AGENDA

BOARD OF TRUSTEES OF THE INTERNAL IMPROVEMENT TRUST FUND

APRIL 27, 1999

Item 1 Minutes

Submittal of the Minutes of the March 9, 1999 Cabinet Meeting.

RECOMMEND ACCEPTANCE

Item 2 Lee/Andreone Option Agreements/Wekiva-Ocala Greenway CARL Project

REQUEST:  Consideration of two option agreements to acquire 421.21 acres within the Wekiva-Ocala Greenway CARL project from Sue and Tommy Ray Lee, and Patricia M. and David G. Andreone.

COUNTY:  Lake

LOCATION: Sections 04, 11, 13 and 14, Township 18 South, Range 28 East

CONSIDERATION:  $765,000

APPRAISED BY

REVIEW Goodman Nolan APPROVED PURCHASE OPTION

NO. PARCEL ACRES (05/28/98) (05/28/98) VALUE PRICE DATE

907004 Lee/6 377.24 $755,000 $715,000 $755,000 $675,000 150 days

907005 Andreone/31 43.97 $100,000 $100,000 $ 90,000 after BOT

421.21 $855,000 $765,000 approval

STAFF REMARKS: The Wekiva-Ocala Greenway CARL project is ranked number 8 on the CARL Priority Project List approved by the Board of Trustees on February 10, 1998, and is eligible for negotiation under the Division of State Lands' Land Acquisition Workplan. The project contains 67,397 acres, of which 32,994.24 acres have been acquired or are under agreement to be acquired. After the Board of Trustees approves this agreement, 33,981.55 acres or 50 percent of the project will remain to be acquired.

All mortgages and liens will be satisfied at the time of closing. These properties are subject to outstanding oil, gas, and mineral interests with the right of entry. Parcel 6 has a right of survivorship reservation for oil, gas and mineral interests, reserved in 1947, in favor of M. P. Edgerton and Richard Edgerton. Upon the death of the Edgertons, the reservation will vest with the fee title holder. Parcel 31 has a 99-year reservation for oil, gas and mineral interests, reserved in 1945 and ending in 2044, in favor of Wilson Express Company. The Bureau of Geology determined there is no significant potential for commercial oil, gas and mineral production at these sites. The appraisers were aware of the outstanding interests and took them into consideration when determining the value of the properties. The Department of Agriculture and Consumer Services, Division of Forestry (DOF), the future managing agency, has determined that while it prefers the interests to be acquired, it can effectively manage the property with the outstanding interests.  In the event the commitments for title insurance, to be obtained prior to closing, reveal any other encumbrances which may affect the value of the properties or the proposed management of the properties, staff will so advise the Board of Trustees prior to closing.

Surveys, title insurance policies, environmental site evaluations and, if necessary, environmental site assessments will be provided by the purchaser prior to closing.

The springs, rivers, lakes, swamps and uplands stretching north from Orlando to the Ocala National Forest are an important refuge for the Florida black bear, as well as other wildlife such as the bald eagle, swallow-tailed kite, Florida scrub jay and wading birds. The Wekiva-Ocala Greenway CARL project will protect these animals and the Wekiva and the St. Johns Board of Trustees

Agenda - April 27, 1999 Page Two

Item 2, cont.

river basins by protecting natural corridors connecting Wekiwa Springs State Park, Rock Springs Run State Reserve, the Lower Wekiva River State Reserve and Hontoon Island State Park with the Ocala National Forest. It will also provide the people of the booming Orlando area with a large, nearby natural area in which to enjoy camping, fishing, swimming, hiking, canoeing and other recreational pursuits.

These properties will be managed by the DOF as part of the Seminole State Forest.

These acquisitions are consistent with section 187.201(10), F.S., the Natural Systems and Recreational Lands section of the State Comprehensive Plan.

(See Attachment 2, Pages 1-47)

RECOMMEND APPROVAL

Item 3 SFWMD/St. Lucie County Acquisition Agreement/Indian River Blueway (Queens Island, Phase II) CARL Project

REQUEST: Authority to enter into an acquisition agreement with the South Florida Water Management District and St. Lucie County for 103.62 acres known as Queens Island, Phase II, contained within the Indian River Lagoon Blueway CARL project.

COUNTY: St. Lucie

LOCATION: Sections 14 and 15, Township 34 South, Range 40 East

STAFF REMARKS: The Indian River Lagoon Blueway CARL project is ranked number 15 on the Bargain/Shared CARL List approved by the Board of Trustees on February 10, 1998, and is funded under the Division of State Lands' Land Acquisition Workplan. The proposed agreement covers 103.62 acres known as Queens Island, Phase II, and is owned by multiple owners.

This site is somewhat unique in that it also involves a grant from the U. S. Fish and Wildlife Service (USFWS). The grant was originally applied for by St. Lucie County (County) as a partnership with Florida Communities Trust Program. Subsequently, the project was funded by CARL and the grant was changed to be a partnership with the County, the USFWS, and the Board of Trustees. The grant was awarded to and will be administered by the Department of Environmental Protection (DEP). As such, it is not necessary that USFWS be a party to this acquisition agreement. The grant requires that federal guidelines be followed in the acquisition process and that all lands acquired, in whole or in part with federal dollars, be held and managed consistent with the intent for which they are being purchased. In order to convert the use or to dispose of these lands, the requirements of the Code of Federal Regulations would have to be met. Federal acquisition procedures require that the South Florida Water Management District (District) offer the full appraised value and pay all closing costs, including documentary stamp taxes.

To facilitate the acquisition of this project, the District, though not contributing funding, has offered to take the lead in the acquisition of this joint project. DEP staff has prepared an agreement that would allow the District to acquire the Queens Island, Phase II, Indian River Lagoon Blueway CARL project in accordance with section 259.041(16), F.S., utilizing the procedures set out in section 373.139, F.S. The District is also aware of and has agreed to comply with all federal acquisition requirements. On June 15, 1995, the Board of Trustees Board of Trustees

Agenda - April 27, 1999 Page Three

Item 3, cont.

approved the use of the District's procedures to allow the District to acquire lands to be held jointly by the Board of Trustees and the District.

District staff will present the agreement to the Governing Board of the District on April 14, 1999, and County staff will present the agreement at its next County Commission meeting. If approved today, and upon receipt of the executed agreement from the District and the County, DEP staff will execute the agreement on behalf of the Board of Trustees.

Incorporated into the agreement are a number of assurances that the District is giving the Board of Trustees in return for its consideration of this agreement. The District has agreed to: (1) comply with the procedures set out in section 373.139, F.S.; (2) defend the Board of Trustees against all title and survey disputes or defects and environmental contamination associated with each acquisition negotiated by the District that were either known or should have been known by the District at the time the District acquired the parcel; and (3) reimburse the Board of Trustees' 50 percent of any overpayment of the purchase price if an audit or investigation determines that the purchase price paid exceeded the actual appraised value.

Pursuant to the proposed agreement, District staff will obtain and review appraisals, negotiate a purchase contract and secure the approval of its Governing Board. The District will provide DEP's Division of State Lands with a board resolution requesting the Board of Trustees' 50 percent share of the purchase price. DEP staff will seek approval for the Board of Trustees' share of the purchase price for each parcel the District contracts to purchase. In addition, the agreement provides for the District to be reimbursed 50 percent of all costs associated with its attempt to acquire lands within the project, including all pre-acquisition and closing related costs, with the pre-acquisition costs and certain closing costs being reimbursed even if the District is unsuccessful in acquiring any property. The agreement authorizes DEP staff to reimburse these costs from CARL incidental expense funds. If the Board of Trustees approves a specific purchase, the District will proceed to closing with title to be vested in the Board of Trustees.

The Indian River Lagoon Blueway, Queens Island, Phase II CARL project will be managed by St. Lucie County, through a sublease from the Department of Environmental Protection, Division of Marine Resources, as a buffer to several area aquatic preserves.

Acquisitions made under this agreement will be consistent with section 187.201(10), F.S., the Natural Systems and Recreational Lands section of the State Comprehensive Plan.

(See Attachment 3, Pages 1-36)

RECOMMEND APPROVAL

Item 4 MacKenzie Option Agreement/Paynes Prairie Project

REQUEST: Consideration of an option agreement to acquire 90 acres, subject to a life estate not to exceed five acres, within the Paynes Prairie Division of Recreation and Parks' Additions and Inholdings project from Richard S. MacKenzie and Claire S. MacKenzie.

COUNTY:  Alachua

LOCATION:  Section 14, Township 10 South, Range 20 East

Board of Trustees

Agenda - April 27, 1999 Page Four

Item 4, cont.

CONSIDERATION:  $359,000

APPRAISED BY

REVIEW Hale APPROVED PURCHASE OPTION

NO. PARCEL ACRES (09/29/98) VALUE PRICE DATE

907003 MacKenzie/120 90 $362,697 $362,697* $359,000 150 days

after BOT

* The approved value is based on the seller retaining a life estate in the property, approval

not to exceed five acres, exclusive of any merchantable timber.

STAFF REMARKS: The Paynes Prairie project has been identified on the Division of Recreation and Parks' Additions and Inholdings List. This agreement was negotiated by the Division of State Lands on behalf of the Division of Recreation and Parks (DRP) under the State Parks Additions and Inholdings Preservation 2000 program. The project contains 3,495 acres, of which 263.1 acres have been acquired or are under agreement to be acquired. After the Board of Trustees approves this agreement, 3,141.9 acres or 90 percent of the project will remain to be acquired.

The specific boundaries of the life estate property (and, if needed, the "Seller's Access Easement" referred to in the contract) shall be mutually agreed upon by the seller and the purchaser prior to the option expiration date. The five acres, or less, making up the life estate property will not encompass any of the property containing timber value as set forth within the appraisal. The life estate, which is non-transferable and limited to residential purposes, will be in effect for the remaining period of Richard S. MacKenzie's life and Claire S. MacKenzie's life. The life estate property is improved with a three-bedroom, one-story, frame residence containing 1,151 square feet of living area. Additional site improvements include a 50' x 125' asphalt tennis court, a 17' x 32' concrete pool and several miscellaneous out buildings. As set forth within the agreement, the sellers will be required to maintain all structures and improvements and shall hold the purchaser harmless for any liability arising out of the use of the life estate property. The sellers shall at their expense maintain insurance on the life estate property during the term of the life estate in an amount acceptable to purchaser. Such policies shall name the purchaser as an insured. DRP, the future managing agency, has determined that the property can be effectively managed subject to the life estate.

All mortgages and liens will be satisfied at the time of closing.  In the event the commitment for title insurance, to be obtained prior to closing, reveals any other encumbrances which may affect the value of the property or the proposed management of the property, staff will so advise the Board of Trustees prior to closing.

A title insurance policy, a survey, an environmental site evaluation and, if necessary, an environmental site assessment will be provided by the purchaser prior to closing.

This property will be managed by the DRP as an addition to the Paynes Prairie State Preserve.

This acquisition is consistent with section 187.201(10), F.S., the Natural Systems and Recreational Lands section of the State Comprehensive Plan.

(See Attachment 4, Pages 1-32)

RECOMMEND APPROVAL

Board of Trustees

Agenda - April 27, 1999 Page Five

Item 5 Maddox/Johnson Option Agreements/Survey Waivers/Hickey Creek Mitigation Park Greenways and Trails Project

REQUEST: Consideration of (1) two option agreements to acquire 0.55 acre within the Hickey Creek Mitigation Park project under the Preservation 2000 Florida Greenways and Trails program from Donna R. Maddox and Gary W. Maddox; and Alice E. and Edward M. Johnson and John J. Johnson; and (2) a request for survey waivers.

COUNTY:  Lee

APPLICANT: Office of Greenways and Trails

LOCATION:  Section 06, Township 44 South, Range 27 East

CONSIDERATION:  $22,600

APPRAISED BY

REVIEW Catlett APPROVED PURCHASE OPTION

NO. PARCEL ACRES (02/27/98) VALUE PRICE DATE

907001 Maddox/11 0.275 $11,500 $11,500 $11,300 150 days after

907002 Johnson/8 0.275 $11,500 $11,500 $11,300 BOT approval

0.550 $23,000 $22,600

STAFF REMARKS: The Hickey Creek Mitigation Park project has been identified on the Office of Greenways and Trails program approved acquisition list. These agreements were negotiated by the Division of State Lands (DSL) on behalf of the Office of Greenways and Trails under the Preservation 2000 Florida Greenways and Trails program. The project contains 11.48 acres, of which these are the first to be acquired. After the Board of Trustees approves these agreements, 10.93 acres or 95 percent of the project will remain to be acquired.

The properties are subject to outstanding oil, gas and mineral interests, with right of entry, in favor of Consolidated-Tomoka Land Co. and Lehigh Corporation, beginning on September 21, 1994, for the entire Maddox Parcel and beginning on February 4, 1987, for the entire Johnson Parcel. The Bureau of Geology determined that there is a modest probability of petroleum production at this site. The appraiser was aware of the interests and took them into consideration when determining the value of the properties. Lee County, the future managing agency, has determined that the properties can be effectively managed subject to the outstanding oil, gas and mineral interests because the probability of retrieval of these resources is very low due to the small size of the lots and the fact that they are surrounded by a platted area with an existing network of roads.

All mortgages and liens will be satisfied at the time of closing. In the event the commitments for title insurance, to be obtained prior to closing, reveal any other encumbrances which may affect the value of the properties or the proposed management of the properties, staff will so advise the Board of Trustees prior to closing.

Staff requests that the Board of Trustees, pursuant to its authority under section 259.041(1), F.S., waive any portions of chapter 259, F.S., and any applicable rule or policy that may require a survey on these parcels. It is the opinion of the Bureau of Survey and Mapping that available boundary information is sufficient to reasonably protect the public's interest.

While these parcels are being recommended for waivers of surveys at this time, should the title commitments and field inspections reveal substantive surveying or surveying related issues which impact the parcels, certified surveys will be provided by the purchaser prior to closing. In the event full surveys are waived, a professional land surveyor will inspect the properties for any visible evidence of improvements or potential boundary issues. In cooperation with the managing agency, the DSL will acquire any special purpose survey work necessary for the effective management of these properties. Board of Trustees

Agenda - April 27, 1999 Page Six

Item 5, cont.

Title insurance policies, environmental site evaluations and, if necessary, environmental site assessments will be provided by the purchaser prior to closing.

These properties will be managed by Lee County as part of the Hickey Creek Mitigation Park.

These acquisitions are consistent with section 187.201(10), F.S., the Natural Systems and Recreational Lands section of the State Comprehensive Plan.

(See Attachment 5, Pages 1-32)

RECOMMEND APPROVAL

Item 6 Edward J. Ruff Development, Inc. Lease Renewal/Modification/Assignment to Barefoot Boat Club Condominium Association, Inc.

DEFERRED FROM THE MARCH 9, 1999 AGENDA

DEFERRED FROM THE FEBRUARY 23, 1999 AGENDA

REQUEST: Consideration of a request to (1) renew an expired five-year sovereignty submerged lands lease for a docking facility used in conjunction with an upland nonresidential condominium and dry storage facility, containing 24,143 square feet, more or less; (2) modify it to a 30-year extended term lease; and (3) assign it to the Barefoot Boat Club Condominium Association, Inc.

COUNTY: Collier

Lease No. 111939239

APPLICANT: Edward J. Ruff Development, Inc.

LOCATION: Section 06, Township 48 South, Range 25 East, in Little Hickory Bay, within the local jurisdiction of Collier County. Aquatic Preserve: No

CONSIDERATION: $3,546.61, representing (1) $2,728.16 as the annual lease fee computed at the base rate of $0.1130 per square foot; and (2) $818.45 as the extended term lease payment calculated at 30 percent of the lease fee, if applicable. Sales tax will be assessed pursuant to section 212.031, F.S., if applicable.

STAFF REMARKS: On October 26, 1993, the Board of Trustees approved the issuance of a five-year submerged lands lease to Tempustech, Inc. for the construction of a six-slip docking facility to be used in conjunction with a proposed upland commercial marina and private club. The upland facilities would include a clubhouse, snack bar, swimming pool, parking and a 90-unit dry storage facility. The six slips would provide temporary mooring for boats launched and retrieved at the site.

Subsequently, on February 14, 1996, the aforesaid lease was modified pursuant to delegation of authority to change the lessee to Edward J. Ruff Development, Inc., who had purchased the uplands from Tempustech, Inc. on October 12, 1995, and to add 18 additional wet slips, thereby creating a 24-slip facility. The lease expired on October 26, 1998. The applicant made this application prior to the expiration of the lease.

On June 11, 1996, the lessee, Edward J. Ruff Development, Inc. ("developer"), filed a declaration of condominium for Barefoot Boat Club, a nonresidential condominium. In the Board of Trustees

Agenda - April 27, 1999 Page Seven

Item 6, cont.

declaration of condominium, the developer submitted the uplands owned by the applicant in fee simple, together with its interest in the sovereignty submerged lands lease, as modified, to condominium ownership under chapter 718, F.S., the Florida Condominium Act (Act). The developer subsequently sold the 18 wet slip condominium "units," for approximately $30,000 each, to individual owners. The six original wet slips are included as "common elements" to be used by the dry slip owners. Under the declaration, the Barefoot Boat Club Condominium Association, Inc. (Association), has the right to "build, maintain and use docks, piers, and other facilities in and over the waters of Little Hickory Bay". Under the Act, leasehold property submitted as nonresidential condominium property must have an unexpired term of 30 years, under section 718.401, F.S. Since the modified submerged lands lease had only a two and one-half year term remaining on its five-year term, the creation of a condominium on the leased portion of the lands appears to be contrary to section 718.401, F.S. To correct this problem, the developer and the Association (still controlled by the developer) request that the Board of Trustees issue a 30-year extended-term lease, and also request that the lease then be assigned to the Association.

Several unit owners filed suit against the developer in the circuit court for Collier County. The plaintiffs (several wet slip and dry slip owners) alleged that the condominium was not validly formed since the submerged lands lease was not for a term of 30 years. The applicant's request for a 30-year lease appears to be motivated by the litigation. Granting the request for a 30-year extended term lease would arguably have the effect of ratifying the inclusion of sovereignty submerged land in the declaration of condominium.

On July 28, 1998, the Board of Trustees considered the issue of whether to allow 30-year leases when it considered the rule amendments for extended term leases. The applicant's president and his attorney attended and unsuccessfully argued their position regarding 30-year leases. At that time, the Board of Trustees said that the applicant could come back with its specific request for a term longer than 25 years and that it would be considered.

The submission of a submerged lands lease to condominium ownership would be a violation of paragraph eight by making a claim of title to the submerged land; paragraph nine by conveying wet slip units into private ownership (transfer or assignment of lease without written consent of lessor prohibited); and paragraph ten by conveying the upland into condominium ownership and terminating fee simple ownership.

Enforcement has not been taken, since such violations must be corrected before renewal of the lease by the Board of Trustees under section 18-21.008(1)(b)3., F.A.C. Further, a site inspection done on September 11, 1998, showed that certain vessels were using more sovereignty submerged lands than had been leased, also a lease violation. A lease modification of the leased area to resolve that problem is pending in the Department of Environmental Protection's (DEP) South District.

Staff recommends that the request for a 30-year lease be denied because it is contrary to section 18-21.008(2)(a), F.A.C., which allows extended term leases of "up to 25 years." At this time, renewal of the lease should be denied because it would violate section 18-21.008(1)(b)3., F.A.C., which requires the applicant be in compliance with all submerged lands rules and statutes. Assignment should also be denied at this time because it would violate section 18-21.008(1)(b)4., F.A.C., involving the same requirements as renewal. There are no exceptions in these rules, and the Board of Trustees declined to extend the lease terms in the rule to 30 years to accommodate such uses as "dockominiums". Staff further recommends that the Board of Trustees deny the request because it is contrary to the public interest and public policy. Staff believes that this would open the door to other private nonresidential dockominiums, which are not a traditional use for which the Board of Trustees has allowed docking facilities to be constructed on sovereignty lands. Such privately-owned facilities do not provide public access to public waters; Board of Trustees

Agenda - April 27, 1999 Page Eight

Item 6, cont.

would further limit the already limited public usage of sovereignty submerged lands near the shore; and would increase impacts on natural resources. Further, conveying sovereignty submerged lands into private condominium ownership is contrary to the public interest and arguably in violation of Article X, section 11, Florida Constitution.

Additionally, section 718.401, F.S., provides that if the rent under the lease is payable by the condominium association or the unit owners, the lease must include certain specific provisions as set forth in the statutes. This would mean that the standard submerged lands lease would have to be revised to conform to the statutory requirements, some of which are likely to be unacceptable to the Board of Trustees. For example, subsection (d) contains detailed provisions governing actions by the lessor (Board of Trustees) for non-payment of rent or other breaches of the lease, including authorization for payment of rent by the lessee into the registry of the court, and requiring that the lessor must post a bond or other security as a condition for the release of funds from the court registry. If the lessor attempts to file liens for non-payment of rent or foreclose such liens in violation of this subsection, then the lessor may be liable for damages plus attorney's fees and costs to the unit owners or the condominium association. As a matter of public policy, this is not recommended as it favors the private owner and increases expenses to and restrains use by the public of its own lands.

A condominium association can enter into leases pursuant to section 718.114, F.S., without converting the leasehold interest into "condominium property" subject to the 30-year lease requirement of section 718.401, F.S. A condominium association lease under section 718.114, F.S., does not subject the leased property "to condominium ownership." The assignment to the association of a future five-year sovereignty submerged lands lease, after the other ownership and lease issues are addressed, would aid in resolving this matter.

Staff accordingly recommends denial of the request for a 30-year extended term lease. Staff further recommends denial of any assignment at this time. Other than the condominium requirements cited above, the applicant has not shown any "unique operational constraints" under section 18-21.008(2)(a)3, F.A.C., which is the test to justify an extended term lease of up to 25 years, not 30 years. In view of the apparent lease violations, staff recommends denial of any lease renewal at this time and, instead, issuance of a temporary use agreement for one year, with the following special conditions: (1) the applicant shall come into full compliance with the lease; (2) the applicant shall eliminate sovereignty submerged lands from condominium ownership; (3) the applicant shall not be fined if it proceeds to correct all lease violations and condominium issues within one year; and (4) if the applicant performs all conditions of the TUA, and is in compliance with all rules and statutes governing submerged lands, a standard five-year lease shall be issued by staff, in which the assignment shall be made. The DEP South District shall stop processing the modification of the lease area until these issues are resolved, and shall not resume such processing until a five-year lease is fully executed and delivered.

A consideration of the status of the local government comprehensive plan was not made for this item. The DEP has determined that the request for an extended lease term for this facility is not subject to the local government planning process.

(See Attachment 6, Pages 1-10)

RECOMMEND (1) DENIAL OF THE 30-YEAR EXTENDED TERM LEASE; (2) DENIAL OF THE LEASE ASSIGNMENT; (3) ISSUANCE OF A TEMPORARY USE AGREEMENT FOR ONE YEAR WITH SPECIAL CONDITIONS; AND (4) ISSUANCE OF A FIVE-YEAR LEASE WHEN ALL CONDITIONS ARE MET

Board of Trustees

Agenda - April 27, 1999 Page Nine

Item 7 G. Sandcastle, Inc. v. Board of Trustees Settlement Agreement

REQUEST: Consideration of a proposed Settlement Agreement in the case of G. Sandcastle, Inc. v. Board of Trustees of the Internal Improvement Trust Fund, Leon County Circuit Court Case No. CV98-4346, and Board of Trustees of the Internal Improvement Trust Fund v. G. Sandcastle, Inc., Pinellas County Circuit Court Appellate Case No. 98-6052-88B (lower court case No. 98-003428-CO-Sec.-41).

COUNTY: Pinellas

APPLICANTS: Department of Environmental Protection, Division of State Lands, and G. Sandcastle, Inc. (George and Veatrice Farrell, principals).

LOCATION: St. Pete Beach

CONSIDERATION: $156,000.00

STAFF REMARKS: In May 1992, the Board of Trustees acquired a proprietary leasehold interest in certain improved commercial and residential property (RICO #137) pursuant to the Florida Racketeer Influenced and Corrupt Organization (RICO) Act, chapter 895, F.S. RICO #137, identified as Apartments 32, 33, 34, and 35, consists of a small one-bedroom apartment, a first-floor restaurant, and a second-story lounge, totaling approximately 7,000 interior square feet. The property is located in the Pass-A-Grille Beach Motel, Inc., a cooperative association ("the cooperative"). The underlying fee ownership of the entire property is vested in the cooperative. The cooperative's Board of Directors has authority to approve or deny the sale of leaseholds.

RICO #137 was advertised for sale by competitive bid by the Division of State Lands (DSL) on two occasions in 1992 and again in 1993. The cooperative exercised its right to deny the sale of the leasehold to the prospective buyers on both occasions. It ultimately proposed Ronald F. Holehouse as a substitute buyer. In December 1993, Mr. Holehouse tendered a written offer to DSL. However, Mr. Holehouse's written offer included hand-written modifications to the contract proposed by DSL not previously agreed upon, and was not accepted by staff. Negotiations to finalize the sale to Mr. Holehouse continued into 1995.

By the end of 1995, negotiations with Mr. Holehouse were discontinued. RICO #137 was readvertised in December 1995. Mr. Holehouse filed suit in January 1996, seeking to compel the Board of Trustees to sell the property at the original price.

RICO #137 remained vacant while under litigation with Mr. Holehouse and DSL continued to incur monthly expenses connected with said property. To cover some of these expenses, staff negotiated a month-to-month sublease on August 13, 1997, with G. Sandcastle, Inc. (Sandcastle), to operate the restaurant. The lease informed Sandcastle of the pending Holehouse litigation and provided that the lease term would be extended at the conclusion of the litigation if the Board of Trustees prevailed and retained possession of the property (paragraph 3B). The lease also gave the Lessee (Sandcastle) a right of first refusal, at any time after expiration of the month-to-month tenancy, to purchase the property if the Lessor (Board of Trustees) received a bona fide offer to purchase the property from a third party (paragraph 24).

A court-ordered mediation conference between DSL and Mr. Holehouse, referenced above, was held in January 1998, resulting in a Settlement Agreement providing for sale of RICO #137 to the plaintiff, Ronald F. Holehouse, for $435,000, subject to the approval of the defendant, Board of Trustees. Approval was given at the December 8, 1998 Cabinet Meeting.

After the mediation settlement was reached with Mr. Holehouse in January 1998, but before the settlement was approved by the Board of Trustees, Sandcastle demanded to be allowed to Board of Trustees

Agenda - April 27, 1999 Page Ten

Item 7, cont.

exercise its claimed right of first refusal. Staff responded that the right did not mature until after expiration of the month-to-month tenancy, which was to continue until final resolution of the Holehouse litigation. Sandcastle brought a breach of contract suit against the Board of Trustees in Circuit Court in Pinellas County on April 4, 1998. The Circuit Court in Pinellas County granted the Board of Trustees' motion to transfer Sandcastle's suit from Pinellas County to the Circuit Court in Leon County where it is now pending.

During the course of the lease term, Sandcastle defaulted on its rent for March and April, 1998. In May, a check for the March and April rent was received, but neither the late fees nor the May rent and late fee were included. The partial payment was returned and a "three-day-notice" was sent pursuant to section 83.20, F.S., demanding that Sandcastle deliver the full amount of rent due or surrender the premises. A check for the full amount due was received, but when orally presented to the bank as authorized by section 673.5011(2)(a), F.S., the bank orally dishonored the check as authorized by section 673.5031(2), F.S., because funds were not available to cover the check. (The bank later confirmed its oral dishonor in writing.) The check was returned to Sandcastle and eviction proceedings were brought in the County Court for Pinellas County. At the final hearing on the eviction, Sandcastle stipulated that its rent was late and funds were not available to cover its check when it was received by DSL.

The County Court ruled in favor of the Board of Trustees and ordered Sandcastle's eviction. The Pinellas County Sheriff's Department finalized the eviction on August 18, 1998, and put the Board of Trustees in possession of the property pursuant to the Court's order. Sandcastle has appealed the eviction.

On November 4, 1998, Sandcastle and Department of Environmental Protection (DEP) staff submitted the case to voluntary mediation in an attempt to resolve Sandcastle's breach of contract lawsuit and the eviction appeal. Mediation was unsuccessful.

On December 8, 1998, representatives of the Governor's Office, DEP Secretary Kirby Green and DEP attorneys met with Sandcastle's attorney and the corporation's principals, Mr. and Mrs. Farrell, prior to and during the Board of Trustees meeting being held that day to discuss settlement. The amount proposed to Sandcastle by Governor Chiles' general counsel was $156,000. The Board of Trustees then conceptually approved settlement with Sandcastle, subject to the requirement that the corporation "must come up with the numbers that prove their claim," i.e., that Sandcastle was required to submit supporting documentation to DSL that would verify the amount claimed as damages. Since the December 8, 1998 Cabinet Meeting, Mr. Holehouse has moved to amend his original complaint, and has delayed the closing, for reasons not related to Sandcastle. It now appears that the Holehouse litigation will continue regardless of settlement with Sandcastle.

Sandcastle submitted its claims with receipts, invoices and other documentation on February 9, 1999, and supplemented the information on February 24, 1999. The total claim of damages, which includes attorney fees, equipment purchases, pre-opening expenses, operating costs and business losses is $704,931.36, offset by $3,580 in returned deposits and $357,373 in operating revenues. The total net claim is thus $349,558.36, not including claimed future lost profits, and the anticipated cost of future litigation.

Taking into account the information provided by Sandcastle, and the estimated future attorney fees for continued litigation, payment of $156,000 is recommended as the settlement amount which can be justified. A copy of a proposed Settlement Agreement is attached to this agenda item. It is recommended that approval of the settlement award be conditioned on Sandcastle's acceptance of the terms contained in the agreement. Some of the more critical terms of the Board of Trustees

Agenda - April 27, 1999 Page Eleven

Item 7, cont.

Settlement Agreement are: payment of any award being contingent upon funds from the closing with Mr. Holehouse or an appropriation by the legislature; payment of existing debts owed by Sandcastle to the Department of Revenue and Division of Alcoholic Beverages and Tobacco directly to those agencies; and a release by Sandcastle and its principals of the Board of Trustees, the Department of Environmental Protection and its staff for any claims arising out of the Lease Agreement, the breach of contract action against the Board of Trustees, and the eviction proceedings. It is also recommended that this settlement offer be held open for a period of 21 days, until 5:00 p.m. on May 18, 1999. If not accepted by Sandcastle by that time the offer expires and is withdrawn without further notice to Sandcastle. This recommendation of approval is not to be construed as an admission of liability and is offered only for the purpose of negotiating a settlement of the lawsuits.

A consideration of the status of the local government comprehensive plan was not made for this item. The DEP has determined that the proposed settlement is not subject to the local government planning process.

(See Attachment 7, Pages 1-15)

RECOMMEND APPROVAL IN THE AMOUNT OF $156,000 UNDER THE TERMS OF THE PROPOSED SETTLEMENT AGREEMENT