are the outstanding private
19 ownerships up in La Costa Isle subdivision. The
20 only lots that Mr. Andress wanted on Cayo Costa
21 Island were five -- not quite ocean front lots, as
22 you can see, they are not directly on the ocean
23 but they have a nice -- they are in this area
24 right here, I believe.
25 MR. ANDRESS: In between two existing houses.
138
1 MR. GREGORY: These are the only lots he was
2 interested in swapping for, the ones that had good
3 beach view. And one of our management objectives
4 there is to try to limit the number of houses
5 which you can see from the beach in order to try
6 to preserve the park experience.
7 People have property out there; they have
8 the right to develop their properties. We are
9 not suggesting that we are trying to obstruct
10 him from developing his property, but we don't
11 feel like we have an obligation to facilitate
12 the development of state lands that are on the
13 beach, you can see from the beach.
14 We were willing to swap Mr. Andress most
15 anything, but he asked for lots that we didn't
16 feel were in the best interest of the state.
17 CFO GALLAGHER: The pink ones are privately
18 owned, right?
19 MR. GREGORY: Yes.
20 CFO GALLAGHER: We own everything else?
21 MR. GREGORY: The county's ownership is in
22 blue here.
23 CFO GALLAGHER: Where are these two houses
24 between -- that he wanted to be between?
25 MR. ANDRESS: There is a house right there,
139
1 and there is a house right there. So we thought
2 we could cluster this. We took a look at the
3 environmental impacts; there is no trees on the
4 property. There is almost -- there are no gopher
5 tortoises or endangered species on the property.
6 CFO GALLAGHER: You want to be on that road
7 between those two houses, not down there on the
8 other road?
9 MR. ANDRESS: We thought this would be one
10 place to go, and they said no to that. Then we
11 went up here to this area right here. You see all
12 the pink houses right here?
13 We said we will trade you for these lots
14 right in here inbetween all these houses. I
15 proposed that to Tracy for the DEP. And she
16 came back again and said no, we are firm here,
17 the only place that we will trade you any lots
18 is over in this area here where all the lots
19 are owned by the state. So our hands were
20 tied. What could we do?
21 CFO GALLAGHER: Listen, guys, whoever.
22 Aren't we better off having all the houses
23 together than building -- putting -- having people
24 put a house over there where there isn't anything
25 else?
140
1 MR. GREGORY: Absolutely.
2 MR. ANDRESS: I am not asking you. I am
3 asking our staff people that do this stuff?
4 MR. GREGORY: That's where all the houses out
5 there are.
6 CFO GALLAGHER: That's where I would want to
7 be. I don't want to be over by the swamp there
8 and that looks like where all the mosquitos are.
9 I've got this marked, I am calling this dude up to
10 get me a lot.
11 GENERAL CRIST: I would like to make a motion
12 on option B.
13 CFO GALLAGHER: But what I would rather do is
14 get this guy a lot over there where the other lots
15 are and not have to do an easement way out to
16 somewhere else.
17 MR. ANDRESS: Mr. Gallagher, not only would
18 that solve the problem with me, but I talked to
19 Mr. McKenzie, I talked to Mr. Floyd, and we were
20 willing to take our 1.1-acre parcels and trade for
21 one and a half and have a stipulation, deed
22 restriction, we can only build one house; we can
23 move three of these lots out of here, over here on
24 these five lots. We would trade these five lots
25 for these three lots and would solve the problem.
141
1 It's a simple solution. And the houses are all
2 clustered.
3 GOVERNOR BUSH: You'd get a better view over
4 there. Why wouldn't you want to do that?
5 MS. ARMSTRONG: I think that's part of the
6 problem, that at least from a staff and park
7 perspective, while solving a problem for
8 Mr. Andress, we didn't want to be giving better
9 state land up, far better state land up and, you
10 know --
11 GOVERNOR BUSH: You would have to meet the
12 wrath of the Governor. Oh, it looks better. If
13 it wasn't better, you wouldn't want it. You seem
14 like a smart guy.
15 MR. ANDRESS: I would rather have a house
16 over here because it's not -- it's off by itself,
17 it's secluded, it's more private, it's 10 and a
18 half foot elevation, it's covered with beautiful
19 oak trees. It's a much more beautiful building
20 site. These sites have nothing on them. You are
21 right there next to all the houses.
22 GOVERNOR BUSH: You are also right next to
23 paradise there, the Atlantic, I mean the Gulf of
24 Mexico and the beautiful beach, it looks like.
25 Anyway we can discuss that. The question
142
1 at hand here is not the swapping issue. The
2 question at hand is this property owner has a
3 right to access his property. And maybe by
4 giving him that right, he will have better
5 leverage to get whatever he wants to get from
6 the department; maybe he won't. But that's for
7 a later day. We'll probably have a lively
8 discussion about that purchase in the future.
9 COMMISSIONER BRONSON: I would second the
10 motion.
11 CFO GALLAGHER: Let me ask a question here.
12 He already -- if we just let him drive around and
13 do it without any daggone easements, what's the
14 problem? If he wants to build something, maybe he
15 will utilize that road.
16 MR. HYDE: I will tell you why. Bill Hyde
17 for the applicant.
18 I guess you could probably take half the
19 tracts out there and drive all over the place
20 and incur the wrath of people. But the bottom
21 line is if you want to borrow money to build a
22 structure, you have to have a legal right of
23 access.
24 By the way, this is not some ploy to drive
25 up the price to get the state to buy it. The
143
1 Andresses legitimately want to build a house
2 out here; that's why they are going through
3 this rigmarole.
4 CFO GALLAGHER: Let me just say here, I think
5 to the staff here, and somebody is going to have
6 to educate me maybe inbetween meetings here --
7 that we would be a lot better off giving these
8 people the better -- if you want to call it --
9 property on that road and get these outparcels out
10 of there rather than having houses build out in
11 that other area.
12 Why don't we get -- if these five guys
13 that have those lots are willing to take it on
14 theirs as a lump sum deal, give them some
15 lumps -- let all the people be on one street,
16 and get those other things in the state's
17 interest.
18 GOVERNOR BUSH: That's not a question, that's
19 homework for another day.
20 COMMISSIONER BRONSON: Commissioner
21 Gallagher's point, now by approving B, he is going
22 to be able to get to that place where he says he's
23 got the oak trees, a lot better place, higher
24 elevation. He is going to build a house there if
25 we don't give him any other option.
144
1 So this could be -- we are going to pay
2 now or pay later; we are going to end up
3 dealing with this one way or the other.
4 GOVERNOR BUSH: So there is a motion and a
5 second for alternative B of the agenda item, and I
6 assume we know what that means. There is no more
7 discussion.
8 CFO GALLAGHER: Which is the staff
9 recommendation.
10 GOVERNOR BUSH: The staff recommendation, the
11 new staff recommendation.
12 CFO GALLAGHER: Any agreement made with the
13 applicant -- when I started about --
14 GOVERNOR BUSH: -- an hour ago. Any other
15 discussion?
16 Without objection, the item passes. Thank
17 you all. Thank you for coming up. Thank you,
18 sir.
19 MR. HYDE: Thank you, Governor, Members of
20 the Cabinet.
21 MS. ARMSTRONG: One more item. Item
22 number 8. This is six option agreements for
23 conservation easements within the Green Swamp Area
24 of critical state concern. They are at or just
25 below 90 percent of appraised value.
145
1 GOVERNOR BUSH: Is there a motion?
2 COMMISSIONER BRONSON: Motion.
3 CFO GALLAGHER: Second.
4 GOVERNOR BUSH: Moved and seconded. Without
5 objection, the item passes.
6 MS. ARMSTRONG: Thank you, sir. That's it.
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146
1 GOVERNOR BUSH: State Board of
2 Administration.
3 Is there a motion on item 1?
4 CFO GALLAGHER: Motion on the minutes.
5 GENERAL CRIST: Second.
6 GOVERNOR BUSH: There is a motion and second.
7 Without objection, item 1 is approved.
8 Good afternoon, Coleman. Item 2.
9 MR. STAPANOVICH: Good morning, Governor,
10 Members.
11 Item 2, approval of fiscal sufficiency of
12 an amount not exceeding 363,400,000.
13 CFO GALLAGHER: Motion on 2.
14 GENERAL CRIST: Second.
15 GOVERNOR BUSH: Moved and seconded. Without
16 objection, the item passes.
17 MR. STAPANOVICH: Item number 3, approval of
18 fiscal sufficiency of an amount not exceeding
19 24,045,000, State of Florida, Florida Education
20 System, Florida Atlantic University.
21 GENERAL CRIST: Moved.
22 CFO GALLAGHER: Second.
23 GOVERNOR BUSH: Moved and seconded. Without
24 objection, the item passes.
25 MR. STAPANOVICH: Item number 4, approval of
147
1 fiscal sufficiency of an amount not exceeding
2 $14,850,000.
3 CFO GALLAGHER: Motion on 2.
4 GENERAL CRIST: Second.
5 GOVERNOR BUSH: Moved and seconded. Without
6 objection, the item passes.
7 MR. STAPANOVICH: Item 5, approval of fiscal
8 sufficiency of an amount not exceeding
9 $350,000,000, State of Florida, Department of
10 Transportation Turnpike Revenue Refunding Bonds.
11 GENERAL CRIST: Moved.
12 CFO GALLAGHER: Second.
13 GOVERNOR BUSH: Moved and seconded. Without
14 objection, the item passes.
15 MR. STAPANOVICH: Item number 6, approval of
16 fiscal sufficiency of an amount not exceeding
17 $210,000,000 --
18 CFO GALLAGHER: Motion on 6.
19 GENERAL CRIST: Second.
20 GOVERNOR BUSH: There is a motion and a
21 second. Without objection, the item passes.
22 MR. STAPANOVICH: Item number 7, approval of
23 fiscal determination of an amount not exceeding
24 $16,855,000 tax exempt Florida Housing Finance
25 Corporation Multifamily Revenue Bonds.
148
1 GENERAL CRIST: Motion.
2 CFO GALLAGHER: Second.
3 GOVERNOR BUSH: Moved and seconded. Without
4 objection, the item passes.
5 MR. STAPANOVICH: Item number 8, approval of
6 fiscal determination of amounts not exceeding
7 $16,840,000 --
8 CFO GALLAGHER: Motion on 8.
9 GENERAL CRIST: Second.
10 GOVERNOR BUSH: There is a motion and a
11 second. Without objection, the item passes.
12 MR. STAPANOVICH: Item number 9, approval
13 fiscal determination of an amount not exceeding
14 $15,850,000 Tax Exempt Florida Housing Finance
15 Corporation Multifamily Mortgage Revenue Bonds.
16 GENERAL CRIST: Motion.
17 CFO GALLAGHER: Second.
18 GOVERNOR BUSH: Moved and seconded. Without
19 objection, the item passes.
20 MR. STAPANOVICH: Item number 10, approval
21 fiscal determination of an increase of an amount
22 not exceeding $350,000 tax exempt Florida Housing
23 Finance Corporation Multifamily Mortgage Revenue
24 Bonds.
25 GENERAL CRIST: Motion.
149
1 CFO GALLAGHER: Second.
2 GOVERNOR BUSH: Moved and seconded. Without
3 objection, the item passes.
4 MR. STAPANOVICH: Item number 11 is
5 information only, Governor, Members; it's State
6 Board of Administration Mutual Fund Proxy
7 Guidelines.
8 We have mutual fund voting guidelines that
9 are posted on the Internet. We had these
10 guidelines in place for many years on the
11 domestic equities and the international
12 equities. We'll be adding these guidelines as
13 well; and as a result of the fine contributions
14 program, it's very similar to what we do on the
15 DB side.
16 CFO GALLAGHER: Move item 12; it's just for
17 information.
18 GOVERNOR BUSH: There is a motion. Well,
19 it's just information. Never mind.
20 Item 12. Excuse me.
21 MR. STAPANOVICH: Appointment of a chair to
22 the Florida Commission on Hurricane Loss
23 Projection Methodology. It's a recommendation
24 that you appoint Dr. Gulati.
25 CFO GALLAGHER: Motion.
150
1 GENERAL CRIST: Second.
2 GOVERNOR BUSH: There is a motion to
3 reappoint Dr. Gulati. Is there a second?
4 GENERAL CRIST: Second.
5 GOVERNOR BUSH: Moved and seconded. Without
6 objection, the item passes.
7 MR. STAPANOVICH: Governor, the final item is
8 13, appointment of a member to the Investment
9 Advisory Council, the appointment of John Jay, by
10 Attorney General Crist.
11 CFO GALLAGHER: Motion.
12 GENERAL CRIST: Second.
13 GOVERNOR BUSH: Moved and seconded. Without
14 objection, the item passes.
15 Thank you very much, Coleman.
16 (The proceedings concluded at 12:15 p.m..)
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1
2 CERTIFICATE OF REPORTER
3
4
5
6 STATE OF FLORIDA )
7 COUNTY OF LEON )
8
9 I, SANDRA L. NARGIZ, RMR, CRR, certify that I
10 was authorized to and did stenographically report the
11 proceedings herein, and that the transcript is a true
12 and complete record of my stenographic notes.
13 I further certify that I am not a relative,
14 employee, attorney or counsel of any of the parties,
15 nor am I a relative or employee of any of the parties'
16 attorney or counsel connected with the action, nor am I
17 financially interested in the action.
18 WITNESS my hand and official seal this 2nd
19 day of July, 2003.
20
21
22 ______________________________
23 SANDRA L. NARGIZ, RMR, CRR
100 SALEM COURT
24 TALLAHASSEE, FL 32301
850-878-2221
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Cabinet
Affairs
