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:
REMARKS BY COLONEL ROBIN HIGGINS
STATE BOARD OF EDUCATION
DIVISION OF BOND FINANCE
DEPARTMENT OF ENVIRONMENTAL PROTECTION
BOARD OF TRUSTEES OF THE
INTERNAL IMPROVEMENT TRUST FUND
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 Tuesday,
April 24, 2001, commencing at approximately 9:41 a.m.
Reported by:
LAURIE L. GILBERT COX
Registered Professional Reporter
Certified Court Reporter
Certified Realtime Reporter
Registered Merit Reporter
Notary Public in and for
the State of Florida at Large
ACCURATE STENOTYPE REPORTERS, INC.
100 SALEM COURT
TALLAHASSEE, FLORIDA 32301
850/878-2221
2
APPEARANCES:
Representing the Florida Cabinet:
JEB BUSH
Governor
TERRY L. RHODES
Commissioner of Agriculture
BOB MILLIGAN
Comptroller
KATHERINE HARRIS
Secretary of State
BOB BUTTERWORTH
Attorney General
TOM GALLAGHER
Treasurer
CHARLIE CRIST
Commissioner of Education
* * *
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3
April 24, 2001
I N D E X
ITEM ACTION PAGE
DEPARTMENT OF VETERANS' AFFAIRS:
(Presented by Robin Higgins,
Executive Director)
Presentation 5
STATE BOARD OF EDUCATION:
(Presented by Wayne V. Pierson,
Deputy Commissioner)
1 Approved 12
2 Deferred 12
3 Approved 13
DIVISION OF BOND FINANCE:
(Presented by J. Ben Watkins, III,
Director)
1 Approved 14
2 Approved 29
3 Approved 30
DEPARTMENT OF ENVIRONMENTAL PROTECTION
POWER PLANT SITING BOARD:
(Presented by David B. Struhs,
Secretary)
1 Approved 32
2 Approved 39
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4
April 24, 2001
I N D E X
(Continued)
ITEM ACTION PAGE
BOARD OF TRUSTEES OF THE
INTERNAL IMPROVEMENT
TRUST FUND:
(Presented by David B. Struhs,
Secretary)
1 Approved 40
2 Withdrawn 40
3 Approved 168
4 Deferred 55
5 Approved 59
6 Approved 61
7 Approved 61
Good Cause
Item 8 Approved 62
STATE BOARD OF ADMINISTRATION:
(Presented by Tom Herndon,
Executive Director)
1 Approved 63
2 Approved 74
3 Approved 69
4 Approved 102
5 Approved 103
6 Approved 119
Good Cause
Item 7 Approved 119
CERTIFICATE OF REPORTER 170
* * *
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REMARKS BY COLONEL ROBIN HIGGINS 5
April 24, 2001
1 P R O C E E D I N G S
2 (The agenda items commenced at 9:41 a.m.)
3 GOVERNOR BUSH: As you all know -- as you
4 all know, Colonel -- Lieutenant Colonel
5 Higgins, who has served us so ably as the
6 Secretary of the Department of
7 Veterans' Affairs, is moving on to Washington,
8 D.C., to take a leadership role in the Federal
9 Department of Veterans' Affairs.
10 And is this your -- is this your
11 George Washington farewell address?
12 MS. HIGGINS: This is it.
13 GOVERNOR BUSH: Well, that's kind of sad.
14 Anyway, you've done --
15 MS. HIGGINS: It is.
16 GOVERNOR BUSH: -- an incredible job,
17 Robin, bringing together the diverse veterans
18 community of this state. And thanks to the
19 generosity of the Legislature, and your hard
20 work, I think veterans are better off today
21 because of your service.
22 And personally, I'm going to miss you.
23 MS. HIGGINS: Same here.
24 When you gave me the best job in Florida
25 two years ago, I never -- I thought I'd be here
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REMARKS BY COLONEL ROBIN HIGGINS 6
April 24, 2001
1 forever. I never thought I'd be here saying
2 this today.
3 But God works in mysterious ways, and I can
4 never second-guess the plans that he has for
5 me.
6 Those of you who know me well, and with
7 whom I've shared a little of my decision making
8 process, know that this has not been an easy
9 decision for me; in fact, one of the hardest
10 I've ever had to make in my life.
11 I would never dream of giving up this
12 position if it weren't for the awesome
13 opportunity that I've been given by the
14 President of the United States to continue to
15 serve veterans in yet another special way,
16 should the U.S. Senate confirm my nomination as
17 Undersecretary for Memorial Affairs in the
18 U.S. Department of Veterans' Affairs.
19 In fact, even though I don't consider
20 myself a political person, and service for
21 veterans, as we all know, is a nonpartisan
22 vocation, I may be one of the very few people
23 who have had the honor and privilege to be
24 appointed by all three Bushes.
25 TREASURER GALLAGHER: That's -- that's a
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REMARKS BY COLONEL ROBIN HIGGINS 7
April 24, 2001
1 good one.
2 GOVERNOR BUSH: That's awfully true.
3 MS. HIGGINS: Bush 1; Jeb Bush, the
4 great -- the Governor of the great state of
5 Florida; and now perhaps,
6 President George W. Bush.
7 GOVERNOR BUSH: As we call them, 41 and 43.
8 MS. HIGGINS: Perhaps -- perhaps I need to
9 meet Marvin next, Governor.
10 Thanks in large measure to your unwaivering
11 support and encouragement, my Department and I
12 have been able to improve the lives, and the
13 status of veterans in this state.
14 There is still much more to do, and I
15 regret not being able to do more in the short
16 time I've been here.
17 But I hope that I will be leaving my
18 employees, many of whom are here -- including
19 Savannah Hart, my special little girl -- the
20 Department, and our 1.7 million veterans, a
21 little better than when I came.
22 Together, we have opened and staffed two
23 new veterans nursing homes, and have begun
24 funding and planning for two additional homes.
25 We have expanded one of the nation's
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REMARKS BY COLONEL ROBIN HIGGINS 8
April 24, 2001
1 busiest national cemeteries in Bushnell,
2 Florida, and received funding for a new
3 national cemetery in south Florida; have
4 improved the economic status of thousands of
5 veterans and their families by helping them to
6 access millions of dollars in Federal benefits;
7 completed memorials to our Medal of Honor
8 recipients, our Korean War veterans, and soon,
9 our World War II veterans.
10 Thank you for having the confidence in me
11 to allow me to take the credit for our -- for
12 what our great employees have done in support
13 of veterans.
14 I hope in Washington to be able to bring
15 the same professionalism, passion, and pride
16 that we all share when we try to make Florida a
17 better place to live to the important
18 constituency that I'll -- that I will serve.
19 The Governor once joked that every time I
20 came before the Cabinet, it was hard to vote
21 against me because I always quoted
22 George Washington or Winston Churchill. So I
23 won't do that today.
24 But I did want to leave you with something
25 that was important to me, so I've given you
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REMARKS BY COLONEL ROBIN HIGGINS 9
April 24, 2001
1 each a copy of my book, Patriot Dreams,
2 inscribed with the following quote from
3 Helen Keller:
4 I am only one, but still I am one. I
5 cannot do everything, but still I can do
6 something. I will not refuse to do the
7 something I can do.
8 Thank you.
9 (Applause.)
10 COMPTROLLER MILLIGAN: Let me -- be seated
11 for a second. Obviously I can't let Robin
12 leave here without making a few comments.
13 I've known Robin frankly since she met and
14 married her beloved husband, Rich, and have
15 enjoyed a remarkable professional relationship
16 with her over those years, when she rose higher
17 and higher in responsibility, serving the
18 Commandant of the Marine Corps as his
19 spokesman; and obviously working for number 41;
20 and doing all the things that she did in
21 Washington before she came to Florida, and
22 maybe took a step down when she worked with me
23 for awhile.
24 MS. HIGGINS: No.
25 COMPTROLLER MILLIGAN: And then -- and then
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April 24, 2001
1 took the time to write -- author, a book that
2 was a tribute to her late husband. And -- and
3 really a remarkable statement of her dedication
4 to trying to bring people awareness of
5 terrorism and the threat to families and the
6 threat to this country.
7 And -- and that in itself has been a -- a
8 huge contribution that she has made to Florida;
9 and to this nation; and to that matter, to the
10 world.
11 And, of course, she stepped in to the job
12 there as Executive Director of Veterans'
13 Affairs.
14 And -- and we can talk about the hospitals,
15 or we can talk about the nursing homes, we can
16 talk about the cemeteries, we could talk about
17 all the things she's done.
18 But the thing she really did there was
19 reach out with a great deal of concern and
20 leadership to the veterans in the state of
21 Florida. And that's -- was a remarkable
22 achievement.
23 And I'm proud to call her a friend, and
24 very proud of her success, and look forward to
25 her going to Washington.
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REMARKS BY COLONEL ROBIN HIGGINS 11
April 24, 2001
1 We have a -- a small momento of -- of our
2 thanks in the form of a resolution.
3 And I would move the resolution, Governor.
4 COMMISSIONER CRIST: Second.
5 TREASURER GALLAGHER: Second.
6 GOVERNOR BUSH: Moved and unanimously
7 seconded.
8 Without objection, it's approved.
9 MS. HIGGINS: Thank you.
10 COMPTROLLER MILLIGAN: Now you may come up.
11 GOVERNOR BUSH: Thank you, Robin.
12 (The Remarks by Colonel Robin Higgins
13 Agenda was concluded.)
14 * * *
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18
19
20
21
22
23
24
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STATE BOARD OF EDUCATION 12
April 24, 2001
1 GOVERNOR BUSH: The next Cabinet meeting
2 will be held on Tuesday; May 15th, 2001.
3 State Board of Education.
4 MR. PIERSON: Good morning.
5 Item 1, minutes to the March 13, 2001,
6 meeting.
7 TREASURER GALLAGHER: Motion.
8 ATTORNEY GENERAL BUTTERWORTH: Second.
9 COMMISSIONER CRIST: Second.
10 GOVERNOR BUSH: Moved and seconded.
11 Without objection, it's approved.
12 MR. PIERSON: Item 2 is a charter school
13 appeal, which is -- request deferral to
14 June 26th at the request of the applicant and
15 School Board.
16 COMMISSIONER CRIST: Motion to defer.
17 TREASURER GALLAGHER: Second.
18 GOVERNOR BUSH: There's a motion to defer
19 and a second.
20 Without objection, it's deferred.
21 MR. PIERSON: Item 3 is appointment of
22 Vyrle Davis as a member of the Education
23 Practices Commission, succeeding
24 Steven J. Brodie, for a term ending
25 September 30th, 2002.
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STATE BOARD OF EDUCATION 13
April 24, 2001
1 TREASURER GALLAGHER: Motion.
2 COMMISSIONER CRIST: Second.
3 GOVERNOR BUSH: Moved and seconded.
4 Without objection, it's approved.
5 COMMISSIONER CRIST: Governor?
6 GOVERNOR BUSH: Yes.
7 COMMISSIONER CRIST: Mr. Davis was my
8 high school principal, and I think will be a
9 great addition to the Education Practices
10 Commission.
11 I just wanted you to know that he's a great
12 man.
13 Thank you.
14 GOVERNOR BUSH: How were you as a
15 high school student?
16 COMMISSIONER CRIST: I'm sorry?
17 GOVERNOR BUSH: How were you as a
18 high school student?
19 COMMISSIONER CRIST: Not as good as you.
20 SECRETARY HARRIS: Uh-oh.
21 GOVERNOR BUSH: How do you know that?
22 (The State Board of Education Agenda was
23 concluded.)
24 * * *
25
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DIVISION OF BOND FINANCE 14
April 24, 2001
1 GOVERNOR BUSH: Division of Bond Finance.
2 COMMISSIONER CRIST: I'm assuming.
3 TREASURER GALLAGHER: Motion on the
4 minutes.
5 ATTORNEY GENERAL BUTTERWORTH: Second.
6 GOVERNOR BUSH: I bloomed a little bit
7 later.
8 TREASURER GALLAGHER: I'm still blooming.
9 GOVERNOR BUSH: Exactly.
10 COMMISSIONER CRIST: I'm still blooming,
11 too.
12 GOVERNOR BUSH: Is there a second?
13 Moved --
14 COMMISSIONER CRIST: Second.
15 GOVERNOR BUSH: -- and seconded.
16 Without objection, it's approved.
17 Item 2.
18 MR. WATKINS: Item 2 is part of our
19 continuing effort to take a more businesslike
20 approach to authorizing and issuing debt.
21 The debt management policy being presented
22 to you today for your consideration basically
23 formalizes best practices in authorizing and
24 issuing debt. It -- it covers four general
25 areas, the first of which incorporates a debt
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DIVISION OF BOND FINANCE 15
April 24, 2001
1 affordability analysis that you are all
2 familiar with.
3 It -- it calls for by policy for that
4 information with respect to the amount of State
5 debt outstanding, and future authorization to
6 do -- to be prepared and presented on an annual
7 basis.
8 Incidentally, there's also legislation
9 being considered in both the House and the
10 Senate to also statutorily require the debt
11 affordability analysis to be prepared and
12 presented to this Board, as well as the
13 legislative leadership, and appropriations
14 chairs in the respective chambers.
15 Secondly, it addresses general debt
16 issuance, which deals primarily with
17 characteristics of debt instruments issued, as
18 well as the structure of particular financing.
19 It adopts fiscally prudent debt management
20 principals to govern the issuance of State
21 debt, and also suggests that these policies
22 should apply all debt encumbering State
23 resources, not just debt which is formally
24 authorized and approved by this Board.
25 Thirdly, it addresses the method of sale
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April 24, 2001
1 and selection of professionals calling for a
2 competitive selection process, unless an
3 exception to that general rule is warranted.
4 And lastly, it includes policies addressing
5 compliance with securities law issues dealing
6 with disclosure, and tax law issues dealing
7 with arbitrage compliance and the use of
8 proceeds.
9 And with that, I'll be happy to answer any
10 specific or general questions.
11 TREASURER GALLAGHER: I sort of paged
12 through here, and I didn't see any mandate that
13 there's a financial advisor hired on each one
14 of these issues.
15 Is there a reason I didn't see it --
16 MR. WATKINS: Well, that's --
17 TREASURER GALLAGHER: -- or did I miss it?
18 MR. WATKINS: -- included in our rules.
19 And so that is, in effect, what we do by
20 practice, pursuant to our rules.
21 And when we were dealing with the policies,
22 if it was a -- if it was more specific --
23 specifically addressed by our rule, and not
24 really of a policy nature, then -- then we left
25 it in the rule and didn't include it in the
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April 24, 2001
1 policy.
2 So it was just a judgment call. But as a
3 matter of practice, we are required to use
4 financial advisors on negotiated transactions,
5 and will continue to utilize that practice.
6 TREASURER GALLAGHER: Okay. Just --
7 MR. WATKINS: And be happy to include it in
8 the form of a policy if -- if that's the
9 pleasure of --
10 TREASURER GALLAGHER: Well, if it's in the
11 rules, you're going to follow them --
12 MR. WATKINS: Correct.
13 TREASURER GALLAGHER: -- that's good enough
14 for me. I just didn't see it in the policy --
15 MR. WATKINS: Right.
16 TREASURER GALLAGHER: -- and it's -- now I
17 know why.
18 GOVERNOR BUSH: Any other comments?
19 COMPTROLLER MILLIGAN: Just a quick
20 comment, Governor.
21 Of course, this is a long overdue policy
22 statement, I think. And -- and congratulate
23 Ben for really taking the leadership on this.
24 I do not agree with the 8 percent cap. He
25 knows that. I don't have a -- a -- really a
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DIVISION OF BOND FINANCE 18
April 24, 2001
1 better number, except I believe it should be
2 lower. I understand the Legislature's looking
3 at a 6.5 percent cap, which I think is a little
4 closer to what we should be doing.
5 I continue to be concerned about other
6 government entities, primarily local and county
7 governments who are committing themselves of
8 considerable bond issues that -- without
9 written good faith of the State of Florida
10 behind them, but.
11 And I am -- continue to be concerned about
12 that.
13 And --
14 GOVERNOR BUSH: I --
15 COMPTROLLER MILLIGAN: -- but this is a
16 great step forward.
17 GOVERNOR BUSH: I was going to make three
18 comments, one of which relates to the issue of
19 the implied good faith and credit of the State.
20 Sometimes that -- there's an implication
21 that if others fail, that the State will --
22 will bail out entities, trans-- Turnpike
23 authorities, not necessary -- or expressway
24 authorities, not our Turnpike, but the -- or
25 bridges, other things like that.
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April 24, 2001
1 And I -- I would hope that we allow the
2 market to work in -- in those particular cases.
3 I think a good -- if people are making bad
4 decisions, the State shouldn't necessarily come
5 in and bail out bad underwriting.
6 You know, bonds are -- there's no
7 guarantee, unless there's a guarantee. I don't
8 think there should be any kind of implication
9 that we are going to stand by public debt that
10 may not be authorized by the State.
11 I don't know if that should be a part of
12 the policy, but I wanted to make that point.
13 MR. WATKINS: Indirectly, not specifically,
14 Governor, because that really is a policy
15 decision to be made by the -- the Legislature
16 primarily with -- with obviously input from
17 this Board.
18 It does address it indirectly though,
19 Governor, in the sense that the policy --
20 basically what it suggests is any time State
21 resources are being encumbered, either directly
22 or indirectly, that the -- the policies
23 articulated in this debt management policy be
24 adhered to, and that the Legislature accepts
25 the long-term financial impact of that decision
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April 24, 2001
1 when they are making that authorization at the
2 outset.
3 So it covers it in that fashion, as opposed
4 to addressing when is the State morally
5 obligated, and when should we pay, even though
6 there's not a technical and legal obligation to
7 pay.
8 GOVERNOR BUSH: Second question or comment
9 I have is -- or question really in this case:
10 Is there anything that would impede us from
11 having -- issuing debt at smaller increments,
12 for example, than 300 million dollars for the
13 P-2000 or Florida Forever bonds?
14 MR. WATKINS: No, sir.
15 GOVERNOR BUSH: Very good.
16 And then the final comment I have -- and
17 this is -- this relates to a conversation I've
18 had with Comptroller Milligan in the past,
19 relates to the use of the lease financing
20 that's mentioned in the policy report for --
21 for some of our technology projects.
22 We're still struggling with the huge
23 capital needs that will very quickly generate
24 savings that, in essence, will pay for the
25 investment.
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April 24, 2001
1 But we're having a hard time, given the
2 fact that operating dollars generally have --
3 have a head start on capital outlay dollars
4 in -- in the budgeting process that we have
5 here at the State.
6 So if there's -- and I'm not sure what the
7 answer is. I just hope that this is being
8 looked at and -- and discussed so that we could
9 have a policy to -- to maybe include some of
10 the existing lines of credit that exist for
11 some of the technology projects, once approved
12 by the Legislature, and gone through the
13 process that we've established.
14 TREASURER GALLAGHER: Well, if -- if I may
15 say, it's interesting that you mention that,
16 because I was planning on mentioning to
17 General Milligan today, and then both of us
18 might mention it to you, that the very serious
19 work that needs to be done on the
20 general ledger that is quite costly, and
21 because it's all general revenue money is
22 basically now not being funded.
23 And that is an area that I think we should
24 use some of the 300 million dollars financing
25 that the Comptroller's about to -- to issue,
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April 24, 2001
1 and get approval to -- to get that general
2 ledger up and running.
3 And without that, all the other pieces
4 aren't going to work.
5 GOVERNOR BUSH: Right.
6 TREASURER GALLAGHER: So --
7 GOVERNOR BUSH: Well, it's in the budget.
8 In -- I think in the Senate it's at zero; and
9 in the House, there's -- it's some number.
10 TREASURER GALLAGHER: Thirteen million or
11 something?
12 COMPTROLLER MILLIGAN: Well, my -- my -- my
13 position with them has been, don't nickel and
14 dime us. Either fund it --
15 GOVERNOR BUSH: Well, they're -- they're
16 not at funding --
17 COMPTROLLER MILLIGAN: -- at the rate we
18 need, which turns out to be not quite as severe
19 as we thought. We're -- we're talking around
20 37, 38 million this year --
21 GOVERNOR BUSH: Forty-five?
22 COMPTROLLER MILLIGAN: -- and -- instead of
23 forty-five, and -- and another 36, 37 million
24 next year.
25 GOVERNOR BUSH: Well, I -- I do think --
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April 24, 2001
1 TREASURER GALLAGHER: I think they're
2 funding it with the money that they didn't
3 spend last year on it, and they just put it
4 forward to this year.
5 COMPTROLLER MILLIGAN: Well, that -- the --
6 but that's only a small amount of -- of --
7 TREASURER GALLAGHER: It's --
8 COMPTROLLER MILLIGAN: -- all the
9 requirements.
10 TREASURER GALLAGHER: -- in the House.
11 COMPTROLLER MILLIGAN: And -- and, frankly,
12 to -- to nickel and dime it that way just
13 doesn't solve the problem. And that's what --
14 GOVERNOR BUSH: Well --
15 COMPTROLLER MILLIGAN: -- we've told them.
16 GOVERNOR BUSH: -- it may -- Commissioner,
17 I would -- I would be interested in pursuing
18 that idea, not just for the information
19 management system, but other technology
20 projects that can show a return in terms of --
21 I mean, this may require some legislative
22 change.
23 But if we can invest in technology that
24 creates a savings immediate that could be used
25 to -- to pay off the proceeds of the debt, or,
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April 24, 2001
1 you know, work out an arrangement with the
2 Legislature where they have some controls,
3 I think we ought to pursue it.
4 And I don't know -- again, it's -- there's
5 a lot of work that needs to be done. I'm not
6 sure this fits the lease financing arrangement
7 that is in place, but it seems like it --
8 there's --
9 TREASURER GALLAGHER: Certain--
10 GOVERNOR BUSH: -- no reason --
11 TREASURER GALLAGHER: -- certainly the --
12 GOVERNOR BUSH: -- why it shouldn't --
13 TREASURER GALLAGHER: -- general ledger, in
14 order to even figure out if you're going to
15 have savings in the other things you do should
16 come first.
17 COMPTROLLER MILLIGAN: That's -- that's one
18 of the problems with our current system. We --
19 we have to back-of-the-envelope our estimates
20 of savings, as opposed to really having hard
21 data, which --
22 TREASURER GALLAGHER: Well --
23 COMPTROLLER MILLIGAN: -- we could get out
24 of a good solid event --
25 TREASURER GALLAGHER: If I --
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April 24, 2001
1 COMPTROLLER MILLIGAN: -- driven
2 general ledger system.
3 TREASURER GALLAGHER: If I could just make
4 a motion that we recommend to the Legislature
5 allowing, at least at this particular moment,
6 the general ledger to be funded through the
7 Comptroller's funds that are done for
8 financing, I'll make that motion so that at
9 least we can deliver that to the Legislature,
10 and at least get that very important part of --
11 of technology done.
12 GOVERNOR BUSH: Good timing.
13 COMPTROLLER MILLIGAN: Yeah.
14 I'll second that.
15 GOVERNOR BUSH: There's a -- you're
16 seconding that it's good timing, or --
17 COMPTROLLER MILLIGAN: Yeah.
18 GOVERNOR BUSH: -- seconding the motion?
19 COMPTROLLER MILLIGAN: Seconding both.
20 GOVERNOR BUSH: Okay.
21 TREASURER GALLAGHER: Was that a good
22 timing motion?
23 GOVERNOR BUSH: There's a motion and a --
24 and a second to recommend to the Legislature
25 that consideration be given for the equipment
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April 24, 2001
1 financing -- to use equipment financing line of
2 credit that the Comptroller has for the
3 general ledger portion of the information
4 management system.
5 Is there any other discussion?
6 COMPTROLLER MILLIGAN: There's -- there's
7 no ceiling on that, is there?
8 MR. WATKINS: For this particular credit --
9 TREASURER GALLAGHER: Three-and-a-half.
10 MR. WATKINS: -- facility, General, it's
11 contemplated that 30 million --
12 COMPTROLLER MILLIGAN: Fifty --
13 MR. WATKINS: -- dollars be available.
14 COMPTROLLER MILLIGAN: How much, 30?
15 MR. WATKINS: Thirty million.
16 COMPTROLLER MILLIGAN: Uh-hum.
17 MR. WATKINS: But there isn't -- there's no
18 reason that we can't address that as a -- as a
19 specific issue in and of itself.
20 In other words --
21 COMPTROLLER MILLIGAN: Okay.
22 MR. WATKINS: -- we'll have to raise the
23 amount of the credit facility. Depending on
24 the -- the total cost of the financing, it may
25 be warranted to go back and -- and do a
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April 24, 2001
1 separate stand alone financing for that system.
2 But that's eminently doable.
3 TREASURER GALLAGHER: This -- it's
4 interesting that this actual financing process
5 started back when I was on the
6 Appropriations Committee, and we started
7 looking in and finding that State agencies were
8 buying things, computers in those days were
9 just starting, and typewriters, and every kind
10 of equipment you can imagine, and using their
11 operations money, and paying 22, 25,
12 18 percent.
13 And it just didn't make any sense when we
14 can borrow money at 4.
15 And so we, I think, put a stop to it -- I'm
16 not sure that we have totally -- and said,
17 you -- if you want to finance this stuff, let's
18 have a method by which we're not spending --
19 GOVERNOR BUSH: I think the General
20 unleashed himself on this subject, and it's
21 been stopped.
22 COMPTROLLER MILLIGAN: Well, this is under
23 control right now. And --
24 TREASURER GALLAGHER: Well, good.
25 COMPTROLLER MILLIGAN: -- took a little
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April 24, 2001
1 while, but --
2 TREASURER GALLAGHER: Even after --
3 COMPTROLLER MILLIGAN: -- it is under
4 control.
5 TREASURER GALLAGHER: -- we did this, it
6 sti-- it kept happening.
7 COMPTROLLER MILLIGAN: Well, that's right.
8 And -- but I -- we're -- we're in pretty good
9 shape on this program right now.
10 And -- and it is a good way of maybe trying
11 to get at the -- the problem. It does require
12 commitment from the Legislature in terms of
13 general revenue to pay down that debt.
14 GOVERNOR BUSH: Absolutely.
15 COMPTROLLER MILLIGAN: But it does spread
16 it out.
17 GOVERNOR BUSH: And in the case of the
18 general ledger, there's not -- as you said,
19 that -- that's the foundational kind of
20 investment that isn't going to necessarily
21 create savings, it'll create efficiencies. And
22 without it, it's hard to do the rest of it.
23 COMPTROLLER MILLIGAN: That -- that's --
24 TREASURER GALLAGHER: None of the other --
25 COMPTROLLER MILLIGAN: -- that's exactly
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April 24, 2001
1 right.
2 TREASURER GALLAGHER: -- nothing else can
3 be done. So --
4 Great.
5 GOVERNOR BUSH: Item what --
6 MR. WATKINS: Can we go back to Item 2, and
7 get a motion on Item 2, which is a debt --
8 TREASURER GALLAGHER: Motion on --
9 MR. WATKINS: -- management --
10 TREASURER GALLAGHER: -- the policy.
11 MR. WATKINS: -- policy, and then we'll
12 move --
13 GOVERNOR BUSH: Very good.
14 MR. WATKINS: -- on to --
15 TREASURER GALLAGHER: Motion on the policy.
16 GOVERNOR BUSH: Is there a second?
17 COMPTROLLER MILLIGAN: Second.
18 GOVERNOR BUSH: Moved and seconded.
19 Without objection, it's approved.
20 COMPTROLLER MILLIGAN: Even with my
21 reservation of 8 percent.
22 MR. WATKINS: Item Number 3 is a report of
23 award on the Master Equipment Financing
24 Agreement.
25 This is a 30 million dollar credit facility
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April 24, 2001
1 intended to run for a term of three years.
2 This is a -- the third time that we have
3 reauthorized a credit facility after we
4 significantly modernized the Consolidated
5 Equipment Financing Program under the direction
6 of General Milligan several years ago to allow
7 for more efficient access to the credit market
8 by individual agencies to finance equipment
9 needs.
10 We received seven proposals, and we awarded
11 the bid to Imperial Bank, which was a low cost
12 provider for the credit facility.
13 TREASURER GALLAGHER: Motion.
14 COMPTROLLER MILLIGAN: Second.
15 GOVERNOR BUSH: Moved and seconded.
16 Without objection, it's approved.
17 COMPTROLLER MILLIGAN: An extraordinary
18 interest rate, too. Extraordinary.
19 TREASURER GALLAGHER: That is. And a --
20 and -- on equipment leasing, that's --
21 GOVERNOR BUSH: Yeah.
22 TREASURER GALLAGHER: -- unbelievable.
23 COMPTROLLER MILLIGAN: Yeah.
24 GOVERNOR BUSH: Thank you, Ben.
25 MR. WATKINS: Thank you.
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April 24, 2001
1 (The Division of Bond Finance Agenda was
2 concluded.)
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April 24, 2001
1 GOVERNOR BUSH: Next up is the Power Plant
2 Siting Board?
3 TREASURER GALLAGHER: Motion on the
4 minutes.
5 COMPTROLLER MILLIGAN: Second.
6 GOVERNOR BUSH: Moved and seconded.
7 Without objection, it's approved.
8 Item 2.
9 MR. STRUHS: Consideration of an order to
10 be executed by the Siting Board adopting an ALJ
11 recommended order recommending the Siting Board
12 find that the Calpine Construction Finance
13 Company Limited Partnership and Osprey Energy
14 Center is consistent and compliant with
15 existing land use plans as zoning ordinances.
16 GOVERNOR BUSH: Anybody --
17 TREASURER GALLAGHER: Motion.
18 GOVERNOR BUSH: -- get that?
19 COMPTROLLER MILLIGAN: Second.
20 GOVERNOR BUSH: I didn't hear a single
21 thing you said.
22 Moved and seconded.
23 Without objection, it's approved.
24 TREASURER GALLAGHER: The real --
25 GOVERNOR BUSH: Is that a new strategy?
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April 24, 2001
1 TREASURER GALLAGHER: The real question is
2 did -- did the court reporter get it?
3 COMMISSIONER CRIST: Yeah. Well --
4 GOVERNOR BUSH: Did you get it?
5 COURT REPORTER COX: No.
6 GOVERNOR BUSH: You want to repeat it?
7 Please.
8 TREASURER GALLAGHER: It's written.
9 He'll -- he'll give --
10 GOVERNOR BUSH: Let's go along with that.
11 TREASURER GALLAGHER: -- it to her --
12 MR. STRUHS: This is -- what that item
13 is -- or was --
14 GOVERNOR BUSH: Thank you.
15 MR. STRUHS: -- is -- is simply a -- a
16 recognition that the proposed plan meets all of
17 the local zoning and -- and siting
18 requirements, land use requirements.
19 TREASURER GALLAGHER: It's moved --
20 GOVERNOR BUSH: Thank you very much.
21 TREASURER GALLAGHER: -- and seconded.
22 COMMISSIONER CRIST: Governor --
23 GOVERNOR BUSH: Yes.
24 TREASURER GALLAGHER: You need a vote.
25 COMMISSIONER CRIST: -- could --
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1 GOVERNOR BUSH: Did we -- didn't we move?
2 TREASURER GALLAGHER: Moved and seconded?
3 GOVERNOR BUSH: Is there a second?
4 Without objection -- there's no objection?
5 COMMISSIONER CRIST: I don't think so.
6 But --
7 GOVERNOR BUSH: It's approved.
8 Oh, you have some --
9 COMMISSIONER CRIST: Yeah. I had a
10 question.
11 GOVERNOR BUSH: Yeah.
12 COMMISSIONER CRIST: Okay.
13 GOVERNOR BUSH: Please. I'm sorry.
14 COMMISSIONER CRIST: Please.
15 That's all right.
16 I was just curious. Could you tell us a
17 little bit about the plant, please?
18 MR. STRUHS: I'd be -- I'd be happy to.
19 The plant is being built by Calpine
20 Construction in cooperation with the City of
21 Auburndale, which is where it will be located
22 in --
23 COMMISSIONER CRIST: Right.
24 MR. STRUHS: -- Polk County.
25 Representatives from the City are here, as well
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April 24, 2001
1 as counsel to Calpine Energy, and they'd be
2 happy to describe to you in detail the plant
3 they're looking to build.
4 It's being built with 65 percent of the
5 power capacity already under contract to serve
6 the needs of the City of Auburndale.
7 COMMISSIONER CRIST: I think -- my main
8 question would be what kind of power plant is
9 it?
10 MR. STRUHS: This would be a gas-fired --
11 it's actually two combustion turbine generators
12 at 175 megawatts each.
13 COMMISSIONER CRIST: Gas though.
14 MR. STRUHS: Yes.
15 COMMISSIONER CRIST: It's gas.
16 MR. STRUHS: And two heat recovery steam
17 generators. It's what we would call combined
18 cycle technology, which is very clean and
19 efficient.
20 COMMISSIONER CRIST: That's more than I
21 need to know. That's what --
22 MR. STRUHS: It's very --
23 COMMISSIONER CRIST: -- I was curious
24 about.
25 MR. STRUHS: -- this is -- this is very
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1 modern and -- and clean --
2 GOVERNOR BUSH: Explain to what -- why --
3 why this can come to us, and why others can't.
4 MR. STRUHS: This is a good question,
5 Governor.
6 Under Florida law, if it is a -- meets the
7 test of being an applicant under the Federal
8 law -- or the State law, then these things are
9 approveable.
10 Being an applicant requires being
11 recognized as a utility. Clearly
12 Calpine Construction Finance Company is not the
13 utility, but the City of Auburndale does have
14 the utility.
15 But because the power plant is being built
16 with a majority of the power already under
17 contract to the City, they qualify as an
18 applicant under the rules.
19 The -- the policy debate that's going on in
20 Florida now, as -- as you well know, is whether
21 or not plants should be built on a merchant
22 basis. In other words, being built without the
23 contracts already in place for that power
24 consumption.
25 GOVERNOR BUSH: Well, the Duke Power had a
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April 24, 2001
1 relationship with a municipal -- with a city at
2 least, maybe not a municipal authority, but
3 a -- not a utility perhaps, but a -- a city,
4 correct?
5 MR. STRUHS: New Smyrna Beach.
6 GOVERNOR BUSH: Wasn't that -- and
7 that's --
8 MR. STRUHS: But I'm not sure they had a --
9 I'm not sure they had a majority of the power
10 under contract.
11 GOVERNOR BUSH: Is it a -- so it's a
12 majority that defines --
13 MR. STRUHS: I believe -- I believe that's
14 the case.
15 I could ask Mr. Dee here to speak to it,
16 who is counsel to Calpine.
17 MR. DEE: Good morning.
18 I'm David Dee. I'm an attorney in the
19 Tallahassee law firm of Landers & Parsons. I'm
20 here today on behalf of the applicant.
21 In this instance, the power from this
22 facility is committed by contract to
23 Seminole Electric, which is a member of the
24 Florida Rural Electric Cooperative
25 Associations.
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April 24, 2001
1 The general manager for that Association is
2 here to speak on behalf of Seminole.
3 But the Pub-- Florida Public Service
4 Commission has addressed this issue, and has
5 concluded that in this case, the contract
6 between Calpine and Seminole satisfy the
7 requirements that were set by the Florida
8 Supreme Court in the case involving Duke.
9 That's the fundamental difference between
10 the two cases.
11 GOVERNOR BUSH: Why?
12 MR. DEE: All of the power in this case is
13 committed to Seminole. In the -- for that
14 reason, we describe it as a contract plan --
15 GOVERNOR BUSH: All right. I thought
16 Secretary Struhs said that there was a
17 percentage, not 100 percent --
18 MR. DEE: A hundred percent of the power is
19 available to Seminole if it needs it.
20 The power from the facility --
21 GOVERNOR BUSH: Okay.
22 MR. DEE: -- is subject to a series of
23 option and a series of other provisions. At
24 this point in time, Seminole has demonstrated a
25 need for I believe 350 megawatts of the
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April 24, 2001
1 527 megawatts to be prepared -- to be provided
2 by the facility, but they have the option of
3 taking all of the power if they need it.
4 GOVERNOR BUSH: Okay.
5 Any other questions?
6 We're going to do the motion and second
7 again.
8 TREASURER GALLAGHER: Motion.
9 GOVERNOR BUSH: I mean, we've done the
10 motion and second.
11 Is there any other discussion?
12 Without objection, it's approved.
13 TREASURER GALLAGHER: That means they can
14 go ahead and do -- make twice as much --
15 GOVERNOR BUSH: Yeah. Exactly.
16 (The Department of Environmental Protection
17 Agenda was concluded.)
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1 GOVERNOR BUSH: Board of Trustees.
2 TREASURER GALLAGHER: Motion on the
3 minutes.
4 COMMISSIONER CRIST: Second.
5 COMPTROLLER MILLIGAN: Where are we?
6 GOVERNOR BUSH: Move -- we're on the Board
7 of Trustees now.
8 COMPTROLLER MILLIGAN: Yes. Okay.
9 GOVERNOR BUSH: Moved and seconded.
10 Without objection, it's approved.
11 MR. STRUHS: We're requesting withdrawal of
12 Item Number 2.
13 TREASURER GALLAGHER: Motion, withdraw.
14 COMMISSIONER RHODES: Second.
15 GOVERNOR BUSH: Moved and seconded.
16 The item is withdrawn.
17 MR. STRUHS: Thank you.
18 Item 3, we've been advised that we should
19 take that up at the end of the Cabinet meeting,
20 so we'll temporarily pass that.
21 GOVERNOR BUSH: The reason for that is we
22 have people coming down -- coming from the
23 Keys, and it's near impossible to get here --
24 TREASURER GALLAGHER: To get here, yeah.
25 GOVERNOR BUSH: -- so we're going to defer
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1 that till the end, which I apologize that
2 members of the -- nonmembers of the State Board
3 of Administration will have to hear the very
4 exciting, compelling discussions --
5 TREASURER GALLAGHER: That will take so
6 long.
7 GOVERNOR BUSH: Well, it probably won't
8 this -- today, I hope. But --
9 COMPTROLLER MILLIGAN: You never know.
10 GOVERNOR BUSH: You never know. Exactly.
11 TREASURER GALLAGHER: Yeah.
12 MR. STRUHS: Item 4 is the Wald acquisition
13 agreement in the East Everglades CARL Project
14 seeking authorization to acquire a 100 percent
15 interest in 18.41 acres, which is 120 lots
16 within the East Everglades CARL project from
17 Morton Wald.
18 The consideration is for $816,000. That
19 comes to $6,800 per lot, or $44,269 per acre.
20 This land was platted as a subdivision back
21 in 1926.
22 The purposes for its acquisition are
23 threefold. One is that as that nearby sewage
24 treatment plant is upgraded to provide tertiary
25 treatment, that water can then be reused, and
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1 this is an opportunity to use that property for
2 the water.
3 The second reason is it will provide well
4 field recharge through better seepage
5 management for the West Dade well field.
6 And finally, it will better accommodate
7 surcharges from the seaport canal, which will
8 go partway in reducing and relieving flooding
9 problems in Sweetwater and Hialeah.
10 So it's a threefold benefit in terms of
11 keeping well fields recharged, flood control,
12 and allowing for recapturing recycling water
13 from the new advanced wastewater treatment
14 plant.
15 One of the things I will point out to you
16 is that this is part of the overall partnership
17 agreement with the Federal government as it
18 relates to Everglades restoration.
19 Because of that, we're obligated to use the
20 Federal acquisition rules, which means we were
21 not able to negotiate a price, we have to pay
22 100 percent appraised value. But this then is
23 a full credit in meeting our 50 percent cost
24 share with the Federal government as it relates
25 to Everglades restoration.
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1 COMPTROLLER MILLIGAN: Could I ask a couple
2 questions, Governor?
3 GOVERNOR BUSH: Yeah. Please.
4 COMPTROLLER MILLIGAN: The appraisers found
5 the highest and best use would be to hold for
6 long-term investment, anticipating some sort of
7 western movement. And that drove, of course,
8 the -- the price way up in terms of the
9 long-term investment.
10 We have been buying property adjacent to
11 this area, within 500 meters, of the boundary
12 of this area -- or within 500 meters of some of
13 this property, and paying $8,000 an acre.
14 Both sites are basically under water most
15 of the time, both are very similar in -- in
16 their construct. I think the highest price we
17 paid in adjacent areas was around 20,000 for
18 property that was fronting on Krome Road.
19 MR. STRUHS: Right.
20 COMPTROLLER MILLIGAN: I'm just having a
21 hard time dealing with $44,000 an acre for this
22 property.
23 MR. STRUHS: As -- as are we. The
24 differences, of course, are that this land has
25 been platted as a subaddition --
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1 COMPTROLLER MILLIGAN: In 1926, as you --
2 MR. STRUHS: Exactly.
3 COMPTROLLER MILLIGAN: -- pointed out.
4 Certainly a wonderful anticipation on
5 somebody's part.
6 I -- I'm not so sure that I can understand
7 why we need to commit $44,000 an acre to just a
8 portion of what we are ultimately going to have
9 to buy in there, and set a -- a framework of
10 44,000 an acre, and stand by for the next time
11 we buy it.
12 MR. STRUHS: Again, the -- the -- the
13 differences are -- the comparisons that you
14 have drawn are accurate, but that other land
15 had not been platted as a subdivision.
16 COMPTROLLER MILLIGAN: Well, I -- I --
17 GOVERNOR BUSH: David, let me --
18 COMPTROLLER MILLIGAN: -- I understand
19 that.
20 GOVERNOR BUSH: -- ask you -- let me ask it
21 another way, because I think the General's -- I
22 appreciate the -- the General bringing this up.
23 We kind of do a tag team on these subjects,
24 because this inevitably has the implication of
25 the next time we see this, even if it's
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1 unplatted, I've just got this sneaking
2 suspicion that the pricing will go up, because
3 they'll use this as a comparable. And we're
4 the only buyer.
5 So the question is: What would the
6 developer or the owner of this property have to
7 do --
8 MR. STRUHS: Uh-hum.
9 GOVERNOR BUSH: -- in order to secure their
10 development rights and build single family
11 homes -- I don't know how many acres -- how
12 many acres is this?
13 MR. STRUHS: It's 18. Eighteen-and-a-half
14 almost.
15 TREASURER GALLAGHER: What, the 93 parcels?
16 GOVERNOR BUSH: So the 120 lots on
17 18 acres --
18 TREASURER GALLAGHER: Oh, 120.
19 GOVERNOR BUSH: -- which is the -- how you
20 get to the valuation that you're -- you're
21 here, what would the developer have to do in
22 order to build in a -- in the area that -- that
23 is, you know, a mile -- a mile east of Krome
24 on -- on Tamiami Trail?
25 MR. STRUHS: Uh-hum.
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1 GOVERNOR BUSH: Eva, you want to come up?
2 TREASURER GALLAGHER: If he comes up --
3 MR. STRUHS: What --
4 TREASURER GALLAGHER: -- with an answer --
5 MR. STRUHS: -- what I would --
6 TREASURER GALLAGHER: -- to that, I'm
7 going --
8 MR. STRUHS: -- what I would --
9 TREASURER GALLAGHER: -- to be impressed.
10 GOVERNOR BUSH: See, I don't know --
11 I mean, this has -- this has just been the
12 general frustration I've had sitting up here --
13 and it doesn't have anything to do with you
14 guys.
15 It's just we are -- we are allowing
16 appraisers to put valuations on things that
17 can't be developed. I mean, I don't think you
18 can develop here. Maybe I'm wrong.
19 But I -- if -- if it -- if -- if I'm -- if
20 I'm -- if I'm right --
21 COMPTROLLER MILLIGAN: It's -- it is zoned
22 open land now, and -- which means they cannot
23 develop --
24 MR. STRUHS: Uh-hum.
25 COMPTROLLER MILLIGAN: -- some--
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1 GOVERNOR BUSH: Well, we're paying a buck a
2 foot for property that can't be developed for
3 what it was platted for in 1928.
4 TREASURER GALLAGHER: Well --
5 GOVERNOR BUSH: I mean, I don't know how
6 we're --
7 TREASURER GALLAGHER: -- my question would
8 be this: What was paid for it, and how long
9 ago? And -- and I didn't see that in my -- in
10 my notes.
11 And I -- well, let's do this. How about
12 just temporarily passing this till the next
13 meeting so we can get our questions answered?
14 MR. STRUHS: Actually I -- I think I might
15 be able to answer some of them now --
16 TREASURER GALLAGHER: Okay.
17 MR. STRUHS: -- if --
18 GOVERNOR BUSH: Oh, good.
19 MR. STRUHS: -- if you'd like.
20 TREASURER GALLAGHER: All right.
21 MR. STRUHS: In-- indeed, in this -- in
22 this case, there were quite a few comparable
23 sales within this specific area that we could
24 look to. So the appraised values we believe
25 are -- are accurate.
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1 And I think the number I was told is there
2 were actually 40 -- 40 transactions within this
3 quadrant that had occurred with -- over the
4 past several years. So land has -- has been
5 regularly traded in this area, and it was based
6 on those -- those --
7 GOVERNOR BUSH: Is this outside the -- the
8 urban service boundary?
9 MR. STRUHS: It is. It is just west of the
10 urban service boundary. And --
11 GOVERNOR BUSH: So --
12 MR. STRUHS: -- usually --
13 GOVERNOR BUSH: -- there's an implication
14 that the Dade County Commission is going to
15 extend the urban service boundary to allow for
16 development to occur. And we're pry-- we're
17 paying respectively on that valuation.
18 MR. STRUHS: Well, in -- in fact, the --
19 COMPTROLLER MILLIGAN: Well --
20 MR. STRUHS: -- Dade County --
21 GOVERNOR BUSH: Why should we do that?
22 Why do we do -- we didn't do it in
23 Pinellas County a year ago? We told them to go
24 back and -- of course, Pinellas County was the
25 applicant then.
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1 TREASURER GALLAGHER: By the way, are any
2 of the lots that we're buying any of those ones
3 that changed hands in the last two or
4 three years?
5 MR. STRUHS: Yes.
6 TREASURER GALLAGHER: Yeah. Well, that's
7 the problem.
8 MR. STRUHS: Well, I believe they have.
9 These specific lots?
10 MS. ARMSTRONG: No.
11 MR. STRUHS: No, not these specific lots.
12 But other lots in this area.
13 TREASURER GALLAGHER: Oh.
14 MR. STRUHS: From -- from which the comps
15 were drawn.
16 TREASURER GALLAGHER: And so --
17 MR. STRUHS: One -- one of the issues --
18 TREASURER GALLAGHER: -- none of the people
19 that we're buying from bought or sold any of
20 those other lots.
21 MR. STRUHS: Mr. Wald has held these lots
22 for -- for some time, I believe.
23 TREASURER GALLAGHER: All right. But he
24 hasn't bought any other ones lately, or sold
25 any in this same area.
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1 MR. STRUHS: Not that I'm aware of.
2 GOVERNOR BUSH: When you say "lots," you
3 mean parcels? I mean, tracts of --
4 TREASURER GALLAGHER: Yeah.
5 GOVERNOR BUSH: -- land?
6 TREASURER GALLAGHER: Well, yeah. Any --
7 any of these parcels are -- you know, that
8 would make the price go up. You know exactly
9 where I'm heading.
10 GOVERNOR BUSH: Yeah.
11 MR. STRUHS: Actually the -- the way we
12 priced these, the way -- the way they're valued
13 is the -- the -- the more lots you have, the
14 less we pay per lot.
15 TREASURER GALLAGHER: Well, yeah, because
16 you get it -- pay -- end up paying wholesale.
17 MR. STRUHS: There's a -- there's a --
18 there's a bulk issue there.
19 The -- Dade -- Dade County has actually
20 proven to be an excellent partner as we try to
21 advance this, because it's part of the
22 Everglades restoration, and it's also part of
23 their expansion of the Bird Drive waste water
24 treatment plant.
25 And, indeed, I would suggest that one of
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1 the things Dade County has done well, both in
2 their interest, and the State's interest, is to
3 not extend --
4 GOVERNOR BUSH: But, David --
5 MR. STRUHS: -- that urban service
6 boundary --
7 GOVERNOR BUSH: -- that -- that's --
8 that's --
9 MR. STRUHS: -- in --
10 GOVERNOR BUSH: -- wonderful. Then why
11 would we value the property at a dollar a foot?
12 MR. STRUHS: Because -- because -- because
13 that's the appraised value, and that's what the
14 comps show.
15 GOVERNOR BUSH: And what's that based on?
16 MR. STRUHS: On -- on 40 -- 40 recent
17 sales.
18 GOVERNOR BUSH: Which implies that the --
19 it's based on Dade County extending the urban
20 service area, and doing exactly what you said
21 they won't do.
22 MR. STRUHS: Well, actually, what
23 they've -- what they've done is --
24 TREASURER GALLAGHER: Speculation.
25 MR. STRUHS: -- they've avoided extending
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1 that urban service boundary.
2 One of the concerns we have, frankly, is
3 if -- if we don't acquire this specific
4 property now, in a matter of time, the
5 Water Management District will be forced to
6 condemn it, using their statutory authority to
7 do just that, and we end up paying --
8 GOVERNOR BUSH: But, David --
9 MR. STRUHS: -- 150 or --
10 GOVERNOR BUSH: -- if you can't --
11 MR. STRUHS: -- 200 percent of the current
12 value.
13 GOVERNOR BUSH: If they can't develop the
14 property, its value is not what you've
15 appraised it at. If they can develop the
16 property, that's probably a very fair appraisal
17 for a tract of land that you put 10 units per
18 acre, or whatever it is, as described here.
19 So it seems like we -- we end up valuing
20 property at the higher price, and then we --
21 then we, you know, get into a position -- why
22 would the Water Management District have to
23 condemn this property if you can't develop it?
24 This is what we do regularly.
25 Those islands that I flew over yesterday
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1 and -- and -- or a couple of days ago that we
2 bought, we bought at a -- you know, a
3 theoretical valuation that assumed that they
4 could be developed, and -- and it wasn't that
5 it wasn't a -- a solid purchase, it wasn't that
6 it wasn't sound environmentally to purchase the
7 islands in -- in whatever -- Lake Toho,
8 whatever it was called.
9 It's the valuation that bugs -- bugs the
10 heck out of me.
11 Or maybe I'm wrong. Maybe -- maybe I'm
12 missing this. Maybe I've been in the
13 real estate business too long or something.
14 But I -- I just don't get it.
15 COMPTROLLER MILLIGAN: Well, I -- I don't
16 get it either, Governor. And --
17 TREASURER GALLAGHER: This is the place to
18 make the sales, I can tell you that.
19 COMPTROLLER MILLIGAN: I -- I would move
20 that we disapprove this item.
21 COMMISSIONER CRIST: What's -- what's the
22 motion?
23 TREASURER GALLAGHER: He's going to move --
24 COMPTROLLER MILLIGAN: Disapprove.
25 TREASURER GALLAGHER: I'll make a
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1 substitute that -- that it be temporarily
2 passed at this time till --
3 GOVERNOR BUSH: It doesn't really pass.
4 It's more --
5 TREASURER GALLAGHER: -- more of it --
6 GOVERNOR BUSH: -- like a legislative
7 thing?
8 TREASURER GALLAGHER: Well, we could de--
9 defer it till the next meeting.
10 GOVERNOR BUSH: -- pass things? Have we
11 ever done that?
12 TREASURER GALLAGHER: Sure, we can.
13 GOVERNOR BUSH: Oh, can we?
14 TREASURER GALLAGHER: Yeah.
15 ATTORNEY GENERAL BUTTERWORTH: If we --
16 TREASURER GALLAGHER: I'll defer -- I'm
17 making it clear.
18 I'll defer it to the next meeting so that
19 we have a chance to look at it. And at that
20 time, maybe General Milligan's is the right
21 one.
22 ATTORNEY GENERAL BUTTERWORTH: Second.
23 GOVERNOR BUSH: You'll yield --
24 COMPTROLLER MILLIGAN: I'll -- I'll accept
25 that.
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1 GOVERNOR BUSH: All right.
2 There's a motion to defer and a second.
3 Any other discussion?
4 Without objection, the motion is deferred.
5 I'm sorry. I don't -- I'm not -- I'm
6 not -- this is a philosophical question that
7 I -- comes up about once a month, and we've
8 never really addressed it.
9 If someone can come explain it to me, and
10 convince me that this is the only path we can
11 take, then I'll -- I'll be a dutiful supporter.
12 But until such time as we deal with this
13 issue, I think we need to stop what we're doing
14 a little bit.
15 TREASURER GALLAGHER: Now -- and just for
16 whatever it's worth --
17 MR. STRUHS: Yes, sir.
18 TREASURER GALLAGHER: -- my interest -- I'd
19 like to hear -- when you can have somebody come
20 by and visit -- why we pay twice as much if we
21 condemn it. That's something that I'd like
22 somebody to explain to me.
23 I mean, I know we pay the legal fees on the
24 other side if they challenge it. I have a hard
25 time seeing how it gets twice as much, but send
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1 somebody by.
2 MR. STRUHS: That -- that -- that
3 projection, or that estimate is based on -- on
4 history.
5 If you look at land that has been acquired
6 through condemnation in the past, it -- it
7 typically runs considerably higher than the
8 appraised value.
9 So that -- that's -- that is a projection
10 based on historic performance.
11 And I --
12 GOVERNOR BUSH: I'm not sure that'd be the
13 case in property that can't ever be developed.
14 MR. STRUHS: Well, we will -- we will -- we
15 will make the case that this land is
16 developable, and -- and then you can make your
17 judgment based on that.
18 COMPTROLLER MILLIGAN: I -- I would --
19 GOVERNOR BUSH: Very good.
20 MR. STRUHS: I --
21 COMPTROLLER MILLIGAN: -- I would like to
22 add, Governor, that, you know, this is a 1-mile
23 square piece of property, approximately.
24 I think it's a mile on the side.
25 GOVERNOR BUSH: Six hundred and
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1 forty-eight.
2 COMPTROLLER MILLIGAN: And whatever --
3 whatever it is, there's a lot of surrounding
4 property that is also under water seven,
5 eight months out of the year.
6 And I -- and I'm not so sure that the loss
7 of this piece of property to the overall good
8 of what the Water Management District is trying
9 to do is all that significant.
10 And I'd like to really understand the
11 significance of this particular piece of
12 property and the criticality, and why we should
13 spend this amount of money, just because it's
14 platted.
15 TREASURER GALLAGHER: And -- and if -- if
16 you look at where this is, obviously somebody
17 has to acquire the land all around it. So this
18 is just the beginning of what needs to be done.
19 So --
20 COMPTROLLER MILLIGAN: We have been
21 acquiring other pieces that surround this area
22 at -- at a much lower rate, because it's not
23 platted is the story. But --
24 GOVERNOR BUSH: Got the casino about a mile
25 west of it --
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1 COMPTROLLER MILLIGAN: Yeah. And got --
2 GOVERNOR BUSH: -- which is --
3 COMPTROLLER MILLIGAN: -- a casino --
4 GOVERNOR BUSH: -- ironic.
5 COMPTROLLER MILLIGAN: Yes.
6 TREASURER GALLAGHER: Okay. Onward to the
7 next.
8 GOVERNOR BUSH: All right.
9 MR. STRUHS: I think I may have mentioned
10 this, but just to -- in the event I didn't.
11 Because this is a State match to Federal
12 grant money that was provided, we are obligated
13 to use the Federal acquisition rules, which
14 demands that we pay 100 percent of the
15 appraised value.
16 So that is -- that is one of the reasons
17 that the item is presented the way it is. We
18 didn't have latitude, in terms of negotiating
19 price, because we're obligated to use the
20 Federal rules, because we're being matched --
21 GOVERNOR BUSH: I vote for a new appraised
22 value.
23 MR. STRUHS: Just wanted to make sure you
24 were aware of that.
25 TREASURER GALLAGHER: Maybe somebody needs
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1 to look at the Federal rules.
2 Let's go to Item 6.
3 MR. STRUHS: Item 5.
4 GOVERNOR BUSH: Item 5.
5 TREASURER GALLAGHER: Oh, Item 5.
6 MR. STRUHS: Brevard County option
7 agreement, Brevard Coastal Scrub Ecosystem CARL
8 Project totaling 59 acres within the
9 Brevard Coastal Scrub Ecosystem.
10 Recommending approval. By -- by point of
11 comparison, on this one where we actually had
12 the latitude as a state to exercise our --
13 TREASURER GALLAGHER: Noncontroversial.
14 MR. STRUHS: -- business-like negotiating
15 skills, we -- we're able to bring this to you
16 at 79 percent of the approved value.
17 GOVERNOR BUSH: Is there a motion?
18 COMPTROLLER MILLIGAN: Motion.
19 COMMISSIONER RHODES: Second.
20 GOVERNOR BUSH: Moved and seconded.
21 Without objection, it's approved.
22 Making progress.
23 TREASURER GALLAGHER: Now we're on 6.
24 GOVERNOR BUSH: Item 6.
25 MR. STRUHS: Item 6 is a Nature Conservancy
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1 option agreement/donation in exchange with the
2 Dunn's Creek CARL Project/Saddle Blanket Lakes
3 Scrub CARL Project.
4 It's acquiring 4,545 acres, which
5 contemplates the acceptance of a donation of
6 1500 acres between the Dunn's Creek CARL
7 Project and The Nature Conservancy.
8 And then in exchange of 77.86 acre parcel,
9 the Board of Trustees land within the
10 Saddle Blanket Lakes Scrub CARL Project for
11 155.72 acre parcel owned by The Nature
12 Conservancy within the Dunn's Creek CARL
13 Project.
14 Happily, Bob Bendict is here from
15 The Nature Conservancy in the event anybody has
16 any questions in terms of precisely how this
17 transaction went forward.
18 But the -- the point is, it's an
19 opportunity to acquire some remarkably valuable
20 resources at substantially below the approved
21 value.
22 And I would also point out that The Nature
23 Conservancy has, as part of this agreement,
24 agreed to provide between three to five years
25 worth of services in terms of doing
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1 environmental restoration of work on that land.
2 TREASURER GALLAGHER: Motion.
3 COMPTROLLER MILLIGAN: Second.
4 ATTORNEY GENERAL BUTTERWORTH: Second.
5 GOVERNOR BUSH: Moved and seconded.
6 Without objection, it's approved.
7 MR. STRUHS: Item 7 is an acquisition from
8 the St. Johns River Water Management District/
9 Department of Agriculture/Division of Forestry.
10 It's an expansion of the Jennings State Forest.
11 It's a 50/50 cost share between the
12 Department of Agriculture and the St. Johns
13 River Water Management District.
14 We're recommending approval.
15 TREASURER GALLAGHER: Motion.
16 ATTORNEY GENERAL BUTTERWORTH: Second.
17 GOVERNOR BUSH: Moved and seconded.
18 Without objection, it's approved.
19 MR. STRUHS: Item Number 8 is the result of
20 a statutory glitch in the Florida Forever bill
21 and an administrative error.
22 We need to achieve your approval of the
23 Water Management District's Florida Forever
24 goals and measures.
25 You may remember several meetings ago, you
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1 already did that for the Department. But
2 apparently you need to do that independently
3 for the Water Management Districts.
4 I will assure you that the goals and
5 measures that the Water Management Districts
6 have adopted are almost identical to the ones
7 you've already approved for the Department.
8 TREASURER GALLAGHER: Motion.
9 COMMISSIONER RHODES: Second.
10 GOVERNOR BUSH: Moved and seconded.
11 Without objection, it's approved.
12 MR. STRUHS: And we will return later with
13 Item 3, I believe.
14 GOVERNOR BUSH: Thank you, David.
15 (The Board of Trustees of the Internal
16 Improvement Trust Fund Agenda was concluded.)
17 * * *
18
19
20
21
22
23
24
25
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1 GOVERNOR BUSH: State Board of
2 Administration.
3 TREASURER GALLAGHER: Motion on the
4 minutes.
5 General?
6 GOVERNOR BUSH: Motion on the minutes?
7 COMPTROLLER MILLIGAN: I'll second the
8 motion.
9 TREASURER GALLAGHER: Thank you.
10 GOVERNOR BUSH: Moved and seconded.
11 Without objection, it's approved.
12 (Commissioner Crist exited the room.)
13 MR. HERNDON: Good morning.
14 GOVERNOR BUSH: Hi, Tom.
15 MR. HERNDON: Our folks are on the way
16 downtown. And with your permission, what I
17 would like to suggest is that we move to
18 Item 3, because the staff person, the Chair of
19 that particular committee, is here, and we
20 could talk about the media selection while the
21 other folks are still in transit, if that's
22 agreeable.
23 Basically what we have for you this morning
24 is three fairly significant milestones in the
25 overall implementation process. If we start
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1 with Item 3, which is the selection of the
2 media firm, Dr. Francis, who's Chairman of that
3 Implementation Group is here, as are
4 representatives from Ketchum Communications,
5 our recommended firm.
6 We also have with us this morning
7 representatives from our office who are going
8 to speak to you briefly on the selection of the
9 Asset Transition Broker.
10 Our recommendation there is, of course,
11 Morgan Stanley.
12 And then we have the first of several
13 unbundled investment products to bring before
14 you this morning as Item Number 4.
15 And so with your permission, Dr. Francis is
16 here, and folks from Ketchum, and Jim Arnold,
17 who has been our consultant throughout the
18 selection of the -- the media firm.
19 And we'll go ahead and let Dr. Francis kind
20 of bring you up to speed as to how we got to
21 the point that we are, and why we selected --
22 rec-- Ketchum to recommend to you this morning.
23 Thank you.
24 GOVERNOR BUSH: Good morning, Doctor.
25 DR. FRANCIS: Good morning, Governor,
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1 Trustees.
2 With -- with this decision this morning
3 before you, we will have the third and final
4 piece of the education program in place.
5 This program will then be positioned to
6 provide to FRS participants complete service at
7 every level from, as we say, high tech to
8 high touch; with vendors who are completely
9 unconflicted, who have no economic interest in
10 the outcomes of the decisions that participants
11 will make; and vendors who are willing to
12 accept full fiduciary responsibility for their
13 actions.
14 As you know, for the economic content, the
15 technical content, and the analytical tools,
16 you've approved Financial Engines to play that
17 role.
18 For the human services, the personnel that
19 will contact and deal directly with employees
20 by phone, through workshop settings, or
21 one-on-one, we have the firm of Ernst & Young.
22 And now the third piece before you today is
23 the recommendation to hire Ketchum as the media
24 firm.
25 And you might ask, well, if the service
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1 levels are provided by the other vendors,
2 what's -- what's the need here, what's --
3 what's the missing piece that we're addressing?
4 And the answer is simply this: That no
5 matter how compelling the economics that are
6 before participants, no matter how good the
7 technical information, no matter how effective
8 the analytical tools, no matter how accessible
9 the support personnel are, if participants
10 don't connect with the information, if they
11 don't grasp and understand what's before them,
12 the program will fail.
13 Effectively, without a media firm to test
14 and ensure that this information is
15 comprehendible, understandable, we'd be pushing
16 information through a pipe, with no idea of the
17 outcome at the other end.
18 The two principal deliverables that the
19 media firm will bring to the program are,
20 first, a motivation and awareness campaign that
21 will engage people, and stimulate interest in
22 this very important economic choice that's
23 going to be before them.
24 And the second, as I mentioned, is to
25 ensure that there's a connection, that there's
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1 comprehension and understanding of the
2 materials.
3 And this will happen through both audience
4 evaluation and full testing with FRS
5 participants of all the prototype materials and
6 tools that will go -- that will ultimately go
7 to participants.
8 Of the original 15 respondents to the RFI,
9 the field was narrowed to three finalists by
10 our media consultant, James E. Arnold
11 Management Consulting; and finally our EPIRG
12 group of -- of persons, both within and outside
13 the SBA unanimously in the final analysis
14 recommends Ketchum, which is a unit of the
15 Omnicom Group, Incorporated.
16 There are a number of reasons that Ketchum
17 stood out among the group of finalists.
18 The first is that Ketchum has an
19 established track record in benefits
20 communications, which is much more specialized
21 and much more focused on the task at hand here
22 than simply a -- excuse me -- than simply
23 employee communications.
24 Secondly, of all the three finalists,
25 Ketchum was the only one to -- to demonstrate
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1 its sensitivity to cost effectiveness. Its
2 recognition that the taxpayers ultimately are
3 footing the bill for this program, and that we
4 need to be as careful as we possibly can.
5 In fact, of the three finalists, Ketchum
6 was the lowest price of -- of the three.
7 The third, and in many ways, the most
8 important, is that Ketchum's strategy is
9 research driven. They did not come to the
10 table pretending to know everything they need
11 to know to successfully roll out this program
12 to participants.
13 But they have a very comprehensive approach
14 toward evaluating what needs to be done in the
15 rollout of the program.
16 And as I understand it, each of you have a
17 copy of the time line that is in draft form
18 now. It's a multicolored fold-out document.
19 But if you've had a chance to glance at that, I
20 think you'll appreciate how comprehensive the
21 proposal is in these early stages. And,
22 of course, it'll be refined as -- as the
23 program moves along.
24 And the final element that -- that sort of
25 clinched the deal was their sensitivity to the
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1 importance of partnering, their recognition
2 that this is a -- in effect, a five-way effort.
3 Not only with the other two principal vendors,
4 but also with the SBA and the Division of
5 Retirement that continues to play an obvious
6 and important role in the retirement system
7 overall.
8 That concludes my remarks.
9 We have representatives of Ketchum here who
10 are available for questions and to say a few
11 remarks.
12 GOVERNOR BUSH: Any questions?
13 COMPTROLLER MILLIGAN: No.
14 DR. FRANCIS: Peter Fleischer.
15 GOVERNOR BUSH: I don't think you need to
16 come, but if you want to.
17 Any --
18 DR. FRANCIS: Your choice.
19 COMPTROLLER MILLIGAN: I -- I'd move the
20 item, Item 3.
21 TREASURER GALLAGHER: Second.
22 GOVERNOR BUSH: Moved and seconded.
23 Without objection, it's approved.
24 DR. FRANCIS: Thank you.
25 GOVERNOR BUSH: Good work.
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1 Work hard. Have fun.
2 DR. FRANCIS: Thank you.
3 MR. HERNDON: The -- if we can then,
4 Governor, with your permission, members, revert
5 back to the regular order to go to the Asset
6 Transition Broker. This is recommendation
7 number 2.
8 Scott Seery is here as Chair of that
9 working group.
10 This is a little bit of a unique working
11 group in the sense that when we went out to
12 solicit representatives from cities and
13 counties and school boards and -- and so forth
14 for participation in our various working
15 groups, we didn't get a lot of takers for this
16 one.
17 As a consequence, it wound up being
18 primarily internal SBA staff folks who worked
19 on this.
20 But we do have quite a bit of expertise in
21 this regard, and I think Scott'll highlight
22 that for you as we go through this brief
23 presentation.
24 MR. SEERY: Good morning.
25 GOVERNOR BUSH: Good morning.
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1 MR. SEERY: The purpose of our recomm-- our
2 memorandum was to recommend the selection of
3 Morgan Stanley to provide asset transition
4 brokerage services to the SBA.
5 I'd like to give just a little bit of
6 background about the asset transition group,
7 discuss the RFI and selection process --
8 process, and highlight some of the important
9 issues associated with asset transition.
10 Transition of assets from the DB program to
11 the DC program will be more complex than
12 transitions performed by the SBA staff in the
13 past. It will require significant and
14 sustained resources devoted to planning,
15 coordinating, recordkeeping, operations, and
16 implementation.
17 Among the factors complicating this
18 transi-- transition are the statutory deadlines
19 for transferring assets; the advanced knowledge
20 of the transition; the expected size of the
21 transition; the multiple election periods for
22 different groups of public employees; the
23 number of asset classes, currencies, and
24 investment managers involved; the potential for
25 different account structures; the extensive
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1 recordkeeping, reporting, and documentation
2 requirements; the coordination of two or more
3 custodians and a third-party administrator; and
4 the need to manage the market exposure of the
5 assets being a transition -- being
6 transitioned.
7 As a result of these factors, we concluded
8 that the best way to conduct this transition
9 would be for the SBA to employ an asset
10 transition broker.
11 We developed an RFI that focused on four
12 broad areas: Technical expertise; the ability
13 and willingness of the firm to meet the needs
14 of the SBA, coordinate activities with the SBA;
15 investment managers and custodians; the
16 financial strength of the firm; and total
17 costs.
18 The RFI was posted on the SBA's website on
19 January 5th, 2001. In addition, we sent a copy
20 of the RFI to a list of ten potential
21 respondents that we identified with the
22 assistance of our consultant.
23 A subgroup of our working group was formed
24 to evaluate the RFI responses.
25 We interviewed the top three respondents
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1 from the nine that responded to the RFI. Each
2 of the three finalists was provided with a
3 specific agenda for an oral interview, and was
4 given 3 hours for their presentation.
5 Based upon these interviews, the evaluation
6 group unanimously selected Morgan Stanley.
7 There were a number of factors that really set
8 Morgan Stanley apart from the others for us.
9 But primarily, it was their experience.
10 While we felt that all three of the ones
11 that we recommended had experience, and were
12 very capable of performing this transition, we
13 felt that Morgan Stanley really demonstrated
14 their experience the most clearly to us.
15 For that reason, we recommend
16 Morgan Stanley as our primary candidate, but
17 would like the opportunity to negotiate with
18 either Merrill Lynch or Deutsche Bank if we are
19 unable to come to terms with Morgan Stanley.
20 And that really concludes my prepared
21 remarks.
22 GOVERNOR BUSH: Any questions, comments?
23 Is there a motion?
24 TREASURER GALLAGHER: Motion.
25 COMPTROLLER MILLIGAN: Second.
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1 GOVERNOR BUSH: Moved and seconded.
2 (Commissioner Crist entered the room.)
3 GOVERNOR BUSH: Without objection, it's
4 approved.
5 Thank you.
6 MR. HERNDON: The next item, 4, begins the
7 process of examining unbundled investment
8 providers that the Board is recommending to the
9 Trustees for selection.
10 And one point that I want to --
11 (Commissioner Crist exited the room.)
12 MR. HERNDON: -- stress here before
13 Ms. Jarriel gets up as Chair -- or Co-Chair of
14 this committee is that the approval that we're
15 soliciting today from you is essentially an
16 initial approval.
17 In other words, let us act with some
18 confidence as we continue to work with these
19 firms, recognizing that later on in the fall
20 when we bring back to you the bundled
21 providers, we will have an opportunity, and you
22 will have an opportunity to look at the array
23 of both bundled and unbundled investment
24 products, and ultimately pick the ones that you
25 think are best for final inclusion in the
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1 program.
2 So this would be the set of firms that we
3 would bring back for these products. There may
4 very well be others on the bundled side that
5 are competitive, that may be superior, at which
6 point, we would want to work through that
7 recommendation process and selection process
8 with you.
9 So the approval today is initial. The
10 firms all understand that. And, of course, it
11 is a little bit of a complication, because
12 we're -- and we'll -- we'll talk about that a
13 little bit later when we talk about the good
14 cause item, for example.
15 But with that brief introduction,
16 Ms. Jarriel is here, who's head of our Fixed
17 Income Division, and Co-Chair of this
18 Investment Selection Committee.
19 TREASURER GALLAGHER: As she's coming up --
20 well, I guess I'll wait till the presentation
21 is over.
22 MS. JARRIEL: Good morning.
23 We included in the briefing packet some
24 background here, and it might be worthwhile
25 just to quickly go through that.
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1 If you recall, several months back, we --
2 we engaged Callan to do the product design work
3 for us. And the intent of the product design
4 was to ensure that we would have products that
5 would offer participants the potential to earn
6 incremental return, to provide capacity for
7 growth, and to provide for liquidity in the
8 context of the overall program.
9 Once we had completed that product design
10 which resulted in 14 institutional products, we
11 developed the selection and evaluation criteria
12 for each of those products, which you
13 previously approved in January.
14 We also, since this was an institutional
15 process widely known to -- to institutional
16 investment managers, as opposed to a classic
17 RFI process, we created an intent to procure
18 document, which we put out on our website so
19 that any interested party would be able to
20 review that process, contact the consultant,
21 and ensure that they were in the database for
22 consideration.
23 As part of the selection process then,
24 Callan, our investment services consultant,
25 screened, based on that criteria; developed a
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1 list of candidates to bring to us.
2 They produced a briefing document, which
3 myself and the other Co-Chair for the
4 Investment Services Implementation Group,
5 Susan Schueren, used for a public meeting which
6 was a briefing of those particular managers.
7 We then scheduled 2-hour interviews. So we
8 invested approximately 25 hours with this group
9 of unbundled providers in the interview and
10 discussion context.
11 And then, lastly, subsequent to the
12 interview process, we had our group discuss the
13 candidates, prepare the scoring sheets, and use
14 that as the basis for our recommendation to
15 the --
16 (Commissioner Crist entered the room.)
17 MS. JARRIEL: -- Executive Director, which
18 is what you have in front of you today.
19 The U.S. Bond active product actually
20 consists of two -- that fund consists of two
21 separate products, a core plus product, and an
22 enhanced index product.
23 The first set of interviews that we've
24 included here for your review were the enhanced
25 product. We interviewed three firms:
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1 Black Rock, Lincoln, and Prudential.
2 Lincoln and Prudential were the classic
3 passive management firms where they have very
4 tight constraints on interest rate sensitivity,
5 sector allocation, and so forth; and they earn
6 a small amount of incremental return through
7 security selection. And that incremental
8 return has typically been in the neighborhood
9 of about 15 basis points.
10 Black Rock was unique in the sense that
11 they use sector rotation and subsector rotation
12 to earn slightly more excess return. Most
13 impressive, this manager was ranked in the top
14 1 percent of the Callan database for core bond
15 managers.
16 Additionally, they were ranked in the lower
17 percentiles for those characteristics that you
18 want to be low, residual risk, downside risk,
19 and so forth.
20 All in all, what we looked at was risk
21 adjusted performance; the quality of the
22 organization; and performance, net of fees. So
23 while fees were important, we wanted to ensure
24 that they were not the compelling reason that
25 we might hire a firm.
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1 And you'll note in the material, net a fee,
2 Black Rock generated over the longer term
3 38 basis points of excess net return, 7 for
4 Lincoln, and 9 for Prudential.
5 When we scored these candidates, we found
6 that Black Rock ranked number 1 by all of the
7 evaluators. So it was an easy choice for us to
8 recommend to the Executive Director Black Rock
9 as the enhanced index manager.
10 Are there any questions about that one
11 before I move on to the next one?
12 Okay.
13 In the core plus strategy, which is the
14 other piece of the active bond fund, we
15 interviewed Western Asset Management, Deutsche
16 Asset Management, PIMCO, and Wellington.
17 Typically, core plus managers will
18 opportunistically use high yield emerging
19 markets and international bonds to supplement
20 their overall core strategy.
21 Additionally, within the core portion of
22 the portfolio, they'll tend to make duration
23 bets, or develop an interest rate sensitivity
24 to the portfolio, utilize sector rotation,
25 yield curve strategies, and security selection.
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1 What distinguishes these core plus firms is
2 the magnitude of those relative bets, and which
3 ones they typically tend to focus on.
4 On the managers that we interviewed, three
5 of the four were top-down managers. This
6 simply means they take a macroeconomic view in
7 developing their sector weights, their interest
8 rate sensitivity, and the yield curve.
9 We had one firm that was a bottom-up firm.
10 When the product design was originally
11 developed, Callan had indicated that it might
12 be attractive if we could find candidates with
13 complimentary styles. And we found that with
14 this group.
15 The -- the two firms that we ultimately --
16 ultimately have recommended are Western Asset
17 Management, and Deutsche, because they both had
18 extraordinarily strong risk adjusted return --
19 returns, either top quartile or top decile;
20 because of the nature of their complimentary
21 styles; and they certainly had quality and
22 quantity of resources in the areas of portfolio
23 management, credit research, quantitative
24 analytics, and so forth.
25 Just briefly, the firms that we chose not
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1 to select, while Wellington's performance was
2 pretty good, they were in the top one-third of
3 the Callan database, they did not look nearly
4 as attractive as either Western or PIMCO.
5 They -- the other two firms outperformed by
6 70 and 50 basis points over the longer periods.
7 We were also impressed with the fact that
8 Western did an extremely good job of conveying
9 their strategy, process, and the interaction
10 between their groups of professionals.
11 And, most importantly, the senior
12 professional that's going to be assigned to our
13 account gives us a good indication of the focus
14 that the firm will have on our account.
15 And in this case, the deputy chief
16 investment officer for the firm, which is the
17 highest ranking senior official that actually
18 manages portfolios, will be the portfolio
19 manager.
20 In our post-interview discussion, we -- we
21 agreed that the complimentary style concept
22 made a lot of sense, and the risk adjusted
23 returns of these two managers were
24 extraordinary.
25 So we felt that Western Asset Management,
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1 and Deutsche offered the best combination of
2 providers for this mandate.
3 So we hereby recommend these two firms.
4 TREASURER GALLAGHER: You say you've
5 recommended two?
6 MS. JARRIEL: Two firms: Western Asset
7 Management, and Deutsche.
8 TREASURER GALLAGHER: I'm -- I'm glad you
9 mentioned that, because I was going to ask why
10 they were both the same.
11 If we keep taking areas that we want to
12 have manages (sic) in, and we have, as we move
13 on, two, three, four, how many are we going to
14 end up with?
15 MS. JARRIEL: We -- we have contemplated
16 that.
17 If you recall, when we originally did the
18 product design, it was contemplated that we --
19 we would perhaps have one bundled provider. So
20 we're cognizant, not only of the fact that
21 there is a lot of uncertainty with regard to
22 the overall participation in the DC program;
23 and as importantly, uncertainty with regard to
24 which options they may select.
25 So the one thing we have tried to do in
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1 each one of these products, is allow ourselves
2 the flexibility that, as the fundings begin to
3 take place, we'll be able, hopefully, to
4 ascertain fairly quickly whether or not it
5 would be as anticipated.
6 And, of course, in -- in some of these bond
7 products, an alternative, if we saw,
8 for instance, that a lot of funding would go to
9 a bundled provider, as opposed to the
10 institutional; or most of the options were
11 going to the equity market, as opposed to the
12 bond market, we could actually scale this back
13 and utilize, for instance, just an enhanced
14 index manager.
15 And as the Executive Director indicated,
16 this is only contingent approval, assuming that
17 we would get the participation levels that were
18 indicated in the product design.
19 In September when we have all of the
20 contingent approval information and the
21 proposed structure in front of you, there'll be
22 the opportunity then to readdress how many
23 managers to avoid, you know, duplication, or
24 to, most importantly, react to a -- a
25 diminution of participation.
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1 TREASURER GALLAGHER: I gather that the --
2 one of -- a concern I have is that if you look
3 at what we're dealing with right now in
4 deferred comp, and a State employee that would
5 get -- and start to make their choices on
6 deferred comp, their head spins.
7 And if we have too many choices here, heads
8 are going to spin.
9 MS. JARRIEL: It's important to note that
10 the employee will not see this as two choices.
11 In fact, in the active bond fund, there are
12 three managers that comprise that strategy.
13 So they're choosing one option. We've just
14 chosen to structure it that way so that there's
15 potential for growth, through the enhanced
16 index product, and the potential for strong
17 outperformance through the active bond fund.
18 So these underlying managers will literally
19 be, you know, invisible to the participant.
20 Now, we are certainly conscious of the cost of
21 having multiple managers if, in fact, the
22 participation levels are lower.
23 TREASURER GALLAGHER: Would it then --
24 would it be the Board's decision to say, okay,
25 we have Deutsche and Western are approved.
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1 I -- would you split the money between the
2 two of them, or would -- or would -- and the
3 individual would know that he's made a decision
4 to go into a core product -- core plus, but
5 y'all would take advantage of both products,
6 which I notice they have a little -- quite a
7 difference in standard deviation, but also
8 quite a difference in -- in yield.
9 MS. JARRIEL: Right.
10 And as you notice these two managers,
11 there's a chart in here that shows the entire
12 group that was interviewed. And you hope that
13 what you always have is risk adjusted return --
14 you know --
15 TREASURER GALLAGHER: It's --
16 MS. JARRIEL: -- higher returns in excess
17 of the risk --
18 TREASURER GALLAGHER: -- those two are
19 excellent in doing that. So they're -- I mean,
20 I -- I think they're good choices.
21 What I didn't know is -- is the plan to
22 people that would make that choice, then the
23 money would go into both even, or how would the
24 split be?
25 MS. JARRIEL: There's -- there's one fund,
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1 and for each of these products, Callan has
2 recommended an allocation. The highest
3 allocation is to the active products, these two
4 managers. And then there's some allocation to
5 the enhanced index piece.
6 So in the active bond fund --
7 TREASURER GALLAGHER: Okay.
8 MS. JARRIEL: -- Black Rock, Western, and
9 Deutsche would all receive funding. And,
10 you know, we -- we are certainly cognizant that
11 as we see what participation levels look like,
12 we -- you know, we'll need to scale any or all
13 of that back potentially.
14 But the employee would see one fund
15 offering, and it's designed really to do two
16 things: Provide them that ability to have that
17 incremental return that a Western or a Deutsche
18 would generate; but also to give us growth
19 potential through this enhanced index product.
20 You know, keep some stability at a low cost,
21 and provide for that growth.
22 So all three would be funded as -- as one
23 product offering for the employee. They --
24 TREASURER GALLAGHER: Okay.
25 MS. JARRIEL: -- would see a U.S. --
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1 TREASURER GALLAGHER: And that would be
2 your basic active fund, bond --
3 MS. JARRIEL: That's our --
4 TREASURER GALLAGHER: -- fund.
5 MS. JARRIEL: -- bond fund, right.
6 TREASURER GALLAGHER: Then you're going to
7 have a high yield fund, which'll be separate?
8 MS. JARRIEL: The high yield is separate.
9 TREASURER GALLAGHER: Which would include
10 the Huff/Mackay -- I know I'm getting ahead of
11 the story, but --
12 MS. JARRIEL: That's fine.
13 TREASURER GALLAGHER: Okay.
14 MS. JARRIEL: In the -- in the original
15 Investment Policy Statement, the products that
16 were shown were some core products, a stock
17 index fund, a bond --
18 TREASURER GALLAGHER: Right.
19 MS. JARRIEL: -- fund product, which --
20 which this comprises. And then there were a
21 laundry list of specialty products, like large
22 cap growth and value and the high yield.
23 And we put those in there so that for the
24 more sophisticated employee who wanted to
25 structure and customized an investment program
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1 for their own needs, they could do that.
2 But the core options are there, and this is
3 one of the core options for the employees.
4 TREASURER GALLAGHER: Okay. I've got this
5 is a core option. But if I wanted to, I
6 could -- as an employee, I could pick my money
7 to go in one of these individually, or you're
8 not going to let that option --
9 MS. JARRIEL: No. The option is -- is
10 one -- one product --
11 TREASURER GALLAGHER: Core --
12 MS. JARRIEL: -- offering.
13 TREASURER GALLAGHER: -- deal. Okay.
14 GOVERNOR BUSH: This is the gener-- what --
15 TREASURER GALLAGHER: The gener-- yeah.
16 GOVERNOR BUSH: -- some would refer to as
17 the -- the generic option.
18 MS. JARRIEL: This is the generic option.
19 GOVERNOR BUSH: This is the State mutual
20 fund.
21 MR. HERNDON: Yes.
22 MS. JARRIEL: We -- we were going to not
23 use that terminology, but --
24 GOVERNOR BUSH: I know you weren't. I
25 just --
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1 MS. JARRIEL: -- that would be the --
2 TREASURER GALLAGHER: You know, that --
3 GOVERNOR BUSH: -- we've heard it enough,
4 I think it might --
5 TREASURER GALLAGHER: But what's -- but
6 what's good here is -- is they've gone through
7 quite a vetting operation, and have -- and have
8 merged what looks like, you know, a great
9 option for people to use. And it could well
10 outperform other ones that have been around for
11 a long time.
12 COMPTROLLER MILLIGAN: Sure.
13 MS. JARRIEL: So any more questions on --
14 GOVERNOR BUSH: Any other questions?
15 Is there a motion?
16 TREASURER GALLAGHER: By the way, are --
17 let me just ask this: Are we using any of
18 these firms now for --
19 (Secretary Harris exited the room.)
20 TREASURER GALLAGHER: -- our core
21 investment bond portfolio?
22 (Attorney General Butterworth entered the
23 room.)
24 MS. JARRIEL: That -- that's a very good
25 question.
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1 In the bond area, I had actually delayed
2 hiring some managers, because I wanted to go
3 through this interview process for these
4 particular managers.
5 In the case of -- and I'll get to high
6 yield later. But in the case of high yield, I
7 needed some capacity.
8 But also we have a lot of internal
9 management where we're managing active core
10 money, and we want to overlay that with an
11 enhanced index manager.
12 So we are planning to engage Black Rock for
13 that purpose as well.
14 The only reason we don't have that
15 currently is we manage the active core bond
16 money internally. But if -- if we were to
17 choose a manager to do that externally, these
18 would be primary candidates for --
19 TREASURER GALLAGHER: Well --
20 MS. JARRIEL: -- that purpose.
21 TREASURER GALLAGHER: -- you've been
22 getting almost 7 percent on your internal core
23 management?
24 I guess I answered that --
25 MS. JARRIEL: Well, we --
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1 TREASURER GALLAGHER: -- question. Okay.
2 MS. JARRIEL: I reserve the right --
3 TREASURER GALLAGHER: I think it's good
4 to --
5 MS. JARRIEL: We'll provide --
6 TREASURER GALLAGHER: -- to look to some
7 out -- people that can enhance --
8 MS. JARRIEL: -- information.
9 TREASURER GALLAGHER: -- it then.
10 MS. JARRIEL: Right.
11 TREASURER GALLAGHER: Good.
12 MS. JARRIEL: Are we ready to move to
13 the --
14 GOVERNOR BUSH: I thi-- have we done a --
15 we done a -- a motion and a second? I don't
16 even remember.
17 TREASURER GALLAGHER: Well, she's still --
18 GOVERNOR BUSH: We have --
19 TREASURER GALLAGHER: -- explaining. We --
20 MS. JARRIEL: We have --
21 TREASURER GALLAGHER: -- have two more --
22 MS. JARRIEL: -- high yield --
23 TREASURER GALLAGHER: -- to go.
24 GOVERNOR BUSH: You've got one more,
25 I'm sorry.
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1 MS. JARRIEL: We have high --
2 GOVERNOR BUSH: I'm sorry.
3 MS. JARRIEL: -- yield left.
4 We had four managers that we interviewed
5 here: Alliance, Mackay Shields, W.R. Huff, and
6 Fidelity.
7 And we spent a little more time in the
8 recommendation memo on the two that we're
9 recommending, because these two are not
10 necessarily as -- as widely recognized names.
11 High yield is a bit different, because in
12 this market, it's an asymmetric market. And
13 what you really want to do is avoid -- avoid
14 the big mistake.
15 You know, if you pick a security that's
16 going to perform well, you earn your coupon,
17 and maybe you earn 20 points in price
18 appreciation.
19 However, in the high yield market, if you
20 make a bad choice, you'll see an immediate,
21 you know, 70 point decline sometimes. They
22 truly react now like equity securities.
23 So our focus here was to really look at the
24 caliber of -- of the analysts that each of
25 these firms had.
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1 TREASURER GALLAGHER: Let me just ask you a
2 question on that -- on the statement you made
3 about the 70 percent.
4 Most of these would, in almost all cases,
5 end up paying at the end, it's just a matter as
6 if you sold early, you'd lose the 70 percent.
7 MS. JARRIEL: That's correct.
8 TREASURER GALLAGHER: And obviously we
9 would manage -- these people pretty much manage
10 these so that they don't sell them before
11 they --
12 MS. JARRIEL: Well, actually in the
13 high yield market, the default rates have been
14 increasing pretty substantially over the last
15 few years.
16 Historically, they had run around
17 3 percent; maybe three years prior to the
18 current year, they were around 6 percent; and
19 now they're up to close to 9 percent.
20 And one of the things we noted in here was
21 the default rates on one of the portfolios,
22 because that's one of the things we like to
23 look at is, what is the ratio of that
24 particular firm's upgrades to downgrades; and
25 what is the default rate on the portfolio
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1 relative to -- to the market as a whole.
2 TREASURER GALLAGHER: But even utility
3 bonds in California can default --
4 MS. JARRIEL: Right.
5 And you make --
6 TREASURER GALLAGHER: -- which just --
7 MS. JARRIEL: -- your --
8 TREASURER GALLAGHER: -- almost never
9 happens anywhere in the country, and all of a
10 sudden, it happened.
11 MS. JARRIEL: True. True.
12 TREASURER GALLAGHER: You never know.
13 MS. JARRIEL: You never know.
14 TREASURER GALLAGHER: I'm sure we don't
15 have any of those. But --
16 Surely.
17 MS. JARRIEL: When you looked at the -- the
18 scores for the four firms that we interviewed,
19 you would see that three of them are -- are
20 clustered fairly tightly.
21 And then Fidelity was the one that ranked
22 the lowest. And I -- and I quickly put in here
23 some -- some reasons for that.
24 They did have the lowest risk adjusted
25 returns. They had a really tough calendar year
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1 2000. They underperformed the market by almost
2 300 basis points.
3 Even though they describe their process as
4 bottom up, which is absolute, relative value
5 security selection, they didn't track upgrades
6 and downgrades in the portfolio, which we found
7 to be unusual.
8 And they were a bit unclear as to how the
9 analyst recommendations were incorporated into
10 the portfolio structure.
11 And most importantly, the portfolio manager
12 who earned the track record was not the
13 individual who was sent to us to manage the
14 portfolio. So that track record then becomes,
15 you know, rather meaningless to us.
16 TREASURER GALLAGHER: A big mistake.
17 MS. JARRIEL: Alliance was the other
18 well-known firm that we looked at. And -- and
19 they described their process as a -- as a
20 top-down, which the macroeconomic portfolio
21 structure bottom-up approach.
22 And they, too, had a strong performance
23 record; albeit, not as strong as either
24 Mackay Shields or W.R. Huff.
25 Again, one of the more important factors in
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1 the evaluation was that the team that was
2 brought to us was not the team that generated
3 the entire track record.
4 Also, even though their risk adjusted
5 returns were top quartile, their downside risk
6 was pretty compelling.
7 We ultimately recommended W.R. Huff and
8 Mackay Shields. And -- and they distinguished
9 themselves in a number of ways. W.R. Huff only
10 manages high yield bonds. That's their only
11 business. They have 9.6 billion under
12 management. They have --
13 (Commissioner Rhodes exited the room.)
14 MS. JARRIEL: -- 35 professionals. And --
15 and that compares very favorable to a -- an
16 Alliance or a Fidelity.
17 TREASURER GALLAGHER: Is this -- is this
18 the Florida Hough?
19 MS. JARRIEL: No. This is actually
20 W.R. H-u-f-f. They're in Morristown,
21 New Jersey.
22 TREASURER GALLAGHER: Okay.
23 MS. JARRIEL: And -- and perhaps one of the
24 reasons that this is not a well-known name, is
25 they do absolutely no marketing. They rely on
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1 their client word of mouth for their --
2 TREASURER GALLAGHER: Nine billion for --
3 MS. JARRIEL: -- success --
4 TREASURER GALLAGHER: -- no marketing isn't
5 all bad, is it?
6 MS. JARRIEL: And they're -- and they're in
7 the consultant databases. And they rely
8 solely -- solely on that.
9 The other thing that was impressive to us,
10 they have a very unique approach to their --
11 their bond selection.
12 They hire people in the industries for the
13 sectors that they cover. And -- and the
14 example I gave is that, you know, they would
15 hire a chemical engineer from a chemical
16 company who had an MBA to analyze that
17 particular industry.
18 And -- and they believe that gives them
19 some depth of insight to those particular
20 industries and companies, and they bring a
21 lot -- along a lot of strong contacts.
22 The most impressive number that I saw for
23 them -- it's -- it's really been a tough period
24 for high yield managers, and they had a 6.5 to
25 1 upgrade ratio over the -- over the -- over
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1 the last several years.
2 So that -- that truly was impressive.
3 If you look at their numbers, they
4 outperformed between 400 and 500 basis points
5 in the periods examined. And most importantly,
6 they -- they actually have a 20-year history.
7 And against the Lipper composite, they're
8 470 basis points for the -- for the 20-year
9 period.
10 TREASURER GALLAGHER: Let me ask a
11 question.
12 You have five that you compared here. How
13 many people actually bid?
14 More than that, right?
15 MS. JARRIEL: Well, remember that in the
16 intent to procure, this wasn't really a bidding
17 process. Callan had the selection and
18 evaluation criteria --
19 TREASURER GALLAGHER: That's right.
20 MS. JARRIEL: -- and they screened --
21 TREASURER GALLAGHER: That's right.
22 MS. JARRIEL: -- the managers --
23 TREASURER GALLAGHER: So these -- these are
24 what's left after that screening.
25 MS. JARRIEL: So these --
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1 TREASURER GALLAGHER: Okay.
2 MS. JARRIEL: -- these were the strongest
3 ones that they recommended after that screen.
4 And admittedly, Huff will not negotiate
5 fees. They're 50 basis points, but with a
6 track record at, you know, 450 to 500 over --
7 (Commissioner Rhodes entered the room.)
8 MS. JARRIEL: -- we feel that the net of
9 fee return is certainly, you know, more than
10 adequate.
11 TREASURER GALLAGHER: Which was very
12 similar to Black Rock, who had double the fees,
13 but the re-- but they get you the return.
14 MS. JARRIEL: Exactly.
15 The other firm that had the best
16 performance profile was Mackay Shields. They
17 generated 485 basis points in excess return
18 over a seven-year period; they ranked in the
19 7th percentile of the Callan database; and they
20 had good downside numbers.
21 Don Morgan, who is the Co-Head of the Fixed
22 Income Group, and the Senior High Yield
23 Portfolio Manager, will be assigned to our
24 account.
25 They basically look at yield and liquidity
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1 to hone down the entire high yield universe to
2 a group of about 250 issuers, and that's what
3 they concentrate on.
4 Again, they had some extraordinary results.
5 They've outperformed in 24 of the last
6 28 quarters.
7 And back to the Commissioner's comment
8 about default rates. They have a default rate
9 of .9 percent in the portfolio, which is --
10 TREASURER GALLAGHER: That's awesome.
11 MS. JARRIEL: -- absolutely phenomenal.
12 TREASURER GALLAGHER: Do they --
13 MS. JARRIEL: So --
14 TREASURER GALLAGHER: -- do -- do they
15 do -- you're talking about Mac-- you call it
16 Mackay -- Mac-- it's not Mackay?
17 MS. JARRIEL: Mackay --
18 TREASURER GALLAGHER: It's Mackay?
19 MS. JARRIEL: -- Shields.
20 TREASURER GALLAGHER: Do -- do -- do they
21 do any -- they do only institutional? Or do
22 they have a -- a -- a marketing product
23 that's -- other than --
24 MS. JARRIEL: They also have a fund --
25 TREASURER GALLAGHER: They do?
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1 MS. JARRIEL: -- a fund that they offer.
2 They also do equities. Unlike Huff,
3 they're not exclusively a fixed income firm.
4 They're --
5 TREASURER GALLAGHER: And they market --
6 MS. JARRIEL: -- smaller --
7 TREASURER GALLAGHER: -- their fund through
8 bundled providers usually?
9 MS. JARRIEL: And -- and they actually do
10 have marketing staff --
11 TREASURER GALLAGHER: Marketing -- okay.
12 MS. JARRIEL: -- for their institutional
13 side as well.
14 So if you compared all of these firms,
15 you know, we would expect for Huff and Mackay
16 to generate in excess of 400 basis points, net
17 of fees; whereas Alliance and Fidelity were in
18 the 110 to 280 basis points.
19 And these were the two where the selection
20 process was extremely easy. All of the
21 evaluators felt that these were extremely
22 strong firms; albeit, not as well-known names.
23 After that --
24 TREASURER GALLAGHER: Well, I want to
25 congratulate you on the process you've gone
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1 through in looking at these standard deviations
2 and returns.
3 It's -- it's pretty impressive people we've
4 found. And I think, you know, it's getting
5 exciting for what our State employees are going
6 to have the opportunity to look at.
7 MS. JARRIEL: Thanks very much. We think
8 so, too. We hope we've identified some good
9 managers.
10 TREASURER GALLAGHER: And found some
11 managers for the --
12 MS. JARRIEL: And found some --
13 TREASURER GALLAGHER: -- major --
14 MS. JARRIEL: -- managers for --
15 TREASURER GALLAGHER: -- fund, which is
16 even better.
17 GOVERNOR BUSH: Is there a motion?
18 TREASURER GALLAGHER: Motion.
19 COMPTROLLER MILLIGAN: Second.
20 GOVERNOR BUSH: Moved and seconded.
21 Without objection, it's approved.
22 Thank you for that great presentation.
23 MR. HERNDON: We will be back before you
24 with about another dozen or so of these
25 presentations on managers, some of which,
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1 Treasurer, will have underneath the product
2 title, multiple managers. Again, it's a
3 capacity issue, and so on.
4 But you'll see those over the course of --
5 of the spring -- the spring and summer.
6 Item Number 5 is the requested approval of
7 Dr. Sneh Gulati as Chair of the Florida
8 Commission on Hurricane Loss Projection
9 Methodology.
10 Dr. Gulati is the statistics expert at
11 Florida International University.
12 COMPTROLLER MILLIGAN: Move her approval.
13 TREASURER GALLAGHER: Second.
14 GOVERNOR BUSH: Moved and seconded.
15 Without objection, it's approved.
16 MR. HERNDON: Item Number 6 is the fund
17 activity analysis for the month of
18 February 2001. And I know that this is
19 routinely submitted.
20 I wanted to just make sure that
21 Treasurer Gallagher was aware -- I know he's
22 had some question about the time lag here.
23 With February, we're now in the middle -- or
24 close to the end of April.
25 We have some very real issues of
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1 reconciliation. We've provided your staff, and
2 the other Aides, with a report on how we
3 compile this information. And we would be
4 happy to talk with you further.
5 But I think you'll agree after you've had a
6 chance to glance at this, that this is
7 probably, given all of the -- the issues
8 associated with preparing this report, a -- a
9 pretty timely product.
10 TREASURER GALLAGHER: So it's this year
11 outside -- outside manager --
12 MR. HERNDON: Well, State Street Bank is
13 our custodian bank. In this case, we work with
14 State Street Bank to reconcile all of our
15 activity during that -- course of that month.
16 So we're doing not only performance
17 reporting, but reconciling all the prices that
18 we bought and sold products at, and so on and
19 so forth.
20 And, of course, we're doing this on an
21 audited basis. So we go through the close of
22 the month process, the settlement date comes --
23 TREASURER GALLAGHER: Audited.
24 MR. HERNDON: -- we then reconcile against
25 our records, against State Street Bank's
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1 records; and we do an audited version, and
2 that's what you have.
3 Now, we can give you unaudited data
4 earlier, but I will tell you -- and you'll
5 notice in here as you look at it -- that it
6 moves. And I don't know how useful it is to
7 you on an unaudited basis, recognizing full
8 well that it is a moving target, you know,
9 until we -- until we can close down on that
10 reconciliation process.
11 TREASURER GALLAGHER: You -- you basically
12 now have the software where you pretty much
13 take the whole portfolio market to market on a
14 daily basis, don't you?
15 MR. HERNDON: We do.
16 TREASURER GALLAGHER: Almost hourly.
17 MR. HERNDON: And you're welcome --
18 yes, sir.
19 We do mark to the close of yesterday's
20 trading activity. And you can call that up on
21 our website and look at it each day. It's --
22 it's an approximation, because it --
23 TREASURER GALLAGHER: Does that include --
24 MR. HERNDON: -- cannot be --
25 TREASURER GALLAGHER: -- the outside
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1 managers?
2 MR. HERNDON: Yes, sir. It's for the
3 entire fund. We also do that for the
4 Lawton Chiles Endowment --
5 TREASURER GALLAGHER: Now, on --
6 MR. HERNDON: -- those two big products.
7 TREASURER GALLAGHER: -- on the outside
8 managers you're doing, is that -- is that
9 something you're doing -- that your software is
10 taking what you think they own at the time and
11 doing it, or is this a report from them daily?
12 MR. HERNDON: We're taking what we
13 understand their activity to be during that
14 period of time --
15 TREASURER GALLAGHER: What they're
16 holding --
17 MR. HERNDON: -- and approximately setting
18 the prices based on what we know of the market.
19 And that's part of the --
20 TREASURER GALLAGHER: So it's --
21 MR. HERNDON: -- reconciliation --
22 TREASURER GALLAGHER: -- internally --
23 MR. HERNDON: -- process.
24 TREASURER GALLAGHER: -- so it's internally
25 done on --
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1 MR. HERNDON: It's --
2 TREASURER GALLAGHER: -- what the --
3 MR. HERNDON: -- internal --
4 TREASURER GALLAGHER: -- managers are
5 holding.
6 MR. HERNDON: -- to State Street Bank, our
7 custodian, and to the outside manager. And the
8 three parts of us form that triangle to try and
9 market to market every day.
10 And it's reasonably accurate. And given
11 the volume of transactions on any particular
12 given day, probably about as accurate as you're
13 going to get, until you've got virtually
14 instantaneous --
15 TREASURER GALLAGHER: What -- what is the
16 volume of transactions that -- that all the
17 managers and the fund would do in a day?
18 MR. HERNDON: Well, it's hard to arrive at
19 an -- at an average number. I mean --
20 TREASURER GALLAGHER: Well, I mean, I know
21 when it's volatile, we --
22 MR. HERNDON: Yeah.
23 TREASURER GALLAGHER: -- it could be
24 realigned. But average day?
25 MR. HERNDON: Well, I'll get you the
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1 information.
2 TREASURER GALLAGHER: Okay.
3 MR. HERNDON: I -- I really don't know, and
4 I'd hesitate to speculate at this point.
5 TREASURER GALLAGHER: All right.
6 MR. HERNDON: Item Number 7 is a proposed
7 good cause item. I want to apologize for
8 bringing this to you. I -- I appreciate full
9 well that there is some concern about this
10 item.
11 Unfortunately, with the volume of work that
12 we have had, this kind of snuck up on us.
13 Basically what we are proposing to do here
14 is to go back and amend the selection and
15 evaluation criteria that we brought before you
16 in January to lower the minimum thresholds for
17 assets under management as one of the screening
18 criteria.
19 You may recall this conversation --
20 in fact, it came up at our Advisory Council
21 back in January as well.
22 We went to -- to you with a number of
23 recommendations, and said, for example, that we
24 don't want to even screen a firm that has less
25 than 5 billion dollars under management. We
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1 think that that's kind of a threshold of
2 confidence.
3 Well, as things have happened, markets have
4 moved away from an awful lot of equity
5 managers, their assets under management have
6 dropped, we find ourselves in some cases -- and
7 I mentioned this a little bit earlier -- where
8 we are now seeing managers that would otherwise
9 participate with us, but they now are looking
10 at the possibility of bundled providers being
11 in the que, which takes money away from them.
12 And they're also looking at the prospect --
13 especially on the small cap and mid-cap side --
14 where money has started to flow into those
15 products, and these guys are sitting there
16 saying, why do we want to reserve a spot for
17 the SBA for 16 or 18 months down the road, when
18 we can get the money now?
19 And so our potential eligibles has shrunk.
20 And our vendors brought this to our attention.
21 We, quite frankly, were focused on getting
22 380 bundled providers, and getting
23 advisory councils, and everything else, and we
24 let this creep up on us.
25 And -- so what we're proposing, per the
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1 chart that is in the attachment, is that we
2 essentially cut in half the minimums, from
3 5 billion, to two-and-a-half billion.
4 It's essentially a 50 percent cut
5 across-the-board.
6 And I will tell you at the outset that what
7 was originally proposed to me was that we only
8 do that for the large cap growth product, and
9 large cap value product.
10 And I went back to them and said, look, I
11 don't want to come back to the Trustees and do
12 this every two weeks --
13 TREASURER GALLAGHER: Because it switches
14 the other way.
15 MR. HERNDON: -- let's -- let's do this for
16 everybody that you think is appropriate to do
17 this for us. So we recommended the 50 percent
18 reduction across-the-board.
19 TREASURER GALLAGHER: Now, let me --
20 MR. HERNDON: We've also -- let me just
21 make this one other point, Treasurer. And
22 then --
23 Sorry.
24 They also recommended decreasing the
25 requirement for the history of the product from
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1 five years to four years. And, again, that
2 goes to the small cap managers in an effort to
3 try and bring more managers into the que.
4 Now, what that does is it, by our
5 projections, if you will, we had anticipated
6 something on the order of 356, plus or minus,
7 firms that would pass our original set of
8 screens at the 5 billion and -- and so forth
9 levels.
10 We're proposing these re-- these reductions
11 in the minimums. That will bring another
12 145 approximately into the que.
13 We don't know how many of these will
14 ultimately surface as finalists. These are
15 firms that passed the screening criteria.
16 And I think that's one of the concerns that
17 we -- we have is that we don't want to get in a
18 posture where we have 40 potential eligibles,
19 and we start looking at performance and
20 everything else to find that you're stuck with
21 a series of not particularly exciting
22 alternatives, quite frankly.
23 So --
24 TREASURER GALLAGHER: Do --
25 MR. HERNDON: -- expanding the universe in
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1 this case by 150 or so we think is a worthwhile
2 step.
3 I apologize for doing this on good cause.
4 The only explanation I can give you, quite
5 frankly, is that our schedule is just
6 relentless. And if we wait until the May 15th
7 meeting, or we go back to our
8 Advisory Council -- the next scheduled meeting
9 of the Advisory Council is June 1st, we will
10 lose somewhere between three and six weeks of
11 processing time, and -- and we really have a
12 difficult time making that up.
13 In fact, I don't think we can make it up.
14 So --
15 TREASURER GALLAGHER: Have you -- have you
16 at least verbally talked to the members of the
17 Advisory Councils on this issue?
18 MR. HERNDON: No, we have not.
19 TREASURER GALLAGHER: Because the one thing
20 that does bother me in this -- and I'm -- I'm
21 in favor of it. But I really don't like it
22 coming to us prior to them having a look at it.
23 MR. HERNDON: Well, I will tell you,
24 Treasurer, and I -- and I think your point is
25 well taken.
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1 I would certainly endorse that were we
2 tightening these criteria. In fact, what we're
3 doing is loosening the criteria, making more
4 firms eligible.
5 And the other point that I would make, and
6 I -- I can't cite you chapter and verse. But
7 at the Advisory Council meeting where this
8 topic was discussed, there was a good bit of
9 discussion about the fact that the threshold --
10 TREASURER GALLAGHER: I --
11 MR. HERNDON: -- might be too high.
12 And we were at that time, confident --
13 quite frankly, I think our confidence was in
14 error. But we lived and learned based on some
15 ensuing events. So --
16 TREASURER GALLAGHER: Well, this'll allow
17 over 500 firms to be -- go through the initial
18 screening is all this --
19 MR. HERNDON: That's right.
20 TREASURER GALLAGHER: -- changes, as
21 opposed to 350. So --
22 MR. HERNDON: That's right.
23 GOVERNOR BUSH: General.
24 TREASURER GALLAGHER: -- I'll move it.
25 COMPTROLLER MILLIGAN: The -- let's go back
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1 to that January meeting, Tom, and --
2 MR. HERNDON: Yes, sir.
3 COMPTROLLER MILLIGAN: -- the argument
4 there was -- and the IAC and the PEORP did
5 comment that maybe these were too high.
6 MR. HERNDON: Yes, sir.
7 COMPTROLLER MILLIGAN: And the response was
8 that you really wanted to make sure we had the
9 best of the best I believe was the precise
10 term.
11 And January, we already had a pretty good
12 idea of where the market was going, and where
13 it had come from. And we were still -- you all
14 were very confident, the best of the best.
15 And -- are we lowering our standards here
16 now? Is that it, we're not really looking for
17 the best of the best?
18 MR. HERNDON: No, sir.
19 I -- I think the -- the way to characterize
20 this, if you'll pardon the -- this -- I don't
21 want this to sound flippant at all.
22 But I think we're looking -- still looking
23 for the best of the best, but they're just a
24 lot harder to find today than they were when
25 the markets were roaring ahead, and -- and
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1 things were a little bit -- a little bit easier
2 to manage.
3 You're at -- your point is well taken
4 though. We -- we should have been more aware
5 of this in January. Frankly, I think we -- we
6 just didn't appreciate the implications fully.
7 We're now beginning to appreciate them a
8 lot better. Working with our consultant has
9 proven to be a unique experience, and we're
10 learning how to do that better as well as we go
11 along.
12 And I don't know what else to say --
13 COMPTROLLER MILLIGAN: The -- the -- the
14 numbers that you're talking about, you know,
15 the 356 and the additional 145, looking at
16 356 is a substantial number to be looking at,
17 and we're paying a fairly good fee to have each
18 of those assessed.
19 That 356, plus or minus, is that real --
20 plus or minus a lot, or plus or minus a little?
21 MR. HERNDON: Well, I don't know --
22 COMPTROLLER MILLIGAN: Is this bec--
23 MR. HERNDON: -- General --
24 COMPTROLLER MILLIGAN: -- this is part of
25 your discussion earlier that some of these
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1 people may not be actually interested?
2 MR. HERNDON: I think we're going to find
3 that to be the case, especially in some of the
4 small cap product lines where we -- we clearly
5 have money flowing in. Money is not flowing in
6 to the rate that it was a few years ago in some
7 of the large cap products.
8 But here again -- and -- and when we talk
9 about 360 and 150, I think we have to
10 appreciate the implications on specific
11 products, because it's easy to kind of get
12 caught up in the -- in the gross numbers, if
13 you will.
14 What we're talking about for the large cap
15 growth, which probably will be one of the most
16 popular equity products for people to invest
17 in. That's what most of us relate to. That's
18 the S&P 500s and the Russell 1000s, and
19 so forth -- we're talking about only
20 40 products passing the initial screens.
21 And that's where our concern lies is that
22 that universe may be too limiting. And even
23 though we're only proposing to add 25, that's a
24 significant addition in terms of the percentage
25 of -- of incremental new vendors. So --
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1 COMPTROLLER MILLIGAN: Given that you made
2 a -- kind of an arbitrary 50 percent --
3 MR. HERNDON: Yes, sir.
4 COMPTROLLER MILLIGAN: -- and that was
5 purely arbitrary, clearly --
6 MR. HERNDON: To a large degree it was. We
7 took a look at what 10 percent did, and it
8 just, frankly --
9 COMPTROLLER MILLIGAN: You did.
10 MR. HERNDON: -- didn't produce --
11 COMPTROLLER MILLIGAN: Okay.
12 MR. HERNDON: -- enough to make that
13 change.
14 And so we moved up the scale to 50.
15 They're having to do a lot, and I -- they,
16 the -- the consultants are having to do a lot
17 of hand counting of eligible firms.
18 And so we just jumped up the scale to
19 50 percent to see what that would produce. We
20 were generally pleased with the numbers that
21 that produced, and thought that made sense.
22 And so --
23 COMPTROLLER MILLIGAN: The -- the cost of
24 assessing is going to be in the range of what,
25 half a million dollars?
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1 MR. HERNDON: About 360,000 probably,
2 something --
3 COMPTROLLER MILLIGAN: Additional --
4 MR. HERNDON: -- like that.
5 COMPTROLLER MILLIGAN: -- costs.
6 MR. HERNDON: Yes, sir.
7 COMPTROLLER MILLIGAN: Okay.
8 MR. HERNDON: Yes.
9 TREASURER GALLAGHER: Had a motion.
10 COMPTROLLER MILLIGAN: I haven't --
11 GOVERNOR BUSH: There's a motion --
12 COMPTROLLER MILLIGAN: -- I haven't -- I
13 haven't decided yet whether I'm going to second
14 it.
15 GOVERNOR BUSH: Well, I'll second it so we
16 can --
17 TREASURER GALLAGHER: That's hard to do.
18 GOVERNOR BUSH: I can't?
19 TREASURER GALLAGHER: Unless you --
20 COMPTROLLER MILLIGAN: I'll second it.
21 TREASURER GALLAGHER: Okay.
22 GOVERNOR BUSH: Thank you.
23 There's a motion and a second.
24 All in favor, say aye.
25 TREASURER GALLAGHER: Aye.
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1 GOVERNOR BUSH: Aye.
2 All opposed?
3 TREASURER GALLAGHER: Two to --
4 GOVERNOR BUSH: All opposed?
5 TREASURER GALLAGHER: -- two to nothing.
6 COMPTROLLER MILLIGAN: I'll say aye.
7 GOVERNOR BUSH: Okay.
8 TREASURER GALLAGHER: He's saying I
9 didn't --
10 COMPTROLLER MILLIGAN: I'll -- I'll --
11 TREASURER GALLAGHER: -- vote for it.
12 COMPTROLLER MILLIGAN: -- support you.
13 MR. HERNDON: Thank you.
14 TREASURER GALLAGHER: Okay.
15 MR. HERNDON: Governor, I know you --
16 GOVERNOR BUSH: It was an enthusiastic
17 unanimous endorsement.
18 COMPTROLLER MILLIGAN: Yeah.
19 MR. HERNDON: I -- I know you have another
20 agenda item, but I -- I wonder if I could ask
21 your indulgence to just briefly give you a
22 history on where we are legislatively.
23 GOVERNOR BUSH: You -- y'all don't -- don't
24 mind, do you?
25 MR. HERNDON: This won't take --
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1 GOVERNOR BUSH: I think it'll --
2 MR. HERNDON: -- but a second.
3 COMPTROLLER MILLIGAN: I think --
4 GOVERNOR BUSH: -- be worth hearing.
5 MR. HERNDON: -- House Bill 347, which is
6 Representative Fasano's bill that amends the
7 existing statute, as I characterized it last
8 time I was before you, is about 90 percent of
9 the way --
10 GOVERNOR BUSH: I thought --
11 MR. HERNDON: -- cured.
12 GOVERNOR BUSH: -- you said 95.
13 MR. HERNDON: Well, I was trying to
14 remember whether I said 95 or -- or 90, and I
15 was going to back up a little bit. But --
16 based on a couple of amendments that are
17 proposed.
18 But it's about 95 -- 90 percent of the way
19 there. It is up on the floor this afternoon
20 for discussion, and I'm sure, certain passage.
21 There are two amendments there. I know
22 that a number of you have been concerned about
23 those amendments, and we've -- we've talked
24 attorney to attorney about some of those
25 amendments having to do with the appointment of
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1 the Executive Director of the Board.
2 GOVERNOR BUSH: That's still on the bill?
3 MR. HERNDON: Well, we believe that it is,
4 Governor. I -- I can't tell you for certain.
5 The -- the one that is proposed, we think,
6 is the one that calls for you to vote in the
7 affirmative, as opposed to it being a unanimous
8 vote.
9 GOVERNOR BUSH: Yeah.
10 MR. HERNDON: So we'll find out I guess
11 this afternoon exactly how that goes.
12 Last night in the Senate --
13 GOVERNOR BUSH: Tom, did you -- I mean, you
14 brought up a good point about --
15 MR. HERNDON: Yeah.
16 GOVERNOR BUSH: -- the legal aspects of
17 that.
18 I would think that that might not pass the
19 legal test, would it, of fiduciary
20 responsibilities? I mean --
21 MR. HERNDON: We've discussed that at
22 length, and had --
23 GOVERNOR BUSH: I'm not volunteering for
24 this duty.
25 TREASURER GALLAGHER: It loads you up with
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1 a lot of extra fiduciary responsibility --
2 GOVERNOR BUSH: I know. I'm just -- that's
3 my --
4 TREASURER GALLAGHER: It also --
5 GOVERNOR BUSH: -- I don't want to sound
6 selfish or anything, but I'd rather -- I'd
7 rather rise and fall together as brothers and
8 sisters, if there ever is a sister, on the --
9 TREASURER GALLAGHER: My guess is that if
10 you let Representative Fasano know that, he --
11 GOVERNOR BUSH: I have.
12 TREASURER GALLAGHER: -- would probably --
13 GOVERNOR BUSH: I did. That's why I
14 thought maybe it --
15 TREASURER GALLAGHER: It's not there
16 anymore?
17 GOVERNOR BUSH: I -- I --
18 MR. HERNDON: Well then, perhaps the
19 balance of this conversation will -- will
20 reassure you a little bit, Governor.
21 The Senate Government Oversight Committee
22 took up their counterpart bill, House --
23 Senate Bill 872 last night.
24 Senator Garcia as Chairman of that
25 committee put the Representative Fasano
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1 amendment or bill on as an amendment to his
2 bill. It did not carry with it any of those
3 executive director appointment amendments.
4 He also cleaned up a couple of issues that
5 we had pointed out to him in
6 Representative Fasano's bill.
7 It now moves to Appropriations in the
8 Senate, because they had it on a number of
9 special risk amendments to add people to
10 special risk.
11 And I'm sure the Division of Retirement is
12 looking at that --
13 GOVERNOR BUSH: Which -- which -- which
14 ones?
15 MR. HERNDON: Well, there are three that
16 I'm aware of. They added all of the forensic
17 employees in the mental health hospitals, which
18 I think has been discussed.
19 They added a number of additional
20 firefighters. And I -- it's hard to tell from
21 the amendment how many numbers we're talking
22 about.
23 They also added some of Ms. Rhodes's
24 employees in the Department of Agriculture that
25 fly the -- the airplanes in the firefighting
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1 process that --
2 GOVERNOR BUSH: Crop duster.
3 MR. HERNDON: -- and so forth.
4 TREASURER GALLAGHER: That --
5 MR. HERNDON: I suspect those last two --
6 GOVERNOR BUSH: Firefighters?
7 MR. HERNDON: I suspect those last two
8 amendments are fairly nominal.
9 But the first one, the forensic employees,
10 probably several hundred people, I would guess.
11 And I know the Division is looking at that.
12 So it goes to Appropriations. We've been
13 told by the Appropriations folks that they
14 expect one more meeting. We're going to try
15 and do a little additional cleanup of the bill
16 there; and, if necessary, again on the floor.
17 And find ourselves in a position of
18 negotiating with Representative Fasano as we
19 get down to the last 10 days or so.
20 TREASURER GALLAGHER: Where's the -- is the
21 trust fund bill traveling with that in itself?
22 MR. HERNDON: The trust fund bill is
23 traveling with it. And it is contingent -- in
24 the House Bill, it is contingent on the passage
25 of Representative Fasano's substantive bill.
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1 The Senate does not treat it that way.
2 GOVERNOR BUSH: Thank you for the update.
3 MR. HERNDON: That's where we are.
4 GOVERNOR BUSH: Okay.
5 MR. HERNDON: Thank you.
6 GOVERNOR BUSH: Thank you.
7 (The State Board of Administration Agenda
8 was concluded.)
9 * * *
10
11
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1 GOVERNOR BUSH: Secretary Struhs.
2 MR. STRUHS: Governor, members of the
3 Cabinet, this is a very exciting item. And as
4 you've pointed out earlier, Governor, we've got
5 some visitors from far away. They're up from
6 the Keys to --
7 (Governor Bush exited the room.)
8 MR. STRUHS: -- talk about their interest
9 in this agenda item, which -- which is approval
10 of the final supplemental environmental impact
11 statement and management plan for the
12 Tortugas Ecological Reserve.
13 (Treasurer Gallagher exited the room.)
14 MR. STRUHS: I'd like to make just a couple
15 of observations at the beginning.
16 This represents a full and equal
17 partnership between the State of Florida and
18 the Federal government as it relates to the
19 management of this Reserve.
20 The State of Florida, through the Board of
21 Trustees, has an equal voice in any management
22 decisions. Indeed, our co-managers for this
23 Reserve -- and I'd also like to point out to
24 you as -- as Trustees, that this in no way
25 compromises or conveys any sovereign submerged
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1 lands. These are continued to be held by the
2 State of Florida.
3 I'd also point out, there are certain
4 benefits that accrue to the State of Florida,
5 not the least of which is that we were able to
6 secure Federal dollars to pay for some of the
7 State employees who are actually out there
8 managing the Reserve.
9 Florida, as a state, will have an approval
10 authority in reviewing and approving any
11 current or future management plans for the
12 sanctuary.
13 And I would also point out that in the
14 event in the future there should be any
15 disputes, those disputes must be resolved to be
16 consistent, not only with Federal law, but also
17 with our own State law.
18 There has been an immense effort over
19 several years that has led to this agenda item
20 that comes before you today. And it was
21 achieved in a way that resulted in broad public
22 consensus.
23 That's reflected in the fact that we have
24 so many speakers, speakers who represent
25 various different interests: Interests of
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1 sportsmen and divers and youth and
2 environmental advocates, commercial fishermen,
3 and -- and the like.
4 I'd like to begin, if I could, by a point
5 of personal privilege --
6 (Governor Bush entered the room.)
7 MR. STRUHS: -- and -- and point out that
8 Mr. Dan Basta, who is the Director of the
9 Marine Sanctuary system from the National
10 Oceanic and Atmospheric Administration in
11 Washington, is here with us today, and he's --
12 he's standing.
13 We're delighted that he was able to make
14 the trip here.
15 I'd also like to begin by pointing out that
16 we do have a -- quite a few speakers. And in
17 the effort to keep it moving quickly, we'd like
18 to suggest that people limit their remarks to
19 3 minutes a piece.
20 And if I could, introduce first
21 Ms. Kathryn Fuller, who came also from
22 Washington today. She's the President of the
23 World Wildlife Fund here in the
24 United States --
25 GOVERNOR BUSH: Secretary Struhs, can we
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1 start first just by recognizing this very well
2 dressed group of young people who have been
3 patiently -- they've listened to the entire
4 State Board of Administration agenda, which
5 showed tremendous patience.
6 I'm sorry, but where are y'all from?
7 MEMBER OF THE AUDIENCE: Florida.
8 MEMBER OF THE AUDIENCE: Marathon.
9 GOVERNOR BUSH: Florida? Okay.
10 COMMISSIONER CRIST: Marathon?
11 MEMBER OF THE AUDIENCE: Marathon, the
12 Keys.
13 GOVERNOR BUSH: Okay. Goo-- oh, you're
14 here for this agenda item.
15 COMMISSIONER CRIST: They're fifth and
16 sixth graders, Governor, from the Keys. And
17 they care deeply about this issue, I'm told.
18 GOVERNOR BUSH: Fantastic.
19 Well, we welcome you. We're delighted that
20 you're here. And I do admire --
21 (Treasurer Gallagher entered the room.)
22 GOVERNOR BUSH: -- your patience to go
23 through that entire agenda about the
24 State Board of Administration without fidgeting
25 at all. I -- I could not do it. You did very
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1 well.
2 Thank you.
3 MEMBER OF THE AUDIENCE: Thank you.
4 GOVERNOR BUSH: I'm sorry, David.
5 MR. STRUHS: That -- that's fine, Governor.
6 Their teacher is Ms. Beth Pinkus --
7 GOVERNOR BUSH: Oh, we already knew who all
8 these people --
9 MR. STRUHS: Ms. -- Ms. Pinkus is -- is the
10 teacher who brought the class here.
11 And if you care to, Governor, we can take
12 them out of order, and -- and allow them to go
13 first.
14 GOVERNOR BUSH: However you want to do it.
15 I just -- I --
16 MR. STRUHS: Would you like to do that?
17 MS. PINKUS: That's fine.
18 GOVERNOR BUSH: -- I thought maybe --
19 MR. STRUHS: Okay. We'll invite up the
20 students.
21 And also as a -- again, as a -- just a -- a
22 personal favor, I'd like to be able to
23 introduce a long friend -- a long-time friend
24 of mine, Kathryn Fuller, President of the
25 World Wildlife Fund, who came from Washington.
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1 Kathryn has accomplished many extraordinary
2 things in her career, not the least of which
3 she served on President Bush's Commission on --
4 GOVERNOR BUSH: Forty-one --
5 MR. STRUHS: -- Quality.
6 GOVERNOR BUSH: -- or forty-three?
7 MR. STRUHS: Forty-one. Forty-one.
8 And in that capacity, I had the chance to
9 work with her on a variety of issues. And she
10 brought a special ability to bring different
11 interests together: Commercial fishermen,
12 recreational fishermen, environmentalists
13 working together to come up with a common
14 vision.
15 So if you would approach the podium,
16 Kathryn. And then maybe the students could
17 follow you up, and then we'll go through the
18 rest of the list.
19 MS. FULLER: Perhaps we could just start --
20 do you mind -- introduce the first speakers, go
21 through with the kids.
22 MR. STRUHS: That's fine. You're doing my
23 job for me.
24 MS. FULLER: No?
25 Thank you. Thank you -- thank you, David.
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1 It's really terrific for me to be here,
2 Mr. Governor, and --
3 GOVERNOR BUSH: Welcome.
4 MS. FULLER: -- and the Cabinet.
5 Let me just start by, as we get all the
6 kids up here, introducing some of those who
7 will be speaking in support of the
8 Tortugas Ecological Reserve.
9 We begin with George Garrett, who is
10 representing the -- George Neugent the Mayor of
11 Monroe County.
12 And then we will hear from a number of the
13 other important constituencies who are
14 supporting the Tortugas Ecological Reserve.
15 George.
16 MR. GEORGE GARRETT: Governor Bush,
17 honorable members of the Cabinet, we're honored
18 here today to be before you.
19 I bring my regrets from the Mayor that he
20 could not attend today, as his flight was
21 canceled leaving Marathon yesterday.
22 The Mayor wants to express --
23 One of those things in the Keys.
24 The Mayor wants to express the full and
25 strong support of the Commission for the
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1 Tortugas 2000 proposal before you today.
2 And I know the Mayor, as he sits as the
3 Chairman of the Sanctuary Advisory Council,
4 also knows that you recognize the very
5 dedicated support of the Sanctuary Advisory
6 Council the Florida Keys National Marine
7 Sanctuary has provided to this effort over the
8 years.
9 Again, we are honored to be here. I will
10 let the important speakers speak. We have a
11 group of kids here, and I know some of the
12 other interests representing Monroe County.
13 Thank you again very much for your time.
14 GOVERNOR BUSH: Good morning -- or good --
15 yeah.
16 Good morning.
17 MS. PINKUS: Good morning.
18 Governor Bush, honorable Cabinet members,
19 my name is Beth Pinkus, and I'm the teacher of
20 the talented and gifted program at
21 Stanley Switlik school in the Florida Keys.
22 My fifth and sixth grade students here have
23 spent many months researching about the
24 Tortugas Ecological Reserve, and they're here
25 to provide testimony on that Reserve.
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1 Thank you very much.
2 GOVERNOR BUSH: Welcome.
3 Must have come by car instead of by plane,
4 huh?
5 MS. PINKUS: Plane.
6 GOVERNOR BUSH: Oh, plane.
7 MS. BIELIK: A long time ago, I visited the
8 Dry Tortugas. I loved every minute of my
9 vacation there.
10 I was, indeed, very young. Therefore, all
11 of my wonderful memories have sadly faded away,
12 but I still hear stories of the unbelievable
13 waters and the beautiful lands.
14 I believe that every person everywhere
15 should have the right to see something so
16 spectacular, something so outrageously
17 beautiful, like the waters in the Tortugas.
18 For the sake of my generation and others to
19 follow, I beg you to listen and to vote to
20 protect the Tortugas Ecological Reserve.
21 GOVERNOR BUSH: Thank you very much.
22 MS. ZIMMERMAN: The Florida Keys are home
23 to the continental United States only coral
24 barrier reef system; and one of the best known,
25 most visited, and threatened tropical marine
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1 ecosystems in the world.
2 Many important organisms are dying off,
3 such as sea grasses, sponges, and sea urchins
4 in the Florida Keys.
5 The Keys's pink shrimp, spiny lobster,
6 red drum, and sea trout populations have
7 severely declined. Thirteen out of fifteen
8 targeted reef fish have now become overfished.
9 Global warming, overfishing, and pollution
10 are killing our coral reefs. The health of the
11 coral in the Keys has been declining, due to
12 coral bleaching, coral diseases, and human
13 activities.
14 GOVERNOR BUSH: Hang on a sec. Come back,
15 come back, come back.
16 I didn't welcome you first. And I -- and
17 you need to say what your name is.
18 MS. ZIMMERMAN: My name's
19 Jennifer Zimmerman.
20 GOVERNOR BUSH: Thank you. Thank you for
21 coming.
22 And maybe what we could do is people
23 could -- can we sign in in advance, is that
24 something that might work a little easier?
25 COURT REPORTER COX: Except George took my
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1 list.
2 GOVERNOR BUSH: George.
3 ATTORNEY GENERAL BUTTERWORTH: George.
4 MR. GEORGE GARRETT: It's back there. I
5 apologize.
6 GOVERNOR BUSH: Could you --
7 TREASURER GALLAGHER: Where's the list?
8 Bring the --
9 GOVERNOR BUSH: Where's the list?
10 Bring it -- well, come on. Go.
11 TREASURER GALLAGHER: Give it to the
12 court reporter, save her a lot of --
13 GOVERNOR BUSH: Maybe we could do that for
14 the -- this will be an efficiency --
15 TREASURER GALLAGHER: Give it to her.
16 GOVERNOR BUSH: -- move here.
17 Okay. Who's next?
18 State your name.
19 MR. CHRIS GARRETT: My name is
20 Chris Garrett.
21 GOVERNOR BUSH: Hey, Chris.
22 How you doing?
23 MR. CHRIS GARRETT: Good.
24 The Tortugas region of the Florida Keys is
25 one of the -- our healthiest reef ecosystems.
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1 It is comprised of interdependent
2 hard bottom habitats, sea grass meadows, and
3 mangrove fringed islands.
4 It is located 70 miles west of Key West.
5 Some of the most spectacular and least
6 disturbed coral reefs in the Florida Keys,
7 Sherwood Forest, can be found in the Tortugas,
8 which boasts the Keys's cleanest waters and its
9 densest coral cover.
10 Powerful ocean currents take larvae from
11 the Tortugas to remote areas of the Gulf of
12 Mexico in the Caribbean Sea, resulting in very
13 high biodiversity.
14 GOVERNOR BUSH: Excellent.
15 Why don't you put the other microphone down
16 close --
17 Perfect.
18 Because at least I'm hard of hearing. The
19 other guys and gals can hear pretty well, but
20 I'm --
21 (Secretary Harris entered the room.)
22 TREASURER GALLAGHER: Put both of them
23 together so you're speaking to both.
24 There you go.
25 MS. SUZIE GREENMAN: Okay.
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1 GOVERNOR BUSH: What's you name?
2 MS. SUZIE GREENMAN: I'm Suzie Greenman.
3 GOVERNOR BUSH: Hey, Suzie.
4 Welcome.
5 MS. SUZIE GREENMAN: Thank you.
6 The Tortugas Reserve will protect community
7 function and ecosystem function, conserve areas
8 of highest biodiversity, protect spawning,
9 nursery, forging, migration, and other
10 critical, or vulnerable activities and habitats
11 to guide marine critters.
12 It'll provide protection to all life
13 stages, provide safe havens for vulnerable
14 species, and encourage the development of
15 natural biological communities.
16 Some of the areas with the most coral cover
17 are included within the proposed boundaries, as
18 are the places of highest biodiversity and
19 productivity.
20 GOVERNOR BUSH: Thank you very much.
21 MR. O'CONNOR: I'm Sean O'Connor.
22 GOVERNOR BUSH: Sean? Nice meeting you.
23 Welcome.
24 MR. O'CONNOR: You, too.
25 Riley's Hump is an example of one of the
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1 critical areas to be protected by the Tortugas
2 proposal. It is an important spawning area for
3 snapper, grouper, and other species.
4 The Reserve may not only play an important
5 role in maintaining populations of a number of
6 species across a large area of the Keys, but
7 migratory pelagic species as well.
8 The proposers are -- promises to help
9 assure the effective conservation and
10 biodiversity for the benefit of future
11 generations like ours.
12 The Tortugas Reserve will provide tan--
13 substantial tangible long-term benefits to
14 recreation and commercial fishermen in the
15 Florida Keys.
16 GOVERNOR BUSH: Very awesome vocabulary, by
17 the way.
18 SECRETARY HARRIS: Yes. All of you.
19 MS. BROWN: I'm Kelly Brown.
20 GOVERNOR BUSH: Hello, Kelly. How are you
21 doing?
22 MS. BROWN: Good.
23 The Keys have 88,000 year-round residents,
24 70 percent of whom regularly participate in
25 activities such as fishing, snorkeling, and
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1 wildlife observation.
2 Tourism and fishing, which depend on a
3 healthy environment, are the engines that fuel
4 our local economy, generating more than
5 1.2 billion dollars yearly.
6 Three million tourists visit every year,
7 accounting for the lion's share of the local
8 economy. Our local fishermen land nearly
9 20 million pounds of seafood each year, which
10 is more than any other county in Florida.
11 GOVERNOR BUSH: I didn't know that.
12 MS. BROWN: The marine environment is our
13 future, and we ask you to protect it by putting
14 in place the Tortugas Ecological Reserve.
15 GOVERNOR BUSH: Thank you for that economic
16 perspective.
17 TREASURER GALLAGHER: That's a lot of --
18 that's a lot of fish --
19 COMPTROLLER MILLIGAN: That's a lot of
20 fish.
21 TREASURER GALLAGHER: Twenty million
22 pounds --
23 GOVERNOR BUSH: Looks like you all
24 coordinated your presentations.
25 TREASURER GALLAGHER: That's a good thing.
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1 SECRETARY HARRIS: Every one's different.
2 MS. KATIE GREENMAN: Hello. I'm
3 Katie Greenman.
4 GOVERNOR BUSH: Hello, Katie.
5 MS. KATIE GREENMAN: Hello.
6 In order to protect the Tortugas, we should
7 be able to control the amount of visitation and
8 tourism.
9 For instance, in just three years,
10 visitation to the Dry Tortugas National Park
11 has doubled from 30,000 -- 60,000, resulting in
12 increasing pressure on the area's resources.
13 Increased commercial and recreational
14 fishing is also taking a growing toll. The
15 average size of a black grouper caught in the
16 Tortugas, for example, is 9 pounds down of its
17 average of 22.5.
18 Recreational fishing is presently allowed
19 throughout the Tortugas, while commercial
20 fishing takes place only outside of the
21 national park.
22 Other impacts that pose stress to the
23 region's resources include anchor damage and
24 declining water quality.
25 GOVERNOR BUSH: Thank you.
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1 MS. TAYLOR-MANGES: Hi. I'm
2 Arielle Taylor-Manges.
3 GOVERNOR BUSH: How are you doing?
4 MS. TAYLOR-MANGES: Good.
5 GOVERNOR BUSH: Excellent.
6 MS. TAYLOR-MANGES: Two years ago I visited
7 the Dry Tortugas. When I went, I was awestruck
8 by the gorgeous water, and the variety of
9 wildlife. I would like future generations to
10 have the same excitement that I did.
11 If you do not jump into action now, we may
12 never have another chance to save these special
13 waters.
14 We believe that our generation is entitled
15 to inherit an intact environment from your
16 generation. Protecting the Tortugas today will
17 help assure our homes, ocean environment now
18 and into the future.
19 We thank you.
20 GOVERNOR BUSH: Thank you.
21 MS. FULLER: Again, I'm Kathryn Fuller,
22 President of the World Wildlife Fund.
23 Thank you again for having me here today.
24 As some of you may know, the World Wildlife
25 Fund operates in more than 100 countries around
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1 the world, including here at home, to protect
2 for future generations what is most precious in
3 our natural world on the land and in the seas.
4 That has led us to focus on 200 some land
5 and seascapes, among them, Florida's Keys, one
6 of the most important areas ecologically of our
7 planet.
8 The Tortugas Ecological Reserve will be the
9 largest marine reserve here in the
10 United States; and, indeed, one of the very
11 largest globally.
12 It represents a huge conservation success,
13 not just for the Keys, not just for the state
14 of Florida, but for the United States as a
15 whole.
16 And in my view, it will be a success for
17 the long-term, because it results from candid,
18 cards on the table, extensive discussions and
19 negotiations over a number of years, among a
20 remarkably diverse group of individuals and
21 institutions, ranging from commercial and sport
22 fishermen to divers and other recreational
23 users; to local community representatives; to
24 environmental organizations; to the Federal
25 government; and, of course, the very important
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1 participation and support from the State of
2 Florida.
3 We hope and expect that this model in
4 Florida's Keys will provide the inspiration for
5 many other marine ecological reserves here in
6 the United States and around the world.
7 Thank you.
8 GOVERNOR BUSH: Could I -- can I ask you a
9 question?
10 Is there -- should -- should this be
11 established, is there baseline research that we
12 can look at to determine what the -- you know,
13 what our objectives are, and how we do?
14 MS. FULLER: Any -- any effort of this
15 importance, any effort like this needs to
16 depend, in the first instance, on sound
17 science. And so that has underpinned every bit
18 of the discussions that have taken place,
19 bringing together as much scientific expertise
20 as exists in the government agencies, and
21 environmental groups, and the knowledge of the
22 local fishermen themselves.
23 GOVERNOR BUSH: What are the objectives
24 of -- the chil-- the students brought up the
25 declining fish populations and -- and the
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1 strains on the reefs.
2 But is there a -- is there -- are there
3 quantifiable objectives for the establishment
4 of this Reserve?
5 MS. FULLER: What it will do is provide
6 both ecological and economic benefits. The
7 fishermen themselves will tell you, as you hear
8 from representatives from the fishing
9 community, that they expect their yields to
10 increase as a result of the protection of
11 spawning areas.
12 This has happened in the Bahamas and other
13 places where these protections of critical
14 nursery grounds have been established.
15 So it represents a win/win for the
16 commercial fishing community; for the sport
17 fishermen, who presumably will have lots more
18 fish to catch; and for the critters themselves,
19 who now will have a refuge in which to breed
20 and flourish.
21 GOVERNOR BUSH: Yes. Charlie.
22 COMMISSIONER CRIST: I'm curious.
23 What all gets included in that term
24 "critters?"
25 MS. FULLER: Well, that's the -- the
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1 slippery biodiversity world -- word.
2 So it's everything from vertebrates like
3 turtles and dolphins, to coral reef creatures,
4 the small reef fish, the corals themselves, the
5 spiny lobsters and crabs, and also some of the
6 microorganisms that make up a reef system.
7 So it's comprehensive.
8 COMMISSIONER CRIST: Indeed.
9 Yes.
10 GOVERNOR BUSH: Do we have other speakers?
11 We do, don't we?
12 MR. STRUHS: Governor, to -- to -- to
13 further address your question specifically as
14 to baseline data, this has been a two-year
15 process getting it to this point where it's an
16 agenda idea before you today. And, indeed,
17 that two years has been used to collect
18 baseline data in terms of fish and lobster
19 population, and the presence of coral.
20 And as I pointed out earlier, Dan Basta is
21 here, Director of the Sanctuary Program from
22 NOAA. And he, if you're interested, can give
23 you a bit more specifics as to what those
24 baselines actually are.
25 GOVERNOR BUSH: Just want to make sure that
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1 there is baseline data, and that there's
2 expectations that we can measure.
3 MR. STRUHS: There -- there are.
4 GOVERNOR BUSH: Okay.
5 MR. STRUHS: Absolutely.
6 Did you want to -- all right.
7 Let me ask people again to limit themselves
8 to -- to 3 minutes.
9 And rather than suggesting an order,
10 I think if you can just line up and introduce
11 yourselves, because the list has changed a
12 couple of times this morning.
13 And there is a signal here that will inform
14 you as to when your 3 minutes has expired.
15 GOVERNOR BUSH: Good morning.
16 MR. IAROCCI: Good morning, Governor Bush,
17 and ladies and gentlemen of the Cabinet.
18 I'm Tony Iarocci. I live in the
19 Florida Keys. I'm a member of the South
20 Atlantic Fisheries Management Council. I
21 represent Florida.
22 I'm also a member of the National Marine
23 Sanctuary Advisory Council, and a member of the
24 Tortugas 2000 Working Group.
25 I believe the Dry Tortugas Marine Reserve
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1 was done right, and put in the right place.
2 The sanctuary utilized the knowledge of local
3 user groups with hands-on experience in our
4 region.
5 (Commissioner Rhodes exited the room.)
6 MR. IAROCCI: The 2000 Working Group used
7 every day, hands-on experience of local
8 fishermen and divers, and combined that with
9 the best available science to cite what I
10 believe will be a model for the future when
11 creating marine protected areas.
12 We must all remember how traditionally
13 opposed groups came together, and all gave a
14 little to come to a unanimous vote on this
15 issue.
16 Also I must state for the record, the
17 commercial fishing industry was well
18 represented in the process. Organizations like
19 Monroe County Commercial Fishermen,
20 Incorporated; and Organized Fishermen of
21 Florida have represented us participating in
22 the process.
23 Lobster fishermen like Richard Diaze, who
24 also represented the Hispanic fishermen; and
25 Peter Gladding, who has fished the Tortugas
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1 30 years for snapper, grouper, and -- and
2 kingfish played key roles in the process.
3 In closing, I must say, the National Marine
4 Sanctuary did take socioeconomic impacts into
5 account, and our concerns were recognized.
6 That's a big step forward when involving
7 the public and resource management.
8 Thank you for this opportunity to speak in
9 support of the Tortugas Ecological Reserve.
10 GOVERNOR BUSH: Thank you very much for
11 coming.
12 Good morning.
13 MR. KINCAID: Howdy. Governor, Cabinet.
14 My name's Don Kincaid. I'm an underwater
15 photographer. And I've got some pictures here
16 for you guys.
17 Everybody talks about the Tortugas, but
18 nobody's really seen it.
19 Somebody like to take these?
20 Shows both areas that are being --
21 attempting to be set aside.
22 I first visited the underwater world of the
23 Tortugas on assignment from National Geographic
24 in 1976. We were there to photograph life in
25 the Gulfstream.
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1 When we swam under the rafts at
2 Sargasso Weed, we were astounded to find
3 juvenile reef fish, amberjack, puffers, shrimp,
4 lobster, and lots of critters that we couldn't
5 identify.
6 The fact is that the Gulfstream was a giant
7 conveyor belt of life. Critters from Mexico,
8 South America, and the west coast of Cuba get
9 sucked into the stream and ride it directly to
10 the first piece of American sea floor where
11 they have the possibility of survival, the
12 Tortugas Reserve area.
13 The next generation of critters then have a
14 better chance of repopulating all the reefs
15 downstream, the entire rest of the
16 Florida Keys.
17 Reserve areas work. There are several that
18 I visit on a regular basis. The fish there are
19 twice as big, twice as many, and have about
20 five times the diversity.
21 The returns to a balanced ecosystem happen
22 in only about two years.
23 The great Florida writer,
24 John D. MacDonald, in two of his Travis McGee
25 novels, said that in all matters of emotional
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1 conflict, the hardest thing to do is probably
2 the right thing to do.
3 Clearly, here we have an opportunity to do
4 the right thing for the next generation of all
5 Americans.
6 Thank you very much.
7 GOVERNOR BUSH: Thank you for coming.
8 MR. GRATHWAHL: Richard Grathwahl.
9 The Marathon Guides Association has asked
10 me to address you, Governor Jeb Bush, and the
11 Florida Cabinet.
12 The Marathon Guides supports the Tortugas
13 Ecological Reserve. And as a sport fishing
14 organization, we were well --
15 (Commissioner Rhodes entered the room.)
16 MR. GRATHWAHL: -- represented by the
17 commercial fishermen and the sport fishingmen
18 (sic) who sat on the panel.
19 I have lived in the Marathon area for
20 41 years, and a licensed captain for 31 years,
21 and a third generation fishing captain.
22 Today you have heard from some of the youth
23 of the Florida Keys who are our next
24 generation. To us, this is a special moment,
25 for many of our members were once children of
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1 the sea, and the children of the Keys.
2 Let us leave a restored Tortugas waters,
3 along with south Florida's waters as part of a
4 legacy that we can be proud to hand down to
5 them to enjoy and watch over in stewardship in
6 their lives.
7 Thank you.
8 Richard Grathwahl, Conservation Chairman.
9 GOVERNOR BUSH: Thank you very much for
10 being here.
11 MR. WHITE: Good morning.
12 My name is David White. I'm the Director
13 of the Center for Marine Conservation,
14 Southeastern Regional Office in St. Petersburg.
15 The Center for Marine Conservation is one
16 of the nation's largest conservation
17 organizations advocating the protection of our
18 world's oceans, our marine wildlife and fish,
19 and important marine ecosystem.
20 We're headquartered in Washington, D.C.;
21 and we have a field office in Key West that --
22 that focuses on the Florida Keys National
23 Marine Sanctuary.
24 The Center for Marine Conservation was one
25 of the advocates for the creation of the
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1 Florida Keys National Marine Sanctuary. And we
2 had a representative that sat on the working
3 group, and helped develop the consensus that
4 resulted in the Dry Tortugas Ecological Reserve
5 that's before you today.
6 We think it's a -- it's an excellent
7 compromise, it's an excellent proposal. We
8 didn't get everything we wanted, but nobody
9 did. But we think this is an excellent
10 compromise.
11 The Center for Marine Conservation is a
12 science based advocacy organization. And I
13 should be telling you all about the scientific
14 reasons why we should support this.
15 But I think the students did an excellent
16 job of that. So, instead, I would like to take
17 this opportunity to commend the State agencies
18 and their Federal partners who participated
19 and -- in the process to develop the Tortugas
20 Ecological Reserve.
21 The Department of Environmental Protection
22 and the Fish and Wildlife Conservation
23 Commission and staff were dedicated and
24 talented individuals who came together with
25 their Federal partners.
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1 Billy Causey, and the members of the
2 Florida Keys National Park put together an
3 extraordinary process, one that we can all
4 learn from in how to take a contentious issue,
5 and make it a consensus process.
6 We urge you to support the adoption of the
7 Dry Tortugas National Reserve.
8 GOVERNOR BUSH: Thank you for being here.
9 MR. BENDICT: I'm Bob Bendict, State
10 Director of The Nature Conservancy,
11 representing our 55,000 members here in
12 Florida.
13 I'm pleased to be here supporting this
14 proposal. This is a historic day for Florida's
15 environment, one of many.
16 It's historic because we're suggesting a
17 proposal and project that will work, that will
18 work for years to come to protect the legacy
19 of -- of Florida's incredible marine resources.
20 Secondly, the process through which it was
21 arrived at is terrific. The State agency and
22 the Marine Sanctuary did a wonderful job.
23 Our colleagues and the other environmental
24 organizations did a terrific job in bringing
25 people together.
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1 The commercial fishermen were courageous in
2 their valiant support of this proposal. This
3 is how conservation should, and can happen.
4 And we hope you approve it.
5 Thank you very much.
6 GOVERNOR BUSH: Thank you.
7 MR. STEWART: Governor, and members of the
8 Cabinet.
9 My name is John Stewart. I've been a diver
10 for over 30 years. I've been full-time in the
11 dive industry for about 26 years.
12 I live and work in West Palm Beach. And
13 I'm here representing the recreational dive
14 industry trade association, Diving Equipment
15 and Marketing Association, or DEMA.
16 The dive industry strongly supports --
17 GOVERNOR BUSH: Today's your day in the
18 Legislature, isn't it? Aren't you, like, doing
19 something today? Isn't there a big
20 scuba diving --
21 MR. STEWART: Yes, there is.
22 GOVERNOR BUSH: -- pool out there?
23 MR. STEWART: It's scuba day, and we
24 certainly would like to see all of you out
25 to -- by the pool.
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1 GOVERNOR BUSH: Well, if we get finished
2 here, maybe we'll have a chance.
3 MR. STEWART: All right. Sounds good to
4 me.
5 The dive industry has always supported the
6 National Marine Sanctuary program as a key
7 vehicle to prot-- protect our marine resources.
8 And the Florida Keys National Marine
9 Sanctuary is, of course, particular interest to
10 the dive industry, as it is the number one dive
11 destination in the world.
12 And the industry has played an active role
13 in the sanctuary starting from day 1. I was
14 honored to have been appointed to the original
15 advisory council, which drafted the initial
16 draft management plan several years ago.
17 And I was -- also served on the zoning
18 subcommittee that drew all the -- the
19 boundaries for the zones.
20 And this ecological reserve in the Tortugas
21 is an extension of what I think we did in the
22 early '90s. And I think history shows, within
23 the existing zones, that an ecological reserve
24 like this can and will work.
25 So we urge you to accept the proposal as
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1 presented, and thank you very much for your
2 time.
3 GOVERNOR BUSH: Thank you.
4 MR. HARRIS: Governor, members of the
5 Cabinet, good morning.
6 In light of your remarks, I'm going to be
7 real quick.
8 My name is Bob Harris. I represent PADI,
9 which is the largest dive organization in the
10 world. Those of you that are PADI certified
11 divers, you know that.
12 We obviously -- diving community, there is
13 a compromise in this process. But the diving
14 community is behind this, as we were with the
15 Florida Keys National Sanctuary.
16 What you are doing is protecting what
17 cannot be replaced. And I'm going to show you
18 something very quickly.
19 GOVERNOR BUSH: Do you need help?
20 MR. HARRIS: This is -- this is kind of a
21 picture of what you're protecting through this.
22 And so these young students here have an
23 opportunity to view these in the future as
24 divers, hopefully.
25 Let me also point out, this is a -- a -- a
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1 picture that was painted by Wyland, who's -- as
2 many of you know, is the most world renowned
3 marine artist in the world.
4 I'm going to give these two things to these
5 young students for coming all the way up here.
6 These was autographed this weekend by Wyland.
7 And you'll find out, these are extremely
8 valuable.
9 But -- he's also, by the way, to let you
10 know, in the spirit of what you're doing today
11 with the approval of this, Wyland has agreed to
12 design and donate to the State of Florida the
13 design for what we hope to come with you next
14 year will be a diving license plate with a
15 coral reef.
16 I know you're excited.
17 GOVERNOR BUSH: Why not?
18 MR. HARRIS: But -- one more license plate.
19 GOVERNOR BUSH: How about just a picture --
20 MR. HARRIS: That's right.
21 GOVERNOR BUSH: -- that we can replace
22 these unusual ones.
23 MR. HARRIS: Absolutely. We can do that.
24 But anyway, he has agreed to do that in the
25 spirit that -- the -- the money that is raised
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1 through that will -- will go to the protection,
2 hopefully, of coral reefs in the State of
3 Florida.
4 And we encourage your support of this.
5 And, again, I want to present these to
6 these -- to these kids --
7 GOVERNOR BUSH: That probably --
8 MR. HARRIS: -- who came all this --
9 GOVERNOR BUSH: -- will be a --
10 MR. HARRIS: -- way to support this.
11 GOVERNOR BUSH: -- pretty good seller.
12 MR. HARRIS: Governor, thank you very much.
13 GOVERNOR BUSH: Thank you all.
14 We appreciate you coming up to Tallahassee
15 just to heighten awareness of your trade --
16 MR. HARRIS: Thank you all for --
17 GOVERNOR BUSH: -- and how important it is
18 for our state.
19 MR. HARRIS: Great.
20 Be glad -- be pleased if you all could take
21 a second and come on out. We've got some kids
22 in the pool out there, we'd love to have you
23 come by.
24 Thank you very much.
25 MR. JOHNSON: Governor and Cabinet, my
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1 name's Paul Johnson. I'm here today
2 representing Reef Relief, a nonprofit
3 organization based out of Key West, Florida.
4 And as the others, we'd strongly endorse
5 and encourage you to -- to approve this
6 recommendation to form the State/Federal
7 partnership in the Tortugas Reserve.
8 I had the privilege to serve under a
9 previous Governor, Governor Martinez, and I was
10 appointed to be the liaison in establishing
11 this sanctuary well over ten years ago. And
12 now, here we are, adding on a very significant
13 part to that.
14 Actually truly one of the world's last
15 ocean frontiers right here in the backyard of
16 Florida, and you're going to have the
17 opportunity here today to make that a reality.
18 As part of the early sanctuary, we worked
19 with a lot of partners. And one of those was
20 the Coast Guard.
21 Actually the sanctuary began as trying to
22 avoid vessel collisions on the reef. And
23 through that, we worked with the -- the
24 international maritime organization, and truly
25 the law of the sea to make sure that this
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1 sanctuary was a reality, both -- not just from
2 our law, but of Federal law, and an
3 international law perspective.
4 And I appreciate the opportunity to be here
5 to endorse that, and to help urge your support.
6 Thank you very much.
7 GOVERNOR BUSH: Thank you very much.
8 MR. PONTIN: Governor, and members of the
9 Cabinet, my name is H.T. Pontin.
10 I've been a licensed master mariner for
11 over 55 years. My experience ranges from
12 handling skiffs, to docking supertankers in
13 Saudi Arabia. The laws of the sea and maritime
14 treaties are my special interest.
15 The 200 mile jurisdiction signed by
16 Harry Truman in 1945 is to explore and exploit.
17 Like most mariners, I want to protect the
18 environment, but I want this to be accomplished
19 in a legal manner.
20 Maritime law and jurisdiction are based
21 upon treaties, which are upheld by the
22 United States Constitution and the
23 U.S. Supreme Court.
24 December 6, 2000, the state of Washington's
25 upheld marine regulations were overturned by
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1 the U.S. Supreme Court.
2 Also just recently the U.S. Supreme Court
3 refused to hear the treasure salvers and
4 20 states claim to sunken Spanish ships, as the
5 jurisdiction was based on treaties.
6 During the last ten years, I have attended
7 most of the Governor's Boating Advisory Council
8 meetings, as well as the Florida Keys National
9 Marine Sanctuary meetings.
10 My purpose during that time was to protect
11 our secured right to navigate. At those
12 meetings, I placed Federal acts, rulings,
13 jurisdiction refer-- jurisdiction residence --
14 references, and state statute, all upheld by
15 the Supreme Court, on the -- on the record.
16 Since the first meeting of the
17 Tortugas 2000 Plan was held, I have asked for
18 proof of jurisdiction.
19 At the thirteenth meeting, May 22nd, 1999,
20 the panel's 26 members were urged to ignore
21 legal jurisdiction when drafting the reserves.
22 The panel chose to ignore my reports and
23 requests, no discussion, no consideration, no
24 research regarding jurisdiction.
25 When the Florida Keys National Marine
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1 Sanctuary finally realized they had no
2 jurisdiction at Riley's Hump, the plan was
3 changed to keep 50 meter and larger vessels out
4 of the area.
5 The international maritime organization was
6 asked, and agreed, to avoid this area.
7 There is still no proof of jurisdiction for
8 laws of vessels less than 50 meters in this
9 area.
10 Florida has no jurisdiction over
11 Sherwood Forest area of the Tortugas 2000 plan.
12 Florida was never given this area by the
13 United States when it became a state in 1845.
14 The Department of Environmental
15 Protection's legal office rec-- they recognized
16 this fact by letter.
17 Today the area -- today you are being asked
18 to approve a plan where the State has no
19 jurisdiction. As beneficial as it is, please
20 postpone your juris-- your decision until the
21 State does prove legal jurisdiction, which can
22 be accomplished.
23 I might add, it took seven years of my
24 going before these meetings for -- for Florida
25 law enforcement to realize they could not
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1 regulate one type of vessel, because all
2 vessels have the secured right to navigate.
3 And I don't have the time to spend another
4 seven years on this plan.
5 Thank you.
6 GOVERNOR BUSH: Appreciate you coming.
7 Good morning still.
8 How are you doing?
9 MR. GLADDING: Good morning, Governor and
10 Cabinet, ladies and gentlemen, and children of
11 the audience.
12 My name is Peter Gladding. I'm a
13 commercial fisherman, who has fished the
14 Tortugas area for 30 years.
15 I ask you to make it anonymous (sic) and
16 adopt this. We went through a lot of work. A
17 lot of us sat down at the table, and hashed it
18 out.
19 And Mr. Pontin, he was right. We didn't
20 pay any attention to legal boundaries, who
21 belonged to what. We did what was right for
22 the fish. Fish don't know the difference
23 between State and Federal waters. And we spent
24 a lot of time -- we spent two years into this.
25 As a commercial fisherman, I knew this
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1 should have took place 20 years ago, not now.
2 It's been called a no take zone, a reserve,
3 a preserve.
4 But as a commercial fisherman, I like to
5 call it a replenishment zone, because I'm aware
6 of the area that's being closed, and I would
7 have closed it 20 years ago as a commercial
8 fisherman.
9 We as commercial fishermen, within one
10 year -- within one year, we'll see the results
11 of one section of it being Riley's Hump, which
12 is out of the State of Florida's jurisdiction.
13 But the fish don't know that.
14 We'll see -- we'll see a windfall from it.
15 And if we see a windfall from it, all you
16 people in this room will see a windfall from
17 it. If fishermen can see a windfall,
18 recreational will benefit from this also.
19 I'd like to thank a lot of people in this
20 room that sat on the working group. I myself
21 sat on it. Especially World Wildlife Fund,
22 Ms. Harrison was very good about bringing us
23 together.
24 And I'd also like to tell you a little bit
25 about our working group. I don't think there's
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1 ever been a working group like that before.
2 They allowed us, out of 24 to 26, we varied,
3 four commercial fishermen.
4 We actually had a voting block. The people
5 that we sat with on this working group, we all
6 worked together. Yes, we had our hard times,
7 but we sat down at a table, and we hashed it
8 out.
9 And we decided, we weren't leaving the
10 table until we had an anonymous (sic) decision.
11 And no Plan A, and no Plan B. One decision,
12 and one decision only.
13 And I'd like to ask that if you have any
14 questions, you ask me now. I'm standing here
15 before you as a commercial fisherman.
16 GOVERNOR BUSH: Thank you very much for
17 your eloquent presentation.
18 Any comments?
19 SECRETARY HARRIS: Governor, I just want to
20 say how much I appreciate the working group and
21 the consensus that they've worked so hard to
22 achieve.
23 I -- I feel like I have a personal stake in
24 this. I'm -- I'm a -- I'm a conch. I was born
25 in Key West, and I'm a diver. And so I -- I'm
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1 really impressed with all the work you've done.
2 And thank you so much for all the time you
3 invested.
4 MR. GLADDING: If we had more working
5 groups like this -- and I've been to a lot of
6 them over my 30 years of commercial fishing --
7 and we all sit down at the table, and we put
8 our cards on it, we could all have a better
9 fishery around the state of Florida.
10 And I'd like to see the state take this in
11 as a reserve anonymous (sic), like everybody
12 else, and be a leader in this nation to do it.
13 And be the first state to do it, the state of
14 Florida.
15 GOVERNOR BUSH: Yes.
16 COMMISSIONER CRIST: Governor.
17 GOVERNOR BUSH: Commissioner.
18 COMMISSIONER CRIST: Thank you, sir.
19 I -- I wanted to commend the gentleman for
20 being here today. I've -- I've never been to
21 the Dry Tortugas. So I'd -- I would love to
22 go.
23 I -- but I did get to Egmont Key this
24 weekend, and I fish. And I've seen what -- how
25 fishing has expanded in our state.
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1 And I -- I don't know if this is the right
2 time to move this project, but if it is, I'm
3 inclined --
4 GOVERNOR BUSH: Sure.
5 COMMISSIONER CRIST: -- to do it.
6 And -- and just want to thank
7 Secretary Struhs for his hard work in this
8 arena, too.
9 SECRETARY HARRIS: Second.
10 TREASURER GALLAGHER: Second.
11 MR. GLADDING: We'd like to invite you to
12 the Tortugas some -- enjoy what you see.
13 COMMISSIONER CRIST: I'd like --
14 GOVERNOR BUSH: There is a motion and a
15 second.
16 Any other discussion?
17 Any objections?
18 Without objection, it's approved.
19 Can we -- Tom, could we -- Tom, could I --
20 I'd like to get the -- if possible, if we could
21 get the students to come up here, so that we
22 could get a picture, if y'all don't mind.
23 (The Board of Trustees of the Internal
24 Improvement Trust Fund Agenda was concluded.)
25 * * *
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1 (The Cabinet meeting was concluded at
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1 CERTIFICATE OF REPORTER
2
3
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5 STATE OF FLORIDA:
6 COUNTY OF LEON:
7 I, LAURIE L. GILBERT COX, do hereby certify
8 that the foregoing proceedings were taken before me
9 at the time and place therein designated; that my
10 shorthand notes were thereafter translated; and the
11 foregoing pages numbered 1 through 168 are a true and
12 correct record of the aforesaid proceedings.
13 I FURTHER CERTIFY that I am not a relative,
14 employee, attorney or counsel of any of the parties,
15 nor relative or employee of such attorney or counsel,
16 or financially interested in the foregoing action.
17 DATED THIS 4TH day of MAY, 2001.
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23 LAURIE L. GILBERT COX, RPR, CCR, CRR, RMR
100 Salem Court
24 Tallahassee, Florida 32301
850/878-2221
25
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