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T H E C A B I N E T S T A T E O F F L O R I D A _____________________________________________________ Representing: STATE BOARD OF TRUSTEES STATE BOARD OF ADMINISTRATION The above agencies came to be heard before THE FLORIDA CABINET, Honorable Governor Bush presiding, in the Cabinet Meeting Room, LL-03, The Capitol, Tallahassee, Florida, on Tuesday, February 11, 2003 commencing at approximately 9:10 a.m. Reported by: SANDRA L. NARGIZ Registered Professional Reporter Registered Merit Reporter Certified Realtime Reporter ACCURATE STENOTYPE REPORTERS, INC. 100 SALEM COURT TALLAHASSEE, FL 32301 (850)878-2221 2 APPEARANCES: Representing the Florida Cabinet: JEB BUSH Governor CHARLES H. BRONSON Commissioner of Agriculture CHARLIE CRIST Attorney General TOM GALLAGHER Chief Financial Officer * * * 3 I N D E X ITEM ACTION PAGE TRUSTEES (Presented by David Struhs) ITEM ACTION PAGE 1 Approved 4 2 Approved 24 3 Approved/Deferred 28 STATE BOARD OF ADMINISTRATION (Presented by Coleman Stipanovich) ITEM ACTION PAGE 1 Approved 30 2 Approved 30 3 Approved 55 4 Withdrawn 55 5 Approved 57 CERTIFICATE OF REPORTER 58 4 1 P R O C E E D I N G S 2 (The agenda items commenced at 9:10 a.m.) 3 GOVERNOR BUSH: Next Cabinet meeting will be 4 Tuesday, February 25, 2003. 5 Board of Trustees. Unless this item is 6 going to take six hours, I think we are going 7 to be finished before we were two weeks ago. 8 TREASURER GALLAGHER: Motion on the minutes. 9 COMMISSIONER BRONSON: Second. 10 GOVERNOR BUSH: There is a motion and a 11 second on the minutes. The item passes without 12 objection. 13 Item 2. 14 MR. STRUHS: Item 2, receiving authorization 15 to enter into an acquisition agreement with the 16 St. Johns River Water Management District, and 17 then to seek your authorization to acquire a 18 75 percent undivided interest in the northeast 19 Florida Blueway project for timberland. 20 Finally, then to designate the Division of 21 Forestry and DEP's Division of Recreation and 22 Parks to co-manage that portion of the 23 property. 24 This property is a rare find on the east 25 coast of these United States. If acquired, you 5 1 will protect 5 miles of shoreline on the 2 Mantanzas River; it would be a substantial 3 increase to the Faver-Dykes State Park, better 4 protect the Guana-Tolomato-Mantanzas Natural 5 Estuarine Research Reserve. 6 It is the site of a variety of threatened 7 and endangered species, including woodstorks 8 and some bald eagle nests, protects water 9 quality for four tributaries into the Mantanzas 10 River and, in fact, protects water quality in 11 the only area in St. Johns County that is 12 consistently opened for shelf fish harvesting. 13 This property has been on our A List for 14 acquisition for quite a few years now. We are 15 quite proud and pleased to bring it to you. 16 I would tell you that this property is 17 currently zoned as agriculture. And what we 18 did is we looked at it and realized that even 19 with that agriculture zoning, it allows up to 20 one unit per 10 acres, and it would be -- a 21 developer could cluster that development, so we 22 would potentially allow about 1700 homes in an 23 area that is, as you know, very fast growing in 24 northeast Florida. 25 GOVERNOR BUSH: Hang on a second. If we can 6 1 stop here just for clarification. 2 Is there someone from the county that 3 might know more about their development process 4 where I can save my questions? 5 MR. STRUHS: We have a local real estate 6 broker from the area. I don't know if we have 7 anyone -- 8 GOVERNOR BUSH: I want to question the 9 clustering idea. If ag land is one per 10 acres, 10 it doesn't automatically presume that someone can 11 go to the county and seek a -- it would have to be 12 a DRI, I assume, that would cluster 1700 units; 13 doesn't necessarily translate that one would lead 14 to the other. You have to get approval and the 15 county has the power to disapprove that, I 16 believe. 17 MR. STRUHS: For the clustering? 18 GOVERNOR BUSH: Yes, if it so desires, it 19 doesn't have to approve that development order 20 just because it's ag land. 21 MR. STRUHS: Okay. 22 GOVERNOR BUSH: You made a statement as 23 though it was fact. I am not sure it's fact, is 24 my point. 25 MR. CLEM: Governor Bush, my name is Scott 7 1 Clem, and I am the director of Growth Management 2 for St. Johns County. 3 GOVERNOR BUSH: Welcome. Thank you. Glad you 4 are here. 5 MR. CLEM: To specifically answer your 6 question, the comprehensive plan of St. Johns 7 County does allow, by right -- I do need to 8 correct that -- it's one unit per 5 acres for this 9 property. They do need to come in for a rezoning 10 process, but the comprehensive plan itself allows 11 that density on this property. 12 GOVERNOR BUSH: That's different than what I 13 asked. You could create 5-acre ranchettes, I 14 guess, subject to building infrastructure that you 15 would require, right? 16 MR. CLEM: Yes, although it really encourages 17 clustering. In this case, the process actually 18 encourages clustering in lower density than the 19 one unit per 5 acres. 20 GOVERNOR BUSH: Then I was accurate. 21 MR. CLEM: It makes sense. 22 GOVERNOR BUSH: I would think that people 23 would go seek development rights, but it is not a 24 foregone conclusion that whatever the ag land 25 generates in terms of units on that property, that 8 1 it would translate directly into that number of 2 units in a plan that they would go seek approval 3 from the county. 4 The county would have the ability to say 5 whether there was offsite mitigation, there is 6 this, there is that, there is trade offs; it 7 doesn't automatically -- the Secretary assumed 8 that there was 1700 units, or whatever the 9 number was that he said, that he made it appear 10 like it was a foregone conclusion that those 11 rights were inherent in this property. 12 And my point is that no, one has to seek 13 the -- go through the entire, some would say 14 fairly cumbersome process on a property this 15 size in getting the development rights from the 16 county. 17 MR. CLEM: That's correct, yes, sir. 18 GOVERNOR BUSH: Thank you. 19 We have happened to run across another, 20 yet another property where there is an 21 assumption of something and valuations I 22 think -- let's go through it. This will be 23 fun. 24 MR. STRUHS: I think, Governor, Cabinet, one 25 of the things we wanted to try to emphasize was 9 1 that in looking at this property, it is likely 2 that a developer, if they were to acquire the 3 property, would likely seek over time to have 4 higher levels density on the property; clearly not 5 a foregone conclusion and indeed maybe never 6 attainable. 7 And yet, it's fair to say I think that the 8 market pressures would be such that private 9 interests would look to -- go through a DRI 10 process and change the zoning and increase the 11 development. 12 What I wanted to try to emphasize to you 13 today was that we purposefully did not allow 14 that to affect our review of the property and 15 looked only at its current existing zoning. 16 We did have the good fortune to get one of 17 the appraisers, one of the two appraisers to 18 join us here this morning. His name is Zac 19 Ryan. And he would be happy -- in fact, I 20 would encourage to maybe walk you through the 21 process by which the appraisal was made. 22 I would point out -- 23 GOVERNOR BUSH: Appraisers don't normally 24 show up at these meetings. This is good, I like 25 this. 10 1 MR. RYAN: Good morning, Governor, I am 2 looking forward to this fun that you talked about. 3 After we finish with the fun, may I have my 4 picture, also? 5 GOVERNOR BUSH: You bet. 6 Okay. David, what are we doing? 7 MR. STRUHS: What I would like to do is 8 introduce Zac Ryan to go first, and then also 9 identify three other individuals who would like to 10 speak to this issue; Patrick Hamilton, who is a 11 local resident and real estate broker; David 12 Gluckman, from Florida Defenders of Wildlife; and 13 Eric Draper from Florida Audubon. 14 GOVERNOR BUSH: Fantastic. Welcome. 15 MR. RYAN: Thank you very much. Good 16 morning. 17 My name is Zac Ryan, I am a real estate 18 appraiser. Our firm specializes in large 19 acreage to the exclusion of all other property 20 types. And to that end, we cover an extremely 21 large geographic area. 22 I am personally certified in Florida, 23 Georgia, and South Carolina, temporarily 24 certified in Texas to go complete a job out 25 there this week. This is the type product we 11 1 deal with on a routine basis. 2 Last year I did a very similar track north 3 of Charleston, South of Myrtle Beach, an 4 8,000-acre track that has five and a half miles 5 of frontage on the intracoastal and a half mile 6 of frontage on the Atlantic Ocean. 7 When we came up to this property, we 8 recognized immediately that it is a regional 9 property and even a national property; it would 10 trade on that basis, and would by no means be 11 restricted to participants and players in the 12 local market. 13 So we approached the assignment from that 14 standpoint and researched sales data not only 15 locally but also up and down the east coast. 16 GOVERNOR BUSH: That's it? 17 MR. RYAN: I didn't know if you had any 18 questions. 19 GOVERNOR BUSH: Yes, I am interested in the 20 valuation. The challenge we face is that this 21 is -- I probably shouldn't speak for my fellow 22 Cabinet members, but this is a beautiful piece of 23 property that fits perfectly into a well, 24 thought-out strategy for the state, in partnership 25 with our local partner in this case to protect 12 1 this ecosystem. I don't think anybody has any 2 disagreement about that. 3 Where the disagreement comes in is this 4 notion of prospective value which is created by 5 local government, and in some cases by our own 6 government, that raises the price for us to 7 pay; which if you've seen -- I am sure you are 8 rivetted at your computer the times when this 9 is shown on video, and you have seen my tirades 10 about this, so I am interested, not so much in 11 what happened in South Carolina because I don't 12 understand their development process; that's 13 not particularly relevant here. I am 14 interested in the price and how you come up 15 with -- how you came up with your valuation. 16 Because just to kind of set the table, 17 Secretary Struhs and others will come, and they 18 will -- they won't brag, but they will come and 19 typically say with pride this is X percent 20 lower than a hundred percent of the appraised 21 value when we purchase it. And my thought is, 22 that's great, all you do is if you jack up the 23 price, you can always have something lower than 24 a hundred percent. 25 So at General Crist's suggestion, we are 13 1 going to have a seminar of some kind or a 2 conference where we discuss this in the broader 3 aspect and we would love to have you come back 4 for that as well if you could. 5 Tell me how you got to the valuation. 6 MR. RYAN: We did not estimate a prospective 7 value. In our opinion, we are 100 percent 8 convinced that we estimated the value of the 9 property as it sits today. 10 I broke my sales down into two different 11 categories. First category was sales which 12 took place in the immediate local market. 13 Second category, secondary sales, took 14 place up and down the east coast. The primary 15 set of data that we focused on were for sales 16 all in St. Johns County; two of those sales 17 transferred under the exact same conditions as 18 this property with ag zoning in place, no, 19 enhanced zoning whatsoever. 20 GOVERNOR BUSH: Who were the purchasers? 21 MR. RYAN: They were private sector purchases 22 who purchased them for mid to long-term hold. One 23 person in the confirmation process, it was learned 24 they anticipated holding their tract for 20 years, 25 15 to 20 years, and they were in the mid 14 1 3,000-dollar range that they paid for their 2 property. 3 It was an inferior track to this property; 4 it did not have the waterfront component. 5 The second sale which transferred under 6 the same set of conditions, ago zoning, no 7 enhanced land use whatsoever, sold for $3,800 8 an acre; and again, sold for mid term hold, 9 speculative investment; they are manicuring and 10 managing the tract. 11 In fact, I have a second company, we are 12 managing the timber for them on that property, 13 and we are harvesting timber right now for the 14 sole purpose of managing the tract for 15 recreational purposes. 16 The timber harvest that's taking place is 17 at a break even point. They are not making any 18 funds off the timber. Their intent in 19 purchasing that property was purely for 20 immediate recreation and mid term speculative 21 investment. 22 They paid $3,800 an acre for that tract; 23 again, a inferior property, does not have the 24 waterfront component that this tract has. 25 The second two sales in our primary 15 1 valuation consisted of properties which did 2 have enhanced land use in place, purchased for 3 immediate development. Both of those we 4 considered superior to our subject property. I 5 think the lowest sale was in the 7,000-dollar 6 range; if my memory serves me correctly the 7 next one is around $10,000 an acre. 8 GOVERNOR BUSH: How small or large? 9 MR. RYAN: These properties were in the, I 10 think the 1500 to 3,000-acre range; somewhat 11 smaller, but we -- in our large acreage market 12 size, we still talk about the larger the tract, 13 sometimes that diminishes the price per acre. But 14 size is getting to be a very rare commodity and in 15 some instances it's bringing up premium because of 16 enhanced flexibility. 17 GOVERNOR BUSH: So you did not place any 18 prospective value on a potential DRI in the 19 valuation of this, even though it states that in 20 this information we have? 21 MR. RYAN: We stated throughout our report 22 that it is our opinion ultimately the tract would 23 go for a DRI. But no, we did not place emphasis 24 on that prospective value. 25 We appraised it as-is, as it sits today. 16 1 It is raw acreage that is there available to 2 the regional and national market. The end use 3 would be as varied as the imagination and ego 4 of the investors that step up to it. 5 GOVERNOR BUSH: And in the imagination and 6 ego of the county, too. This is not -- you don't 7 just assume, just because someone buys it and they 8 have an imagination, that they are going to secure 9 development rights. It may be that the 10 requirements of St. Johns County are such that, in 11 terms of the mitigation for the impacts on 12 property like this, that it makes it 13 extraordinarily expensive, and so their 14 imagination needs to be curtailed. 15 MR. RYAN: Yes, sir, and I did not mean to 16 suggest that I was assuming that. 17 Many of those exact same assumptions exist 18 in the comparable sales that I used. Those 19 people are purchasing these properties, 20 assuming they can do something in the future. 21 And it is -- I have to reflect -- I am here 22 today to tell you what my honest opinion of 23 what I think that property will trade for. And 24 I have to reflect on their assumptions as well. 25 GOVERNOR BUSH: I am not disagreeing with 17 1 your, if you are looking at this on a market 2 basis, that you factor what the actual prices 3 were. And I appreciate the fact that you are 4 saying that the purchasers of the comparables all 5 based this -- base their purchase on some in the 6 future development of the property. 7 But what I was told was that you were 8 including that there was some factor for DRI 9 inherent in your appraisal and you are saying 10 that's not case? 11 MR. RYAN: Right. We did a secondary 12 analysis at the end of our report where we said if 13 it were to achieve a DRI, it would probably trade 14 in this range; it would be more similar to the 15 second comparables, that would take a two to three 16 year process at a minimum and it would cost a 17 million and a half dollars. 18 We just did a check of -- a calculation 19 for a check of reasonableness at the end where 20 we said a what-if scenario: What if it did go 21 to DRI? 22 But our primary emphasis was on an as-is 23 basis, as it sits today. 24 GOVERNOR BUSH: Primary or complete? 25 MR. RYAN: Our complete. I am sorry. 18 1 GOVERNOR BUSH: Thank you. 2 So there was no middle ground between a 3 prospective value created by a DRI and an as-is 4 property purchase? 5 MR. RYAN: I am not exactly sure how to 6 answer that. 7 I am a hundred percent convinced that my 8 number that I picked today is an as-is number. 9 So I guess I would have to say no. 10 GOVERNOR BUSH: Okay. I don't have any 11 concerns then. I was misinformed. 12 MR. RYAN: Thank you. I look forward to the 13 opportunity to come back. 14 GOVERNOR BUSH: When you come, help us 15 understand why it is in a fast-growing place, 16 where there is rising property values, that people 17 come -- this may not be one of these cases, but 18 many cases we are the sole buyer and we are 19 competing with ourselves, jacking up the prices, 20 when there is an underlying assumption that the 21 option is for a development that is never going to 22 take place. That's the part I've got a problem 23 with. You have convinced me in this case. 24 MR. RYAN: I would like to give you some 25 degree of comfort that if you miss this one, it 19 1 will have roof tops next year or in a very short 2 period of time. I don't think you are competing 3 with yourself at all in this instance. 4 GOVERNOR BUSH: I appreciate you coming up. 5 TREASURER GALLAGHER: Motion on 2. 6 MR. STRUHS: There are a number of speakers 7 if you wish to hear from them. 8 GOVERNOR BUSH: Sure. 9 MR. STRUHS: There were a couple of additions 10 that apparently didn't get on my list early this 11 morning, I apologize for that. We have got Roger 12 VanGlent and Scott Clem, both from St. John 13 County, and Patrick Hamilton, David Gluckman and 14 Eric Draper. 15 If we can keep the comments very brief, 16 please. 17 GOVERNOR BUSH: Who is first? Good morning, 18 Eric. 19 MR. DRAPER: Good morning, Governor, Members 20 of the Cabinet, I am Eric Draper, Audubon, 21 Florida. 22 We think this is a very important 23 purchase. Our chapter helped nominate this 24 project to the Florida Forever list. It's a 25 wonderful partnership between the state and the 20 1 Water Management District to bring it ahead. 2 And we encourage your approval of it. Thank 3 you. 4 GOVERNOR BUSH: Thank you, Eric. 5 MR. GLUCKMAN: Governor and Members of the 6 Cabinet, my name is David Gluckman, and I am here 7 on behalf of the Florida Wildlife Federation. 8 We also strongly support this project, and 9 Governor, at some point we need a good dialogue 10 with you on the appraisal process. We have 11 been involved on this since the very beginning 12 and it's a very difficult thing to deal with. 13 And I understand your concerns, but there 14 are a number of others who have gone through 15 this. 16 If you get a chance, talk to former 17 Representative Herb Morgan, talk to him about 18 the issue. He was the one that started it back 19 in 1978 or '79 when we first started. And he's 20 got some very interesting insights and I think 21 sitting down maybe with some of the people from 22 the department may help you a little bit 23 because it's a very different process when you 24 have to do appraisals from inside and a 25 relatively risk-averse process where the state 21 1 has its own requirements versus the private 2 sector. 3 And it creates a dynamic that's very 4 interesting. We are pleased that you are 5 looking at it because it is obviously an 6 extremely important issue for all of us because 7 we want the most property we can get for our 8 bucks. 9 We appreciate your activity in that area. 10 We certainly would like to talk to you about it 11 if we get a chance. 12 GOVERNOR BUSH: I am looking forward to it. 13 This is really important, because as we mature, as 14 we evolve in our land purchasing, we are maturing 15 towards properties like this that but for the 16 state, the potential development is there; so the 17 prices go up. 18 And I want to make sure -- we are going to 19 run out of dough, when we can't buy hundred 20 thousand acres anymore $800 an acre or whatever 21 it was when Preservation 2000 started and its 22 predecessors. So this is important. And I am 23 more than happy -- I look forward to the 24 dialogue in our, whenever we are going to have 25 our -- is it set up? 22 1 GENERAL CRIST: Yes, it's set up. 2 GOVERNOR BUSH: Hope you all will 3 participate. 4 MR. STRUHS: March 6. 5 MR. VANGLENT: My name is Roger VanGlent. I 6 live close to this property, just north of it. I 7 am chairman of the Land Acquisition Management 8 Program, citizens committee established by the 9 county, and president of the local Audubon 10 Chapter. 11 As I drive down U.S. 1 between St. 12 Augustine and Palm Coast, in the southern part 13 of St. Johns County, in the early morning I see 14 a magnificent flock of over 100 woodstorks 15 flying west to the freshwater wetlands in the 16 center of St. Johns. 17 In the early evening I see the same flock 18 of these wonderful but threatened birds flying 19 east to their roost in the woods along 20 Mantanzas marshes in this property. 21 We have a chance today of preserving this 22 daily event for many, many years to come. The 23 citizens of southeast St. Johns County in their 24 20/20 vision support this acquisition. It is 25 the result of years of work and the development 23 1 of a comprehensive plan that identified the 2 need for conservation and preservation in the 3 county, a plan produced by our planning 4 department -- Mr. Clem was in charge, is in 5 charge of it; it is the result of the 6 establishment by a citizens group of our Land 7 Acquisition Management Program which encouraged 8 and supported the Mantanzas Blueway, which you 9 approved two years ago. 10 And it is the result of hard work by a 11 water management district in identifying 12 critical water conservation recharge needs, in 13 keeping our waters clean. And it is the result 14 of the Rayonier Company's commitment to keeping 15 preservation a significant goal in their land 16 management operations. 17 In sum, it is a winning partnership 18 between and among citizens, government, and 19 industry. We at Audubon thank you for 20 supporting this acquisition. 21 GOVERNOR BUSH: Thank you, sir. Thanks for 22 coming. 23 MR. STRUHS: Were there other speakers? I 24 think the other speakers will pass. 25 I just wanted to add one other point on 24 1 this property that I should have mentioned up 2 front. 3 As we reviewed it, one of the things I 4 found important to recognize was that while it 5 is a waterfront property and there is a lot of 6 marsh and cypress gums on this property, that, 7 in fact, 78 percent of it is upland. So we are 8 not just buying wetland. It's much, largely 9 high and dry. 10 GOVERNOR BUSH: There is a motion and a 11 second. Any other discussion? The item passes 12 without objection. 13 Thank you all very much. 14 TREASURER GALLAGHER: Who made the second? 15 GOVERNOR BUSH: He seconded it. 16 COMMISSIONER BRONSON: Yes. 17 TREASURER GALLAGHER: Good job. 18 MR. STRUHS: Item 3 is a waiver of eminent 19 domain policy and eminent domain authorization for 20 the Southern Golden Gate Estates properties. 21 This is an issue that, as you remember, we 22 discussed two weeks ago. It breaks down into 23 basically five different segments. 24 What I would like to do is give you a 25 little update and a recommendation as to how we 25 1 might proceed. 2 It breaks into the parcels that are owned 3 by the Miccosukee Tribe, Mr. Miller's 4 homestead, Mr. Hardy's homestead, eight vacant 5 lots and roads and easements, all within the 6 Southern Golden Gate Estates project. 7 We have been working on this, as you might 8 suspect, over the last two weeks since the last 9 Cabinet meeting. We are hopeful, given those 10 discussions, that we may still find 11 accommodations that will work for Mr. Hardy and 12 Mr. Miller as well as potential ability to 13 negotiate a mutual beneficial arrangement with 14 the Miccosukee Tribe. 15 Given that, what I would recommend is that 16 we would defer the Miccosukee parcels, 17 Mr. Miller's homestead and Mr. Hardy's 18 homestead for two weeks, allowing us to 19 continue those discussions which seem to be 20 fruitful; and then to get your permission today 21 to proceed with this agenda item for the eight 22 vacant lots as well as the roads and easements. 23 I can anticipate what your question might 24 be on roads and easements, which is why I begin 25 that process, if in fact we haven't yet secured 26 1 all the parcels. 2 But what I would tell you is that the 3 lawyers advise us that this is going to be a 4 long, time-consuming effort, and that we are 5 better off at least beginning the process and 6 reviewing the roads and easements now so that 7 we are prepared in the event we are successful 8 in acquiring these remaining parcels. 9 So with that background, I would recommend 10 approval of substitute item 3 with those 11 amendments. 12 TREASURER GALLAGHER: Governor, I move item 13 3, with deferring of the three mentioned by 14 Secretary Struhs, which is Mr. Hardy's property, 15 Mr. Miller's and Miccosukee Tribe, and defer those 16 until March 13, and the others today. 17 GENERAL CRIST: Second. 18 GOVERNOR BUSH: Motion and a second. 19 MR. STRUHS: There were some speakers on 20 this. Does anybody wish to speak still? 21 GOVERNOR BUSH: Commissioner Bronson. 22 COMMISSIONER BRONSON: I heard David say two 23 weeks, and we were concerned, would they have 24 enough time; with the 13th, that gives you pretty 25 much a month, that ought to be enough time 27 1 hopefully. So I will second the motion. 2 GOVERNOR BUSH: You will third it. 3 Secretary Struhs, are we absolutely 4 certain that we need to have this property in 5 order for the Feds to authorize this project? 6 Do we have to have fee simple title to the 7 property before an authorization can take 8 place? 9 MR. STRUHS: I am as sure about that as I am 10 about anything regarding the Everglades. We 11 discussed it with the Army Corps of Engineers. 12 There are -- not only is it customary; in fact, I 13 think it's actually in the federal rules that all 14 these property owners be treated consistently; but 15 from a purely engineering point of view, the 16 necessity of having all those parcels in fee 17 simple ownership appears to be critical. 18 GOVERNOR BUSH: For the project itself, 19 that's for the implementation, right, of the 20 project? But what about -- 21 MR. STRUHS: To authorize the project? 22 GOVERNOR BUSH: Yes. 23 MR. STRUHS: Of course, Congress can do 24 anything they want. So I can't say for certain 25 that Congress would not authorize this project if 28 1 there was one or two remaining parcels unacquired. 2 I think the reality is that our chances 3 for that federal authorization increase 4 dramatically if, in fact, we can state a 5 hundred percent acquisition. 6 And the point is we have come so far and 7 we are so close, it would be unfortunate to 8 have just a few remaining parcels stand in the 9 way in from what will be a critical part of 10 water supply, flood control and environmental 11 restoration. 12 We are, as I said, hopeful that the 13 discussions the last two weeks which have been 14 positive will continue for another two weeks 15 and we'll be able to come back to you with 16 solutions that will be respectful of 17 Mr. Hardy's, Mr. Miller's, as well as the 18 Miccosukee Tribe's unique situation. 19 GOVERNOR BUSH: Very good. There is a motion 20 to defer the two homestead properties and the 21 Miccosukee lands until March 13 and approve the 22 use of the eminent domain for the rights of way on 23 the eight unimproved properties. There is a 24 motion and second. Any other discussion? 25 Without objection, the item passes -- is 29 1 deferred, excuse me, until March 13. 2 MR. STRUHS: Passes and deferred. 3 GOVERNOR BUSH: I am getting old; 50. 4 TREASURER GALLAGHER: Comes quick, doesn't 5 it? 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 30 1 GOVERNOR BUSH: State Board of 2 Administration. 3 TREASURER GALLAGHER: Motion on the minutes. 4 COMMISSIONER BRONSON: Second. 5 GOVERNOR BUSH: Moved and seconded. Without 6 objection, the item is approved. 7 Item 2. Is there a State Board of 8 Administration? 9 GOVERNOR BUSH: Item 2. 10 MR. STAPANOVICH: Item 2 is a fiscal 11 sufficiency, approval of fiscal determination of 12 an amount not exceeding $12,270,000 tax exempt 13 Florida Housing Finance Corporation Multifamily 14 Mortgage Revenue Bonds, 2003 Series. It's 15 recommended that this fiscal sufficiency be 16 approved. 17 TREASURER GALLAGHER: Motion. 18 GENERAL CRIST: Second. 19 GOVERNOR BUSH: Moved and seconded. Without 20 objection, the item passes. 21 Item 3. 22 MR. STAPANOVICH: Item 3 is a total fund 23 investment plan proposed changes. As you recall, 24 Governor and Members, it was deferred at the last 25 meeting, and I was able to get through the process 31 1 for the most part and some background information. 2 And we got to the first recommendation, which was 3 the investment objective. 4 So what I would like to do, just briefly, 5 is take just a minute and revisit, recap the 6 process. 7 It was a four-part approach in which we 8 did asset/liability modeling; the second part 9 was doing the portfolio modeling across the 10 efficient frontier and trying to determine the 11 appropriate asset allocation; and the third 12 part was review of peer practices; and then the 13 fourth and final part was looking at the 14 comparative advantages and disadvantages of the 15 organization. 16 Resources employed; we used our general 17 consultant Ennis Knupp, we also used Callen and 18 Associates, which is our investment consultant 19 at the board, as well as staff, of course, and 20 then it was reviewed by the Investment Advisory 21 Council and approved with the majority vote. 22 We also consulted other national 23 consultants around the country as well, like 24 Wilshire and Associates and Russell and 25 Company. 32 1 What I would like to do is move you to, if 2 you would look at your document in your packet 3 you will see a presentation -- it's actually in 4 slide form, and I will refer to it as a hard 5 copy by pages. 6 If you just pull out slide 29, that cuts 7 to the chase in terms of what the key 8 recommendations are. Then I will talk about 9 each key recommendation to some extent and then 10 answer questions. 11 The first recommendation is to adopt a 12 4 percent real return objective. The 13 discussion at the last meeting was that we were 14 revising this from 4.3 to 4.0 and the 15 justification for doing that. 16 As you recall, we talked somewhat 17 extensively about capital market assumptions 18 and that was part of the equation that has 19 taken us to lower capital market assumptions, 20 to a lower investment objective. 21 Secondly, we talked about the actual rate, 22 because the investment objective is designed to 23 meet our liability stream looking out 30 24 years -- in this particular study 15 years. 25 And because of a number of things on the 33 1 liability side, that there is lower inflation; 2 in the '99 study the estimate was a 3 3.5 percent; in the 2002 study that was just 4 completed, I know we are in 2003, it's now 5 2.5 percent. 6 There is also lower wage growth, there is 7 lower employment growth, but there are a number 8 of factors that the liability stream is not 9 what it was in 1999. Therefore, that's another 10 part of the equation again that allows us to 11 reduce the investment objective. 12 And the reason for doing this is then we 13 don't need to -- we can continue to do a 4.3, 14 but that's taking on an inordinate amount of 15 risk to reach an objective that will keep us 16 fully funded, a hundred percent projected, 17 looking out over the next 15 years, so by 18 reducing the investment objective to 4.0, it 19 helps us as well as reduce our risk in terms of 20 some volatility. 21 And that has to do also with the asset 22 allocation and how we reallocate assets in 23 terms of reducing the volatility. 24 The second recommendation, which is 25 establishing a new global asset class, 34 1 essentially that is not a great deal different 2 than what we are already doing. We have, of 3 course, an international equity asset class, we 4 have a domestic equity asset class. The only 5 thing we are doing with the global asset class 6 is engaging global managers that review the 7 world economy across all boundaries; they will 8 not view it in just domestic or international. 9 If they are looking at a car company, they 10 are looking at the best valuation for a car 11 company in the world and it makes no 12 difference. 13 There would be -- in the global asset 14 class, unlike the other asset classes, there 15 will be some strategic decisions made in which 16 they might be a little more weighted, literally 17 several percents more weighted in domestic 18 equities or international at any point in time. 19 So it's more of a strategic decision-making 20 process, it's short term versus all the other 21 asset classes which are -- excuse me -- 22 tactical, whereas all the other asset classes 23 are strategic and static and we are very 24 disciplined to those targets. 25 The third recommendation is to authorize 35 1 the following asset allocation revisions. 2 Currently we are at 54 percent in domestic 3 equities, we are at 12 percent international 4 equities, 25 percent in fixed income, 4 percent 5 in real estate, 4 percent in alternative 6 investments and 1 percent in cash. 7 The recommendation that we are making is 8 to go from 54 to 48 percent in domestic 9 equities; essentially that's a 6 percent 10 reduction, and we would be moving 4 percent of 11 that 6 percent to the global equities asset 12 class, which would drive a benchmark that would 13 be basically weighted 50/50. Therefore, 14 2 percent of that 4 would be international and 15 2 percent would be domestic equities. 16 The balance of 2 percent would go to 17 international equities, raising that to a 18 14 percent exposure. 19 Fixed income, recommendation would move 20 from 25 percent to 21 percent, a 4 percent 21 reduction. Essentially 3 of that 4 percent is 22 going to real estate. And real estate in terms 23 of an asset class is probably, compared to the 24 other asset classes, is much like a fixed 25 income type investment as anything on the -- 36 1 across the asset classes. 2 Then the balance of that 4 percent, 3 1 percent would move to alternative investments 4 moving that from 4 to 5 percent and cash target 5 would remain at 1 percent. 6 The final recommendation is to authorize a 7 phased-in implementation over one year 8 beginning in June. And the reason we would be 9 doing this is twofold. 10 One is it would lessen the cost impact in 11 terms of impact on the markets as you execute 12 trades, as well as commission cost of trading; 13 and then it gives us additional time to do our 14 due diligence and prepare in the international 15 asset class in terms of bringing in -- because 16 the international asset class, the global asset 17 class will roll up into the international asset 18 class and that will enable them time to do 19 their manager searches on the global side. 20 In addition, in real estate, because that 21 asset class will be going from 4 to 7 percent, 22 that influx of capital, it will enable them 23 time to do their due diligence and diversify 24 their asset class and engage additional 25 managers. 37 1 The last document in your packet is 2 actually what you are being asked to approve 3 today, and that is the total fund investment 4 plan. 5 The principle recommendations again, which 6 I've just gone through, are really on page 2, 7 is the change in the investment objective; then 8 on page 5 is the asset allocation and global 9 equities; on page 6 and finally on page 8, 10 recommendation 4, the implementation. 11 What you are being asked to approve today, 12 Governor and Members, is this total fund 13 investment plan. 14 TREASURER GALLAGHER: I have a question. For 15 a long time, way before I was ever here the first 16 time -- 17 GOVERNOR BUSH: That's a long time. 18 TREASURER GALLAGHER: That is a long time. 19 That's way before you were 50, that's for sure. 20 In fact, it was before I was 50. 21 Anyway, your organization has been known 22 as the SBA for a long, long time and all of a 23 sudden we are seeing this morphos into FSBA. 24 Is there some reason for that? 25 MR. STAPANOVICH: Well, my investment 38 1 communication manager keeps hounding me about this 2 common theme of the Florida State Board of 3 Administration as we deal with people out around 4 the country. We know in the state, State Board of 5 Administration, and we are most often referred to 6 as State Board of Administration. 7 But as we deal with, as you are aware, 8 Treasurer, like the Council for Institutional 9 Investors and stuff, it better qualifies with 10 the State Board of Administration, that's the 11 Florida State Board of Administration, just 12 like we have the California -- 13 TREASURER GALLAGHER: Whatever your pleasure. 14 Everybody out there for 50 years has known it as 15 the SBA and I think you are going to confuse them 16 more by making it the FSBA. 17 GOVERNOR BUSH: This is like, when I went to 18 the University of Texas, Coleman; we didn't call 19 it the University of Texas, we called it The 20 University and everybody knew what we meant. 21 TREASURER GALLAGHER: Around the country, 22 when you are fourth largest, everybody knows what 23 the SBA is in Florida, especially those people 24 that want to come invest money for us. 25 MR. STAPANOVICH: Then we can incorporate 39 1 that change into your approval today, should you 2 decide to approve this document, and we'll change 3 Roman Numeral II to read overview as FRS and SBA 4 rather than FSBA. 5 GOVERNOR BUSH: If that's the only problem 6 you've got with this, then take your victory. 7 TREASURER GALLAGHER: It's sort of like UM; 8 we know it isn't the University of Maine or 9 Michigan or -- we know what it is and so does 10 everybody else in the country, especially when we 11 lose. 12 MR. STAPANOVICH: I fully understand. It 13 will be SBA moving forward. 14 TREASURER GALLAGHER: I don't know about ever 15 and ever, just as long as I am around, I guess. 16 GENERAL CRIST: Coleman, I was curious, does 17 this plan change, does that affect -- what is it, 18 $86 billion? 19 MR. STAPANOVICH: Roughly, probably today 20 it's closer to about 82 billion. 21 GENERAL CRIST: Just a couple of questions. 22 When you look at the alternate investments, could 23 you kind of define what that means? 24 MR. STAPANOVICH: Alternate investments, you 25 will also hear referred to as a private asset 40 1 equity class. 2 The alternative investment asset class is 3 the highest risk asset class that we have. And 4 the purpose of that asset class is to diversify 5 across the risk reward continuum, and that the 6 idea is that different asset classes, different 7 assets move in different directions over 8 different periods of time. And believe it or 9 not, by having a higher risk asset class like 10 alternative investments, which would have 11 subasset class investment, investment vehicles 12 such as leverage buyouts, large leverage 13 buyouts, middle market leverage buyouts, 14 venture capital, mezzanine investing, distress 15 debts, these are more risky investments. 16 Now keep in mind that the benchmark for 17 that asset class is also more aggressive 18 because if you are taking on more risk, you 19 expect to have a higher reward. 20 So, for example, on domestic equities, our 21 benchmark is the Russell 3000 which represents 22 the broad domestic equity market. In 23 alternative investments, it's 600 basis points, 24 6 percent over in addition to the return in the 25 Russell 3000. 41 1 So it's a more aggressive asset class. 2 But at the same time, it reduces in the 3 aggregate, the overall return reduces because 4 of the co-variances going on, it reduces the 5 volatility in the total return, even though 6 it's a more volatile asset class. 7 But funds our size, if you are looking at 8 the top 20 funds in the country, you would 9 find, maybe with the exception of two, they all 10 have -- actually I think all 20 have 11 alternative investment classes and only two 12 that don't have venture capital in their asset 13 classes. 14 GENERAL CRIST: So it's a high risk. 15 MR. STAPANOVICH: It is. 16 GENERAL CRIST: And we are increasing it. 17 MR. STAPANOVICH: By one percentage point, 18 yes. 19 GENERAL CRIST: If I might, Governor. 20 The fixed income category, we are -- is 21 that considered high risk? 22 MR. STAPANOVICH: No. 23 GENERAL CRIST: Put we are reducing it? 24 MR. STAPANOVICH: We are. That's primarily 25 because we, the consultants primarily feel, and 42 1 it's what's happening all over the country, not 2 only do you see capital market assumptions coming 3 down, but there is becoming a growing consensus. 4 And this is aggressive and I will point this out. 5 From going from 25 percent to 21 percent among our 6 peers will put us in the bottom quartile in terms 7 of exposure to fixed income. 8 GENERAL CRIST: What does that mean? 9 MR. STAPANOVICH: That means that 75 percent, 10 and probably more, of our peers in the Cost 11 Effective Measurement Services Universe or the 12 Tucks Universe or the National Association of 13 State Investment Officers Universe will put us in 14 the bottom quartile; 75 of everybody else would 15 have more fixed income exposure than we do today. 16 GENERAL CRIST: They would have more 17 conservative investments than we do? 18 MR. STAPANOVICH: I don't know whether it 19 would be more conservative investments, to answer 20 your question specifically; it would be fixed 21 income exposure. If they got more exposure say to 22 alternative investments, overall their investment 23 strategy could be more aggressive than ours. 24 But in terms of fixed income exposure, 25 they certainly would have more fixed income 43 1 exposure. 2 Now that's trending down. As these 3 studies come in and more of these states and 4 corporations do this, you are going to see the 5 fixed income, I absolutely believe and the 6 consultants are telling us you are going to see 7 that trend down. 8 We are at a 40-year low in fixed income 9 rates. You have got the long bond that is 10 vacillating anywhere between 4 and 5 percent. 11 It just can only go to zero. 12 And I remember 198- -- that would have 13 been 1981, August, September '81, it was like 14 14 percent. 15 And so again, I don't think we are going 16 back there, but we see a lot more downside 17 risks in fixed income than upside. 18 GENERAL CRIST: In any of the fixed income, 19 do we invest in inflation bonds? 20 MR. STAPANOVICH: We do in the Lawton Chiles 21 Endowment Fund, but not in the Pension Fund. The 22 reason is because that's a fairly small market; 23 it's a fairly -- it may be even somewhat liquid, 24 but it's such a small market; for us, a fund of 25 our size, to have any exposure to those investment 44 1 vehicles, to have an impact on the total fund 2 return, it would have miniscule impact in terms of 3 the amount that we would be willing to participate 4 in that small market. 5 We would not want to become a market. 6 Don't get me wrong; it's much bigger than we 7 are but the market is just too small. Now as 8 it grows and things change, we will revisit 9 that. But it is part of the Lawton Chiles 10 Endowment Fund, which is about 1.4 billion 11 today. 12 GENERAL CRIST: It just strikes me -- and you 13 were kind and came by and visited yesterday, I 14 appreciate that; and you have done a great job. 15 But it looks like we are increasing our 16 amount of real estate investments. And some 17 people argue -- Governor, this is your field, 18 actually, so you would know better about this 19 than I -- that we may be sort of at a bubble as 20 it relates to real estate, and it's at the high 21 end. 22 And yet, we are going into it more deeply 23 according to this strategy. And we at war, but 24 we may be going to a more intensive aspect of 25 war shortly. 45 1 And in terms of making a more risky, if 2 you will, investment strategy at this time I 3 have concerns. I have a fiduciary 4 responsibility in this new role. 5 MR. STAPANOVICH: Those are good questions, 6 General, and you are absolutely right. In the 7 public equity market, we are at 66 percent 8 currently; that means international and domestic, 9 if you were to total them up, we are at 10 66 percent. 11 We still remain at 66 percent in this 12 proposal, but in terms of non, in the asset 13 classes, in terms of nonfixed income, these 14 other asset classes, in this proposal we would 15 move from 74 percent exposure across asset 16 classes to 79 percent exposure. 17 So this is a more risky investment 18 approach because we are reducing our exposure 19 to fixed income. 20 However, 3 percent of that is -- excuse 21 me -- yeah, is moving to real estate. And our 22 real estate unit is pretty much direct 23 investments. So you have some control over -- 24 what we read is that there is a bubble, 25 certainly maybe in single family housing, 46 1 certainly in housing on golf courses, beach 2 property and that kind of thing. 3 But there are certainly some other very 4 opportunistic real estate investments across 5 the country when you look at what's happening 6 in the economy, with the tech bubble that burst 7 and a lot of building, office building 8 opportunities and stuff like that. 9 So really it comes back to our 10 organization, the people, the money managers we 11 work with, the consultants that we work with. 12 Part of that consideration was our staff at the 13 board, is that they continued to do a good job 14 in being very selective in what they invest in 15 in real estate. But there are certainly 16 bubbles still out there, but there are 17 opportunities as well. 18 GOVERNOR BUSH: Part of the -- I asked 19 similar questions yesterday in our briefing 20 because real estate and fixed income are both 21 interest rate sensitive and I have no clue where 22 interest rates are going. 23 I know that the real estate strength is 24 principally now interest rate driven because 25 cap rates -- deals can be done significantly 47 1 easier, they make more sense when rates are -- 2 you can go borrow at lever plus one and your 3 all-inclusive rate is 3 percent or something. 4 It's kind of hard not to make money on real 5 estate. 6 But I think the bigger question is how 7 long is your horizon on these investments? Not 8 looking at it from the perspective of what's 9 going to happen in March or April or May or a 10 year from now. 11 I think the fiduciary responsibility we 12 have is to say what allocation of assets are 13 appropriate for the next 10 years. We may 14 adjust every three years, but the perspective, 15 the long-term returns are what matters. 16 And so long as the risk and return profile 17 is within the margin so that we are not way out 18 there, either overly conservative or overly 19 aggressive, I think this is the right approach. 20 Who knows what is going to happen in the 21 next month or two? We are in very volatile 22 times. And how long will it take you to invest 23 up to the 7 percent, if you go up that -- to 24 the -- two years, is that right? 25 MR. STAPANOVICH: Well, the implementation 48 1 period we are asking for approval for is one year, 2 but that doesn't mean that we will get it all 3 invested. There are investment vehicles that are 4 REIT-like that we can park money in until we can 5 actually identify -- we are not going to rush in 6 and try to -- whatever the number is, I think it 7 is probably 3 billion, somewhere in the 8 neighborhood of $3 billion -- and try to get 9 $3 billion of property bought in one year; it 10 won't happen. 11 But there will be -- that money will be 12 parked and we'll move that target over a year, 13 and then we'll try to replicate it in more 14 liquid type real estate investments until we 15 can actually develop the entire strategy. 16 GENERAL CRIST: In terms of venture capital, 17 are we increasing or decreasing in venture capital 18 investments according to this new strategy? 19 MR. STAPANOVICH: The Trustees, prior to you 20 coming on the board, General, the Trustees, the 21 IEC and staff, we researched venture capital. 22 What we have today in alternative 23 investments is an asset class that looks like 24 no other asset class of alternative investments 25 among our peers in that we are not diversified 49 1 in that asset class. 2 We are 90 plus percent, really approaching 3 99 percent leverage buyouts. We have very 4 little venture capital, literally maybe 5 25 million or so, it could be a little more. 6 GENERAL CRIST: I am sorry? How much? 7 MR. STAPANOVICH: 25 million. Remember, it's 8 an asset class that is approaching $4 billion, but 9 that's very miniscule. 10 We don't have -- that's just inherent, 11 some of the leverages -- Cypress Fund was one 12 where we all might recall -- certainly 13 Treasurer Gallagher would -- at that point in 14 time because you were around, I believe, 15 Treasurer, when Cypress Fund was approved and 16 was a trustee in another capacity. 17 That's the only exposure we have. So we 18 are looking to diversify that asset class. And 19 the Trustees, after much due diligence and 20 vetting this with the IEC, et cetera, has 21 approved a capital venture program and said the 22 venture capital program is targeted to be about 23 8 percent of that 4 percent. 24 We are in the process now of manager 25 searches and evaluations and this kind of 50 1 thing. So we look to invest about $300 million 2 in venture capital over the next several years. 3 So the program has been designed, it's 4 established, and we are in the process of 5 implementation. 6 I will tell you today, though, there is a 7 lot going on in the venture capital area and 8 this would be a good opportune time just to 9 touch on that. And it has to do with 10 disclosure issues. 11 The venture capital community has been a 12 very closed community in terms of revealing 13 information and how they invest; it's very 14 embryonic; a lot of what they do is very 15 proprietary, and they consider most of what 16 they do kind of insider stuff and they don't 17 like it to be available to the general public. 18 What happens is their competitors and 19 other people with not good intentions use that 20 information against them in doing what -- 21 something that's very specialized. 22 So that issue is going on out there, and 23 we are addressing it. We are looking at what 24 we need to do to -- because two things can 25 happen, is if we are not able to possibly have 51 1 some exemptions through legislation, to keep 2 some of this information -- we do it in real 3 estate already and we do it to some extent in 4 the public markets where our transactions and 5 our trades are not revealed for X amount of 6 days, so people can't front run us and that 7 kind of thing. 8 So we are already doing it, but to some 9 limited fashion; and in having some exemptions 10 in the venture capital area, because if we 11 don't, it's going to push us down to second 12 tier or third tier of venture capital type 13 firms; and when it does that, our 14 recommendation will be to abandon the venture 15 capital program because we will not have a 16 venture capital program, as good fiduciaries, 17 that is second tier and third tier. 18 It's going to be the best we can find in 19 the country or we won't do it at all. 20 So that's a bit of an open question right 21 now. But to answer the question, I am sorry 22 for being long winded, we will have a venture 23 capital program hopefully. 24 GENERAL CRIST: Yeah, but I think my question 25 was, is it going to be more or less? 52 1 MR. STAPANOVICH: More; we essentially have 2 zero and we'll be moving to about 300 million. 3 GENERAL CRIST: Is that a good thing to do? 4 MR. STAPANOVICH: Yes, it is. 5 TREASURER GALLAGHER: I hope he is not here 6 recommending it if it's a bad thing to do. 7 GENERAL CRIST: That would be my concern. 8 That's why I am asking the questions. 9 GOVERNOR BUSH: If you look at these 10 investment categories, and it would probably be 11 worth getting an update on 10-year records, 12 five-year records, 20-year records, one-year 13 records, you will find that the higher risk 14 investments have, on the one-year basis, have 15 gigantic swings. Venture capital, I would assume 16 right now to use an old real estate expression, is 17 probably sucking air. 18 Real estate probably has the highest 19 returns right now in those categories on a 20 one-year basis. But if you look at it as we 21 need to over a long-term period, stocks, which 22 have taken the greatest bath in the last three 23 years since the depression, I assume, offers 24 the highest return. 25 And my guess is that nothing -- history is 53 1 a pretty good guide that, if you went forward 2 10 years or 20 years, that you would find -- it 3 might all adjust up or down but the end result 4 will be something similar to -- the risk return 5 profile has worked pretty well and bonds would 6 be the lowest with the greatest security; 7 stocks would be second, in the long-term, it 8 has the greatest combination of risk and return 9 in terms of safety as well as high return and 10 the other ones are more volatile. But to mix 11 it altogether is what you do and then get 12 through. 13 TREASURER GALLAGHER: Motion on 3. 14 GOVERNOR BUSH: The other thing that's 15 important is -- 16 TREASURER GALLAGHER: There is a motion. 17 GOVERNOR BUSH: The other thing that's 18 important is one of the questions I had related to 19 your concerns the last two weeks ago which was are 20 we lowering our return criteria in a vacuum 21 basically which will automatically require a 22 raising of the contribution rate? 23 And Coleman confirmed with me, after 24 checking with the others, with our peers, that 25 almost everybody is lowering their's as well; 54 1 it may not be the exact same number, it may not 2 be 4 percent, it may be a little bit lower or a 3 little bit higher, but there seems to be a 4 general consensus of lowering the returns down. 5 TREASURER GALLAGHER: Weren't we lowering 6 about three-tenths of a percent? 7 GOVERNOR BUSH: Yes, on that basis. 8 MR. STAPANOVICH: That was a question that 9 Treasurer Gallagher asked at the last meeting and 10 we did go out and do some surveying, as I shared 11 with you all, and looked at other states, looked 12 at other corporations; and we had already heard it 13 from our consultants, and see some evidence of 14 that in news print and it's pretty much confirmed 15 that absolutely everybody is reducing. 16 GOVERNOR BUSH: There is a motion. Is there 17 a second? There is only three of us; you have to 18 second it or somehow -- 19 GENERAL CRIST: Second. 20 GOVERNOR BUSH: There is a motion and second. 21 Any other discussion? In all in favor say aye. 22 TREASURER GALLAGHER: Aye. 23 GOVERNOR BUSH: Aye. 24 All opposed? 25 GENERAL CRIST: I. 55 1 GOVERNOR BUSH: Motion passes, two to one. 2 TREASURER GALLAGHER: Motion on 4 to 3 withdraw. 4 GENERAL CRIST: Second. 5 GOVERNOR BUSH: There is a motion to withdraw 6 and a second. Without objection, the item is 7 withdrawn. 8 Item 5. 9 MR. STAPANOVICH: Item 5 is a request for 10 approval of some rule making. 11 There are six rules that are in this 12 agenda item. Four are existing rules that need 13 revisions and two are new rules. 14 The CAT Fund requests that the Trustees 15 approve the following, and this would be 16 existing rules, the first four, and then we'll 17 go through here for revision. 18 And these rules have been taken to the 19 Advisory Council of the CAT Fund in a workshop 20 that took place on January 9 and a second 21 workshop that took place on the 14th and they 22 have approved these proposed rules that are 23 coming to you today. 24 So the first rule is filing a notice of 25 proposed rulemaking of rules 19-8.010, Florida 56 1 Administrative, FAC -- I forget what the C is. 2 That has to do with reimbursement contracts. 3 The second rule is 19-8.012, Procedures to 4 Determine Ineligibility for Participation and 5 Exemption from Participation in the Florida 6 Hurricane Catastrophe Fund. 7 The third one is 19-8.013, Revenue Bonds. 8 And the final existing rule to be revised 9 is 19-8.029, the 2003 Insurer Reporting 10 Requirements. 11 The two new rules are 19-8.030, the 12 insurer responsibilities, and 19-8.031, having 13 to do with hurricane mitigation. 14 If you have any questions about that, 15 someone from the CAT Fund is available. 16 TREASURER GALLAGHER: We are now saying prior 17 fiscal year means what we knew we actually got in 18 the prior fiscal year, so it's a fixed amount of 19 money that could be appropriated, for mitigation, 20 as opposed to prior year means the same year they 21 are in, which there has always been a confusion; 22 probably because people want a confusion. I don't 23 think everybody was confused but -- 24 MR. STAPANOVICH: These rules should help. 25 GENERAL CRIST: Motion on 5. 57 1 TREASURER GALLAGHER: Second. 2 GOVERNOR BUSH: Moved and seconded. Any 3 other discussion? The item passes without 4 objections. 5 Thank you very much. 6 (The proceedings concluded at 10:30 a.m.) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 58 1 2 CERTIFICATE OF REPORTER 3 4 5 6 STATE OF FLORIDA ) 7 COUNTY OF LEON ) 8 9 I, SANDRA L. NARGIZ, RMR, CRR, certify that I 10 was authorized to and did stenographically report the 11 proceedings herein, and that the transcript is a true 12 and complete record of my stenographic notes. 13 I further certify that I am not a relative, 14 employee, attorney or counsel of any of the parties, 15 nor am I a relative or employee of any of the parties' 16 attorney or counsel connected with the action, nor am I 17 financially interested in the action. 18 WITNESS my hand and official seal this 19th 19 day of February, 2003. 20 21 22 ______________________________ 23 SANDRA L. NARGIZ, RMR, CRR 100 SALEM COURT 24 TALLAHASSEE, FL 32301 850-878-2221 25 |