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T H E C A B I N E T
APPEARANCES:
ACCURATE STENOTYPE REPORTERS, INC. 3
ACCURATE STENOTYPE REPORTERS, INC. DIVISION OF BOND FINANCE 4 2 (The agenda items commenced at 10:06 a.m.) 3 (Commissioner Crist not present in the 4 room.) 5 GOVERNOR BUSH: Division of Bond Finance. 6 TREASURER GALLAGHER: Motion on the 7 minutes. 8 GOVERNOR BUSH: Second -- there's a -- it's 9 moved and seconded. 10 Without objection, it's approved. 11 Item 2. 12 MR. WATKINS: Item 2 is adoption of a 13 resolution authorizing the issuance and 14 negotiated sale of up to 300 million dollars in 15 PECO refunding bonds. This is the last step in 16 the authorization process to execute the PECO 17 forward refinancing transaction. 18 TREASURER GALLAGHER: Motion on 2. 19 SECRETARY HARRIS: Second. 20 GOVERNOR BUSH: Moved and seconded. 21 Without objection, it's approved. 22 MR. WATKINS: Item Number 3 is a resolution 23 authorizing the issuance of up to 695 million 24 dollars in PECO bonds. That's the current 25 fiscal year appropriation, and the competitive ACCURATE STENOTYPE REPORTERS, INC. DIVISION OF BOND FINANCE 5 2 authorization. 3 TREASURER GALLAGHER: Motion on 3. 4 ATTORNEY GENERAL BUTTERWORTH: Second. 5 GOVERNOR BUSH: Moved and seconded. 6 Without objection, it's approved. 7 MR. WATKINS: Item Number 4 is a report of 8 award on the competitive sale of 225 million 9 dollars in lottery revenue bonds. This was a 10 part of the Lottery Revenue Bond Program 11 initiated in June of '98. 12 This is the ninth series of bonds that have 13 been issued under that program. And we've got 14 1.5 billion dollars outstanding in lottery 15 revenue bonds. 16 The bonds were awarded to the low bidder at 17 a true interest cost of 4.76 percent. 18 TREASURER GALLAGHER: Motion on 4. 19 ATTORNEY GENERAL BUTTERWORTH: Second. 20 GOVERNOR BUSH: Moved and seconded. 21 Without objection, it's approved. 22 MR. WATKINS: Item Number 5 is a call of 23 the meeting of the Florida Water Pollution 24 Control Finance Corporation, with the Board 25 consisting of Comptroller Milligan, ACCURATE STENOTYPE REPORTERS, INC. DIVISION OF BOND FINANCE 6 2 This is a report on the inaugural issue of 3 50 million dollars of bonds for the loan -- low 4 interest rate loans to local governments for 5 pollution control projects. 6 The negotiated sale took place on June 18th 7 and 19th, with retail order period on 8 June 18th, institutional pricing on June 19th. 9 The sale went very well, the bonds were priced 10 aggressively, resulting in a true interest cost 11 of 4.32 percent. 12 COMMISSIONER BRONSON: Move Item 5. 13 COMPTROLLER MILLIGAN: Second. 14 MR. WATKINS: Chairman Struhs? 15 MR. STRUHS: Thank you, Ben, and thanks for 16 your excellent work in managing this for the 17 Board. 18 I thought it might be worthwhile for -- 19 especially for Comptroller Milligan and 20 Commissioner Gallagher, who are members of the 21 Board, to give just a -- a quick overview of 22 success of this first 50 million dollar bond 23 sale, which was completed in June. 24 Because the bond sale was relatively small, 25 compared to the resources that are coming in, ACCURATE STENOTYPE REPORTERS, INC. DIVISION OF BOND FINANCE 7 2 60 million dollars a year back in repayments, 3 we received a bond rating of -- two different 4 ratings, one AAA; and the other AA+. So we 5 actually did far better than we would have ever 6 expected. 7 That, in turn, is what -- 8 (Commissioner Crist entered the room.) 9 MR. STRUHS: -- leads to the low interest 10 rate of actual 4.32 percent. That would 11 actually allow us to offer low interest loans 12 to communities to invest in wastewater projects 13 at about 3.1 percent. 14 And being able to offer some of these needy 15 communities those low interest rates is -- is 16 very important. It provides us very important 17 environmental protection benefits, because it 18 allows us to get things cleaned up and in the 19 ground that much faster. 20 Looking to the future, as you may remember, 21 the Legislature has authorized us to issue 22 another 75 million dollars next year, and the 23 year after that, by rolling it up to 24 100 million dollars. 25 In total, that will be an additional ACCURATE STENOTYPE REPORTERS, INC. DIVISION OF BOND FINANCE 8 2 improving our water quality, investing in 3 wastewater infrastructure, and we're doing it 4 without raising taxes, it's tax-free money that 5 we can actually get in the ground sooner to 6 make environmental quality improvements. 7 We're excited about what we are able to do 8 here. Some of the ideas we are looking to for 9 the future would potentially be working in 10 concert with the Florida Legislature. It is 11 through the idea of further bond down interest 12 rates for those small mismanaged communities, 13 where even a 3 percent interest rate may be a 14 bit of a stretch. 15 And if we can offer them zero percent 16 interest rates, we could get even more good 17 work in the ground to protect their water 18 quality. 19 But, again, thank you to Ben for his 20 excellent work. 21 And if there are any questions or 22 discussion. 23 TREASURER GALLAGHER: Now, we're -- you 24 actually just called the meeting to report it 25 to us, is that what the minutes were? ACCURATE STENOTYPE REPORTERS, INC. DIVISION OF BOND FINANCE 9 2 yes, sir. 3 TREASURER GALLAGHER: And that's all we 4 need. 5 MR. STRUHS: That's all we need to do. 6 TREASURER GALLAGHER: We don't need to 7 accept them in, just -- 8 MR. STRUHS: No, sir. 9 TREASURER GALLAGHER: Thanks for the 10 report. 11 MR. STRUHS: Thank you. 12 GOVERNOR BUSH: Is that it? 13 TREASURER GALLAGHER: That's it. 14 GOVERNOR BUSH: You want to finish your 15 meeting? 16 TREASURER GALLAGHER: We had a report. 17 Yeah. 18 (The Division of Bond Finance Agenda was 19 concluded.) 20 * * * 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC. DEPARTMENT OF HIGHWAY SAFETY/MOTOR VEHICLES 10 2 Highway Safety. 3 TREASURER GALLAGHER: Motion on the 4 minutes. 5 ATTORNEY GENERAL BUTTERWORTH: Second. 6 GOVERNOR BUSH: Moved and seconded. 7 Without objection, it's approved. 8 Item 2. 9 MR. DICKINSON: Item 2 is a -- approval of 10 the quarterly report for the quarter ending 11 June 2001. 12 TREASURER GALLAGHER: Motion on 2. 13 ATTORNEY GENERAL BUTTERWORTH: Motion. 14 GOVERNOR BUSH: Moved and seconded. 15 Without objection, it's approved. 16 MR. DICKINSON: Item 3 is submission of 17 accomplishments for the 2000-2001 performance 18 contract for the Executive Director. 19 I'll point out that we've got about 20 37 items listed there, contractual provisions. 21 We achieved 36 of them. The one that's still 22 in abeyance will be accomplished probably 23 the -- later in the fall. For sure, next 24 spring. But I think fall. So we will have 25 accomplished everything. ACCURATE STENOTYPE REPORTERS, INC. DEPARTMENT OF HIGHWAY SAFETY/MOTOR VEHICLES 11 2 TREASURER GALLAGHER: Motion to approve. 3 ATTORNEY GENERAL BUTTERWORTH: Second. 4 GOVERNOR BUSH: Approved and seconded. 5 SECRETARY HARRIS: Second. 6 Governor, I have a question. 7 GOVERNOR BUSH: Yeah. 8 SECRETARY HARRIS: Y'all go so fast. I was 9 trying to jump in on the second -- on the 10 quarterly report. 11 I just wanted to commend you on some of the 12 issues that you've done, particularly commend 13 you on the steps that you're taking to reduce 14 and eliminate some of those problems that we 15 found during the election day. 16 I also particularly want to thank you for 17 Mrs. Helen Howard, the liaison between your 18 office and ours, and the Supervisors of 19 Election. She's doing an excellent job from 20 all the reports in the field. 21 Third, in the March quarterly report, you 22 said that 180,000 people had received their -- 23 citizens have received their voter registration 24 services through these field offices. And I 25 know the Governor's task force asked you to ACCURATE STENOTYPE REPORTERS, INC. DEPARTMENT OF HIGHWAY SAFETY/MOTOR VEHICLES 12 2 to us in March. 3 Could you let us know -- could you give us 4 a progress report on what some of those 5 programs are -- are accomplishing now? 6 MR. DICKINSON: Governor? 7 GOVERNOR BUSH: Yeah, please. 8 MR. DICKINSON: Yes, ma'am, 9 Madam Secretary. 10 As a matter of fact, we -- we came to you 11 with a 10-point plan. Eight of those 10 points 12 have been addressed. The final two are in the 13 final stages. Work orders are in progress, and 14 they should be resolved, here again, this fall. 15 I'll be reporting to you as those come up. 16 We have had a -- it's a great opportunity 17 for us to look at ourselves again. And as 18 you're well aware, we've had many things that 19 have been put on our driver license examiners 20 when you come into the shop. 21 But we've got some reconciliation processes 22 now that require them, before they go forward, 23 to -- to ask these questions, and document 24 exactly what the responses are. 25 So I think we've got a much tighter audit ACCURATE STENOTYPE REPORTERS, INC. DEPARTMENT OF HIGHWAY SAFETY/MOTOR VEHICLES 13 2 SECRETARY HARRIS: Yes -- 3 MR. DICKINSON: -- communication, and 4 accountability issues. And I'm -- I've been 5 down -- out in the field Saturday a couple of 6 weeks ago, and -- and I can guarantee you that 7 it has a -- a spot high on the agenda. 8 SECRETARY HARRIS: Concerning 9 accountability, would it be possible in terms 10 of your managerial risk reviews if you included 11 their performance standards, how they address 12 the voter registration. Most -- most of the 13 managers across the state are doing a yeoman's 14 job. 15 But it would -- if you could consider 16 adding that as one of the -- one of the issues 17 concerning a review, it might help to raise the 18 level of that for us, among all the managers 19 throughout the state. 20 MR. DICKINSON: Done. 21 And I want to thank you also for working 22 with us. And I'm sure you're aware of this, 23 but your office has approved some -- just 24 letter grade paper for us to put in some of our 25 stuffers, which it saves us a ton of money. ACCURATE STENOTYPE REPORTERS, INC. DEPARTMENT OF HIGHWAY SAFETY/MOTOR VEHICLES 14 2 MR. DICKINSON: And that's been a help. 3 SECRETARY HARRIS: And finally, I just want 4 to make you aware, in northwest Florida, as 5 well as in Duval County, I -- I believe it 6 started in Escambia, but some of the 7 supervisors of elections have created cards 8 that you've been working with us that it -- 9 that the postcards are sent to those who are 10 registered, and in the event they don't receive 11 their voter registration in a certain number of 12 days, it has all the locations where they can 13 follow up and go find out exactly what 14 happened. 15 We hope that we'll be able to institute 16 that program with all the supervisors 17 throughout the state. But we appreciate your 18 assistance on that as well. 19 MR. DICKINSON: Yes, ma'am. 20 We're -- we're working -- we'll get it 21 done. 22 SECRETARY HARRIS: Thanks. 23 TREASURER GALLAGHER: I asked for the last 24 one, Governor. 25 GOVERNOR BUSH: Without objection, it's ACCURATE STENOTYPE REPORTERS, INC. DEPARTMENT OF HIGHWAY SAFETY/MOTOR VEHICLES 15 2 TREASURER GALLAGHER: Go forward. 3 MR. DICKINSON: Item 4, submission of the 4 2001-2002 performance contract of the 5 Executive Director. 6 TREASURER GALLAGHER: Motion on 4. 7 ATTORNEY GENERAL BUTTERWORTH: Second. 8 GOVERNOR BUSH: Moved and seconded. 9 Without objection, it's approved. 10 TREASURER GALLAGHER: If I -- 11 MR. DICKINSON: Thank you. 12 TREASURER GALLAGHER: If I may mention one 13 thing. 14 You did report to us in here the statistics 15 by county, as well as a percentage of insured 16 vehicles. And I just thought it might be worth 17 pointing out that as of June 2001, 82 percent 18 of the vehicles in the state of Florida are 19 insured. 20 If you go back to when they really had 21 numbers, June of '92, it was 68 percent back 22 then. Now it's 82 percent. That's -- that's 23 good news. 24 But let me give the other side of it. That 25 means that there's one million eight hundred ACCURATE STENOTYPE REPORTERS, INC. DEPARTMENT OF HIGHWAY SAFETY/MOTOR VEHICLES 16 2 insured in the state of Florida. 3 GOVERNOR BUSH: All live in Broward and 4 Dade. 5 TREASURER GALLAGHER: Well, okay. Not 6 quite. It's close. 7 Two hundred and forty thousand of them are 8 in Dade County. 9 So if you're driving in Dade County, make 10 sure you have uninsured motorist coverage is 11 what I would -- what I would warn you. 12 But -- 13 GOVERNOR BUSH: I crashed with almost every 14 one of them. 15 TREASURER GALLAGHER: All 240,000? You 16 need -- you need to get a driver. 17 GOVERNOR BUSH: Oh. 18 TREASURER GALLAGHER: So I want to thank 19 the Department for maintaining all those 20 records. And it's a very hard thing to do. 21 You can imagine every day how many people drop 22 their insurance, or don't have it, or change 23 companies, or add insurance. 24 And it's a -- a major daily project to keep 25 that information up and available for ACCURATE STENOTYPE REPORTERS, INC. DEPARTMENT OF HIGHWAY SAFETY/MOTOR VEHICLES 17 2 would like to know what's happening -- 3 MR. DICKINSON: Without the hammer, if you 4 will, or assistance, I should say, of your 5 department, we wouldn't be able to get the 6 insurance companies to the table to even talk 7 to us. 8 They have been fantastic. In the last 9 three years, we've made some real strides -- 10 TREASURER GALLAGHER: It was a little 11 rough -- 12 MR. DICKINSON: -- in communication 13 links -- 14 TREASURER GALLAGHER: -- at first -- 15 MR. DICKINSON: Thank you. 16 TREASURER GALLAGHER: I mean, it was a 17 little rough at first, but it's real important 18 to do this. Obviously people have their 19 license taken away for not having insurance, 20 lose their tag, or their cars taken away one 21 way or another. 22 So it's a good program. We're -- we're 23 getting places, but we have a ways to go. 24 Thank you, Fred. 25 MR. DICKINSON: Thank you. ACCURATE STENOTYPE REPORTERS, INC. DEPARTMENT OF HIGHWAY SAFETY/MOTOR VEHICLES 18 2 (The Department of Highway Safety and Motor 3 Vehicles Agenda was concluded.) 4 * * * 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 19 2 Beautiful Betty Coxe. 3 MS. COXE: Wonderful Governor. 4 I'm sorry I'm not Wayne Pierson. He was 5 unable to be with us today. And -- 6 TREASURER GALLAGHER: This is much better. 7 MS. COXE: I haven't done this before, so I 8 hope you will bear with me. 9 COMMISSIONER CRIST: Betty, we're glad 10 you're not Wayne. 11 MS. COXE: Thank you, sir. 12 At least I don't try to play basketball at 13 my age, right? 14 Item 1 on our agenda is minutes of the 15 May 30th and June 12th and June 26th meetings. 16 TREASURER GALLAGHER: Motion. 17 COMMISSIONER CRIST: Second. 18 GOVERNOR BUSH: Moved and seconded. 19 Without objection, it's approved. 20 MS. COXE: Item 2 has been withdrawn at the 21 request of the applicant and the School Board. 22 TREASURER GALLAGHER: Motion to withdraw. 23 GOVERNOR BUSH: Is there a second? 24 COMMISSIONER BRONSON: Second. 25 GOVERNOR BUSH: There's a motion to ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 20 2 Without objection, it's approved. 3 MS. COXE: Item 3, 21st supplemental 4 authorizing resolution to the master 5 authorizing resolution adopted on July 21, 6 1992, authorizing the issuance of not exceeding 7 300 million dollars, State of Florida, full 8 faith and credit, State Board of Education, 9 Public Education Capital Outlay refun-- Capital 10 Outlay refunding bonds, one or more series, the 11 refunding bonds; and a resolution authorizing 12 the negotiated sale and delivery of the 13 refunding bonds. 14 TREASURER GALLAGHER: Motion on 3. 15 GOVERNOR BUSH: Could you explain that, 16 please, Betty? 17 MS. COXE: Yes, sir. 18 GOVERNOR BUSH: Just joking. 19 Is there a second? 20 COMMISSIONER BRONSON: Second. 21 COMMISSIONER CRIST: Second. 22 GOVERNOR BUSH: Moved and seconded. 23 Without objection, it's approved. 24 MS. COXE: And you thought that one was 25 fun. Wait till Item 4. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 21 2 resolution to the master authorizing resolution 3 adopted on July 21, 1992, authorizing the 4 issuance of not exceeding 695 million dollars, 5 State of Florida, full faith and credit, 6 State Board of Ed, Public Education Capital 7 Outlay bonds, 2001 series; and a resolution 8 authorizing the competitive sale of a portion 9 of such funds by the Division of Bond Finance. 10 TREASURER GALLAGHER: Motion on 4. 11 COMMISSIONER CRIST: Second. 12 GOVERNOR BUSH: Moved and seconded. 13 Without objection, it's approved. 14 That's a lot of money. 15 MS. COXE: Yes, sir. 16 Item 5 is a rule. Rule 6A-4.01761, 17 Specialization Requirements for Certification 18 in the Area of Speech Language 19 Impaired/Associate - Academic Class. 20 TREASURER GALLAGHER: Motion, 4 -- 5. 21 COMMISSIONER CRIST: Second. 22 GOVERNOR BUSH: Moved and seconded. 23 Without objection, it's approved. 24 MS. COXE: Item 6, Rule 6A-1.09431, Special 25 Request Procedure for Exemption from Graduation ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 22 2 Seeking a Standard High School Diploma. 3 TREASURER GALLAGHER: Motion on 6. 4 COMMISSIONER CRIST: Second. 5 GOVERNOR BUSH: Can we -- can you just -- 6 this is an area that's near and dear to my 7 heart. 8 Could you explain what we're doing that's 9 different? 10 MS. COXE: Basically we're upgrading under 11 this particular item, the graduation 12 requirements for students and essential 13 procedures inherent therein. 14 And Shan Goff is here to tell you the 15 details. 16 GOVERNOR BUSH: Could -- could -- 17 MS. COXE: Shan, if you could come forward, 18 please. 19 COMMISSIONER CRIST: Hi, Shan. 20 GOVERNOR BUSH: Better answer actually. 21 MS. COXE: Right. 22 MS. GOFF: Good morning. 23 GOVERNOR BUSH: Good morning. 24 MS. GOFF: This rule basically 25 operationalizes and details what we do in order ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 23 2 to exempt a child with disabilities from the 3 FCAT or the SSAT, or the graduation test. 4 And it outlines the procedures that the 5 District must follow in giving us information 6 that really demonstrate that there are 7 extraordinary circumstances that prevent this 8 child from taking the assessment, even with 9 appropriate accommodations. 10 GOVERNOR BUSH: Will this make it harder or 11 equally hard, or easier for students with a 12 wide array of disabilities to be able to get a 13 diploma? 14 MS. GOFF: I'm not sure it will change, 15 other than it does make public the kind of 16 procedures that have to be followed. And 17 basically the information that has to be 18 presented so that we can assure that child does 19 have the same skills and competencies, but 20 because of extraordinary circumstances, they're 21 prevented from participating in the SSAT. 22 GOVERNOR BUSH: This is -- 23 MS. GOFF: Or the FCAT, excuse me. 24 GOVERNOR BUSH: Let me ask it another way. 25 Is this based on y'all's experience -- you ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 24 2 dads that express concerns about this. 3 Is this -- just updating a rule based on 4 the practical experience of having to resolve 5 these disputes that come to the Department? 6 MS. GOFF: Yes, sir, it is. 7 GOVERNOR BUSH: Thank you. 8 Is there -- I think it's been moved and 9 seconded. 10 COMMISSIONER CRIST: Yes. 11 GOVERNOR BUSH: Without objection, it's 12 approved. 13 MS. COXE: Item 7, Rule 6A-4.0012, 14 Application Information. 15 TREASURER GALLAGHER: Motion on 7. 16 COMMISSIONER CRIST: Second. 17 GOVERNOR BUSH: Moved and seconded. 18 Without objection, it's approved. 19 MS. COXE: Item 8, Rule 6A-6.03012, Special 20 Programs for Students who are Speech and 21 Language Impaired. 22 TREASURER GALLAGHER: Motion on 8. 23 COMMISSIONER CRIST: Second. 24 GOVERNOR BUSH: Moved and seconded. 25 Without objection, it's approved. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 25 2 Florida Comprehensive Assessment Test 3 Requirements. 4 Here to offer the opening is Commissioner 5 of Education, Charlie Crist. 6 COMMISSIONER CRIST: Thank you, Betty. 7 Governor and Cabinet, thank you very much. 8 I am honored to bring to you today 9 Florida's next step in raising the standards in 10 education. We know how vitally important it is 11 that our precious children are prepared to lead 12 productive and successful lives after 13 high school. 14 When we set high expectations, we give our 15 hardworking public school teachers the vision 16 and tools they need to increase student 17 achievement, and they rise to the occasion. 18 When we set higher standards, our students 19 rise to the challenge. There are tremendous 20 success stories throughout Florida. Today we 21 have the unique opportunity and privilege to 22 set the passing score for earning a high school 23 diploma in our great state. 24 Since the 1970s, the testing for our 25 high school diploma has been based on minimum ACCURATE STENOTYPE REPORTERS, INC.
2 skills won't get you very far. Students need 3 to have increased proficiency, especially in 4 these key areas of reading and mathematics in 5 order to be truly successful. 6 The Legislature recognized the need for 7 this change and authorized us to set a passing 8 score on the Florida Comprehensive Assessment 9 Test for high school graduation. 10 In preparation, staff at the Department 11 took the necessary steps to develop a 12 recommendation. Using the 2000 FCAT test 13 results, and input from teachers and business 14 leaders to identify appropriate standards of 15 achievement, staff suggested 287 in reading, 16 and 295 in math as appropriate passing scores. 17 Then I asked they conduct further research, 18 since the 2001 FCAT scores were available. Our 19 10th grade students showed increases, going 20 from 69 percent passing in math to 75 percent; 21 and in reading, from 65 percent to 68 percent. 22 As a result of this continued review, I'm 23 recommending the passing scores of 287 in 24 reading and 295 in math for students who took 25 the test in the spring of 2001; and that we ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 27 2 raising both the math and reading scores to 3 300, beginning with those who take the test 4 after February of 2002. 5 This new requirement will serve Florida 6 students and their families by assuring them 7 that their high school diploma signifies that 8 they have achieved the critical skills and 9 abilities needed to meet the needs of the real 10 world. 11 I think it's also important that we equip 12 our teachers with tools to help our students 13 succeed. 14 Three years ago, the Legislature gave 15 districts funding flexibility by creating the 16 Supplemental Academic Instruction Fund with 17 527 million dollars to assist lower performing 18 students. 19 In the year 2000, that amount increased to 20 662 million; and in 2001, to 677 million 21 dollars. 22 That equals, on average, $400,000 for each 23 high school in the state. 24 This is, however, an issue that involves 25 all of us. This is a community concern that ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 28 2 expand the emphasis by bringing in new 3 partners. 4 I have worked with my friend, Florida 5 Education Secretary, Jim Horne, and we agreed 6 to increase our commitment to leave no student 7 behind. 8 We have 2.5 million dollars available to 9 assist school districts that want to implement 10 best practices to increase student achievement, 11 and motivate students to master the standards. 12 We want to gain input from educators and the 13 public on how best to support these students. 14 We will be meeting with our educators and 15 community partners to identify the best ways to 16 help our students. 17 We will involve the Department of Education 18 Office of School Improvement. 19 We will then meet with our state 20 superintendents during their conference in 21 mid-September to establish how these funds can 22 best be utilized. 23 Now let us move on to the specifics of the 24 proposed rule amendment. And here to present 25 the specifics of the rule are Betty Code, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 29 2 Thank you, Betty. 3 Thank you, Governor. 4 MS. COXE: Thank you, Commissioner; 5 thank you, Governor; thank you, members of the 6 State Board of Education. 7 It's my privilege today to get to come 8 before you and offer for you the background on 9 the rule that you will be deliberating upon. 10 As you know, this is an inherent component 11 to the A+ plan. 12 And there is a lot that's great about the 13 A+ plan for education. Among those things, 14 it's clarity of message. Everyone will 15 remember that the A+ plan is about a year's 16 worth of learning for a year spent in school, 17 and tracking the progress of every single child 18 in our state. 19 And that is an awesome responsibility, 20 because we have nearly two-and-a-half million 21 students, and we don't want any of them left 22 behind. 23 So you, as the State Board of Education, 24 have gone about a very important task of 25 setting high standards for us. And it is the ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 30 2 about our work today. 3 Now, there are a lot of ways we could talk 4 about the standards and how they impact our 5 state, and the focus on Sunshine State 6 Standards, as you know. Those standards set 7 what it is a kid should know and be able to do 8 in grades K through 12. 9 And you adopted those in 1996. So for 10 five years now, our schools have been working 11 hard with those standards, letting the sunshine 12 reign, as the speech goes, so that kids in our 13 state will have the knowledge and the skills 14 they need to do well. 15 We don't know of any better way to share 16 this message than to have you hear from a 17 principal. As some of you were able to go to 18 her school in the past, her name is Janet Hupp. 19 She is principal of Miami Palmetto Senior High. 20 And the Florida Board of Education recently met 21 there. 22 Couldn't help but think of you, 23 Treasurer Gallagher. It was definitely close 24 to Coral Gables, and the beauty that you call 25 home -- and the Governor. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 31 2 GOVERNOR BUSH: I live closer to Palmetto 3 than he does. 4 TREASURER GALLAGHER: True. 5 MS. COXE: It was a gorgeous facility, and 6 we had wonderful hospitality. And 7 Principal Hupp was -- was delightful in sharing 8 with us what standards have meant to her school 9 and the students there. 10 So, y'all, may I introduce y'all to 11 Sharon Hupp -- Janet Hupp. I'm sorry. 12 Come on up now. 13 Delighted to have you with us today. 14 MS. HUPP: Thank you very much. 15 I brought kind of a very different 16 presentation for you. 17 And is Colleen here? She said she would 18 help me set this up so you could watch 19 something extremely different than what you've 20 heard already this morning. 21 It is a pleasure for me to be here. My 22 name is Janet Hupp. I'm principal -- very 23 proud principal of Miami Palmetto Senior High 24 School, which is in Dade County, very close to 25 Deering Bay. And I have been fortunate enough ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 32 2 very pleased to share our story with you. 3 Miami Palmetto is a school with great 4 tradition and has an incredible history. When 5 we were initially designated as a C school for 6 the last two years, we know in our hearts, 7 there's no way that could possibly be so, but 8 we were -- but we were. 9 And we proud -- proudly moved on to become 10 an A school, and an institution that makes a 11 difference in children's lives. 12 If you'll bear with me for just one second. 13 I also brought a -- a very entertaining 14 tape. Someone just said to me, are you going 15 to show the Wild Wild Test? So I hope there's 16 a VCR so you can enjoy it as much as everyone 17 from the Board did. 18 TREASURER GALLAGHER: Let me -- would you 19 tell us how many students you have? 20 MS. HUPP: Thirty-four hundred, sir. 21 TREASURER GALLAGHER: And where does that 22 put you -- 23 (Commissioner Bronson exited the room.) 24 TREASURER GALLAGHER: -- in size in the 25 state, about four or five? ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 33 2 Dade County, we're one of the smallest 3 high schools in Dade County. 4 TREASURER GALLAGHER: The largest is still 5 Holmes Braddock at -- 6 MS. HUPP: Yes, sir, it is. 7 TREASURER GALLAGHER: -- 5700? 8 MS. HUPP: Fifty-six hundred this year. 9 TREASURER GALLAGHER: That was 5600. 10 MS. HUPP: And with the new school, 11 Felix Varela, being built to relieve them, 12 they're still at 5600. 13 TREASURER GALLAGHER: The -- you don't want 14 to be anywhere near there when -- right before 15 school opens, and right after it closes. 16 MS. HUPP: Right. 17 TREASURER GALLAGHER: It's a bad place to 18 be around. 19 MS. HUPP: We're at 3400, and about 20 147 percent capacity. And anyone who knows 21 Miami Palmetto knows that's very large for us. 22 But it's a great place. 23 MS. CASTILLE: Oh, it's working. 24 MS. HUPP: Yeah. Yeah, Colleen. 25 TREASURER GALLAGHER: Is this especially ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 34 2 MS. HUPP: Don't you love technology when 3 it doesn't work? I'm sorry. 4 TREASURER GALLAGHER: No, that's when we 5 don't like it. 6 MS. HUPP: I was supposed to be here at 7 7:30, but the -- the airline had electrical 8 problems, and we decided, it's probably good to 9 get off and let them fix it before we flew 10 here. 11 GOVERNOR BUSH: There we go. 12 MS. HUPP: We hope for good. 13 The hour glass is still ticking. 14 There we go. 15 GOVERNOR BUSH: Why don't you remind me 16 later. 17 TREASURER GALLAGHER: I think you need to 18 get rid of that little -- that -- 19 MS. HUPP: Oh, yeah. 20 GOVERNOR BUSH: There you go. 21 TREASURER GALLAGHER: There you go. 22 GOVERNOR BUSH: All right. 23 MS. HUPP: There we go. 24 GOVERNOR BUSH: We're off and running. 25 MS. HUPP: Let's see. We're going to meet ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 35 2 I was asked to talk to you about how 3 Palmetto went from a grade of C to an A. And 4 although we know the grading criteria is not 5 really comparing apples to apples, and the 6 criteria has changed, Palmetto has been 7 committed to maintaining high standards since 8 1957, and has been nationally recognized for 9 our excellence. 10 It became painfully clear to us that we 11 could not rest on our laurels, and that we 12 could meet the Governor's challenge as we 13 continue to have high expectations for all of 14 our students, and to certainly assist any 15 student who needed extra help but could not 16 meet the standards. 17 Maybe not. 18 So two years ago, we decided that school 19 improvement and student achievement obviously 20 go hand in hand. And to accomplish both, we 21 needed to reculture the school, and the 22 environment, building a strong team, a sense of 23 family, and a feeling of pride in a school were 24 essential to its improvement. 25 So we began moseying down that FCAT trail, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 36 2 catchy and fun way of getting our student and 3 staff's attention and providing motivation. I 4 firmly believe humor and laughter are critical 5 to success. 6 We knew we needed to look at our clientele, 7 and we collected all the data that we could 8 possibly get our hands on, and shared that 9 information with our staff so that we could get 10 a better handle on our students' needs. 11 Helping schools use data effectively, and 12 systematically would be of great benefit as -- 13 (Commissioner Bronson entered the room.) 14 MS. HUPP: -- they work on school 15 improvement. 16 We found that only 32 percent of our 17 students live in that prestigious Pinecrest 18 community. 19 We also found our demographics had changed 20 significantly, and better reflected the makeup 21 of Dade County. 22 We also recognized that we do have 23 tremendous parental involvement and community 24 support. 25 We've always been an incredibly strong ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 37 2 program has become a powerhouse and our student 3 activities program finds a place for everyone 4 to belong. 5 We're extremely proud that we're the only 6 high school in Dade County that's been 7 recognized by the State as a five-star school. 8 Among other things, we found that in spite 9 of our stellar advanced placement programs, 10 50 percent of our 10th grade students work at 11 levels 1 or 2 on the reading portion of the 12 FCAT. 13 And even though we have tremendous parental 14 and community support, we needed to reach out 15 to all of our stakeholders. At Palmetto, we 16 know that the school alone is not totally 17 accountable for student learning. In fact, 18 that responsibility in educating children is 19 shared by many different players, including 20 their families, the business community, and 21 policymakers from the local, State, and 22 national level. 23 This notion of shared accountability does 24 not release the school from responsibility for 25 student learning. However, it does put the ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 38 2 accountable, rather than in the passive 3 position of being held accountable. 4 As the staff, we knew that helping students 5 to better master the Sunshine State Standards 6 across the curriculum had to be our mission. 7 We became determined that improving teaching 8 and learning had to be a well thought-out, 9 intentional, ongoing process. 10 And furthermore, we felt we needed to 11 foster leadership, collaboration, skills, and 12 that collegiality you talked about that are 13 essential to school improvement. 14 After we determined who we are, we focused 15 our attention on discovering what we believe 16 our mission is, what is our shared vision as a 17 school. Are we providing an environment where 18 all students can learn, succeed, and achieve. 19 As I mentioned before, we felt the need to 20 build a sense of pride and ownership for our 21 wonderful school, reculturing and establishing 22 a new climate. 23 The first challenge in creating an 24 inquiring-minded school is to harness 25 individual energy to address whole school ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 39 2 staff, and students combined their talents, and 3 painted paws; and, yes, we painted that pride. 4 We came together on Saturdays and forged 5 strong bonds with Fairchild Tropical Gardens 6 and the Pinecrest Business Association, and we 7 planted that pride. 8 That is the same -- my husband looked at 9 this, and said, well, why didn't you take a 10 picture of the same place? It is the same 11 place. We just put in sidewalks and cleaned it 12 up, and did a little nice landscaping. 13 On Saturday, we had over 350 hard workers, 14 and we spruced up that pride. 15 One early release day, after our 16 professional development activities, we had a 17 barbecue for the entire staff. And then we sat 18 on the athletic field for a family portrait. 19 We created a sense of family with the staff, 20 and we captured that pride. 21 We purposely involved the staff in fun, 22 spirited, and collaborative development on 23 early release days and Saturdays. As a matter 24 of fact, early release day and services were 25 specifically designed to promote dialogue and ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 40 2 After we determined who we are, and what we 3 believe our mission is, it was time to 4 desire -- to determine our desired results. 5 What do we want for our students, all of our 6 students. 7 So we continued to build the pride. We 8 worked on peer collaboration and collegiality; 9 we creatively used resources; we made sure that 10 we infused the Sunshine State Standards in all 11 curriculum. Not just language arts and math 12 teachers are responsible for a child's 13 education. We had pure determination on the 14 part of the students and the staff, and 15 enthusiasm by everyone. 16 It is infectious, you know. I know many of 17 you probably go to football games, and you 18 don't wait for a touchdown to cheer, you clap 19 and stand up and act crazy for a good play or a 20 small gain. 21 We provided as many opportunities as 22 possible for peer collaboration among our 23 teachers. In a large high school, teacher 24 isolation is a major problem. Our teachers 25 were provided with opportunities, rewards, and ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 41 2 We did vertical teaming work sessions; we 3 did CRISS training, which is Creating 4 Independence Through Student Strategies; we 5 encouraged our teachers to go to the 6 Zelda Glazer Riding Institute. And, of course, 7 we established our very own How the Test Was 8 Won Saturday workshops. 9 We knew that working in interdisciplinary 10 groups was essential. Higher order thinking 11 skills, and the application of knowledge must 12 be emphasized across the curriculum. As a 13 matter of fact, each staff member was on a 14 subcommittee assigned by planning periods, and 15 instead of -- 16 (Commissioner Bronson exited the room.) 17 MS. HUPP: -- large faculty meetings, we 18 broke down the walls by opening dialogue and 19 looking at data and research and small groups. 20 We found you must prioritize resources to 21 make it all work. You have to be creative with 22 the allocation of your resources. 23 Some of the things we scraped up money for 24 was an essential FCAT coordinator, someone to 25 watch the store, assess the data, provide ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 42 2 our students. 3 Stipends for Saturday training was very 4 popular. Over 60 members over a two-year 5 period of time have come out on Saturdays for 6 training, and more will be back this third 7 time. 8 We paid for the best facilitators we could 9 locate. It's essential to keep our staff 10 engaged so they'll be able to see the results 11 and believe in themselves. We paid for the 12 CRISS training, which is not free. Over 13 three-fourths of our staff's been trained. And 14 believe it or not, we paid for Coke -- Coke and 15 cookies. 16 These efforts help provide ownership for 17 the results. Nothing worth doing well is free, 18 but quality training is worth the teacher's 19 time, and it directly impacts student learning 20 and achievement. 21 Our District did provide us with great 22 support, and the support personnel not only 23 presented at our early release days and staff 24 development workshops, but then they'd return 25 and model these best practices in the ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 43 2 And, of course, we made it a practice of 3 celebrating any and all successes. 4 Using our interdisciplinary subcommittees 5 and How the Test Was Won workshops, we trained 6 our staff on how to infuse the Sunshine State 7 Standards into their curriculum. 8 GOVERNOR BUSH: We just -- I want to ask 9 you a question. 10 MS. HUPP: Absolutely. 11 GOVERNOR BUSH: Are you telling me that a 12 science teacher could actually help a child -- 13 MS. HUPP: Absolutely. 14 GOVERNOR BUSH: -- learn how to read? 15 MS. HUPP: Absolutely. A PE teacher, a 16 home ec teacher, a woodshop teacher. 17 GOVERNOR BUSH: It helped? 18 MS. HUPP: They need to. It's not a 19 one-man show. It's not just 10th grade 20 language arts teachers. 21 GOVERNOR BUSH: And social studies, you 22 can -- 23 MS. HUPP: Absolutely. 24 GOVERNOR BUSH: Thank you. 25 MS. HUPP: We provided in-service and ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 44 2 tests, all tests, and all departments, using 3 FCAT questions and style, and -- and learning 4 techniques. 5 We hand produced task cards, which are 6 question stems that simulate the types of 7 higher order questions asked on the FCAT, 8 provided them to all 9th and 10th grade 9 teachers to use in their classrooms. 10 I think one of my fondest memories of 11 Palmetto will be the sight of clerks, students, 12 parents, teachers, administrators, and even a 13 beloved custodian -- 14 (Commissioner Bronson entered the room.) 15 MS. HUPP: -- cutting out those brightly 16 colored cards for distribution. Talk about 17 teamwork. 18 In order for students to have a better 19 understanding of expectations across the 20 curriculum, rubrics have become a major focus 21 for us. As a matter of fact, this suggestion 22 came as a -- a result of research and 23 subcommittee feedback. 24 Most of you are aware that the FCAT, 25 Florida Writes provides us with a rubric to ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 45 2 preparation. 3 Our teachers used those Florida Writes 4 rubrics to score all students' papers. In 5 addition, they use anchor papers to train 6 students on how to score using a rubric. 7 The students themselves used the same 8 rubrics to score each other's papers. And then 9 the students offer their own rubrics for class 10 assignments. Clear expectations, well 11 understood, and applicable feedback. 12 We knew we needed to provide a culture 13 where students feel comfortable challenging 14 themselves. 15 There cannot be an elitist attitude. There 16 must be, I can do it, and our responsibility is 17 to make sure that they can. And it is an 18 attitude adjustment in high school. 19 How did we build the enthusiasm and 20 hard work to crescendo at the right time? 21 First of all, we had a "prep rally" for our 22 10th grade students, and reviewed helpful test 23 taking strategies, and gave them a motivational 24 talk, and answered any questions that they 25 might have. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 46 2 long, first period, three or four classes; 3 second period, three or four classes. I wanted 4 to personally talk to every 10th grade student 5 face-to-face, and stress the importance of them 6 taking personal pride and school pride in their 7 performance on the exam, and let them know that 8 I believed in them. 9 We fed them breakfast every day in the 10 testing rooms. Just granola bars, fruit juice, 11 a donation from Publix, our -- our business 12 partner. 13 We gave them magic pencils. And as strange 14 as that sounds in high school, psychology is a 15 wonderful thing. And when the lead broke on 16 the blue end cap pencils, they came up for a 17 new one, because it might make a difference. 18 We gave them door prizes to encourage 19 attendance. Ninety-five percent attendance to 20 be an A school. Our business and community 21 partners gave us gift certificates and prizes. 22 And if you were in attendance as a 10th grade 23 student, on time, in place with your pencil, 24 your name went in a hat and we drew names, and 25 they won something for being there. Whatever ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 47 2 Our teachers wore our How the Test Was Won 3 t-shirts. We organized testing rooms to 4 provide for an uncrowded, comfortable, quiet 5 environment proctored by staff that they knew 6 and respected. 7 I have to share with you that rescheduling 8 a large high school to accommodate that is a 9 real challenge in on overcrowded school. And 10 because it goes for a week, and this year when 11 we do retesting in October and again in March, 12 it is quite a challenge. 13 We thought you would enjoy some of our 14 student-made and written PR. And I'm not sure 15 if you're going to be able to see the video. 16 Are we? 17 That's not it. 18 This is handwritten by students, produced 19 by students. And it's something we shared the 20 first -- the week -- two weeks before the FCAT 21 started. 22 And we just thought you'd get a real kick 23 out of seeing some of the things -- crazy 24 things we do in high school to keep people 25 motivated. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 48 2 Clips of different things. 3 (Thereupon, the videotape was published.) 4 MS. HUPP: He doesn't go to our school. 5 (Thereupon, the videotape was published.) 6 MS. HUPP: I just want you to know that 7 Palmetto is proof positive that when high 8 standards are an every day part of the school 9 culture, students do learn to put forth more 10 effort, and achievement improves. 11 Thank you very much. We did get to become 12 an A school with a lot of hard work and a lot 13 of belief in themselves. 14 TREASURER GALLAGHER: Can -- I have a 15 question? 16 GOVERNOR BUSH: Yes. 17 TREASURER GALLAGHER: The -- how many of 18 your students last year were able to opt out of 19 the HSCT by using the FCAT? 20 MS. HUPP: I don't know. I don't know. 21 Our passing rate's still not wonderful though. 22 We have an 85 percent passing rate in math, and 23 a 52 percent in reading. So we still have a 24 lot of work to do. 25 We're concerned. A lot of our lower level ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 49 2 could see by our demographics, that's a 3 significant portion of our population that 4 we're working with. 5 TREASURER GALLAGHER: So you have -- you 6 are doing some remediation for all of those 7 students? 8 MS. HUPP: Absolutely. 9 But basically, rather than just teaching 10 the test, Mr. Gallagher, which we really do not 11 believe in at our school, we're trying to 12 provide them with the skills they need through 13 every course. 14 And -- and essentially working with some 15 double teaming, maybe taking a language arts 16 class and a reading class instead of an 17 elective. 18 TREASURER GALLAGHER: Well, it's a little 19 hard to teach the test if they don't know 20 how -- 21 MS. HUPP: Absolutely. 22 TREASURER GALLAGHER: -- to read, isn't it? 23 MS. HUPP: Exactly. 24 TREASURER GALLAGHER: Thank you. 25 MS. HUPP: So thank you very much. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 50 2 MS. HUPP: I appreciate your -- 3 GOVERNOR BUSH: Our sound system has been 4 totally changed. 5 MS. CASTILLE: One thing you need to do is 6 you need to make sure that -- that you keep 7 your microphones off if you're not speaking. 8 If there are too many microphones on, then 9 there's -- 10 GOVERNOR BUSH: While I'm -- 11 MS. CASTILLE: -- feedback. 12 GOVERNOR BUSH: -- speaking? Now it 13 doesn't work. 14 TREASURER GALLAGHER: I'll let you work 15 over here, for whatever it's worth. 16 MS. HUPP: Thank you very much. 17 GOVERNOR BUSH: Thank you. 18 It's back on again. 19 MS. COXE: Thank you so much, Janet. 20 MS. HUPP: You're welcome. 21 MS. COXE: We wanted to reemphasize what 22 Janet's major message was: High expectations, 23 clearer standards where everyone understands. 24 And with those things, and a sense of humor, 25 and a planned approach, great things can happen ACCURATE STENOTYPE REPORTERS, INC.
2 And you know, it doesn't do much good to 3 have a standard if you can't tell how you're 4 doing as to get -- whether you're getting there 5 or not. There has to be a means of 6 measurement. And in our state, it is the 7 Florida Comprehensive Test. 8 And I -- I left out how Janet was able to 9 make that into a fun exercise. That's how it 10 ought to be. It should not be something 11 children are afraid of. They ought to be 12 prepared, and they ought to be viewing this as 13 an opportunity to show what they know. 14 When we get to a rule as the one we're 15 doing today, it can be a little confusing 16 though, because you have been inundated with 17 FCAT information and results. 18 And you know the major purpose for giving 19 FCAT is not about what we're doing today. It's 20 about children and families so that parents get 21 the message of how their kids are doing. 22 And that's the number one use for FCAT. 23 The number two use, of course, is for 24 schools and teachers. Teachers want to know if 25 they've been successful in the classroom. They ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 52 2 giving them information. Schools need to know 3 how to reconstruct curriculum. That's the 4 number two reason. 5 The third reason is accountability. 6 We aggregate the scores of the kids, and we 7 see how the schools are doing as institutions 8 themselves. And they earn grades. And we're 9 not here today to talk about that use of FCAT, 10 but we are here to brag a little bit that 11 thanks to your perseverance and diligence, 12 41 percent of the schools in our state earned a 13 grade of A or B last year. That's an awesome 14 finding, and a tremendous show of growth. 15 But what you're here to do today is to 16 discuss and deliberate the use of FCAT in a 17 brand new way, and that's 10th grade FCAT score 18 as a measure for -- for which students earn a 19 standard high school diploma. 20 Florida has been testing as a requirement 21 for high school diplomas since 1976. So this 22 is not a new responsibility for you. 23 You have done it through a number of tests 24 up until this one. But this is a -- a huge 25 change, and you heard the Commissioner speak ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 53 2 Florida Legislature indicated that it no 3 more wanted a minimum competency requirement, 4 that instead it should be the mandate of the 5 State to have a passing score set on a more 6 rigorous requirement from FCAT. 7 And that is the deliberation that you have 8 before you today. And you're going to hear 9 about the specifics of it rather succinctly 10 from Dr. Fisher, who is our testing expert. 11 We're so lucky to have him. 12 But just a reminder of the basics, because 13 if you're like me, you get overwhelmed with it. 14 FCAT is given for purposes today, we're talking 15 about the reading and math sections. When kids 16 take it, they're scored on a score of 100 to 17 500. Those various scores have labels on it so 18 parents and schools know about what it means to 19 get 150 versus a 250 or a 500. 20 And those pieces of information all fall 21 in -- fall into the accountability system. 22 Now, as Dr. Fisher comes up to tell you 23 what we have done in processing for you to hear 24 this rule today, I need to tell you a little 25 bit about him. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 54 2 promptly left it at the seat, as I'm famous for 3 doing, so I have to do it off the cuff. 4 We are so lucky to have Tom Fisher chair 5 our accountability system and assessment 6 program for FCAT. He's been with the 7 Department for about 100 years now. 8 So that means that he has watched all the 9 iterations of assessment, he has been through 10 all the litigation that's required for having 11 tests of various sorts. He is really our first 12 seamless system guy, because he's a K-20 man. 13 His assessments, starting this year, 14 kindergarten, all the way through college, 15 which he's done for many years. 16 He is a member of numerous national 17 committees that deal with assessment, including 18 the National Assessment Governing Board, which 19 handles NAEP. He's been with them for a number 20 of years, and participates in the national 21 framework and policy formation. 22 His brilliance and pragmatism are a rare 23 blend. 24 And it's my pleasure to introduce to you 25 Dr. Thomas Fisher. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 55 2 members of the Cabinet. 3 I have a couple of summary slides that I'd 4 like to use to summarize the information which 5 you folks previously have been given so that we 6 will not go through all of this in enormous 7 detail. 8 I'm not sure whether or not this projector 9 is operational or not. 10 Colleen, are you going to -- 11 There we go. That's what I needed. 12 GOVERNOR BUSH: Colleen's coming to help 13 you. 14 There we go. 15 DR. FISHER: Is there a way to adjust that? 16 These -- these transparencies that I 17 have -- or these slides that I have summarize 18 the information which you have in your folders 19 so we can follow along with it. 20 And basically the issue is the passing 21 scores for FCAT, grade 10. And it's what's 22 required by law. And that's what we are about 23 with this rule. 24 Basically, standard setting is -- as we 25 know it today, didn't exist in 1976 when we ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 56 2 Test. 3 If you go out and try to ask somebody, how 4 do you go about setting standards, nobody could 5 tell you. There were no articles, there were 6 no experts. In fact, Florida was the first 7 state to pass such a graduation test. 8 Since then, the process has been perfected, 9 and is widely applied. 10 Our process is one that is certainly 11 professionally sound, state of the art. We 12 start with basic input from teachers and 13 curriculum specialists, who actually spend time 14 inspecting the real test. 15 They make certain recommendations. Those 16 recommendations are reviewed by another 17 committee, an independent committee of district 18 school administrators, also citizens and 19 business leaders. We then draft the rule, and 20 go through public hearings. 21 In this case, we did six public hearings. 22 They were all conducted between 4:00 o'clock in 23 the afternoon and 6:00 p.m. so that we could 24 get wide attendance. 25 These are the summary points related to how ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 57 2 informed judgment. 3 There is no magic formula that can be 4 applied. You cannot crank an equation and 5 generate passing scores, because it basically 6 is informed judgment supplemented by statistics 7 where relevant. 8 Start out with a consideration of what the 9 test measures, you consider the potential 10 impact on the students, and you also keep in 11 mind the intent of the program, which is to 12 improve education in Florida. 13 In other words, you have to have standards, 14 and you have to have challenging standards. 15 And the passing score that you will be voting 16 on today is part of that overall process. 17 These are the recommendations that were 18 captured in the draft rule as it was originally 19 presented. A passing score in reading, 287; a 20 passing score in math, 295. 21 I need to point out that the teacher 22 committees recommended much higher numbers than 23 that. That's very common. My wife and I were 24 both math teachers. When we looked at the math 25 test, we're quite comfortable thinking that ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 58 2 stuff. 3 So when teachers get together, whether 4 you're talking about reading teachers, or 5 science teachers, or math teachers, that kind 6 of feeling permeates through. 7 Then when you start giving them impact 8 data, they begin to get a dose of reality. 9 So the scores that were presented by the 10 teachers, and also by the review groups were 11 quite high. And there's a lot of discussion 12 about how many years would it take us to get 13 there, and how many steps should we place in 14 rule in order to get to that high level? 15 Well, we took care of that in a sense by 16 the third bullet on this transparency. We 17 said, let's adopt this beginning point. It's a 18 little harder than the existing high school 19 graduation test. And then let's provide in the 20 rule that these passing scores will be 21 reviewed. And an expert review would occur 22 after the 2002 assessment is administered. 23 What we don't want to do is to fall into 24 the trap of setting some standards and then 25 just leaving them. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 59 2 if we continually push the envelope. 3 Another dimension of this rule that we 4 presented is the suggestion that we delay the 5 implementation of Step 2, which I'll show you 6 on the next transparency. 7 The original achievement levels set by 8 the Board of Education are called Levels 1, 2, 9 3, 4, 5. And we implemented them in a two-step 10 process. Step 1 is where we are now, and 11 Step 2 is to begin 2002. 12 There's certainly discussion and positive 13 reaction from the educational community that if 14 we would delay Step 2 until 2004, it would give 15 more time for transition into the new 16 achievement levels to expectation of FCAT. 17 TREASURER GALLAGHER: Can we ask questions 18 as you go along? 19 GOVERNOR BUSH: Yes. 20 DR. FISHER: Surely. 21 TREASURER GALLAGHER: You said now that 22 you're looking at that -- the frequency 23 distribution that you have here of what 24 teachers thought, business people thought -- 25 I think the business folks that got involved ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 60 2 And -- and you recommend all the way at the 3 very, very bottom of what any of them picked. 4 DR. FISHER: Yes. That is correct. 5 TREASURER GALLAGHER: And what you're 6 talking about right now, three years ago, the 7 decision was made to set the standards for the 8 schools, for the levels, and increase those -- 9 that bar, which I think you would agree that 10 bar that we have right now is quite low. 11 And in order to move things along, it was 12 scheduled in two years, this is 2002 coming up, 13 that we would increase that bar. 14 And you're now talking about holding it off 15 for another two years, and I have a big problem 16 for that. Everybody for two years, 17 three years, has known it was going to 18 increase. 19 Not only did they know that, but we're 20 seeing -- I think we heard testimony today that 21 50 percent of the schools in the state of 22 Florida, 45, something like that, are Bs or As? 23 Was that correct? 24 Forty-one percent? 25 DR. FISHER: I didn't hear the comments. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 61 2 do you think that they've pretty well met the 3 less standard across the state -- 4 (Attorney General Butterworth exited the 5 room.) 6 TREASURER GALLAGHER: -- we need to move it 7 up, so that we truly have what we promised the 8 people of the state of Florida, that we would 9 show -- realizing the bar we started with was 10 very, very low, and we inch up a little bit in 11 two years; and hopefully, continue to move up 12 in two years, and move it up. 13 So that -- recognizing that we started low, 14 but we want to show this improvement. And if 15 we don't have those kind of goals, we're not 16 going to -- we're not going to continue to see 17 the improvement that we hope to see in actual 18 learning. 19 DR. FISHER: If I may place a different 20 transparency on the screen to capture what you 21 were talking about. 22 This is the wording of the present 23 achievement levels in rule. And you can see 24 the top part is Step 1, which is where we are 25 now. Notice that it's labeled 1999-2000-2001. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 62 2 So what the rule proposes to do is to take 3 that second step, and make it read 2004. 4 TREASURER GALLAGHER: Well -- 5 DR. FISHER: Commiss-- 6 Treasurer Gallagher's point is -- 7 TREASURER GALLAGHER: I disagree with doing 8 that. That's -- is what I'm saying. 9 I mean, why would -- why would we recommend 10 three years ago that this move would take 11 place, and now we're backing off. I mean, we 12 are -- now -- as far as I'm concerned, we just 13 lowered the standards for the state of Florida 14 to what we all admit is a very, very low level. 15 GOVERNOR BUSH: Can I give an opinion on 16 this? 17 We're not lowering standards by deferring 18 this decision. Part of the challenge -- and 19 I think the principal from the great Palmetto 20 High School I think would -- would concur with 21 this, based on her presentation, is that as you 22 raise standards, and you raise expectations, 23 you can't get beyond the horizon. 24 Because if you get beyond the horizon, 25 there begins to be a feeling of -- of failure, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 63 2 And by deferring this element of it, 3 recognizing that we're going to have the 4 grading of schools incorporating the annual 5 student learning gains coming into the equation 6 this December, and we'll have a hearty debate 7 about that I'm sure, as it's going forward, it 8 provides a degree of stability that I think is 9 important for the accountability system to -- 10 to go forward. 11 I -- I -- actually when we started this -- 12 when Tom came to me and presented all this, I 13 was -- I was actually -- I had your position. 14 But I've been convinced that -- that our focus 15 ought to be -- the first element of what the 16 rule change is that we're talking about, which 17 is the cut score and where do we -- where are 18 our expectations there? 19 And so I -- I have -- with a lot of 20 thought, and a lot of discussion with a lot of 21 people around the state, a lot of School Board 22 members, superintendents, the general consensus 23 is, this is the proper thing to do for 24 stability for our accountability system. 25 And so I'm -- I'm much more supportive of ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 64 2 journey a couple weeks ago. 3 SECRETARY HARRIS: I have a question. 4 I may still -- where you were when you 5 started a couple of weeks ago. But if you go 6 back to this page, the page -- the prior -- and 7 if you look at it, it's a little more difficult 8 to discern because there aren't totals. 9 But really what you want to look at in 10 Level 1 and Level 2 is that you want to make 11 sure that those numbers are going down as you 12 proceed from 1999 to 2001. 13 So, in essence, if you were at Level 1 and 14 Level 2 in 1999 and grade 4, you -- you'd get 15 53. And then you'd add Level 1 and Level 2 in 16 2001, you get 47. 17 (Attorney General Butterworth entered the 18 room.) 19 SECRETARY HARRIS: When you look at these 20 standards going across-the-board, we're -- 21 we've prog-- we've progressed dramatically in 22 almost every category. 23 And then on Level 4 and Level 5, the reason 24 it's kind of squishy, you don't want to see 25 those levels go up as they're adding -- I mean, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 65 2 So you have dramatic results going from, 3 like, 19 to 25. So there's improvement in 4 Level 1 and Level 2, with the exception of 5 8th grade, and there's dramatic improvement in 6 Level 4s and Level 5s. 7 But Level 3 gets to be a little squishy, 8 because you don't know if -- you want to make 9 sure that if it's -- people moving from Level 1 10 to Level 2 to Level 3, and not coming down. 11 But, in fact, it's not. 12 The issue is that these schools have 13 dramatically improved because they've been 14 challenged. 15 And you're still -- I mean, what's -- 16 what's debilitating to me is, when you're 17 asking for these standards, you're not even 18 talking about Level 3 where performance is 19 inconsistent, but they answer generally -- 20 they're not generally -- well, correct. 21 Level 2, it says: Performance at this 22 level indicates that the student has limited 23 success with challenging -- with a challenging 24 content. 25 I mean, if we're going to say that Level 2, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 66 2 pass, it seems like there's something wrong 3 with that. And I think the whole crux of the 4 issue is to -- to really look at it is, this 5 is -- these are in 10th grade when you're 6 looking at the standards now. 7 And we're concerned about the failure rate 8 of passing this test. But they have six times 9 to take the test, and the studies show that 10 each time the test is taken, it -- those 11 failure rates decrease by 50 percent. 12 So by the time you take it out to the sixth 13 time, it's well below 5 percent. 14 And I don't know -- you know, I -- I feel 15 like the most important aspect isn't the score 16 of the test. If -- if there's a failing 17 school, they get more resources, they get more 18 attention. While it's -- it's uncomfortable -- 19 we've seen examples of how the community 20 rallies around and makes it better. 21 But I -- I'm concerned that -- again, they 22 have six times to take the test. And if we 23 keep it at this very, very low level, which is 24 a -- an extremely low level, that the student 25 has limited success with this test, we're ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 67 2 disingenuous to the students. 3 And then on top of that, the Legislature, 4 to be consistent with other schools around the 5 country, has already lowered the grading scale 6 to make it 90 to 100 is an A from where it was 7 previously. 8 So while I understand the difference 9 between the former test and this test and 10 trying to reconcile apples to oranges, I'm -- 11 I'm still concerned that we're not giving our 12 students the quality education that they 13 deserve, and we're not creating the standards. 14 We found that when we create those 15 standards, the -- they rise to that occasion. 16 Again, overall, it's been un-- you know, fairly 17 substantial increase across-the-board, with the 18 exception of -- of one category. 19 COMMISSIONER CRIST: Dr. Fischer, if -- 20 like to make a point, actually in concurrence 21 with the Governor. 22 I had the opportunity recently to chat with 23 three superintendents from the Tampa Bay area, 24 Superintendent Earl Lennard, Hal Hinesley, and 25 John Long. And just to try to listen and get ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 68 2 rubber meets the road, frankly. And I think 3 that their opinion's awfully critical and 4 important to this process. 5 And the recommendations they made were the 6 287 level. 7 And that's certainly not as high as I think 8 Commissioner Gallagher is of the opinion we 9 should move toward. But it's also lower than 10 the motion I've made. 11 And -- and I think what we want to do here 12 is -- is not set the children up for 13 disappointment. And we want to encourage them, 14 and make sure they have the opportunity for 15 success, and realize that this is a -- it's a 16 gradual increase that we're advocating today. 17 SECRETARY HARRIS: Commissioner Crist, is 18 that due to the fact that it's been advertised, 19 that what we're talking about -- I concur with 20 you to keep it at the 287 to 300 for the tests 21 coming up that have already been taken, because 22 that's what's been advertised as -- as what 23 would pass. 24 COMMISSIONER CRIST: Uh-hum. It's kind of 25 a fairness issue. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 69 2 agree with that. 3 But in the future, I mean, in terms of 4 waiting -- I under-- you've had more experience 5 in talking with the supervisors (sic), and -- 6 and I'm woefully behind on that, so I really do 7 respect and defer much to you and the Governor. 8 But on the other hand, they've had 9 three years to know that they're going to get 10 to this -- this point. 11 GOVERNOR BUSH: Well, we're dealing with 12 two separate -- 13 TREASURER GALLAGHER: The two issues here: 14 One is -- one is going to be the FCAT score 15 number in math and reading that you have to 16 have in order to graduate from high school. 17 Now, put it in perspective. This is a 18 10th grade test. You get six chances to take 19 it before you get out of high school. 20 Now, when we first had a high school 21 graduation test -- 22 Were you here for that, Dr. Fisher? 23 DR. FISHER: Yes. 24 TREASURER GALLAGHER: 1979? 25 DR. FISHER: 1976 was -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 70 2 DR. FISHER: -- when it started. 3 TREASURER GALLAGHER: Was it '76? 4 COMMISSIONER CRIST: Yeah. I didn't 5 have -- I graduated in '75. 6 TREASURER GALLAGHER: You -- you were -- 7 COMMISSIONER CRIST: Lucky, I guess. 8 TREASURER GALLAGHER: -- young, Charlie. 9 COMMISSIONER CRIST: Yeah. 10 ATTORNEY GENERAL BUTTERWORTH: You can 11 still take it, if you want. 12 COMMISSIONER CRIST: No. 13 I'll pass on that. I've been offered the 14 FCAT, too, and I declined. 15 TREASURER GALLAGHER: What's going to 16 happen here is everybody's looking at -- at 17 numbers. And what they're saying here is that, 18 my goodness -- and I'm going to -- I'm going to 19 talk first, I think we need to go on. 20 The first -- the first part of this rule 21 change is the years. What should take place in 22 2002, as opposed to what you're trying to hold 23 off to 2004. 24 The other part is, what score is needed in 25 the FCAT, math and reading, in order to get a ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 71 2 So let me -- I'd like to just speak on 3 that -- the second one first. 4 Or the -- yes, the second -- 5 GOVERNOR BUSH: The -- 6 TREASURER GALLAGHER: No. The first one 7 first. The cut score. 8 We're -- we set a cut score two years ago. 9 And that cut score, if I remember correctly, 10 was 315 in math and 327 in reading. 11 Is that correct, for one to pass the FCAT, 12 in lieu of taking the -- 13 GOVERNOR BUSH: -- HSCT. 14 TREASURER GALLAGHER: -- HSCT. 15 DR. FISHER: That's what we refer to as a 16 waiver score. 17 TREASURER GALLAGHER: Right. 18 So we set the waiver score. Everybody for 19 the last two years knew that that's the number 20 you had to get in order to waive the HSCT. 21 Now, let's think about how we got there. 22 We got there because, although I will be first 23 to say that a Level 1 isn't really an F, and a 24 Level 2 isn't really a D, and a Level 3 isn't 25 really a C, and a Level 4 isn't a B, and a ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 72 2 front. 3 However, they are levels, and they are 4 perceived to be five different rate schedules, 5 and you can call them levels, you can call them 6 letters, you can call them whatever you want, 7 there are five different grade scales. 8 I think everybody knows that Level 1 is 9 pretty much totally unacceptable, if -- if 10 that's where our students are, in any of the 11 tests we give them in their school, they 12 would -- that school would end up being a -- an 13 F school, wouldn't it? 14 DR. FISHER: Well, the criteria for the 15 school grades involves percentages of students 16 as well as levels -- 17 (Secretary Harris exited the room.) 18 DR. FISHER: -- so you have interaction -- 19 TREASURER GALLAGHER: I just said if all of 20 them were there -- if all the students were 21 there, it would be an F school, wouldn't it? 22 GOVERNOR BUSH: Yes. 23 DR. FISHER: When you were -- when you were 24 Commissioner of Education, that decision was 25 made, because the law says you must specify a ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 73 2 while you were in office. 3 TREASURER GALLAGHER: Right. That was 4 considered unacceptable. 5 DR. FISHER: Level 1. 6 TREASURER GALLAGHER: Right. 7 And so we're saying that to graduate from 8 high school, you take a 10th grade test, and 9 you go one point above what was considered to 10 be unacceptable, and you can graduate from 11 high school. That's what I consider 12 unacceptable. 13 Absolutely unacceptable. 14 I mean, I think that the minimum should be 15 what we set back two years ago for being able 16 to waive that test, which was, at the very 17 lowest, the bottom of a Level 3. 18 Now, again, we don't want to use letters. 19 But do you think a person could have a level -- 20 should have -- be able to graduate from 21 high school with a Level 1 average? 22 Can they? 23 DR. FISHER: No, not a Level 1. 24 TREASURER GALLAGHER: Should they be able 25 to graduate from high school -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 74 2 TREASURER GALLAGHER: -- if they have a 3 Level 2 average? 4 GOVERNOR BUSH: They won't with this 5 proposed rule either. 6 TREASURER GALLAGHER: How about a Level 2 7 average? 8 DR. FISHER: Well -- 9 TREASURER GALLAGHER: They should be able 10 to graduate from high school with that? 11 DR. FISHER: Remember, their passing score 12 is what you folks say it will be. 13 TREASURER GALLAGHER: I understand that. 14 I also -- and I can say that a Level 2 15 would be considered a D, couldn't I? 16 DR. FISHER: I'm sorry, level which? 17 TREASURER GALLAGHER: Two. 18 DR. FISHER: Yes. 19 TREASURER GALLAGHER: And in order to 20 graduate from high school, you have to have 21 what average in your letter grades on your 22 subjects? 23 DR. FISHER: Well, remember, that that 24 grade point average is across different 25 subjects. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 75 2 point you're making is what would it be if you 3 were talking about a single course in 4 mathematics. You know, you can pass a single 5 course in mathematics with a grade of D. 6 Another way of -- 7 TREASURER GALLAGHER: But if your average 8 of all your grades was D, would you get a 9 diploma? 10 DR. FISHER: No, I don't believe so. 11 TREASURER GALLAGHER: Right. 12 So the two most important things that we 13 believe someone needs in order to function in 14 life are reading and math. 15 Would you agree with that? 16 DR. FISHER: I would agree that reading and 17 math is -- is a high priority of the -- the 18 State Board. 19 I'm always very careful about saying 20 "function in life," because I tend to get sued 21 over things like that. 22 TREASURER GALLAGHER: Well, I get sued so 23 much as Insurance Commissioner, it probably 24 doesn't matter, I'll just go ahead and say it. 25 But these -- ACCURATE STENOTYPE REPORTERS, INC.
2 TREASURER GALLAGHER: My concern is if we 3 as a state have said math and reading are what 4 we're going to test, because it's very hard to 5 learn other things without a decent basis of 6 those two, we take a 10th grade test, and we 7 say, you have to have the first point of a D in 8 order to graduate from high school. Now, to 9 me, that's just totally unacceptable. 10 If you get six times to pass it, I think 11 people can learn to read and do math over the 12 next three years in high school to take a 13 10th grade test. 14 And if they can't, I don't think they ought 15 to be graduating. And I don't -- 16 GOVERNOR BUSH: Commissioner Gallagher, 17 how -- for the last ten years, we've had an 18 8th grade test to pass, and where was the 19 outrage then? 20 I mean, the -- the -- the fact is that this 21 is a progressive issue. Is this test tougher 22 than the HSCT test? 23 The answer is yes. 24 Are we showing improvement because we're 25 raising the bar gradually, rather than raising ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 77 2 end? 3 The answer is yes. The obvious -- the -- 4 the scores are improving. 5 And so it's a question of how do we get 6 there. 7 (Secretary Harris entered the room.) 8 GOVERNOR BUSH: If we -- if we move too 9 quickly to raise the bar too high, you're going 10 to have the accountability system that we have 11 in place that's unique to our state -- I mean, 12 many other states don't even have graduation 13 tests that they -- standardized tests that they 14 have. 15 I mean, they're -- we're so far ahead of 16 most states in this regard, but we will -- we 17 will be in a very vulnerable position if we 18 calibrate this in a way where you have what is 19 perceived to be failure. 20 I don't believe any of these kids that 21 cannot pass this test for failures, I believe 22 our system has failed them by socially 23 promoting them from 4th grade on. 24 And -- and it took a generation to get 25 here. And I think we need to have patience ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 78 2 to show the continuous improvement that has 3 begun. 4 And, you know, it is -- I -- this is the 5 strangest position for me to be in. 6 TREASURER GALLAGHER: Well, I sure hope you 7 feel uncomfortable. 8 GOVERNOR BUSH: I do feel uncomfortable 9 about it. But I'm also realistic. And I know 10 that -- that I want -- I want these -- I want 11 teachers and principals to mobilize as they 12 have done. 13 If the standards -- our expectations were 14 unreasonably high, I don't think you would find 15 the excitement at Palmetto High School, or 16 other places, to organize in a way that assures 17 that the kids that have been left behind and 18 have gone from Palmetto Middle, or another 19 middle school, to these high schools, without 20 any capacity to pass this test, which is what 21 we've allowed to happen through this policy of 22 social promotion, I don't believe that the 23 principals, the leaders of these schools will 24 be as motivated as we're seeing now. I just 25 don't see it. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 79 2 mention something here. 3 Correct me if I'm wrong, Dr. Fisher. 4 In 1976, when we gave the first HSCT -- and 5 I know a lot of people are real concerned 6 because of minority scores, so many people 7 failing. 8 And if we went to the math score of -- of 9 315, which is what I think it ought to be, 10 69 percent of black students at that level 11 would flunk it the first time, according to 12 your statistics; is that correct? 13 DR. FISHER: I don't have that chart in 14 front of me. If you're referring to the higher 15 number in Level 3 that you -- 16 TREASURER GALLAGHER: That's correct. The 17 minimum Level 3 number, 310 -- 315, I'm sorry, 18 for math. 19 The numbers I see here is 69 percent of 20 black students would fail the first time they 21 take it. They've got five other times to take 22 it. 23 And if you go over to the reading score, 24 I'm recommending a -- a 327, which is again the 25 beginning of level B. And that would run it up ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 80 2 DR. FISHER: Yes. Those are the numbers I 3 have on the chart. 4 TREASURER GALLAGHER: In 1976, the first 5 time the State had a high school graduation 6 test, do you know how many black students 7 failed the first time you took it? 8 DR. FISHER: Yes. That's on the -- the big 9 size chart, which I provided to you, and it's 10 also shown on the -- you need to -- 11 TREASURER GALLAGHER: I think it's, like, 12 24 percent? 13 DR. FISHER: Yeah. Twenty-- twenty-three. 14 TREASURER GALLAGHER: Twenty-three. 15 The second time they took it, was about 16 47 percent, 44? 17 DR. FISHER: Yes. 18 TREASURER GALLAGHER: And that's an 19 interesting number to me, because what we're 20 doing here is we're keeping this thing at a 21 bond -- one step above -- one point above the 22 line of F, and acting like after six times they 23 take it -- 24 I mean, there might be 5 percent that 25 don't, because 5 percent can't handle it. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 81 2 level to that minimum of a C -- or at least 3 somewhere between that, that you're going to 4 have a -- a chance for people to actually have 5 a level in which we would be proud that they 6 graduate from high school with it. 7 And maybe you think the -- the beginning of 8 a Level C or a Level 3 would be too high, or 9 raising the standards too much. But certainly 10 the one point above a Level 2 D is 11 absolutely -- I mean, it's -- it's 12 embarrassing -- 13 (Commissioner Bronson exited the room.) 14 TREASURER GALLAGHER: -- to have it at 15 that. 16 And I know that you're still going to -- 17 and to worry about how many pass the first 18 time, when we know twice as many pass the 19 second time. 20 And I don't know about the sixth time, I 21 think they're going to have the skills in 22 reading and math they need, or they shouldn't 23 graduate from high school. 24 DR. FISHER: Well, let me give you a little 25 bit of insight into that kind of growth that ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 82 2 This chart shows the set of results for 3 2000, which is at the bottom; and the set of 4 results for 2001, which is at the top. You've 5 got two different groups of 10th graders, and 6 you can see that that does improve. 7 So the question is, what kind of 8 improvement would you see? And the HSCT chart 9 that you were reading from, 23, 40, 47, 48, 10 went up to, what, 68 percent after about 11 seven years. 12 I think it's testimony to the fact that the 13 standards are important. And if you put 14 standards before students, they will rise to 15 the occasion. 16 And the trick is, you don't want to fall 17 into the trap of setting standards that people 18 perceive of as being unreachable. 19 Now, where that is is a judgment call. And 20 the only thing we can sort of look at is what 21 is the track record. And that's why I provided 22 to you the HSCT results so that you could see 23 what happened as it waxed and waned over the 24 years, and then showed you the results from 25 this transparency here for the year 2000, year ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 83 2 what would happen. 3 Under the current situation, we know that 4 we're in the process of making a transition. 5 Rightly or wrongly, there are people who fear 6 changes. And there's a certain amount of 7 nervousness out there that the standards picked 8 for FCAT might be something that -- 9 (Commissioner Bronson entered the room.) 10 DR. FISHER: -- will cause people to be -- 11 sort of go into a state of paralysis, and we 12 don't want that to happen. 13 We want them to feel a certain amount of 14 anxiety, but they've got to be able to feel 15 that it's reachable, attainable. 16 We also have to consider that the HSCT was 17 given to 11th graders, and now we're giving 18 this test to 10th graders. 19 As you pointed out, Treasurer Gallagher, 20 they get an additional opportunity or two to 21 take this test -- 22 TREASURER GALLAGHER: Or -- or five. 23 DR. FISHER: Yes. Well, total of six 24 actually. 25 TREASURER GALLAGHER: It's five additional. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 84 2 So you have -- you've got these things that 3 you have to take into consideration: One, 4 you know that results will go up; two, you know 5 that it's very important for leaders at all 6 levels to keep their eye on the target and keep 7 talking up achievement; and, number three, we 8 have some sense of track record of what we've 9 been able to accomplish in the past. 10 Now, my personal feeling is that we lost 11 some momentum in the '80s with the HSCT. We 12 could have kept pushing the envelope, but for 13 whatever reasons, that sort of wandered. So 14 now we have the important opportunity to set 15 some standards that people will think are 16 reasonable and will move us ahead. 17 TREASURER GALLAGHER: Dr. Fisher, just at 18 that point. Talk about wandering? 19 That's exactly what we're doing when we're 20 holding this off, this other part off two 21 years. We are in the wandering program, just 22 what you said should have happened in the 23 '80s, here we are in the 2000s, which I never 24 thought would happen with this Board. Never. 25 That we would back off what was something ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 85 2 time, with the best expertise, saying this is 3 where these kids need to go, we need to 4 continue to raise the bar so that we can get 5 where we need to be, and we're a long way from 6 it. 7 GOVERNOR BUSH: Was this -- is this -- 8 TREASURER GALLAGHER: Is -- 9 GOVERNOR BUSH: -- what he's talking about, 10 was it -- was it waived one time in the last 11 year, this -- the -- was it deferred a year? 12 DR. FISHER: I don't recall that. 13 GOVERNOR BUSH: This -- I'm not talking 14 about the cut score. I'm talking about -- 15 DR. FISHER: I mean, the achievement 16 levels? 17 GOVERNOR BUSH: Yeah. 18 DR. FISHER: We originally came before -- 19 we -- we originally considered a three-step 20 kind of process, and settled on a two-step 21 process. 22 GOVERNOR BUSH: Right. 23 And that -- and that three-step process 24 where we were going to raise the standards 25 occurred 1999 I believe. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 86 2 GOVERNOR BUSH: This Board -- 3 DR. FISHER: Yes. 4 GOVERNOR BUSH: -- has already deferred 5 this one time is my point. 6 TREASURER GALLAGHER: Right. And that's 7 what I'm concerned about. I mean -- 8 GOVERNOR BUSH: Well, you were the 9 Commissioner of Education -- 10 TREASURER GALLAGHER: That's okay. 11 GOVERNOR BUSH: -- is my point. 12 TREASURER GALLAGHER: We're going to keep 13 doing it. Well, I mean, the word -- 14 GOVERNOR BUSH: It's -- 15 TREASURER GALLAGHER: -- you're talking 16 about wandering, that's wandering. 17 GOVERNOR BUSH: It's not wandering. We're 18 going to change the gradings of schools. And 19 you can either recalibrate the grading of 20 schools in a way that allows you to -- to feel 21 good about this, and come up with the exact 22 same result. 23 I mean -- or we can be consistent and -- 24 and -- and create a consistency that allows 25 people to continue to be engaged in rising ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 87 2 in the last two years. 3 Commissioner? 4 COMMISSIONER BRONSON: Thank you, Governor. 5 One of the -- one of the things that I'm 6 concerned about that we don't go too far here 7 is if you're going to hold the prize just above 8 when a child jumps for it, and you -- every 9 time they get close, you raise it a little 10 higher, they're going to quit jumping. 11 They're going to quit trying. 12 And -- and I want to make sure that we're 13 going about this the right way. And I think -- 14 I think the Governor may have hit on a point 15 here. 16 When I taught school, one of the things 17 that I did teach in the public school system, 18 and I -- I noticed a lot of things in the 19 public school system that was going on. You've 20 got some great teachers out there. And how 21 we're delivering the system may be as big a 22 problem as anything we've got right now in 23 education. 24 Let me tell you the biggest problem we have 25 in education right now, is we stigmatize these ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 88 2 kindergarten, till the time they get out of 3 high school. They're stigmatized. 4 You know, the very elite are always shown 5 as the elite, the very -- the ones that have 6 the toughest problem are always shown at the 7 bottom of the list. 8 And we have tested them until the point to 9 where they know where they fit. By the time 10 they're in the 3rd or 4th grade, some of these 11 children quit, they abso-- absolutely shut 12 down. 13 And to me, that's not helping a single 14 child in this state in the education system. 15 And I -- I think we have some good teachers and 16 some good schools that want to change. 17 Maybe what we need to be doing here is 18 watching how we're delivering the whole system, 19 not each individual child, and whether 20 they're -- 21 And -- and I tell you who's going to get 22 hurt the worst in this is the slow learning 23 disability children. Because they have a tough 24 time trying to meet standards as set today 25 anyway. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 89 2 children that really have problems because of 3 learning disability, whether they have 4 dyslexia, whether they have numerous other 5 problems down there, and we're going to keep -- 6 we're going to push them even further back. 7 And so we need to somehow get this whole 8 thing around, start with a good level here, 9 and -- and let them catch up, and then bring a 10 new group up and put the bar a little bit 11 higher, and teach them a little bit higher, and 12 move our teaching program to the point to where 13 you can make those goals. 14 You know, Palmetto has shown us something: 15 That -- that is, when you've got teachers 16 working toward a goal and all the students 17 working toward a goal, you can -- you can 18 finally get there. 19 And I think they've shown that it can be 20 done. But one of the things we've got to quit 21 doing is stigmatizing these children from the 22 time they're in kindergarten and -- so that 23 they have a want to learn. 24 And I think -- I think we can gain what 25 you're doing by gradually coming up a little ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 90 2 for it if we change it where they just can't 3 ever reach it. 4 GOVERNOR BUSH: Can we -- 5 SECRETARY HARRIS: I just -- 6 GOVERNOR BUSH: Go ahead -- go ahead, 7 Secretary. 8 SECRETARY HARRIS: I -- I just still have a 9 question. I mean, obviously we don't want to 10 stigmatize these children. But we don't want 11 to be telling them that they're doing well 12 when, indeed, they're not. 13 I think -- I mean, I certainly understand, 14 it's been advertised at the 287 and 300 level. 15 But that is the lowest level on your chart, 16 and -- and the next to the lowest level in the 17 state. 18 So really these are the lowest level of Ds, 19 and you're going to categorize it I guess as -- 20 as mentioned earlier. And we're saying, that's 21 okay. 22 And not only that, we're saying it's going 23 to be okay for the next two years, even though, 24 you know, the -- the progress, as I said 25 earlier, is really dramatic here. And you've ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 91 2 into the next category, or even skipping a 3 category. 4 I don't want to set the bar too high that 5 we discourage students. But I also don't want 6 to tell them that they're doing well, and 7 encourage them, if, in fact, they're not. And 8 it seems to me -- as I said, I understand that 9 starting with the standard because it's been 10 advertised. 11 But this -- we make the mistake, this is 12 the -- the lowest of -- of the low, where it 13 says they have limited success. 14 I -- I just -- I'm really discouraged that 15 Florida would be making that statement on top 16 of the fact that the Legislature has, indeed, 17 lowered grades as well, the grading schedule. 18 MS. COXE: Madam Secretary, we do need to 19 clarify a couple of things, just to repeat what 20 the Governor and the Commissioner said earlier. 21 This business about grading schools for 22 this school year will come before you in a few 23 months. But we will not be grading schools 24 this year the way they've been graded in the 25 past. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 92 2 consider what it is you want students to know 3 and be able to do and demonstrate when you 4 decide who gets an A, a B, and -- et cetera. 5 The other thing about graduating from 6 high school, absolutely. You don't -- you 7 would love to think that you would have a score 8 higher than a D. But I think we have to bear 9 in mind that this is one requirement for 10 graduation. It's not the only one. 11 So the students have course work they have 12 to master in specific areas, they have a GPA 13 they have to have generated, et cetera. 14 So maybe this one element is not as high as 15 you would like. That doesn't mean they don't 16 have the rest of the story that would ease your 17 mind somewhat. It's a -- it's a hard 18 deliberation. 19 Governor, with your permission, I would 20 like to recognize the Honorable new Secretary 21 of Education -- 22 GOVERNOR BUSH: Please. 23 MS. COXE: -- Jim Horne, who has also asked 24 to speak on this issue. 25 Mr. Secretary? ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 93 2 SECRETARY HARRIS: Good morning. 3 MR. HORNE: Good morning. 4 It's great to be here. I mean, only twice 5 before -- 6 GOVERNOR BUSH: Is there where you -- 7 MR. HORNE: -- where -- 8 GOVERNOR BUSH: -- appropriated all this 9 money, this -- this seat? 10 MR. HORNE: Actually I think we did it on 11 the fourth floor. And -- but now, it's a 12 different role. I'm in the -- with my hand out 13 begging for it. 14 I just want to take a few minutes and just 15 give you, I think, my opinion on this issue. 16 One of the things that I like to look to 17 as -- as a way to gauge some of this is the -- 18 the NAEP example, the National Assessment of 19 Education Progress. This is the -- the 20 nation's report card. 21 And we did not -- Florida did not 22 participate this past year. We generally 23 participate every couple of years. And there 24 was a testing conflict with the date, and so we 25 did not participate. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 94 2 results just came out in the last 10 days, is 3 that there are the states that clearly have 4 the -- the highest standards that do the 5 regular testing, and have strict accountability 6 for the states that are outperforming all of 7 the other states. 8 The results reflect that, in this case, 9 Texas and North Carolina are way out ahead of 10 all the other states. 11 Interesting about Texas and North Carolina, 12 they've started this process, oh, ten or more 13 years ago. So they're many more years ahead of 14 us. 15 Texas clearly is outperforming in areas, 16 especially in achievement gap with minorities. 17 They -- they've closed the gap tremendously in 18 Texas, both in -- with Hispanics and 19 African Americans. 20 Now, the Texas system is built on some 21 gradual movement in setting higher standards. 22 Now, there's two issues I think that y'all 23 are debating that you -- you may be getting 24 sort of -- kind of confused on. 25 One is sending a cut score for graduation, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 95 2 scores that would then determine the levels. 3 And those levels then become one ingredient in 4 determining the grades for schools. 5 So make sure that you -- when you are 6 debating the issue, that you don't get 7 confused. 8 Clearly, the best performing states are 9 those who take high standards seriously, that 10 look at achievement data, and use it to move 11 changes in schools, particularly in curriculum, 12 and in teaching. 13 And Florida has now built, I think, a very 14 strong, very high standard system, one that has 15 regular testing. We have talked about 16 six opportunities to take this test to pass it. 17 And we also have a very strict 18 accountability. And we are evolving. 19 Commissioner Gallagher, we are -- we all 20 strive to get that. 21 You know, interestingly enough, with all 22 the talk and debate, everybody's focused on the 23 same thing. We want to -- we want to arrive at 24 the same station at the same point. And I 25 think that's important, that we look at that. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 96 2 performed well, they've built it on some 3 gradual changes. 4 We don't, I think, want to have some 5 situation where we create a sticker shock where 6 we shock the system to the point where it can't 7 recover and make the kind of progress that we 8 need to do. 9 Now, the flipside is, in the states that 10 aren't performing well, we point to -- to 11 New York. New York arguably has the lowest 12 standards in the nation. So clearly Florida is 13 on the right path. We have -- and have much 14 significant positive change in our education 15 system. 16 We need to continue to stay the course. We 17 need to continue to focus on where those scores 18 need to be. We're not there. 19 The NAEP test tells us right now, in our 20 nation, that three-fourths -- 75 percent of 21 4th, 8th, and 12th graders are not proficient. 22 That's unacceptable in our country. 23 And I'm sure Florida, in many ways, is no 24 different than where we are as far as 25 efficiency. We've got to set our goal, we've ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 97 2 sure that we're doing it in a very methodic 3 way, a way that gets us there without simply 4 creating so much shock in the system that we do 5 not recover from that. 6 Six opportunities, you're right, 7 Katherine Harris, that -- that the test taking 8 experts tell us, each time we take the test, 9 50 percent will -- will pass. 10 And if we put some -- forth some effort -- 11 and Commissioner Crist and I are talking about 12 an initiative that will brighten the -- bring 13 some resources in to help these students that 14 are not getting there, to make sure that they 15 have prepared and can be able to succeed as 16 well. 17 SECRETARY HARRIS: Secretary, will you 18 just -- that sounds great. 19 Congratulations again. 20 Can you help me just with one idea. 21 MR. HORNE: Sure. 22 SECRETARY HARRIS: And that is, if we're 23 really focused on these levels, and it takes 24 six times to pass -- I mean, six chances you 25 have to pass, and each time it goes 40 percent ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 98 2 that seems like that's a pretty good standard. 3 I guess I just don't understand why we're 4 starting with the lowest possible score before 5 it's an F. I mean, we're starting with the 6 lowest side of Level 4, that one step over 7 that's the difference between the F. 8 That's just -- I understand it's not the 9 passing grade, I understand there are other 10 issues that go into graduation. I'm just 11 having a hard time that that's the standard 12 that we set after three years of saying that we 13 were going to move on. And then we're going to 14 say -- we're going to leave -- well, we'll move 15 up a little bit -- but basically leave it close 16 to that. 17 That -- that doesn't seem challenging, and 18 it doesn't seem to be encouraging our students 19 in a way that would make them feel that they've 20 accomplished something when they did -- do 21 pass. 22 MR. HORNE: Well, granted, that these 23 scores are relatively low. And we recognize 24 that. I don't think anybody, you know, will 25 argue the point that these scores are not where ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 99 2 We did not get in this situation overnight. 3 This was 30 years or more in the making. And 4 you're not going to test your way out of it in 5 one year or two years or three years. It's an 6 evolutionary process. 7 These scores were set; teachers, 8 administrators, and policymakers were involved 9 in this process of setting these scores. And 10 it's clearly, we need to continue to raise the 11 bar. 12 And that's where we're going. And I think 13 that we need to stay the course, we need to 14 continue to move the bar up. And I think 15 that's the basic proposal here today is that we 16 shouldn't change it for those who have taken 17 the test, and move the bar up to a level for 18 the -- the incoming 10th graders. 19 And I suspect the new Florida Board of 20 Education will take it upon themselves, this 21 issue, to look at where it ought to be in 22 the -- in the incremental years as we go 23 forward. 24 I think we should borrow from the success 25 of Texas, for example. Their task system has ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 100 2 that that's -- you know, there's not a lot of 3 data out there on -- on high stakes testing, 4 but there is some. 5 And let's look at that, and let's -- let's, 6 you know, begin to develop a system that we 7 know will work. 8 TREASURER GALLAGHER: So -- so clarify this 9 for me. Everything you said is we ought to be 10 raising the bar, moving ahead like Texas does, 11 and everything else. 12 But I think you got up here to tell us that 13 we shouldn't change what was scheduled to be 14 changed this year, and we ought to hold it off 15 for two years. 16 Now, which side are you arguing? 17 MR. HORNE: No. I -- I'm talking -- y'all 18 are talking about two issues: One, the 19 particular levels; and then the actual cut -- 20 cut scores. 21 And I do believe that we need to, for the 22 incoming 10th graders, make some incremental 23 increase in the cut scores. And I think that 24 the proposal that I've seen moves that to 300 25 and 300. 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2 we moved it down from -- from what -- you could 3 take the FCAT in 10th grade, and not take the 4 HSCT from a 327, now we're saying it's a 287. 5 One was the beginning of Level 3, and now we're 6 moving it to the beginning of Level 2. 7 GOVERNOR BUSH: That's an apple to a 8 tangerine comparison. 9 MR. HORNE: I think we're looking at 287 10 and 295, and -- and moving it to 300 and 300. 11 GOVERNOR BUSH: Okay. Can -- Betty, can 12 I -- just -- I want to ask you a question -- 13 MS. COXE: Yes. 14 GOVERNOR BUSH: -- if -- we are dealing 15 with two things. 16 The cut scores I think people understand, 17 that's -- whatever -- wherever we establish 18 that will be the place that will be the -- the 19 score that will allow someone to graduate from 20 high school. 21 The question of the levels and where people 22 stand as it relates to levels, what impact will 23 that have on anything? 24 MS. COXE: The major impact of that is on 25 the message, sir, as we discussed earlier -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 102 2 ability to graduate from high school? 3 MS. COXE: No. 4 GOVERNOR BUSH: Okay. Will it -- does 5 it -- since we're changing this grade -- the 6 grading of schools, will it have an impact on 7 that that won't be adjusted when we change the 8 grading of schools to include annual student 9 learning gains? 10 MS. COXE: No. It's a descriptor term 11 only. 12 GOVERNOR BUSH: So -- I mean, shouldn't we 13 focus first and foremost on what our 14 expectations are? 15 Which -- you can say that it wasn't raising 16 standards. But if you have an 8th grade level 17 test, which is the -- the HSCT test, according 18 to -- I know Tom gets real nervous when I use 19 things like that, but he would -- I think he -- 20 I finally got him to agree to that, didn't I, 21 Betty? 22 MS. COXE: Yes, sir. 23 GOVERNOR BUSH: Eighth grade level test, 24 we're moving into a 9th or 10th grade level 25 test, which is the 10th grade FCAT, we're ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 103 2 and 295 to 300, we're progressively raising the 3 standards, I would argue that we are following 4 the Texas model. 5 And unlike Texas, we have accountability 6 for consequences that will be the catalytic 7 converter to make it go faster. 8 TREASURER GALLAGHER: Is this some kind of 9 amendment here that you guys -- appears with 10 these new numbers that I haven't seen? 11 I -- I saw what the original rule was, 12 which was 287, and now you're talking 295 and 13 300 -- 14 GOVERNOR BUSH: It's 287 for -- for 15 reading, 295 for math was the original rule. 16 And Commissioner Crist proposed that -- that -- 17 those numbers stay for the students that took 18 the test last spring, because these -- those 19 rules were publicized and there was a feeling 20 that maybe some expectations had already been 21 built up because of that publicity. 22 But going forward, I believe February 2002, 23 the score would be 300 for math and 300 for 24 reading. 25 COMMISSIONER CRIST: Governor, maybe this ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 104 2 the motion? 3 GOVERNOR BUSH: Sure. 4 COMMISSIONER CRIST: I make the motion that 5 subsection (8) be further amended to add an 6 additional sentence as follows: The passing 7 score for the reading test shall be a score 8 equal to or greater than 287. The passing 9 score for the mathematics test shall be a score 10 equal to or greater than 295. 11 Effective February 1, 2002, the passing 12 score for the reading and mathematics test 13 shall be a score equal to or greater than 300. 14 I think what this reflects, Governor, and 15 members of the Cabinet, is a gradual, 16 reasonable progress that is, in fact, 17 attainable. 18 GOVERNOR BUSH: Can I -- can I just put 19 this in perspective for my -- my fellow Cabinet 20 officers. 21 Two eighty-seven today, based on the 22 10th grade test that was taken last spring 23 would yield a 32 percent non-pass rate for -- 24 for reading; 300 would yield a 41 percent 25 non-pass rate. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 105 2 315 would yield a 54 percent non-pass rate. 3 And if you take -- break it down by race, 4 you have roughly 79 percent of 5 African Americans that would fail, 41 percent 6 of white students, and 66 percent of Hispanic 7 students if we went to the 315. 8 I intend to be the Governor that implements 9 this on behalf of the next generation of 10 Floridians. I honestly believe that if we 11 raise the standards to where I know we want 12 them to be over the long haul, if we raise them 13 there immediately, we will have what 14 Commissioner Bronson described, which is a lot 15 of shattered dreams, a lot of frustration, a 16 lot of principals that have -- a lot of -- a 17 lot of people that in the beginning of this, 18 weren't -- didn't buy into the A+ plan. 19 I'm looking over at our very talented 20 leader at the local level -- my guess is that a 21 lot of your colleagues weren't that fired up. 22 But now having embraced it, because they 23 see the potential of children learning at an 24 accelerated rate. 25 And, you know, one of the exciting things ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 106 2 it's becoming a calling for the entire state. 3 It's not just -- we're not just asking 4 principals and teachers to do this. 5 Businesses and volunteers and others now 6 are -- are invading our schools to assure that 7 our children learn. And they'll do the exact 8 same thing I believe when they see these 9 numbers of -- of first time failure rates being 10 high, that we create a student centered system 11 where we -- we remediate. We've increased the 12 funding for this. I know that they can -- can 13 reach for a higher standard. 14 I just worry that if you raise it up to 15 where the Commissioner -- 16 Commissioner Gallagher, with the best of 17 intentions, is describing that that -- that bar 18 immediately would be too high. 19 TREASURER GALLAGHER: So let me get what 20 this amendment does. 21 What we're saying is we're going to move 22 up -- as of February 1st, 2002, we're going to 23 move it -- up the reading test -- 24 GOVERNOR BUSH: And -- 25 TREASURER GALLAGHER: -- it's going to go ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 107 2 GOVERNOR BUSH: Yes, sir. 3 COMMISSIONER CRIST: Yes. 4 TREASURER GALLAGHER: And the mathematic 5 test is going to go from a 295 to a whopping 6 300, 5 points? 7 How come one's so big a change, and the 8 other one's 5 points? 9 SECRETARY HARRIS: Secretary Crist, I don't 10 understand that either from the standpoint that 11 on all these tests, it shows that the reading 12 comprehension is actually lower than math. 13 So to put them -- you know, the tests where 14 they come in, and the standards are -- are 15 different. So to put them at the same level is 16 something that I don't understand from the 17 standpoint that one of the criteria is that you 18 either pass math or you pass reading, that you 19 have a passing score. Whenever you're getting 20 back to a different standard of grading 21 schools, it seems like you're leaving math at 22 an arbitrarily low level. 23 Maybe it -- I mean, as the Governor said, 24 in reading, you're going from 32 to 41, both 25 still failing by any standard. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 108 2 300. I don't know why we don't go a little 3 bit -- I mean, if we're going to move here, 4 then let -- let's at least show some of the 5 same -- the equitable kind of movement in math 6 as -- as we are reading. 7 GOVERNOR BUSH: Betty, do you have a -- 8 MS. COXE: Yeah -- yes, sir. 9 Well, I would like to say thank you for 10 your passion on this topic. You've struggled 11 at the same levels that most of us have as we 12 worked through this. I don't have an easy 13 answer about 300. 14 Part of our job is to crystallize a message 15 that you send, and to share in the field of a 16 150,000 educators and administrators and 17 families this whole story about the passing 18 score. 19 It's difficult to articulate a message of 20 some arbitrariness, which is one of the things 21 we struggled with the 287 and 295. People want 22 to say, well, but they're both grading 100 to 23 500. Why isn't it the same score for each? 24 So you end up getting into a psychobabble 25 sort of discussion. When we looked at the ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 109 2 perhaps there was more to be served in the 3 public good to have a single number. 4 TREASURER GALLAGHER: Well, let me just ask 5 you a question here. 6 MS. COXE: Okay. 7 TREASURER GALLAGHER: This is rather 8 interesting that what you've done in this 9 particular test is you're changing the 287 that 10 was recommended originally, to a 300 -- 11 MS. COXE: Correct. 12 TREASURER GALLAGHER: -- in 2002. 13 MS. COXE: Correct. 14 TREASURER GALLAGHER: On both reading and 15 math. 16 Now, isn't it interesting that the level 17 for 2000 and 2001 for a Level 2 is right now 18 287. That's the -- the cut by which you move 19 into Level 2, a D. Okay? 20 MS. COXE: Uh-hum. 21 TREASURER GALLAGHER: What you have 22 recommended, what has been around for about 23 three years, was that Level 2 would start at 24 300 in 2002. 25 MS. COXE: Uh-hum. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 110 2 And so you're actually doing that for the 3 FCAT 10th grade, saying that we're going to 4 move -- we're going to move it up to 300, which 5 is the minimum Level 2. And in reading, 300 is 6 the minimum Level 2 for the other. So we're 7 moving that up for a high school graduation to 8 the minimum D. 9 But we're not going to move all the rest of 10 the score numbers up that we had planned to do 11 to that same level to 300. 12 So what you're really -- seems to be doing 13 here is that you've come up with a number so 14 that it's a minimum of a Level 2. I guess it 15 would be pretty embarrassing to have it be a 16 Level 1 in 2002 if we'd have actually followed 17 what the plan was in having increased the level 18 of expectations. 19 MS. COXE: You definitely have us there. 20 That would not be a good thing. We would not 21 want a Level 1 score in any way. 22 TREASURER GALLAGHER: So that's why we're 23 doing this moving to 300, so it will look good 24 in 2002, because that would have -- had been a 25 Level 1 before, and that wouldn't be too good. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 111 2 questions or comments? Maybe -- I think 3 we've -- we have a difference of opinion here, 4 and we'll have a chance to -- 5 TREASURER GALLAGHER: So I can see I'm 6 outnumbered. But I just wanted to point a few 7 things like that out. 8 SECRETARY HARRIS: Sorry. I'm sorry. 9 We're just all going through this learning 10 process. 11 And I still -- I still just need an 12 explanation on the 300. The math scores are 13 higher than -- than reading. I have a problem 14 that the math -- I mean, in this -- this -- 15 this amendment, that the math is still the 16 lowest level on Step 2. 17 When you've got a mid-level on Level 2 on 18 reading, and you're still leaving it at the 19 bottom level, the lowest level in math for the 20 10th grade -- I mean, I don't -- I don't 21 understand that. 22 MS. COXE: As I indicated, it was our 23 decision after discussion that the greater good 24 would be served with the clarity in the 25 message. That was our recommendation. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 112 2 of course, you'll have to decide. 3 I would like to -- 4 SECRETARY HARRIS: That's perception over 5 reality. I mean, I understand the message. 6 But I just -- I just want to make sure that -- 7 GOVERNOR BUSH: This is all perception. 8 This has no impact -- this has no impact on 9 a -- on a particular student. 10 It is all perception. It's important 11 perception. But it doesn't change anything 12 because, unlike the cut score, where there's a 13 consequence of not being above the cut score, 14 these numbers are purely perception. 15 Because we're going to, again, change the 16 grading scores -- right now if we did this, and 17 there was no change in the grading of schools, 18 which is what the law now requires us to do to 19 include annual student learning, it would have 20 an impact. It definitely would raise the 21 number of D and F schools in all likelihood. 22 But since we're changing it for the school 23 year, it has no impact. None. Which is why -- 24 I mean, it -- we can feel good and stuff. But 25 the -- the bigger issue is the cut score issue ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 113 2 TREASURER GALLAGHER: It has a perceptional 3 impact. The perception is that we whimped out 4 on what we were originally planning to do as a 5 state. We've basically backed up on what was 6 scheduled for an increase of a bar. 7 Now that's -- 8 GOVERNOR BUSH: This is what we -- 9 TREASURER GALLAGHER: -- what -- 10 GOVERNOR BUSH: -- did when you were -- 11 TREASURER GALLAGHER: -- appropriate -- 12 GOVERNOR BUSH: -- Commissioner of 13 Education. I mean, I'm shocked by this. 14 Any other -- anybody else going to speak, 15 or are we -- 16 TREASURER GALLAGHER: I guess we beat it 17 up. We might as well vote. 18 GOVERNOR BUSH: We have beat this baby up. 19 COMMISSIONER CRIST: We have a motion. 20 GOVERNOR BUSH: Does everybody understand 21 the motion? 22 Is there a second? 23 COMMISSIONER BRONSON: Second. 24 GOVERNOR BUSH: Moved and seconded. 25 Any other discussion? ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 114 2 THE CABINET: Aye. 3 GOVERNOR BUSH: All opposed? 4 TREASURER GALLAGHER: No. 5 GOVERNOR BUSH: The ayes have it. 6 Commissioner Crist and Secretary Horne, 7 we -- it'd probably be useful to have a -- the 8 plan that was described in your preliminary 9 remarks presented to us at some point so that 10 we can get a sense of how we can help assure 11 that we really move to this student centered -- 12 centered system, where if kids aren't passing 13 this test, that we use the remedial money that 14 the Legislature has granted the schools, the 15 Districts, as well as this new money, to really 16 try to stimulate -- stimulate much more 17 involvement from outside the school system into 18 the schools to assure the children learn. 19 I think it's a great idea. 20 MS. COXE: Thank you, Governor. 21 Item 10 is Rule 6A-1.0943, Statewide 22 Assessment for Students with Disabilities. 23 COMMISSIONER CRIST: Motion. 24 TREASURER GALLAGHER: Second. 25 COMMISSIONER BRONSON: Second. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 115 2 Without objection, it's approved. 3 MS. COXE: Items 11 through 29 are 4 reappointments. I'll read them as a group. 5 Lourdes L. Garrido, Broward Community 6 College; Mari-Elain C. Ebitz -- 7 (Commissioner Bronson exited the room.) 8 MS. COXE: -- Frank E. Stafford, Jr., 9 Central Florida Community College -- 10 excuse me -- Community College. 11 The first one was Broward Community 12 College, in case I messed up. 13 Virginia C. Stuart, Brenda G. Taylor, 14 Chipola Junior College; James E. Gardener, 15 Peter E. Mallory, Mary Ann M. Paul, 16 Daytona Beach Community College; 17 Earlene T. Lockett, Suzanne Z. Thamm, a 18 Wyman C. Winbush, Florida Community College of 19 Jacksonville. 20 Clinton C. Mayo, Gulf Coast Community 21 College; Thomas Huggins, III, Nancy Watkins, 22 Hillsborough Community College. 23 Kathryn Lynn McInnis, Suzanne M. Norris, 24 Julia M. Richardson, Lake City Community 25 College. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 116 2 D. Alan Hays, Lake Sumter Community College. 3 Jennifer M. Saslaw, Edward Vogler, 4 Manatee Community College. 5 Armando J. Bucelo, Jr., Helen A. Ferre, 6 Denise R. Mincey-Mills, Miami-Dade Community 7 College. 8 Betty E. Land, Jane T. Lowe, 9 Michaelena C. Wilson, North Florida Community 10 College. 11 Elizabeth S. Campbell, Joseph W. Henderson, 12 William Thornton, Okaloosa-Walton Community 13 College. 14 Carolyn L. Williams, Palm Beach Community 15 College; Twyla G. Ely, Thomas W. Moore, 16 Ernest S. Pinner, Martha Santiago, 17 Polk Community College. 18 Karen R. Stern, Anna R. Stilwell, 19 Dale S. Wilson, St. Johns River Community 20 College. 21 James A. Davis, Jr., Bessie G. Jackson, 22 Santa Fe Community College. 23 Deanne F. Schaffner, Seminole Community 24 College. 25 And Jerry Buchanan, Jose M. Hoyos, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF EDUCATION 117 2 TREASURER GALLAGHER: Move Items through -- 3 11 through 29. 4 GOVERNOR BUSH: Is there a second? 5 COMMISSIONER CRIST: Second. 6 GOVERNOR BUSH: Moved and seconded. 7 Without objection, it's approved. 8 Well done, Betty. 9 MS. COXE: Yes, sir. 10 COMMISSIONER CRIST: Thank you, Betty. 11 GOVERNOR BUSH: Come back any time. 12 MS. COXE: Yes, sir. 13 Thank you. 14 (The State Board of Education Agenda was 15 concluded.) 16 * * * 17 18 19 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC. 118 2 3 4 5 STATE OF FLORIDA: 6 COUNTY OF LEON: 7 I, LAURIE L. GILBERT, do hereby certify that 8 the foregoing proceedings were taken before me at the 9 time and place therein designated; that my shorthand 10 notes were thereafter translated; and the foregoing 11 pages numbered 1 through 117 are a true and correct 12 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 24TH day of AUGUST, 2001. 18 19
APPEARANCES:
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ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 122 2 GOVERNOR BUSH: Administration Commission. 3 TREASURER GALLAGHER: Motion on the 4 minutes. 5 COMMISSIONER CRIST: Second. 6 GOVERNOR BUSH: Moved and seconded. 7 Without objection, it's approved. 8 MS. TINKER: Thank you. 9 Item 2 is a discussion item. 10 At the June 26th Cabinet meeting, you all, 11 sitting as the State Board of Trustees of the 12 Internal Improvement Trust Fund, raised 13 concerns about the land acquisition prices for 14 land surrounding the Everglades. 15 You discussed very -- various options among 16 yourself ranging from land use practices to 17 looking at -- 18 (Commissioner Crist exited the room.) 19 MS. TINKER: -- alternatives for 20 eminent domain type land acquisition practices, 21 as well as the Area of Critical State Concern 22 Program. 23 You asked staff to come back to you after 24 exploring some of these options with a 25 discussion item, and that's what we've done. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 123 2 presentations to share information about 3 planning and regulatory practices at the State, 4 regional, and local levels. 5 Because of the time this morning, I'm going 6 to ask all the speakers to please limit their 7 comments to about 3 minutes each so that we can 8 get through the list, because there are quite a 9 few speakers. 10 But just to kind of run through the 11 program, Steve Seibert, Secretary of DCA, will 12 share some information about the area of 13 Critical State Concern Program; Henry Dean, 14 Executive Director of the South Florida Water 15 Management District will share an action that 16 was recently taken by the District to adopt a 17 Water Preserve Area rule. 18 We have the three local governments from 19 the area represented today: Dade County, 20 Broward County, and Palm Beach County, and 21 they'll be sharing their own local strategies 22 for land use planning and -- and regulatory 23 practices that encourage and compliment 24 Everglades protection. 25 And then Secretary David Struhs from DEP to ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 124 2 acquisition in the Everglades properties. 3 And then we have several representatives 4 from the environmental groups. 5 So I'm going to move through these quickly. 6 GOVERNOR BUSH: There you go. 7 MS. TINKER: Steve Seibert. 8 MR. SEIBERT: Thank you. 9 Any questions? 10 TREASURER GALLAGHER: Good. Next. 11 GOVERNOR BUSH: Critical State Concern. 12 MR. SEIBERT: Critical State Concern. 13 Governor, the same law that gave you the 14 DRI process in 1972 also gave you that concept 15 of the Areas of Critical State Concern. 16 With your permission, Governor, I'll move 17 to call that the ACSC. 18 Thank you. 19 My job is to explain to you what the ACSC 20 designation is, and how you receive such a 21 designation. 22 Since its inception, this program has 23 resulted in the designation of really only 24 five areas: Apalachicola Bay area, 25 Green Swamp, Big Cypress, Key West, and the ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 125 2 I think it's fair to say that the really 3 active one is Monroe County in the 4 Florida Keys. Each of these areas were 5 designated due to their unique environmental 6 sensitivity, their vulnerability to 7 development, and the critical significance in 8 terms of land and water resources, each one of 9 these areas. 10 There are two ways of getting a designation 11 as such: One is by rulemaking, the other is by 12 legislative decision. 13 And the rulemaking process is at least a 14 two-year process. The Governor appoints a 15 resource planning and management committee. If 16 you go in that direction, they develop a 17 program. That program for the protection of 18 the resources goes to the 19 Administration Commission, and then for 20 approval or not approval by the Legislature. 21 The legislative designation has a lot of 22 the same rules, but obviously they make that 23 decision. 24 Once the designation occurs, you've got 25 responsibilities, both -- both at the local ACCURATE STENOTYPE REPORTERS, INC.
2 At the local level, local governments must 3 adopt and implement planning and regulatory 4 programs which are consistent with the 5 principals for guiding development. That's the 6 term of art. Principals for dividing -- for 7 guiding development. 8 They need to change their comp plan -- 9 (Governor Bush exited the room.) 10 MR. SEIBERT: -- they need to change their 11 refuse regulations, they need to do everything 12 consistent with the principals for guiding 13 development. 14 The State's responsibility is to assure 15 that that takes place. 16 We review and the Department of Community 17 Affairs has the primary responsibility. We 18 review all comprehensive plans, and land 19 development regulations adopted by local 20 governments under the designation. No plan or 21 regulation becomes effective unless it's 22 approved by the Department. 23 We can recommend that you all change the 24 rules for these communities. Maybe most 25 importantly from a standpoint of time and ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 127 2 development orders, building permits, 3 variances. It's a -- very much of a -- of a 4 State oversight role, more so than we have in 5 any other kind of program that we deal with. 6 Say -- resources tend to follow this kind 7 of heightened scrutiny. And so within a 8 certain period of time, all the State agencies 9 have to inform you all as to how their programs 10 fit into these principals for guiding 11 development. 12 The impact of an Area of Critical State 13 Concern is what you think it is. It's a -- 14 (Commissioner Crist entered the room.) 15 MR. SEIBERT: -- great deal of time and 16 energy. The heightened scrutiny, more time 17 spent in process than you have in virtually any 18 other -- other kind of land use process. 19 That's what the designation -- 20 (Commissioner Bronson entered the room.) 21 MR. SEIBERT: -- is, and those are the 22 communities that have been designated 23 historically. 24 I will close with just two thoughts. As 25 you listen to the testimony of those that come ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 128 2 helpful principals. 3 The first is that this ACSC is a regulatory 4 and planning framework. It is not a method. 5 It is not a method to affect the value of land. 6 I would urge you to decouple that 7 discussion. 8 And, secondly, just as an agency head who 9 gets this message, it is clear to everyone in 10 this process, particularly those of us who 11 oversee development kinds of decisions, 12 Everglades restoration is critical. It is of 13 compelling interest to this state and to this 14 nation. 15 No action of any government should 16 undermine that effort. And that is very 17 clearly the direction that we've been given. 18 It is how the Governor wants me to respond, and 19 I think that's what you will be hearing from 20 the local governments that speak after me. 21 Thank you very much. 22 Teresa. 23 MS. TINKER: Did anybody have any questions 24 for Secretary Seibert? 25 The next speaker is Henry Dean. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 129 2 have a question? 3 COMMISSIONER BRONSON: Well, I did. 4 I wanted to make sure now -- and I 5 understand, having served on natural resources 6 in the Senate, where -- where a lot of this is 7 going. 8 MR. SEIBERT: Yes, sir. 9 COMMISSIONER BRONSON: But I'm in a new 10 position now, and that is making sure that 11 agriculture can remain a viable industry in 12 this state. 13 Now, this does not in any way, I hope, 14 infringe on agriculture's ability to stay into 15 production without going through normal 16 channels of buying those lands and so forth, 17 right? 18 MR. SEIBERT: You are correct, sir. 19 Agric-- the ACSC designation defines 20 development. Agriculture is specifically 21 exempted from the definition of development 22 under this law. 23 COMMISSIONER BRONSON: I -- I wanted to 24 make sure that was on the record. 25 MR. SEIBERT: Yes, sir. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 130 2 MR. SEIBERT: Yes. Madam Secretary. 3 SECRETARY HARRIS: On -- on the first -- on 4 the first issue, that's really a local land use 5 decision, it doesn't -- I mean, this -- this 6 rule -- this wouldn't affect anything that 7 we're talking about right now within the -- 8 we -- we went -- there was just -- talking 9 about what the Water Management did. 10 But the second one in terms of how it's 11 created, if -- if we augmented that, I mean, 12 wouldn't that be intrusive, it'd be a huge 13 undertaking? 14 It seems like if we try to use that -- what 15 you're calling a regulatory and planning tool, 16 if we tried to use that in terms of addressing 17 some of the issues that we were concerned with 18 in the last Cabinet meeting, that would take an 19 incredibly long time, and by that time, the -- 20 (Governor Bush entered the room.) 21 SECRETARY HARRIS: -- property would 22 already be purchased. 23 MR. SEIBERT: I think that's an accurate 24 assessment. It is a -- it is -- 25 SECRETARY HARRIS: It takes -- ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 131 2 SECRETARY HARRIS: -- almost two years -- 3 MR. SEIBERT: -- it is a very involved -- 4 SECRETARY HARRIS: -- of rulemaking and -- 5 and things -- things such as that. 6 MR. SEIBERT: Yes, ma'am. It's a very 7 involved process. 8 SECRETARY HARRIS: I'm sure I have more 9 questions after people -- 10 MR. SEIBERT: Okay. 11 SECRETARY HARRIS: -- testify. 12 Thank you. 13 MR. SEIBERT: Thank you. 14 Anyone else? 15 Thank you. 16 GOVERNOR BUSH: Thanks, Steve. 17 MR. DEAN: Hello, again. 18 I'm here now to briefly discuss the 19 Water Preserve Area rule, which our 20 governing board adopted last Thursday at our 21 regular governing Board meeting. 22 That rule, by the way, will probably take 23 effect in mid-October, Governor, having been 24 adopted just last Thursday. 25 What is it? ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 132 2 development in the South Florida District in 3 this WPA area, a lot of discussion which led to 4 the realization that it might be good to look 5 at development activity within the Water 6 Preserve Area in Palm Beach and 7 Broward Counties, adjacent to the 8 Water Conservation Areas, and see if, in fact, 9 there was a need for a slightly better 10 regulatory review by the water management 11 districts over and above the normal 12 district-wide review of projects under the 13 environmental resource permitting review -- 14 (Secretary Harris exited the room.) 15 MR. DEAN: -- jurisdiction. 16 The -- the governing Board and the staff 17 held hearings, worked on a rule, and -- and as 18 I said last Thursday, adopted the Water 19 Preserve Area basin rule which provides four or 20 five additional criteria, really performance 21 standards over and above the normal ERP 22 regulatory program for developments to meet the 23 plan to take place in this area. 24 The area, by the way, consists of 25 approximately 160,000 acres. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 133 2 for an additional 50 percent water quality 3 treatment over and above the normal rule, it 4 limits excavation depths to min-- minimize 5 seepage. There is no lowering of the water 6 table. And there are more stringent mitigation 7 requirements. 8 We are confident that this rule will 9 provide that as development takes place, which 10 is a local planned use decision, as development 11 takes place in the Water Preserve Area, that it 12 will be more consistent with our goal of water 13 resource protection as we pursue the Everglades 14 restoration project. 15 Governor, I'll be glad to answer questions, 16 or turn it over to the local government -- 17 GOVERNOR BUSH: In your -- 18 MR. DEAN: -- speakers. 19 GOVERNOR BUSH: In your rulemaking process, 20 was there endorsement of the concept from 21 different groups? 22 MR. DEAN: I would have to probably ask 23 either John Fumero or Yvonne that question. 24 MR. FUMERO: Yes. 25 MR. DEAN: There was. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 134 2 the -- at the heel of -- 3 GOVERNOR BUSH: On the job -- 4 MR. DEAN: -- the -- yes. 5 GOVERNOR BUSH: Can you just tell -- I'd be 6 curious, did you have the developers, builders, 7 environmentalists, local governments, was 8 there -- 9 MR. FUMERO: Yes, Governor. It was a 10 multiyear ruling effort. We had a number of 11 public workshops, and we had the environmental 12 community from Audubon Society to Sierra Club 13 participating. 14 We had the Economic Development Council, 15 Broward County, the whole group of folks. And 16 quite honestly, developers wanted it a little 17 less stringent, the environmental community 18 wanted it -- 19 (Secretary Harris entered the room.) 20 MR. FUMERO: -- a little more stringent. 21 So we thought we got it just right. 22 GOVERNOR BUSH: Okay. Thank you. 23 You probably did. 24 Any questions? 25 MS. TINKER: The next speaker is Bob ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 135 2 MR. USHERSON: Good morning. It's a 3 pleasure to be here. 4 And in 3 minutes, to give you a very brief 5 summary of 30 years of effort by Dade County to 6 help the national and State governments protect 7 the Everglades. 8 Our first significant efforts were 9 undertaken in the early 1970s, coming out of 10 one of our 100-year droughts in 1970 and '71, 11 that we seem to experience every ten years. 12 And it became apparent to Dade County 13 government at the time that we could not 14 forever rely on the Water Management District 15 to deliver water to us at times of need, 16 particularly when we saw that the management 17 would be increasing farther north. 18 So Dade County took it upon itself to do 19 whatever it could to protect its water 20 resources within its boundaries. 21 The County Manager imposed, and the Board 22 of County Commissioners ratified a building and 23 zoning moratorium on 323 square miles of 24 interior wetland in Miami-Dade County. It was 25 named the East Everglades Building and Zoning ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 136 2 The area covered by this moratorium 3 extended from what you know to be a central 4 lake belt area of west central Dade County 5 through the preserve area, through the buffer 6 areas, out into the Shark River Slough, down 7 into the Upper Taylor Slough Basin, south 8 through the Canal 111, southern Everglades, 9 Save Our Rivers Project Area. 10 Imposed a moratorium on the area, and 11 proceeded to initiate rezonings of the 12 inappropriate urban zoning out of these areas. 13 The results of this rezoning and the 14 additional rezonings to implement our new 15 comprehensive plan that we adopted in 1975 by 16 ordinance, as the first in the state that we 17 know of without the buy awareness before it was 18 required by law, the Board of County 19 Commissioners rezoned 16,000 acres, 26 square 20 miles, more or less, scattered through these 21 interior wetland areas to protect its future 22 water supply, and to protect these living 23 resources, commercial and sport fisheries, and 24 all of the economic activity that Dade County 25 have relied on these environmental resources. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 137 2 part of the Shark River Slough which now, as 3 you know, later became part of a national park 4 expansion area. 5 In the southern Canal 111 area, which is a 6 CERP Everglades project, 6,000 acres of 7 industrial zoning, down-zone it. 8 When you burn dry area, the water preserve 9 area that you are looking at, we down-zoned 10 1300 acres, mostly industrial, about half a 11 square mile of residential. 12 In the buffer areas east of Levy 30, 13 containment levy, another 1,000 acres, also 14 including industrial zoning in what you know as 15 the central lake belt area, about 5,000 acres 16 in the central lake belt area. 17 And then also at the shoreline of 18 Biscayne Bay and what now has become Biscayne 19 National Park, we did the same thing. 20 GOVERNOR BUSH: Can I ask you a question? 21 MR. USHERSON: Yes. 22 GOVERNOR BUSH: With all that excellent 23 work, why is it that properties that are not 24 bordering on the urban service boundary, but 25 outside of it, tracts of land that we purchased ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 138 2 would give one -- one could only conclude 3 that -- that these properties are going to be 4 inside the urban service boundary at some 5 point, because we're -- you're -- someone is 6 creating the climate where we're buying land at 7 dollars per foot, not a thousand dollars per 8 acre. 9 That's -- that was the only point that I 10 was trying to make. Commissioner Gallagher 11 came up with an interesting idea that the 12 staffs have pursued about Critical State 13 Concern being one of the possibilities, and -- 14 and we'll hear additional information about 15 that. 16 But that's a serious issue to me. I mean, 17 because we're going to be buying a lot of this 18 land, I hope. And there's concern by a lot of 19 people that we need to accelerate the purchase 20 of land. 21 And we don't have the money to buy it at 22 dollars per foot, because someone is 23 creating -- at least creating a climate where 24 appraisers go in and -- and have this 25 perspective valuation. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 139 2 you'll make my day. 3 MR. USHERSON: I -- I just learned about 4 that particular transaction recently. I really 5 haven't followed what the -- 6 GOVERNOR BUSH: Oh. 7 MR. USHERSON: -- individual persons 8 opposed to it. 9 But I do understand that the transaction 10 and your interest would occur in what is an 11 antiquated subdivision. And I know the State 12 was looking at what to do about 13 antiquated subdivisions a long time ago. 14 I frankly -- 15 GOVERNOR BUSH: But it was plotted -- it 16 was platted. It was -- but it was -- 17 MR. USHERSON: And I haven't had time to 18 look into how our zoning standard applies to 19 these antiquated subdivisions. And I've gotten 20 mixed information in time to come back to you. 21 And I can't give you a definitive answer. I'm 22 not sure if they had accumulated 1 acre or 23 5 acres. And I frankly haven't looked at the 24 appraisal. I don't know what the appraiser 25 assumed. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 140 2 thoroughly looked at multiple times. And I 3 imagine that they understood in our zoning 4 program and appraised it. 5 But it is an anomalous place. There are a 6 few of these things scattered around the, 7 quote, preserve, and Everglades area. There 8 are -- there are more of these in the 9 agricultural areas than there are in these -- 10 in the areas to be protected. 11 GOVERNOR BUSH: Okay. 12 TREASURER GALLAGHER: So -- so I guess, if 13 I may, we're out there -- you're probably not 14 the right one to answer it -- but we're out 15 there buying these now prior to somebody 16 developing them, putting actual improvements on 17 them. 18 MR. USHERSON: The only other thing I can 19 think of -- oh, yeah, there's no -- no 20 improvements there. The county has an urban 21 growth boundary and an urban service boundary, 22 and it's been very stable. Contrary to popular 23 opinion, in the last dozen years, the Board of 24 County Commissioners has moved up two 25 occasions, including a total of three-quarters ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 141 2 dozen years. 3 GOVERNOR BUSH: That's -- 4 MR. USHERSON: But there -- it's very 5 stable there, but this lake belt project that 6 was being studied recently may have also 7 stimulated some expectations that Dade County 8 might be induced to change its policy about 9 their development in some of these areas. 10 So there could have been perhaps a little 11 bit more speculation over the last couple of 12 years as a result of that. But again, I 13 haven't analyzed the -- the land price range 14 in -- 15 TREASURER GALLAGHER: I think that's the 16 perception that I got was that any of those 17 areas that are -- that have been historically 18 platted, they were going to be able to build on 19 them. 20 Now, you're telling me that the County has 21 not let that happen. 22 MR. USHERSON: There are development rights 23 on all of -- all of this private property. 24 GOVERNOR BUSH: These are built -- 25 MR. USHERSON: Just the question is, how ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 142 2 to -- 3 GOVERNOR BUSH: It's one -- one unit per 4 5 acres. 5 MR. USHERSON: -- 5 acres -- 6 GOVERNOR BUSH: And you're not buying -- 7 you weren't buying it at one unit per 5 acres, 8 we were buying a buck twenty a foot, which is, 9 you know, five units per 1 acre. 10 MR. USHERSON: The zoning code can be read 11 to allow on -- on an antiquated plat, could 12 allow -- could be read to allow on an acre. 13 Now, it could be read to acquire 5 acres. And 14 again I have -- 15 GOVERNOR BUSH: I think it's -- I think we 16 were told it was 5 acres is -- 17 MR. USHERSON: And why -- why that price 18 for a 5-acre property, when the other 5 acre 19 properties around there, you know, are, what 20 nine, ten thousand dollars -- 21 GOVERNOR BUSH: See, that's my point. Now, 22 that's -- that's the -- 23 MR. USHERSON: And the appraiser -- there's 24 no -- no appraisal. 25 GOVERNOR BUSH: There -- you're kind of on ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 143 2 TREASURER GALLAGHER: Not the guy that did 3 it. 4 GOVERNOR BUSH: Yeah. 5 And I'm -- I don't want to -- I don't want 6 you to feel uncomfortable. 7 But the fact is, that we are buying 8 property with a perspective valuation attached 9 to it, not what people could develop it. 10 And if we are committed to the restoration 11 of the Everglades, which I -- this Cabinet 12 certainly has shown its interests, and the 13 Legislature has as well, we're going to have to 14 be careful about how we go about this. 15 And if -- if local governments by 16 independent decisions make it harder for us to 17 do our job, then we're going to have to react. 18 I mean, we're going to have to create a new 19 strategy that might include local governments, 20 for example, that want to have development in 21 areas that are in these buffer areas. 22 That's fine. They have that right. We're 23 not -- I don't -- I'm not an advocate of taking 24 away local control over -- over these matters. 25 But maybe they become a partner with us. Maybe ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 144 2 because of actions taken independently. 3 Now, you're saying maybe the County isn't 4 the reason why this is taking place. I take 5 that at face value. Something's happening. 6 MR. USHERSON: I would submit to you that 7 it has not been the County. The County has had 8 a very stable policy dealing with its growth 9 boundary over the years. 10 There are now pending proposals to move the 11 boundary. There are pending proposals to 12 change our policies regarding moving that 13 boundary. 14 The Department of Community Affairs, I 15 will tell you, having been with my department 16 for 30 years, the Department of 17 Community Affairs' practice in Dade County has 18 been excellent. They deal with the big issues, 19 both in -- in the outer boundary, and in the 20 central areas. They don't nit-pick us on the 21 small issues. 22 They state and continue to send a message 23 to the local governments that they want us to 24 continue to manage these places the way we have 25 been. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 145 2 I think that perhaps some of the speculation 3 that people may want to do, you know, wouldn't 4 be occurring. And I think the State can help 5 the local governments with the message that the 6 Department of Community Affairs is going to 7 keep doing the job, at least it's been doing it 8 in Dade County, and that'll help in this 9 effort. 10 SECRETARY HARRIS: I have a question. 11 Because of this -- these sentiments, and 12 because of the feeling -- pervasive feeling 13 that perhaps local governments would move the 14 boundaries, we don't want to step in and -- I 15 least I can only speak for myself, and try to 16 take over local governments prerogatives, or -- 17 or move on that. 18 But not only I think it would be really 19 helpful -- and I'm not sure exactly what 20 mechanism this would involve -- what -- I think 21 the State can continue through DCA to extend 22 that -- extend that very strong message about 23 not moving our inboundaries outward into 24 antiquated subdivisions, or whatever the title 25 is. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 146 2 strong message from the -- these County 3 governments that are involved in the Everglades 4 restoration that you're not -- that you don't 5 have an interest in doing that. 6 I mean, I don't know if there are 7 resolutions and votes or ordinances, I have no 8 idea. But it'd be really helpful, in terms of 9 partnerships if the counties were sending that 10 strong message as well so that if the State is 11 going to come in and have to purchase these 12 properties, we're not being threatened with the 13 rumors of counties widening those -- those 14 boundaries or -- 15 (Treasurer Gallagher exited the room.) 16 SECRETARY HARRIS: -- soon -- 17 MR. USHERSON: That's a good idea. 18 GOVERNOR BUSH: Thank you. 19 MR. USHERSON: My pleasure. 20 MS. TINKER: The next speaker is 21 Peter Ross, representing Broward County. 22 And Mr. Ross is followed by Frank Duke, 23 representing Palm Beach County. 24 GOVERNOR BUSH: Welcome. 25 MR. ROSS: Good afternoon. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 147 2 presentation to demonstrate Broward County's 3 efforts to protect the Everglades. 4 In the essence of time, I'm going to try to 5 move through it quicker than I had planned, and 6 just focusing on a couple slides. 7 For those who don't know -- and I think 8 after last year, that's fewer than it used to 9 be -- there -- there -- there's 10 Broward County -- 11 GOVERNOR BUSH: I thought it was off the -- 12 I thought it was -- we pushed it out to the 13 Atlantic? 14 What happened? 15 ATTORNEY GENERAL BUTTERWORTH: We had an 16 election last year, we had to have it go back 17 in -- 18 GOVERNOR BUSH: Unfortunately. 19 I liked it back the other way. 20 MR. ROSS: I have no comment on that. 21 But actually, one thing a lot of people 22 don't know about Broward County is that a 23 majority of the county is actually designated 24 for conservation use, is in -- and is within 25 the Water Conservation Areas. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 148 2 miles, of which 800 square miles are actually 3 within the conservation area, 400 square miles 4 are to the east of the conservation area. 5 This is our de facto urban development 6 boundary. I'm glad it's there. Foresight, 7 I guess, a long time ago. 8 But we're rapidly approaching that 9 boundary. We're about a million six now. We 10 have an estimated build-out population around a 11 million eight, million eight-and-a-half. I 12 suspect we'll probably go past that -- 13 GOVERNOR BUSH: Sure is -- 14 MR. ROSS: -- when we -- when we redevelop 15 in the east. But at least as far as our vacant 16 lands to the west, we're -- we're rapidly 17 running out. 18 The east coast buffer area really occupies 19 a small portion of the County in the southwest 20 part of the County. 21 This map identifies the various status of 22 parcels within that area regarding purchase and 23 preservation for preserve. 24 Most of the area has now been -- has now 25 been protected. The light blue areas have been ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 149 2 several of those purchases, especially the 3 buffer strip west of U.S. 27 between the dike. 4 We're also able -- were able through 5 mitigation, the development proposals, to 6 obtain approximately 2600 acres, including 1400 7 acres of the approval of west in increment 3; 8 and of the 700 acres to the south, through the 9 approval of the Sunset Lakes development. 10 The areas in the yellow are -- is my 11 understanding, are the areas that the 12 Water Management District is focusing in on 13 purchasing. Those areas are designated for 14 agriculture on our land use plan. It's our 15 lowest urban use. It's approximately one unit 16 per two-and-a-half acres. 17 GOVERNOR BUSH: Sawgrass Expressway would 18 be where? 19 MR. ROSS: Sawgrass Expressway would be 20 north following up -- that's I-75 on the right 21 boundary there. 22 This is I-75. 23 Sawgrass extends north of there. 24 So these -- these yellow areas are the 25 remaining areas to be purchased. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 150 2 (Treasurer Gallagher entered the room.) 3 MR. ROSS: -- in this area going back to 4 the mid-'90s. I don't foresee any. 5 The Commission has adopted some very 6 stringent policies within the 7 Comprehensive Plan, specifically the last one 8 there, which is the discouraged higher 9 intensity density uses within the buffer strip, 10 and adjacent to the buffer strip. 11 They've also adopted policies specifically 12 supporting the Water Preserve Area Feasibility 13 Study, and have committed to establishing 14 appropriate land uses within that area, though 15 I -- I suspect that our agricultural category 16 is probably the best we can do. 17 Our conservation categories not only are 18 restricted to government on the properties, 19 publicly owned lands. 20 I would make one note with respect to 21 your -- your purchase program is that we're 22 also in the business of buying land. I'm not 23 sure the voters in Broward County approved a 24 400 million dollar bond issue, of which 25 200 million dollars is set aside for ACCURATE STENOTYPE REPORTERS, INC.
2 natural lands in the eastern portion of the 3 County. 4 And one thing they were finding right off 5 the bat is that the land values are 6 skyrocketing in the County. We had originally 7 estimated approximately $110,000 per acre for 8 purchase of these lands, and we're finding at 9 least early purchases, they're more in the 10 neighborhood of 200,000, even as much as 11 $300,000 per acre. 12 So I guess it's the law of supply and 13 demand as -- as the lands -- remaining lands 14 dwindle, those that are left become more and 15 more valuable. 16 GOVERNOR BUSH: Well, that's true. But if 17 you have the ability to create the values 18 through the entitlement process, then you're -- 19 you know, you're an accessory to the crime. 20 MR. ROSS: Well, I think at least with 21 respect to the lands that we're looking at, 22 they're within -- primarily within the urban 23 area -- 24 GOVERNOR BUSH: Right. 25 MR. ROSS: -- and those land values were ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 152 2 GOVERNOR BUSH: I feel your pain. 3 MR. ROSS: Right. 4 -- years and years and years ago. 5 GOVERNOR BUSH: Right. 6 MR. ROSS: Not like you're going to pay 7 now. 8 GOVERNOR BUSH: I understand. 9 MR. ROSS: As far as those areas to the 10 west, you know, I don't see any further 11 changes. You know, the Commission has adopted 12 a very strong legislative policy, including 13 supporting strong State growth management laws, 14 including State oversight over the local plan, 15 and a definition of compelling State interests 16 to include natural areas such as the 17 Everglades. 18 So our current Commission's very supportive 19 of the Everglades. 20 GOVERNOR BUSH: Any questions? 21 Thanks. 22 (Attorney General Butterworth exited the 23 room.) 24 MS. TINKER: The next speaker is 25 Frank Duke, representing Palm Beach County. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 153 2 Good afternoon, Governor, members of the 3 Cabinet. 4 By way of introduction, and before I begin, 5 I would like to thank Governor Bush for giving 6 me the opportunity to represent local 7 governments on the South Florida Ecosystem 8 Preservation Working Group as one of the local 9 government representatives. 10 I think the fact that Palm Beach County has 11 continued to send me to those meetings, both 12 during the period when I worked as a 13 representative of Governor Chiles, and 14 continuing to represent Governor Bush, is an 15 indication of the commitment of our government 16 with Palm Beach County to the Everglades and 17 the restoration of that international resource. 18 Palm Beach County prides itself on being 19 innovative in its planning. 20 Recently we adopted a series of -- of tiers 21 into our Comprehensive Plan establishing 22 different development regulations for different 23 areas of our county. 24 And this was recognized as being an 25 innovative approach to planning by the American ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 154 2 Association of Counties, which have recommended 3 that other local governments consider that 4 approach. 5 And one of the things that we did when we 6 developed this altere was recognize the 7 importance of the water preserve areas and how 8 we need to integrate that into our whole 9 planning effort. 10 At the same time, we recognized that we 11 have to have in our plan, provisions to deal 12 with the Everglades and the water preserve 13 areas. 14 So in our conservation element, we have 15 specific policies dealing with this issue. 16 And the other issue that we have done is 17 our land use element, we have adopted a 18 mandatory TDR program so that the only way that 19 a developer/property owner can get increases in 20 density is through use of TDRs. 21 And we designated the water preserve areas 22 as a single area for those TDR units so that 23 developers would have to buy the development 24 rights off that property, ideally lowering the 25 cost of that property to the State, the ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 155 2 government. 3 Not only have we done that, we've also 4 tried to be very active with the 5 Water Management District in being a full 6 partner on the implementation of the water 7 preserve areas. 8 Palm Beach County in 1996 did a land swap 9 with the Water Management District for 10 approximately 725 acres, and we required a 11 landfill site. Once we discovered it was 12 needed for the water preserve areas, we did a 13 land swap to give this land to the Water 14 Management District in exchange for other land 15 so it could be developed for the water preserve 16 areas. 17 But perhaps the most significant area of 18 our county where the water preserve areas are a 19 factor is our agricultural reserves. 20 This an area about 21,000 acres where we've 21 said our focus is going to be agriculture. But 22 when we developed a master plan for this area, 23 the Board of County Commissioners also said we 24 need to not only look at how we can preserve 25 and enhance agriculture, we also need to look ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 156 2 resources, and particularly in this area. And 3 they directed my office to develop this 4 master plan for that area. 5 In recognition of the importance of this 6 area to the water preserve area, it was done as 7 a full partnership with the Water Management 8 Districts. South Florida -- 9 (Attorney General Butterworth entered the 10 room.) 11 MR. DUKE: -- was a 50/50 partner. And I'm 12 also proud to say that we had participation 13 from a number of State agencies, including the 14 Department of Agriculture and Consumer Services 15 if we did this. 16 In doing this, we developed plans for 17 options for development for both how 18 development could occur, how people could 19 increase densities in this area from one unit 20 to 5 acres, which is the underlying development 21 pattern, to let them get up to one unit per 22 acre, that requires that they get the 23 development rights off of other property. 24 And the property that we're saying they 25 needed to get those development rights from is ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 157 2 water preserve areas, as well as the central 3 core of the area that the Department of 4 Agriculture indicated was the most valuable 5 land for agriculture. 6 And as part of this, Palm Beach County 7 approved 150 million dollar bond issue for the 8 acquisition of land, with 100 million dollars 9 of that dedicated to be spent in this area. 10 And so, over the past few years, we have 11 taken actions to implement the ag reserve 12 master plan. We've purchased approximately 13 2,000 acres, including land that is in the 14 water preserve area footprint. 15 And, Governor, one thing that we would very 16 much appreciate is to use your influence in 17 Washington to get the Federal government to 18 release some of the funds for the South Florida 19 Water Management District that they had 20 indicated they would be looking to partner with 21 us on. 22 And for some time, we've been unable to get 23 that done, which is mutual frustration along 24 the ship. 25 I will admit, we have no plan amendments in ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 158 2 1,000 acres -- 930 acres as an agricultural 3 preserve area, indicating all the development 4 rights have been stripped from the land. So it 5 can only be used for agriculture or water 6 resource purposes. 7 And we've designated 679 acres as 8 conservation, taking -- further taking 9 development rights off of that land. 10 So Palm Beach County is doing -- doing land 11 use amendments in the footprint for the 12 water preserve areas. But none of our 13 amendments have increased the development 14 potential of land in this area. Every one of 15 them have been a decrease. 16 The other area that we have received some 17 criticism for what we've been doing is what we 18 call our sector plan. This is a partnership 19 with the State of Florida that we were 20 encouraged to do by 1,000 Friends of Florida, 21 to take an area of roughly 60,000 acres that's 22 outside of the footprint of the water preserve 23 areas, but is in between very sensitive lands 24 that do have a role in the environment or the 25 restoration of the Everglades. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 159 2 to the north, Wild Country area, and the City 3 of West Palm Beach to the east, and the 4 Loxahatchee National Wildlife Refuge to the 5 south. 6 And what we said we needed to do was we 7 needed to develop a true comprehensive plan for 8 this area, integrating land use, 9 transportation, and water. 10 And so the very first thing that we did in 11 this plan was look with the Water Management 12 District, what are the areas you need for water 13 resources so that we will have areas of 14 stormwater to contribute toward the enhancement 15 and preservation of the Everglades. 16 And the consultants that we have working on 17 this project right now have developed a series 18 of scenarios ranging from applying the same 19 land acquisition program we had for the 20 ag reserve to this area, all the way up to 21 increases in density. 22 And one of the things that was approved in 23 every one of these is recognition of the 24 importance of water resources and how we needed 25 to include that in all of our planning. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 160 2 GOVERNOR BUSH: Thank you very much for 3 coming. 4 MS. TINKER: Secretary David Struhs from 5 the Department of Environmental Protection. 6 MR. STRUHS: Thank you, Teresa. 7 An interesting offshoot of this discussion 8 over coordinating governments in terms of land 9 use planning has been a discussion over whether 10 or not the resources needed to carry out this 11 program are reliable and adequate. 12 And I'm here this morning -- I'm sorry -- 13 afternoon -- to report to you that we are, 14 in fact, on schedule and in the black, and that 15 the funding formula to which Florida committed 16 itself two years ago continues to serve us 17 well. 18 Clearly, we are all concerned on the one 19 hand about controlling costs; and on the other 20 hand, making sure that the project is never 21 stalled or jeopardized because of a lack of 22 dollars. 23 Our consistent funding that keeps pace with 24 project needs is the best long-term strategy 25 for keeping the project moving forward and ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 161 2 Recently some of our not-for-profit 3 partners have recently engaged us in an 4 interesting discussion, a discussion that 5 centers on the idea of totaling up our 6 estimated land acquisition costs for this 7 decade, and then going out and borrowing that 8 sum of money up front. 9 The idea, of course, is that because land 10 will only continue to appreciate, having that 11 cash balance in the bank will make sure that no 12 deal slips away, and that, indeed, our 13 acquisition schedule may be accelerated. 14 We're now evaluating this idea, and 15 evaluating it seriously. But the conclusion 16 will ultimately boil down to what assumptions 17 one makes about the inflation of land value, 18 vis-a-vis the unbudgeted additional costs of 19 paying interest rates. 20 And, of course, when it comes to predicting 21 inflation and interest rates, there are only 22 two correct answers: We don't know, and it 23 depends. 24 One thing that we do know well, however, 25 having just learned the lesson the hard way, is ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 162 2 balances sit in land acquisition trust funds. 3 Those resources, I would suggest, are no more 4 secure than relying on the appropriation of 5 general revenue. 6 Indeed, I would go farther and suggest, 7 there's a strong argument that putting the 8 Everglades restoration to a single up-down vote 9 by the Legislature every year actually provides 10 more transparency and more accountability, both 11 for the agencies, such as ours, responsible 12 with managing the project; and also, frankly, 13 for the legislators who come to Tallahassee and 14 have to vote for it. 15 At this point in our analysis, it seems 16 that the idea of borrowing a million dollars 17 with the goal of spending it over four years, 18 rather than -- than staying with our current 19 plan to spend the same amount of cash as we go 20 over ten years, may increase the costs without 21 necessarily increasing the project benefits. 22 That is not to say that we should be 23 allergic to the idea of borrowing money in a 24 specific instance where we can demonstrate that 25 it will save money long-term. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 163 2 probably best made on a case-by-case basis, and 3 that's the discussion in which we currently 4 find ourselves. 5 One of our planning scenarios shows that if 6 we did borrow a billion dollars today, even at 7 low interest rates, by year 11 of this project, 8 every dollar appropriated by the Legislature 9 would be going to debt service, leaving Florida 10 out of the ball game at that critical point 11 when the construction phase kicks in to full 12 gear. 13 We cannot allow our eagerness to accelerate 14 land acquisition today, which is a good agenda, 15 but we cannot allow that to create a situation 16 in the future that precludes a pay-as-you-go 17 plan for the second decade of this project. 18 Then, of course, there are some practical 19 considerations. We know with some certainty 20 how many total acres we're going to need to do 21 the Everglades restoration. 22 As of today, however, the project footprint 23 has not yet been determined for half of the 24 total acreage required. In other words, we 25 cannot yet tell you where we will need half of ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 164 2 Now, I would point out that this is the 3 result of adaptive management. And as the 4 program proceeds, it also has the salutary 5 effect of controlling land prices, but keeping 6 more options open and in play. 7 It's no different than the Department of 8 Transportation keeping several road alignments 9 available until they determine the best public 10 interest and best public value. 11 On the political front, allow me to advise 12 you, if I might, this political consideration 13 regarding Florida's status compared to future 14 Congressional appropriations. 15 The Federal Water Resources Development Act 16 that authorizes Everglades restoration requires 17 a truing up of State and Federal investments 18 every five years. 19 In the unlikely event that we could 20 actually responsibly spend a billion dollars 21 over the next four or five years, it could 22 potentially put Florida so far out in front 23 ahead of the Federal contributions, that it 24 would be a legitimate fear that the Federal 25 government simply might never catch up. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 165 2 Not a single acquisition has been lost because 3 of a lack of resources thus far. And if the 4 205 million dollars already appropriated to the 5 Everglades Restoration Trust Fund, 87 million 6 is now encumbered, leaving a current balance of 7 118 billion dollars. 8 And next fiscal year, under our current 9 funding plan, 305 million dollars will have 10 been specifically appropriated. This does not 11 include other acquisition dollars from other 12 programs, appropriations that are used to 13 purchase lands and count towards Florida's 14 50 percent share, and it does not include the 15 153 million dollars being spent by local 16 governments as part of our acquisition and cost 17 sharing programs. 18 Now -- 19 GOVERNOR BUSH: Almost finished? 20 MR. STRUHS: I am. 21 This does not mean, of course, that we 22 should dismiss the idea of borrowing money in 23 the future. If we can demonstrate in a 24 particular circumstance that it makes sense, 25 and we can save money, then we should pursue ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 166 2 But for now, our advice is simply to stay 3 the course. We've planned to work, now let us 4 work the plan. 5 GOVERNOR BUSH: Thank you. 6 Any -- 7 SECRETARY HARRIS: I love the adapted 8 management. 9 If you know what half of the acreage is, 10 it's 149,000 acres that you are going to 11 acquire by 2010, and it's going to cost you've 12 estimated a billion six in 2001 dollars, if you 13 were able to borrow half of that much to 14 purchase the half of the acreage that you know 15 exists. So rather than four years, it would 16 only be two years. You would dramatically 17 lower the amount of interest that would be 18 owned -- I mean, I think it's still a way that 19 you could take a look at it. 20 And I understand the -- 21 MR. STRUHS: Right. 22 SECRETARY HARRIS: -- aspect of what you 23 just mentioned about getting ahead of the 24 Federal government, per se. I mean, that 25 might be a way to continue to look at it, ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 167 2 to that. 3 MR. STRUHS: It -- it is. And -- and we -- 4 we will do that. 5 We have a pretty clear idea of which 6 parcels are on our list now, and how we were 7 going to space them out over the next three or 8 four years. 9 And if we look at the money that's in the 10 bank and the money that's anticipated to 11 arrive, we are, like I said, on schedule and in 12 the black. 13 So -- so I think we need to begin with the 14 presumption that we stick with the plan that's 15 been working thus far, but not out of hand 16 dismiss entirely the idea of borrowing money 17 strategically if we can demonstrate that it 18 makes sense for a particular acquisition. 19 And I think our -- our discussions with 20 outside interest groups will focus on how and 21 when and where to set up -- up the mechanisms 22 that would accomplish that in the event it's 23 needed in the future. 24 SECRETARY HARRIS: Secretary, when we -- 25 when we met last time, in the Area of Critical ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 168 2 a -- it sounded like a viable idea because -- 3 because of these issues, 2001 dollars, 4 ten years out, all these kinds of things. 5 But now we've heard some of the testimony, 6 it seems that, number one, it's very intrusive 7 to private property right owners, as well as to 8 local governments. It's -- it's -- the time 9 has extended, the uncertainty is extended. 10 I'm not quite sure why -- can you -- can 11 you just revisit -- last -- last Cabinet 12 meeting, we -- we bought this acreage that 13 prompted this discussion basically by the foot, 14 rather than by the acre. 15 And if, indeed, as these -- the counties 16 that are most dramatically affected have come 17 forward today and have expressed their close 18 relationship with DCA and how they wish to 19 continue to work and not moving urban 20 boundaries out, you know, why did we go that 21 far; and is there another way -- I don't 22 necessarily agree with these -- you know, that 23 this issue of creating an area of -- with 24 stronger regulatory issues and being more 25 intrusive, is there a way that we can work with ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 169 2 the future, is there some kind of ordinance, 3 resolution, something they could pass that will 4 strengthen the perception of those urban 5 boundaries that they're firm so that we're not 6 pressured, or from a perception issue, that 7 we're afraid that this acreage is going to be 8 purchased, so we're going to be paying so very 9 much more? 10 (Commissioner Bronson exited the room.) 11 MR. STRUHS: Right. 12 Secretary Harris, what I would say in 13 response to that is, I would not underestimate 14 the power of what you've accomplished today 15 just by having this conversation. 16 I think it is probably the first time in 17 anybody's memory that you actually have the 18 three or four key counties in the same room, 19 with the two key State agencies, and the 20 Water Management District, and the Board of 21 Trustees together having this conversation 22 directly. 23 And I think what we would learn from 24 today's discussion is that it's, on the one 25 hand, unfair for us to deionize the counties, ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 170 2 driving up land values, because, in fact, they 3 have a very prudent and responsible record. 4 On the other hand, I think we've -- we've 5 sent our message loud and clear, which is that 6 we need to make sure that we are better 7 coordinated. 8 And I think what I heard from 9 Secretary Seibert in terms of their resolve, 10 using their existing authority, is without it 11 going into a two-year process to create a 12 designation is -- is exactly right. 13 What we heard from the Water Management 14 District in terms of using their existing 15 regulatory authority, and doing it in a 16 collaborative way with all the interests, and 17 actually make sure that any development that 18 does occur adjacent to the Everglades has no 19 negative consequence on ground or surface water 20 flows is exactly the right way to go. 21 And currently, our Department has gotten 22 the message as well, in terms of making sure 23 that we are diligent in -- in identifying the 24 very best value. 25 One of the things that Teresa asked me to ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 171 2 the next Cabinet meeting on August 28th, we are 3 having the second in a series of workshops, and 4 that is focused on appraisals, so that you will 5 learn from our experience how we make it work, 6 and how we don't. 7 And then you can obviously offer your own 8 observations and -- and recommendations. And 9 that would be a critical part of our result. 10 In closing, I think the very fact that you 11 as a Cabinet brought all of us together here 12 and are focused on this in a laser-like way 13 will make an important difference. 14 SECRETARY HARRIS: I think the leadership 15 that you've seen, particularly by the 16 Comptroller and the Governor as focusing on 17 these prices has sponsored it. 18 And I'm also shocked we've never gotten 19 everybody together like this. But I'm pleased, 20 and commend you for -- for doing it. 21 And I -- hopefully the message is loud and 22 clear from the State, and it seems to be 23 echoing back to the Counties so that we're not 24 going to put in untenable positions that we 25 think we have to -- we're being threatened with ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 172 2 developed. 3 MR. STRUHS: And I'd like to say one -- one 4 quick comment, sir -- 5 (Commissioner Bronson entered the room.) 6 MR. STRUHS: -- and that is, if -- if 7 you -- if you -- 8 GOVERNOR BUSH: We're going to be here till 9 10:00 at night. 10 MR. STRUHS: -- if -- if you look at the 11 acquisitions that are poised in the que for the 12 next few years, these will be, by definition, 13 the highest priced acquisitions, because they 14 are the ones that are occurring in most 15 urbanized counties. 16 But we looked at the longer term future. 17 That's not to say they won't be expensive, it's 18 not to say we won't be diligent, but they will 19 be more value lands. 20 SECRETARY HARRIS: I just wanted to say, I 21 thought the designation went too far, and -- 22 with all this meeting today, we've accomplished 23 a lot. 24 MR. STRUHS: Thank you. 25 GOVERNOR BUSH: Thank you. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 173 2 I could -- I could just add one thing real 3 quickly, David. 4 I wish to commend yourself also, the 5 Secretary, and Jane Goodman, which in -- in 6 bringing this issue up. And I'm surprised, 7 just in the few short weeks since Stuart, you 8 were able to put this whole thing together. 9 The only question I have is that -- right 10 now is -- as you brought up valuation. We 11 heard from the representative of Dade County 12 pertaining to the particular item that we voted 13 on on our last meeting in Stuart as to whether 14 or not the value, was that really a correct 15 value that we put on. 16 If he said it was one unit in every 5 acres 17 we ended up buying, as the Governor said, five 18 units per 1 acre, has that deal actually 19 been -- has a check been sent out yet? 20 I don't -- I doubt it. 21 MR. STRUHS: I don't -- I don't believe it 22 has, no. 23 GOVERNOR BUSH: Update. 24 ATTORNEY GENERAL BUTTERWORTH: No, we're 25 not that good. We're good, but we're not that ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 174 2 GOVERNOR BUSH: It'd be pretty impressive. 3 ATTORNEY GENERAL BUTTERWORTH: But -- if -- 4 if the owner of the property -- 5 MR. STRUHS: The answer's no. 6 ATTORNEY GENERAL BUTTERWORTH: It has not 7 gone out yet. 8 MR. STRUHS: My guess is, no. 9 ATTORNEY GENERAL BUTTERWORTH: Can you find 10 out be-- before 10:00 o'clock tonight as to -- 11 the meeting dates -- as to whose valuation 12 might be correct, because at the last meeting 13 we had. 14 And I think we terminate -- until we close 15 this agenda item, I believe that we can still 16 move to reconsider. 17 So -- so, Governor, I'd like to get more 18 information on this, and leave -- at the 19 appropriate time, move to keep the 20 Administration Commission agenda open to the 21 end of this meeting. 22 GOVERNOR BUSH: Wouldn't it be -- wouldn't 23 it be the Board of Trustees agenda? 24 MR. STRUHS: Yes, sir. 25 ATTORNEY GENERAL BUTTERWORTH: But ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 175 2 The Board of Trustees agenda. 3 MR. STRUHS: We'll get that information, 4 General. 5 GOVERNOR BUSH: Are there any other 6 speakers? 7 MS. TINKER: Yes, sir. 8 We have three environmental groups 9 represented, two speakers from the 10 Audubon Society: Erin Deady, and Charles Lee. 11 I'm sorry if I mispronounced your name. 12 MS. DEADY: That's okay. 13 GOVERNOR BUSH: Three-minute rule. 14 Charles. 15 MS. DEADY: Erin Deady, Audubon of Florida. 16 I've handed in my presentation, so 17 hopefully that's gotten to you, that you can 18 flip through that with me. 19 Did that go out? 20 Maybe. 21 I'd like to first start out in a summary. 22 Audubon, we really feel that there is an urgent 23 need for a billion dollars of land acquisition 24 by 2006. This is something that no one really 25 contests in the CERP implementation plan that ACCURATE STENOTYPE REPORTERS, INC.
2 Currently there is no land acquisition 3 strategy for the District. I do know that they 4 are working on one, and a draft is in progress. 5 But right now, there is no plan. 6 And the Water Preserve Area's components of 7 the CERP restoration program are those that are 8 less susceptible to being lost. 9 Obviously, my presentation, I point out the 10 history of the Water Preserve Areas. I'm sure 11 you're very familiar with that. 12 But one thing I do want to point out is -- 13 (Attorney General Butterworth exited the 14 room.) 15 MS. DEADY: -- that a Water Preserve Area's 16 Feasibility Study is due out any day. And this 17 is the road map. Essentially this is 18 land buying equitable to that which you need 19 for Department of Transportation building a 20 road. 21 These footprints aren't flexible. The 22 lands need to be purchased. 23 This series of components is obviously 24 going to catch a water loss to tide, it's going 25 to provide supply benefits, and environmental ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 177 2 But we're in a development race against the 3 train, so to speak. I've pointed out in my 4 presentation some obstacles to acquisition. 5 Currently, as I've mentioned, there is no 6 final land acquisition strategy. And 7 contingent with that, we would -- we would put 8 forward that there is not a secured funding 9 source, and I will articulate that a bit more 10 towards the end of my presentation. 11 And we also have speculated values of the 12 land. 13 I can point to some specific examples which 14 will be further mentioned by my peers. 15 Acme Basin B is, in fact, one of those pieces 16 of land, a deal that has slipped away, so to 17 speak. 18 The Wald property we're familiar with. I 19 would urge you to not reconsider that purchase, 20 and to please move forward with it. It is in 21 the Bird Drive area recharge component of the 22 CERP. The footprint is fairly defined. 23 And also I'd like to point out in just 24 looking at the water preserve areas map, there 25 should be a South 6. There's a South 5, ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 178 2 Because the land is developed, we've already 3 lost that. 4 One chart that I have included in here was 5 provided to me by the Water Management 6 District. It gives a status update of where 7 they are with acquisitions in the water 8 preserve areas project. We're about 40 percent 9 of the way acquired, 26 percent in Dade, 10 61 percent in Broward, 49 percent in 11 Palm Beach. 12 The bulk of the purchases of the water 13 preserve areas is scheduled to be completed by 14 2004, with the exception of the ag reserve in 15 2005. 16 And another concern that I have is the 17 Bird Drive area recharge component, where the 18 Wald property is located. That is not 19 scheduled for completion until 2009. 20 This is something that we really need to 21 look at. If we have concerns about escalating 22 land values with that purchase, maybe we should 23 expedite and not have a completion date of 24 2009. 25 I've included in here just a snippet from ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 179 2 which is land acquisition. 3 So I am concerned when I hear a concern 4 about the State getting out in front of the 5 Federal government on funding. The commitment 6 of the State is to fund the land acquisition. 7 Finally, I'm looking at the funding slide. 8 By 2006, 946 million dollars needs to be slated 9 for land acquisition. 10 That's a total of 105,000 acres over the 11 next five years. And currently in the 12 District's budget for FY '02, 68 million 13 dollars exists. There was a 50 million dollar 14 spending cap in the budget this year with funds 15 that were appropriated to the Save Our 16 Everglades Trust Fund. 17 So we only have 68 million dollars cash for 18 land acquisition this year. We need 19 946 million by 2006. 20 I've identified for you on the kind of 21 draft working plan, the land acquisition water 22 preserve areas components, so you can see that 23 those are scheduled for completion of both of 24 those by 2004, with -- for Bird Drive Area 25 Recharge 2009. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 180 2 the strategy. You've heard us speaking about 3 this particular bonding proposal. 4 This is a bonding as needed type thing. 5 And we're looking at a 20-year bond issue, 6 which would give us 750 million dollars up 7 front. 8 I would love to see an analysis from DEP 9 and the Water Management District on 10 acquisition and the cost benefits of that. 11 GOVERNOR BUSH: Okay. 12 MS. DEADY: So this is our potential 13 funding proposal. 14 Thank you. 15 GOVERNOR BUSH: Thanks. 16 MR. LEE: Governor, I'd like to make a 17 couple of brief points. And I can make them 18 briefer by passing out some handouts. So I'll 19 give them to you. 20 MR. SEIBERT: Here you go. 21 Here you go. 22 GOVERNOR BUSH: Steve will do it. 23 MR. SEIBERT: I'll do it. 24 MR. LEE: This is a copy of the map off of 25 the website of the Army Corps of Engineers in ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 181 2 illustrating the key -- 3 (Secretary Harris exited the room.) 4 MR. LEE: -- Everglades restoration 5 components. 6 And you'll see some of these components are 7 marked in red. 8 Governor, and members of the Commission, 9 the components that are marked in red are the 10 ones that are endangered and will continue to 11 be endangered until the land is acquired by 12 local government land use decisions, either 13 directly in or adjacent to -- and both of those 14 factors are important -- because it's not only 15 the land use changes in the WPA areas and the 16 other Everglades restoration units, but the 17 ones adjacent to them, that affect the land use 18 patterns in that area, and ultimately may come 19 back to affect the valuation question. 20 Everything in red on this map is 21 endangered. 22 All the boxes in red are components of this 23 Everglades restoration which won't take place 24 if we don't buy land, and where the land use 25 changes are going to make a compelling ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 182 2 Now, the other handout I have for you is a 3 case in point. 4 And I think it's -- it's very interesting, 5 Governor, and members of the Commission, that 6 we are here today on the 14th of -- of August. 7 Because down in Palm Beach, in Palm Beach 8 County, on the 14th of August, today, they're 9 having a County Commission meeting. 10 And one of the things they're doing at that 11 County Commission meeting is they're having 12 what's called a transmission hearing of land 13 use amendments that are affecting some parcels 14 in very close proximity to the Acme Basin B WPA 15 acquisition area, and other of the WPA areas 16 immediately adjacent to the 17 Loxahatchee Preserve. 18 They're taking existing land use 19 designations on their map, which today are at 20 10 units per acre, they're taking them -- downs 21 up so they can have five units -- I'm sorry -- 22 GOVERNOR BUSH: One unit -- 23 MR. LEE: -- one unit per 10 acres they're 24 taking out so they can have one unit per 25 5 acres. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 183 2 explain this away. They'll probably try to 3 explain this away by saying, it's just a 4 conforming amendment to existing subdivisions. 5 Remember the discussion of the Wald property, 6 the existing subdivision. 7 But the bottom line is very simple: Today, 8 Palm Beach County Commission is meeting to 9 transmit an amendment to increase the land use 10 density at the very area we're trying to 11 establish these restoration projects. 12 Now, I think it's important if you look on 13 this piece of paper to take a look at what the 14 Department of Community Affairs said in 1989 15 when this same land use amendment was proposed. 16 The Department of Community Affairs in 1989 17 objected to these land use amendments and said 18 they would propagate sprawl. 19 According to the material in the County's 20 agenda -- and I don't know if this is the exact 21 words that would actually come from the 22 Department of Community Affairs. They're -- 23 Steve's obviously here to -- to address this 24 himself. 25 But what's in the County's agenda item ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 184 2 is not objecting to this land use change. 3 Now, my purpose for bringing this to you 4 today is very simple: Governor, I spent the 5 better part of a year deliberating as a member 6 of your Growth Management Study Commission. 7 And one of the principal recommendations 8 that we made was that the State, through the 9 Department of Community Affairs, should 10 prioritize its evaluation of land use changes. 11 And what the Department of 12 Community Affairs should really be 13 concentrating on, we said -- we recommended, 14 was those areas of compelling State interest 15 that would affect a crucial statewide resource. 16 I'm here to suggest that if the Everglades 17 is not one of them, if the Everglades is not at 18 the top of that list of compelling State 19 interests, I don't know what a compelling State 20 interest is, if this isn't it. 21 My suggestion to you is a simple 22 suggestion. I think if we work through the 23 discussion of the various areas and the various 24 time lines, there might be some places where 25 that lengthy and difficult area of critical ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 185 2 the Department of Community Affairs set out to 3 evaluate that. 4 But primarily, and more particularly, 5 simply by reprioritizing the focus of the staff 6 of DCA, by bringing together a work unit, if 7 you would, within the Division of Community 8 Planning, bringing in some of the people from 9 the Water Management District who are working 10 on the Everglades restoration project to 11 supplement the information that the staff at 12 DCA has, I would suggest that -- that we could 13 do a lot of good if you, Governor, would simply 14 ask the Department of Community Affairs to 15 formally ratchet up its focus on the Everglades 16 as an area of compelling State interest, 17 establish within DCA the infrastructure to be 18 able to know what does and what does not harm 19 particular Everglades restoration units. 20 And then make sure that if we have, as we 21 do today, on the Palm Beach County Commission 22 agenda, a land use amendment, which is back to 23 back with one of these Everglades restoration 24 areas, and may affect its value or may even 25 affect the very ability to achieve it, in some ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 186 2 appropriate kind of intervention, which under 3 the Growth Management Act, they've got the 4 power to say we don't like this amendment, 5 they've got the power to bring that amendment 6 to you for your consideration. Those are among 7 the things we would hope DCA would be doing. 8 This is a good place to start looking. 9 Perhaps they should be doing it with this 10 amendment that's on the County Commission 11 agenda today. 12 But moreover, what I would ask is that you 13 consider applying that compelling State 14 interest concept directly to the Everglades so 15 that we can begin, one, implementing the 16 concept that we recommended as the Growth 17 Management Commission; and, two, we can get out 18 ahead of some of these Everglades issues in a 19 way that will hopefully preclude some of the 20 land use and value changes that will otherwise 21 impede this property. 22 Finally, I'll say, Erin Deady, my colleague 23 who preceded me, in my view, is right. We need 24 to improve the speed of this land acquisition 25 program. There are 105,000 acres of known ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 187 2 that are at the core of each of these projects 3 that are outlined in red on this sheet. 4 This is where the rubber meets the road. 5 Everglades restoration is either going to 6 be real, or Everglades restoration is going to 7 be a mirage, based on the achievement of the 8 acquisition of that 105,000 acres. 9 The time line for the acquisition is 10 spelled out in CERP. It's the next five years. 11 We'll either have the footprint to build these 12 reservoirs, just like DOT has to have a 13 right-of-way for a highway. They can't build 14 the highway without the right-of-way. We can't 15 build the reservoir without the footprint. 16 We'll either own it in the next five years, 17 in which case Everglades restoration will be 18 real; or we won't own it. 19 And it's a pretty amenable fact. And -- 20 and I think we need to move with more dispatch, 21 more funding, more seriousness than we're 22 moving now. 23 This isn't how DOT buys road right-of-ways. 24 We need to be looking at figuring out how we 25 can get the acquisition of these areas into a ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 188 2 as if it was -- this was the new 3 West Town Expressway. 4 Otherwise, we're not going to be there. 5 GOVERNOR BUSH: Thank you, Charles. 6 MR. LEE: And -- 7 MS. TINKER: Two final speakers: 8 Charles Pattison, representing 1,000 Friends of 9 Florida; followed by Richard Grosso, 10 representing the Everglades Coalition. 11 MR. PATTISON: Governor, I gave Charles Lee 12 my 2 minutes. So I only have one left. 13 GOVERNOR BUSH: You'll be the only one to 14 comply with my humble wish, too. 15 MR. PATTISON: Just a real quick point that 16 Secretary Harris raised. 17 There is something short of an Area of 18 Critical State Concern. It's called a Resource 19 Planning Management Committee. That's 20 something that you have the ability to 21 designate a group of local government, State 22 agencies, possibly Federal agencies, local 23 people, to work through and identify issues 24 like this that can voluntarily be worked in the 25 comprehensive plans without going the next step ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 189 2 I think that's a -- a key thing. There is 3 one other group that potentially could do 4 something like that. It's a creature of the 5 South Florida Water Management District. 6 They've appointed 45 of us to sit on something 7 called the Water Resources Advisory Commission. 8 I think it'll be useful. 9 Unfortunately I would just tell you that 10 growth management of land use issues are 11 seventh on the priority list, and we think we 12 might get to two or three. 13 This is a tough issue. I think the 14 coordination is great, but it won't happen in 15 one meeting. It's something that has to be -- 16 (Attorney General Butterworth entered the 17 room.) 18 MR. PATTISON: -- reenforced continuously. 19 Potentially, the Resource Committee could do 20 that. 21 We thank you for looking at this. It is 22 real. There are 2 million people alone that 23 will be coming to Palm Beach, Broward, and Dade 24 in the next 20 years. 25 Thank you. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 190 2 MR. GROSSO: Thank you, Governor, members 3 of the Commission. 4 Richard Grosso. 5 Thank you for indulging me as the last 6 speaker. I'm representing the Everglades 7 Coalition today. 8 And we've written you a letter that you 9 would have in your files. 10 Two things we want you to understand about 11 Everglades restoration. Number one, for as 12 long as people have been studying it, they've 13 been saying, the critical missing factor is 14 linking land use decisions to restoration and 15 water decisions. 16 Number two, the plan, as you've approved 17 it, as Congress has approved it, by all 18 accounts needs to be improved, through adaptive 19 management. We're relying on water 20 technologies that won't pan out perhaps, in 21 which case we're going to need more land than 22 we're counting on now. If we can't secure the 23 lands we know now that we need, improvement 24 won't be an option. 25 Everglades restoration cannot happen, ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 191 2 The Coalition says to you: Do two things, 3 but Audubon tells you about acquisition. Let's 4 make sure we're doing it as fast as we possibly 5 can. If we don't buy the lands, we simply 6 can't restore it. 7 Number two, something short of an Area of 8 Critical Area designation. You have -- DCA has 9 had the authority since 1985, under the 10 existing Growth Management Act, to enforce the 11 Act in western Dade, Broward, Palm Beach, 12 Martin, and St. Lucie Counties. 13 For all sorts of independent reasons, it's 14 urban sprawl, it inhibits the infill of 15 redevelopment, it costs more to provide 16 services out there, it takes up habitat, it 17 chews up farmland. 18 All those independent reasons, comp plan 19 amendments that would impact the Water Preserve 20 Areas, or areas adjacent and nearby to them, 21 should be found out of compliance with the 22 Growth Management Act, should not be adopted in 23 the first place. 24 We urge you in the strongest possible terms 25 to direct DCA to, with zeal, enforce the Growth ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 192 2 plan amendments that compromise Everglades 3 restoration at all. 4 And before that, please send the -- the 5 message -- which I think you've gone a long way 6 today -- to the local governments that tell 7 them, the State will strictly scrutinize such 8 plan amendments. Please don't adopt them in 9 the first place, because that is a State 10 objective. 11 That's why the Act was adopted, so that 12 State objectives, like destroying the 13 Everglades, and the State investments, won't be 14 undermined by -- by local land use decisions. 15 The State has every right. 16 We will often disagree with DCA, with 17 Palm Beach County, with Dade County, with 18 Martin, with St. Lucie when they say they've 19 done all they can in the land use planning 20 realm to protect the Everglades. We're going 21 to have a lot of dispute there. 22 There's an awful lot of planning decisions 23 currently on the table, or on the table in the 24 near future, in Palm Beach, in Martin, in Dade. 25 And we say, please tell DCA, hold the line, ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 193 2 let amendments pass that are going to 3 compromise restoration. Because it's not just 4 the Water Preserve Areas, it's the areas that 5 surround them, that are habitat, that impact 6 the water resources and the Water Preserve 7 Areas. 8 That's the focus, State enforcement. We 9 have all the existing authority we need under 10 the Growth Management Act. It just requires, 11 as Charles Lee says, that focused State 12 enforcement, that belief by DCA that it's okay 13 to do their job and enforce the Act in 14 southeast Florida, because this is a compelling 15 State interest. 16 With that, we hope you will send that 17 strong message. The Everglades Coalition 18 believes very strongly that you've done the 19 right thing by raising this issue and elevating 20 it. 21 It's a -- it's -- it's time has come. 22 And -- and we hope the issue won't go away, we 23 hope you'll -- you'll ride herd on the 24 agencies, and make sure that your investment in 25 Everglades restoration is -- pays off. ACCURATE STENOTYPE REPORTERS, INC. ADMINISTRATION COMMISSION 194 2 really appreciate it. 3 GOVERNOR BUSH: Thank you very much. 4 MS. TINKER: That concludes the -- 5 GOVERNOR BUSH: Teresa, thank you. 6 This was a good discussion. And there's a 7 lot of -- this will not go away. This is an 8 issue of great importance to the State. And 9 whether it's the price or the -- the absorption 10 rate of our purchasing, we need to make -- 11 spend some time to build a consensus on where 12 to from here. 13 There's a lot -- lot of work to do, 14 Mr. Secretary. 15 Hope you were listening. 16 MR. SEIBERT: Yes, Governor. 17 MS. TINKER: Thank you. 18 GOVERNOR BUSH: Thank you. 19 (The Administration Commission Agenda was 20 concluded.) 21 * * * 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC. 195 2 3 4 5 STATE OF FLORIDA: 6 COUNTY OF LEON: 7 I, LAURIE L. GILBERT, do hereby certify that 8 the foregoing proceedings were taken before me at the 9 time and place therein designated; that my shorthand 10 notes were thereafter translated; and the foregoing 11 pages numbered 119 through 194 are a true and correct 12 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 24TH day of AUGUST, 2001. 18 19
APPEARANCES:
ACCURATE STENOTYPE REPORTERS, INC. 198
ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 199 2 GOVERNOR BUSH: Board of Trustees. 3 (Discussion off the record.) 4 (Recess.) 5 (Commissioner Crist not present in the 6 room.) 7 GOVERNOR BUSH: Board of Trustees. 8 MR. STRUHS: Item 1 is approval of the 9 minutes. 10 TREASURER GALLAGHER: Motion. 11 GOVERNOR BUSH: Moved and seconded. 12 Without objection, it's approved. 13 MR. STRUHS: I would recommend we take two 14 items out of order. I'd like to move Item 7 to 15 the top of the list, followed immediately by 16 Item 9. That would allow Mayor Partyka and 17 Mayor Sullivan, and Representative Bense from 18 having to wait, and to get back down to 19 business. 20 GOVERNOR BUSH: Okay. 21 (Commissioner Crist entered the room.) 22 MR. STRUHS: Item 7, if you would turn your 23 attention to that one, please. 24 GOVERNOR BUSH: Go ahead, David. 25 MR. STRUHS: Item 7, we're recommending a ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 200 2 And I would like to tell you a little bit 3 of the history, beginning with the fact that's 4 it's an excellent project. It is one that 5 people can't help but be excited about. 6 Well, what this project does is it -- 7 GOVERNOR BUSH: I think it's going downhill 8 from here, it sounds like. 9 MR. PARTYKA: Yeah. 10 MR. STRUHS: The -- the Mayor and I have 11 discussed this in some detail already. 12 This represents an emerging new issue for 13 our greenways and trails program in Florida, 14 because we're moving now more away from -- away 15 from the linear acquisitions, and more towards 16 buying the trailheads that then give us access 17 to those trails and greenways. 18 One of the reasons we're recommending a 19 denial is that this will -- if it were to go 20 forward, will consume fully one-third of the 21 annual greenways and trails budget this year. 22 And, in fact, there is an existing access 23 to this very trail just 2.5 miles away from the 24 one that's been proposed here. 25 The other thing that is somewhat related to ACCURATE STENOTYPE REPORTERS, INC.
2 of 1997, the City of Winter Springs, after they 3 had submitted this plan to the 4 State of Florida, rezoned the adjacent land. 5 And by rezoning for denser development, it 6 resulted in the land value doubling from 7 1.4 million to about 3.5 million. 8 And that is one of the things that I think 9 is -- is the kind of piece of information that 10 you need to be aware of when you -- when you 11 make your decision. 12 Having said that, it's a marvelous trail. 13 It gets 12,000 users every month, it's an 14 excellent location, excellent design, it's well 15 integrated into their urban plan. 16 And Mayor Partyka will make a compelling 17 argument that one of the things you need to 18 consider is not just the value of the land, but 19 the number of citizens served. And that these 20 trailheads, and urban areas, while more 21 expensive, will likely provide more 22 opportunities to -- to users. 23 TREASURER GALLAGHER: Can I ask you -- 24 GOVERNOR BUSH: Yes, sir. 25 TREASURER GALLAGHER: -- would you repeat ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 202 2 We have a piece of property sort of in -- 3 downtown. 4 MR. STRUHS: Yes. 5 TREASURER GALLAGHER: And the -- who -- who 6 upgraded the -- who upgraded the -- 7 MR. STRUHS: The City of Winter Springs. 8 TREASURER GALLAGHER: So the City of 9 Winter Springs took an area that they want to 10 buy, that they want us to participate in 11 buying. 12 MR. STRUHS: Well, they -- they -- we would 13 buy the entire parcel. We would buy the entire 14 parcel. 15 TREASURER GALLAGHER: We buy -- well, the 16 State buys it. 17 MR. STRUHS: There -- there's no local 18 management to the acquisition. 19 TREASURER GALLAGHER: Right. So the State 20 buys the whole project. 21 MR. STRUHS: Yes, sir. 22 TREASURER GALLAGHER: And prior -- when did 23 the -- in the scheme of things did they 24 increase the zoning? 25 MR. STRUHS: Application for the project ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 203 2 TREASURER GALLAGHER: The application comes 3 to the State. 4 MR. STRUHS: For this project, yes, sir. 5 MS. ARMSTRONG: Different parcel. 6 MR. STRUHS: A different parcel? 7 Okay. The parcel immediately -- 8 MS. ARMSTRONG: It was rejected. 9 MR. STRUHS: -- to the north. 10 MS. ARMSTRONG: Right. 11 MR. STRUHS: It was the adjacent parcel 12 that was rejected. 13 TREASURER GALLAGHER: Which, of course, ran 14 the -- 15 MR. STRUHS: Yes, sir. 16 TREASURER GALLAGHER: -- value of this up 17 that we're supposed to buy. 18 MR. STRUHS: Right. 19 TREASURER GALLAGHER: This is -- why can't 20 we be the government in this one? 21 GOVERNOR BUSH: Let's go. 22 MR. STRUHS: Having said that, this does 23 not reflect on the quality of the project, 24 which is a -- which is a first rate project. 25 TREASURER GALLAGHER: No. Just -- just the ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 204 2 MR. STRUHS: I'd like to invite 3 Mayor Partyka to -- to come up here. 4 And then, Mayor, if you would do the honors 5 of -- 6 MR. PARTYKA: Yes. 7 MR. STRUHS: -- of introducing your -- your 8 guests. 9 MR. PARTYKA: Yes. 10 MR. STRUHS: And if you could also advise 11 them to be expeditious. 12 GOVERNOR BUSH: Welcome, Mayor. 13 MR. PARTYKA: Yeah. 14 Thank you. Thank you, Governor. 15 Thank you, Governor. 16 And I should say -- good -- good afternoon. 17 I had planned for good morning. 18 And I also want to thank the Governor and 19 also the Cabinet, as members of the Board of 20 Trustees, for allowing us to speak. And we 21 have talked among our-- ourselves, and we'll 22 try to speed this thing up, but give you a 23 nice, thorough, brief, exciting summary on all 24 this. 25 What I'd like to do, first of all, is to ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 205 2 cases, they've taken a day out of their work, 3 Commissioners to come up. And I'd just -- just 4 like to introduce that. 5 We have Deputy Mayor Commissioner, 6 David McLeod. 7 Okay. If he could come up here, and he'll 8 be the support. 9 Commissioner Martinez is going to be coming 10 up. 11 Commiss-- Commissioner of the City, 12 Gennell. And, Commissioner Gennell, I'm so 13 glad. She's also the -- the Chairperson for 14 the Greenway and Trails Advisory Board in 15 Seminole County. 16 She's also the Chair of the CALNO group, 17 which is representatives of all the cities in 18 Seminole County. 19 And we also would have had 20 Commissioner Blake here. He was with us 21 yesterday, but had to go to Chicago for some 22 personal business. 23 We have our City Manager here, which is 24 Ron McLemore. 25 We also have Jerry Sansom, who's our ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 206 2 Then in addition to that, we're going to 3 have some people -- and wishing to speak, but 4 they're visitors with us, and represent the 5 Greenway and Trails Advisory Board. They also 6 represent the -- Central Florida Dressage 7 Association. And we also have letters of 8 support from Seminole County Commission, and 9 also from the Florida Trails Association, and 10 also from the Greenway and Trails Council. 11 So, as you can see, we have a lot of things 12 going on. 13 But let me tell you, I -- I -- I apologize 14 for the fact that we're doing this in an 15 afternoon. I would have liked for this -- to 16 do this in an afternoon, a productive morning. 17 Instead of giving you food for the body, 18 we're going to try to give you a little food 19 for thought. 20 So hopefully we'll get some clarification 21 in terms of what we want to do. 22 Now, why are we here? We're here to 23 talk -- what we're calling the Central Winds 24 Trailhead Regional Project. And we're talking 25 about a project that's part of the ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 207 2 The project is important for this region. 3 This I believe is the first urban trailhead 4 project that DEP will be getting involved in. 5 Because of that, it is critical to 6 understand that this is not your typical 7 trailhead in the middle of the backwoods, but 8 right in the middle of a major urban 9 development project that will impact hundreds 10 of thousands of people. 11 This trailhead is a confluence of many 12 cities and areas. People will be coming from 13 Oviedo, Longwood, Casselberry, Lake Mary, 14 unincorporated Seminole County, and 15 Orange County. 16 This is not some small project in 17 Winter Springs for the sole use of the 18 citizens, but as a regional project that 19 happens to be in Winter Springs. 20 We have already -- have incorporated the 21 Cross Seminole Trail as a part of our city. 22 And we want to continue to have the 23 infrastructure to support this wonderful 24 program. 25 As part of our infrastructure plan, we have ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 208 2 and parking for the visitors. 3 The trailhead would be part of the 4 infrastructure that will be the productivity to 5 people with the trail. 6 Without this infrastructure, where will 7 the -- the people park, where will they meet, 8 where will they go to the bathroom. It could 9 be a real mess. 10 And as you can see, this scenario cannot 11 happen. Think of this as a railroad without 12 any stations. 13 And that's the consideration here. We want 14 to make sure we support that infrastructure. 15 Now, one other area that's important to 16 consider is the cost of the land. I happen to 17 be a real estate broker with Realvest Partners, 18 and do work with other cities, such as 19 Kissimmee Airport, DeBary, and Port Canaveral. 20 I agree with the DEP staff that this may be 21 the most expensive land that they will buy. 22 Interestingly -- interestingly enough, they 23 also think this is a very good project, and 24 actually has been rated very, very high, 25 in fact, top three of the projects. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 209 2 let's compare some pricing of land. 3 First of all, the price of this land is 4 roughly $4 a square foot. Several hundred 5 yards away, the land is appraised at $9 a foot, 6 and, again, nearby land is listed at $12 a 7 foot. 8 Up and down the Route 434 corridor, which 9 is our main highway, the land is priced in the 10 5 to $6 range throughout. And if you bid like 11 that -- 12 GOVERNOR BUSH: This is -- I think this is 13 where -- maybe I'm wrong, but I think everybody 14 generally -- we've been supportive of this 15 project. 16 MR. PARTYKA: Good. 17 GOVERNOR BUSH: We've put money in already. 18 Why don't we get to the part that might be of 19 most concern, which is this price -- 20 MR. PARTYKA: Right. 21 GOVERNOR BUSH: -- and the amount of money 22 that -- the -- the source of money, how much 23 this takes of the entire -- 24 MR. PARTYKA: Uh-hum. 25 GOVERNOR BUSH: -- budget -- the annual ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 210 2 MR. PARTYKA: Right. 3 GOVERNOR BUSH: So maybe -- those are the 4 two issues that I think -- 5 MR. PARTYKA: Okay. Well, let me -- if I 6 may -- if I -- 7 GOVERNOR BUSH: Give us -- give us your -- 8 MR. PARTYKA: -- knowledge, okay? 9 GOVERNOR BUSH: Four bucks a foot. 10 MR. PARTYKA: We're dealing -- 11 Okay. We're dealing with prices that's an 12 urban setting, all right? We're dealing with 13 land that's going to be higher because it's 14 urban -- 15 GOVERNOR BUSH: Is there any property in -- 16 in the -- in the immediate area that could be 17 used -- I mean, you're -- we -- 18 MR. PARTYKA: We -- we have looked at every 19 single possibility. In fact, the land around 20 Black Hammock -- the trailhead that we have 21 currently three-and-a-half miles away, the land 22 is priced at $5 to $12 a foot, right adjacent 23 properties. 24 So even if we wanted to do that, we're in 25 the same situation. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 211 2 we're trying to do is incorporate this entire 3 trail system and infrastructure as part again 4 of the -- of our downtown total regional 5 project -- 6 GOVERNOR BUSH: Right. Which -- 7 MR. PARTYKA: -- which is very important. 8 GOVERNOR BUSH: -- is the second -- or 9 third question I had. 10 MR. PARTYKA: Right. 11 Now -- 12 GOVERNOR BUSH: Now -- 13 MR. PARTYKA: Let me -- let me share one 14 more piece, Governor. And I think this is 15 important. 16 And I'm going to use the analogy of the 17 Super Bowl. 18 Too many times, people look at the price 19 and say, is the price a fair price? I think 20 the price is a fair price on a comparison 21 basis. 22 Now, the real question is value for the 23 dollar, the buck. Value for the buck. And 24 that's what you've got to do. 25 Quality of the dollar. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 212 2 achieve where there's going to be hundreds of 3 thousands of people literally coming to this 4 location. 5 Think of it as the Super Bowl. The 6 Super Bowl advertises literally millions of 7 dollars worth of commercials on an absolute -- 8 since it's higher than other commercials. 9 But they achieve on a per person basis 10 value because they reach so many more people. 11 What we're trying to do here is exactly the 12 same thing is, that on a dollar per basis, it 13 may be higher; but on a per person basis, it 14 actually represents a better value than if you 15 call that dollar a square foot plan in 16 Chuluota, or somewhere in unincorporated 17 Seminole County. 18 And so the point of all this is, you really 19 will have impact on a region of people that 20 represents hundreds of thousands of people that 21 will be using this on a regular basis. 22 So when you break it down to a per dollar 23 basis, it's really cheaper. So when you think 24 of it as a weighted factor, it may take 25 one-third of the local budget, but it actually ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 213 2 ten times your normal project. 3 GOVERNOR BUSH: Yeah, General. 4 COMPTROLLER MILLIGAN: I have before me, 5 Mayor, a -- 6 MR. PARTYKA: Yes. 7 COMPTROLLER MILLIGAN: -- and I'm not sure 8 if the rest of the members have seen this. 9 MR. PARTYKA: Uh-hum. 10 COMPTROLLER MILLIGAN: It's called 11 Option B. 12 MR. PARTYKA: Right. 13 COMPTROLLER MILLIGAN: And without the 14 purchase of the Spring Land tract. 15 And as I look at Option B, it contains 16 trailhead parking, paved; it contains a -- an 17 equestrian area. It contains essentially the 18 same resources that you're looking to put in 19 I guess under Option A, which is the -- the 20 purchase of the Spring Lands tract. 21 And so I -- I think I need to pass this 22 down to everybody. It is a planned Option B 23 that you've had in the -- in the mill all along 24 that doesn't require the Spring Lands Tract to 25 achieve, if not all the objectives, many of the ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 214 2 And I recognize that 26 acres of that is 3 subject to an agreement by the citizens of -- 4 MR. PARTYKA: Right. 5 COMPTROLLER MILLIGAN: -- Winter Springs. 6 MR. PARTYKA: Right. 7 COMPTROLLER MILLIGAN: The other half of it 8 is already in your possession. 9 MR. PARTYKA: In reference to this 10 property, interesting enough, this is a -- this 11 is the second option. 12 Our first option when we first planned this 13 all out included the plan that we have right 14 now, with this piece, plus the adjacent parcel. 15 And we literally had the combination of the 16 trailhead, along with parks. 17 Because of the lack of funding that -- 18 that, in fact, we didn't get, we had to go back 19 and consolidate a little bit, come out with an 20 Option 2, which is an alternative. 21 Interesting enough, the citizens of the 22 City, in effect, said, you know what, the City 23 is not giving us enough land for its active 24 recreation needs, ball parks, restrooms, fields 25 where they can practice and play. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 215 2 initiative. They have said, we're going to 3 take this to a vote on September 4th -- 4 GOVERNOR BUSH: We've got Option B that 5 could be implemented. 6 MR. PARTYKA: No. It's supposed to be used 7 only as the referendum states. It's supposed 8 to be used for active fields for the citizens. 9 COMPTROLLER MILLIGAN: Well, I -- 10 MR. PARTYKA: Yes. Yes. 11 COMPTROLLER MILLIGAN: I -- I happen to 12 have in front of me the referendum. 13 And the part to construct soccer, football, 14 baseball, and other recreational facilities. 15 MR. PARTYKA: That's correct. That's 16 correct. 17 COMPTROLLER MILLIGAN: "Other recreational" 18 facilities is a fairly broad term, including, I 19 presume, equestrian park, parking so that 20 people can use the -- the trail -- 21 MR. PARTYKA: Uh-hum. 22 COMPTROLLER MILLIGAN: -- and so forth. 23 So I -- I'm -- I'm not sure where I see 24 that the -- this 26-acre referendum is -- 25 MR. PARTYKA: If -- if you were -- if you ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 216 2 this was presented by them, we had some word 3 limitations in the referendum that we couldn't 4 say everything. 5 But everyone is aware that all these 6 people -- and we've got active support from the 7 community on this -- 8 GOVERNOR BUSH: But, in all -- 9 MR. PARTYKA: -- that -- 10 GOVERNOR BUSH: -- due respect -- 11 MR. PARTYKA: -- this is -- 12 GOVERNOR BUSH: -- due respect, the -- 13 Option B is a -- it's a parking lot. 14 MR. PARTYKA: Right. 15 GOVERNOR BUSH: That's what we're talking 16 about here is a parking lot with bathrooms. 17 You need parking lots with bathrooms. As this 18 drawing shows, it could be used with a 19 trailhead as well as for the -- the -- the 20 baseball and softball fields, correct? 21 MR. PARTYKA: Well -- 22 GOVERNOR BUSH: There's no sign of any -- 23 you have existing parking. But you could -- 24 that can also be used for that. 25 MR. PARTYKA: Well, the City -- the City, ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 217 2 3.5 million dollar referendum that the City's 3 going to be passing themselves, has been a plan 4 to actively use the park. They've already 5 signed it; developed it; and, in fact, used 6 this strictly for the active parks. 7 Yes. Oh. Let me -- let me -- let me 8 introduce -- maybe I could get a professional 9 here, instead of a politician. 10 We're going to have -- we're going to have 11 one of our specialists here that actually got 12 involved with the -- with designing this. And 13 this is Jim Avitabile. 14 Okay. 15 MR. AVITABILE: Thank you, Mayor. 16 Governor Bush, Cabinet members, if I could 17 just put a little bit of clarity to this. 18 My background is, I'm a transportation 19 professional, 22 years of experience. And 20 during that time frame, I've been involved in 21 about 150 miles of active trail projects that 22 are in place. 23 I remember the Seminole County Greenways 24 and Trails Advisory Committee was actively 25 involved in participating towards the support ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 218 2 implements the program they have in front of 3 you. 4 What we're trying to do was actually 5 illustrated in a different plan, and is much 6 different than what is in front of you in that 7 particular plan. 8 The proposal that we are looking forward to 9 on the Spring Land property is going to be a 10 truly integrated, urban trailhead. 11 The best of my knowledge -- and I have been 12 involved in projects and greenways throughout 13 the state of Florida -- I don't believe you 14 have one of these facilities anywhere in the 15 state of Florida right now. 16 You've done work for DEP, my colleagues 17 have done a lot of interactive work with DEP. 18 We talked to your staff. This is a very unique 19 proposal that we're moving forward with. 20 The one that you see there -- 21 COMPTROLLER MILLIGAN: The -- 22 MR. AVITABILE: Well, the -- yes. 23 MR. PARTYKA: Go ahead. 24 MR. AVITABILE: You want to get the map? 25 MR. PARTYKA: We're getting it right now. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 219 2 MR. AVITABILE: It's a 9-acre, totally 3 comprehensive trailhead that is going to have 4 direct access -- 5 MR. McLEMORE: They have it in front of 6 them. 7 MR. AVITABILE: -- on State Road 434. The 8 parcel in question is right here. 9 MR. McLEMORE: I think they have it in 10 front of them. 11 GOVERNOR BUSH: That doesn't show -- 12 MR. PARTYKA: They have -- 13 MR. AVITABILE: We had a small board this 14 morning. A rigid board. 15 Do you have that? 16 MR. PARTYKA: Yes. 17 GOVERNOR BUSH: This is what -- 18 MR. McLEMORE: But they have it in front of 19 them already. 20 MR. AVITABILE: -- what we're talking 21 about. 22 GOVERNOR BUSH: Oh, I know. Okay. We've 23 got that. 24 MR. AVITABILE: Okay. 25 GOVERNOR BUSH: We have that. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 220 2 it, what they were looking at earlier, it's a 3 very disjointed thing. It's much smaller 4 parking. It allows circumferal (phonetic), so 5 it is not the same with respect to what we're 6 trying to achieve for the regional performance 7 of this trails program. You've already -- 8 GOVERNOR BUSH: Here's -- 9 MR. AVITABILE: Go ahead. 10 GOVERNOR BUSH: This is not a program 11 that -- one of the questions I had, well, why 12 can't this be the community's -- the Florida 13 Community Trust purchase, which would be much 14 more in line with exactly what you're doing. 15 This is a greenway and trails program where 16 we're not talking about urban redevelopment. 17 MR. AVITABILE: I believe that -- 18 GOVERNOR BUSH: We're trying to buy -- 19 we're trying to create something of value for 20 generations to come. 21 And, again, we're back to the same issue. 22 Is it appropriate to spend 4 bucks a foot to do 23 that, when the alternatives are to -- to do 24 many other projects in this -- in this category 25 that has been cut back by -- by the ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 221 2 critical because I was supportive of this. 3 In fact, we proposed it, where we doubled the 4 amount of money going for Communities Trust 5 funding, and we cut back the -- proportionally 6 in all the other areas. 7 Did you -- did you go to the 8 Communities Trust process? 9 MR. AVITABILE: My understanding is that we 10 were unable to get into the current round, and 11 that we had a commitment already on this 12 particular parcel. And as a result of having 13 that commitment -- 14 GOVERNOR BUSH: You had a commitment from 15 whom? 16 MR. AVITABILE: From DEP. We had to seek 17 the commitment to -- 18 GOVERNOR BUSH: They're recommending 19 denial. 20 MR. AVITABILE: Right now. But I'm just 21 saying -- 22 Ron, do you want to elaborate on that 23 issue? 24 MR. McLEMORE: Let me help a little bit. 25 I'll try a little bit. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 222 2 MR. McLEMORE: All right. The plan that 3 you have in front of you is an old plan which 4 was developed as the agency has tried to 5 shuffle its priorities. The -- that plan was 6 made at a point in time in which the agency had 7 an interest in funding that property. 8 Now, when they then said, we no longer have 9 an interest in funding the Parker tract, that 10 was a decision made by the agency. We are no 11 longer interested in funding the Parker tract. 12 That's the plan you have in front of you. 13 Then -- then it was back as inventory to 14 look at for other things. 15 So as a result of that, then the -- the 16 Parker tract was -- was almost immediately 17 under contract for development. 18 So that contract -- 19 TREASURER GALLAGHER: Where's the Parker 20 tract on this? 21 MR. McLEMORE: Let me show you. 22 GOVERNOR BUSH: Let's -- that's Plan B you 23 call it. 24 TREASURER GALLAGHER: Plan -- Plan B is the 25 one in the maze that -- ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 223 2 MR. McLEMORE: Show you. 3 GOVERNOR BUSH: General, where do you get 4 all this information? 5 MR. McLEMORE: Part of the investigation. 6 Parker tract. 7 GOVERNOR BUSH: Okay. 8 TREASURER GALLAGHER: So on here, what it 9 is is this is -- all this green. 10 MR. PARTYKA: Yes. That's correct. 11 MR. McLEMORE: That is the Parker tract, 12 which we initially had approved, not the 13 funding, but approved as a project approval 14 based on its criteria -- 15 GOVERNOR BUSH: For which -- which 16 category, trails and greenways, or was it 17 the -- 18 MR. McLEMORE: Greenways and trails. 19 MR. PARTYKA: It was part of the greenway 20 and trails. 21 TREASURER GALLAGHER: The State did that -- 22 MR. McLEMORE: No. No. This was a plan 23 that was done when the agency was interested in 24 recommending funding approval for the Parker 25 tract. They asked us to bring a plan that they ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 224 2 you know, get this for the Parker property. 3 Then the policy of economic 4 consideration -- this is the piece that 5 escalated in value so much that the agency -- 6 it went from one something up to three 7 something is this tract. 8 TREASURER GALLAGHER: But that's already 9 been purchased. 10 MR. McLEMORE: This tract -- once -- 11 Yeah. This tract was under contract. 12 That contract then went through its superior 13 and due diligence, and the owners decided in -- 14 or came to us and said, we know you need it for 15 recreational area, we'd like to work out a deal 16 with you. 17 And -- but what I need you to understand 18 is, the reason we are here on this tract is 19 because the agency said they're no longer 20 interested in this tract. 21 TREASURER GALLAGHER: Let me just -- 22 GOVERNOR BUSH: Meaning B. 23 MR. McLEMORE: Off the greenways and 24 trails. 25 TREASURER GALLAGHER: They're no longer ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 225 2 GOVERNOR BUSH: David, you want to come -- 3 MR. McLEMORE: They're -- 4 GOVERNOR BUSH: -- help us? 5 MR. STRUHS: This -- 6 GOVERNOR BUSH: David, let's -- 7 MR. STRUHS: Yes. 8 COMPTROLLER MILLIGAN: -- Secretary Struhs, 9 please -- 10 MR. STRUHS: Yes, sir. 11 When -- when this proposal originally came 12 before the Department, it included two tracts. 13 At the same time it was being brought to us, it 14 was a two tract forum, one tract being known as 15 the Parker tract. Coincidental with that, the 16 City changed the zoning. 17 The effect was the value of the land jumped 18 from about 1.5 to about 3.5 million dollars. 19 When we saw the increase in value, we 20 encouraged the applicant, the City to remove 21 that tract of land, because we didn't think we 22 could afford it, and to proceed with -- and to 23 proceed with this -- with this remaining tract. 24 MR. PARTYKA: Right. 25 TREASURER GALLAGHER: So wait a minute now. ACCURATE STENOTYPE REPORTERS, INC.
2 By who? 3 MR. McLEMORE: No. It is still owned by 4 the original property owner. 5 MR. PARTYKA: Okay. We can -- 6 GOVERNOR BUSH: You -- 7 MR. PARTYKA: You need to get to the mic. 8 MR. McLEMORE: It is subject to referendum, 9 all right? 10 COMPTROLLER MILLIGAN: For the City to buy 11 it -- 12 GOVERNOR BUSH: So they rezoned it for -- 13 COMPTROLLER MILLIGAN: -- at -- 14 GOVERNOR BUSH: -- that -- 15 COMPTROLLER MILLIGAN: -- at their price of 16 3.4 million dollars, 26 acres, at what amounts 17 to about $135,000 an acre. 18 MR. McLEMORE: Well, again, the reason you 19 have the change is because that project was no 20 longer a project that the State was interested 21 in. 22 GOVERNOR BUSH: That's because you rezoned 23 it -- 24 MR. PARTYKA: It was -- 25 GOVERNOR BUSH: -- to -- you upgraded the ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 227 2 MR. McLEMORE: It was -- it was commercial 3 prior to that, and it was rezoned at the 4 town center. 5 GOVERNOR BUSH: To increase the value and 6 density -- 7 MR. McLEMORE: It was zoned -- well, you 8 could build more units on that property. 9 GOVERNOR BUSH: Right. 10 Okay. I mean, so obviously you guys didn't 11 want to buy it either. If you were granting 12 higher development rights, I mean, that's -- 13 MR. McLEMORE: You can call -- 14 TREASURER GALLAGHER: Well, higher prices. 15 MR. McLEMORE: -- I -- I think maybe one 16 thing to keep in mind is that the town center 17 is a comprehensive plan -- 18 GOVERNOR BUSH: Sure, it is. But -- but 19 you understand -- 20 MR. McLEMORE: We understand where you're 21 coming from. But that -- 22 GOVERNOR BUSH: You had to sit through 23 the -- the conversation -- 24 MR. McLEMORE: Heard -- heard it all. 25 GOVERNOR BUSH: -- so you heard the -- ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 228 2 GOVERNOR BUSH: -- this is the -- 3 MR. McLEMORE: Right. 4 GOVERNOR BUSH: -- same song, different 5 verse. 6 MR. McLEMORE: I still don't understand why 7 DCA says the compact development, which rated 8 the price of land; then over here, we say, no, 9 don't make those decisions, because it may -- 10 GOVERNOR BUSH: May -- 11 MR. McLEMORE: -- costs too much. So -- 12 GOVERNOR BUSH: Government -- 13 MR. McLEMORE: -- there seems to be a 14 contradiction. 15 TREASURER GALLAGHER: That's right. 16 GOVERNOR BUSH: That's why the people with 17 DCA would tell you is, use Florida Communities 18 Trust Program, which has been expanded to take 19 advantage of the State's generous commitment to 20 these types of projects. 21 That's what they would tell you, because 22 that has been the Legislature's change in 23 policy to expand those programs, to do exactly 24 what you're trying to do. 25 I don't think they'd say anything other ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 229 2 Right, Steve? 3 MR. SEIBERT: That's correct, Governor. 4 GOVERNOR BUSH: Thank you. 5 MR. SEIBERT: Always, Governor. 6 GOVERNOR BUSH: Just kidding. 7 MR. McLEMORE: For that reason then, that 8 plan was no longer applicable, you know, to 9 our -- to our program. 10 And then we went to the other piece of 11 property, which is the property before you 12 today, which has not really experienced that 13 large escalation in price. 14 So that I think is -- is why everybody 15 settled on this as the -- the best piece. 16 GOVERNOR BUSH: Any other comments or 17 questions? 18 ATTORNEY GENERAL BUTTERWORTH: Governor, 19 unless more people want to speak, but I think 20 the sense of the Governor and Cabinet is -- 21 where we want to go -- is where the -- 22 GOVERNOR BUSH: Yeah. I -- I'm pretty 23 convinced of what we need to do. 24 And, again, it doesn't really relate to 25 the -- I think this -- all of what you're doing ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 230 2 And we have been supportive of it in the past. 3 It's just, for whatever reason you guys 4 went on the path to try to accomplish this 5 through a -- a program that I don't think has 6 been designed to do exactly what you're trying 7 to do, a parceling in the sense that your 8 improvement fits the criteria of the -- of a -- 9 MR. PARTYKA: Well -- 10 GOVERNOR BUSH: -- greenways and trails 11 project -- 12 MR. PARTYKA: -- let -- let me ask you 13 something, Governor. 14 We're -- we're kind of a little bit stuck 15 here since we've been going through this as a 16 process, we've really -- truly feel that this 17 is -- this is part of the infrastructure to 18 support that trail. 19 Whether it has been some, let's say 20 far-reaching consequences; i.e., maybe going 21 someplace else. 22 Ultimately we're here looking for some kind 23 of State help, partnership. And part of that 24 is, we want to contribute also. 25 We're taking everything that we have at ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 231 2 acquisition to work on development of the 3 piece, as well as the long-term maintenance of 4 this property. 5 Now, from our standpoint, we'll continue to 6 do that. We've done it with the Seminole 7 Cross -- Cross Seminole Trail at this point in 8 time. We continue to do that. 9 We will do like a lot of other projects 10 have required but not been taken care of. 11 But the question is, where do we get the 12 money. If -- if basically you're saying, let's 13 transfer the acquisition of this from one, 14 which is OGT, to another over here, then our 15 experience and our trip has been worthwhile. 16 We have people that are here that are 17 supporting this. But -- 18 GOVERNOR BUSH: Maybe Secretary Seibert 19 could speak to that. 20 But I do think that your objective is to 21 revitalize a community that's growing, in all 22 sorts of ways, and -- 23 MR. PARTYKA: Right. 24 GOVERNOR BUSH: -- and you've got a -- a 25 great plan, that the way to partner with the ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 232 2 best suited for that. 3 MR. PARTYKA: Uh-hum. 4 GOVERNOR BUSH: And that -- Steve? 5 I have no clue what the process is. I just 6 know there's more money to -- 7 MR. SEIBERT: There is, Governor -- yes. 8 You're right. 9 There's one logistic issue that I need to 10 raise though, which is that yesterday we closed 11 out the application deadline for this next FCT 12 year. 13 We have a record number of applications. 14 It was 5:00 o'clock last night. 15 But I -- I just want to be honest. 16 But, yes, this is the kind of project that 17 would -- should fare well in that very 18 competitive process. 19 COMMISSIONER BRONSON: Governor, I -- 20 you know, I've gone through a number of these 21 particular programs, and especially when we 22 were looking at some issues in the Senate as 23 well. 24 And I -- I know there are two places that 25 want a horse park right now, and they're going ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 233 2 And the number of acres in that horse park 3 is much greater than this, and certainly it's 4 nowhere near the price of this. And -- and 5 they also would like, you know, something that 6 would be geared for the horse owners -- 7 MR. PARTYKA: Absolutely. 8 COMMISSIONER BRONSON: -- to go forward. 9 And -- and, you know, to go with a project 10 that's going to cost us this much money would 11 be almost a slap in the face to the people who 12 have got this other program with all this 13 acreage out there that's less total money per 14 acre by a long shot than this is. 15 So it -- it makes it tough for us to have 16 to vote on an issue of this magnitude. 17 ATTORNEY GENERAL BUTTERWORTH: Governor, 18 I'll make a motion. 19 GOVERNOR BUSH: Yes. 20 ATTORNEY GENERAL BUTTERWORTH: I'll move 21 the staff recommendation. 22 GOVERNOR BUSH: Is there a second? 23 COMMISSIONER BRONSON: Second. 24 COMPTROLLER MILLIGAN: Second. 25 GOVERNOR BUSH: Second? ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 234 2 There's a motion and a second to accept the 3 staff recommendation. 4 All in favor, say aye. 5 THE CABINET: Aye. 6 GOVERNOR BUSH: All opposed. 7 The motion is denied -- or the agenda item 8 is denied. 9 You may want to visit with 10 Secretary Seibert to see if there's any way 11 that -- 12 There isn't. 13 MR. SEIBERT: No. 14 GOVERNOR BUSH: Timing is everything. 15 MR. PARTYKA: Okay. 16 GOVERNOR BUSH: We'll work with you, as we 17 have in the past. But -- 18 MR. PARTYKA: Governor, can I just ask you 19 one thing. 20 GOVERNOR BUSH: Yeah, sure. 21 MR. PARTYKA: Is there a possibility, as an 22 alternative, to basically borrow the money from 23 OGT today, okay, and, in effect, get it from 24 Community Trusts as we go through the 25 application process? ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 235 2 we -- it's a competitive process, and there's 3 no certainty that you'll be able to get it -- 4 get it done. 5 MR. PARTYKA: Uh-hum. 6 GOVERNOR BUSH: There's much -- there's 7 much -- there are more applications than -- 8 than money -- 9 MR. PARTYKA: Okay. 10 GOVERNOR BUSH: -- even in this case. 11 MR. PARTYKA: Okay. 12 Okay. Thank you. 13 GOVERNOR BUSH: Thank you for coming. 14 MS. GENNELL: Governor, can I have a 15 minute? 16 GOVERNOR BUSH: Can you have a minute? 17 MS. GENNELL: Yeah. 18 GOVERNOR BUSH: We've already decided the 19 item -- 20 MS. GENNELL: One minute. 21 GOVERNOR BUSH: -- you can have a minute -- 22 MS. GENNELL: I know you have. 23 GOVERNOR BUSH: -- if you'd like. 24 MS. GENNELL: No. It's all right. 25 I just wanted to -- I'm Commissioner ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 236 2 and also the Chairperson of the Seminole County 3 Greenways and Trails Advisory Board. And the 4 Council -- I'm the Chairperson of the Council 5 of Local Governments in Seminole County. 6 This is to give you a little bit broader 7 perspective of what you are seeing. I 8 understand what you're looking at. 9 You're looking at something that looks very 10 urban and very much geared toward an urban type 11 renewal, or urban development type project. 12 But I think it's very important that you 13 realize that this particular trailhead location 14 is essential, as in the missing link of the 15 entire Florida National Scenic Trail and the -- 16 the National Trail. 17 There is no other good location for a 18 trailhead. 19 Now, granted, this may go all the way down 20 and be done with. And when that happens, we -- 21 the trailhead that -- that the Secretary 22 described 2.8 miles away, is, in fact, what 23 he -- he did describe it as an access place. 24 Now, the access place has 40 spaces that 25 are currently full, and there's only 3 miles of ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 237 2 eighty thousand users a month. 3 GOVERNOR BUSH: Well, again -- 4 MS. GENNELL: There'll be no place to put 5 one. 6 GOVERNOR BUSH: We -- you may want to look 7 at Option B again. 8 MS. GENNELL: Well -- 9 GOVERNOR BUSH: And based on what 10 General Milligan said, there's -- there -- 11 there seems to be some leeway there about 12 definition of what other uses might -- might 13 allow. 14 MS. GENNELL: Well, thank you very much. I 15 just wanted to -- to assure you that there's a 16 regional and a national need -- 17 GOVERNOR BUSH: Oh, we -- 18 MS. GENNELL: -- for providing the 19 infrastructure that goes with these trails. 20 And to put the trails in, people have got to 21 have a way to adequately access them. 22 Thank you. 23 GOVERNOR BUSH: Thank you. 24 ATTORNEY GENERAL BUTTERWORTH: Thank you 25 very much. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 238 2 few minutes. I'll -- 3 (Governor Bush exited the room.) 4 ATTORNEY GENERAL BUTTERWORTH: -- be 5 Chairing the meeting, David. 6 Do you want to go to Number 9 now? 7 MR. STRUHS: General, what I would like to 8 do is go off script just for a second here, if 9 I could, please. 10 One -- this is just in the realm of trying 11 to be a problem solver. We know that the City 12 of Winter Springs has approximately $750,000 13 set aside to actually construct the facilities 14 on this property should the Board of Trustees 15 choose to acquire it. 16 I wouldn't want to put the City on the spot 17 here now. But one of the things we could 18 perhaps revisit for future consideration is 19 having to reprogram that money to meet that at 20 match -- make that a contribution towards the 21 acquisition, and clearly force them to postpone 22 the actual development and construction on site 23 to some future budget year. 24 But it would show a -- a good faith 25 interest in terms of managing the cost of the ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 239 2 TREASURER GALLAGHER: I don't -- 3 General -- 4 ATTORNEY GENERAL BUTTERWORTH: Go ahead. 5 TREASURER GALLAGHER: I don't think there's 6 anything keeping you from bringing it back to 7 the Trustees. 8 MR. STRUHS: Yes, sir. 9 TREASURER GALLAGHER: I would maybe check 10 with the Aides before I bring it back next 11 meeting. 12 But -- and let the City come forward with 13 something formal before you do it. And I think 14 that we'd be willing to look at it. 15 ATTORNEY GENERAL BUTTERWORTH: David, would 16 you suggest that the City might -- it'd be 17 beneficial for them to have a deferral versus 18 a -- a denial here? 19 MR. STRUHS: Yes. 20 MR. McLEMORE: Yes, sir. 21 MR. PARTYKA: Yes. 22 MR. STRUHS: I -- 23 TREASURER GALLAGHER: I'll move to -- 24 ATTORNEY GENERAL BUTTERWORTH: -- to -- 25 TREASURER GALLAGHER: -- to defer, as ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 240 2 ATTORNEY GENERAL BUTTERWORTH: Is there a 3 second? 4 COMMISSIONER BRONSON: Second. 5 ATTORNEY GENERAL BUTTERWORTH: Okay. 6 Anyone opposed? 7 COMPTROLLER MILLIGAN: I'm not opposed. 8 The question: Defer to when? 9 TREASURER GALLAGHER: The next meeting, if 10 they have something to bring. 11 MR. PARTYKA: Okay. 12 ATTORNEY GENERAL BUTTERWORTH: Well, maybe 13 it'd just be up to them, General, as to -- 14 TREASURER GALLAGHER: Whenever they -- 15 whenever they have something that thinks -- 16 COMPTROLLER MILLIGAN: Well, fine. If it's 17 an open-ended affair, that's fine, too. 18 ATTORNEY GENERAL BUTTERWORTH: So what 19 we'll do is we'll do a motion for 20 reconsideration, it'll pass unanimously, and -- 21 and a motion to defer will then also be the 22 same vote. 23 And then Steve will bring it back -- or -- 24 or the Department will bring it back when the 25 City makes that request. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 241 2 MR. PARTYKA: Good. Thank you very much on 3 behalf of the City. 4 ATTORNEY GENERAL BUTTERWORTH: Yeah. 5 MR. PARTYKA: Appreciate that last, you 6 know, comeback. 7 Thank you. 8 ATTORNEY GENERAL BUTTERWORTH: Well, 9 sometimes David is a problem solver. Maybe 10 he'll solve more of our problems. 11 MR. STRUHS: -- more on the agency. 12 Yes, sir. If we could then take Item 13 Number 9. 14 ATTORNEY GENERAL BUTTERWORTH: The only 15 problem with Number 9, David, if you can advise 16 the City that this will take, I understand, 17 five votes. So if they feel very comfortable 18 going right now with the five people sitting up 19 here, we'll be -- we'll be glad to listen to 20 them. 21 This -- this is an issue which is a 22 little -- because it's the law, they might have 23 done it the best way, but it's -- 24 MR. STRUHS: What -- what we -- what we may 25 do is -- is -- is actually begin the discussion ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 242 2 decision will occur when we have a full slate 3 of -- 4 ATTORNEY GENERAL BUTTERWORTH: If, in fact, 5 this body though -- if -- if this Board decides 6 to take that vote before someone else comes, 7 I think that may be -- we've been going for 8 over 2 hours, you might want to consider 9 spending a few extra minutes here. 10 MR. STRUHS: All right. Well, why don't we 11 then go to Item Number 2. 12 Item 2, we're recommending the acceptance 13 of the annual report from the Florida Keys 14 National Marine Sanctuary. 15 This is an annual status report. 16 TREASURER GALLAGHER: Motion on 2. 17 ATTORNEY GENERAL BUTTERWORTH: Are there 18 any speakers on this? 19 TREASURER GALLAGHER: Motion on 2. 20 MR. STRUHS: We have people here who -- 21 COMMISSIONER BRONSON: Second. 22 MR. STRUHS: -- are happy to answer 23 questions. 24 ATTORNEY GENERAL BUTTERWORTH: Okay. 25 Anybody have any questions? ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 243 2 Commissioner Bronson. 3 All in favor, say aye. 4 THE CABINET: Aye. 5 ATTORNEY GENERAL BUTTERWORTH: All opposed? 6 Passes. 7 MR. STRUHS: Item 3, we're recommending 8 withdrawal on this item. We're working on some 9 easement issues on this item. 10 TREASURER GALLAGHER: Motion to withdraw. 11 ATTORNEY GENERAL BUTTERWORTH: Is there a 12 second? 13 COMMISSIONER BRONSON: Second. 14 ATTORNEY GENERAL BUTTERWORTH: Any 15 opposition? 16 The item is withdrawn. 17 MR. STRUHS: On Item 4, we're recommending 18 approval. It's two option agreements to 19 acquire -- to acquire two hundred and 20 four-and-a-half acres. This is in the 21 Charlotte Harbor Flatwoods CARL project. 22 TREASURER GALLAGHER: Motion on 4. 23 ATTORNEY GENERAL BUTTERWORTH: Second? 24 COMMISSIONER CRIST: Second. 25 ATTORNEY GENERAL BUTTERWORTH: Second. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 244 2 THE CABINET: Aye. 3 ATTORNEY GENERAL BUTTERWORTH: All opposed? 4 Passes unanimously. 5 MR. STRUHS: Item 5 is -- is -- is actually 6 a historic vote for -- for all of you. Item 5 7 will be the very first Florida Forever 8 acquisition with the bonded resources from that 9 program. 10 So -- 11 TREASURER GALLAGHER: Too bad the Governor 12 is not here to vote -- 13 MR. STRUHS: We wanted -- we wanted to make 14 sure you were aware of that, and that -- 15 ATTORNEY GENERAL BUTTERWORTH: You may wish 16 to hold that off until everyone is here, and 17 that might be appropriate. I'm wondering if 18 we should do that. 19 MR. STRUHS: That -- that's fine. 20 We can -- 21 ATTORNEY GENERAL BUTTERWORTH: Defer 22 Item 5. 23 MR. STRUHS: We can move on to Substitute 24 Item Number 6. 25 Item Number 6 is also an interesting first ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 245 2 "B" list project. 3 And you will recall some of the advice that 4 you provided the Division of State Lands and 5 the Department a year or so ago was to try to 6 come up with a way in which we could create 7 more competition among sellers so that we were 8 actually getting the best cost of value. 9 The way we implemented your -- 10 TREASURER GALLAGHER: Could I just do 11 this -- could we go on to 7? Because otherwise 12 you're going to have 6 be the first one, 13 instead of 5 -- 14 ATTORNEY GENERAL BUTTERWORTH: We can't go 15 on to 7. 16 MR. STRUHS: We did 7. We can go on to 17 Number 8. 18 ATTORNEY GENERAL BUTTERWORTH: Or Number 8. 19 Or let's do 7 over again. Right. 20 MR. STRUHS: Item Number 8, we're 21 recommending approval. This is a termination 22 of surplus property. It's for the expansion of 23 an existing cemetery. This is State forest 24 land that really cannot effectively be managed 25 in the way it's configured with the cemetery ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 246 2 TREASURER GALLAGHER: Motion on 8. 3 COMMISSIONER BRONSON: Second. 4 ATTORNEY GENERAL BUTTERWORTH: Moved and 5 seconded. 6 All in favor, say aye. 7 THE CABINET: Aye. 8 ATTORNEY GENERAL BUTTERWORTH: All opposed? 9 Item passes unanimously. 10 MR. STRUHS: Item 10. We're recommending 11 approval of Item 10. 12 This item, which is in the Corkscrew CARL 13 project, is analogous to a program that you 14 were quite familiar with, which is the 15 Golden Gate Estates project, although on a much 16 smaller scale. There are 213 parcels here. 17 We have obviously been focusing on a 18 willing seller's approach. This is land that 19 will be necessary as a flowway for Everglades 20 restoration. It's along the lines of an 21 infrastructure or a public right of way 22 project. This land will eventually be 3 feet 23 under water. 24 The off-- the -- the permission we're 25 seeking here is to be able to offer ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 247 2 above the appraised value in an effort to 3 accelerate the land acquisition. 4 And, indeed, I think it's a pretty good 5 example of our efforts to actually carry out 6 the wishes that you heard from some of the 7 advocacy groups earlier, which is to make sure 8 that we are pursuing these things aggressively. 9 And this is a good example of that. 10 But also I -- 11 TREASURER GALLAGHER: Motion. 12 MR. STRUHS: -- I was just going to point 13 out that this is a very fair deal for -- for 14 the -- for the landowners, in that it includes 15 using Federal grant money for fuller, greater 16 replacement value of -- of homes. And there 17 will be eleven residences that will initially 18 be affected. 19 ATTORNEY GENERAL BUTTERWORTH: Moved by 20 Treasurer Gallagher. 21 Is there a second? 22 COMPTROLLER MILLIGAN: I -- I have a 23 question -- question to -- 24 MR. STRUHS: Yes, sir. 25 COMPTROLLER MILLIGAN: If we fail in the ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 248 2 eminent domain would be pursued against these 3 homeowners. 4 MR. STRUHS: Yes, sir. 5 COMPTROLLER MILLIGAN: Of course, it's not 6 consistent with our policy, and this would be 7 done under Federal -- 8 MR. STRUHS: That's correct. 9 COMPTROLLER MILLIGAN: -- policy. 10 If the homeowner refuses the 5,000 -- 5,000 11 or 125 percent, and then it goes into 12 eminent domain, does that strengthen the -- 13 their position in terms of the price they can 14 demand under eminent domain? 15 Do you follow me? 16 MR. STRUHS: I do. 17 And -- and the honest answer is I really 18 don't know. 19 I think -- 20 COMMISSIONER BRONSON: I -- I think -- if I 21 could -- in other procedures that we've known 22 where the Federal eminent domain comes in, it's 23 not as advantageous under Federal 24 eminent domain as it is under State eminent 25 domain. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 249 2 flat rate based on the figures they have. And 3 I don't think any of those are going to come 4 close to what -- 5 COMPTROLLER MILLIGAN: Okay. So -- so 6 we're not prejudicing anything in the future. 7 COMMISSIONER BRONSON: I don't think so. 8 ATTORNEY GENERAL BUTTERWORTH: The 9 Commissioner's correct, that the Federal law is 10 different. It's -- it's not as lenient, and 11 it's a part of the infrastructure rule. 12 Is there a second? 13 COMMISSIONER BRONSON: Second. 14 GOVERNOR BUSH: Second by 15 Commissioner Bronson. 16 Any discussion? 17 All in favor, say aye. 18 THE CABINET: Aye. 19 ATTORNEY GENERAL BUTTERWORTH: All opposed? 20 Passes unanimously. 21 Well, we'll see the historic Number 9. 22 I think everybody wants a part of history, so 23 let's do Number 9. 24 MR. STRUHS: Let's see. Item 9, you will 25 recall that it's long been a -- a tentative ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 250 2 What I -- what I would recommend, 3 Mr. Chairman, if it -- if it suits you, is that 4 we continue to postpone Item Number 9, and 5 perhaps turn our attention to Items 5 and 6. 6 ATTORNEY GENERAL BUTTERWORTH: Okay. So 7 you do not wish to have your Governor -- our 8 Governor be a part of history. 9 Let the record reflect. 10 MR. STRUHS: A no-win proposition for me. 11 ATTORNEY GENERAL BUTTERWORTH: Do we have a 12 time as to when the Secretary of State will be 13 back, or the Governor? I mean, is there a 14 time? 15 MS. GOODSON: General, the Secretary of 16 State is on a plane out of town. She's not -- 17 ATTORNEY GENERAL BUTTERWORTH: Okay. 18 That -- it'll take her a little longer to get 19 back. 20 The -- and the Governor will be back only 21 in a few minutes. 22 I think at a point in time, we probably 23 could start Number 10. I don't -- Number 9. I 24 don't think we -- we will not conclude it until 25 the Governor gets here. ACCURATE STENOTYPE REPORTERS, INC.
2 then. 3 Item Number -- 4 ATTORNEY GENERAL BUTTERWORTH: That way you 5 can preserve your position, and that way the 6 Governor will be part of history on Items 5 and 7 6. 8 MR. STRUHS: That's fine. Thank you, sir. 9 On Item Number 9, this draws into a -- a 10 clear focus the results of some actions by the 11 Legislature back in 1999. It'd been a 12 long-standing tentative Florida law that should 13 the Board of Trustees choose to surplus 14 publicly held lands, that they were to offer 15 that land first to the local government. 16 What happened in 1999 is the passage of the 17 Florida Forever Act is that was amended. And 18 it was amended in a way that required it to not 19 only be -- 20 (Treasurer Gallagher exited the room.) 21 MR. STRUHS: -- offered to local 22 governments, but to be offered at the same 23 price for which the State paid, regardless of 24 how much land they have grown in value in the 25 intervening years. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 252 2 Florida Statute. 3 I've asked Eva Armstrong, Director of our 4 Division of State Lands, to -- because of the 5 importance of the issue, to be prepared to set 6 the stage and describe in summary what the 7 issues are that are presently before you. 8 I'd like to point out -- 9 ATTORNEY GENERAL BUTTERWORTH: Since this 10 is not an objectioned, asked-for agenda item, 11 we can proceed with four people. Just getting 12 some history based on -- 13 MR. STRUHS: Yes, sir. 14 ATTORNEY GENERAL BUTTERWORTH: -- the -- 15 MR. STRUHS: Eva? 16 ATTORNEY GENERAL BUTTERWORTH: Eva? 17 MS. ARMSTRONG: Thank you. 18 What you have before you is a proposal to 19 resolve a challenge faced by the City of 20 Panama City Beach. The challenge is how to 21 increase the -- how to meet the increasing 22 demands for recreation and community event 23 needs, and do it in a way that contributes to 24 their economic health overall. 25 The policy, as the Secretary explained to ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 253 2 (Governor Bush entered the room.) 3 MS. ARMSTRONG: -- a new policy decision 4 for you as a member of the Board of Trustees, 5 which is whether or not when we are asked to 6 sell property to local government, you're 7 willing to sell it at what the State paid for 8 it originally. 9 And in this case, it was bought over 10 20 years ago for a price of 2.2 million 11 dollars. 12 The Board of Trustees property at issue is 13 49 acres. It was bought at the request of the 14 City in 1979, specifically for use as a park, 15 and we then leased it to the City, and they've 16 been managing it for that use since. 17 In 1998, the City went to the St. Joe 18 Company, which is the -- our immediately 19 adjacent landowner here, and said, we need some 20 more area for parking, recreational use, we 21 want to improve the recreational opportunity at 22 that site, could you help us. 23 And so during the process of discussions 24 with St. Joe, the two entities came up with 25 their community redevelopment plan, which they ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 254 2 But the specifics were that they were going 3 to be able to not only provide them with the 4 additional parking they needed, but St. Joe was 5 willing to swap them some land immediately 6 north that would provide greater park area, 7 in fact, almost double the size of their 8 current park. 9 The original idea was that the State would 10 give up 12 acres of our property for 51 acres 11 from St. Joe. 12 We went and started our process to go to 13 evaluate this and -- and come up with a -- with 14 a contract. 15 But we ran into three major obstacles. The 16 first was that the development design that 17 facilitated what the City and St. Joe needed, 18 would eliminate the remaining legal access to 19 the Board of Trustees' property from the south. 20 That -- that's a value implication. 21 Number two, there's a stormwater treatment 22 pond that would be needed to facilitate the 23 St. Joe development, and they were going to 24 expand our -- an existing pond on our site. 25 Again, it has a value implication. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 255 2 we thought those values would be, they 3 determined that it was really going to be cost 4 prohibitive for them to move forward. 5 And at that point, the City came back to us 6 and said, you know, we really want to be able 7 to -- to improve our park, isn't there 8 something else we can do. 9 And that's when we said, well, we can look 10 at this new law. We don't know what the 11 Trustees will do. You know, we'll have to 12 place that policy decision before them and let 13 them decide. And that's why we're here before 14 you today. 15 And I will tell you that while on the one 16 hand, it's frustrating to transfer property at 17 a -- at a value that's 20 years old, 18 specifically 2.2 million dollars, when the 19 current market value puts it somewhere between 20 4 and 6 million. 21 We do not have appraisal. That's based on 22 tax assessed values and discussions in the 23 area. You know, and that's a substantial 24 difference. 25 It does, in fact, enhance the original ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 256 2 the first place. And the ultimate swap, which 3 is then between the City and St. Joe, would 4 actually increase the acreage at the park by 5 another 81 acres. 6 To further protect the intent of the 7 original purchase, which was to maintain it as 8 a park, the City agreed to permanently protect 9 the 35 acres they now have, and what they add 10 to it for recreation and conservation. That's 11 written into the language for the quitclaim 12 deed. 13 And if approved, the City, once we transfer 14 the 49 acres to the City, they would then lease 15 the 15 that St. Joe needs for the ten years 16 required by law. 17 And -- but at this moment, as soon as we 18 approve it, St. Joe will transfer the 81 acres 19 to the City so they'll go ahead and take the 20 property -- take possession now. 21 And we have a number of speakers. 22 ATTORNEY GENERAL BUTTERWORTH: One 23 question, again, Governor? 24 GOVERNOR BUSH: Yes, please. 25 ATTORNEY GENERAL BUTTERWORTH: Eva, have -- ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 257 2 that lease for these ten years from St. Joe? 3 MS. ARMSTRONG: I don't know. We can ask 4 the City, and they'll -- 5 ATTORNEY GENERAL BUTTERWORTH: Is it based 6 on the -- the value of 20 years ago, or is it 7 based on today's values? 8 MS. ARMSTRONG: They tell me they are 9 charging 2.3 million dollars. 10 (Treasurer Gallagher entered the room.) 11 ATTORNEY GENERAL BUTTERWORTH: Per year? 12 That's pretty -- 13 MS. ARMSTRONG: No. One time annual. 14 ATTORNEY GENERAL BUTTERWORTH: Oh. 15 MS. ARMSTRONG: That's going to help to pay 16 us. 17 MR. STRUHS: Mayor Sullivan and 18 Representative Bense. 19 MR. SULLIVAN: Governor and Cabinet 20 members, I humbly appreciate the opportunity to 21 come. 22 And on behalf of the 8,000 Floridians that 23 live in Panama City Beach, and the ones that 24 live in Bay County, we have a unique 25 opportunity. We have a piece of property that ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 258 2 a field that we've been using for seafood 3 festivals and horse shows. 4 We have just a -- a unique opportunity to 5 get that property for the people that live in 6 our area, something that won't cost them 7 anything to use, something that will be nice, 8 something that they will be to have festivals 9 on. 10 And the reason that we're able to, is 11 because we find ourselves in this partnership 12 with St. Joe, and we get to use their money. 13 We get to use their money to pay for this, if 14 y'all are amenable to that, and we get to use 15 their money to enhance this property and make 16 it nicer than we ever could by ourselves. 17 So I'm simply here to ask you for your 18 consideration. 19 And thank you for the time to -- to present 20 my plea to you. 21 Thank you. 22 GOVERNOR BUSH: Any questions? 23 Any other -- 24 Representative Bense, would you like to -- 25 MR. BENSE: Please. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 259 2 you to let you know how important this project 3 is to me and my District. It's the Panama City 4 Beach portion of my District. 5 We've been working for a long time on the 6 Beach. I was formerly Chairman of the TDC to 7 really make some nice, forward-thinking 8 improvements to our -- to our beach. And this 9 is really going to be one of the biggest things 10 that we can do to -- to help our area. 11 So I would certainly appreciate your 12 support of this fine project. 13 Thank you. 14 GOVERNOR BUSH: Is there -- was there a 15 motion, General? 16 ATTORNEY GENERAL BUTTERWORTH: Not yet, 17 Governor. 18 COMMISSIONER BRONSON: I move to approve 19 the item. 20 GOVERNOR BUSH: Is there a second? 21 TREASURER GALLAGHER: Second. 22 GOVERNOR BUSH: Any other discussion? 23 Moved and seconded. 24 Without objection, the item passes. 25 Thank you very much. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 260 2 MR. BENSE: Thank you. 3 MR. STRUHS: There are two items remaining 4 on the agenda, Item Number 5 and Item Number 6. 5 Item Number 5, Governor, is -- is the very 6 very first Florida Forever land acquisition, so 7 we're glad you're back to -- 8 GOVERNOR BUSH: Yes. 9 MR. STRUHS: -- to be here for that. 10 This is an option agreement to acquire 11 2,512 acres, adjoining the Lake Wales Ridge 12 Wildlife and Environmental Area, to be managed 13 by the Florida Fish and Wildlife Conservation 14 Commission. 15 Mr. Hartman is here from the Commission 16 should you have any questions. 17 This is the first "A" list acquisition, 18 and -- and we just wanted to reflect on the 19 fact that this is a -- 20 GOVERNOR BUSH: This is -- 21 MR. STRUHS: -- it is going on. 22 GOVERNOR BUSH: It is a continuation of 23 history being made as we go forward. I think 24 the State is really one of the leaders, if not 25 the leader, on a long-term basis for the ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 261 2 And we've had a lot of conversations in a 3 lot of different ways about this, but I -- the 4 remarkable thing is that year in and year out, 5 the Democrats and Republicans alike, almost 6 without exception, we -- we might talk about 7 price, we might talk about some of the 8 strategies of local governments, and the things 9 that are going on, but there is such broad 10 consensus for the State continuing to -- to 11 purchase these properties in the way that we 12 do. And I think it's something that all of us 13 can be very proud of. 14 TREASURER GALLAGHER: Motion to approve 15 Item 5. 16 GOVERNOR BUSH: Yes. 17 COMMISSIONER BRONSON: I think one of 18 the -- one of the things that I really am glad 19 this is the first piece, because we get a 20 chance to put conservation, natural resource 21 issues along with archeological, historical 22 data that dates 2000 years, around the 23 preColombian date of some of the earlier 24 Indians -- or some of the early Indians -- 25 I think we had some here 8,000 or so years ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 262 2 But this is a -- this is a group of Indians 3 that they're working on trying to find out 4 about their interactions with other Indians of 5 the northeast, which is one of the first cases 6 where they've dealt that far out of the state 7 of Florida. 8 So this a historical site, as well as a 9 natural resource site, and I think this is a 10 very appropriate first buy for the natural 11 resource area. 12 GOVERNOR BUSH: General Butterworth? 13 ATTORNEY GENERAL BUTTERWORTH: Governor, 14 the -- the Commissioner's ancestors were here 15 at that point in time. That's why he knows so 16 much. 17 GOVERNOR BUSH: Secretary Struhs, do you 18 want to tell us -- one more -- one more 19 question before we vote on this. 20 MR. STRUHS: Yes, sir. 21 GOVERNOR BUSH: How'd you do on the 22 purchase price to appraised value? 23 You should toot your horn more when we give 24 you a hard time when you do the opposite. 25 MR. STRUHS: Well, on Item 5 or on Item 6? ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 263 2 MR. STRUHS: Well, Item -- 3 GOVERNOR BUSH: That one looks pretty good, 4 too, doesn't it? 5 MR. STRUHS: Item 6 is the one I'd like to 6 brag about. 7 GOVERNOR BUSH: Okay. You don't want to 8 brag on 5? 9 TREASURER GALLAGHER: You don't want to -- 10 GOVERNOR BUSH: There's a motion and a 11 second -- 12 TREASURER GALLAGHER: You already bragged 13 on this one. 14 GOVERNOR BUSH: I think -- I got -- maybe 15 I'm looking at the wrong thing. 16 TREASURER GALLAGHER: You've got -- the -- 17 the high -- we were paying close to the high -- 18 the 9.99 percent of it? 19 MR. STRUHS: You say 99 percent. 20 ATTORNEY GENERAL BUTTERWORTH: But you 21 can't put a value on the history -- the 22 history -- 23 GOVERNOR BUSH: That's right. They're not 24 including the -- the Bronson factor in this. 25 There's a motion and a second. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 264 2 Okay. Now, Item 6. 3 MR. STRUHS: I'm -- I'm going to have to 4 tell Secretary Harris that you were carrying 5 the historic mantle for her while she were 6 gone. 7 MR. STRUHS: Item 6 is the last item on the 8 agenda. 9 And this is a -- this one is worth just 10 30 seconds. 11 About a year ago, as the Board of Trustees, 12 you encouraged us to come up with new means by 13 which we would rate more competition amongst 14 the sellers so that it wasn't all one-sided. 15 We took that advice seriously. And part of 16 what we needed to accomplish that is we 17 established a "B" list. And these were the 18 projects that were -- were excellent projects, 19 excellent acquisitions, but didn't rank high 20 enough to get on the "A" list. 21 So the theory was that by putting them on 22 the "B" list, you would create the desire on 23 the part of some of those sellers to come in 24 with bargain prices. Because, for various 25 reasons, they need to transfer the property. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 265 2 good values, but it also puts a downward 3 pressure on the "A" list, because to be sent an 4 RFP the same sort of resources, we finally 5 don't find ourselves in -- in -- always in a 6 buyers market. This is the first effective 7 result of that. 8 It's the first Florida Forever acquisition 9 off of the so-called "B" list. It's an 10 excellent piece of property. And we're 11 delighted because the -- the purchase price is 12 79 percent of the appraised value. 13 We beat this property at auction. Time and 14 time again, you encouraged us to be alert to 15 these opportunities and to get to the auction. 16 In this case, we actually got to the landowner 17 prior to going to auction. 18 Brevard County is paying for half of the 19 acquisition, and the title thus, fully, 20 100 percent with the Board of Trustees. So 21 it's really an excellent opportunity. 22 And your portion -- the 50 percent share is 23 actually 39 percent of the approved value, and 24 yet you take 100 percent of the title. 25 TREASURER GALLAGHER: Motion on 6. ACCURATE STENOTYPE REPORTERS, INC. TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 266 2 GOVERNOR BUSH: Moved and seconded. 3 Without objection, approved. 4 I commend you -- 5 MR. STRUHS: Thank you. 6 GOVERNOR BUSH: -- Secretary Struhs, for 7 your good negotiating. 8 (The Board of Trustees of the Internal 9 Improvement Trust Fund Agenda was concluded.) 10 * * * 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 267 2 Administration. 3 I appreciate everybody in the room's 4 patience. Apologize for the -- the length of 5 the time here. 6 (Attorney General Butterworth and 7 Commissioner Crist exited the room.) 8 MR. HERNDON: Thank you. 9 Item Number 1 is the minutes of the meeting 10 held June 12th and 26th. 11 TREASURER GALLAGHER: Motion on minutes. 12 COMPTROLLER MILLIGAN: Second. 13 GOVERNOR BUSH: Moved and seconded. 14 Without objection, it's approved. 15 MR. HERNDON: Item Number 2 is approval of 16 fiscal sufficiency in an amount not exceeding 17 250 million dollars, State of Florida, full 18 faith and credit, State Board of Education, 19 Public Education Capital Outlay Bonds. 20 COMPTROLLER MILLIGAN: Move Item 2. 21 TREASURER GALLAGHER: Second. 22 GOVERNOR BUSH: Moved and seconded. 23 Without objection, it's approved. 24 MR. HERNDON: Item Number 3 is also 25 approval of a fiscal sufficiency of an amount ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 268 2 Florida, full faith and credit, State Board of 3 Education, Public Education Capital Outlay 4 Refunding Bonds. 5 And I believe you adopted earlier today -- 6 (Commissioner Bronson exited the room.) 7 MR. HERNDON: -- a set of resolutions from 8 the Division of Bond Finance. 9 TREASURER GALLAGHER: Motion to approve 10 Item 3. 11 COMPTROLLER MILLIGAN: And second. 12 GOVERNOR BUSH: Moved and seconded. 13 Without objection, it's approved. 14 MR. HERNDON: Item Number 4 is the 15 combination or appointment of Mr. Don Burton as 16 the new member of our Investment Advisory 17 Council. This is Commissioner Gallagher's 18 appointee from Tampa, Florida. 19 COMPTROLLER MILLIGAN: Move it. 20 TREASURER GALLAGHER: Second. 21 GOVERNOR BUSH: Moved and seconded. 22 Without objection, it's approved. 23 COMPTROLLER MILLIGAN: Can we -- can we 24 move Item 5 to last? 25 GOVERNOR BUSH: Item 5 for last? ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 269 2 GOVERNOR BUSH: Do you really want to do 3 that? 4 COMPTROLLER MILLIGAN: I don't care. I 5 do -- 6 GOVERNOR BUSH: Let's -- let's see what 7 happens. That's sadistic. 8 COMPTROLLER MILLIGAN: A motion on that. 9 And obviously -- 10 GOVERNOR BUSH: Okay. 11 TREASURER GALLAGHER: Will you turn your 12 mic on? 13 COMPTROLLER MILLIGAN: Move reappointment 14 of Tom Herndon as Executive Director of the 15 State Board of Administration, and approve a 16 $5,000 lump sum bonus to be paid in August, and 17 separate from the fixed COLA increase to be 18 paid in November. 19 I would also move that the SBA staff submit 20 draft legislation to amend the statute on the 21 annual appointment of the Executive Director to 22 simply majority vote of the Board of Trustees. 23 GOVERNOR BUSH: Could you repeat that? 24 Since -- 25 COMPTROLLER MILLIGAN: I'll -- I'll send it ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 270 2 The -- the number is different. But the -- 3 The language is -- of the bill is behind 4 it, and would be a strike amendment for a 5 portion of it. 6 TREASURER GALLAGHER: I'll second. 7 GOVERNOR BUSH: Could we have some 8 discussion? 9 COMPTROLLER MILLIGAN: Sure. 10 GOVERNOR BUSH: On the -- on the bonus, we 11 have -- you have an employment contract that is 12 bonusable based on certain performance 13 criteria? 14 Is this over and above that? 15 MR. HERNDON: No, sir. I don't have a 16 contract. I serve at your pleasure. 17 We have provided throughout the years that 18 I've been at the Board, various performance 19 standards. Sometimes the Board has reviewed 20 those fairly rigorously, other times not. 21 This year, what we proposed as the 22 performance standard essentially for the Board 23 was two-fold: One was that we meet or exceed 24 our performance benchmark for the investment 25 fund; and, secondly, that we implement the ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 271 2 budget at the point in time that you take up 3 the evaluation. Of course, this reappointment 4 process is new. 5 GOVERNOR BUSH: Now I understand why you 6 would want to take this out of order. 7 But -- but the -- the -- in that, 8 there's -- you -- you -- the bonus I'm -- 9 that -- that's in here is -- that you're 10 recommending, is it part of that performance 11 criteria? 12 COMPTROLLER MILLIGAN: It -- it -- it is. 13 He has, of course, used his option to provide 14 bonuses to -- to his leadership, which he has 15 done. 16 I think that -- at the same time, that we 17 are looking at retaining his services. I think 18 it's appropriate to recognize his performance 19 at that time. 20 And I think $5,000 is a -- a -- frankly, a 21 very low amount in terms of the responsibility 22 he has with a hundred plus billion dollar 23 franchise. 24 But we have also discussed, and are 25 pursuing I think eventually from Tom, an ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 272 2 performance based incentives to him and -- or 3 whoever's in that position, and other persons 4 in leadership positions, which I think is an 5 appropriate way of doing business. 6 We don't have that in -- in place right 7 now. And so this is an opportunity to thank 8 him, and recognize him for his performance over 9 the past year. 10 GOVERNOR BUSH: Okay. 11 Any other comments? 12 There is a motion -- 13 COMPTROLLER MILLIGAN: And a second. 14 GOVERNOR BUSH: Was there a second? 15 All in favor, say aye. 16 THE CABINET: Aye. 17 GOVERNOR BUSH: Aye. 18 All opposed, no. 19 MR. HERNDON: Thank you very much. It is a 20 very unexpected pleasure, and I do appreciate 21 it. 22 Item Number 6 is State Board of 23 Administration requesting the following two 24 rules for adoption by the Trustees. These both 25 relate to the defined contribution program. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 273 2 procedures for asset transfers during the 3 initial period of choice. 4 And the second rule is a procedure for new 5 employees to choose or not choose. 6 And these are literally the procedures that 7 the employee will follow in the way of forms 8 and -- and so forth that are attached to your 9 materials. 10 TREASURER GALLAGHER: Motion. 11 COMPTROLLER MILLIGAN: Move -- second. 12 GOVERNOR BUSH: Moved and seconded. 13 Without objection, it's approved. 14 MR. HERNDON: Item Number 7 is the defined 15 contribution status report Number 11. We're 16 again very pleased by-in-large with our 17 performance thus far in terms of staying on 18 track and on budget. 19 I would just add a couple of things. Since 20 this was published, we have been fortunate to 21 consummate an agreement with the Division of 22 Retirement, and have that contract signed, 23 which we're very pleased about. 24 In addition, yesterday afternoon, one of 25 our working groups selected -- or -- or ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 274 2 Tier V annuity products. And that memo has 3 been sent down to your offices this morning. 4 We also have -- I know you all saw this 5 while I was out of town -- some of the 6 preliminary creative treatment that's being 7 proposed for the program, some of the -- the 8 logo and color schemes, and some of the -- the 9 literature and so forth that will go with 10 the -- the creative treatment, and we're very 11 pleased with that. 12 Major milestones, of course, today we're 13 going to talk about a little bit later on. But 14 in addition to that, we're going to be having 15 an Advisory Council meeting -- a joint 16 Advisory Council meeting at the end of this 17 month on August 30th, and then two more in 18 September, again, culminating at least 19 potentially with you on September 25th in Miami 20 at your meeting there, at which time we will 21 try and put together the -- the final 22 investment option line-up which would then be 23 folded in the creative program and -- and -- 24 and so forth. 25 So we're looking forward to that, and ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 275 2 COMPTROLLER MILLIGAN: Could I ask a quick 3 question, Tom? 4 MR. HERNDON: Yes, sir. 5 COMPTROLLER MILLIGAN: On the retirement 6 contract, would you care to comment on the 7 costing of it? Was it competitive? 8 MR. HERNDON: Yes, sir. 9 COMPTROLLER MILLIGAN: I know that was an 10 issue -- 11 MR. HERNDON: It -- it was. 12 And the Division will have some 13 expenditures that they're going to have to 14 incur to provide some of the services to us. 15 But we ultimately settled on a dollar per 16 DC participant, which we think is a reasonable 17 cost. And we had the option to negotiate those 18 fees in the out years as some of their 19 start-ups costs scale down. 20 So I think we're -- we're very pleased with 21 that. 22 COMPTROLLER MILLIGAN: Thanks. 23 MR. HERNDON: Item Number 8 is submitted 24 for information and review. It's the fund 25 activity analysis for the month of April and ACCURATE STENOTYPE REPORTERS, INC.
2 TREASURER GALLAGHER: Motion on 8. 3 COMPTROLLER MILLIGAN: Thanks. 4 No motion required, I don't think. Just -- 5 MR. HERNDON: No. 6 Item Number 9 is the Hurricane Catastrophe 7 Fund requesting the approval of the following 8 rule, which is 19-8.028, which adopts the 9 premium formula for the 2001-2002 contract 10 year. 11 And this rule has been through all of the 12 appropriate procedural steps -- 13 COMPTROLLER MILLIGAN: Move Item 9. 14 TREASURER GALLAGHER: Second. 15 GOVERNOR BUSH: Moved and seconded. 16 Without objection, it's approved. 17 MR. HERNDON: That brings us to Good Cause 18 Item 10, which was submitted for your 19 consideration. 20 This is the discussion item, and possible 21 action by you, with respect to the selection of 22 bundled providers. 23 As you'll recall, the August 6th meeting of 24 our Investment Services Implementation Group 25 heard from Mercer & Associates, which are our ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 277 2 Investment Services Group, and -- and from 3 there to you, that we reduce the number of 4 bundled providers for the second phase of the 5 review to five. 6 Now, recall, we started at 18, two dropped 7 out, we had 16 that went through Phase I, which 8 is what you're seeing today. We're now down -- 9 recommending that five go forward. 10 That second phase is site visits to their 11 facilities, and oral interviews here in town, 12 looking at their education program, at their 13 recordkeeping capabilities, and so forth. 14 Now, we forwarded on to you that 15 recommendation. And the site visits and the 16 interviews are, in fact, underway for those 17 five, recognizing that you may wish to make 18 some modifications to the agenda. 19 I want to just mention for your information 20 that we have received protests from VALIC and 21 SunAmerica, and last night received a protest 22 from Horace Mann. We have met with both VALIC 23 and SunAmerica, and discussed their concerns 24 with them, and stand by our staff 25 recommendations. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 278 2 Horace Mann, and do not really know the 3 substance of their concerns at this point. You 4 may hear from them this afternoon. 5 Governor, members, that briefly brings you 6 up to speed with where we are. 7 I thought, if it's all right with you, I 8 would ask the Mercer consultants to give you a 9 brief snapshot of their process, and then we 10 have a list of speakers who would like to 11 address you, both wishing to change the 12 process, and some who would like the process to 13 stay as is. 14 And there are about a half a dozen of those 15 altogether. 16 So -- 17 GOVERNOR BUSH: All right. 18 MR. HERNDON: -- if that's all right. 19 I'd like to ask Wes Compton and 20 Wendy Young, who are the two Mercer principals 21 that have been involved with us, especially 22 through this particular sequence of -- of 23 events. 24 GOVERNOR BUSH: Good afternoon. 25 MR. COMPTON: How are you? ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 279 2 Tampa Mercer office. 3 And I brought Wendy Young here today. 4 My role in this process, and for the State 5 throughout the whole PEORP implementation, has 6 really been foremost to bring the very best of 7 our people to the State to help with this 8 selection process. 9 Mercer's a very large firm. We have 10 roughly 7,000 worldwide employees. We're the 11 largest firm that consults in global benefits 12 in human resources. 13 We also have a dedicated practice, just 14 related to public sector clients. Wendy's a 15 member of that practice, and she's recognized 16 nationally. She speaks nationally, and has 17 done a tremendous amount of this type of search 18 work, and knows these vendors very well. 19 And now I'd like her just to talk a little 20 bit about the specific process we've gone 21 through. 22 MS. YOUNG: Good afternoon, gentlemen. 23 What I'd like to do is just take a few 24 minutes to walk through at a very high level 25 the evaluation process that we used in ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 280 2 received. 3 And as Tom mentioned, we did get bids from 4 16 different companies, and many of them 5 submitted more than one proposal. 6 So I must say that without the help of Wes, 7 who was very instrumental in helping us go 8 through this process, as well as a team of 9 other consultants within Mercer with well over 10 75 years of experience just with Mercer, well 11 over 100 years of public sector retirement plan 12 experience, we couldn't have done it without 13 them. 14 But I don't want to take a lot of time, but 15 I would like to just touch on a few items just 16 to highlight the report that we've -- we 17 presented last Monday. 18 The first is is, as Tom mentioned, it was a 19 two phase -- two-part phase RFI process. I 20 would like to note that the investment product 21 evaluation was done by Callan & Associates, and 22 the results of that presented on May 29th. 23 In addition, companies were allowed, as I 24 said, to propose multiple bids. And the 25 categories that were made available were: No ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 281 2 product only, along with interfaces with the 3 existing chosen TPA for the PEORP. 4 Second, moderate services. 5 And then, thirdly, significant services. 6 And a determination was made prior to -- prior 7 to the issuing the RFI that significant 8 services included allocated recordkeeping, 9 which you may hear discussed today, which is 10 individual participant level recordkeeping, 11 maintained by the investment product provider, 12 as opposed to the central PEORP TPA. 13 TREASURER GALLAGHER: Wait, wait. 14 MS. YOUNG: Sure. 15 TREASURER GALLAGHER: Are you telling me 16 that we're not going to be -- 17 GOVERNOR BUSH: Want to use the -- 18 TREASURER GALLAGHER: -- existing -- 19 they're not going to be existing in both 20 places? 21 MS. YOUNG: Well, there would be kind of a 22 participant level record at the TPA that would 23 receive a data feed from the allocated 24 recordkeeper of the amount that the person has. 25 But that primary record, which additions ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 282 2 the bundled provider. 3 TREASURER GALLAGHER: Well, my 4 understanding was that our -- that our TPA was 5 to track within a bundled provider where the -- 6 where the money is, and a person should have 7 the ability to move it out of that bundled 8 provider, if they chose to, into another 9 investment. 10 MS. YOUNG: They would be able to do that, 11 that the account as the bundled provider would 12 be liquidated. You know, if you said, 13 for example, I want to transfer, you know, 14 $10,000 that I have here, that would be pulled 15 out of that account, liquidated, and 16 transferred to the other investment option that 17 you chose. 18 It could be a core investment option, or 19 another bundled provider. 20 TREASURER GALLAGHER: So what you're saying 21 is though that our TPA does not track the 22 individual choices one would make in a 23 bundled provider. 24 MS. YOUNG: They would -- yes. They would 25 just have the overall amounts, and they would ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 283 2 invested. But the determination of the value 3 of those components would be made by the 4 allocated record keeper in that case. 5 TREASURER GALLAGHER: So then there's no 6 checks on whether that's correct or not. 7 MS. YOUNG: Well, I think there would be 8 planned level checks, and reconciliation, and 9 data collection. 10 But that's one of the reasons as we went 11 through this process, we spent a lot of time 12 evaluating capabilities and interface 13 capabilities, so that we could be assured that 14 there were checks and balances, and, you know, 15 accurate recordkeeping going on. 16 Because that was a -- that was a concern of 17 ours, that when you start getting more hands in 18 the pie, so to speak, there's more 19 possibilities for, you know, interface 20 problems, and so forth. 21 Does that answer your question? 22 TREASURER GALLAGHER: Partially. 23 MS. YOUNG: Okay. 24 Beyond that, I won't belabor it, but the 25 RFI did have selection criteria, as well as an ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 284 2 categories and appropriate weights. 3 And we'll be talking about how we applied 4 those weights in more detail in just one 5 minute. 6 I think it was important to realize that 7 Mercer did compare similar proposals against 8 each other. Basically, all the no services 9 proposals against themselves, moderate service 10 proposals, and significant service proposals. 11 We did assign a numeric score to all the 12 various RFI categories, many of which had 8 to 13 10, to as many as 20 to 30 subitems. 14 And then all of those scores were rolled up 15 for a total score for each of the proposals, as 16 we'll see in just a moment. 17 TREASURER GALLAGHER: Could you tell me 18 what the proposal with reimbursement means? 19 MS. YOUNG: Yes. 20 There are -- I guess to -- to sort of 21 simplify it, most investment products have 22 disclosed or declared investment management 23 fees. If you aren't familiar with mutual 24 funds, which I'm sure you are, you'll realize 25 that there would be a disclosed investment ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 285 2 Built into that fee in many cases are 3 operational costs and things like that. And in 4 which case a product provider who's bringing a 5 fund to the program may receive reimbursements 6 from that fund company to help offset expenses. 7 If a case such as yours in which you would 8 have a very large volume of money, and in some 9 of these situations, commensurately as a -- 10 you know, proportional amount, lower cost 11 services, simply because you're -- you know, 12 may have tens and hundreds of thousands of 13 participants, they pass back to the plan or to 14 plan participants some portion of that amount, 15 that disclosed investment management fee, and 16 it's generally called a reimbursement, or a 17 rebate, or an offset. 18 TREASURER GALLAGHER: So a soft 19 something -- 20 MS. YOUNG: It's -- I guess it's soft to a 21 degree. But it -- the overall number is 22 disclosed, and a subset of that is then being 23 passed back to the plan or its participants. 24 And that is a relatively common situation 25 in the industry. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 286 2 you evaluate each one of these proposals? 3 Did you have -- is there -- did one person 4 or a team of people evaluate all of them, so 5 that there was some consistency, or you had 6 individuals that didn't see every proposal? 7 MS. YOUNG: Basically what we did is we 8 broke down the various components. And then 9 each component -- so, for example, education 10 services, administrative services, investments, 11 expenses, and so forth -- was assigned to 12 and -- a primary evaluator, who went and 13 reviewed each and every proposal for their 14 category that they were looking at, scored 15 them; then those scores were reviewed; and then 16 obviously, in some situations, you may have had 17 three primary and secondary evaluators 18 evaluating components of one category. 19 So, for example, investment product 20 offering, for example, might have had two, and 21 they would be rolled up into the overall score 22 for that category. 23 So I think it's important to note that any 24 scoring was done by the same individual for all 25 of the proposals. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 287 2 COMPTROLLER MILLIGAN: If -- if that 3 evaluator had any questions pertaining to a -- 4 a particular proposal, did they contact the 5 proposer? 6 MS. YOUNG: In some limited instances where 7 we needed clarification, or information was not 8 provided, we did contact the vendors and 9 obtained that. 10 COMPTROLLER MILLIGAN: So there was 11 communications with the vendors whenever you 12 had a question of -- 13 MS. YOUNG: Of significant -- you know, 14 for example, if something major was left out, 15 or, you know, it was unclear. 16 But in general, we did try to rely on the 17 printed written response that we received. 18 Because -- I think one thing that I was 19 going to point out as I went through this is, 20 for a significant service proposal, 21 for example, we may have had 300 questions that 22 composed that evaluation, and that wasn't even 23 taking into consideration the investment piece 24 or the cost piece. So there was a lot of 25 information. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 288 2 that. 3 What I'd like to do is -- I mentioned we 4 did get 16 responses. We did categorize the 5 service proposals into the three categories I 6 touched on. 7 I do want to note that moderate services, 8 because they are -- do not have allocated 9 recordkeeping services, are primarily education 10 service proposals, along with the investment 11 product offering that they're proposing. 12 I don't want to leave you with the 13 impression that those education services are 14 necessarily less significant than the education 15 services under a significant services proposal. 16 The primary distinction between those two 17 categories was whether or not recordkeeping at 18 the participant level was being provided. 19 We had varying levels of services and, 20 you know, evaluated that under both moderate 21 and significant services category. 22 TREASURER GALLAGHER: Did you -- if I may. 23 Did you pick out what categories these 24 people went to, or did they pick them out? 25 MS. YOUNG: They -- originally we asked the ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 289 2 they were proposing on. And then we looked 3 through the categories -- the proposals, and 4 tried to determine, you know, how commensurate 5 one was to the other, and found that there was 6 a natural break between proposals with 7 education and allocated recordkeeping services, 8 and proposals that were simply education or 9 some similar type of service. 10 TREASURER GALLAGHER: And you used -- you 11 only really used two different grade criterias 12 that I saw. 13 MS. YOUNG: That's correct. 14 TREASURER GALLAGHER: One would be no 15 services -- 16 MS. YOUNG: Uh-hum. 17 TREASURER GALLAGHER: -- you would grade -- 18 grade those; and then the other two, partial 19 and full services had the exact same criteria. 20 MS. YOUNG: Uh-hum. 21 MR. COMPTON: Well, with the exception of 22 administrative services. And -- which was laid 23 out by the RFI. 24 And the RFI did allow us to -- to move 25 people to categories that if it facilitated the ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 290 2 same -- 3 GOVERNOR BUSH: I assume that there had to 4 be some assumptions about these bundled 5 offerings, what percentage of the offerings 6 would be allocated to each category. 7 MS. YOUNG: Uh-hum. 8 GOVERNOR BUSH: Were they the same 9 across-the-board? 10 MS. YOUNG: Well, perhaps -- 11 GOVERNOR BUSH: For all the -- for all 12 the -- for all the companies? 13 How did you do that? 14 MS. YOUNG: Okay. Well, maybe -- and this 15 would be a good point for me just to kind of 16 walk through our scoring methodology and how 17 this whole thing worked. 18 GOVERNOR BUSH: Okay. 19 MS. YOUNG: The first thing I'd like to do 20 is start by saying, we did use 1,000 point 21 scale in doing our evaluation, simply because 22 we did have such a large number of data points, 23 so many -- and very important relevant factors 24 to evaluate. 25 Then what we did was we broke that ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 291 2 for the various categories that were outlined 3 in the RFI. 4 I think what's important to note is that 5 under any of the service proposals, whether 6 there are no services or significant services, 7 the RFI laid out the broad categories. But 8 what's important to also realize is that within 9 those categories, we were evaluating, you know, 10 10 or 15 major components. And many of those 11 are listed in the report that you have. 12 But it is constantly a battle that, 13 you know, if you want to weight something more, 14 you have to take points away from something 15 else. And, you know, that -- that was a 16 challenge. 17 But the RFI laid out the broad 18 categories -- 19 TREASURER GALLAGHER: Well, are you talking 20 about more -- 21 MS. YOUNG: We didn't do that. But, 22 I mean, when you say, I'm going to give 23 10 percent to organizational qualities, someone 24 might argue, well, you know, maybe that should 25 only be 5 percent; or someone could say, it ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 292 2 But obviously whenever you do that, you 3 have to take points or add points to another 4 category. 5 TREASURER GALLAGHER: Right. 6 But did the RFI say how many points were 7 going to be awarded for each of the area? 8 MS. YOUNG: Yes. 9 And then within each area, we did take all 10 the relevant data points, and then assign -- 11 say, if there were eight categories below that, 12 assigned whether somebody should get, you know, 13 out of 100 points, 10 points or 20 points or 14 50 points. 15 TREASURER GALLAGHER: And that was also 16 recognized in the RFI? 17 MS. YOUNG: No, that was not. That was our 18 subevaluation of the RFIs received, and our 19 best judgment as to how we would apportion 20 those 100 points, for example, and their 21 organizational quality. 22 TREASURER GALLAGHER: All right. Well, was 23 that approved by SBA staff? 24 MS. YOUNG: They did see the preliminary 25 scoring sheets that we wrote that down with. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 293 2 change it after you showed it to them? 3 MS. YOUNG: Nothing really changed, no. 4 I think we, you know, did take one category 5 of -- of restrictions and made it an add-on, as 6 opposed to a component of a full service. But 7 none -- none of the original scores changed. 8 And I think one of the other things I'd 9 like to point out is when you look through the 10 no services categories, you'll see that, 11 you know, one of the things that's different 12 under the moderate and significant services is 13 the fact that now you have to add in education 14 and administrative services. 15 And under the RFI with the weighting that 16 was involved, education, slash, administrative 17 services, and expenses received 18 twelve-and-a-half percent each out of the 19 total, you know, 100 or 1,000 points. 20 Under the moderate service proposals, 21 because they were really just education and 22 related services, that 125 points out of our 23 1,000-point scoring criteria was attributed to 24 these education services: Would include 25 in-person meetings, phone counselors, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 294 2 I think it's also important to notice that 3 education is a very dynamic category. 4 And it is not solely in-person services, 5 it's not solely phone counseling services. But 6 a good portion of the weighting that was 7 involved, about 50 percent, was asset 8 allocation tools, the methodology that's used 9 to come up with retirement planning materials, 10 so that we looked not only at what a 11 participant might see, but also what -- what 12 helped drive or develop those materials that 13 are being used as part of the education 14 process. 15 TREASURER GALLAGHER: How -- how would 16 you -- when you looked -- I looked in -- in the 17 report here, I see that there's different -- 18 I'll call them rebates -- based on the products 19 and the manager. Sub-- the bundled provider. 20 And in order to figure the cost of them -- 21 well, I would guess they -- here's the fee, and 22 then different managers give certain amount 23 off, based on how much money they get. 24 MS. YOUNG: Uh-hum. 25 TREASURER GALLAGHER: And so how do you ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 295 2 much money a manager's going to get, and how do 3 you -- and that would only be based on how many 4 people pick that particular one -- 5 MS. YOUNG: Uh-hum. 6 TREASURER GALLAGHER: -- and a spread 7 within that one manager. So do you want to try 8 to carry me through that? 9 MS. YOUNG: Certainly. 10 Generally the investment management 11 expenses, almost without exception, are asset 12 based. And then they -- they do differ from 13 investment products, you know, among the 14 different classes and within the different 15 companies and the specific funds. 16 Reimbursements are also generally an asset 17 based fee. So when we looked at the cost of 18 each overall proposal, we took the investment 19 ratio, expense ratio for each fund, we did -- 20 looked at it on a net basis. 21 So, for example, if they said, my fee is 22 80 basis points, but I'm giving back 20 basis 23 points -- 24 TREASURER GALLAGHER: So if they don't give 25 the 20 basis points back until they have a ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 296 2 have a hundred billion, you give them both back 3 the same? 4 MS. YOUNG: Uh-hum. 5 No. We would look at the overall expected 6 assets in the bundled provider, which 7 I believe, if I'm not mistaken, was 8 8 billion dollars. 9 MR. COMPTON: Yeah. But -- 10 MS. YOUNG: Plus -- 11 MR. COMPTON: But -- this is a great 12 question, difficult area to analyze, because 13 you don't really know how much money's going to 14 come to these individuals, and how much is 15 going to be invested in each of the various 16 investments. 17 TREASURER GALLAGHER: Exactly. 18 MR. COMPTON: We spent a tremendous amount 19 of time working with Callan and the SBA 20 staff -- staff in coming up with a model of how 21 much money we thought would move to the bundled 22 providers by asset class so that we could 23 figure how much to give each investment on an 24 ongoing basis with the initial transfer, as 25 well as going forward, because cash flow's ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 297 2 so a year. 3 GOVERNOR BUSH: What percentage of the -- 4 I assume this is -- is this associated expenses 5 or investment product offering and associated 6 fees and expenses? 7 MS. YOUNG: That was in each of those 8 categories -- 9 GOVERNOR BUSH: Both of them. 10 MS. YOUNG: -- off -- yeah. 11 GOVERNOR BUSH: What percentage would the 12 re-- reimbursement rebate be of -- of those 13 categories? 14 MR. COMPTON: What -- what we did was, we 15 figured, how much money per asset would go into 16 each investment, and we gave maximum 17 reimbursement credit for the reimbursements, 18 which ranged, depending on the amount of 19 assets, to like maybe upwards of 20 25 basis points or something like that. 21 GOVERNOR BUSH: I understand. 22 But what -- how much weight in that -- how 23 much subweight -- 24 MR. COMPTON: Oh. 25 GOVERNOR BUSH: -- in that -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 298 2 expense. So -- 3 GOVERNOR BUSH: We -- at least -- the 4 question's a great one, because there are areas 5 of this that are subjective. 6 MS. YOUNG: Uh-hum. 7 GOVERNOR BUSH: No amount of fancy talk 8 is -- you have to make some subjective 9 valuations -- 10 MS. YOUNG: Uh-hum. 11 GOVERNOR BUSH: -- and this is -- this is a 12 category where clearly there's some 13 subjectivity. 14 So the question is, in those two categories 15 where fees and expenses are measured, how much 16 of that, I guess -- appears to me it's 17 thirty-two-and-a-half percent of the whole 18 evaluation. 19 How much is related to this question of 20 reimbursement or rebates? 21 MR. COMPTON: Well, what we did was we took 22 total investment management fees, and 23 subtracted out rebates. So all of that 24 factored in to the entire expense evaluation. 25 So -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 299 2 one of these companies, I assume, had different 3 threshold levels for their rebates. So how -- 4 TREASURER GALLAGHER: And each -- each 5 investment. 6 GOVERNOR BUSH: Managing that -- 7 MR. COMPTON: We spent -- we spent hundreds 8 of hours -- 9 GOVERNOR BUSH: -- on that. 10 So -- so the question is: Out of that 11 32 percent, how much -- there are other fees 12 and -- and commissions that are -- that are 13 direct that don't relate to any kind of 14 subjectivity. They are what they are. 15 Do you understand the question? 16 MS. YOUNG: Yes. 17 And most of, I think, the reimbursements 18 were, you know, specific, it'll be 19 15 basis points or 20 basis points. 20 But the ones that had graduated ones -- I 21 remember there was one that was -- that broke 22 at two-and-a-half billion dollars. So they 23 would have gotten the first two-and-a-half 24 at -- you know, once you had more than 25 two-and-a-half billion dollars, you went to the ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 300 2 Since we assumed there'd be at least 3 8 billion dollars in the bundled provider, they 4 would have been in that higher reimbursement 5 level. So that higher level would have been 6 netted out of their expense. 7 MR. COMPTON: And we also have an exhibit 8 in the report where we calculated the expenses 9 for all the investments completely without the 10 reimbursements so that you can see what the 11 asset charge is for that -- it's in one of the 12 appendices -- and then with reimbursements. 13 And then to the extent, based on the cash 14 flow projections so that we gave everyone the 15 benefit of the reimbursements, we used that for 16 our scoring process. 17 TREASURER GALLAGHER: In hindsight, would 18 you have felt more comfortable if everybody 19 knew how you were going to do it, what those 20 criteria were before they put their bids in? 21 Instead of figuring out what those criteria 22 were going to be after they put their bids in? 23 MS. YOUNG: Well, I guess the criteria, 24 I think would have been the same -- 25 TREASURER GALLAGHER: Fine. ACCURATE STENOTYPE REPORTERS, INC.
2 TREASURER GALLAGHER: Fine. 3 MS. YOUNG: -- whether it would have been 4 beneficial for the vendors to know, you know, 5 exactly how that fee methodology was going to 6 be calculated. I expect that, you know, we 7 were looking for, you know, the lowest cost. 8 But if it would have helped them to know 9 it, I guess maybe the answer could be yes. 10 But generally, I think most providers know 11 that, you know, you're looking for a 12 combination of, you know, low cost; good 13 performance; and, you know, quality services. 14 TREASURER GALLAGHER: What did you look 15 at -- did you have that criteria all set before 16 you started going through these, or did you do 17 it after you got this, started realizing, well, 18 we've got -- 19 MS. YOUNG: Well, the overall weight for 20 the expenses was all predetermined. 21 TREASURER GALLAGHER: I understand that 22 part. 23 But was that -- that was in the RFP. 24 MR. COMPTON: As well as the calculations 25 before we actually saw how it might impact in ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 302 2 We spent a lot of time, before we even 3 received the RFIs, working through our scoring 4 methodology. Because we wanted to make sure 5 everyone got an even shake on the -- 6 TREASURER GALLAGHER: So what you're 7 telling me is, your total scoring methodology 8 was given to SBA staff and approved prior to 9 you doing it. 10 MR. COMPTON: Prior to what -- 11 TREASURER GALLAGHER: Prior to you scoring. 12 MR. COMPTON: Yes. Uh-hum. 13 TREASURER GALLAGHER: So SBA staff knew 14 exactly how you were going to allocate how much 15 in each one of the accounts, the type of 16 accounts it was, so much would go to a 17 money market, so much would go into -- and 18 they -- and they agreed with that prior to 19 doing any of that. 20 MS. YOUNG: Yes. We developed a model, and 21 staff looked at it, also Callan, the investment 22 consultant looked at it -- 23 TREASURER GALLAGHER: All looked at that 24 model prior to you looking at the first RFI. 25 MS. YOUNG: Uh-hum. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 303 2 it to be able to -- 3 TREASURER GALLAGHER: I knew you had it. I 4 just wanted to -- you went through a process 5 that was approved prior to looking at all the 6 RFIs. 7 MR. COMPTON: Yeah. We made every effort 8 to really lay out all the scores well in 9 advance of where we started working with 10 everybody, to give everyone a fair shake. 11 MS. YOUNG: And the reimbursements were 12 relatively straight forward. Other than the 13 one that I mentioned that had a 2.5 billion 14 dollar break point, most of them were, 15 you know, itemized by investment product, and 16 they were, you know, 10 basis points or -- 17 GOVERNOR BUSH: Out of curiosity, since 18 you -- you make the assumption that the 19 8 billion dollars, moving into 20 bundled providers, how many bundled providers 21 did you assume you were going to pick? 22 MS. YOUNG: We were looking at them on a 23 stand-alone basis so -- as if they were the one 24 and only bundled provider in the program. 25 TREASURER GALLAGHER: That's where you come ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 304 2 GOVERNOR BUSH: Well, but that -- 3 TREASURER GALLAGHER: Okay. 4 MS. YOUNG: (Nodding head.) 5 TREASURER GALLAGHER: Okay. 6 GOVERNOR BUSH: -- kind of -- that's not a 7 likely ball of scenarios out there that would 8 be -- I'd mark that one down as a remote 9 chance. 10 Doesn't have an impact on thresholds that 11 you're -- again, can I go back to the question? 12 I -- I don't think -- I'm having a hard 13 time explaining -- 14 MS. YOUNG: Uh-hum. 15 GOVERNOR BUSH: -- because I -- I didn't 16 get the answer to my question. Maybe I'm not 17 saying it right. 18 But you have 32 percent I believe,
20 relates to fees and associated costs. 21 Of that amount -- you said that there -- 22 that the reimbursement rebate issues are in 23 both of those categories. So of that 24 32 percent, how much is related to just the 25 straight fees that you can quantify ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 305 2 that is -- where you -- you have more 3 subjectivity? 4 You said there was 100 factors in each one 5 of these -- 6 MS. YOUNG: Well, that one -- you know, the 7 expense ratio is a -- a -- cost item is a 8 pretty straightforward one. 9 MR. HERNDON: Pretty straightforward. 10 MS. YOUNG: And you looked at each 11 investment product proposed, and you have a 12 disclosed investment management fee. 13 GOVERNOR BUSH: Right. 14 MS. YOUNG: Then for each product, there 15 may be a reimbursement that was -- 16 GOVERNOR BUSH: Right. 17 MS. YOUNG: -- provided back. 18 So if the fee was 80, it would go down now, 19 if you took off 10, that would be down to 70. 20 Then for each one of those investment 21 categories, we evaluated high to low the fee 22 proposals -- the net expense ratios on those 23 products. 24 GOVERNOR BUSH: Right. 25 MS. YOUNG: And then scored them, and then ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 306 2 missing -- 3 GOVERNOR BUSH: Well, you're missing the -- 4 the -- to get to that net amount, there 5 requires some subjective instant iterations, 6 some assumptions. 7 And I'm just asking how much of the -- how 8 much is that factored in to this 32 percent of 9 the whole deal? 10 MR. COMPTON: Well, and it's more than 32, 11 because there's another component of it that's 12 on the expenses. And -- and it's -- it's -- a 13 lot of it's factored in. 14 But -- and we did have this discussion on 15 what should the cash flow be, and should it be 16 8 billion or 4 million -- 17 MS. YOUNG: Four billion or two billion. 18 MR. COMPTON: -- and since -- to be able to 19 put everyone on a stand-alone basis, the 20 consensus was to use the 8 billion number. 21 MR. HERNDON: Well -- 22 TREASURER GALLAGHER: Having -- 23 GOVERNOR BUSH: Well, no one -- to have 24 8 billion. So if you're using that as the 25 basis of evaluating their thresholds to ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 307 2 it -- it seems like -- 3 MR. COMPTON: And for a lot of the 4 providers -- 5 GOVERNOR BUSH: -- we're missing the -- 6 MR. COMPTON: -- if it were 2 billion, it 7 might not have even had much of an impact. But 8 for some of them, it could have a material 9 impact. You're -- you're -- you're absolutely 10 right, it could impact the score. 11 MS. YOUNG: But I think -- I think the one 12 that's graduated is one based on 2.5 billion. 13 And, you know, you would have most likely, even 14 with potentially, you know, four bundled 15 providers, exceeded that threshold. 16 TREASURER GALLAGHER: So the 2.5 billion is 17 not what the entire bundled provider would 18 have. That -- that discount comes from one of 19 those money managers, right? 20 MS. YOUNG: Well, that was their overall -- 21 their whole product lineup in that particular 22 case. 23 TREASURER GALLAGHER: Now, but they -- oh, 24 they didn't give -- 25 MS. YOUNG: They didn't give -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 308 2 MS. YOUNG: No. Most of the other ones 3 did, but this one did not. 4 TREASURER GALLAGHER: That's -- okay. 5 Well, let's look at the other ones that did. 6 MS. YOUNG: Uh-hum. 7 TREASURER GALLAGHER: Did some bundled 8 provider bidders give you different -- I'm 9 going to use rebates, because that's an easy 10 number for me -- 11 MS. YOUNG: Uh-hum. 12 TREASURER GALLAGHER: -- easy word. 13 -- different rebates than others, from the 14 same manager. 15 MS. YOUNG: The same manager. 16 MR. COMPTON: And -- 17 MS. YOUNG: Yes. I'm thinking -- I don't 18 know -- 19 MR. COMPTON: Well, I don't know if we know 20 that -- 21 MS. YOUNG: -- off my head -- 22 MR. COMPTON: -- off the -- very top of our 23 head, but we could certainly find that out for 24 you. 25 But each -- each proposal was unique and ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 309 2 TREASURER GALLAGHER: You might get close 3 to the microphone. There's a lot of people out 4 here -- 5 MR. COMPTON: I'm sorry. 6 TREASURER GALLAGHER: -- hanging on every 7 word you're saying. 8 MR. COMPTON: This is great stuff. 9 TREASURER GALLAGHER: They're either 10 hanging on it, or hanging it, one of the two. 11 MR. COMPTON: Each proposal is very unique 12 and different. And the structure, the 13 proposal, the educational offering, the rebate 14 offering, and -- I mean, we can certainly do an 15 analysis to compare different rebates and 16 expense ratios to the extent that funds are 17 redundant, because some vendors did provide 18 some of the same funds where we saw the same 19 fund more than once with various vendors. 20 And -- and so -- but we didn't do that type 21 of analysis. We were looking at kind of each 22 proposal as a whole, and then compare it 23 against each other. 24 MS. YOUNG: And there was not a huge amount 25 of redundancy. But just leafing through, it ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 310 2 revenue sharings on the same fund from a 3 different provider. 4 MR. HERNDON: Wendy, I'm concerned we 5 haven't answered the Governor's -- 6 MS. YOUNG: Question -- 7 MR. HERNDON: -- question though. 8 GOVERNOR BUSH: I mean, I'm kind of -- 9 figured I hadn't been able to ask it, so I 10 probably don't deserve an answer. 11 MR. HERNDON: Well, no -- 12 MS. YOUNG: It's -- it's really, it's a 13 net. 14 MR. HERNDON: I mean, we -- it was 15 subjective in the sense that somebody had to 16 pick a figure with which they should work in 17 terms of what was going to be the total amount 18 flowing to that bundled provider in order for 19 each of the bundled providers to then be 20 treated equally. 21 And then within that figure, based on the 22 investment products that that bundled provider 23 proposed, these folks, with us, did an asset 24 allocation. And that asset allocation differed 25 from bundled provider to bundled provider, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 311 2 GOVERNOR BUSH: So -- so now they have -- 3 MR. HERNDON: They all -- 4 GOVERNOR BUSH: -- two variables. 5 MR. HERNDON: But they all sum to 6 8 billion. 7 GOVERNOR BUSH: Right. 8 But I'm just -- we're trying to get -- I -- 9 I don't know -- I'm not a lawyer. I've just 10 got a sneaking suspicion that we'll all have to 11 play one for purposes of our jobs here for a 12 second. 13 You -- you have the fee structure being 14 variable -- I mean, subjective, because it's -- 15 it's different -- it's proposed in different 16 ways because of thresholds for rebates and the 17 like. 18 And you all had to make assumptions about 19 allocation -- asset allocations for each 20 bundled provider. 21 MR. HERNDON: That's right. 22 GOVERNOR BUSH: Why wouldn't you just use 23 the same allocation for each provider to create 24 a -- a similar way of doing things? 25 I mean, wouldn't it -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 312 2 don't have -- some of them -- some of them -- 3 GOVERNOR BUSH: But then we didn't -- 4 TREASURER GALLAGHER: -- or -- 5 GOVERNOR BUSH: -- or whatever it's called, 6 ITM, or whatever, didn't we require that there 7 be -- that they offer nine different -- 8 TREASURER GALLAGHER: Whatever they wanted 9 to offer. 10 MR. HERNDON: Up -- up to. So you -- 11 TREASURER GALLAGHER: Up to. 12 MR. HERNDON: Some that did and some that 13 didn't, some in all categories, some skipped 14 categories -- 15 TREASURER GALLAGHER: For example, 16 inflation protective bonds. You know, there's 17 two -- three companies that didn't provide one 18 there, but yet they had to figure that somebody 19 might want to put money in it or not. And that 20 was pretty subjective. 21 High yield bonds, some provided it, some 22 didn't as a -- as a choice. U.S. bond index, 23 some provided it, some didn't. Large growth 24 active, I see here one didn't, the others did. 25 U.S. large value active, I guess everybody did ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 313 2 probably everybody did that. 3 GOVERNOR BUSH: Were they penalized -- were 4 companies penalized, in essence, in the system 5 that you created by offering fewer choices? 6 MS. YOUNG: Only to the extent that they 7 didn't have a diversified line-up, then, yes, 8 we had a -- 9 GOVERNOR BUSH: Isn't that -- 10 MS. YOUNG: -- a pointed score for -- 11 GOVERNOR BUSH: -- isn't it a little 12 ironic, given the fact that there seems to be 13 resistance to having bundled providers because 14 of the choices that they do offer now that they 15 come and -- isn't it more like the other 16 options that -- that employees are going to be 17 given, that somehow they're penalized in the 18 process? 19 MS. YOUNG: I think you look at it from the 20 perspective that, if someone chooses a bundled 21 provider, we'd like to give them the basics of 22 diversification. And it wasn't a very -- it 23 was just meeting the major asset classes. It 24 wasn't a high -- 25 MR. COMPTON: I'm not sure he understood. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 314 2 line-up to cover the risk return spectrum. 3 They got points for that. To the extent 4 that -- 5 GOVERNOR BUSH: Even if they offered six 6 instead of nine options -- 7 MR. COMPTON: Well -- 8 GOVERNOR BUSH: -- if they covered -- 9 MR. COMPTON: -- it was -- 10 GOVERNOR BUSH: -- the whole range of -- 11 MR. COMPTON: Right. 12 And as opposed to they -- they're just 13 offering two options or three options, it 14 really wasn't a diversified line-up. They 15 would get less points, there was another area 16 that that was scored. 17 GOVERNOR BUSH: Okay. 18 MR. HERNDON: Why don't we go ahead and -- 19 MS. YOUNG: Okay. 20 TREASURER GALLAGHER: Let me -- let me just 21 think about this here so I get it clear in my 22 head. 23 How did you weight the different 24 investments in regards to guessing where people 25 would go? Is there some past history you used? ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 315 2 TREASURER GALLAGHER: In other words -- 3 MS. YOUNG: On the asset -- 4 TREASURER GALLAGHER: -- okay, let you 5 have nine -- 6 MS. YOUNG: -- allocation -- 7 TREASURER GALLAGHER: -- nine different 8 investment managers that I use? 9 MS. YOUNG: Uh-hum. 10 TREASURER GALLAGHER: And a certain 11 percentage is going to be in money market that 12 I haven't offered, and a certain percentage is 13 going to be in a growth fund, and certain 14 percentage -- 15 How did you come to that? That -- how did 16 you recognize how you should percentage-wise 17 take that 100 percent of the dollar and 18 allocate it among all those -- 19 MR. COMPTON: We -- 20 TREASURER GALLAGHER: -- different -- 21 MR. COMPTON: -- went through three or 22 four different sources to come up with a 23 consensus weighting for the asset class. 24 We referenced some internal and external 25 survey material on what is the asset allocation ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 316 2 and how much is in money markets, stable value, 3 fixed, bond, equity, et cetera. 4 We also ran that through Callan and got 5 their consensus agreement on what that -- that 6 allocation should be. 7 And last, we ran it by the SBA. Again, all 8 in advance of doing -- 9 MS. YOUNG: And then also got input from 10 various professionals within our firm on 11 what -- 12 TREASURER GALLAGHER: Was -- 13 MS. YOUNG: -- would be appropriate. 14 TREASURER GALLAGHER: Wouldn't it have been 15 better -- this is in hindsight. Of course, 16 I've got great 20/20 hindsight -- to allow 17 everyone to know that that was going to be the 18 criteria used? 19 In other words, these are finite numbers 20 that you guys came up with, and -- and we're 21 going to figure, I as a -- I as a bidder, might 22 be able to make a better bid if I know how 23 you're -- how I'm thinking it's going to get 24 allocated. 25 Right or wrong? ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 317 2 you know, the criteria within the RFI. And 3 within that, we did have to figure out how to 4 score certain things. 5 But to literally -- other than simply pass 6 out our individual scoring sheets all the way 7 through, I mean, I guess that would be -- 8 TREASURER GALLAGHER: Well, that's -- 9 MR. COMPTON: -- it's not the typical thing 10 to -- 11 TREASURER GALLAGHER: It may not be -- it 12 is -- it is a thing that is done when you're 13 dealing with government. Sometimes, you say, 14 look, here's a scoring sheet that we're going 15 to be using. And here's how it's all going to 16 be allocated. 17 Therefore, one recognizes -- you know, all 18 of a sudden they find out that you think 19 there's going to be a lot of money in a MidCap, 20 their experience may be there's a lot of money 21 in a small cap. 22 And so they're going to rely on some of 23 their experiences, and that they don't know 24 that you've come to the conclusion of everybody 25 else. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 318 2 would rather have that policy -- figure that 3 maybe the people that do business with me think 4 differently than you think. Everybody does. 5 MS. YOUNG: Uh-hum. 6 GOVERNOR BUSH: General. 7 TREASURER GALLAGHER: So I would be at a 8 disadvantage if I did that. 9 COMPTROLLER MILLIGAN: Tom, how difficult 10 would it be to do a sensitivity analysis, both 11 in terms of the amounts that were allocated, as 12 well as the distribution to the various asset 13 class? 14 MS. YOUNG: Not very difficult. 15 MR. COMPTON: Yeah. We could certainly do 16 it. I mean, we -- it would -- it would take -- 17 TREASURER GALLAGHER: I mean -- 18 MR. COMPTON: -- it would take more than a 19 day or two to do. 20 TREASURER GALLAGHER: Well, it's possible 21 that everybody agrees on your asset allocation. 22 COMPTROLLER MILLIGAN: I think -- I would 23 think you could do one relatively easily, I -- 24 I think it would be a good thing to do, and 25 would kind of satisfy -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 319 2 COMPTROLLER MILLIGAN: -- those -- 3 MR. COMPTON: -- it may not make a 4 difference on the -- 5 GOVERNOR BUSH: Well, I think it'd have 6 been -- probably in terms of timing, I'm not 7 sure -- you mention -- you say you're getting 8 sued -- what was the deal? 9 Protested. 10 MR. HERNDON: Three terms -- three firms 11 have protested. 12 GOVERNOR BUSH: That's the first step prior 13 to a -- I assume a legal case -- 14 TREASURER GALLAGHER: Well, a protest is a 15 legal case. 16 GOVERNOR BUSH: All right. Well, is that 17 going to slow this process down? 18 Shouldn't we -- if -- if there is a way to 19 bring -- to lessen uncertainty or subjectivity 20 to make it more as -- as clear or transparent 21 and objective as possible, wouldn't it lessen 22 the chance for losing parties to cry crocodile 23 tears? 24 MR. HERNDON: Yes, it would. I think it 25 also depends on -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 320 2 MR. HERNDON: It -- it depends on the 3 outcome, and it depends on what you do here 4 this afternoon, the degree to which there are 5 losing parties who have a -- an -- an action. 6 GOVERNOR BUSH: Tom, does it make sense to 7 hear from -- 8 MR. HERNDON: That's what I was going to 9 suggest, was if you're ready, we can go ahead 10 and move to -- 11 TREASURER GALLAGHER: Good time to hear 12 from -- 13 MR. HERNDON: Sure. 14 GOVERNOR BUSH: See what they're going to 15 be -- 16 TREASURER GALLAGHER: The happy and the 17 sad. 18 GOVERNOR BUSH: -- where we're going. 19 MR. HERNDON: And the Mercer folks, Wendy 20 and Wes, are also available to respond to the 21 comments from the firms. So -- 22 TREASURER GALLAGHER: We don't want them to 23 leave. 24 MR. HERNDON: The -- the first person that 25 I have to speak today is -- excuse me -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 321 2 MR. CONDON: Good afternoon. 3 Nice to have -- give me the opportunity to 4 speak to you. I'm Bob Condon, President of 5 VALIC. 6 When we were apprised of the results last 7 week, one of the concerns that we had is that 8 there was such a close relationship between the 9 first three companies in our category, it was 10 724 to 706 to 700 at the time, less than a 11 2 percent spread. 12 And since there was no preordained number 13 of finalists that had been announced in the 14 RFP, and since there was about a 15-point drop 15 to the next company after us, we just assumed 16 that so much could be found in discovery 17 through the site visits and through the oral 18 presentations, which is very traditional in 19 this business, that we assumed that it was a 20 close enough gathering of companies that it 21 would have -- would have been included in the 22 finals. 23 And, in fact, in the material that was sent 24 by Mercer at the recommendation stage, they 25 even pointed out, quote, while there were many ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 322 2 very well, Mercer has concerns about the 3 10-year fade-out restriction imposed on its 4 fixed annuity products, and we recommend the 5 FSBA explore reduction or elimination of that 6 aspect of the proposal and/or give due weight 7 to this factor during the final decision making 8 process, which pretty much indicates that there 9 was going to be some additional discovery, and 10 it could have actually resulted in a change in 11 points. 12 Subsequently, because, in our particular 13 category, we were given credit for 62 points in 14 a category that only had 60 points possible, 15 and we pointed that out to the SBA and to 16 Mercer. There was then a memorandum sent to 17 you all on August 10th, and I'll quote from 18 parts of it. 19 It says: As you can see from the attached 20 letter from William Mercer, they are modifying 21 their final scores for several of the bundled 22 provider organizations to reflect minor 23 adjustments. 24 Further quote: These changes result from 25 several different adjustments that Mercer was ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 323 2 August 6th meeting, but were not incorporated 3 into the report due to a human error. 4 Further quote: One of these errors was 5 identified at the meeting on August 6th -- 6 that's the one we pointed out -- and prompted 7 Mercer to reexamine scores. 8 I think questioning whether they would have 9 been reexamined if that hadn't been pointed 10 out. 11 -- at which point, they realized that they 12 had failed to transport the correct 13 spreadsheet. Unfortunately, Mercer's 14 assignment is not an exact science. 15 Two points there. One is that when they 16 did reexamine the numbers, they found eight 17 additional categories of errors resulting in a 18 66 point change. Six points would have put us 19 in second place. 20 So that -- so it leads us to question, 21 you know, how many of these things could take 22 which -- our point was, had we been included in 23 the process, the site visits, this could have 24 been an ongoing thing. 25 And just a very slight point change, either ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 324 2 TIAA-CREF, or in finding some of these points 3 with the -- with our margin being so close, we 4 felt that we could have added value to the 5 process. 6 In one other area where we had some concern 7 is that the RFP specifically asks respondents 8 to, quote, list the total costs for all of the 9 investment and related services, and separate 10 those fees specifically used for investment 11 related services, and those used for 12 noninvestment services, including 13 administration, distribution expenses, 14 educational information, and advice items, 15 unquote. 16 We did that. 17 According to Mercer's report that was 18 delivered to you, and I quote again: The 19 majority of the respondents gave only an 20 overall investment expense which covered all of 21 their proposed services. 22 To ensure compatibility or comparability in 23 evaluating proposals, Mercer scored projected 24 over all expenses and assigned the same score 25 to each applicable associated category. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 325 2 they just described to you about expenses, 3 our -- we got rebundled after we had split our 4 expenses out, but that's what we were 5 instructed to do in the RFP. We got bundled 6 back in, and it affected each one of those 7 categories. 8 And I'll just give you an example. And I 9 have several of these, but I don't want to eat 10 up everybody's time, but I'll just give you 11 one -- 12 TREASURER GALLAGHER: Well, let me just -- 13 while you were arguing, I was going to ask for 14 a motion on it. 15 Go ahead. I'm sorry. 16 MR. CONDON: And, for example, just to pick 17 the U.S. fixed income fund, with our expenses 18 bundled in, we end up 20th. 19 With them removed, which we were instructed 20 to do, and we did, we would have placed 10th in 21 that category. And, again, we're only talking 22 about being 6 points behind in the first place. 23 And so it's these types of things that 24 while they're being evaluated, we would -- we 25 would hope that we could be included as part of ACCURATE STENOTYPE REPORTERS, INC.
2 If there was no predetermined number of 3 companies in the category in the first place, 4 why wouldn't we continue to be included in the 5 process so that if these corrections stand. 6 And, for example, not only would we be 7 repositioned, but, you know, I think it's a 8 fair question that if the -- if the RFP 9 specifically told respondents to break these 10 costs out, and according to Mercer, quote, 11 unquote, the majority gave only an overall, 12 wouldn't there be some reduction in points 13 possible for companies that did that? They 14 were not responsive to the RFP. 15 And this was a point that before the RFP, 16 we heard repeatedly from you all, from the SBA, 17 we want to see all these expenses broken out. 18 TREASURER GALLAGHER: Exactly. That was -- 19 General Milligan was real strong on that. 20 MR. CONDON: And so, again, what we're 21 asking for is to be included as part of the 22 process while these things are being tested 23 out. And -- and we just think that that's a -- 24 a fairness issue, and we would hope that you 25 would consider it. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 327 2 TREASURER GALLAGHER: Got a question for 3 Mercer. 4 MR. HERNDON: Wendy, Wes. 5 TREASURER GALLAGHER: You know what it is. 6 This Board specifically wanted to know what 7 everybody's expenses were all the way down to 8 the individual investment managers. 9 MS. YOUNG: Uh-hum. 10 TREASURER GALLAGHER: Per investment 11 manager, total expenses. That was something we 12 wanted to know from day 1, we always knew, and 13 heard from everybody, you'll never get bundled 14 providers to break down the individual 15 expenses. But we demanded it in the RFP. 16 MS. YOUNG: Uh-hum. 17 TREASURER GALLAGHER: And those who didn't 18 give it, why weren't they just thrown out? 19 MR. COMPTON: Well, I -- I think there's 20 two arguments. If they didn't give it, they 21 said it was all three. And so they could have 22 got fault points. Or -- and those that did -- 23 TREASURER GALLAGHER: You believed it -- 24 MR. COMPTON: -- give it -- 25 TREASURER GALLAGHER: -- was all three, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 328 2 MR. COMPTON: Well, that's the challenge. 3 TREASURER GALLAGHER: Well, my -- listen, 4 they gave a lump sum is what they did. They 5 didn't tell you anything was free. And you 6 used that lump sum. 7 What you should have done is said that they 8 didn't break it out -- break it out, including 9 put down a zero, it's free, which then we'd all 10 start wondering how they stay in business. 11 Why would they have been included? 12 Now, maybe all the ones that didn't do that 13 aren't on the list, I don't know. But that's 14 something that was pretty strongly spoken here, 15 and I think that's probably why it was an item 16 that was put in the RF-- RFI, because we wanted 17 to know what those expenses are, how much are 18 those managers going to charge, what's the 19 expense being charged for our large volume. 20 MS. YOUNG: Uh-hum. 21 TREASURER GALLAGHER: And, again, what are 22 all the providers going to charge. 23 GOVERNOR BUSH: Do you know why we wanted 24 to know? 25 At least one of the reasons was to make ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 329 2 assumes it was a higher cost delivery of a 3 service, and we wanted to know what the extra 4 cost was, because we had these other, you know, 5 750,000 retirees -- you know, people who are 6 retired or working, and -- and depend on this, 7 and we need to have as much transparency as 8 possible to compare whatever the generic -- I 9 don't recall the -- the other offerings that 10 we've already approved. 11 And there was a legitimate reason to do 12 this as Trustees, very legitimate. 13 I'm kind of surprised that it didn't -- 14 that -- 15 MR. COMPTON: Well, and that's why that 16 appendix where we listed all of those 17 investment options -- I mean, that's where we 18 lumped in -- all -- all of the overall fees for 19 the programs, because the -- going through 20 these types of analyses -- and this isn't just 21 with the analysis we're doing today. This is 22 the challenge with doing this type of analysis 23 for any type of defined contribution system is 24 that vendors -- each vendor has their own 25 pricing structure, and they do it all ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 330 2 And so some kind of way you have to 3 consolidate all of the costs of the programs so 4 that you can compare them against each other. 5 And these are the ways that we, in our 6 professional experience, have been able to 7 tackle that as to -- as opposed to kind of like 8 squeezing a -- a balloon where they low ball 9 one cost, but then there's another cost out 10 here that no one else has, you know, our 11 challenge and what -- the whole reason we're 12 doing this is to bring it all together so you 13 can really get an apples to apples comparison, 14 vendor by vendor with all of the various 15 expenses. 16 And in this -- in all of our experience 17 across the board is the best way that we've 18 been able to do that. 19 MS. YOUNG: So -- 20 TREASURER GALLAGHER: Well, is it possible 21 that -- that one would give an overall expense, 22 which would be X; but if one broke it out, it 23 might not add up to X. And so one could give 24 you theirs separately, and figure that they 25 were going to be graded based on those ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 331 2 the RFI, and yet you added them all up where 3 other people didn't break it out and gave you a 4 total, sort of forcing you to use a total. 5 And so if one was asked to give a -- a 6 total, they may well -- they may have totaled 7 less. Or totaled more. But I think the total 8 would be less, is my guess. 9 MS. YOUNG: Well, and we just looked at it 10 from the overall net cost to the participant 11 for the overall bundled provider offering which 12 included all of their services. 13 TREASURER GALLAGHER: Okay. 14 MR. HERNDON: But they -- 15 TREASURER GALLAGHER: But then you also 16 broke -- what you would be asking -- how much 17 was it going to cost educational, right, how 18 much was it going to -- is it -- is it 19 administration -- 20 MS. YOUNG: Uh-hum. 21 TREASURER GALLAGHER: Did we have how much 22 the managers were charging? 23 MR. HERNDON: Uh-hum. 24 GOVERNOR BUSH: Yes. 25 MR. COMPTON: Yes. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 332 2 manager charges from -- 3 MR. HERNDON: Yes. 4 MR. COMPTON: That's the one piece we 5 did -- 6 MR. HERNDON: That's -- 7 MR. COMPTON: -- get. 8 MR. HERNDON: -- that's where you get full 9 disclosure. 10 TREASURER GALLAGHER: -- need to get so we 11 can get the rebates against it. 12 MR. HERNDON: But -- but the point that 13 Wendy's making, I think it needs reinforcement, 14 is that we got the total net costs that the 15 firm was proposing to charge for all of their 16 services. 17 Now, some of their services they represent 18 to you are free as part of the program. But 19 you have the total net costs firm to firm to 20 firm. They're different but they're all -- 21 it's all-inclusive. 22 Now, some firms chose to give you the 23 detail that said how much are you -- are we 24 paying for education; another firm said, it's 25 part of the overall costs. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 333 2 give us what that was, right? 3 MR. HERNDON: But their representation to 4 you -- 5 TREASURER GALLAGHER: That -- 6 MR. HERNDON: -- is that it's free. 7 TREASURER GALLAGHER: -- give it away. 8 MR. HERNDON: That's right. 9 MR. COMPTON: Which is -- it's not uncommon 10 in the industry -- 11 MR. HERNDON: Yeah. 12 MR. COMPTON: -- for -- for that to happen 13 that way. And so it's not uncommon for them 14 not to provide that information. 15 GOVERNOR BUSH: There's a lot more 16 breakdown -- 17 TREASURER GALLAGHER: Uh-hum. 18 GOVERNOR BUSH: -- than -- than -- 19 MR. COMPTON: And it's presented in part -- 20 I mean, there's a lot more information. So 21 it's -- 22 MR. HERNDON: And -- and this is the 23 summary report, too, Governor, and members. 24 I mean, there's a great deal more detail behind 25 this that we just didn't burden you with at ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 334 2 But -- do you want to go ahead and hear 3 from the next -- 4 TREASURER GALLAGHER: -- a couple of 5 speakers, I just -- 6 MR. HERNDON: Yes. 7 The next party that wishes to speak is 8 Dan Demko from SunAmerica. 9 MR. DEMKO: Governor, Commissioner, 10 General, thank you for allowing me to appear 11 today. 12 I represent SunAmerica AIG, one of the 13 largest, if the -- not the largest financial 14 services and insurance company in the world. 15 We're in 130 countries, we have a market 16 cap of over 200 billion dollars. 17 We made 5.7 billion dollars in net income 18 last year, ten-and-a-half times one of the 19 companies who scored above us in the ranking. 20 And we have over -- well, we have 10,000 21 employees in China. So we're pretty -- we're a 22 pretty big organization. 23 My -- my comments today really are directed 24 at the scoring process. We think the scoring 25 process not only didn't follow the objectives ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 335 2 statute, and it didn't follow the IPS. 3 Let me give you an example. 4 The IPS said there are three criteria, for 5 it -- for this process: Fiduciary 6 responsibility, diversification, investment 7 advice. 8 Mercer scored out of 1,000 points, 9 6 points, or 6/10 of 1 percent, for fiduciary 10 responsibility. You are the fiduciaries. You 11 may think it's worth more. I certainly think 12 it's worth more. 13 They scored -- when the legislation said, 14 the highest rated, they scored that 12 points 15 or 1.2 percent out of 1,000. 16 TREASURER GALLAGHER: On what per what? 17 MR. DEMKO: On the financial strength of 18 disability. 19 Diversification. 20 Without diversification, a participant may 21 not achieve a spread amongst different asset 22 classes, which is the whole key for people 23 being successful. 24 In the defined contribution world, what's 25 more important than investment results are ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 336 2 education advice. 3 Well, let's talk about diversification for 4 a minute. 5 There were nine categories, from a 6 money market to foreign active fund. The 7 Tier I and Tier III that is part of the SBA. 8 We offered nine -- nine offerings in -- one 9 in each category. 10 We didn't get -- for the tip -- the income 11 protected block, the score -- Callan didn't 12 score us high enough to take that one forward, 13 so we ended up with 8. 14 Nationwide, in those categories, ended up 15 with 6; Fidelity, in those categories, ended up 16 with 6. They said that they didn't have a 17 U.S. stock index fund, Fidelity said that, or 18 didn't offer it. 19 They also said they didn't have a high 20 yield bond active fund, or didn't offer it. 21 But they did offer three funds in the U.S. bond 22 active. 23 What we did is in terms of looking at how 24 we scored -- how we were scored in the process, 25 Mr. Herndon was gracious enough yesterday to ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 337 2 And, Governor, this I think goes to your 3 question. 4 How did we score so poorly in the fee 5 category? How did you arrive at the fees, how 6 did you make that decision? 7 This is what Mercer told us they did. They 8 said, like you were saying, 8 -- 9 8 billion dollars is going to go into each 10 provider. 11 Then they said, by each investment 12 category, Fidelity, we think that 11 percent of 13 the 8 billion is going to go into the 14 money market fund. 15 SunAmerica, we think 36 percent of the 16 8 billion is going to go into your money market 17 fund fixed annuity. 18 Now, in the category of costs, there are 19 405 points. So just in the money market fund, 20 fixed annuity state value fund. 21 And, by the way, a fixed annuity is not a 22 money market fund. But it got categorized in 23 the same category. 24 The point total for us, 36 percent times 25 405 points is 145 points. That's what that one ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 338 2 For Fidelity, that same category is 3 11 percent times 405, or 44 points. 4 So by category, for each company it was 5 different. So you can't -- there is no apples 6 to apples comparison. This is apples to 7 vegetables. 8 For -- using that scoring average -- 9 And, General, this goes to your question. 10 -- I would say 36 percent of your category 11 is fairly important, 145 points. Even though 12 for somebody else, it's only 44, so it may be 13 less important. But for us, 36 percent for one 14 fund, out of the nine, 36 percent. They scored 15 us zero in that category. Zero. We got no 16 points. 17 The reason they said is, you weren't 18 responsive. When, in fact, we said, throughout 19 a number of the different places in our bid, 20 there is no charge for a fixed annuity, there 21 is no charge for fixed annuity, there is no 22 charge for fixed annuity. 23 There was another question that said, gee, 24 describe your pricing. We said our pricing is 25 proprietary, we're not going to put it in a ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 339 2 But if you want the information, call us, 3 we'll give it to you so you can do your 4 evaluation. 5 General, they called us. They called us on 6 a fee -- another category, which, by the way, 7 they said they never used in the evaluation, 8 and they never asked us about a 145 points out 9 of 405 in our bid. 10 Didn't even ask us the question: What is 11 your -- what is your pricing structure, how 12 does that work? 13 The -- and there are other examples in the 14 bid where -- where Mercer says, gee, we're not 15 going to give you any points for educational 16 services. Well, on -- 25 times in the bid, we 17 say, we provided it. 18 Gee, we're not going to give you any credit 19 for educational services where in the bid we 20 said nine times we had Internet services, we 21 had all those tools. 22 But the one thing that our bid does that 23 none of the other companies does in the area of 24 education, investment advice, we offered 25 independent expert advice -- that we can give ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 340 2 literally manage their money for them, based on 3 this investment horizon. 4 In order for us to do that, because nobody 5 else in the country, no other state, no other 6 city, no other county has this opportunity that 7 we brought to you. 8 In order for us to do that, we have to go 9 to the United -- the United States Department 10 of Labor, which we've done, and get an 11 exemption from ERISA. 12 And once we get that exemption, which we 13 were told -- and I think Mr. Herndon spoke to 14 the Director up there, we expect to get 15 approved soon -- we become a fiduciary, we 16 become a -- we sit in your shoes, we become 17 responsible for the advice we give to these 18 individuals. We are a fiduciary. 19 We're the only ones who bid -- who can 20 bid -- who could give investment advice, if you 21 have to have the exemption. Nobody has it. 22 This is a -- kind of a first of its kind in the 23 country for a company of -- of our size. 24 But not only are we offering to, we haven't 25 heard from the bid. When it came to advice ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 341 2 behind companies who have the -- all the -- the 3 me-too tools, you know, me-too, I've got a 4 brochure that says, this is how it works. 5 Me-too, I've got a website; me-too, I have a 6 call center. 7 We said that 29 times in the bid, we got no 8 points for it. 9 I could go on and on and on, you know, talk 10 about liquidity. Your rules are -- it has to 11 be liquid, you have people who move their money 12 in and out every day. 13 We build a product that -- fixed and 14 variable that says, yeah, every day, in and 15 out, complete liquidity, ten-year lockout. 16 We get -- I don't know how that happens. 17 You said unallocated. You want your TPA to 18 be responsible for the individual records. We 19 took a bundled provider -- a bundled product 20 and took out the recordkeeping services, and 21 said, okay, SBA, we're giving you all of this, 22 and it's with your administrator. So if you 23 want to move money out of those funds, you have 24 that right, you go in, all the participant 25 accounts are there with your administrator. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 342 2 there are a lot of other points in here where 3 it just -- where you -- you read what they did, 4 and you look through the points. 5 For example, in one place, it says, we gave 6 Company A and Company B the highest points, 7 because they offer a fixed annuity. Well, 8 in fact, these two companies didn't offer a 9 fixed annuity. 10 So I just think, particularly when you -- 11 I mean, bottom line, you can't say that you 12 have an apples to apples comparison, when, 13 in fact, if you score one company in this 14 category, money market -- and, by the way, it 15 changed as it went down. 16 I mean, we had scored 36 percent in the -- 17 in an equity category, both doubling and 18 large cap, where Fidelity got scored a 19 different -- how can we use Fidelity, because 20 that was the information we have. 21 My assumption is, is that when we asked 22 them, well, why did you do that, why did you -- 23 why did you say, well, we're going to get 24 36 percent of our funds of this 8 billion 25 dollars is going to go into a mutual fund, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 343 2 a hatched kind of position, where with 3 Fidelity, it's going to be 11, their answer 4 was, oh, because we think that's how it's going 5 to work. 6 By the way, if that happens with my 7 exemption, I lose the exemption, because I'm 8 not providing people the right kind of advice, 9 which I have to report back to the -- to the 10 Department of Labor, U.S. Government. 11 So we really think this whole thing is 12 flawed. We think that you ought to take a -- 13 I mean, really sit down and look at the 14 evaluation. I mean, tear through it, pull it 15 apart, because when you pull it apart, it 16 doesn't -- it doesn't work. 17 I appreciate your time. 18 MR. HERNDON: Do y'all want to respond to 19 some of this again? 20 GOVERNOR BUSH: Yeah. 21 Just -- the key issue, again, is how did 22 you -- how -- maybe you could respond to more 23 than one thing. 24 The thing that is -- is most concerning to 25 me is that you would -- using the money market ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 344 2 different -- 3 MR. COMPTON: Governor, the -- 4 GOVERNOR BUSH: -- provider -- 5 MR. COMPTON: -- misrepresentation. 6 I mean, there were a lot of real 7 misrepresentations unfortunately there. 8 GOVERNOR BUSH: Okay. But -- 9 MR. COMPTON: We -- we did -- 10 GOVERNOR BUSH: -- but why would there 11 be -- you did say that there was a 12 difference -- you allocated differently because 13 some people didn't bid in that particular 14 category. 15 TREASURER GALLAGHER: Uh-hum. 16 GOVERNOR BUSH: Was that the only reason 17 that there would be any different assumptions 18 of allocations? 19 MS. YOUNG: Well, when you don't have nine 20 identical fund types proposed by each company, 21 and we had companies with fewer than nine -- 22 GOVERNOR BUSH: Right. 23 MS. YOUNG: -- and different asset classes, 24 we have a choice of simply taking the number of 25 funds somebody had, and averaging it. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 345 2 then 20 percent would go into each one of those 3 funds. 4 And we felt that that isn't necessarily 5 reasonable because participant usage doesn't 6 simply say, I've got, you know, $100 going in, 7 I'm going to divide it 1/5 among the five 8 available funds, that they do use certain 9 products such as stable value products or large 10 cap products, based on survey data, based on 11 our experience, and then based on what the 12 expectations are for the PEORP program as well. 13 And we used that, as opposed to a simple 14 average -- 15 MR. COMPTON: Kind of -- 16 MS. YOUNG: -- with the funds. 17 MR. COMPTON: -- kind of a broad way of 18 saying, the way we did it was, with each off -- 19 each vendor provided an array of products 20 covering different asset classes. 21 Fidelity might have had a money market and 22 some bond products in equity; Sun had a fixed 23 account, and some bond products and equities. 24 Basically they had their own asset 25 allocation. Based on all of the survey ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 346 2 discussions with the -- the SBA, we divided the 3 8 billion dollars, which we came to before, and 4 said, each vendor gets 8 billion dollars for 5 comparability purposes. 6 But then, based on our survey information, 7 and what their specific proposed outside 8 allocation was, we divied up the money that the 9 funds were -- that the survey recommended. 10 And so that's why you see the relative 11 differences per asset class that one vendor 12 might have, because they have a different array 13 of investments than another -- 14 GOVERNOR BUSH: Can you explain the 15 38 percent to 11 percent? 16 MR. COMPTON: Well, a money market fund was 17 separately evaluated, versus a stable value or 18 fixed fund. We felt that money market assets, 19 if a stable value or fixed fund were offered as 20 part of the array, we'd get a relatively small 21 percent of the total assets. 22 And a stable value or a fixed product, if 23 offered, would give a relatively high 24 percentage of the overall assets. And that's 25 very consistent with survey information and -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 347 2 find. 3 So that's why with Fidelity, we only 4 offered a money market fund, it was -- their 5 money market wasn't rated as highly, because we 6 didn't think as much money would go into that 7 fund. 8 SunAmerica, on the other hand, who offered 9 a -- a fixed account, we thought a lot of money 10 would go into that fund, because fixed accounts 11 are very popular. That's why it was weighted 12 very heavily. 13 It's unfortunate that they refused to 14 respond to that piece of the proposal, and -- 15 and they're absolutely right, they were 16 penalized as a result of it. 17 But we -- when we don't get the 18 information, we can't plug it in and evaluate 19 it. And so -- 20 MS. YOUNG: And I think one of the other 21 things I wanted to mention is regarding the 22 education services. 23 SunAmerica was evaluated for education 24 services. And factored into that was a 25 considerable weight given to investment advice ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 348 2 advice that they were giving. 3 And then actually they scored, you know, as 4 one of the top proposers in that education 5 subsection. And I think -- you know, I thought 6 that -- I looked at it from the perspective of, 7 you know, education's wonderful; someone 8 telling me what to do is even better. And that 9 was factored into the evaluation. 10 MR. COMPTON: And -- and they did get full 11 points for their fiduciary offer, granted it 12 wasn't a lot of points. We only had 13 100 overall points on the organizational 14 qualities to work with, and we certainly gave 15 them credit for that. 16 MS. YOUNG: Although that did factor in 17 down in their operational capability, so it was 18 used in several other situations as well. 19 GOVERNOR BUSH: The -- the question of 20 confidentiality or proprietary information that 21 they were willing to give I guess orally -- 22 I'm not quite sure -- did you not receive that 23 message? 24 MR. COMPTON: Well, the -- the -- if -- our 25 notice indicated that they were requested for ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 349 2 presented a fixed product did provide the 3 information that was requested. And so that's 4 kind of where we are with it. 5 TREASURER GALLAGHER: On the -- on 6 annuities -- 7 MS. YOUNG: Uh-hum. 8 TREASURER GALLAGHER: -- I need some 9 discussion before we go on before this bid was 10 out about my concerns of -- of the annuity 11 product, especially in this area having a 12 penalty for taking money out early. 13 And it sounds to me like a few of these 14 companies have offered annuity products in 15 this -- in this bundle. 16 And I guess what concerns me is that if 17 they have a high penalty, they can offer a high 18 interest rate. Therefore, they would get a lot 19 of points with a high interest rate, and 20 probably nothing as far as the penalty -- as 21 far as the penalty is concerned; is that 22 correct? 23 MR. COMPTON: You want to talk to that? 24 MS. YOUNG: I guess I would say that in 25 actuality in the particular case you're talking ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 350 2 100-point penalty for onerous significant 3 transfer restrictions. 4 And while interest rates factored into the 5 evaluation under the product offering and 6 performance, I would say that the penalty 7 probably was ten-fold, if not greater. 8 MR. COMPTON: I mean, we're talking about 9 the two -- the opportunity of restriction. And 10 that -- I mean, we took 100 points off of their 11 score, which is 10 percent of the entire score, 12 and we still scored as well as they did. 13 We felt that by reducing that transfer 14 restriction, that it would enhance their score, 15 as opposed to their score being penalized. 16 TREASURER GALLAGHER: I mean, do -- say 17 that again? 18 MR. COMPTON: By -- for example, if you 19 negotiate down a ten-year, which we certainly 20 hope that, you know, what we do is negotiate 21 down that ten-year transfer restriction, that, 22 if anything, that would only help that overall 23 score, because the penalty shouldn't be as 24 onerous as that that we assigned to it. 25 TREASURER GALLAGHER: Well, they've got to ACCURATE STENOTYPE REPORTERS, INC.
2 MR. HERNDON: Perhaps. 3 TREASURER GALLAGHER: Just trying to -- 4 MS. YOUNG: Yeah. 5 But I think the increase they would get 6 for -- or the decrease they'd get for a lower 7 interest rate, compared to the increase they 8 would get, for example, if they eliminated it 9 altogether would be a magnitude of 10 to 1. 10 TREASURER GALLAGHER: Well, I can tell you 11 that I'm very opposed to any annuity being used 12 at this point in somebody's retirement. 13 With a -- with a penalty. 14 MS. YOUNG: Well, we were following the 15 legislation, which allowed people to oppose 16 that type of product. 17 We felt that, you know, penalizing them as 18 strongly as we did, you know, took that into 19 consideration, but the legislation enabled them 20 to propose that. 21 MR. COMPTON: But -- but we don't disagree 22 with you at all. 23 MS. YOUNG: No. 24 MR. COMPTON: Now, with respect to the 25 flexibility that the legislation says, we don't ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 352 2 relative, you know -- 3 TREASURER GALLAGHER: But, see, but I'm 4 at -- at the point where I -- I would not want 5 to see any -- at this phase, any penalty for -- 6 for taking money out ever. 7 I mean, I brought with me the deferred comp 8 choices. And just as an example, if we pick 9 enough bundled providers here, we will 10 absolutely give every one of our employees a 11 chance to go to the funny farm. They're 12 already doing it with this. 13 And penalties for moving the money around 14 is not good. 15 MR. HERNDON: We have four, it looks like, 16 more speakers. 17 Mr. George Zock -- is that the correct 18 pronunciation? 19 MR. ZOCK: That's right. 20 MR. HERNDON: I'm sorry -- with 21 Horace Mann. 22 MR. ZOCK: Thanks. 23 Thank you for the opportunity. 24 We were disappointed with the scores and 25 the advice grading evaluation from the -- from ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 353 2 first round scores from Callan & Associates. 3 The investment performance scores for 4 Horace Mann scored among the best in the 5 industry. And that had a lot to do with the 6 partner that we partnered with for the proposal 7 here, Florida -- Wilshire & Associates out of 8 Santa Monica, California. 9 We came into the second round with the same 10 innovative approach to the RFP and the 11 State of Florida. And that was to partner with 12 two experts: One in the field of education, 13 ETI, Education Tech, Inc.; and 14 FasCorp Corporation for administrative 15 services. 16 Both of these firms have participated in 17 the first round of the evaluation to be the 18 educational provider for the State plan, ETI; 19 and FasCorp for the third party administrator. 20 Both of those firms scored extremely high 21 in the first round evaluation. However, in the 22 second round evaluation, they did not score 23 high, they scored low. 24 The same consistency, along with the points 25 brought out by the previous speakers, raises ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 354 2 calculations of the report to the SBA. 3 While other aspects of the scoring are 4 puzzling, either because the criteria was 5 subjective, calculated in a black box, or 6 because of the complexity of the RFP, 7 misinterpretations, I can't -- I can't at this 8 stage provide any more specifics on our 9 results. 10 I can disclose to you that we did not use 11 8 billion dollars in our allocation. We did 12 not assume that all participants who elected to 13 move to a bundled provider would go to 14 Horace Mann, nor did we assume that we would be 15 the only company that would be -- would be 16 chosen. 17 We assumed a number that was significantly 18 smaller than that. And then those funds would 19 be allocated across the nine investment options 20 that we did submit to the State of Florida, 21 keeping our expense level very high when 22 compared to the rest of the -- rest of the 23 industry. 24 Had we known that 8 billion dollars was the 25 dollar amount, and we learned that here today, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 355 2 would have been -- would have been different. 3 I would request that the Trustees consider 4 conducting a detailed review of the 5 consultant's report, and would ask that 6 Horace Mann be included on the on-site visits 7 so that we would not lag behind the other 8 participants vying for the business in the 9 state of Florida. 10 On behalf of Horace Mann, I'd like to thank 11 the Board of Trustees and the SBA for this 12 chance to participate. 13 Horace Mann is not here to disrupt this 14 process, but here to try to assist in a fair 15 evaluation of investment alternatives. 16 Thank you. 17 GOVERNOR BUSH: Thank you. 18 MR. HERNDON: Want to say anything? 19 MS. YOUNG: I think just a -- a quick 20 comment. 21 In terms of the 8 -- 8 billion dollars, 22 that comment, I mean, everybody had the 23 opportunity to propose their most competitive
25 might have used for cost breakpoints. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 356 2 amount of assets actually was attributable to 3 you, we would give you a cost savings, they 4 were in the same position as anyone else from a 5 relative basis to make such a proposal. 6 GOVERNOR BUSH: I'm not sure that's -- 7 I mean, that you could price your product based 8 on volume, or you can pr-- there are different 9 ways of pricing your product. 10 And, again, I just worry that the lack of 11 transparency across-the-board may not have 12 given us the best possible deal in terms of -- 13 in terms of costs. 14 I don't know. This is new to me. I'm 15 learning as I go along. 16 And -- 17 MS. YOUNG: I mean, they even had the same 18 information, and then they were evaluated 19 relative to -- 20 GOVERNOR BUSH: Your -- 21 MS. YOUNG: -- each other. 22 GOVERNOR BUSH: -- your -- your 23 assumptions, which you needed to do to do your 24 job, the question is, by not telling the people 25 that bid, did you get a better price, or a -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 357 2 services? I -- 3 TREASURER GALLAGHER: Yeah. 4 For example, you had to take -- you had so 5 many points for costs, and then you allocated 6 how much money was going to go to each one to 7 figure out your costs. 8 So, therefore, each individual bundled 9 provider that put a bid in didn't have a -- you 10 had to allocate them differently, and so you 11 got different costs out of it. 12 That's -- that's a -- I mean, that's real 13 tough to justify how you got apples to apples 14 when you compare them. Now, agree, they didn't 15 put the same thing in. But -- 16 MR. COMPTON: Well, another step to that 17 evaluation was that among each asset class, we 18 compared all bundled providers and proposals -- 19 for example, on equity funds, all -- all 20 bundled providers that provided equity funds, 21 we had them lined up against each other, and 22 then we ranked their funds, based on expense 23 registers, low to high. And that's really 24 where the ultimate score came from on the 25 expenses. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 358 2 kind of takes the asset allocation out of the 3 equation again. Now you're being compared from 4 all -- you're being compared to your peer group 5 of providers that had equity funds, your peer 6 group of providers that had -- 7 GOVERNOR BUSH: Well, didn't -- 8 MR. COMPTON: -- money market funds, and -- 9 GOVERNOR BUSH: -- wouldn't the -- the 10 companies that -- because you made assumptions 11 about allocations of where the money went, if 12 you put it -- if you gave them too much of a 13 higher expense carrot, wouldn't they be 14 penalized in the point process? 15 MR. COMPTON: But only to the extent that 16 they were going to -- what it was is if you 17 were going to get a lot more of the assets 18 because of your diversified line-up, then your 19 funds are going to be weighted in accordance 20 with what we thought the asset allocation was 21 going to be. 22 That was the weighting of the score that 23 that individual fund got relative to the 24 peer group of everyone else that might have had 25 an active fund, or the peer group that -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 359 2 MR. COMPTON: -- the long -- 3 GOVERNOR BUSH: -- can I make a -- 4 MR. COMPTON: Yeah. 5 GOVERNOR BUSH: This is -- this is 6 really -- I mean, I -- 7 MR. COMPTON: It's pretty deep. Yeah. 8 GOVERNOR BUSH: -- I'm a nov-- I'm an 9 amateur at this. 10 But if you have this range of risk versus 11 return -- you call it the -- you -- you just -- 12 MR. COMPTON: Diversified spectrum. 13 GOVERNOR BUSH: Spectrum. 14 MR. HERNDON: Spectrum. 15 MR. COMPTON: Okay. 16 GOVERNOR BUSH: And let's say that the way 17 you've analyzed it, six offerings for one 18 company were identified, or were qualified, and 19 nine were on the other, wouldn't it make sense 20 to assume the same investment percentages over 21 the spectrum, so as, for example, if you -- 22 if -- I assume the middle is where it mostly 23 would go -- maybe I'm wrong. 24 And -- and you could divide -- if someone 25 was not in one of the -- one of the nine ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 360 2 the -- the investment areas that were ranked 3 next to that -- 4 MR. COMPTON: Uh-hum. 5 GOVERNOR BUSH: -- so that you're staying 6 more or less in the same spectrum, rather 7 than creating -- 8 MR. COMPTON: That's -- 9 GOVERNOR BUSH: -- before you could have 10 the -- 11 MR. COMPTON: That's actually what we did. 12 That's exactly what we did. We -- sorry 13 it's taken -- 14 GOVERNOR BUSH: Well -- 15 MR. COMPTON: -- so long -- 16 GOVERNOR BUSH: -- maybe I'm not an 17 amateur, or -- 18 MR. COMPTON: The only thing -- 19 MS. YOUNG: We're -- 20 MR. COMPTON: -- the only thing that's 21 confusing is that we assumed that every 22 provider got 8 billion dollars. And so that 23 required a bit of a -- as opposed to if I 24 didn't offer a fixed fund, now I'm only going 25 to get 6 billion dollars, because I didn't have ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 361 2 So that's what cost a little bit of the 3 allocation. But we kept it to a relative 4 spectrum. And that's exactly what we did. 5 We -- we just have -- it's us not doing a 6 very good job of explaining it, I'm afraid. 7 So -- 8 GOVERNOR BUSH: Mr. Herndon. 9 MR. HERNDON: Malcolm Campbell with 10 TIAA-CREF. 11 MR. CAMPBELL: Governor, General, 12 Commissioner, I'm Malcolm Campbell with 13 TIAA-CREF, Teachers Insurance and Annuity 14 Association - College Retirement Equities Fund. 15 We're -- 16 GOVERNOR BUSH: Let me -- let me guess, you 17 like the system. 18 MR. CAMPBELL: We are very pleased to be 19 here. 20 About six months ago, I didn't think we'd 21 actually be here, because we were kind of at 22 loggerheads with staff over the design. 23 But through your guidance and 24 encouragement, and through the changes made in 25 the legislation, and through the process to ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 362 2 are one of the five finalists in this RFI, the 3 competition for the bundled provider position, 4 and we're delighted to be there. 5 We're also delighted that yesterday we were 6 notified that we are one of the five finalists 7 for the annuity provider, the post-retirement 8 annuity provider. 9 We look forward to the process moving 10 forward. We understand that this is not only a 11 Request for Information, but it is an 12 Invitation to Negotiate, and we look forward to 13 the continuation of the process. 14 GOVERNOR BUSH: Thank you. 15 MR. HERNDON: Mr. Bill Jaison with Aetna. 16 MR. JAISON: Good afternoon, Governor, 17 General, Treasurer. 18 Bill Jaison with ING Aetna Financial 19 Services. I just wanted to step on up, and -- 20 and you're probably wondering whether I'm in 21 favor or -- or against. 22 I wish I could say I didn't have an ax to 23 grind, but I do. 24 We very clearly want to win a slot to help 25 partner with the State, and drive the PEORP ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 363 2 But I -- I will say that, yeah, we -- we 3 are pleased to be a finalist. But I also share 4 a few perspectives in that regard. 5 This is -- this has been a very 6 deliberative process, a brutal process, I might 7 say, excruciating detail, a very rigorous 8 analysis. 9 But, again, I would say it's very 10 indicative of government business. It yields 11 qualitative and quantitative results. 12 And as we all know, those who participate 13 in the government business every day, it's -- 14 it's -- you pick a strategy, you build a case, 15 you tell your story. 16 This data, the roll up of this data, 17 I think, provides a story on each company. 18 Some of us are pleased with the story. I could 19 tell you, I'm -- I'm neutral about the data. 20 I think we were scored well in certain areas, 21 and scored perhaps not so well in other areas. 22 But I will also share the fact that we did 23 not make the cut yesterday. So we're -- we're 24 not happy with how we were scored there. But, 25 again, we picked the strategy, and we picked ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 364 2 Tier -- Tier V segment. 3 I will stand before you today and urge you 4 to give the SBA the authority to continue and 5 conduct this analysis, being decisive in their 6 decision making, continue to follow a strict 7 process and strict guidelines, but move this 8 process forward. 9 And I am concerned, and -- and on behalf of 10 ING Aetna, we are concerned that if we take 11 this process and perhaps interrupt the 12 integrity of this process, it will -- it will 13 cause an avalanche of issues that we will all 14 be wrestling through. 15 Again, I can certainly sympathize with some 16 of my competitors. We're pleased to be 17 considered in the finalists. 18 And if you change the -- the approach here, 19 we would certainly respect that, and we will 20 continue to participate with the 21 professionalism and grace that we feel like we 22 participated with for the past two-and-a-half 23 years. 24 Thank you for your time and consideration. 25 GOVERNOR BUSH: Thank you. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 365 2 Florida School Board Association. 3 MR. BLANTON: Thank you, Governor, 4 Commissioner, General. 5 I was not planning on speaking today. I 6 heard enough about scores this morning. And 7 so -- then later today, you were talking about 8 private business scores, so I thought I should 9 say something. 10 Number one, you know I represent 47 percent 11 of the employees -- we employ 47 percent of the 12 Florida Retirement System. You all know that 13 I've followed this process, and this particular 14 major issue very closely for the last couple of 15 years, because of who I represent and the 16 impact it's going to have on our -- on our 17 individuals. 18 We want the process to work for our 19 employees, simple as that. I'm not here -- 20 I -- I don't represent -- I'm not here to -- to 21 make sure that this side gets something or this 22 side gets something. It's got to work right. 23 The process has been open, Mr. Herndon has 24 been great. He has -- talked to him many times 25 about what is there, and what we need to do is ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 366 2 We've always operated under a couple major 3 premises in doing all this. Number one, we 4 have always asked -- and it's no secret to 5 anybody -- to have as many -- as many bona fide 6 vendors as possible for choice among school 7 employees so that they can make an educated 8 guess. 9 And, secondly, Commissioner Gallagher is 10 exactly correct. We have always -- we have 11 always asked to know the exact costs -- fees 12 and costs of every category from every group 13 that's going to submit. Not blanket costs. 14 Fees and costs by category where our people, 15 when they get to this point in the next 16 year-and-a-half -- year, when -- can know who 17 they want to select. 18 Some of the things I'm hearing here today 19 is conflicting to that. And so I think that 20 there has to come a time where there's all 21 these costs are not there, we know what they 22 are by category so the various individuals who 23 are going to make a decision, State employees 24 we represent, public employees that we all 25 represent together, we think they have the ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 367 2 category for every single vendor that come 3 before us. 4 Thank you. 5 TREASURER GALLAGHER: Let me ask you a 6 question, sir. 7 You think that -- that seven bundled 8 providers offered to -- to the employees, sir? 9 MR. BLANTON: No. I've never said we 10 wanted 70 multiple providers -- 11 TREASURER GALLAGHER: Not 70. Seven. 12 MR. BLANTON: Seventy. 13 TREASURER GALLAGHER: That's a little far. 14 MR. BLANTON: Seventy. 15 No. Because Texas did that. You know, 16 they had 135, and they messed up. 17 Seven? 18 TREASURER GALLAGHER: Seven. 19 MR. BLANTON: Seven. I thought you said 20 70. I'm sorry. 21 We have always thought there should be a 22 number that's reasonable and can be categorized 23 by the Department. And generally whether 24 that's five or eight or whatever is -- is a 25 good number. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 368 2 ten, you know, because I think you get too big 3 at that point. 4 But the other part of that, 5 Commissioner Gallagher, is that whoever they 6 are, I think needs to be operating from a level 7 playing field so that -- that my employees 8 understand the costs that are involved with 9 each of those, whether it's seven, eight, nine, 10 or ten. 11 TREASURER GALLAGHER: Well, here's -- 12 here's what Florida State employees get to pick 13 from with seven bundled providers. They can 14 have all those choices. 15 Now, you think that's an easy thing for 16 somebody to sit down and figure out? 17 MR. BLANTON: It's not easy. But, 18 you know, my employees at my office have the 19 same choices, and -- and they make educated 20 decisions about -- about those things. 21 So I think as many choices as possible is a 22 good thing. 23 But -- but right now where we are with the 24 number of vendors that are out there, which are 25 limited right this moment, I think that my ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 369 2 various costs that are associated with those 3 various categories. 4 TREASURER GALLAGHER: Well, I agree with 5 that. 6 Many of these bundled providers provide the 7 exact same money manager. 8 MR. BLANTON: Possible. 9 Thank you, sir. 10 GOVERNOR BUSH: Thank you. 11 MR. HERNDON: Let me just reenforce one 12 point that Wayne makes, and that is that -- 13 that any bundled provider, or -- or unbundled 14 provider, we -- you will see the full cost 15 disclosed. 16 And it may not be broken down to the detail 17 level, Commissioner, that you're interested in, 18 and that we're interested in, but you'll see a 19 full net cost. 20 It won't be additional costs or hidden 21 costs that aren't there. But you run into the 22 same problem we were alluding to earlier, and 23 that is that something is free, this party 24 charges for it, this other party charges half 25 of what the other party -- so you do have that ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 370 2 But you are going to see the full net costs 3 disclosed. So that certainly is not the 4 problem. 5 The last speaker that I have is 6 Russ Bjorkman, who's a member of our Investment 7 Advisory Council. 8 MR. BJORKMAN: Am I not the last one to 9 speak? 10 MR. HERNDON: As far as I know. 11 MR. BJORKMAN: I would like to be the last 12 one. 13 TREASURER GALLAGHER: You're last, unless 14 somebody else jumps up. 15 MR. BJORKMAN: Okay. 16 TREASURER GALLAGHER: Hopefully the last. 17 MR. BJORKMAN: Hi. Good afternoon. 18 I'll be quick. Hard to believe, but I'll 19 be quick. 20 GOVERNOR BUSH: Why don't you say who you 21 are again, please? 22 MR. BJORKMAN: Hi. Russell Bjorkman. I am 23 a member of the Investment Advisory Council. 24 I have the two pages of notes that I 25 prepared before I came up here today that I'll ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 371 2 Secretary Gallagher. 3 But the comments that I want to make -- and 4 I would like to make a suggestion, if I could. 5 TREASURER GALLAGHER: I think you ought to 6 give a copy to the Governor, too. 7 MR. BJORKMAN: Excuse me? 8 TREASURER GALLAGHER: I think you ought to 9 give a copy to him, too -- the Governor also. 10 MS. CASTILLE: We have one. 11 TREASURER GALLAGHER: Oh, okay. 12 GOVERNOR BUSH: I don't have it. 13 MR. BJORKMAN: The -- in my opinion, the 14 difference between the Categories II and III 15 within this bundled concept, a difference is 16 trying to be defined without a distinction. 17 And I think they ought to be combined. 18 But I believe that -- excuse me -- 19 I believe that Mercer could, in -- in concert 20 with the SBA staff, clearly quantify detail and 21 articulate every aspect of the methodology for 22 the grading, which is what you have talked 23 about a good bit. 24 I think that the bid process could be 25 reopened on an abbreviated process to properly ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 372 2 Also -- oh, part of the RFI was an 3 Invitation to Bid -- or excuse me -- was an 4 Invitation to Negotiate. I believe that that 5 first step should be followed up with a -- an 6 analysis back to the vendors, and then a 7 final -- a final mandate to them to put their 8 best proposal forward. 9 And I think that the overwhelming majority 10 of the -- what appears to be now to be an 11 overly -- an overly qualitative, subjective 12 evaluation criteria could be reduced to a 13 highly quantitative, objective review. And 14 that would be very specific in the area of 15 return and fees. 16 I think that that's -- since a lot of work 17 has been done, I believe that methodology could 18 be developed quickly, it would go to the 19 vendors, the vendors would respond, they would 20 get a last chance, after seeing everybody 21 else's, to come back with a -- with their 22 absolute bottom line. 23 And then the progress (sic) goes forward in 24 a very clean nature. Everybody's not going to 25 be happy, unless you pick which is what you've ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 373 2 somebody's going to be left out. 3 But we do have to have gainful choice and 4 create competition within the system that's 5 here. And on the track that I think that we're 6 going down, I don't see meaningful competition 7 within there only being one or two providers. 8 I think that the -- that the concept of the 9 generic funds make a lot of sense. I think the 10 concept of a -- of an unbundled name brand 11 provider makes a lot of sense. 12 And then a few -- and that is going to be a 13 tough decision that lies squarely on your 14 shoulders, whether it should be one, or whether 15 it should be five, I think, which is the 16 maximum that the law calls for, bundled 17 providers, but somewhere -- 18 It doesn't have a maximum? 19 Okay. They never did -- they never did put 20 a maximum. I will -- five would be on the high 21 end. But certainly two to three is a 22 reasonable number. 23 You then have meaningful choice, you have 24 competition, the competition would be dynamic 25 going forward, as opposed to a static ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 374 2 people, and you would only have one choice. 3 And I think that that can all be done, and this 4 can be put on track again. 5 And that's -- that is my suggestion for you 6 to provide direction to the SBA to do that. 7 And I'll -- 8 TREASURER GALLAGHER: Let me ask -- 9 MR. BJORKMAN: -- make copies. 10 Yes. 11 TREASURER GALLAGHER: Have you -- you have 12 obviously been through all this, and looked at 13 it. And from your observation, you think it's
15 MR. BJORKMAN: I think there's questions. 16 I think it -- I think the wheels are kind of 17 hanging on the side. And I -- I don't think 18 it's broken. I think it can be fixed, but 19 I think it needs to be highly quantified. 20 Every ounce of subjectivity for these 21 evaluations need to be removed. 22 COMPTROLLER MILLIGAN: Let's talk about 23 best and final for a -- 24 MR. BJORKMAN: Okay. 25 COMPTROLLER MILLIGAN: -- for a second. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 375 2 COMPTROLLER MILLIGAN: What -- what would 3 be required to really go back for a best and 4 final, more than has already been done in terms 5 of Mercer's evaluation? Would you have to 6 identify specific areas that you're seeking 7 clarification, or just providing them the 8 evaluation in its entirety, and requesting a 9 best and final? 10 MR. BJORKMAN: A highly quantified 11 evaluation, with the scoring that shows where 12 everybody is, and, of course, the methodology 13 as to how you got there. 14 If that went back to the vendors, and they 15 looked at it, and they could see where they're 16 high, where they're low, and where maybe they 17 can cut, maybe they can't cut, and then they 18 could make a final down and dirty -- 19 COMPTROLLER MILLIGAN: I'm not 20 suggesting -- I'm suggesting, Russ, that -- or 21 asking, frankly, do you think what has already 22 been done, packaged and sent back to each of 23 the competitors -- 24 MR. BJORKMAN: I don't think that's their 25 final offers at all, no, sir. ACCURATE STENOTYPE REPORTERS, INC.
2 I'm not -- 3 GOVERNOR BUSH: I see what you're saying. 4 COMPTROLLER MILLIGAN: You take the 5 analysis that has been done, and you send it 6 back to each of the proposers, and ask whether 7 they're best and final. 8 Is that an adequate amount of information 9 for them to respond with a really good best and 10 final? 11 MR. BJORKMAN: Well, I think what -- with 12 the methodology being very well articulated, 13 and the scoring sheets being very clearly 14 explained, yes. That -- you could possibly cut 15 out that middle step that I -- that I 16 mentioned. 17 Is that what you're kind of asking? 18 COMPTROLLER MILLIGAN: Well, I'm just 19 trying -- I'm trying to avoid having to go back 20 and -- 21 MR. BJORKMAN: Well, I'm thinking -- 22 COMPTROLLER MILLIGAN: -- more work, when 23 we have an -- 24 MR. BJORKMAN: Well -- 25 COMPTROLLER MILLIGAN: -- a thorough ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 377 2 have the methodology, I presume -- 3 MR. BJORKMAN: Well, I think that my 4 concern with doing that within this particular 5 step is that that methodology seems to be 6 somewhat elusive in the mind of the vendors. 7 And so I think that that methodology needs 8 to be clearly quantified, let them make the 9 bid -- now, I'm -- and I don't know exactly -- 10 COMPTROLLER MILLIGAN: I'm not -- I'm not 11 sure how you quantify the methodology, other 12 than you lay out what your methodology is, and 13 some of them may be quantitative, some of them 14 may be qualitative -- 15 GOVERNOR BUSH: Can we get -- Mr. Herndon, 16 can you come up here for a second to talk about 17 this? 18 Because I think one of the possibilities 19 might be to come to take a variation on what 20 Russell's saying, to bring -- to -- to go 21 back -- right now you all are proposing that 22 we -- that you -- you're -- actually you 23 started site visits on five -- with five 24 companies. 25 MR. HERNDON: Right. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 378 2 proposal, do they require site visits as 3 well -- 4 MR. HERNDON: No, sir. No, sir. 5 GOVERNOR BUSH: So we're talking about site 6 visits for the -- the folks that are providing 7 additional services. 8 MR. HERNDON: Correct. 9 GOVERNOR BUSH: What would happen if we -- 10 we suggested that you go do site visits for 11 everybody -- 12 TREASURER GALLAGHER: That's only about 13 ten -- 14 GOVERNOR BUSH: Well, it's -- minus -- 15 I mean, it's even less in terms of -- if it's 16 ten, but it's -- it's -- 17 TREASURER GALLAGHER: Well, I think you 18 have all the -- obviously you don't have to go 19 see Prudential twice -- 20 GOVERNOR BUSH: You only go once. 21 TREASURER GALLAGHER: -- you don't go see 22 the other one twice. 23 GOVERNOR BUSH: And in that process, we 24 clarify some of these concerns, make the effort 25 to move what y'all may say is qualitative -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 379 2 qualitative, and then immediately move to the 3 process that General Milligan proposes for the 4 last best shot for the next -- I mean, how long 5 would that take? 6 MR. HERNDON: Well, it's going to take a 7 few days to schedule and conduct the additional 8 site visits and -- 9 GOVERNOR BUSH: I bet they would be 10 accommodating -- 11 MR. HERNDON: Oh -- 12 GOVERNOR BUSH: -- to your schedule. 13 MR. HERNDON: -- it's not -- it's not -- 14 it's -- yeah, it's our folks that have the 15 problem because they're stretched very thin. 16 GOVERNOR BUSH: I see. 17 MR. HERNDON: It's not the vendors that -- 18 that are the problem in that regard at all. 19 Let me just remind you though that you -- 20 you think about this in thirds. I mean, 21 investment performance and costs, educational 22 services and recordkeeping. Some of this is a 23 qualitative assessment, and you're looking at 24 educational services -- 25 GOVERNOR BUSH: Of course, it is -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 380 2 COMPTROLLER MILLIGAN: Absolutely. 3 GOVERNOR BUSH: Right. 4 MR. HERNDON: So it is not as simple as 5 quantifying everything in -- in the -- 6 GOVERNOR BUSH: I've just got a sense that 7 some of the parts that could be quantitative 8 that relate to fees and expense -- expenses 9 because of some of the underlying assumptions 10 that were made, that maybe the vendors didn't 11 know about, started moving into the subjective 12 area. 13 And I -- my -- without knowing exactly how 14 this process works, my guess is, that'll slow 15 down the end -- the end game of this if -- 16 MR. HERNDON: Yes, sir. 17 GOVERNOR BUSH: -- if we don't watch out 18 anyway. 19 So why not pause, make the effort to -- to 20 bring some clarity to this for everybody. 21 And the -- the part that Russell made, the 22 point he made that I completely agree with, is 23 if you have a more dynamic negotiating 24 situation, you're going to get better -- 25 I mean, to me, transparency brings -- will ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 381 2 you know, we might have a disagreement on. 3 But clearly, if you have more people 4 bidding, and they know it's their last best 5 shot, you're going to get your best deal, 6 rather than what the proposal was here today, 7 which was to narrow the field, and then 8 negotiate. 9 COMPTROLLER MILLIGAN: I -- I guess I'm 10 trying to understand, if you -- you do a site 11 visit, which is certainly within the realm of 12 possibility, and then provide as -- I guess a 13 function of the site visit, the analysis, 14 and -- that was done, with which may include 15 the methodology that was used in the conduct of 16 the analysis -- 17 GOVERNOR BUSH: Right. 18 COMPTROLLER MILLIGAN: -- and then ask for 19 a best and final, does that really get to the 20 solution better I guess is what I'm trying 21 to -- 22 TREASURER GALLAGHER: Well, let me just 23 throw a couple of things in here, just -- if I 24 could ask a question of probably Mercer and our 25 Executive Director. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 382 2 me if I'm wrong. 3 In regards to organizational qualities, it 4 doesn't look like the point spread's enough so 5 that you wouldn't do business with any of those 6 guys because of that, would you? 7 MR. COMPTON: Generally, no. But that's 8 almost entirely subjective. So to the extent 9 that you let everyone go and renegotiate, I 10 mean, I could see the thing stall forever, with 11 everyone out here just -- 12 GOVERNOR BUSH: That may not be -- 13 TREASURER GALLAGHER: -- later. I'm 14 just -- I'm trying to move these on out. Okay? 15 That's one we argue about it. Everybody's 16 saying they're going to organizational somebody 17 else. 18 The bottom line is, in my looking at it 19 here, I just want you to confirm it, if you 20 feel that every one of them has enough 21 organizational qualities in the way you graded 22 it that they can operate. 23 We -- we can -- we feel comfortable that 24 their operations can handle this -- this deal; 25 is that correct? ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 383 2 that's correct. 3 TREASURER GALLAGHER: In both capabilities 4 and qualities. 5 MR. HERNDON: (Nodding head.) 6 MR. COMPTON: Well, I mean, there was more 7 variability of capabilities because that's all 8 of a sudden starting to become things like 9 systems links with the TPA, and things of that 10 nature. And so -- 11 TREASURER GALLAGHER: Well, my guess is, 12 you gave Horace Mann 30, and TIAA-CREF -- 13 Horace Mann got 30 because an outside -- an 14 outside person was doing it as well as 15 themselves. 16 MR. COMPTON: Well, I mean, we could go to 17 a -- but things like -- 18 TREASURER GALLAGHER: And that's my guess. 19 MR. COMPTON: That's the type of thing that 20 factors into the scoring, no question about it. 21 TREASURER GALLAGHER: But nobody knew that 22 when they put their bid in. 23 MR. COMPTON: Well -- 24 MR. HERNDON: They knew that that category 25 was -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 384 2 category -- 3 MR. HERNDON: -- going to be -- how much 4 they were going to get for that category. 5 TREASURER GALLAGHER: Right. 6 But if they -- if -- as the fellow said 7 here from Horace Mann, he said that it is -- 8 they went out and recruited the best 9 third party administrator they could find that 10 was really graded high, and they all looked at 11 them on the education side, and figured, man, 12 we've got to really be -- we've got to be good 13 here. 14 We've got the best who is out there, and 15 we've got the best on the other side, and so 16 what ended up happening is, because -- 17 MR. COMPTON: But that's a relative term, 18 too. 19 TREASURER GALLAGHER: Did y'all make the 20 decision that because they were doing for 21 themselves, they weren't going to get as many 22 points. 23 MR. COMPTON: No, not -- 24 TREASURER GALLAGHER: That's what my guess 25 is. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 385 2 No. I mean, it's relative to what everyone 3 else provided, and what they might think is 4 best. I mean, not really -- 5 GOVERNOR BUSH: If we created a process 6 where if they disagreed with your assessment, 7 they gave -- they -- they had their shot on the 8 site visit to say, hey, wait a second, 9 you know, we're -- we're really strong in this, 10 and you said, well, we didn't have that 11 information or something, and you made an 12 adjustment based on new information, would that 13 be an appropriate thing to do, to have a 14 process where you -- you bring some clarity to 15 some of these questions that were brought up. 16 Now, you may go to Horace Mann and say, now 17 we really believe what we believe, you know, an 18 organizational whatever it is, in which case, 19 you'd come back to us, and you would say, this 20 is -- we went to these site visits, this is -- 21 this is where we stand right now. 22 And the question then becomes, do we throw 23 in the, you know, best deal on the table right 24 then coming back to us, or do we -- do we make 25 it a -- you know, a two-step process. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 386 2 answer today. If we could do it all at once, 3 I'm all for it, because these meetings are too 4 long -- 5 TREASURER GALLAGHER: Yeah. 6 Here's -- I -- I'll just -- get down there. 7 Just -- I mean, finish where I was going. I 8 got into giving Horace Mann as an example. I 9 won't do that again. 10 Pretty much operational capabilities, and 11 organizational qualities, you do business with 12 any one of these companies, or somebody might 13 not? 14 MR. COMPTON: Well, I mean, there are some 15 that we do a lot more business with, and do a 16 nice job; and some that we really haven't even 17 really seen or -- or touched very much. And 18 so -- 19 TREASURER GALLAGHER: Right. 20 So may-- so maybe if you don't touch them, 21 you may feel better. 22 All right. There are -- there are certain 23 things together that I think are extremely 24 important, at least to me. 25 And unless somebody would go visit and say, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 387 2 kind of buying, or whatever else, that may -- 3 certainly something that might be considered 4 subjective, but it's a very important 5 subjective. 6 Short of that, associated expenses ought to 7 be pretty daggone easy for us to get and to be 8 able to compare. 9 Investment management process, looks to me 10 like everybody's pretty well even on that. 11 Nobody -- doesn't look like anybody's had any 12 big problem with any of them. 13 So you don't need to do that again. 14 Let's say everybody's qualified -- 15 COMPTROLLER MILLIGAN: Well, I mean, 16 you know, I know where you're going. But I'm 17 not so sure that is the way to do this by the 18 seat of the pants here right -- 19 TREASURER GALLAGHER: Well -- 20 COMPTROLLER MILLIGAN: -- now, and decide 21 what -- what factor you're going to reconsider 22 and what factor you're not going to reconsider. 23 TREASURER GALLAGHER: Well, I -- 24 COMPTROLLER MILLIGAN: The best and final 25 is a best and final. And that -- and if that's ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 388 2 we ought to take it. 3 From the layout -- you lay out what your 4 analysis was of the -- of the initial input, 5 you send it back to them, and you tell them, 6 hey, come back with your best and final. And 7 you go through the analysis again. 8 That's what you do. You're going to have 9 to do it. 10 TREASURER GALLAGHER: Well, but -- 11 COMPTROLLER MILLIGAN: And you -- 12 TREASURER GALLAGHER: -- but let me just 13 finish where I'm trying to come from. 14 And you may be right on where I'm going. 15 The bottom line is is that if we agree that 16 these companies -- that they're all -- have 17 some qualities, they -- I'm going on across, 18 something that I think it got 300 points, and I 19 think it should have 300 points, I think it's 20 probably one of the most important things we do 21 for our -- our constituents, which are the re-- 22 soon to be someday be retirees, gross 23 performance is certainly something that -- 24 that's a -- that's a down and dirty final, how 25 well they perform the important thing. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 389 2 want everybody to know how much those are on a 3 per fund basis probably. 4 Okay. That's extremely important. You 5 guys gave it 200 points, so that's pretty 6 important. 7 Education administrative services. Now, 8 there's one -- I guess that's something that 9 needs to be analyzed, but it needs to be a 10 totally transparent analyzation. 11 These are what we need points for, and they 12 already know how you did it. These are what 13 you get good for, these are what you get bad 14 for. 15 Associated expenses, obviously you gave 16 125 points for that, too. So what I'm looking 17 at here is about 750 points. Everybody's -- 18 pretty much can do the rest of the stuff over 19 here, in my opinion. 20 So let's let them ride. You don't have to 21 look at that again, it's there, and boom. They 22 all got enough to qualify. 23 So now we're into the things that we -- the 24 thing that I think we're -- at least I can 25 speak for myself -- is interested in. And ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 390 2 it cost? 3 And that's what these last four really are, 4 how well do they perform, and how much does it 5 cost? 6 MR. COMPTON: Well, and that is the most -- 7 I guess, quantitative -- 8 TREASURER GALLAGHER: Exactly. 9 MR. COMPTON: -- analysis, and we've 10 already done -- it's a matter of agreeing on 11 what assumptions, like cash flow, 8 billion 12 dollars -- 13 TREASURER GALLAGHER: All right. 14 MR. COMPTON: -- those types of things -- 15 TREASURER GALLAGHER: So -- 16 MR. COMPTON: -- need to be met. 17 TREASURER GALLAGHER: -- where I'm coming 18 from, if the other one is pretty much, okay, 19 everybody qualifies, they're there, we're 20 taking them off the table, because they're all 21 subjective choices anyway, and everybody can 22 tell -- okay, maybe made it there. 23 Now, totally transparent. Every single way 24 you're going to look at how many points they 25 get, in the front end, with all these vendors ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 391 2 them and telling them how they're going to get 3 graded, and listen to their complaints, and 4 somebody to say, I'm sorry, that's a complaint, 5 but we're not going to go along with it. 6 Or, that's valid, and, okay, we'll do this. 7 They get to -- they're not going to change 8 their performance on a lot -- I think that's 9 going to be where it is. 10 But I think -- I do think the changes 11 are -- these expenses and -- and the other 12 services that they are -- they're offering, 13 certainly associated expenses is part of 14 their -- those are all -- I think they -- they 15 can be quantitatively done. 16 I think they can be totally objective. And 17 if they aren't totally objective on those, 18 we're not going to -- there's still the 19 subjective. 20 And that's the kind of thing I'd like for 21 you to put together. That's just my side of 22 it. 23 You guys may disagree. But that would be 24 my -- 25 GOVERNOR BUSH: You're not saying anything ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 392 2 TREASURER GALLAGHER: -- the final -- 3 I'm just eliminating the first four so that 4 the -- the objectives are out, and let's see if 5 they can perform -- now, if you've got somebody 6 you don't think can perform, you better -- 7 you'd better talk about that. 8 But other than that, let's see what it 9 costs, and see how much they're going to do it 10 for. Everybody'll know exactly how they're 11 going to get graded. 12 MR. HERNDON: I assume in any of the 13 scenarios that you're trying to describe, 14 nobody gets an opportunity to offer new 15 investment products. I mean, they -- they -- 16 TREASURER GALLAGHER: They're locked into 17 where they are -- 18 MR. HERNDON: -- they came to the dance 19 with what they brought already. 20 TREASURER GALLAGHER: Well, let me ask you 21 this though: I -- I think that's probably a 22 good -- one way. But let me -- let me just ask 23 you this: 24 If this was open for negotiation down the 25 road anyway, and they were sitting there, and ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 393 2 these, we would -- we would do business with 3 you, which would be where the negotiation is, 4 if you set your criteria out, and you -- they 5 know that if you have a full nine good spread, 6 you're going to get the max points for that; 7 and if you don't, you're not, then they have an 8 opportunity to do that. 9 But -- so I would say that they should be 10 able to change products knowing when they know 11 exactly how they're going to be scored on 12 exactly what -- what the deal is. 13 MR. HERNDON: And they all had that 14 information in advance publicly in front of 15 Advisory Councils, we discussed the criteria, 16 we discussed the weighting process. 17 These things were circulated around -- 18 I'm sorry -- these things were circulated 19 around. 20 So I mean, I appreciate that there were 21 some of the subelements that were not described 22 to the vendors. 23 In addition, the RFI-ITN says, give us your 24 best and final offer here and now. It wasn't 25 something that we were going to try and ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 394 2 We can do what you describe. It is going 3 to impact the schedule. That may or may not be 4 manageable. I really don't know at this point 5 until we sit down and think through some of 6 what you're describing. 7 The process the General is describing 8 probably works the best in some respects, and 9 that is, we will give everybody the detailed 10 analysis that was done by Mercer, and by 11 Callan. They already have some of that 12 information. 13 Given that opportunity to -- to -- to 14 comment on it, if that's what they would like 15 to do. Some have already taken advantage of 16 that opportunity and come and seen us. And in 17 some respects, we were reluctant to disa-- to 18 agree with them. 19 And then ask them if there's anything that 20 they would propose differently, absent a whole 21 new investment line-up where everything else, 22 because then you just start -- 23 TREASURER GALLAGHER: That's -- 24 MR. HERNDON: -- that's -- that's possible. 25 So that may be the simplest thing. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 395 2 there are probably some categories where there 3 isn't really a whole lot of discrimination 4 between the -- the firms. 5 But -- 6 COMPTROLLER MILLIGAN: Do I hear you now, 7 Tom, you think you could do a best and final -- 8 whatever that really means -- but a best and 9 final within the construct that we have right 10 now, and -- and probably have to go back and do 11 an analysis of that best and final, you would 12 want to do site visits up front, or would you 13 want to go through the best and final within 14 the construct, another analysis, and then 15 site visits? 16 On the criteria that there is some line to 17 be drawn here, as to the number? 18 And you either sink or you swim with it. 19 MR. HERNDON: There's no question in my 20 mind that the point that we're at now at least 21 presents an opportunity for the firms to 22 comment on what we have done up to this point. 23 We're happy to give them that opportunity. 24 They knew by-in-large most of this 25 information going in -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 396 2 MR. HERNDON: I -- 3 COMPTROLLER MILLIGAN: -- give you an 4 example. We've heard them talk about the 5 8 billion that -- 6 MR. HERNDON: Right. 7 COMPTROLLER MILLIGAN: -- is being dropped 8 on them. 9 With an 8 billion drop, maybe somebody will 10 price things a little bit different. 11 MR. HERNDON: Perhaps. 12 COMPTROLLER MILLIGAN: And -- 13 GOVERNOR BUSH: They're going to price it 14 different if they get another shot at it. 15 MR. HERNDON: Well, now they will -- 16 TREASURER GALLAGHER: I guarantee you -- 17 I'll make you a bet on that one. 18 MR. HERNDON: No. I -- I -- I suspect 19 you're right. 20 If they've heard some of the other messages 21 that you've given today as well, the annuities 22 and the lock-outs and some of the other -- 23 GOVERNOR BUSH: Here's another way you'd 24 want to get the best price is that we 25 conduct -- this may not be the -- I'm talking ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 397 2 state the number of bundled providers that we 3 would expect. 4 You really want to make this competitive. 5 Well, right now we say it. You know, because 6 there may be an expectation that there's going 7 to be nine bundled providers, or -- 8 TREASURER GALLAGHER: Well, the 8 -- 9 GOVERNOR BUSH: We never really established 10 our policies on that. Or we can wait. 11 I'll just -- I throw that out -- 12 COMPTROLLER MILLIGAN: Wait and -- 13 TREASURER GALLAGHER: You will -- you will 14 start up a -- 15 Almost no matter what number you pick, you 16 will start a whole new lobbying effort going. 17 MR. HERNDON: I -- I, frankly -- 18 GOVERNOR BUSH: I just thought I'd be 19 mischievous. I'm sorry. 20 MR. HERNDON: I, frankly, think that it 21 probably makes more sense to turn back around 22 the analysis that we've done thus far to each 23 of the companies, the 16 firms that are still 24 in -- in play, ask for their comments on it, 25 we'll try and do an evaluation, ask for their ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 398 2 that they propose, and postpone any further 3 site visits. 4 Because I don't see any point sending our 5 folks out to do site visits to 16 vendors when, 6 in fact, we may be looking to four or five or 7 six that are -- that are finalists. 8 And just call off the ones that we've got 9 currently scheduled, and set aside the ones 10 we've done for future reference. 11 Now, how some of the folks that are 12 tentatively identified take that, I don't know. 13 But -- 14 GOVERNOR BUSH: Well, I mean -- 15 MR. HERNDON: That's -- 16 GOVERNOR BUSH: -- it may have been a 17 mistake to do the site visits before coming to 18 us, although you -- you were doing it for time 19 purposes -- 20 MR. HERNDON: That's correct. 21 GOVERNOR BUSH: -- to make sure that we 22 stayed on the timetable. 23 But it should not have sent a signal to 24 anybody that -- before a decision was made by 25 the State Board of Administration that there ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 399 2 I think we have enough history to know that 3 these guys here particularly are real 4 independent. 5 MR. HERNDON: Well, we said very clearly in 6 the memo that transmitted the recommendations 7 to you, that we were awaiting your further 8 direction. 9 So everybody knew that -- that we had five 10 finalists that we were moving forward with, and 11 there was an option for others, depending on 12 your consideration. 13 This is not -- 14 COMPTROLLER MILLIGAN: I will try to -- I 15 will try to articulate what a proposal might 16 be. 17 And that is that we return the analysis 18 that has been conducted by the SBA and the 19 contractors, to each of the vendors, 16 I guess 20 it is; and that we request that they review 21 and -- and make their best and final offers in 22 reference to the criteria as they see it now, 23 and that we would go back and have to do 24 another analysis, I presume, based on any 25 changes that might occur. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 400 2 recommendation from you, Tom, as to who we 3 conduct site visits with, and further 4 negotiation. 5 Does that make sense? 6 MR. HERNDON: And let me just make one -- 7 COMPTROLLER MILLIGAN: Yeah. 8 MR. HERNDON: -- question/clarification. 9 When you said review and provide the best 10 and final offer, I think were you also 11 contemplating that they would provide us with 12 some clarification in those instances where 13 they -- 14 COMPTROLLER MILLIGAN: Oh, clearly. 15 MR. HERNDON: Okay. 16 COMPTROLLER MILLIGAN: Yes. Clearly. 17 I mean, they -- they would have to discuss with 18 you any changes they are seeking to make, and 19 so forth, or requests. 20 GOVERNOR BUSH: I think one of the things 21 that was clear is that we are expecting full 22 disclosure of all their pricing for every 23 element of -- of the proposal. 24 TREASURER GALLAGHER: Yeah. 25 I -- I'm -- I'll just tell you that as far ACCURATE STENOTYPE REPORTERS, INC.
2 in, they've -- they've opted themselves out. 3 Anybody that puts in a penalty for moving 4 their money from another -- one place to 5 another, I feel that they opted themselves out. 6 I'm only speaking for myself. There's a 7 couple other people have to say on that. 8 But we've been pretty clear on that from 9 the beginning. 10 COMPTROLLER MILLIGAN: I think Russ wanted 11 to make a -- 12 GOVERNOR BUSH: Yes. Russell. 13 MR. BJORKMAN: General, from -- from what I 14 understood that you just said, I don't see the 15 qualitative subjective issue being removed to 16 where there's a highly quantitative analysis 17 process. 18 COMPTROLLER MILLIGAN: I -- I don't 19 think -- I don't believe you can remove all of 20 the qualitative aspects of this thing. 21 What I think you can do though with those 22 things that have -- and are able to be 23 quantified, are to have really a better input 24 by the vendor on -- on those particular 25 quantifiable items. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 402 2 in the qualitative or subjective activities. 3 GOVERNOR BUSH: I think the point being 4 that once -- now, whatever information that the 5 vendors didn't have, now they do. And if 6 they're going to get their last best shot, that 7 term is qualitative decision making into a more 8 quantitative one, just by the very fact that 9 they know what the parameters are. 10 COMPTROLLER MILLIGAN: There will be some 11 qualitative issues I'm sure that will be 12 discussed, and -- and probably modified as a 13 result of that discussion. 14 But -- 15 GOVERNOR BUSH: General, I -- I'm taking 16 your -- your statement as a -- in the form of 17 a -- 18 COMPTROLLER MILLIGAN: Motion. Yes, sir. 19 TREASURER GALLAGHER: Let me just ask, if 20 we took the ones that we -- that we know are 21 somewhat subjective, and say that everybody 22 qualifies under those, so leave them out. 23 I mean, we do business with any one of these 24 companies based on organizational, 25 operational -- ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 403 2 agree with you, Tom, except that there's enough 3 variance in the numbers that have been assigned 4 on some of those qualitative areas that a 5 change could have a -- a fairly significant -- 6 the result could be sensitive to a change -- 7 TREASURER GALLAGHER: Right. 8 But look -- but here's what we do. We're 9 trying to find out people that are going to 10 give us the best for our buck, okay? 11 One of the things that they had to do in 12 the beginning is find out if somebody didn't -- 13 didn't even have the ability to produce. 14 That's what these first subjective things did. 15 COMPTROLLER MILLIGAN: No. If -- if you're 16 offering to amend the -- the -- 17 TREASURER GALLAGHER: The motion? 18 COMPTROLLER MILLIGAN: -- a motion, do so. 19 I -- I believe that we need to include all 20 the categories as they exist right now if 21 you're going after a best price. 22 TREASURER GALLAGHER: And -- and just -- 23 Governor, I guess you can be in the middle of 24 this one -- take -- have you choose. 25 I would like to -- I guess, take those ones ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 404 2 handle it or not. 3 And really what -- what matters to me, now 4 that we know those companies can handle it, is 5 what's their performance, how much are they 6 charging? That's what I care about at this 7 point. 8 And the rest of the stuff, look, I -- I 9 haven't heard anybody tell me that one of 10 the -- none of these -- these are all -- 11 I mean, I know every one of these companies. 12 There's not one company here that I haven't 13 heard before, I'm not familiar with. 14 A bunch of them are insurance companies, 15 pretty good sized ones. So -- 16 GOVERNOR BUSH: I think, Tom, the -- 17 TREASURER GALLAGHER: I'm trying to just 18 get -- get them -- forget having -- change 19 their deals so they can pick up 2 or 3 points 20 over here. Forget that. 21 Let's just look at the performance and the 22 fees. 23 GOVERNOR BUSH: But if they can convince 24 Mercer and the State Board that perhaps 25 they're -- the measurement was not accurate or ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 405 2 capabilities, then so be it. I mean, if they 3 can, great. 4 It still -- it is still subjective, you're 5 right about that. The -- 6 TREASURER GALLAGHER: But, see, we can 7 eliminate that. We can say, look, every one of 8 these companies can do this. Why have them 9 fight over points there. What -- 10 GOVERNOR BUSH: But -- 11 TREASURER GALLAGHER: -- really counts in 12 this, how much they're charging, and how much 13 are their returns? 14 MR. HERNDON: But the point is, 15 Commissioner -- and I respectfully disagree. 16 But some of these companies could do it better 17 than others. And that's the issue here. 18 You're trying to obtain a set of organizations 19 that can provide the best service. 20 This is the -- the equivalent to shopping 21 for an automobile. I mean, we're out here 22 looking at various automobile lots, and some of 23 them have -- can provide us with a better 24 automobile than others can. 25 And we want to try and get the best one, ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 406 2 the best cost, the best looks, and so forth -- 3 GOVERNOR BUSH: To simplify this, I'm going 4 to second General Milligan's motion. 5 TREASURER GALLAGHER: Well, you can't 6 second it, but I'll do it for you because -- 7 GOVERNOR BUSH: I can't? 8 Oh, well. 9 TREASURER GALLAGHER: -- you -- you can cut 10 the baby. So I'll -- I'll second it. 11 GOVERNOR BUSH: Thank you. You're -- 12 you're a great American. 13 So any more discussion? 14 TREASURER GALLAGHER: You thought I was 15 really going to stir it up, didn't you? 16 GOVERNOR BUSH: Yes, I did. Well, after 17 this morning, I was -- I was not certain. 18 TREASURER GALLAGHER: Only once a time -- 19 once a meeting -- 20 GOVERNOR BUSH: There's a -- do you have 21 any -- 22 MR. HERNDON: I -- 23 GOVERNOR BUSH: -- before we vote, please? 24 MR. HERNDON: No. Not -- not before you 25 vote, no. ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 407 2 announcement -- 3 GOVERNOR BUSH: Okay. There's a motion, 4 and a second. 5 Without objection, it's approved. 6 Yes, Tom. 7 MR. HERNDON: We'll do our best to try and 8 give you a revised schedule and a work plan and 9 so forth. 10 I need to announce that the meeting that 11 was scheduled for 45 minutes after the 12 adjournment of this is canceled -- 13 GOVERNOR BUSH: Canceled. 14 MR. HERNDON: -- as -- as are the other 15 interviews and site visits that were scheduled 16 at this point forward are also canceled. 17 TREASURER GALLAGHER: Wait a minute. 18 Let me ask a question here. We've got one 19 other little thing that's floating around, 20 Governor. We have -- we have a bunch of bid 21 protests hanging out there. 22 Can we -- now, how many -- could we have 23 everybody that's -- 24 Do you know -- do you know how many 25 protests we have, Tom? ACCURATE STENOTYPE REPORTERS, INC. STATE BOARD OF ADMINISTRATION 408 2 TREASURER GALLAGHER: Three? 3 MR. HERNDON: Three. 4 TREASURER GALLAGHER: Can somebody from 5 each of those three come up here, and let us 6 know if you're still protesting till this 7 thing's over, you want to continue to protest, 8 what? Wait till this is over -- 9 (Discussion off the record.) 10 TREASURER GALLAGHER: I guess we're 11 adjourned. 12 COMPTROLLER MILLIGAN: Are we adjourned? 13 MS. CASTILLE: Yes. I believe that's an 14 adjournment. 15 (The State Board of Administration Agenda 16 was concluded.) 17 * * * 18 (The Cabinet meeting was concluded at 19 4:23 p.m.) 20 21 22 23 24 25 ACCURATE STENOTYPE REPORTERS, INC. 409 2 3 4 5 STATE OF FLORIDA: 6 COUNTY OF LEON: 7 I, LAURIE L. GILBERT, do hereby certify that 8 the foregoing proceedings were taken before me at the 9 time and place therein designated; that my shorthand 10 notes were thereafter translated; and the foregoing 11 pages numbered 196 through 408 are a true and correct 12 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 24TH day of AUGUST, 2001. 18 19
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