The Governor and Cabinet - Florida Department of State

THE CABINET

STATE OF FLORIDA

_____________________________________________________

T H E C A B I N E T

S T A T E O F F L O R I D A

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Representing:

DIVISION OF BOND FINANCE
OFFICE OF FINANCIAL REGULATION
DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES
BOARD OF TRUSTEES OF THE INTERNAL IMPROVEMENT TRUST FUND
STATE BOARD OF ADMINISTRATION

The above agencies came to be heard before
THE FLORIDA CABINET, The Honorable Governor Bush
presiding, in the Cabinet Meeting Room, LL-03, The
Capitol, Tallahassee, Florida, on Tuesday, March 1,
2005, commencing at approximately 9:11 a.m.

Reported by:

MARY ALLEN NEEL
Registered Professional Reporter

ACCURATE STENOTYPE REPORTERS, INC.
2894-A REMINGTON GREEN CIRCLE
TALLAHASSEE FLORIDA 32308
(850)878-2221

APPEARANCES:

Representing the Florida Cabinet:

JEB BUSH
Governor

CHARLES H. BRONSON
Commissioner of Agriculture

CHARLIE CRIST
Attorney General

TOM GALLAGHER
Chief Financial Officer

* * *

I N D E X

DIVISION OF BOND FINANCE
(Presented by Ben Watkins)

ITEM ACTION PAGE

1 Approved 5
2 Approved 5
3 Approved 6
4 Approved 6
5 Approved 9

OFFICE OF FINANCIAL REGULATION
(Presented by Don Saxon)

ITEM ACTION PAGE

1 Approved 12
2 Approved 12
3 Approved 12
4 Approved 13
5 Approved 13
6 Approved 13

DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES
(Presented by Sherman Wilhelm)

ITEM ACTION PAGE

1 Approved 14
2 Approved 14

BOARD OF TRUSTEES OF THE INTERNAL
IMPROVEMENT TRUST FUND
(Presented by Colleen Castille)

ITEM ACTION PAGE

1 Approved 15
2 Withdrawn 15
3 Approved 16
4 Approved 16
5 Withdrawn 16

STATE BOARD OF ADMINISTRATION
(Presented by Coleman Stipanovich)

ITEM ACTION PAGE

1 Approved 17
2 Approved 18
3 Approved 18

CERTIFICATE OF REPORTER 20

1 P R O C E E D I N G S

2 GOVERNOR BUSH: The next cabinet meeting will

3 be Thursday, March 17th.

4 Division of Bond Finance. Where is Bond Boy?

5 There he is.

6 CFO GALLAGHER: Governor, let me just say

7 congratulations on our AAA bond rating.

8 (Applause.)

9 CFO GALLAGHER: And I'll make a motion on the

10 minutes.

11 ATTORNEY GENERAL CRIST: Second.

12 GOVERNOR BUSH: There's a motion and a second.

13 Without objection, Item 1 passes.

14 Item 2.

15 MR. WATKINS: Item 2 is a resolution

16 authorizing the issuance of up to $22,145,000 in

17 capital outlay bonds for school construction.

18 CFO GALLAGHER: Motion.

19 ATTORNEY GENERAL CRIST: Second.

20 GOVERNOR BUSH: There's a motion and a second.

21 Without objection, Item 2 passes.

22 MR. WATKINS: Item Number 3 is a resolution

23 authorizing the issuance and competitive sale of up

24 to $430 million of PECO refunding bonds.

25 ATTORNEY GENERAL CRIST: Motion.

1 COMMISSIONER BRONSON: Motion.

2 CFO GALLAGHER: Second.

3 GOVERNOR BUSH: There's a motion and a second.

4 Without objection, the item passes.

5 MR. WATKINS: Item Number 4 is a resolution

6 authorizing the issuance and competitive sale of up

7 to $140 million of right-of-way refunding bonds.

8 CFO GALLAGHER: Motion.

9 ATTORNEY GENERAL CRIST: Second.

10 GOVERNOR BUSH: Motion and a second. Without

11 objection, the item passes.

12 Does this AAA rating kick in in advance of

13 this, or are we --

14 MR. WATKINS: They're post issuance, but we

15 already had momentum moving our way because of the

16 Moody's rating upgrade. So this is --

17 GOVERNOR BUSH: Any debt --

18 MR. WATKINS: So this is helpful.

19 GOVERNOR BUSH: Any more debt that we can

20 refund?

21 MR. WATKINS: Well, it's interesting. If you

22 will reflect back to 2003, I think we did about 200

23 and -- saved the State about $250 million by

24 executing about $2-1/2 billion in refundings over

25 the course of a 12-month period. And under federal

1 tax law, we can only advance refund things once,

2 remember, and I asked you to talk to your brother

3 about that --

4 GOVERNOR BUSH: Yes, I remember that.

5 MR. WATKINS: -- over Thanksgiving.

6 CFO GALLAGHER: And we --

7 GOVERNOR BUSH: My eyes glaze over when people

8 give me advice to go talk to my brother about

9 things, by the way.

10 CFO GALLAGHER: You would be living --

11 MR. WATKINS: But this is for a good --

12 GOVERNOR BUSH: Exactly. It only happens once

13 an hour.

14 MR. WATKINS: But I had to put in my plug

15 anyway.

16 And the conventional wisdom was at that point

17 in time and over the course of '04, we would be in a

18 rising rate environment, and notwithstanding the

19 Feds' restricted monetary policy and moving

20 short-term rates up in a measured way, long-term

21 rates have actually stayed low and actually improved

22 a little bit or gone down a little bit. That

23 anomaly is not going to hold forever, obviously, and

24 things will normalize, and the yield curve will

25 normalize. But as with the old country saying,

1 we've got to make hay while the sun shines. So

2 we've executed over the last 30 days or so --

3 GOVERNOR BUSH: Did you do that because the FFA

4 leadership is here?

5 MR. WATKINS: Absolutely. It's in keeping with

6 -- consistent with the theme, Governor.

7 GOVERNOR BUSH: Well done.

8 MR. WATKINS: But over the last 30 days, we've

9 executed approximately 735 million in refundings.

10 GOVERNOR BUSH: General.

11 MR. WATKINS: Saving the State about $75

12 million, all in the education program.

13 ATTORNEY GENERAL CRIST: Yes. If I might, I

14 think the sun is going to continue to shine, but you

15 said you don't think it is. So do you recommend

16 short-term investments as a result of that thought?

17 MR. WATKINS: It is -- really what I'm

18 referring to is the shape of the yield curve, and

19 short-term rates are going up, but long-term rates

20 have come down. And in a more normal rate

21 environment, you would expect all rates to rise,

22 both short-term and long-term rates. And if rates

23 are higher, then it makes it more difficult to save

24 money by refinancing debt at a lower interest rate.

25 So that's what I mean. I think things will

1 normalize. I really think it's an anomaly, the fact

2 that short-term rates are rising and long-term rates

3 are coming down. And if the --

4 GOVERNOR BUSH: That doesn't last forever.

5 MR. WATKINS: And that won't last forever.

6 GOVERNOR BUSH: So what item are we on now?

7 MR. WATKINS: We're on Item Number 5, Governor.

8 CFO GALLAGHER: Motion on 5.

9 COMMISSIONER BRONSON: Second.

10 GOVERNOR BUSH: There's a motion and a second.

11 Without objection, Item 5 passes.

12 CFO GALLAGHER: Even before you tell us what it

13 is. Thank you.

14 MR. WATKINS: You're welcome. Governor --

15 GOVERNOR BUSH: So, Ben, what are we going to

16 do now? We've gotten AAA from -- do we have to go

17 back and get Fitch or --

18 MR. WATKINS: Well, I reminded -- this was --

19 the S&P action was not surprising to me, but

20 unexpected. They were scheduled to come down in

21 May. They like to come down and do their review of

22 the State's finances after the legislative session,

23 and so we were scheduling a meeting up with them and

24 actually had preliminary dates.

25 But with the state financial statements being

1 released, they really had the information they

2 needed. They were doing their report on the states,

3 if you will, a report card on the states. And in

4 connection with that review, they basically reached

5 a conclusion of, "Why do we need to wait? The

6 evidence is already in. The trends are there. The

7 reserves are at record levels. The State has

8 demonstrated their ability to effectively manage the

9 State," and as they put it, their rationale is,

10 "Based on the State's strong and conservative

11 financial and budgetary management practices,

12 coupled with substantial budget reserves and

13 economic trends that had been the strongest in the

14 nation nationally."

15 GOVERNOR BUSH: Well, Ben --

16 CFO GALLAGHER: Well, let me just add one

17 thing. When they looked at the southern states that

18 had AAA ratings, we had more reserves than all the

19 other southern states combined. So that's pretty

20 strong.

21 MR. WATKINS: Correct.

22 GOVERNOR BUSH: Have there been any states that

23 have gone up to AAA in the recent --

24 MR. WATKINS: Not in my recent memory. I

25 haven't gone back and analyzed it, but, Governor, I

1 mean, this is clearly away from the trend. The

2 trend over the last several years had been weaker

3 ratings or downgrades in ratings because of the

4 fiscal stress because of the '01-03 recession. So

5 clearly not only are we not -- we're going the other

6 way, which is clearly the exception rather than the

7 rule, both in terms of reserves and recognition by

8 the rating agencies in terms of the way you all have

9 -- we've been managed through these latest

10 challenging budgetary times.

11 GOVERNOR BUSH: Well, the group that doesn't

12 get much credit on just about anything is the

13 Florida Legislature, but they could have --

14 CFO GALLAGHER: Spent it all.

15 GOVERNOR BUSH: Yes. They could have really

16 messed us up, and they didn't. They did something

17 that is pretty unique for a legislative body, which

18 is to manage the resources of the State in a way

19 that a family budget, a good family budget would be

20 managed. So kudos to the Florida Legislature.

21 Thank you, Ben.

22 MR. WATKINS: Thank you, Governor.

1 GOVERNOR BUSH: Financial Services Commission,

2 Office of Financial Regulation.

3 CFO GALLAGHER: Motion on the minutes.

4 ATTORNEY GENERAL CRIST: Second.

5 GOVERNOR BUSH: There's a motion and a second.

6 Without objection, Item 1 passes.

7 Item 2.

8 CFO GALLAGHER: By the way, that --

9 GOVERNOR BUSH: Items 1 and 2.

10 CFO GALLAGHER: One and 2, for February 1st,

11 2005, and September 21st, 2004.

12 GOVERNOR BUSH: Both have passed without

13 anybody upset.

14 Item 3.

15 MR. SAXON: Good morning, Governor and Cabinet.

16 Item 3, adoption of repeal of Rule 3C-22.005,

17 Florida Administrative Code.

18 CFO GALLAGHER: Motion on 3.

19 ATTORNEY GENERAL CRIST: Second.

20 GOVERNOR BUSH: Motion and a second. Without

21 objection, Item 3 passes.

22 Item 4.

23 MR. SAXON: Adoption of repeal of Rule

24 69W-301.004 --

25 CFO GALLAGHER: Motion on 4.

1 MR. SAXON: -- Florida Administrative Code.

2 ATTORNEY GENERAL CRIST: Second.

3 GOVERNOR BUSH: There's a motion and a second.

4 Without objection, the item passes.

5 MR. SAXON: Item 5, adoption of repeal of Rule

6 69U-120.680.

7 CFO GALLAGHER: Motion on 5.

8 ATTORNEY GENERAL CRIST: Second.

9 GOVERNOR BUSH: Motion and a second. Without

10 objection, the item passes.

11 MR. SAXON: Item 6, adoption of repeal of Rule

12 3D-1.006 and 3D-1.010, Florida Administrative Code.

13 CFO GALLAGHER: Motion on 6.

14 COMMISSIONER BRONSON: Second.

15 GOVERNOR BUSH: Motion and a second. Without

16 objection, the item passes.

17 Thank you.

18 MR. SAXON: Thank you.

1 GOVERNOR BUSH: Board of Trustees, Department

2 of Agriculture and Consumer Services.

3 CFO GALLAGHER: Motion on the minutes.

4 ATTORNEY GENERAL CRIST: Second.

5 GOVERNOR BUSH: There's a motion and a second.

6 Without objection, the minutes pass.

7 Item 2.

8 MR. WILHELM: Staff requests permission to

9 alter 17 aquaculture leases from five-year terms to

10 ten-year terms.

11 CFO GALLAGHER: And they do have the option

12 after the seven years to increase the fees; correct?

13 MR. WILHELM: After '07, yes, the fee will be

14 increased.

15 CFO GALLAGHER: I meant '07.

16 MR. WILHELM: Yes, sir.

17 CFO GALLAGHER: Okay. Motion on 2.

18 COMMISSIONER BRONSON: Second.

19 GOVERNOR BUSH: There's a motion and a second.

20 Without objection, the item passes.

21 Thank you very much.

22 MR. WILHELM: Thank you.

1 GOVERNOR BUSH: Board of Trustees.

2 CFO GALLAGHER: Motion on the minutes for

3 October 26, '04; November 9th, '04; December 7th,

4 '04; February 1st, '05; and the corrected minutes

5 from the April 13th, '04 cabinet meeting.

6 COMMISSIONER BRONSON: Second.

7 GOVERNOR BUSH: Motion and a second. Without

8 objection, the item passes.

9 MS. CASTILLE: Item 2 we're asking to be

10 withdrawn at this time for further information.

11 CFO GALLAGHER: Motion to withdraw 2.

12 ATTORNEY GENERAL CRIST: Second.

13 GOVERNOR BUSH: There's a motion to withdraw

14 and a second. Without objection, the motion is

15 withdrawn.

16 MS. CASTILLE: Item 3, Searcy Estate Florida

17 Forever project. This is the consideration of an

18 option agreement to acquire 600 acres within the

19 Searcy Estate Florida Forever project, the

20 designation of the Division of Forestry as the

21 managing agency, and confirmation of the management

22 policy statement.

23 CFO GALLAGHER: Motion on 3.

24 ATTORNEY GENERAL CRIST: Second.

25 GOVERNOR BUSH: There's a motion and a second.

1 Without objection, the item passes. Thank you.

2 MS. CASTILLE: Item 4, six conservation

3 easements for Pinhook Swamp Florida Forever project.

4 CFO GALLAGHER: Motion on 4.

5 ATTORNEY GENERAL CRIST: Second.

6 GOVERNOR BUSH: Motion and a second. Without

7 objection, the item passes. Thank you.

8 MS. CASTILLE: Thank you. Item 5. This item

9 is being withdrawn, Governor and members of the

10 Cabinet. Both parties have agreed to a contract,

11 and --

12 CFO GALLAGHER: Let me just say that Bob

13 Ballard did a great job in standing by and handling

14 the negotiations between Southern Grace Cruises and

15 the Cypress Gardens Adventure Park. It wasn't easy.

16 The reason we don't have this item today and I'm

17 making a motion to withdraw is because they came to

18 an agreement. Thank you very much, Bob. Thank you,

19 Colleen.

20 ATTORNEY GENERAL CRIST: Second.

21 GOVERNOR BUSH: There's a motion to withdraw

22 Substitute Item 5 and a second. Without objection,

23 the item is withdrawn. Good work, Bob.

24 MS. CASTILLE: Thank you, Governor and

25 Treasurer Gallagher and members of the Cabinet.

1 GOVERNOR BUSH: State Board of Administration.

2 THE COURT: Motion on the minutes.

3 ATTORNEY GENERAL CRIST: Second.

4 GOVERNOR BUSH: There's a motion and a second.

5 Without objection, Item 1 passes.

6 Where is Coleman?

7 CFO GALLAGHER: Well, we can do it without

8 Coleman. I'll move Item Number 2.

9 GOVERNOR BUSH: Is he out there?

10 UNIDENTIFIED SPEAKER: We're finding him.

11 CFO GALLAGHER: We can get it through without

12 him.

13 GOVERNOR BUSH: He'll have a heart attack if we

14 just go ahead and do this.

15 There he is.

16 MR. STIPANOVICH: Sorry.

17 GOVERNOR BUSH: Item 2.

18 MR. STIPANOVICH: Request approval of fiscal

19 sufficiency of an amount not exceeding 430 million

20 State of Florida State Board of Education public

21 education capital outlay refunding bonds.

22 CFO GALLAGHER: Motion on 2.

23 ATTORNEY GENERAL CRIST: Second.

24 GOVERNOR BUSH: There's a motion and a second.

25 Without objection, the item passes.

1 MR. STIPANOVICH: Item 3 is a request for

2 approval of fiscal sufficiency of an amount not

3 exceeding 140 million State of Florida Department of

4 Transportation right-of-way acquisition and

5 reconstruction refunding bonds.

6 ATTORNEY GENERAL CRIST: Motion on 3.

7 CFO GALLAGHER: Second.

8 GOVERNOR BUSH: There's a motion and a second.

9 Without objection, the item is approved.

10 MR. STIPANOVICH: That completes the agenda,

11 Governor.

12 GOVERNOR BUSH: Thank you, Coleman.

13 (Proceedings concluded at 10:04 a.m.)

2 CERTIFICATE OF REPORTER

4 STATE OF FLORIDA)

5 COUNTY OF LEON )

7 I, MARY ALLEN NEEL, do hereby certify that the

8 foregoing proceedings were taken before me at the time

9 and place therein designated; that my shorthand notes

10 were thereafter transcribed under my supervision; and

11 that the foregoing pages numbered 1 through 19 are a

12 true and correct transcription of my stenographic notes.

13 I FURTHER CERTIFY that I am not a relative,

14 employee, attorney or counsel of any of the parties, or

15 relative or employee of such attorney or counsel, or

16 financially interested in the action.

17 DATED THIS 9th day of March, 2005.

21 ___________________________
MARY ALLEN NEEL, RPR
22 2894-A Remington Green Lane
Tallahassee, Florida 32308
23 (850) 878-2221