Representing:
OFFICE OF INSURANCE
REGULATION
DEPARTMENT OF
REVENUE
DEPARTMENT OF LAW
ENFORCEMENT
BOARD OF TRUSTEES OF THE INTERNAL IMPROVEMENT TRUST
FUND
STATE BOARD OF ADMINISTRATION
The above agencies came to be heard
before
THE FLORIDA CABINET, Honorable Governor Bush presiding, in
the
Cabinet Meeting Room, LL-03, The Capitol, Tallahassee,
Florida,
on the 26th day of October, 2004, commencing at
approximately
9:30 a.m.
Reported by:
KRISTEN L.
BENTLEY
Certified Court Reporter
ACCURATE STENOTYPE REPORTERS,
INC.
2894 REMINGTON GREEN
LANE
TALLAHASSEE, FL 32308 (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
* * *
ACCURATE STENOTYPE REPORTERS, INC.
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3
I N D E X
OFFICE OF INSURANCE
REGULATION
(Presented by KEVIN MCCARTY)
ITEM
ACTION
PAGE
1
Approved
5
2
Approved
9
DEPARTMENT OF
REVENUE
(Presented by JAMES ZINGALE)
ITEM
ACTION
PAGE
1
Approved
20
2
Deferred
42
DEPARTMENT OF LAW
ENFORCEMENT
(Presented by GUY TUNNELL)
ITEM
ACTION
PAGE
1
Approved
46
2
Approved
49
BOARD OF TRUSTEES OF THE INTERNAL IMPROVEMENT TRUST
FUND
(Presented by EVA ARMSTRONG)
ITEM
ACTION
PAGE
1
Approved
51
2
Deferred
51
3
Approved
51
4
Approved
57
5
Approved
58
6
Approved
74
7
Approved
75
8
Approved
75
9
Approved
118
10
Approved
130
STATE BOARD OF
ADMINISTRATION
(Presented by COLEMAN STIPANOVICH)
ITEM
ACTION
PAGE
1
Approved
131
2
Deferred
131
3
Approved
131
4
Approved
132
ACCURATE STENOTYPE REPORTERS, INC.
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OFFICE OF INSURANCE REGULATION -
10/26/04
4
1
PROCEEDINGS
2
THE GOVERNOR: The next cabinet meeting is Tuesday,
3 November 9th,
2004. Now we have in front of us the
4 schedule for the 2005
cabinet meeting schedules. Is there
5 a motion to accept
it?
6
CFO GALLAGHER: I'd like to move to accept with a
7 proposed date change
from 9/20/05 to 9/22/05.
8
THE GOVERNOR: Now we all got to go back and see --
9
CFO GALLAGHER: No, I think everybody has already
10 looked at it.
11
THE GOVERNOR: Have we?
12
CFO GALLAGHER: I wouldn't do it as a surprise.
13
THE GOVERNOR: Did you look at it?
14
MR. PEREZ: Did you see it?
15
CFO GALLAGHER: Yes.
16
THE GOVERNOR: What's the date that was changed?
17
MR. PEREZ: We already incorporated it, didn't we?
18 It's in the draft,
TG.
19
THE GOVERNOR: Treasurer TG to you, Kent.
20
CFO GALLAGHER: It wasn't in mine.
21
MR. PEREZ: It should be in this draft.
22
THE GOVERNOR: To the 22nd? Has it changed to the
23 22nd?
24
CFO GALLAGHER: Yes, so this is correct? Okay.
25 That's in
there. Move it as it's done.
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1
THE GOVERNOR: There is a motion and a second?
2
GENERAL CRIST: Yes.
3
THE GOVERNOR: Moved and seconded. Without
4 objection, the
calendar is approved as presented.
5
Thank you.
6
Financial Services Commission. Office of Insurance
7 Regulation. A
topical subject these days.
8
MR. McCARTY: Good morning, Governor Bush, members of
9 the Commission.
I'm here with an agenda item. No. 1 is
10 the adoption of the
minutes.
11
CFO GALLAGHER: Motion on the minutes.
12
COMMISSIONER BRONSON: Second.
13
THE GOVERNOR: Moved and seconded. Without
14 objection, Item 1
passes.
15
MR. McCARTY: Agenda Item No. 2 has to do with the
16 issuance of an
emergency rule by the Financial Services
17 Commission. As
you know, this summer of storm destruction
18 in Florida has been
particularly egregious. We have 1.3
19 million claims to
date. Charley claims exceed 419,000.
20 Frances claims
443,000. Ivan claims 168,000. And the
21 preliminary data with
respect to Hurricane Jeanne, are
22 claims in excess of
267,000. All told, we have insured
23 losses in Florida
property for commercial and residential
24 in excess of 17.1
billion.
25
THE GOVERNOR: How much is residential?
ACCURATE STENOTYPE REPORTERS, INC.
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1
MR. McCARTY: I have not parsed that data out. About
2 two-thirds of it
historically from past data has been
3 residential but I
can't --
4
THE GOVERNOR: But the number of claims I thought
5 were estimated, when
it's all said and done to be
6 2 million --
7
MR. McCARTY: Well, there's a dispute with the claims
8 insurance information
office as well as our office. So
9 our collective data so
far suggests that it's going to be
10 about 1.3 billion --
excuse me, 1.3 million claims and
11 17.1 billion in
losses.
12
CFO GALLAGHER: But the insurance estimates that
13 there are claims that
have not been filed and it could go
14 up to 2 billion -- 2
million claims.
15
THE GOVERNOR: Okay.
16
MR. McCARTY: That's true. Some of the residents'
17 homes are summer
homes or winter homes. And some of their
18 claims have not even
been put in yet. So this is actual
19 claims data that is
reported by the insurance industry on
20 a weekly basis.
21
THE GOVERNOR: I just want to make sure, because I
22 repeat these things
and I want to make sure I'm not
23 misleading
anybody. The 1.3 is residential and
24 commercial?
25
MR. McCARTY: Yes, sir.
ACCURATE STENOTYPE REPORTERS, INC.
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OFFICE OF INSURANCE REGULATION -
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1
THE GOVERNOR: Okay.
2
CFO GALLAGHER: And you have -- there are some people
3 that made up their
mind that they weren't going to file
4 anything until the
hurricane season was over. They figure
5 that way they are sure
of only one deductible. So, you
6 know, everybody has
their way of doing things.
7
MR. McCARTY: Unlike Hurricane Andrew, the four
8 hurricanes that have
struck Florida have covered most of
9 Florida's 67 counties
and have been subject to a federal
10 disaster
relief. This rule is necessary in order to
11 promote the
expeditious settlement of the claims.
12 Insureds have, as I
said, reported on 1.3 million while
13 efforts in the
industry have been pretty extraordinary in
14 the complaints but
there have been thousands of complaints
15 filed with the
Division of Consumer Services, with the
16 Department of
Financial Services.
17
In many instances, the consumer may have met with the
18 company
representatives but has not received payment for
19 the repair of the
property. Failure to resolve claims and
20 the resulted
inability of insureds to be able to repair
21 their homes poses an
immediate threat to the public safety
22 and welfare of the
people of Florida. As a result,
23 Treasurer Gallagher
asked me to draft an emergency rule,
24 the subject which is
before you.
25
The basic terms and conditions of the rule are as
ACCURATE STENOTYPE REPORTERS, INC.
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OFFICE OF INSURANCE REGULATION -
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1 follows: It
prohibits insurers and insurance adjusters
2 from failing to act
promptly to communicate with respect
3 to the insurance
claims from consumers in Florida. The
4 rule applies to all
residential property and auto claims
5 in Florida. It
includes the four hurricanes and Tropical
6 Storm Bonnie.
7
It's broken up into three compliance periods but
8 essentially Bonnie,
Frances, and Charley. And insurance
9 companies are required
to provide additional living
10 expenses and advance
appropriate funds. All damage will
11 have to be evaluated
and initiated assessments will have
12 to be made and a good
faith reasonable estimate to
13 negotiate a
settlement of all disputed claims.
14
THE GOVERNOR: All within a certain --
15
MR. McCARTY: Yes, all with -- for claims filed
16 October 21st, they
shall have until November 22nd. And
17 for claims filed
November 8th, they shall have until
18 December 8th.
19
THE GOVERNOR: So it's 30 days going forward?
20
MR. McCARTY: Yes, that's correct.
21
THE GOVERNOR: And it's only for these four storms.
22 It's not for
future?
23
MR. McCARTY: That's correct.
24
CFO GALLAGHER: Governor, just to give you a little
25 bit of
background. We received, as of last Thursday, 7800
ACCURATE STENOTYPE REPORTERS, INC.
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OFFICE OF INSURANCE REGULATION -
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1 complaints, almost
8,000, on basically, Where's my
2 adjuster? And so
that's really the basis for this.
3 People have waited for
quite a long time for some kind of
4 an answer. And I
believe it's important that we take
5 action to let the
industry know that they have a contract.
6 That contract is one
that people pay their money and a lot
7 of money for insurance
and they expect somebody to come
8 handle their
claim. And they may have a difference of
9 what that claim ought
to be, but they ought to at least
10 find out if there is
a difference and they haven't had a
11 visitation in many
cases.
12
An interesting statistic, for what it's worth, is
13 that there are 50,000
less insurance adjusters in this
14 country today than
there were when Hurricane Andrew hit in
15 1992. And what
has happened is the companies basically
16 have not kept a large
number of adjusters as full-time
17 people. They've
left and become agents or done other
18 jobs. And they
basically contract out to individual firms
19 to do the adjusting
and have created a shortfall for these
20 kinds of
emergencies. And we do have adjusters from all
21 over the country
working in Florida, including Canada.
22 And still nowhere
near what, you know, I think anybody
23 would believe we
should have. We're operating with a
24 shortage. I
know the companies are doing as much as they
25 can to get that
shortage covered, but we want to make sure
ACCURATE STENOTYPE REPORTERS, INC.
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OFFICE OF INSURANCE REGULATION -
10/26/04
10
1 they realize that
we're real serious about our citizens
2 being taken care
of.
3
MR. McCARTY: Yeah. And we have been working with
4 your office to
identify any surplus of adjusters in
5 various adjusting
companies around the country and trying
6 to match those up with
any of the companies that we've
7 identified that have a
shortage of adjusters.
8
THE GOVERNOR: Well, if we have a shortage of
9 adjusters and we're
putting the responsibility on the
10 insurance companies
to get the adjustments done and they
11 can't do anything
about it because there's no adjusters,
12 what are the
consequences of not complying with the 30-day
13 rule?
14
MR. McCARTY: Well, the consequence is it merely
15 establishes a prima
facie case for administrative
16 proceedings.
The companies will be able to have an
17 opportunity to
demonstrate the efforts that are being
18 made. We've
already dispatched investigators to nine
19 companies in Florida
where we received some of the top
20 complaints and are
working with them, corrective action
21 plans including
identifying some of the areas. But this
22 helps us further to
identify the companies where we would
23 need to marshal our
resources to help them do the job for
24 the people that are
their customers.
25
CFO GALLAGHER: They do also have the ability to use
ACCURATE STENOTYPE REPORTERS, INC.
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OFFICE OF INSURANCE REGULATION -
10/26/04
11
1 their agents to
assist, at least the first claim reporting
2 which is to get
additional living expense checks out,
3 things like
that. Many companies have done that. Some
4 have not. This
is an encouragement for them to make sure
5 that these people get
their additional living expense cash
6 so they can live in
another place or have a mobile home or
7 whatever they need so
that they will have a place to live.
8 As we know, Governor,
we visit people who are living in
9 one or two rooms of
their home and they can't live there
10 and their insurance
companies tell them it's going to be
11 eight or nine months
before they get a chance to have
12 their home fixed.
13
THE GOVERNOR: General?
14
GENERAL CRIST: Thank you.
15
Kevin, just a couple questions. Is there any time
16 limit within which
the companies have to render whether
17 they are going to pay
or not currently under your rules?
18
MR. McCARTY: No, there is nothing in the emergency
19 rule other than they
are required to meet those three
20 standards that are
established in the emergency rule.
21 Some of the claims
may actually end up in dispute and
22 there's a provision
in the emergency rule for providing
23 for expedited
mediation procedure.
24
GENERAL CRIST: And you say there are about nine
25 companies that are
having a difficulty?
ACCURATE STENOTYPE REPORTERS, INC.
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1
MR. McCARTY: There are nine companies that we are
2 currently --
3
GENERAL CRIST: Received the most complaints about?
4
MR. McCARTY: That we have received complaints about
5 and have identified in
conjunction with the Division of
6 Consumer Services as
requiring a heightened level of our
7 scrutiny.
8
GENERAL CRIST: Okay. Do you know, of those
9 companies, how many
have retained additional adjusters?
10
MR. McCARTY: Most of them have.
11
GENERAL CRIST: Do you know how many?
12
MR. McCARTY: Excuse me?
13
GENERAL CRIST: Do you know how many?
14
MR. McCARTY: No, I do not.
15
GENERAL CRIST: Can you find out?
16
MR. McCARTY: Sure.
17
THE GOVERNOR: I think one of the challenges we face,
18 this -- I use my two
life experiences in the last couple
19 of years, medical
malpractice reform, where collecting of
20 data and having a set
of data that proponents and
21 opponents could all
agree is the set of facts that, you
22 know, the
policymakers then could use to change the
23 policies was
nonexistent. Or at least if it was existent,
24 it was so murky that
it was difficult to assess. And then
25 fast-forward to the
storms, the general's question is a
ACCURATE STENOTYPE REPORTERS, INC.
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OFFICE OF INSURANCE REGULATION -
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1 logical question to
ask. One of the questions that I've
2 been asking and Kevin
is probably tired of hearing it is,
3 Well, if we have a
problem, who is doing better? How do
4 we -- which companies
have made it a higher priority to
5 get adjusters out and
to get the claims process started?
6 Because remember,
Kevin, and for people interested in
7 this, this is also the
first step in getting FEMA support.
8 So, you know, if the
private adjuster doesn't show up,
9 people that are
qualified for FEMA support for damage done
10 can't -- so you can
multiply the frustration.
11
And when the utility companies had their power down,
12 I'm sure they weren't
too happy about spending the time
13 counting how many
customers had their power out and how
14 many each, twice a
day, how successful were they in
15 putting power back
on. But the transparency of that
16 accelerated the
number of people getting power back on.
17 Going forward, one of
the lessons learned seems to me is
18 in the insurance
world would behoove the insurance
19 companies and the
insurance regulators and the consumers.
20 I think everybody has
got an interest in this to be able
21 to have clear
measurements of where we are because you're
22 asking us to approve
a rule which I'm supportive of
23 because I think it's
important at this time given these
24 circumstances to do
this but we don't have the data to
25 really know if one
company is doing spectacularly. I
ACCURATE STENOTYPE REPORTERS, INC.
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1 mean, I've got a
particular interest in citizens. How are
2 they doing? Is
that one of the nine that you're looking
3 at?
4
MR. McCARTY: Well, that's one of the ones we're
5 always looking
at. I didn't include it in the nine. But
6 in reference to that,
we've done our first data call with
7 regard to some of the
performance measures that you're
8 referring to,
Governor. And part of that is going to look
9 at claims adjusted
within a certain amount of days.
10
Also, starting with the nine companies that were in,
11 we're doing actual
performance measures so that your
12 consumers in the
future not only are going to be able to
13 look at price, but
are going to be able to look at
14 evaluations of the
services provided during the storm.
15
So we are initiating those, collecting those
16 universal data
elements so that these comparisons can be
17 made in the
future.
18
THE GOVERNOR: But if we did it like we did at the
19 Emergency Operations
Center for the utility companies, it
20 would be, as a
consumer of insurance, I'd like to know,
21 during good times,
heck, every insurance company is great.
22 Every insurance agent
is wonderful because we never --
23
CFO GALLAGHER: They just collect our money.
24
THE GOVERNOR: They just collect our money and they
25 are pleasant and
they're friendly and they are good
ACCURATE STENOTYPE REPORTERS, INC.
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1 salesman and they
help, you know, with small things. But
2 on the tough times,
they probably -- I mean, I had a good
3 experience with my
insurance company after Andrew and I've
4 always had good
experience with my insurance company
5 during difficult times
and I appreciate it. But if you
6 don't know, you know
--
7
CFO GALLAGHER: Well, one of the things, for example,
8 that you run into is
in our first collection of data we
9 want to know how many
adjusters are representing each
10 company. And
when we got finished, we got 35,000 so that
11 looked pretty
good.
12
THE GOVERNOR: Double counting?
13
CFO GALLAGHER: The only problem was you have one
14 adjusting companying
representing two and three companies.
15 And each one of those
adjusters is handling maybe a couple
16 hundred claims from
each company.
17
MR. McCARTY: After Opal and Erin we did embark on a
18 project to
investigate specifically the number of
19 adjusters relevant to
the number of policyholders. What
20 you saw, as Treasurer
Gallagher has alluded to before,
21 during the late 1990s
in order to reduce expenses,
22 insurance companies
went from an employee basis to a
23 contract basis
particularly for emergency services which
24 did reduce their
overall cost which was important in terms
25 of competition.
But in those cases, they've all had these
ACCURATE STENOTYPE REPORTERS, INC.
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1 emergency contingency
contracts expecting that they would
2 be at the front of the
line. But the truth of the matter
3 in the pool was then
therefore reduced. So in our attempt
4 to gather that data,
while it showed an adequate number of
5 adjusters, they were
sharing the same pools of adjuster by
6 contract.
7
CFO GALLAGHER: And so if we end up with only 12 or
8 15,000 adjusters
instead of the 35, that's a tremendous
9 difference in the
ability for the industry to respond to
10 the plans.
11
THE GOVERNOR: That's all the more reason to have a
12 transparent reporting
process so that you don't -- I mean,
13 one of the lessons
learned again is that you don't -- we
14 had the experience
with the utility companies again where
15 at least in the first
storm one of our utility companies
16 was very insular and
was very cautious. So cautious to
17 the extent people got
quite upset and there was so much
18 uncertainty.
And then the lessons were learned for the
19 second or third storm
and they were much more open and
20 they communicated,
Here is our problem. Here is our
21 challenge. I
mean, if everybody knew that the insurance
22 companies didn't have
adjusters, I think they might have a
23 better -- the number
of complaints might drop if they just
24 knew. And how
can they know if we don't?
25
MR. McCARTY: That's correct. And in terms of the
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1 claim it's handling,
we did our first data call with
2 respect to those
performance parameters that you've been
3 talking about and
we'll be sharing that data with you on a
4 go-forward basis.
5
THE GOVERNOR: When?
6
MR. McCARTY: Well, we had the first one and we can
7 give it to you this
week.
8
CFO GALLAGHER: One of the things that I think should
9 happen -- and I think
the company should recognize it's
10 going to happen -- is
that there needs to be a grading of
11 who responded and who
didn't and all those data elements
12 taken into
consideration, like how big they are, how many
13 policies they have,
those kinds of things, with how many
14 claims they have and
how they responded. And I think if
15 we put those together
and basically say, Okay, these are
16 the companies that
did the best and these are the
17 companies that did
the worst, I think that's sort of where
18 the Governor is
coming from. I happen to agree with that.
19 That's what the
people need to know and that's what we
20 need to know and
those guys that are doing the worst need
21 some help, either out
or some other help. And so I think
22 that's where we're
heading.
23
And you know, now that they have deadlines, I think
24 what we do is respond
to those people that don't respond
25 to the
deadlines. And we'll see the early results from
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1 what you're collecting
now. But what really counts to me
2 is we set up times and
deadlines. Did they meet them or
3 didn't they and how
fast are they getting them done.
4
THE GOVERNOR: General?
5
GENERAL CRIST: Thank you. Kevin, if you need any
6 help getting that
data, we stand at the ready to help you.
7
MR. McCARTY: We always appreciate your cooperation,
8 Commissioner.
9
CFO GALLAGHER: I'll move the emergency rule.
10
THE GOVERNOR: There is a motion and a second to
11 support the emergency
rule. Is there anybody here that
12 would like to discuss
this or are we --
13
CFO GALLAGHER: There are some industry folks that
14 might want to say
something.
15
THE GOVERNOR: I know. There's a lot of people that
16 I thought might be
interested. If they wanted to speak
17 about it from the
practical perspective. I mean, this is
18 not -- I hope this is
not being perceived as being
19 punitive.
20
MR. McCARTY: Well, I certainly hope --
21
THE GOVERNOR: Silence means acceptance. So it's
22 okay to be opposed to
--
23
CFO GALLAGHER: They did have a chance to look at it
24 and they recognized
that there are people out there
25 hurting and need an
adjuster. And I think they recognize
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1 that this is something
that has to happen and they need to
2 respond unless Mr.
Safley (phonetic) would have something
3 to say. I see
him hiding back there.
4
THE GOVERNOR: Is there anybody who'd like to speak
5 to the rule before we
move on?
6
(No response.)
7
Very good. There is a motion and a second. All in
8 favor say aye.
9
(Aye.)
10
All opposed.
11
(No response.)
12
Thank you, Kevin.
13
MR. McCARTY: Thank you, Governor.
14
CFO GALLAGHER: Thank you, Kevin.
15
16
17
18
19
20
21
22
23
24
25
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DEPARTMENT OF REVENUE - 10/26/04
20
1
THE GOVERNOR: Department of Revenue.
2
CFO GALLAGHER: Motion on the minutes.
3
GENERAL CRIST: Second.
4
THE GOVERNOR: There's a motion and a second on the
5 minutes. Without
objection, the motion passes.
6
DR. ZINGALE: Good morning.
7
THE GOVERNOR: Good morning.
8
DR. ZINGALE: We have, the second item is an
9 administrative
order. We don't bring too many
10 administrative orders
in front of the cabinet. So I'd
11 like to give you just
a quick, brief summary of the
12 process that brought
us here. This was an audit of a HAAS
13 Publishing. It
deals with a commercial rental issue.
14 Racks in stores,
contracts between the publishing company
15 and businesses.
The Department's contention for the
16 rental of commercial
property.
17
The process that happens once the audit is completed
18 is there is a lot of
negotiations that go on at site when
19 the audit is being
conducted. The taxpayer has the right
20 to protest internally
to the Department's conferees. This
21 occurred awhile back
that conferees agreed to waive
22 penalty. We're
dealing only with tax and interest here.
23 Once the internal
appeal process was completed, the
24 taxpayer chose to
appeal that process to an administrative
25 law judge. The
administrative law judge issues to the
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
21
1 Department a
recommended order.
2
Because this tax audit situation is in excess of
3 $250,000, we have to
bring all recommended orders in front
4 of the Governor and
cabinet in excess of $250,000. The
5 order we brought in
front of you adopts all of the
6 recommendations of the
administrative law judge. The
7 taxpayer is
represented today by Rex Ware. With your
8 permission, he was
asked to come and speak briefly in
9 front of the
cabinet.
10
THE GOVERNOR: Absolutely. Mr. Ware, welcome.
11
MR. WARE: Thank you, Dr. Zingale. Thank you,
12 Governor and cabinet
members. Again, my name is Rex Ware.
13 I'm with the law firm
of Steel, Hector and Davis here in
14 Tallahassee.
And I represented HAAS Publishing Companies
15 through the
litigation process and continue to represent
16 them today. I'd
like to make just a few issues. We did
17 file exceptions to
the administrative law judge's
18 recommended
order. They're fairly lengthy. We raised
19 what we think are
many critical exceptions which I'll just
20 mention briefly and
then get to the one main issue that
21 I'd like to bring
out, especially today.
22
We raised the issue as to whether the audit in this
23 case was commenced
timely. We believe the undisputed
24 facts were it was
not. We raised whether the ALJ, that is
25 the judge, improperly
ruled that this case dealt with an
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
22
1 exemption from tax
rather than an exclusion from tax, thus
2 affecting who the
statute would be strictly construed
3 against. We
think she failed when she basically ruled
4 that the statute
should be strictly construed against the
5 taxpayer rather than
the state.
6
We raised the issue as to whether or not she ruled
7 properly whether or
not this involved a nontaxable
8 franchise. We
believe she failed when she ruled that it
9 did not involve
that. And we also believe that she failed
10 when she ruled that
the Department of Revenue met its
11 initial burden.
There is a statute, 120.80(14), that says
12 the Department of
Revenue has the burden of proving the
13 factual and legal
basis of its assessment.
14
In this case, the Department of Revenue did not bring
15 its auditor to
testify. It merely brought its conferee
16 who was involved in
the protest process. We believe
17 that's a basic
failure, the Department of Revenue did not
18 meet its
burden. The Department has said that they
19 oftentimes do not
bring their auditor to testify. We
20 think this is the
first time this issue has been raised
21 and that they fail on
that issue.
22
Without waiving any of those exceptions, I do want to
23 go into a little more
detail about one major issue, one we
24 think that is of
fundamental fairness to the taxpayer in
25 this case and we
believe should compel you to reject the
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
23
1 recommended order and
the proposed final order that you
2 have before you.
3
Florida is one of the few states that taxes
4 commercial
rentals. There are a couple of other states
5 out there that actual
tax commercial lease payments. The
6 statute that's at
issue today is that statute. It says
7 commercial rent is
taxable but it says that payments for
8 valuable intangible
rights that might be involved are not
9 taxable. And it
says if you have a contract that involves
10 both, some taxable
rights and some nontaxable intangible
11 rights, that you're
supposed to allocate between them and
12 tax only the
commercial rent.
13
In this case, my client is a publishing company. He
14 goes in and
negotiates contracts with retail stores,
15 Eckerd's, Walgreen's,
7-11s, and says, Look, if you'll
16 give us the exclusive
right to distribute our little
17 apartment guides in
your store, then we'll pay you a lot
18 of money. And
this is a lot of money they pay. I'll get
19 to that real quickly
in a second. If the store says, No,
20 we're not going to
give you exclusive right, we're going
21 to let everybody put
their free publications in our store,
22 our client does not
pay for that right.
23
The judge in this case found that the contracts in
24 this case contained
both taxable and nontaxable elements.
25 So we're under the
statute that says you apply the tax to
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DEPARTMENT OF REVENUE - 10/26/04
24
1 the taxable, the
nontaxable. But then she went on to find
2 that the two experts
we hired were not credible. And so
3 therefore, there was
no evidence of what that allocation
4 ought to be so you
uphold the entire assessment and that's
5 where we think she
made a critical mistake. One of these
6 experts was a Florida
licensed real estate appraiser who
7 has done hundreds of
analyses of Florida commercial real
8 estate projects.
He came in and said, Look, I went and
9 looked at where that
rack was in stores. The rack is
10 about three by
two. And I came up through a formula, what
11 we do as experts, and
found out what the rent should be
12 for that. Then
I looked at the payments that HAAS was
13 paying and he
testified essentially that HAAS was paying
14 more than five times
the fair market value of that space.
15
So he concluded, as we had argued, that, in fact, my
16 client was paying for
much more than just the rental of
17 that space and he
came up with a formula and gave a
18 percentage. He
said 12 percent of what HAAS pays to the
19 retailer on average
should be for taxable rent.
20
We also hired an expert who was a business evaluation
21 expert who's done
hundreds of analyses. He came from the
22 other direction
independently and came up with essentially
23 the same conclusion,
that there were many valuable
24 intangibles being
paid for here but only a certain amount
25 of it was for taxable
rental space.
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
25
1
We think simply that the administrative law judge,
2 for whatever reason,
didn't like our experts, didn't want
3 to accept our experts
and said that she disagreed with
4 them. So she
basically disregarded them and said the
5 whole thing is
taxable. So in summary that --
6
THE GOVERNOR: Hang on a second.
7
CFO GALLAGHER: Can I ask a question here?
8
DR. ZINGALE: Yes, sir.
9
CFO GALLAGHER: My understanding was that I guess
10 after you add
interest and everything it was $900,000?
11
MR. WARE: I just calculated the additional interest
12 since the notice of
reconsideration and we're just over a
13 million dollars in
tax and interest.
14
CFO GALLAGHER: But the actual amount of tax was
15 580,000?
16
MR. WARE: I think that's right, approximately right.
17 570 to $580,000, yes,
sir. So on this one issue which we
18 think is critical,
basically the statute says you need to
19 allocate
payments. We think the judge said you need to
20 allocate
payments. Our experts working independently from
21 each other, with no
rebuttal experts from the Department
22 of Revenue, came up
and said we were paying more than five
23 times the fair market
value of that space in these
24 payments we
made. But DOR, in asking you to uphold the
25 recommended order is
asking that my client have to pay
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
26
1 taxes on the entire
payments. We simply think this is an
2 issue of fairness
that, yes, you can make us go on and
3 appeal. I mean,
the next step after this process is for
4 us to appeal to the
First District Court of Appeal. But
5 we think you have the
basis here today in the record to do
6 the fair thing and
that is to allocate the payments based
7 upon the testimony of
those expert witnesses. And I'd be
8 glad to answer any
questions.
9
CFO GALLAGHER: Another question.
10
MR. WARE: Yes, sir.
11
CFO GALLAGHER: Is this tax collected by the retail
12 store from you and
then forwarded to the Department of
13 Revenue?
14
MR. WARE: That would be the normal process. If the
15 parties involved, the
K-Mart and my client, believed it
16 was taxable at first,
K-Mart would have charged my client
17 tax, omitted it to
the Department of Revenue. That didn't
18 happen. No one
essentially had any idea about this until
19 DOR came in and
audited my client. And they have the
20 right to do that
under the statutes. They can pick either
21 party. The
problem in the case was we couldn't prove
22 whether K-Mart had
been also audited on the issue or not.
23 That's just an
impossible task to prove because we don't
24 have a right to see
their records.
25
CFO GALLAGHER: Well, one of the questions I'm going
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
27
1 to ask the Department
is if I'm Proctor and Gamble and
2 they give me so much
shelf space and they are actually
3 selling my product and
they're making money on everything
4 else but that's my
shelf space they allocate to me, are
5 they going to tax that
too? I mean why would one be taxed
6 and the other not is
my question. I mean, you can try and
7 answer it first.
8
MR. WARE: I don't have an answer for that. My
9 understanding is that
is often not something that's picked
10 up in an audit as
taxable. But I'll leave that to the
11 Department of
Revenue.
12
THE GOVERNOR: Well, did you -- you said that you do
13 agree that there
should be an allocation and that you
14 should pay some
rent.
15
MR. WARE: Yes, sir --
16
THE GOVERNOR: I'm sorry, pay some tax on the rent.
17
MR. WARE: We argue in the alternative. We still
18 argue that this whole
thing is essentially like a
19 franchise. It's
not like a McDonald's franchise but we
20 said alternatively
we're going to give the State what we
21 think it's asking
for.
22
THE GOVERNOR: Your experts suggested that they're --
23 I mean, put aside the
12 percent allocation, your own
24 experts contradicted
that statement. They said that you
25 should -- that there
was some rent -- you know, that there
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DEPARTMENT OF REVENUE - 10/26/04
28
1 was some rent out of
this and some intangible value of
2 having your stuff
parked there.
3
MR. WARE: They said, yes, if there was some portion
4 taxable. If you
looked there, you would look at fair
5 market value of what
that space was.
6
THE GOVERNOR: But you don't contend even that you
7 should be paying any
sales tax on rent because you don't
8 think there is
rent.
9
MR. WARE: We think legally, no, that this falls
10 under the exception
of that statute for intrinsically
11 valuable and tangible
personal property rights. I think
12 that's the phrase the
statute uses.
13
Thank you.
14
THE GOVERNOR: Doctor, you want to answer Treasurer
15 Gallagher's
question?
16
DR. ZINGALE: Treasurer Gallagher's first. This is a
17 commercial rental
situation, not a sale of a product.
18 Different statute,
different application. If you're
19 stocking up my
product to sell in your store the tax is
20 borne by the product
and the sale price of that product.
21 This is a commercial
rental situation. I think it was
22 correctly stated that
--
23
CFO GALLAGHER: They're paying based on what? On
24 what --
25
DR. ZINGALE: On rental of space. And there is a
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DEPARTMENT OF REVENUE - 10/26/04
29
1 contract between them
and each of these retailers that
2 outline the conditions
of that rental agreement. The
3 proration and issues
that were discussed could not be
4 found in that
contractual relationship.
5
CFO GALLAGHER: Isn't it up to the retailer to
6 collect the tax?
If I rent the commercial property, I
7 have to collect the
tax paid.
8
DR. ZINGALE: But if you think about sales tax, and
9 this is really sales
tax of a commercial rental, who pays
10 the ultimate
tax? The citizen does.
11
CFO GALLAGHER: The renter.
12
DR. ZINGALE: The citizen has -- the renter or the
13 purchaser of the
product, they have the obligation to pay
14 the tax.
15
THE GOVERNOR: But shouldn't K-Mart or Eckerd's be
16 the one they should
go after?
17
DR. ZINGALE: Should have --
18
CFO GALLAGHER: They are the ones that collected it.
19
DR. ZINGALE: -- collected it.
20
THE GOVERNOR: They are your agent, right?
21
DR. ZINGALE: They are our agent.
22
CFO GALLAGHER: And if they don't collect it, you go
23 to them and you say,
Give me the money, and you go worry
24 about the guy that
you rented it to.
25
DR. ZINGALE: Think about that. The statute
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
30
1 correctly allows us to
go after either party. If we would
2 go after K-Mart, they
didn't collect the tax from the
3 taxpayer that was
due. They didn't collect it. It was
4 still owed by the
taxpayer. The statute allows us to go,
5 as Rex did say, to the
source, the taxpayer in this
6 situation and make the
assessment there which is what we
7 did.
8
CFO GALLAGHER: I can understand that but what are
9 you doing to
K-Mart? Nothing?
10
DR. ZINGALE: No.
11
CFO GALLAGHER: Why not?
12
DR. ZINGALE: K-Mart is being told this is taxable,
13 K-Mart is being
explained how the law works. But the
14 situation is that for
us -- and we did review all the
15 audits of K-Mart,
okay. They didn't collect this tax from
16 what we can tell.
17
CFO GALLAGHER: I understand that. But just because
18 they didn't collect
the tax doesn't mean they don't owe
19 it.
20
DR. ZINGALE: The law in this situation allows the
21 tax to be paid by one
of two people. They are not in
22 violation of any law
because they did not collect it.
23 This is not a sales
tax situation. This is a contract
24 between a taxpayer
and a corporate entity and the
25 conditions that are
outlined in that contract govern. And
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
31
1 we have the option of
going to the taxpayer in one place
2 or going out and
trying to identify that taxpayer's
3 businesses in
literally thousands of retail establishments
4 all over the
state.
5
CFO GALLAGHER: Okay. I understand that. Now, what
6 is happening today in
regards to the contracts that exist
7 by HAAS?
8
DR. ZINGALE: It would be governed by each individual
9 contract that not only
this company has but many other
10 companies that are in
the same business. They can
11 structure that
contract, as a number of them have, to help
12 stock the
activity. There are many different types of
13 contracts that govern
this type of relationship. What the
14 Department does is
goes into those contracts. Okay.
15 Tries to identify a
factual basis and applies the law.
16 Okay. That's
essentially what we took in front of the
17 administrative law
judge.
18
CFO GALLAGHER: Is this the only company that has
19 this problem?
20
DR. ZINGALE: This is a problem because -- and I
21 think Rex correctly
stated it -- a difficult law to
22 understand and
interpret primarily because we are only one
23 of the few states in
the nation that tax these type of
24 transactions.
25
THE GOVERNOR: But, Jim, are there a whole series of
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DEPARTMENT OF REVENUE - 10/26/04
32
1 other lessees inside
of retail outlets that want to have
2 an exclusive
arrangement to sell whatever? Like the
3 magazine guys.
4
DR. ZINGALE: That's what this is, yes, like the
5 magazine guys.
Some, depending on the nature of their
6 contract, pay all
across the board --
7
THE GOVERNOR: Do they pay tax now though, the
8 companies that --
9
DR. ZINGALE: Yes.
10
THE GOVERNOR: They do?
11
DR. ZINGALE: Yes.
12
THE GOVERNOR: HAAS is the only one you've identified
13 that doesn't.
14
DR. ZINGALE: Vending machines, that was under our
15 audit. This is
one of many that are out there.
16
CFO GALLAGHER: But HAAS now is going to amend their
17 contract so that they
are paying tax?
18
DR. ZINGALE: They can restructure their contract in
19 a way to allow a
different situation. But in this case,
20 they are limited by
what their business is which is
21 primarily renting
rack space in these facilities and
22 putting free
publications out there and we look at that
23 contractual
relationship between the taxpayer and that
24 individual
entity.
25
CFO GALLAGHER: Now, if a store let them put it in
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DEPARTMENT OF REVENUE - 10/26/04
33
1 and didn't charge them
for it, what would you do?
2
DR. ZINGALE: There would be no tax due.
3
THE GOVERNOR: How does these new retail arrangements
4 where product is put
on shelves on consignment, in
5 essence --
6
DR. ZINGALE: If it's a product, it's a product. And
7 the sale of the
product at that price is taxable. If it's
8 a product. This
is a contractual relationship to rent
9 space, it's not a
product. It's a contractual
10 relationship to rent
space.
11
CFO GALLAGHER: And technically, they are giving them
12 the space free.
13
THE GOVERNOR: But that's what I'm saying.
14
CFO GALLAGHER: They are not paying rent for the
15 space.
16
THE GOVERNOR: I'm saying that there are new
17 arrangements in
retailing where people do actually rent
18 space --
19
DR. ZINGALE: For free. Let Lisa talk.
20
THE GOVERNOR: Talk, Lisa. Can't hear you when
21 you're whispering
like that.
22
MS. ECHEVERRI: In the situation that you're
23 describing, it's
different from what we have in this
24 assessment. In
a consignment situation, the retail owner
25 has control over the
space, has control over the products
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DEPARTMENT OF REVENUE - 10/26/04
34
1 within their
space. There is a relationship there that
2 when the product is
sold there is a commission or a
3 consignment that's
paid back to the person who provided
4 the tangible personal
property. But that person is not
5 renting space.
They can't walk in the store and have
6 control over the
placement of that product within the
7 space or any kind of
exclusive right to real property.
8
In these situations, the owners of the retail
9 establishments don't
have control over the publications in
10 the racks. They
just have an agreement with the company
11 that those racks can
be placed in a specific location,
12 usually the entrance
to the store and the publishing
13 company is renting
the space. They are not asking the
14 retailer to have any
control over the product itself, to
15 sell the product, to
make sure that the product is neatly
16 stacked or anything
like that. They are just asking for
17 the placement of
their racks within the entryway of the
18 store. So it's
a contract for space.
19
Now certainly within those contracts they can create
20 allocations to pay
for other services as opposed to the
21 space. In these
contracts, there was no evidence to
22 support that and the
witnesses that they provided to
23 provide that
testimony were found not to be credible. So
24 the Department was
left to basically just take the plain
25 language.
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
35
1
THE GOVERNOR: So how did the administrative law
2 judge say, Yes, there
should be an allocation but, No, I
3 don't like these
allocations so there won't be an
4 allocation?
5
MS. ECHEVERRI: I think what the administrative law
6 judge said was that,
Yes, they had made arguments that
7 maybe there were other
things that were tied up into this
8 transaction, that
there may have been some amount for
9 something of intrinsic
value or intangible value but that
10 there was nothing in
the documents. There was nothing in
11 the transactions that
you could look to in terms of
12 evidence. And
their own witnesses were not found to be
13 credible to support
that allocation. And in the absence
14 of some evidence to
provide an allocation, all you can do
15 is look at the
contract and the amounts that were paid.
16
CFO GALLAGHER: All right. Do you think that they
17 did this on purpose
or do you think they just sort of
18 happened to fall
through the cracks and they got stuck
19 with this?
20
MS. ECHEVERRI: You know, I've been with the
21 Department about 13
years and I can tell you commercial
22 rentals are one of
the most difficult areas and we
23 constantly have
taxpayers who are unaware of the
24 obligation,
especially where you have a situation where
25 you have a company
like HAAS that's out of state. This is
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DEPARTMENT OF REVENUE - 10/26/04
36
1 not a tax that's
imposed in other states, it's one that's
2 imposed in Florida,
and I don't think that they
3 intentionally avoided
or tried to, you know, not comply
4 with the law.
It's a mistake. But there are also many,
5 many taxpayers who are
aware of the law and are in full
6 compliance with the
law.
7
THE GOVERNOR: Let me just ask --
8
DR. ZINGALE: The hearing level, internally, because
9 of what you just
stated -- we waived all the penalty.
10 That was an
acknowledgment that this wasn't a deliberate
11 undertaking by the
taxpayer and that was a substantial
12 amount of penalty
that was waived.
13
CFO GALLAGHER: So our choice at this point is to
14 agree with the
administrative law judge and then their
15 choice is to go
appeal it and that's what you probably
16 expect. Is that
what your client is going to do?
17
MR. WARE: Yes, sir. I mean, I can quite honestly
18 say if you guys
uphold the recommended order in your final
19 order, we intend to
appeal it because of obviously the
20 large sums of money
involved.
21
CFO GALLAGHER: Have you made an offer to settle this
22 case?
23
MR. WARE: I've explained this before. Back in the
24 spring, early spring,
before I was involved in the case,
25 my client, through
its consultant made an offer to settle
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
37
1 the case for about, I
want to say, $340,000. It received
2 no response at that
time in the protest process from DOR.
3 When we got close to
hearing, a couple days before
4 hearing, there was
some talk about negotiations. The
5 Department mentioned
something about, Well, if you make us
6 an offer in or around
that area, my client said, Well, we
7 never got a response
to our first one, you know, we think
8 we need to go forward
because now we've hired experts and
9 we've done all those
things to go forward.
10
CFO GALLAGHER: Well, to me, I think -- you want to
11 say something?
12
DR. ZINGALE: I'm pretty sure from the staff the
13 condition of that
settlement would have been that the
14 Department would have
to agree that it was not a taxable
15 situation, okay.
16
CFO GALLAGHER: That's not --
17
DR. ZINGALE: And therefore prospectively going
18 forward, they would
be treated differently under similar
19 circumstances than
other taxpayers and the Department
20 wouldn't do that.
21
CFO GALLAGHER: What I would like to do -- you want
22 to say something?
23
COMMISSIONER BRONSON: You know, this is a problem
24 that I had even in
the legislative process. The
25 difference between
common sense and logic and legality
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
38
1 seem to have a big,
you know, opposite poles here. If the
2 company -- if the
company -- I think we've been using
3 Wal-Mart, it can be
any store. But if they pay a tax on
4 that square footage of
that building to the State of
5 Florida and to the
local community and they do a
6 contractual agreement
with anybody that comes in and sells
7 a product which ends
up having the sales tax, you said
8 sales taxes are
differentiated between the rack space.
9
But if Wal-Mart has already paid for the square
10 footage of that
building and anything that sold out of it,
11 it seems to me that
we're double-taxing the people that
12 Wal-Mart does
business with or any other business on that
13 same space where
there is a contractual agreement with a
14 seller. I mean,
from a commonsense standpoint, that looks
15 like double taxation
for the same space to me.
16
DR. ZINGALE: Wal-Mart isn't paying a tax on its
17 rental space to
itself. They pay property tax on the
18 value of the
property. When they choose to go out and
19 enter into a
contractual relationship for the rental of
20 this space, that's
the only time that's being taxed.
21
THE GOVERNOR: These things aren't being sold either,
22 they're being given
away. So it's not necessarily the
23 same. Now there
is some value. For the life of me I
24 haven't figured out
what the value of giving away
25 something free is
that you would pay so much for. But one
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DEPARTMENT OF REVENUE - 10/26/04
39
1 of these days we'll
probably learn about that.
2
DR. ZINGALE: It's a very profitable business.
3
CFO GALLAGHER: Let me float something here. I would
4 like to bring this
back to the next cabinet meeting and
5 give you-all, the
Department of Revenue, and HAAS a chance
6 to negotiate a
settlement somewhere around what they
7 offered here because I
think -- and it means that going --
8 in the future, they
recognize there is a tax, they pay the
9 tax and they'll do
their contracts to that in the future.
10 Because I think we
need to treat people fairly here. And
11 if somebody in good
faith is operating in the state of
12 Florida, doesn't
believe they owe tax and all of a sudden
13 we're hammering them
for a million bucks, that's pretty
14 anti business and
anti everything.
15
If you can prove they've been doing this on purpose,
16 trying to beat the
tax, that's a whole different story,
17 I'm ready to hammer
them. But I don't think we ought to
18 do it that way and
I'd just like -- and maybe nothing
19 changes at the next
meeting. But it would be my
20 recommendation to my
colleagues that we bring it back to
21 the next meeting,
give you-all two weeks to try and work
22 something out.
You want to give me a comment?
23
THE GOVERNOR: Dr. J, is that acceptable to you?
24
DR. ZINGALE: If I could, because that's your
25 pleasure, if that's
what you wish to do, remember this is
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
40
1 a major taxing
source. This is not the only taxpayer in
2 the state of Florida
that's doing this. This is every
3 single place you go
into --
4
THE GOVERNOR: Right --
5
CFO GALLAGHER: The agreement doesn't make this a
6 precedent at all.
7
THE GOVERNOR: What Treasurer Gallagher is suggesting
8 is to try to reach a
settlement that would include an
9 ongoing obligation on
the part of HAAS that this is a
10 taxable
transaction.
11
CFO GALLAGHER: And they will pay the tax in the
12 future and it is not
precedential.
13
DR. ZINGALE: I think that's where we were earlier
14 with them in trying
to settle. So I think the burden
15 falls on the
taxpayer. I think if I could, they are going
16 to have to ask for an
extension. So let's ask them if
17 they will ask for
that extension.
18
MR. WARE: Dr. Zingale, I think we have to give our
19 permission for an
extension so the Department of Revenue
20 doesn't run against a
time deadline but we'd be glad to do
21 that.
22
CFO GALLAGHER: Okay. And they'll give you the
23 extension. You
have two weeks now to work it out and come
24 back to us.
Look, they thought they were going to win and
25 they found out they
are not. So, you know, at this point
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
41
1 they're stuck.
2
DR. ZINGALE: That's a reasonable compromise.
3
CFO GALLAGHER: And now they have a real good reason
4 to negotiate and we're
going to give them that
5 opportunity. And
if they come to something that's
6 reasonable, bring it
back to us. And if they don't, let
7 them go appeal it.
8
THE GOVERNOR: They could still win. Occasionally,
9 the DCA does overrule
administrative law judges. So
10 you'll have to ride
that risk. That's what negotiations
11 are all about.
12
DR. ZINGALE: And from the Department's standpoint,
13 if does end up in
front of an administrative law -- in
14 front of a district
judge, they will be looking at that
15 law itself, okay,
which is something we would like a judge
16 to rule on
someday.
17
CFO GALLAGHER: Well, at this point, I move that we,
18 with permission on
both sides, to get extensions, it will
19 come back to the next
cabinet meeting.
20
THE GOVERNOR: There is a motion. Is there a second?
21
COMMISSIONER BRONSON: Second.
22
THE GOVERNOR: There is a motion to withdraw to the
23 next cabinet meeting
which is in two weeks subject to
24 making sure there is
an ironclad agreement here that there
25 is going to be an
extension. There is a motion and a
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF REVENUE - 10/26/04
42
1 second. Without
-- yes, Jim.
2
DR. ZINGALE: If we could restate that. I'm trying
3 to restate that in a
manner that would help us. I think
4 we are postponing
action, final action, on this until the
5 next cabinet
meeting.
6
CFO GALLAGHER: That's correct.
7
DR. ZINGALE: With an expression on the part of the
8 cabinet to work with
the taxpayer.
9
THE GOVERNOR: I thought that's what I said but I'm
10 not going to
quibble. That's fine.
11
DR. ZINGALE: Just want to make sure all the Ts are
12 crossed.
13
THE GOVERNOR: You got the Ts crossed there? Thank
14 you, ma'am.
15
MR. WARE: And I'll put on the record that we will
16 give the Department
of Revenue the appropriate extension.
17
THE GOVERNOR: Thank you.
18
CFO GALLAGHER: You should because it's to your
19 benefit.
20
THE GOVERNOR: Thank you.
21
22
23
24
25
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF LAW ENFORCEMENT - 10/26/04
43
1
THE GOVERNOR: Department of Law Enforcement.
2
MR. TUNNELL: Good morning, again, Governor, General,
3 Chief,
Commissioner. Did I get the roll call right?
4
THE GOVERNOR: You got it right.
5
GENERAL CRIST: Present and accounted for.
6
MR. TUNNELL: I want to take just a second to thank
7 you again for
recognizing Mark and Rochelle. They are
8 indeed outstanding
members of this department. We are
9 extremely proud to
have them -- to call them our own.
10 They are great
examples. It is indeed a distinct honor to
11 be named FDLE's agent
or scientist of the year. And
12 certainly the fact
that you recognized them makes that
13 honor even more
prestigious.
14
Commissioner Bronson, it sounds like our State
15 campaign is off to a
really good start. I wanted to
16 mention that FDLE has
raised about 80 percent of our goal
17 this year. So
we're moving along well. We had some real
18 exciting
fund-raisers. It's funny, I always thought I was
19 a much better free
throw shooter than I proved out to be.
20 Our memories fade
over the years, I guess. But we have a
21 number of things
scheduled in the weeks ahead. Hopefully
22 I'll have a chance to
redeem myself.
23
Getting down to our formal business. FDLE has two
24 items on the
agenda. Item No. 1, we respectfully submit a
25 series of nine rules
for final adoption in Title 11 of
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44
1 Florida's
Administrative Code. Seven rules in Chapter 11B
2 deal with officer
standards and training. They're a
3 result of the 2003 and
2004 legislative changes.
4 Basically, they are
housekeeping revisions. The bulk of
5 these rule changes are
due to the implementation of CMS,
6 the curriculum
maintenance system. It's a new law
7 enforcement basic
recruit training curriculum. As of July
8 1st, '04, all 41
training schools are using this new
9 system. It
involves more hours that are scenario-based
10 for law enforcement
training. As a result, we've had a
11 number of new classes
taught, new instructor certification
12 requirements, and new
state exam.
13
The rule in Chapter 11C-6 is from the Criminal
14 Justice Information
Program that deals essentially with
15 criminal justice --
or criminal history record retention.
16 You may recall that
in 2004 the Legislature passed a law
17 that expanded checks
to include contracted persons and
18 student teachers in
charter schools and alternative
19 schools that directed
FDLE to begin retaining school
20 applicant
fingerprints on July 1 of 2004. Current
21 employees are
required to be rechecked and have their
22 fingerprints retained
as well.
23
Good news is per the statute, we'll begin searching
24 against incoming
arrests on December 15th, 2004, something
25 that the new ICHS,
the Integrated Criminal History System,
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DEPARTMENT OF LAW ENFORCEMENT - 10/26/04
45
1 allows us to do.
For instance, if a school employee is
2 arrested anywhere in
Florida, we'll be able to provide
3 notice to the school
district via E-mail within 24 hours.
4 Again, it's a good
news item, public safety item. But
5 basically, it's a
security alarm. It allows an ongoing
6 notification system to
the schools upon the arrest of any
7 employees.
8
CFO GALLAGHER: Let me just say that is a very, very
9 good thing and I know
that Attorney General Crist and I,
10 both having served as
education commissioner, there was
11 quite a few problems
when teachers would come up for
12 probable cause and
this had happened a year back and
13 nobody knew it.
And now all of a sudden, they have been
14 teaching the
classroom, everything else, when they had
15 some kind of a
horrendous thing that nobody would want
16 them in class for and
they did it in some other county and
17 nobody knew it.
18
MR. TUNNELL: Yes, sir.
19
CFO GALLAGHER: So this is, I think, a very important
20 protection for our
students.
21
MR. TUNNELL: I agree. It will be a real asset for
22 the school districts
to have this information available
23 almost immediately to
them.
24
GENERAL CRIST: It's a good point. If I might,
25 Commissioner.
Does that notice go out on a charge or on a
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DEPARTMENT OF LAW ENFORCEMENT - 10/26/04
46
1 conviction?
2
MR. TUNNELL: On an arrest, on a charge.
3
GENERAL CRIST: On an arrest?
4
MR. TUNNELL: Yes, sir.
5
GENERAL CRIST: All right.
6
MR. TUNNELL: This rule also fulfills our statutory
7 requirement to
formalize the process and establish a fee
8 for the retention
fee. I think it's six dollars a year.
9
THE GOVERNOR: Motion.
10
GENERAL CRIST: Motion.
11
THE GOVERNOR: There's a second. Any discussion?
12 Without objection,
Item 1 passes.
13
MR. TUNNELL: Thank you. Just a note, if approved,
14 these rules -- they
were -- they take effect on or after
15 November the
30th.
16
Item No. 2 is FDLE's proposed legislative initiatives
17 for the 2005
session. Essentially, there are three bills.
18 No. 1 is the FDLE
general bill. Basically contains
19 several provisions
that are criminal history related as
20 well as some
housekeeping and technical issues. Item
21 No. 2 is a sexual
predator offender glitch bill and it
22 adds a definition of
technical and vocational schools to
23 the statute. It
also replaces the term "predator" with
24 sexual offender, the
references, and clarifies criteria
25 for sexual predator
criteria offenses.
ACCURATE STENOTYPE REPORTERS, INC.
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DEPARTMENT OF LAW ENFORCEMENT - 10/26/04
47
1
Item No. 3 is a methamphetamine bill that establishes
2 new penalties for
improper dispensing and trafficking. It
3 also provides for an
establishment of a child endangerment
4 penalty. It's
almost identical to the bill filed last
5 year that died
awaiting a floor vote. With your approval,
6 we'd like to move
forward with advancing these proposals.
7
CFO GALLAGHER: What -- is there a particular name
8 that I would recognize
on what a methamphetamine is?
9
MR. TUNNELL: Yes, sir. Just -- this is modeled
10 after a bill in
Oklahoma that kind of set the stage. The
11 problem we have now
is a lot of the over-the-counter
12 bills -- or drugs
that are available, nonprescriptions
13 such as Sudafed,
these are items that are processed from
14 which, through an
illegal process, manufacturing of
15 methamphetamine comes
about. So this is dealing with only
16 the powder form,
tablet forms of these pills. Folks could
17 still buy the liquid
form of cold allergy tablets that
18 contain
pseudoephedrine.
19
CFO GALLAGHER: So what happens is they take the
20 pills and crush them
up and make them into something, mix
21 some chemicals and
--
22
MR. TUNNELL: Through a process that I can't begin to
23 explain all of it,
but it's a process that they were able
24 to derive --
25
THE GOVERNOR: It's also a very dangerous process.
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DEPARTMENT OF LAW ENFORCEMENT - 10/26/04
48
1
MR. TUNNELL: Yes. Biohazards are tremendous safety
2 issues.
3
THE GOVERNOR: Huge environmental issues. Very
4 dangerous.
People get blown up.
5
CFO GALLAGHER: You're moving them to a Schedule 5
6 drug in order for a
prescription as opposed to getting
7 them over the
counter?
8
MR. TUNNELL: Yes, sir.
9
CFO GALLAGHER: But I guess you can still go to
10 Georgia to get
them?
11
MR. TUNNELL: More than likely unless they catch on
12 and model their bill
--
13
THE GOVERNOR: Unless they've already passed the law.
14 Who knows. Have
they?
15
CFO GALLAGHER: Oklahoma is the only one that's done
16 it so far.
17
THE GOVERNOR: This is a bigger problem than it gets
18 attention I think,
the methamphetamine problem.
19
MR. TUNNELL: It really is. We've had a number of
20 cases where some
local communities will limit access
21 but -- through some
local action, county ordinance or city
22 ordinance. But
you drive to the next -- we mentioned
23 Wal-Mart, down the
highway and buy all you want. So it's
24 a real problem for
the law enforcement process.
25
CFO GALLAGHER: Motion on 2.
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DEPARTMENT OF LAW ENFORCEMENT - 10/26/04
49
1
COMMISSIONER BRONSON: Second.
2
THE GOVERNOR: There's a motion on 2 and a second.
3 Without objection, the
item passes. Thank you, Guy.
4
MR. TUNNELL: Thank you very much.
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
ACCURATE STENOTYPE REPORTERS, INC.
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BOARD OF TRUSTEES - 10/26/04
50
1
THE GOVERNOR: Board of Trustees of the Internal
2 Improvement Trust
Fund. Eva.
3
MS. ARMSTRONG: Good morning, how are you?
4
CFO GALLAGHER: Motion on the minutes.
5
COMMISSIONER BRONSON: Second.
6
THE GOVERNOR: You want to please excuse Colleen
7 Castille?
8
MS. ARMSTRONG: Certainly. She's at a special event
9 on your behalf,
Governor, for Federal Express --
10
THE GOVERNOR: It's on my behalf? Wait a second.
11 She told me last
night she was not coming. She's using me
12 as an excuse?
13
MS. ARMSTRONG: I understood that she was standing in
14 for you at a Federal
Express hybrid car event, is what I
15 was told this
morning.
16
THE GOVERNOR: That's true. But I'm not sure she was
17 standing in for
me. I think she's standing in for
18 herself.
19
MS. ARMSTRONG: I stand corrected, sir.
20
THE GOVERNOR: And it's a fine event.
21
MS. ARMSTRONG: Fine event.
22
THE GOVERNOR: Part of our efforts to become a leader
23 in alternative energy
technologies.
24
MS. ARMSTRONG: Absolutely. And we need to do that,
25 don't we?
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BOARD OF TRUSTEES - 10/26/04
51
1
THE GOVERNOR: Yes, we do.
2
MS. ARMSTRONG: Yes, sir.
3
THE GOVERNOR: Thank you, Eva.
4
MS. ARMSTRONG: With that.
5
CFO GALLAGHER: Motion on the minutes on Item 1.
6
THE GOVERNOR: There's a motion on Item 1. Is there
7 a second?
8
COMMISSIONER BRONSON: Second.
9
THE GOVERNOR: Moved and seconded. Without
10 objection, Item 1
passes.
11
Item 2.
12
MS. ARMSTRONG: We're requesting to --
13
CFO GALLAGHER: Motion to defer Item 2.
14
MS. ARMSTRONG: Yes, sir.
15
COMMISSIONER BRONSON: Second.
16
THE GOVERNOR: There's a motion to defer and a
17 second. Without
objection, the item is deferred.
18
Item 3.
19
MS. ARMSTRONG: Item 3 is consideration of the annual
20 Land Management
Review Team findings.
21
CFO GALLAGHER: Motion to accept.
22
GENERAL CRIST: Second.
23
THE GOVERNOR: There is a motion and second to
24 accept. Without
objection, the item passes.
25
MS. ARMSTRONG: Item 4 is the DCF American
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BOARD OF TRUSTEES - 10/26/04
52
1 Habilitation Services'
sublease. In it, there are five
2 things we're asking
for. Request to approve a 12-year
3 sublease between DCF
and American Habilitation Services.
4 A determination that
the proposed use is not contrary to
5 the public
interest. A delegation of authority to the
6 secretary of DEP to
approve future subleases for DCF's
7 cluster
facilities. A standard sublease form for future
8 use by DCF and a
determination that an award of the
9 sublease without
conducting of competitive bid is in the
10 public interest.
11
Since we had this item before you, a provision has
12 been added to make it
clearer that termination of the
13 lease to the provider
will discontinue its service -- the
14 termination of the
lease should the provider discontinue
15 its service for any
reason. Did that make that clear?
16
GENERAL CRIST: Motion on 4.
17
MS. ARMSTRONG: We did correct it and we will correct
18 future
subleases. That will be a standard correction in
19 our subleases for
those providers.
20
THE GOVERNOR: What about going back to the
21 existing -- are there
any existing leases where --
22
MS. ARMSTRONG: There are but they are on an annual
23 lease. So as
soon as that lease comes up, we'll put
24 the new language in
it.
25
THE GOVERNOR: Yes, General.
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BOARD OF TRUSTEES - 10/26/04
53
1
GENERAL CRIST: Thank you. Just on Item 5. Can you
2 explain or elaborate
on that a little bit, please?
3
MS. ARMSTRONG: On Item 5, sir?
4
GENERAL CRIST: A determination --
5
MS. ARMSTRONG: Oh, on the provision. Yes.
6
GENERAL CRIST: It's Item 5 of 4. A determination
7 that an award of a
sublease without conducting a
8 competitive bid is in
the public interest pursuant to
9 Section 18-2. --
10
MS. ARMSTRONG: Right. As you may recall, this
11 provider is servicing
a clientele that has -- they have
12 serviced over a
period of time. And to do competitive
13 bid -- and I do have
the DCF staff here who can explain it
14 in greater
detail. But to go through a competitive bid,
15 there are few in the
field. And to disrupt the provision
16 of the services to
those clientele can be very disruptive
17 for those
clients. So they have -- it's DCF that has
18 determined that it's
in the client's best interest as long
19 as that company is
providing the services to continue with
20 this provider.
But if you'd like greater information,
21 I'll be glad to get
them up here.
22
GENERAL CRIST: Just one question. How few is "few"?
23
MS. ARMSTRONG: DCF? Mr. Schoolfield, I believe, is
24 this gentleman's
name.
25
MR. SCHOOLFIELD: Hi. I'm Kerry Schoolfield. I'm
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BOARD OF TRUSTEES - 10/26/04
54
1 actually with the
Agency for Persons with Disabilities,
2 serve as the bureau
chief there.
3
MS. ARMSTRONG: Did you hear the question?
4
MR. SCHOOLFIELD: I'm sorry, would you mind --
5
GENERAL CRIST: Can you explain the rationale between
6 the no bid
contract?
7
MR. SCHOOLFIELD: The no competitive bid. The
8 American Habilitation
Services has been providing services
9 to this clientele
since about 1991. Prior to that time in
10 the '80s when these
cluster facilities were built, when
11 the Sunlands were
deinstitutionalized in the early '80s,
12 it was competitively
bid at that time. American
13 Habilitation Services
took over a contract that I believe
14 it was ARA Defcon had
that won the bid. So it was sort of
15 a buyout of that
organization. So it's been a continuous
16 provision of services
with a new contractor coming in
17 basically buying out
another one.
18
The people that live in these facilities are
19 medically
complex. The people with developmental
20 disabilities we
serve, they are probably the most
21 complicated to
serve. Many have lived there all their
22 lives, you know, they
have -- so to competitively bid it
23 out and to bring in a
new contractor could be a disruption
24 to them. Many
of the caregivers that serve them now, for
25 example, the American
Habilitation Services have been with
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BOARD OF TRUSTEES - 10/26/04
55
1 them much of their
lives, at least since 1991 and prior to
2 that time. And I
would suspect, even though I wasn't here
3 at the time, that when
the change of contractors occurred
4 in '91 many of those
caregivers would have just
5 transferred to the new
company. So it's not uncommon in
6 our institutions for
people to actually grow up with the
7 clientele and be
caregivers for life. So from the
8 client's standpoint,
it's a good thing to just not be
9 disruptive.
10
GENERAL CRIST: I was thinking about the taxpayer's
11 standpoint too.
How many other companies are there like
12 that? I think
that was --
13
MR. SCHOOLFIELD: We have 20 cluster facilities
14 around the state that
are state-operated. That's out of
15 about 90 private
ICFDDs that are not under our
16 jurisdiction.
AHCA operates or licenses those. The
17 number of actually
for-profit, I believe there is two or
18 three others that are
for-profit and the rest of them are
19 not-for-profit
corporations.
20
THE GOVERNOR: There's annual reviews of the contract
21 and there's quality
measures. And if they're not in
22 compliance, then
their contract won't be renewed. What we
23 were dealing with the
last cabinet meeting, you may
24 recall, was that the
lease we were granting extended way
25 beyond the term or
the contract couldn't be -- the lease
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BOARD OF TRUSTEES - 10/26/04
56
1 couldn't be
extinguished if the contract was extinguished
2 which made no sense at
all. So we've changed this lease
3 and I'm hoping, Eva,
and, sir, that we change all of our
4 leases to not give a
property right to a vendor or a
5 provider that isn't up
to snuff.
6
MR. SCHOOLFIELD: Correct. And that's in there now.
7
CFO GALLAGHER: All of these leases are subject to
8 appropriations and are
subject to legislation based on an
9 annual basis because
that has to be in every lease. So
10 for those leases that
slip through the cracks and we don't
11 have, we should take
a look and find out where they are
12 and probably have a
legislative fix to those so that they
13 are changed.
14
MS. ARMSTRONG: Well, I need to be clear. Okay. Our
15 legal staff felt that
the language was clear and we feel
16 we've made it clearer
with this change. I really need to
17 be on the table in
this public forum so that none of our
18 leaseholders feel
that they've got some loophole here
19 where they've got a
property right that they don't have.
20
THE GOVERNOR: Well, you sure as heck didn't explain
21 it that way last time
we were together. So I'm glad you
22 cleared that up.
23
MS. ARMSTRONG: Understand. Well, I think the
24 secretary in
deference to really wanted to make it very
25 clear so that anybody
reading this lease is abundantly on
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BOARD OF TRUSTEES - 10/26/04
57
1 top of the table and
understands when you read it, if your
2 lease with -- if your
contract with DCF or the disabled
3 persons agency goes
away for whatever reason, you lose
4 this lease and that's
what we did.
5
THE GOVERNOR: I don't think we can rely on
6 appropriations because
these are line items in the budget,
7 not particularly and
we don't fund each specific contract.
8 And so it could just
create litigation. Better to be
9 clear on the legal
lease.
10
CFO GALLAGHER: I agree. They could also put
11 proviso --
12
MS. ARMSTRONG: It is really clear now.
13
THE GOVERNOR: Well, they could. That's true. You
14 could proviso it
which we don't encourage in the executive
15 branch unless it's
our proviso.
16
CFO GALLAGHER: Unless we write it, exactly.
17 Sometimes it's the
good stuff.
18
THE GOVERNOR: Any other discussion?
19
CFO GALLAGHER: I'll move Item 4.
20
THE GOVERNOR: There's a motion. Is there a second?
21
COMMISSIONER BRONSON: Seconded.
22
THE GOVERNOR: Moved and seconded. Without
23 objection, the item
passes. Thank you.
24
MS. ARMSTRONG: Item 5 is consideration of an option
25 agreement to acquire
24.5 acres within the Perdido Pitcher
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BOARD OF TRUSTEES - 10/26/04
58
1 Plant Prairie from the
Nature Conservancy.
2
COMMISSIONER BRONSON: I'd like to make a motion on
3 Item 5.
Governor, first I'd like to make a motion to
4 approve Item 6 --
5
THE GOVERNOR: Five.
6
COMMISSIONER BRONSON: On 5, I mean, except with some
7 guidance that I'd like
for the cabinet --
8
CFO GALLAGHER: I think this is on 6.
9
THE GOVERNOR: Is there a motion on 5?
10
CFO GALLAGHER: I'll move approval.
11
GENERAL CRIST: Second.
12
THE GOVERNOR: Moved and seconded. Any discussion?
13 Without objection,
the item passes.
14
Item 6.
15
MS. ARMSTRONG: Is consideration of an option
16 agreement to acquire
perpetual conservation easement over
17 2,124 acres within
the Apalachicola River Florida Forever
18 project. The
reason the item was originally deferred has
19 now been
resolved. There shall be no directional drilling
20 from either on or off
the property. Mr. Tucker from the
21 family is here if you
have questions -- representing the
22 seller -- is here, if
you have questions.
23
THE GOVERNOR: Commissioner?
24
COMMISSIONER BRONSON: I would like to make the
25 motion to approve
Item 6 with some guidance to the
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59
1 Department. The
goal of the State in negotiated
2 conservation easements
is to obtain the rights it needs to
3 protect the sensitive
environment resources at the lowest
4 possible cost while
ensuring the landowner will be able to
5 continue working the
land. There has been much discussion
6 of changing the
balance of rights under these easements
7 and the relevant
statutory provisions dealing with the
8 issues.
9
In some cases, landowners will agree to place more
10 rights with the State
while others will not. The balance
11 of the rights issue,
the test for bringing proposed
12 easements to the
Governor and cabinet is not whether the
13 landowner signs over
the majority of rights to the State
14 but whether the
proposed easement contains the conditions
15 to ensure protection
of the resource the State is seeking
16 to protect at any
reasonable cost.
17
The Governor and cabinet highlighted several areas of
18 concern, directional
drilling from adjacent lands is one
19 and negotiated
easements, DEP should make certain those
20 concerns are
adequately addressed in the proposed
21 easement. Those
are some conditions that I would like to
22 put to protect us as
cabinet members and as the trustees
23 of the internal
improvement trust fund for state lands,
24 but at the same time,
making the motion to approve Item 6.
25
THE GOVERNOR: Okay. There is a motion with
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1 guidance.
2
GENERAL CRIST: Second.
3
THE GOVERNOR: And a second. We have some
4 discussion. Can
you tell me in English what that meant?
5
COMMISSIONER BRONSON: Well -- Governor, as you know,
6 we had quite a lengthy
discussion last time on some of
7 these easement issues
and whether the State is getting a
8 bang for its buck or
whether or not in making the
9 easements in the
interest of the State to protect
10 environmental issues
and environmental, both plant, animal
11 and other issues
involved with the environment, whether
12 the State is getting
the biggest bang for its buck in
13 doing this. And
at the same time, recognizing something
14 that the
environmental groups have recognized for a long
15 time, and that is
that the people who currently are
16 working this land
under these easement programs have done
17 a very good job of
protecting, in many cases, animal and
18 plant species or the
State would not be wanting to even
19 make these easement
requests available to the Board.
20
With that in mind, making sure that rules and
21 regulations and
caveats are not put on that would
22 actually, in the long
run, hurt the very lands we're
23 trying to protect and
the environmental issues we're
24 trying to protect,
that there be some continuity of
25 working with that
landowner in these easements so it does
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1 not keep them from
doing what they've basically been doing
2 all along on this
property which is helping to protect
3 natural resources.
4
And that's -- I just wanted to put that in here to
5 make sure we don't put
caveats on where a landowner says,
6 Wait a minute.
I've got an easement with you. Now you've
7 made it where I can't
even make a living doing the very
8 things that I've been
doing here. And at the same time,
9 still protecting our
natural resources myself. In other
10 words, that landowner
is paying for the protection of the
11 State's natural
resources, not the State of Florida.
12 That's what happens
in these agreements. And I want to
13 make sure that --
because that saves us money and it still
14 gets done what we
intended to do all along, which is
15 protect our natural
resources.
16
THE GOVERNOR: But, for example, Commissioner, if
17 the -- go back to
this, and I appreciate the person that
18 agreed to change this
lease. I appreciate their
19 willingness to do so
from our last meeting. There was a
20 discussion about
whether or not there should be the
21 allowance of
directional drilling for drilling for oil on
22 this property or
below this property. That is an
23 appropriate thing to
exclude in the Apalachicola Basin,
24 right?
25
COMMISSIONER BRONSON: I'm not in disagreement with
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1 that.
2
THE GOVERNOR: So you're just -- this is a statement
3 of principle that the
conservation easement should be --
4 I'm just trying to
give guidance because I want to make
5 sure. Because I
didn't understand it the first time you
6 said it. What
you're saying is that if we're going to
7 grant conservation
easements, that they should not be done
8 in a way that inhibits
the ability of a person to manage
9 the property?
10
COMMISSIONER BRONSON: Right. But on the issues such
11 as drilling or any
other substantial issue that's above
12 and beyond what's
being operated right now on the property
13 at the time of the
lease, that would come back to this
14 Board of Trustees and
that no such issue would necessarily
15 be granted by DEP or
anyone else until the Board of
16 Trustees has a chance
to discuss those issues since we are
17 the ones who are
granting the lease in the first place --
18 or the conservation
easement in the first place.
19
So it would directly come back here. What I'm saying
20 is, what the
Department knows is going on on the property
21 right now and has
been basically agreed to as an
22 acceptable practice,
that that practice will not be
23 inhibited by other
rules and regulations of the Department
24 that would cause that
landowner to either have to go out
25 of business or --
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1
THE GOVERNOR: You mean after the fact?
2
COMMISSIONER BRONSON: After the fact.
3
GENERAL CRIST: What's already okay is still okay?
4
COMMISSIONER BRONSON: Well, I mean, if they are
5 willing to accept as
an easement brought to this board the
6 practice that's going
on right now, and that could include
7 silviculture or
anything else that is within practicable
8 -- in other words, if
you got old trees that need to come
9 out because they're an
endangerment to the rest of the
10 trees because of
pests and disease, that landowner can
11 still take those out
so that they can protect the rest of
12 the trees on the
property. I mean, that happens in
13 natural silviculture
processes.
14
But there again, the Department would have to work
15 with the landowner to
make sure they're not going in and
16 cutting trees that
they shouldn't be cutting and those
17 types of
things. That landowner knows good and well as an
18 agriculturalist what
needs to be done on that property to
19 protect natural
resources that are already there that the
20 State wants to
protect anyway. So I'm just saying that
21 the Department should
not have the right, without coming
22 back to this Board,
to put caveats on a landowner who may
23 be in an agriculture
business, a natural business,
24 operating the way the
Department has accepted the property
25 in this conservation
easement and then go in and say,
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1 Well, we decided we
don't like this. So we're going to
2 put this caveat in
that says you can't do this anymore.
3 Well, that may put the
person out of business. And at the
4 same time, that person
is not going to be taking care of
5 those natural
resources because he can't afford it.
6
THE GOVERNOR: Now, is this -- this is a little bit
7 different than what we
talked about. Is this happening
8 right now, that people
-- the Department has gone and
9 said, Sorry, in spite
of our legal agreement on a
10 conservation
easement, we're now going to prohibit this
11 use even though we
agreed to it to begin with when we
12 signed the
agreement?
13
COMMISSIONER BRONSON: I think some agreements -- and
14 it may be long gone
after the four of us are gone from
15 this earth and it
could be when there's a whole new group
16 of people in DEP or
whatever they are going to call the
17 Department years to
come, that if a family and some of
18 these families have
had these properties for hundreds of
19 years or a hundred
plus years, that this would keep
20 them --
21
CFO GALLAGHER: Just the Bronsons.
22
THE GOVERNOR: Yeah, just the Bronsons.
23
COMMISSIONER BRONSON: This would keep a State
24 agency, and maybe
it's -- well, it would be DEP under this
25 instance because
they're the ones asking us to agree to
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1 this. That they
will not go in and make arbitrary, in
2 some cases, changes to
an agreement that was already in
3 place by saying under
current guidelines, We ought to do
4 this to this
property.
5
THE GOVERNOR: So this is more of a statement of
6 principle regarding
pre -- this is a preemptive statement.
7 You don't have any
specific cases where legal contracts
8 that are binding have
been broken because there is a
9 new --
10
COMMISSIONER BRONSON: There have been -- I do know
11 of cases where
caveats on some leases have been added
12 after a basic
agreement understanding has been made. And
13 then it comes back
and says, Oh, and by the way, we think
14 you ought to do
this.
15
THE GOVERNOR: But that's before the contract is
16 signed.
17
CFO GALLAGHER: -- it's negotiated in or out.
18
COMMISSIONER BRONSON: And I guess the purpose
19 for doing -- well, I
want to make sure it doesn't happen
20 after the signing of
a contract.
21
THE GOVERNOR: Right.
22
COMMISSIONER BRONSON: But you also make the
23 statement, Don't lose
contracts that would be good
24 easements, good
protection for the environment, by making
25 some, what I think
could be egregious statements on a
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1 potential signing of a
contract which could cause people
2 to back out and
therefore that natural resource is not
3 being protected
permanently under a contract with the
4 State.
5
THE GOVERNOR: Treasurer?
6
CFO GALLAGHER: Well, these have to come here.
7
COMMISSIONER BRONSON: Yes.
8
CFO GALLAGHER: And if somebody doesn't like what we
9 are doing, they can
come talk about it. Or if we don't
10 like what they are
doing, we can talk about it. And this
11 is a prime example of
a contract that came to us and
12 because of a lack of
a second, and I believe basically
13 because of the
drilling issue, it got fixed. And then it
14 can move ahead and
get signed if it goes ahead and we pass
15 your motion.
16
COMMISSIONER BRONSON: Well, and I agree. This -- I
17 may be overstating a
little bit here of what I'm concerned
18 about. But the
point is that concern, in my opinion, is
19 real. And I
don't want a State agency, whether DEP or
20 anybody else to go in
and try to put a caveat on an
21 agreement that could
be egregious to the person who's
22 actually taking care
of the property at --
23
THE GOVERNOR: Commissioner, can we do this? Because
24 we had a really good
debate -- discussion, not debate, on
25 the whole
conservation easement issue and we didn't really
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1 conclude it. I
mean, we had discussions on it. If you
2 would allow us to,
your office and the Department and our
3 offices to try to
establish some kind of policy guideline
4 on this and present it
in the next two weeks as a
5 stand-alone
discussion, rather than tying it -- no one --
6 I don't think anybody
has seen your particular proposal.
7 It may be -- I mean,
in principle, I don't have any
8 problems with it
because I don't want the Department to,
9 after the fact, or any
government agency after the fact,
10 once you have a
legal, binding contract to -- I don't
11 think they have the
right to do what you are suggesting
12 they do and I don't
think they've done it in the past.
13 And if they had, then
they are in violation of the law
14 which would not be
something that we would want to be
15 associated with.
16
But the second part of what you said is I think where
17 your concerns
are. Which is, as we negotiate these things
18 to put so many
burdens on ranchers and farmers that we
19 can't do our deals
and therefore protect the natural
20 resource and protect
the quality of life or the way of
21 life of the
beneficiaries of these easements is what
22 you're -- sounds like
that's the bigger concern. That's
23 not going to impact
this deal, I don't think.
24
COMMISSIONER BRONSON: No.
25
THE GOVERNOR: They've agreed to it. So can we --
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1 can you extract your
guidance so that we -- well, it's
2 only guidance.
But I'd rather have this be a discussion
3 that we -- because I
agree with you. I think conservation
4 easements are the way
to go but they also should be done
5 in a way that creates
a win/win which is we protect the
6 natural resource and
people get to be able to keep
7 their -- they get some
equity for the intrinsic value of
8 the land, allows them
to continue their way of life.
9 That's the whole
point.
10
COMMISSIONER BRONSON: That's it in a nutshell. And
11 quite frankly, I'm
very concerned, as well as the
12 succeeding
generations that may keep that very property
13 much in the manner
that their ancestors have kept it. But
14 with new and modern
times coming up and things happening,
15 it may cause some
people to want to change the perpetual
16 agreement based on
other conditions and I just want to
17 make sure there were
no changes that could happen in that
18 manner that would
cause a problem for those generations.
19
CFO GALLAGHER: But you don't want to do that because
20 any contract should
have the ability to be changed with
21 both parties
agreeing.
22
COMMISSIONER BRONSON: If both parties agree.
23
CFO GALLAGHER: Right. And so they could come to the
24 Department and say,
We'd like this changed. The
25 Department could go
to them and say they'd like this
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1 changed and there
could be an exchange of dollars for a
2 change or there could
be just an exchange because it's
3 better land management
and I don't think we should shut
4 those out.
5
COMMISSIONER BRONSON: Well, I don't think this would
6 do that. If
there is an agreement between the two
7 parties, anything
could be done under contractual
8 agreement. What
I don't want is an agency to go in and
9 say, We're telling you
this is the change that's going to
10 be made whether you
like it or not. And because that
11 agreement has been
signed to as of the time that this
12 board signed it.
13
THE GOVERNOR: Well, what happens -- I guess we'll
14 have a conversation
about this now. What happens if there
15 are laws that change
or court rulings because the federal
16 government likes to
-- federal judges tell us that -- say
17 cattle ranching is
allowed and some federal judge says
18 that water quality
standards now prohibit, you know --
19 there is some kind of
change that's required that isn't in
20 the lease but now is
a new regulation or a new statute or
21 a new court ruling
that adds to the burden of the rancher?
22
COMMISSIONER BRONSON: Quite frankly, not being an
23 attorney, from a
landowner's standpoint and a citizen of
24 the state of Florida
standpoint, then I would say that
25 that ruling or that
law has broken the agreement of the
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1 contract that was
signed originally and would have to be
2 renegotiated with the
landowner and the State.
3
CFO GALLAGHER: But what if there were already --
4 there wasn't any
contract and it was just the landowner
5 that owned the land,
what would happen?
6
COMMISSIONER BRONSON: Well, you're signing an
7 agreement which is
almost like a lease. It's a --
8
THE GOVERNOR: It's a transfer of title.
9
MS. ARMSTRONG: I have an attorney who can help you
10 with that
question.
11
THE GOVERNOR: Please help us, Attorney. We're
12 always looking for
help from attorneys.
13
MS. ARMSTRONG: As a landowner, you'll like the
14 answer.
15
COMMISSIONER BRONSON: If I like -- did you say if I
16 like the
answer? That's why we have attorneys.
17
MR. VIELHAUER: Right. Well, in that particular
18 case, I mean, if that
was a federal requirement that was
19 passed by a federal
law, I mean, we wouldn't have been a
20 party to that and we
couldn't renegotiate it but you do
21 have a potential
argument as a landowner that there would
22 have been a taking
and you could file for a taking. But
23 we could not go back
and renegotiate the contract.
24
CFO GALLAGHER: Federal government would have to pay
25 them money for what
they changed.
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1
THE GOVERNOR: They don't do that.
2
CFO GALLAGHER: They're supposed to.
3
THE GOVERNOR: Or a state judge decides. I mean, it
4 happens all the time
where some extraneous -- or the
5 Legislature.
Some extraneous event impacts the use of
6 that property
indirectly. And that doesn't mean that that
7 contract is no longer
binding. Because if not, we'd have
8 complete chaos.
I mean, we would -- nor there would be
9 certainty for the
property owner that has the easement
10 that sold his
transfer of title to us and got an easement
11 in return to have the
certainty that he could go to a bank
12 and be able to get
credit for the intrinsic, what remains
13 as the value of the
land.
14
MS. ARMSTRONG: Right. The subsequent law, he's
15 going to verify this
for me, cannot affect your contract.
16
MR. VIELHAUER: Right. But every single one of these
17 contracts that we
ever do always has a provision in there
18 that says that it's
bound by governing state and federal
19 law. So that is
a condition that already exists in the
20 contracts.
21
COMMISSIONER BRONSON: The governing laws that are on
22 the books at the time
the contract is signed, correct?
23
MR. VIELHAUER: Well, right. But any new law would
24 also be included
within that too.
25
COMMISSIONER BRONSON: Since we have time to keep
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1 this discussion
going.
2
MS. ARMSTRONG: I was going to move it on for you.
3 We won't do that
now.
4
COMMISSIONER BRONSON: Here's my point. And I'm not
5 taking shots at the
Department or any department of the
6 State
government. What I'm saying is, I want to make sure
7 that whatever
contractual agreements between a private
8 citizens of the state
or a corporation of the state in
9 conjunction with
making an agreement with the State of
10 Florida, the Board of
Trustees, the Florida cabinet, if
11 you will, that there
is some protection of that private
12 person or business
that does contractual agreements with
13 the State that does
not do away with their -- what they
14 feel is their rights
at the time they sign this agreement
15 with the State that
would put them in such burden that
16 they either could not
operate anymore and therefore claim
17 a taking of the
state, I guess that would be their natural
18 first move is to say,
Okay, under this condition, then the
19 State has taken my
ability to do business on my property
20 and therefore, it is
a taking. Pay me for the rest of the
21 rights to this
property. In other words, buy it out fee
22 simple.
23
I want to make sure the private citizens who's
24 dealing in good faith
with the State is protected in these
25 and not that it gives
them any advantage over the State or
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1 that any agency would
have advantage to make caveats to
2 those agreements
without recourse of that private citizen
3 or business to come
back and say, Okay, Judge, if this is
4 the case, then buy me
out fee simple, this is a taking.
5 And make that
claim. I just want to protect the
6 individual landowner
and/or corporation that makes any
7 contractual agreement
with the State through DEP or any
8 other agency, that
they're protected and they're not
9 giving up any kind of
rights to challenge those decisions
10 once it's been
changed. That's what I'm trying to do.
11 Maybe I did it in a
very complicated way, but that's what
12 I'm trying to do.
13
THE GOVERNOR: Well, I'm not sure the cabinet is
14 going to be able to
tell every department of State
15 government that they
can't do certain things. But as it
16 relates to the
Department of Environmental Protection, we
17 can give them
guidance. And I want to make sure that the
18 guidance that we give
is a consensus view and it's
19 important enough, I
think, if you don't mind, for us to
20 work on it and have a
discussion about it.
21
COMMISSIONER BRONSON: Okay. I'll withdraw the --
22
THE GOVERNOR: In two weeks.
23
COMMISSIONER BRONSON: -- portion of my statement.
24 But I'll still --
25
THE GOVERNOR: And get -- you know, I think --
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1
COMMISSIONER BRONSON: Move No. 6 but I -- we'll talk
2 about --
3
THE GOVERNOR: And if you could get -- I think it's
4 important to get -- we
make jokes about the lawyers. I
5 think it would be
important to get your department's
6 lawyers engaged on
this as well from the perspective of
7 the landowner because
they do have some unique
8 perspectives that
would be very helpful. So, Eva, can
9 we -- Stephanie, when
do you start?
10
MS. ARMSTRONG: We have an easement that we're
11 working with
Secretary Castille on. And if it's finalized
12 in time for that
meeting, it's a little bit different and
13 it would provide you
with a lot of discussion points. It
14 will fit right
in.
15
THE GOVERNOR: Okay. There's a motion and a second
16 on Item 6.
Without objection, the item passes. Thank
17 you.
18
MS. ARMSTRONG: Item 7 is consideration of a proposed
19 settlement agreement
in the claim of Robert Lee and
20 Tangerene Hancock
Smith and First American Title Insurance
21 Company. There
was an error by the survey company at the
22 time of the
acquisition which placed our boundary line
23 2.6 acres to the
north and east of where the ownership
24 actually lies and it
was over someone else's property.
25 First American Title
Insurance is reimbursing the State
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1 for the cost of the
2.6 acres at the acquisition cost to
2 the State of $740 an
acre or $1,924. The Board of
3 Trustees will issue a
quitclaim deed to the 2.6 acres and
4 it will clear it
up.
5
CFO GALLAGHER: And who's paying for all the legal
6 fees and everything
that are involved in this?
7
MS. ARMSTRONG: Title insurance company. Your title
8 insurance is covering
the cost.
9
CFO GALLAGHER: Motion on 7.
10
COMMISSIONER BRONSON: Second.
11
THE GOVERNOR: Moved and seconded. Without
12 objection, the item
passes.
13
MS. ARMSTRONG: Item 8 is consideration of a proposed
14 settlement agreement
in the case of Edna Lee Wilson versus
15 the Estate of Nathan
Lee and the Board of Trustees.
16
CFO GALLAGHER: Motion on 8.
17
GENERAL CRIST: Second.
18
THE GOVERNOR: There's a motion and a second. Are
19 you happy?
20
MS. ARMSTRONG: I'm happy.
21
THE GOVERNOR: Without objection, the item passes.
22
MS. ARMSTRONG: Items 9 and 10 are both rulemaking
23 concerning
sovereignty submerged lands of the state.
24 Item 9 is proposed
rulemaking for ownership oriented
25 facilities. It
is regarding amendments to Chapter 18-21
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1 that specify the
maximum number of slips and preemption
2 allowed for private
residential multifamily docks
3 including those docks
serving mixed use upland residential
4 and revenue generating
activities.
5
I want to point out that both of these rules are a
6 work in
progress. At this point, we have held workshops
7 on both. We've
been taking them in tandem because both of
8 them are dealing with
sovereignty submerged lands although
9 they're really
separate. The fee rule is handled by
10 Division of State
Lands. And the ownership oriented
11 facilities are
handled by Jim Stoutamire's bureau which
12 has dealt with the
regulatory aspect of the Agency. And
13 when I say "work in
progress", we have come to you -- in
14 fact, it was at your
direction some months back, motion by
15 Gallagher on WCI item
that said, Go address fees --
16
THE GOVERNOR: Treasurer Gallagher?
17
MS. ARMSTRONG: Treasurer Gallagher, I'm sorry. What
18 did I call him?
19
THE GOVERNOR: Gallagher.
20
MS. ARMSTRONG: Oh, dear. I've done that twice. My
21 apologies, sir.
22
THE GOVERNOR: He's like a baseball player.
23
CFO GALLAGHER: I get no respect.
24
(Laughter.)
25
MS. ARMSTRONG: Treasurer Gallagher's motion.
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1
CFO GALLAGHER: I don't deserve it so it's okay.
2
(Laughter.)
3
THE GOVERNOR: At least call the guy fire marshal
4 Gallagher.
5
CFO GALLAGHER: Marshal Gallagher, I like that.
6
THE GOVERNOR: That does have a good ring to it.
7
MS. ARMSTRONG: It was on Treasurer Gallagher's
8 motion that set us off
on this exercise and we are now at
9 the point where we're
asking you for permission to go to
10 public hearings and
then we will come back for final
11 adoption. So we
are not yet at a final product here.
12
With that, we have speakers. What I thought I'd do
13 is, on Item 9, have
Jim Stoutamire walk you through
14 proposals for the
changes that we have at this point in
15 time. I need to
emphasize that we are open to changes to
16 these
proposals. It is not a finalized product. And with
17 that, Jim
Stoutamire.
18
COMMISSIONER BRONSON: I have a question.
19
THE GOVERNOR: Yes, Commissioner.
20
COMMISSIONER BRONSON: Before we go through the
21 step-by-step, one of
the things that concerns me right now
22 considering we've had
four hurricanes and we've had
23 extensive damage to
some people, especially those in the
24 clam business, people
who have used floating docks and
25 other things that
they have managed to work through the
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1 process before these
rules are going to be looked at, my
2 concern is that we do
not make it so egregious that they
3 cannot get back in
business. In other words, that we do
4 it in a practical way
that we're not causing docks to cost
5 so much, you know,
twice as much or whatever to replace as
6 long as they're doing
it within the guidelines that they
7 originally had their
agreements with the State. It's
8 going to cost them
plenty of money to redo them anyway
9 simply because of
their destruction just like --
10
THE GOVERNOR: What about private owners, you know,
11 docks behind people's
homes as well? Do you care about
12 them?
13
COMMISSIONER BRONSON: I care about them as well.
14 Because if they had
an original agreement with the
15 State --
16
THE GOVERNOR: So what is the policy? That's a great
17 question.
18
MR. VIELHAUER: Well, currently, with regard to each
19 one of the four
hurricanes that came through, the
20 Department has
enacted emergency orders addressing each
21 and every one of
them. And in the emergency order, it
22 provides that as long
as the facility was legal before the
23 hurricane, they can
rebuild exactly what they had. So
24 without going back
through and getting new permits and
25 everything, they can
rebuild what they had.
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1
CFO GALLAGHER: All right. That begs the question:
2 If they have one that
might be considered illegal but
3 nobody has ever done
anything about it and they've let
4 them have it there,
now you're saying they can't build.
5
MR. VIELHAUER: No, we're dealing with those on a
6 case-by-case
basis. Depending on what the nature of the
7 illegality was and
trying to work with them to rebuild
8 something that would
be in compliance with our rules and
9 with our
regulations. So they can't go back out and
10 rebuild an illegal
facility. But we will work with them
11 to build something
that is legal.
12
MS. ARMSTRONG: Let me assure you the Department is
13 being very fair and
generous.
14
CFO GALLAGHER: I don't want to get them saying
15 they're letting
everybody rebuild illegal stuff. That's
16 fine.
17
THE GOVERNOR: Great. Thank you, Treasurer. We were
18 going to have to
extend the conversation a little longer
19 then. This is
an interesting issue and I guess the answer
20 that you got was
better than I thought you were going to
21 get.
22
COMMISSIONER BRONSON: I'm glad it was as good --
23
THE GOVERNOR: Just let the record show the
24 Department was
responding to the needs of your
25 constituents which
I'm happy to hear as well because
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1 that's a major
commitment I just heard. Now was there
2 caveats --
3
CFO GALLAGHER: Emergency rule. So that's great.
4
GENERAL CRIST: It's only fair.
5
THE GOVERNOR: Just ask the billboard owners of the
6 state if it's fair
because they can't rebuild.
7
CFO GALLAGHER: Let me ask you a question here.
8 Don't you have to get
approval from us to do the rules?
9
MS. ARMSTRONG: Emergency order of the governor.
10
CFO GALLAGHER: Oh, you use that emergency rule to
11 do --
12
THE GOVERNOR: Oh, I knew that.
13
(Laughter.)
14
MS. ARMSTRONG: It was part of the emergency response
15 effort from the
hurricane.
16
CFO GALLAGHER: Is there any other emergency rules
17 you guys have done
that you haven't told us about?
18
MS. ARMSTRONG: I don't think -- correct me if I'm
19 wrong. I don't
even think that was an energy rule. It
20 was part of the
immediate response just as shoring up the
21 houses on the beaches
to make sure the ones that are
22 clinging right on the
cliff could get something under them
23 to keep the house
up. We didn't do it as a rule. It was,
24 Get out there and
shore up your structure. It was part of
25 that same response to
the hurricane effort.
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1
THE GOVERNOR: So do the aquaculture guys know that,
2 Charlie?
3
COMMISSIONER BRONSON: In response to the Department,
4 and I think they've
been working with just about everybody
5 on this, and I know
it's a monumental job. But like the
6 clam business has been
just devastated by these storms.
7 The oyster guys have
been devastated by these storms and
8 they're going to have
a tough time coming back. They just
9 didn't want to have to
jump through extra hoops to get
10 what they already had
back in place so that they could
11 continue their
business. And those are going to be the
12 first people I hear
from, I can guarantee you.
13
MS. ARMSTRONG: We'll have contact with Jim Boxell
14 (phonetic) from our
office to get the connection.
15
CFO GALLAGHER: And you haven't heard from him yet so
16 probably things are
going all right.
17
COMMISSIONER BRONSON: Well, they haven't even begun
18 to get started, some
of them, as to where and how and
19 borrowing the money
and trying to work with the federal
20 government and other
people to get back in --
21
THE GOVERNOR: Out of curiosity. My emergency order,
22 Eva, is there a time
certain when it --
23
MS. ARMSTRONG: That that has to be completed?
24
THE GOVERNOR: Or started.
25
MS. ARMSTRONG: I'll find out. I don't know that but
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1 I'll find out.
2
THE GOVERNOR: Because that may be an issue.
3
MS. ARMSTRONG: It runs for 60 days. We're in the
4 process of working on
them now.
5
CFO GALLAGHER: Well, most emergency orders are only
6 good for 90 days.
7
MS. ARMSTRONG: I don't think it's done by emergency
8 rule. We didn't
do a rule. We just put it into effect.
9
CFO GALLAGHER: All right. Well, look and see if
10 there needs to be
something we need to do because there's
11 a lot of people that
aren't going to be able to fix
12 anything for a long
time. We're talking six, eight, nine,
13 if it's a dock and
their house is blown away, I can tell
14 you they're going to
be worried about nine months from now
15 fixing their house
before they get around to their dock
16 and they need to have
that intrinsic right left for their
17 dock to be done two
years from now if it's two years from
18 now because they are
going to spend all their money, some
19 of them, with two or
three deductibles which we're also
20 going to have to take
care of. But they're not going to
21 spend it on their
dock which probably isn't covered by
22 insurance.
23
COMMISSIONER BRONSON: One more question, Governor,
24 if I can.
25
THE GOVERNOR: Sure.
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1
COMMISSIONER BRONSON: Eva, does this mean that
2 within the 60 days
they come to you and say, I want to
3 rebuild my docks the
way I had them so that I can do my
4 business that that in
itself is good enough for you to
5 work with them not to
come up with a whole brand-new plan,
6 money and
everything?
7
MS. ARMSTRONG: I'll find out when the 60-day clock
8 starts. I think
that's what the question is.
9
COMMISSIONER BRONSON: But my question is as long as
10 they come to you and
say, Here's where my business was, I
11 was approved by DEP,
I want to build it just the way I had
12 it, keep my business
going, that that satisfied the
13 contact of the 60
days, not the fact they got to have
14 their money in place,
their plans in place, everything in
15 place within 60 days
because that's, as the treasurer
16 says, that's not
going to happen.
17
CFO GALLAGHER: And some people are using FEMA loans
18 and some of those are
waiting to see what the insurance is
19 going to pay.
And, you know, it's a big catch-22 here and
20 we need to bend over
backwards to give the people all the
21 time they need to
rebuild.
22
MS. ARMSTRONG: Yes, sir, we'll do it.
23
THE GOVERNOR: Okay.
24
MS. ARMSTRONG: Are we ready?
25
THE GOVERNOR: We're ready.
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1
MR. STOUTAMIRE: Good morning. Jim Stoutamire, DEP.
2 Pardon me if I
ping-pong between glasses. I've had eye
3 surgery and I've gone
from farsighted to nearsighted. So
4 I can either read or
see you, not both.
5
THE GOVERNOR: Before you could either see or read,
6 but not both?
7
MR. STOUTAMIRE: Something like that. Hopefully it
8 will all get
straightened out by the first of the year.
9 At any rate, this
rulemaking is designed to balance the
10 preemption of public
trust lands for private benefit of
11 multifamily dwelling
units with the rights of the other
12 individuals of the
State to use those public trust lands.
13 One of the major
changes in the rule is to replace the
14 current sliding unit
to slip ratio associated with
15 multifamily docks
with a not-to-exceed one slip per unit.
16
The reasoning behind this is that calculating the
17 ratio is often
misunderstood. It's difficult to
18 calculate. And,
in fact, part of the ratio comes out with
19 4.666 into an
infinity number of slips. The graduated
20 unit to slip scale is
only a marginal impact on the amount
21 of preemption of the
public trust lands and is typically
22 not the major
controlling factor in limiting preemption.
23 The unit to slip
ratio by itself does not address the
24 amount of preempted
area. Many facilities cap out on
25 40 square feet to
each linear foot of shoreline which I'll
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1 get to in a moment
before they cap out on their unit to
2 slip ratio.
3
And, finally, there is ample authority in the
4 proprietary and the
regulatory rules to restrict the
5 number of vessels that
are allowed at a facility, to
6 protect environmental
resources and listed species. On
7 balance, staff feels
that the proposed change to the unit
8 to slip will provide
more flexibility for the design of
9 these facilities
without significantly increasing private
10 preemption of public
trust lands or increasing adverse
11 impacts to
environmental resources or listed species.
12
In addition, the rule clarifies that any portion of a
13 facility, and this
would include new facilities, or
14 existing facilities
that's converted to private,
15 residential
multifamily use, would be subject to these
16 provisions of the
rule. This addresses hybrid facilities
17 of which you've seen
several conversions of existing
18 public marinas for
private residential use.
19
We do provide somewhat along the lines of the WCI
20 item that you may
remember from I believe it was September
21 a year ago, a
potential exception to the 40 to 1, that's
22 40 square feet of
preempted area for each linear foot of
23 shoreline in the
applicant's ownership in areas where, for
24 lack of a better
term, it's a good location. There's
25 adequate depth, no
resources, no additional dredging is
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1 needed. There
are no threatened and endangered species
2 concerned and the
project provides an overall public
3 benefit. We were
very careful to use the term "benefit",
4 not to be confused
with the public interest test.
5
And that public benefit is to offset the increase in
6 preempted area of the
public trust land over what the rule
7 would otherwise
allow. We've made an amendment to the --
8 or are proposing an
amendment to the delegations from the
9 trustees to staff that
would state quite clearly that any
10 project that requests
an exception, the 40 to 1 exception,
11 will not be delegated
to staff. In other words, the final
12 agency action would
have to come in front of the Board of
13 Trustees to discuss
and review the proposed public
14 benefit. We've
added an option for number of riparian
15 single-family
homeowners who could otherwise build
16 multiple individual
docks. Say ten homeowners who could
17 build ten individual
docks.
18
We've added an option for them to build a single
19 multifamily dock
which would be less preemptive, less
20 environmentally
impactive. We've eliminated some of the
21 disincentives in the
rule to doing so. Disincentives
22 include the
requirement to pay lease fees, some
23 limitations on the
location of these structures in aquatic
24 preserves.
We're in a catch-22 where a single dock for a
25 number of riparian
homeowners would be prohibited in
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1 certain areas but
individual docks would be allowed in
2 those same areas even
though they would cause more impact.
3 We've provided that
these -- such facilities would require
4 that a conservation
easement be placed along the shoreline
5 of all the riparian
lots to ensure no future docks were
6 built off of those
lots. And that, in deference to the
7 Secret Oaks case
--
8
GENERAL CRIST: Excuse me? Could I ask a question?
9
MR. STOUTAMIRE: Sure.
10
GENERAL CRIST: I'm not sure I know what you're
11 talking about.
Can you just tell me in English what
12 you're talking
about?
13
MR. STOUTAMIRE: We've had several proposals where,
14 for example, ten
single-family homeowners wanted to get
15 together and build a
shared dock in an aquatic preserve in
16 an area with seagrass
beds off all ten lots. In the
17 aquatic preserve rule
there is a prohibition on multi slip
18 docking facilities,
which is what the facility would be,
19 terminating in a
resource protection area one or two. At
20 the same time, the
aquatic preserve rule would allow
21 individual
single-family docks to terminate in an RPA 1
22 or 2.
23
The Department then finds itself in the awkward
24 position of you can't
have a shared dock for ten
25 single-family lots,
but you can have ten single-family
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1 docks. Staff
feels that clustering of a dock and with
2 inserted language that
requires these docks to be located
3 in lower resource
areas if they are available, is better
4 for both the
environment and the public trust lands.
5
GENERAL CRIST: Can they still have an individual
6 dock in front of their
house under what you're talking
7 about?
8
MR. STOUTAMIRE: If they sign on to a lot to use
9 slips at a shared
facility, we're proposing that a
10 conservation easement
be placed on the property that would
11 prohibit --
12
GENERAL CRIST: What if they don't do that? I'm just
13 talking about a
single-family home. Can they --
14
MR. STOUTAMIRE: Right now, they can build a dock,
15 yes.
16
GENERAL CRIST: Okay. Thanks.
17
MR. STOUTAMIRE: This would have no impact unless you
18 voluntarily signed on
to a community dock. We have had
19 some
suggestions. The rule, as it's drafted, proposes
20 that this type of
dock be granted a letter of consent in
21 lieu of a
lease. This was intended to get past the
22 problem of punishing,
if you will, these people for doing
23 the right thing by
making them pay lease fees. There's
24 been a suggestion and
we're going to look at this as
25 requiring them to
obtain a lease making this a fee waived
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1 lease.
2
CFO GALLAGHER: Can I ask a question?
3
MR. STOUTAMIRE: Certainly.
4
CFO GALLAGHER: There is a boating safety study in
5 process. Are you
familiar with that?
6
MR. STOUTAMIRE: Yes, sir, I understand that the
7 contract will be let
sometime next month and we'll be
8 looking at the results
of that project as it goes through.
9 Although I do
understand that they don't anticipate having
10 it finished for a
couple of years. But we will be looking
11 at the results as we
move forward through this rulemaking.
12
CFO GALLAGHER: Well, that's good that -- that makes
13 it somewhat of a
quandary. Because if you're doing your
14 rules and the boating
safety study comes in and conflicts
15 with that, that means
I guess we have to consider that
16 when it comes -- and
make rule changes, right?
17
MR. STOUTAMIRE: That would be correct but we can't
18 predict what the
study will come out with. I would
19 anticipate that as a
result of the study, presuming it's
20 finished in a couple
of years, we'll be back in front of
21 you looking at any
number of sections of the rules and
22 perhaps looking at
legislation on the regulatory side of
23 the shop in
addition. But I can't predict the outcome.
24 Last time we looked
at number of slips and we did not look
25 at private
residential slips was back in the mid 1980s
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1 with the Blue Urban
Marina Commission. And that hasn't
2 been updated since
then so the information is 20 years out
3 of date.
4
CFO GALLAGHER: Well, you know, I personally think
5 and I think a lot of
people would agree that, if anything,
6 we probably have a
shortage of slips. And, you know,
7 we've got dual
pressures here. One group doesn't want to
8 build anymore.
Another group needs a place to put their
9 boat.
10
MR. STOUTAMIRE: Understood. And our job is to try
11 to, at least in this
draft rulemaking, try to tread the
12 line between the
two.
13
CFO GALLAGHER: Exactly. Okay. So you recognize
14 that.
15
MR. STOUTAMIRE: Finally, we are making one
16 additional
modification to the delegations. As currently
17 drafted, the
delegation speaks to final Agency action
18 being reserved to the
Board of Trustees for certain
19 facilities that
exceed size, size thresholds. For
20 example, private
easements over 5 acres or facilities that
21 involve 50 or more
boat slips. This creates the odd
22 situation that if a
project is up for denial, say, for
23 example, somebody
wants to build a facility and refuses to
24 give us the
conservation easement that's required by rule,
25 we, as staff, cannot
deny that project. We have to bring
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1 it to the Board for
denial.
2
We are proposing to change the delegation to speak to
3 where the proposed
Agency action is approval of a project
4 for these size trigger
thresholds, that those would have
5 to be brought to the
Board. That denials simply based on
6 size would not have to
come to the Board. Please note
7 that the heightened
public concern provisions remain in
8 effect. And if a
denial raises heightened public concern
9 issues with respect to
resources or other public policy
10 reasons, such
projects would, in fact, be brought to the
11 Board. And I
would note the WCI item was brought to the
12 Board as a denial
primarily because of heightened public
13 concern in addition
to the size issue. So this would not
14 change substantively
much of the items you'd see. Would
15 just remove the
requirement that we bring more or less
16 proforma denials to
you.
17
THE GOVERNOR: All right. Do we have speakers?
18
MR. STOUTAMIRE: I believe we have speakers.
19
MS. ARMSTRONG: You have eight speakers.
20
THE GOVERNOR: Eight?
21
MS. ARMSTRONG: Yes, sir. The first one is Jim Brown
22 from Fish and
Wildlife Commission. He's going to talk to
23 you about that study,
Treasurer Gallagher.
24
THE GOVERNOR: And we are going to be brief --
25
MS. ARMSTRONG: Yes, sir. We have Pat Rose, Tasha
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1 Buford and Peggy
Mathews.
2
THE GOVERNOR: Good morning.
3
MR. BROWN: Good morning, Governor and cabinet, thank
4 you very much. I
just wanted to give you a brief outline
5 of the study that was
mentioned by Treasurer Gallagher.
6 We are doing a
three-phase study. We received a grant
7 for -- did I misspeak
there? We received a grant for $1.2
8 million from the U.S.
Fish and Wildlife Service. We have
9 additional Agency
funds and funds from Lee County who
10 would like to be the
pilot on this study. The first phase
11 of this study is an
inventory. We hope to inventory
12 marinas, dry storage
facilities, mooring fields, boat
13 ramps, and docks
including private docks.
14
We're not sure if we're going to get that far with
15 the amount of money
that we have. We will certainly get
16 to multifamily
docks. But we do hope to get to private
17 facilities as
well.
18
THE GOVERNOR: Aren't all docks theoretically
19 permitted?
20
MR. BROWN: Excuse me?
21
THE GOVERNOR: Aren't docks permitted?
22
MR. BROWN: Yes, sir.
23
THE GOVERNOR: Couldn't you just -- rather than -- I
24 mean, how are you
going -- why would it take forever or
25 take a lot of money
to be able to identify the number --
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1 at least the number of
permitted docks wouldn't be that
2 hard, would it?
3
MR. BROWN: Yes, sir. We plan to look at all the
4 contractors that we
negotiate with. We will look at all
5 avenues of collecting
that information.
6
THE GOVERNOR: Clerk of the courts? I mean, that
7 shouldn't be that
hard.
8
MR. BROWN: Yes, sir.
9
THE GOVERNOR: If you're going to go count them all,
10 that might be a
little more difficult.
11
MR. BROWN: And there are some, of course, that
12 aren't permitted that
do add into the equation. So that's
13 why it is important
to take a look at what's out there as
14 well.
15
Phase 2 of the project is mapping, actually taking
16 all the information
we collect from the inventory and
17 placing that into a
GIS format. We'll be able to identify
18 where all the
marinas, boat ramps, and where all the
19 facilities are in the
state. And the third phase is
20 looking at the
current and future supply and demand
21 projections of
recreational boating access in Florida. We
22 want to look out to
20 years down the road to figure out
23 what those
projections will be in Florida. And that's
24 just a brief summary
of our project.
25
THE GOVERNOR: Thank you. Any questions? Thanks.
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1
MR. BROWN: Thank you, sir.
2
MR. ROSE: Good morning, Governor, members of the
3 board.
Appreciate this opportunity to address you this
4 morning. My name
is Pat Rose. I'm an aquatic biologist
5 with the Save the
Manatee Club and also be speaking on
6 behalf of 18 other
environmental organizations saving you
7 some time. So my
comments will be a little more lengthy
8 than it might have
been had it been me speaking only for
9 our
organization. But I'll try to be succinct and go
10 through it
quickly.
11
In my background and 13 years working with the State
12 of Florida managing
its marine mammal and protected
13 species programs, in
particular working with manatees,
14 we've had to deal
with boating issues over a long period
15 of time. I've
started in this work in the late '70s and
16 have designed and
conducted many boating studies in that
17 process. And I
was very encouraged to hear that the
18 commission is now
going to go out and update some studies
19 that haven't been
updated for about 20 years and do the
20 complete shoreline
surveys to get an idea of what is there
21 and then project out
future needs.
22
I'm going to reference in my discussions this morning
23 some of those that
have been done historically but just
24 touch on the high
points.
25
THE GOVERNOR: All right.
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1
MR. ROSE: I guess the main point I would like to
2 leave you with today
so if I lose you in any part of the
3 rest of it is this
rule that has come before you and
4 they're going out for
proposed rule, is not an emergency.
5 There is no
overwhelming need to make a change now. It's
6 a rule that's been in
place for 20 years. It's working
7 well.
8
Do we need to look at adjustments in it, minor
9 adjustments like you
asked for when WCI came before you?
10 We reviewed their
project and their request. We thought
11 that was a reasonable
request. We felt that the decisions
12 you made to make
adjustments to the rule and exceptions
13 were
appropriate. They had very large ships -- large
14 boats that they
wanted to dock. The 40 to 1 rule was
15 restrictive on them
because the sort of trend in Florida
16 is towards larger
boats for the wet slip. So we think
17 that those kinds of
adjustments ought to be looked at and
18 they are
appropriate.
19
But to eliminate entirely the sliding scale which has
20 worked so well the
last 20 years so that you didn't have a
21 lot of extra docks
being built that weren't being
22 utilized. In
fact, the last study, and the reason for
23 that rule change 20
years ago is because that was
24 happening. We
need to -- what we're asking you to do and
25 I'll just mention
quickly, the other organizations that
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1 are asking the same
question, is that you would take more
2 time with this rule,
defer the action on the proposed rule
3 at this time and send
it back either to the submerged
4 lands technical
advisory committee that used to meet and
5 work on the issues and
try to work out controversies
6 before they came back
here and we'd ask you to look at
7 that and consider
that.
8
We'd ask you to consider the kinds of data that would
9 be necessary to
understand what changing a rule that's
10 been in place 20
years will cause. And we don't think
11 that those
implications of the rule have been well thought
12 out. We think
information is available for you to look at
13 that, for staff to
look at that. But real quickly, the
14 organizations also
that are asking that same request are
15 the Animal Welfare
Institute, Conservancy of Southwest
16 Florida, Defenders of
Wildlife, Environmental
17 Confederation of
Southwest Florida, the Florida Consumer
18 Action Network, the
Friends of the Everglades, the Florida
19 League of
Conservation Boaters, the Florida Office of
20 Southeast Clean Water
Network for Florida Public Interest
21 Research Group.
Floridians for a Sustainable Population,
22 Florida Wildlife
Federation, Gulf Restoration Network, the
23 Legal Environmental
Assistance Foundation, the Pegasus
24 Foundation for Save
the Manatee Club, Sea Turtle Survival
25 League, sierra Club,
Tropical Audubon and Wildlife
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1 Advocacy Project.
2
Just for example, and I know you guys are busy. But
3 information,
scientific studies are very important in
4 understanding what the
implications are. Your charge, as
5 you know, as the
trustees of Florida is to try to balance
6 this very difficult
process of providing public access,
7 providing facilities
for those people who are the riparian
8 interest along our
waterways. At the same time, balancing
9 that with the resource
protection.
10
Unfortunately, it isn't as simple as just what you
11 permit by either
letter of consent or by lease as to what
12 is built on that
site. Many other things happen. And
13 once those boats
leave those facilities, this is a direct
14 connection to those
secondary and cumulatative impacts.
15 Going back as far as
1983 when this Board directed the
16 Blue Ribbon Marina
Siting Committee to come forward with
17 recommendations on
statewide Marina Siting, there were a
18 number of
recommendations made and some were followed,
19 some weren't.
20
Interesting enough, that committee which was made up
21 of mostly boating
interests with one enviromental
22 organization which
was Florida Audubon on it, made
23 profound
recommendations, most of which have not been
24 followed. And
today, we're finding ourselves in this
25 predicament where
there is a competing interest, if you
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1 will, between access
and protection of the aquatic
2 resources. We're
asking you to reaffirm that kind of
3 direction and direct
staff to go out and obtain the kind
4 of information
necessary to give you an intelligent choice
5 in making changes to
these rules that is responsive to
6 what's happening today
and will be responsive to what is
7 going to happen in the
future.
8
I understand that time is short. I have a lot of
9 other things I would
like to say but I'll limit it to a
10 couple of other
points. We feel that the Department
11 doesn't understand
just how radical a change this is. We
12 think this will not
only open up a lot of new dock
13 construction based on
the proposal that's before you for
14 new facilities, and
that's not necessarily bad. But where
15 it is and how it is
and the ins and outs of that is what's
16 important to
understand.
17
THE GOVERNOR: Do you think it's radical?
18
MR. ROSE: Pardon me?
19
THE GOVERNOR: You said this radical not specific in
20 the rule --
(Inaudible.)
21
MR. ROSE: Yes, the elimination of the unit to slip
22 ratio. If you
consider -- this is for condominiums now
23 primarily. You
can build them 10, 15 stories high
24 oftentimes. You
can have hundreds of units. And to this
25 point, even though
you had very large numbers of units,
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1 the larger the
facility you have today in the rule, the
2 less percentage of
slips they can have over the sovereign
3 submerged lands.
This would take that sliding scale out
4 and give you up to one
to one. That in and of itself is
5 one of the ways it
would do that.
6
Secondly, then if you didn't adjust the 40 to 1
7 ratio, however, as Jim
said in his introduction, a lot of
8 those facilities would
run up against the 40 to 1
9 limitation. But
this rule also proposes to make
10 exceptions to the 40
to 1. So at the same time that
11 you're increasing
number of slips that can be built,
12 you're also
increasing, potentially, the amount of
13 preempted area that's
available for them to do that. And
14 if you do that,
that's not just prospective. It's also
15 going to be looked at
in terms of all the facilities that
16 have been built over
the last 30 years in Florida, and
17 particularly the last
20 years that have been under this
18 rule.
19
THE GOVERNOR: People can come back in and say we
20 want to apply to the
new ruling and expand existing
21 marina.
(Inaudible.)
22
MR. ROSE: Yes. And let me make it clear. We are
23 not opposing
development of new slips. We're not opposing
24 development of new
boat ramps and those kinds of things.
25 We're saying that we
need to use the best science in that
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1 process and we've had
a lack of marina siting in Florida
2 for a long time.
3
And what I'd like to point to, about the only -- in
4 my estimation, the
only substantial information we have on
5 this kind of
information and marina siting has come,
6 unfortunately, on the
backs of the manatees through the
7 Manatee Protection
Plan which I know you strongly endorse
8 and a lot of good work
has been done in particular
9 counties. So
we're way ahead of the game in a number of
10 counties where
manatees have been a key issue and a
11 driving force on that
because those local governments have
12 worked with the
various agencies and the boating groups
13 and the environmental
groups and have come forward and
14 done responsible
boating -- excuse me, marina siting
15 plans.
16
And I need to leave you because when I'm done, I'm
17 done. There are
going to be a series of boating speakers
18 coming behind me and
they're going to tell you there is a
19 crisis out there and
that there are not enough slips
20 available and you
need to do something right away. Well,
21 rebuilding the docks
from the hurricanes is a crisis and
22 we absolutely support
the ability for those folks to
23 rebuild their docks
as they were before. We've always
24 maintained that
position even in prior hurricanes and
25 issues that have come
before you. We have supported that
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1 rebuilding. I
wanted to make sure that's clear.
2
However, citing just a couple of examples for you.
3 In Indian River
County, in their 2002 Manatee Protection
4 Plan, on Page 37, it
states that the boat facilities
5 single-family docks
was approximately 50 percent in terms
6 of their capacity, as
still being available. Brevard
7 County, January 2003,
the current overall occupancy rate
8 for wet and dry slips
was estimated at 54 percent and
9 62 percent
respectively. In Volusia County, March 2004, a
10 draft report.
In the ICW portions of Volusia County along
11 the Intercoastal
waterways, they're at 88 percent so
12 they're coming close
and they're going to be needing some
13 capacity pretty
soon.
14
The St. Johns River, they're at 63 percent. They
15 don't expect to meet
capacity in the St. Johns until the
16 year 2020.
Those are just some examples for you because
17 you're going to hear
the opposite side of that. And I
18 think there are
places in Florida where they are at
19 capacity and they do
need new slips. And those slips, I
20 think, will come
forward whether or not this rule is
21 changed or not.
22
The most recent study that's been done by Sea Grant
23 on boater needs and
wants, if you will, was just finished
24 in Sarasota and
Manatee County. The survey respondents
25 within that 2004
study by Sea Grant, there was .8 percent
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1 of the boaters said
there were inadequate docks and ramp
2 facilities is one of
their concerns there. And that's
3 just Sarasota and
Manatee County. That just gives an
4 example of .8 percent
of those respondents. They listed
5 things like boating
safety and boating education and law
6 enforcement and all
those kinds of things, were much
7 higher needs for
them. Things that have been well
8 understood that we do
need in Florida for a long time.
9
And so what I'm suggesting to you is that we feel
10 that there are some
adjustments that would be appropriate
11 to the 18-21
rules. But that this goes too far, too fast
12 and is not based in
the kinds of information necessary to
13 make the intelligent
lasting decisions like they made 20
14 years ago and have
brought this rule forward to this time
15 and had it worked
well.
16
And I'll leave you with a recommendation by the Fish
17 and Wildlife
Conservation Commission and then I'm going to
18 close. And I
appreciate your indulgence and the time.
19 There's a lot more I
would have liked to have said because
20 this is an issue I've
spent my life working on frankly as
21 a boater, a
fisherman, a scuba diver and underwater
22 photographer trying
to balance these things because I
23 think it's important
that we do that but we base it on
24 science. I'm
just going to find that one quote and bring
25 it to an end.
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1
There was a recommendation in a letter that was sent
2 to the Department of
Environmental Protection by the
3 imperiled species
section of the Fish and Wildlife
4 Conservation
Commission. In that letter, quote, We
5 strongly recommend
that the ratios for slips and amount of
6 preempted area not be
changed unless it provides a clear
7 benefit to the natural
resources and is consistent with
8 long-term manatee
protection planning.
9
Just to mention that because we're not -- these 19
10 environmental
organizations aren't by themselves in
11 concerns for this but
we do pledge that we want to work
12 with and have
historically worked with this process and
13 we'll be glad to
continue to do that to find a fair and
14 balanced rule that
will protect the resources and provide
15 for future boating
access in Florida. Thank you for your
16 time.
17
THE GOVERNOR: Thanks.
18
MS. ARMSTRONG: Okay. Tasha and Peggy.
19
MS. BUFORD: Governor and Board, I'm Tasha Buford.
20 I'm with the law firm
Youngvan Assenderp and I represent a
21 variety of commercial
marina interests and residential
22 development.
23
THE GOVERNOR: Can you move the mic just a little bit
24 more?
25
MS. BUFORD: Better?
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1
THE GOVERNOR: Better.
2
MS. BUFORD: Tasha Buford with Youngvan Assenderp and
3 we represent a variety
of commercial marina interests and
4 residential
development. We have followed the rule
5 development effort for
the year and think the staff has
6 done a superb job at
trying to balance environmental
7 concerns and concerns
of the industry to open up more of
8 the waterfront for
public access as well as additional
9 development.
10
We are simply urging you to initiate rulemaking.
11 These concerns on
both sides can be worked out in much
12 detail. It's
now been a year. The development has gone
13 well, we think.
We're not entirely happy with it. I
14 understand the other
group are not. We're simply asking
15 for an opportunity to
formalize this and move forward so
16 all issues can be
resolved in the rulemaking process.
17 We're not close to a
final rule, but we do think the staff
18 has done an excellent
job so far at balancing everyone's
19 interests so we're
simply asking for an opportunity to
20 initiate the
process. We do think the staff has looked
21 very hard at
balancing more access to the water and
22 environmental
concerns and in deriving more public benefit
23 for anyone who seeks
to avail themselves of the rule. So
24 we just ask for your
support and let the staff move
25 forward and all these
issues will be hashed out in all the
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1 detail that they
deserve. Thanks.
2
MS. MATHEWS: Good morning. I'm Peggy Mathews and
3 I'm with the Florida
Marine Contractors Association which
4 are the actual dock
builders. I'd like to say I'm going
5 to waive my time in
support of the comments that will
6 follow me made by John
Sprague in the Marine Industries
7 Association. I
would like to state though your comments
8 on the emergency
repair order and the concern over the
9 deadline was very
accurate. We appreciate your
10 recommendation for
DEP to extend the deadline because it
11 was causing panic to
commence work with the homeowners
12 along with the dock
builders that were also impacted by
13 this storm so we
appreciate that recommendation. Thank
14 you.
15
MR. SPRAGUE: Good morning. John Sprague, Marine
16 Industry Association
of Florida. And I operate one of
17 those marinas that
was 100 percent destroyed by Hurricane
18 Jeanne. I
understand the rebuilding issues and whatever.
19 I will tell you
though, we had a very good meeting with
20 Secretary Castille
yesterday laying out all of our
21 problems and the
rebuilding and whatever. She's coming
22 out with a document
that clarifies so we understand what
23 commencement is and
the 60 days and how all that works.
24 And, secondly, she's
going to hold workshops around the
25 state that we can
bring in all of our engineers ourselves
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1 and whatever in each
one of the districts. So they have
2 an understanding as we
redo our designs and whatever that
3 we can work hand in
hand so we know exactly what DEP
4 requests and DEP knows
what we're doing. So I just wanted
5 to say that was very
positive and we appreciate it.
6
This is a real simple issue. 1985, DEP did a study
7 that said most
multifamily docks around the state of
8 Florida weren't being
utilized. And therefore, it would
9 allow them
proliferation of multifamily docks that weren't
10 being utilized is not
good public purpose. We agree with
11 that. And being
a boater back then, I understand most the
12 docks, even our
marinas back in those days were pretty
13 empty. But this
is 2004, this is 18 years later. And
14 regardless what Pat
says, I will tell you in south Florida
15 there is a crisis in
critical shortage of docks. Let
16 permitting drive this
issue. All we're asking you to do
17 is if you did a
public policy issue in 1986 that said we
18 need to restrict the
numbers being built and now we're
19 over here in 2004
saying wait a minute. Now it's the
20 other way around and
we need to go back to the policy
21 decision what's good
for the public. And water access is
22 good for the public
in the state of Florida.
23
Every time we get a condo person that can't utilize
24 his boat in his own
condo facility, he's going to go to
25 one of our public
marinas and suck up one of those few
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1 remaining public slips
we have. And because he's a
2 waterfront homeowner,
he can pay the dollars and cents.
3 And it's a right that
we just rescind the ratios, not the
4 right that if you want
to do fees, whatever, that's part
5 of your proprietary
obligations and we understand that
6 totally.
7
THE GOVERNOR: What about the question of existing
8 marinas going back
into DEP now and saying new rules apply
9 we're restricted now
want to expand--
10
MR. SPRAGUE: It's a case by case. I mean, anybody
11 that has been --
12
(Off-the-record discussion.)
13
MR. SPRAGUE: Well, they would be allowed to do it.
14 They would be allowed
to apply for an ERC permit. And as
15 you well know, the
permit process in the State of Florida
16 has stopped water
access for the last four years because
17 of lawsuits.
Anybody that applies, you don't
18 automatically get
this multifamily dock, you've got to
19 apple to the Core, to
U.S. Fish and Wild Life, to the
20 State of Florida and
everybody for a permit to expand.
21 The marina siting
criteria and the manatee protection
22 plans, all that is
going to dictate to you whether that
23 existing condo can
build an additional slip. It's not an
24 automatic because you
rescind your rule that says, We're
25 not giving you an
arbitrary ratio. We're going to allow
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1 you to apply.
Doesn't mean you're going to go through the
2 permit process.
Doesn't mean you're going to get all the
3 slips you want.
You may not get any. But at least it
4 gives them the ability
to apply. Under the ratios we're
5 even proposing today,
we've locked their hands in
6 handcuffs and said,
You can't apply even if you wanted to
7 or the application
that you can do is very minimal.
8
THE GOVERNOR: Well, I'll save my comments --
9
MR. SPRAGUE: This is jobs. It is the economy. It
10 is real estate
values. It is boat manufacturers in the
11 state of Florida of
not having places to put them. It has
12 tax basis having to
do with our cities, our counties, and
13 our state
government. It is major economics through the
14 state of
Florida. Thank you very much.
15
THE GOVERNOR: Thank you.
16
MS. ARMSTRONG: Eric Draper, then Bonnie Basham.
17
MR. DRAPER: Eric Draper, Audubon of Florida. I want
18 to comment first on
the beautiful bird photography you
19 have in the room here
today. Thank you very much.
20
THE GOVERNOR: It's much more appropriate than some
21 of the pictures we
have in the cabinet.
22
MR. DRAPER: Anyway, take off on that, and just on
23 what John said, and
just say that also represents part of
24 the economy of
Florida. There's a lot of money spent by
25 people going out and
staking out those birds and taking
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1 those pictures, buying
computers and all the other stuff.
2 So that's an important
part of our economic base. I'm
3 going to make my
comments brief here and just say that we
4 have a couple of
comments about the rule. We just want to
5 note as was indicated
-- with the description one of the
6 trends going on in the
state of Florida that does not
7 mention the cabinet
item is the increased conversion of
8 our waterfront areas
to developed areas resulting in a
9 loss of habitat in
many cases.
10
We have a couple of issues with the rules that I'm
11 going to raise here
and I'll be very quick with it. The
12 rules seemingly good
provision, which is allowing the
13 consolidation of
single-family dock structures is
14 outweighed by a
couple of factors. One is that these
15 would now be allowed
simply by a letter of consent even in
16 an aquatic preserve
area and, in fact, can be located
17 more -- or will end
up being located more in a situation
18 in an aquatic
preserve where you could have the damage
19 then, would be the
case for the single-family dock.
20
We also think there is some additional incentive with
21 these multifamily
dock structures for people to put in
22 docks that otherwise,
in the multifamily, put in slips
23 that otherwise
wouldn't be there in order to lease them
24 out. There's a
big business in the state of Florida right
25 now if you're an
individual slip holder or you simply have
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1 waterfront land
leasing your slip or your waterfront
2 capacity. And
this, of course, is a public benefit that's
3 granted to the
homeowner that's then leased sometimes with
4 hundreds and hundreds
of dollars. That ought to be taken
5 a look at.
6
The proposed 40 -- the exception to the 40 to 1 ratio
7 is too
open-ended. And I won't get into the details on
8 that because I know
you're in a hurry. And the
9 replacement of
multifamily dock structure with a one to
10 one ratio is too much
relaxation of that important rule.
11 And, again, we'll
just get into the rulemaking process
12 with our comments
directly to the Agency. Thank you very
13 much.
14
THE GOVERNOR: Thank you. Please.
15
MS. BASHAM: I'm Bonnie Basham and I'm here
16 representing the
Florida Council of Yacht Clubs and
17 Standing Watch.
And before I make my very brief comments,
18 this is the first
chance I've had to see all four of you
19 guys in the same
place. So let me take a minute to the
20 cabinet and
especially to you, Governor, we can't thank
21 you strongly enough
for the strong confident leadership
22 that you showed
during the hurricanes. I can tell you, I
23 was in towns all over
this state and it felt so good to
24 turn on the
television set and have you standing there
25 saying, We're going
to come back. So thank you so much.
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1 We really do
appreciate it.
2
THE GOVERNOR: Thank you, Bonnie.
3
MS. BASHAM: I was going to tell you that you're
4 everybody's big
brother but I wasn't sure you wanted to
5 hear that. I'm
usually the one that's asking you guys to
6 slow down and form a
committee and stop the rule and all
7 that kind of
stuff. But I've work with the Department for
8 over a year now on
this rule. I think it's come a long
9 way. I think
it's got a few more glitches that need to be
10 straightened
out. But I urge you to go forward with it.
11 At the same time, I'm
going to urge you to direct the
12 staff to continue to
work on the ratio issue.
13
That ratio, as you heard John say, was put in back in
14 1986 in a totally
different world, in a totally different
15 time. We
believe that the ratio needs to come out and the
16 environmental
permitting process which is so much stronger
17 now needs to be the
thing that drives the number of slips
18 and the size of the
docks as people make those
19 applications.
We look forward to working with the
20 Department and we
really would ask you to ask the staff to
21 reconsider that ratio
and bring it out and make -- take
22 all those pieces of
it out and let the permitting process
23 drive the
process. Thanks.
24
THE GOVERNOR: Thank you.
25
MS. ARMSTRONG: That's all the speakers on this rule.
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1
THE GOVERNOR: What is the timing of the rulemaking
2 process from here on
out if we decide to go forward?
3
MR. STOUTAMIRE: Where we are now, we've conducted
4 six public workshops
on this rule, three back in January
5 and three in
June. We had modest participation as is
6 typical before you
enter the more formal process part of
7 the rulemaking
process. If we move forward here today, we
8 would publish a notice
of proposed rulemaking. We'll hold
9 a minimum of two
public hearings, a more formal type of
10 input, probably more
and would anticipate making -- coming
11 back to you-all
sometime after the first of the year with
12 a proposed rule with
whatever amendments come up and are
13 accepted during that
hearing process in the January or
14 February time
frame. There are some time clocks in the
15 rulemaking but we can
keep it going for a fairly long
16 period of time.
If you want more details though, I'd have
17 to ask Bud.
18
THE GOVERNOR: That's fine. It was a general
19 question. I
have a little bit of a concern that a lot of
20 this, I mean these
rules are focused on the balance that
21 we all want to
achieve, access versus protection of the
22 waters. So
these rules either -- I mean, the main
23 objective is to try
to calibrate supply, trying to figure
24 out what the proper
supply is that would balance
25 protection of the
natural environment and access. And as
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1 we grow, there will be
greater demands on access but also
2 greater pressures on
the natural systems.
3
It makes the challenge even more difficult to find
4 that common
ground. And I'm a little concerned that -- I
5 didn't hear too much
specificity about supply and demand.
6 And what happens if we
change a rule -- I could see how
7 that would change for
new -- going forward new permits,
8 new marinas. But
the impact of the existing marina space,
9 how many people -- not
necessarily entities would come
10 back to expand marina
space. I'm more than happy to go
11 forward with this
rule. But before I would be supportive
12 of a rule, I think
there needs to be a lot more
13 information given to
me personally at least. I can't
14 speak for anybody
else. About the impact these rules --
15 what is the existing
supply and demand situation and what
16 the -- what these
rules would do to change that
17 relationship because
the best of intentions could yield a
18 bad result. We
don't want to do that. Without that data
19 I don't know how you
can make that calibration, you know,
20 the proper
balance.
21
MR. STOUTAMIRE: As I said earlier, we'll be looking
22 at ongoing results of
the FWC study.
23
THE GOVERNOR: But by February are you going to have
24 it?
25
MR. STOUTAMIRE: No, sir.
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1
THE GOVERNOR: So what's the point? I mean, in other
2 words, you do not want
to put us in a position whereby
3 permitting we are
individually, with each unique case,
4 trying to determine
how much supply should be in existence
5 because then it
becomes arbitrary and capricious. You
6 want the rules to do
that and then the permits to be able
7 to deal with the
nuances, you know, the -- not every
8 marina would be
exactly the same. I mean, isn't that
9 correct? That's
why the rulemaking process is being --
10
MR. STOUTAMIRE: Understood. And we have proposed to
11 relax the unit to
slip ratio to, quite candidly, provide a
12 little bit more
flexibility in the number of vessels that
13 were put within a
facility --
14
THE GOVERNOR: And I think that's fine.
15
MR. STOUTAMIRE: -- under the 40 to 1 cap but we did
16 not want to simply
remove, as many have asked us, the 40
17 to 1 cap because then
that would throw the door wide open.
18 We did allow an
exception to the 40 to 1 cap under some
19 very limited
circumstances and where the exception was
20 fully aired in front
of the public, in front of you-all,
21 and that was as far
as we were prepared to go upon
22 relaxing the rule at
this time. Whether we can go any
23 further, two years
down the road on the basis of the fish
24 and wildlife study or
not is a question I can't answer
25 right now. It's
a good balance at the moment.
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1
THE GOVERNOR: Treasurer, please.
2
CFO GALLAGHER: One of the things that happens when
3 you establish a ratio
is that you also establish the
4 value. And you
start making slips extremely expensive
5 because of the lack of
availability. So that's another
6 thing you have to also
consider. And I don't think we
7 want to make boating
impossible for everybody to afford.
8
MR. STOUTAMIRE: I believe that's going on right now.
9 And, in fact, the
ratio we have now would allow fewer
10 slips than the
proposed one to one. But of course it
11 depends on what size
vessels you want to market to within
12 the 40 to 1
limitation. If you're marketing the large
13 boats, inherently,
you're going to get fewer slips than if
14 you're marketing the
smaller boats.
15
CFO GALLAGHER: Right. But for whatever it's worth,
16 larger boats create a
lot of economic plus compared to a
17 small boat. I
mean, a small boat buys fuel. A large boat
18 buys fuel, food, and
has employees, and has all kinds of
19 other things.
And in most cases, extremely
20 environmentally
better than what small boaters can
21 possibly do.
22
MR. STOUTAMIRE: Depending on the location, yes, sir.
23
CFO GALLAGHER: In most cases. Well, that's our job
24 to see what the
location is. Anyway, I just want to make
25 sure that we consider
-- you know, boating is one of the
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1 reasons people like
living in Florida and that we should
2 have available that
resource to people. Obviously keeping
3 the environment in
mind and looking at what the ratios are
4 and I mean, I know
we're doing the boating safety study
5 but we probably ought
to use a slip availability study
6 somehow or another and
see what this market really is.
7 And my gut says that
there just isn't enough available
8 marinas and slips for
people to keep their boats.
9
COMMISSIONER BRONSON: Can I ask a question also,
10 Governor, if I
can?
11
THE GOVERNOR: Sure, Commissioner.
12
COMMISSIONER BRONSON: The thing that -- and I've
13 seen this in every
town where there's a little fishing
14 village anywhere in
the state and I don't care which side
15 of the state you want
to go on. And especially in Brevard
16 County where you have
got people coming up and down the
17 Intercoastal, to me,
it seems more practical to have a
18 place for those
people to put those -- to dock those boats
19 or ships than to get
offshore and throw out an anchor
20 somewhere and anchor
for a day or two while they're
21 visiting the
area.
22
It seems to me that the more damage is going to be
23 done by throwing
those big anchors out than it is by
24 putting it in a dock
where it can be kept properly. And
25 so I think the
treasurer has a good point about is there
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1 enough slips to make
sure that people have a place to dock
2 and that their boats
are taken care of and that their
3 fuel, refueling is
done right and so forth rather than
4 having people just
anchor offshore there or in the
5 Intercoastal someplace
and actually do more damage, in my
6 opinion, to the bottom
than otherwise would be done by
7 putting a slip
in. That seems to be one of the questions
8 I'd like to get an
answer to.
9
CFO GALLAGHER: Well, I know a lot of these questions
10 aren't answerable at
this point. Let's do this. I'd like
11 to move ahead with
this rulemaking. I think you've heard
12 comments from up here
and what we think. You've heard out
13 there. You have
a lot of interests to deal with. We're
14 going to see it again
when it comes back. And you guys
15 are the ones that
have to sit here and cut the baby before
16 you deliver it to
us. And we have a recut process if
17 necessary.
18
THE GOVERNOR: Do we have to say that?
19
(Laughter.)
20
CFO GALLAGHER: I don't mean a human baby. I'm
21 talking about the
rule baby. It will be a grown-up rule
22 by the time it gets
here. How's that? Didn't want to
23 create that vision
for sure. But you have a lot of
24 interests to work
with. You got a big project going. I
25 think it's a very
important project and I think it's an
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1 opportunity to look at
the marketplace and see to it that
2 we're taking care of
that and all the other issues,
3 especially what
Commissioner Bronson said. So with that,
4 I will make the motion
to move ahead.
5
THE GOVERNOR: There's a motion.
6
COMMISSIONER BRONSON: Second.
7
THE GOVERNOR: There's a second. I would just like
8 to add that when this
comes back to us from my
9 perspective, if you've
not had an accurate assessment of
10 where we are today in
terms of supply and what the demands
11 are and if you don't
have an accurate assessment of what
12 the proposed rule
will do to change that, then I will
13 be -- I'd be very
concerned. And so if it means we have
14 to wait a little bit
to get the information, I'd rather
15 wait a few months to
get accurate information than to pass
16 a law that then has
consequences we've not thought through
17 that would require us
to come back and change whatever we
18 were doing. So
if that guidance helps, that would be
19 great.
20
MS. ARMSTRONG: Yes, sir. Got it. Very helpful.
21
THE GOVERNOR: Any other discussion? There's a
22 motion and a
second. Without objection, the item passes.
23
MS. ARMSTRONG: Great. And on Item 10, which is a
24 consideration of a
request to publish a notice of proposed
25 rulemaking regarding
amendments to Chapter 18-21 that
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1 would adjust some fees
associated with the usage of
2 sovereignty submerged
lands and clarify certain rule --
3 current rule
provisions, Bud Vielhauer will walk you
4 through those proposed
rule changes. This will be briefer
5 and we only have two
speakers on this one.
6
CFO GALLAGHER: Let me ask a question on this. I see
7 one of the things
you're doing is to provide a 10 percent
8 discount to facilities
participating in clean marina or
9 clean boatyard
program.
10
MS. ARMSTRONG: Yes, sir.
11
CFO GALLAGHER: Does that include pumpout stations
12 and things like that
for the clean?
13
MS. ARMSTRONG: Yes. We can have somebody address
14 clean marina.
But the discount is to encourage more
15 people to get into
the clean marina program.
16
CFO GALLAGHER: Okay. Because what I've seen at
17 marinas is that -- I
mean, almost every marina I see, the
18 pumpout station isn't
working.
19
MS. ARMSTRONG: Well, if you're in the clean marina
20 program, it's
supposed to be working.
21
CFO GALLAGHER: Well, I don't know whether they're in
22 the clean marina
program or not. All I know is if they
23 have a pump place,
there's a big sign on it "out of
24 order". There's
a lot of marinas with that. I don't know
25 why but there
are. Just my two cents.
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1
THE GOVERNOR: Yeah, General.
2
GENERAL CRIST: Could you just give me a brief
3 discussion of the
fee?
4
MR. VIELHAUER: Sure. I can actually -- part of what
5 I was going to do is
explain our current fee structure,
6 the way it's set up in
the rule calls for people who lease
7 sovereignty submerged
lands from us for commercial marina
8 operations to pay us
under one of two formulas. And that
9 is they either pay the
greater of a square footage charge
10 which runs, I think
right now, about 13 cents per square
11 foot or 6 percent of
their revenue, whichever is greater.
12 So that's the way our
current fee structure works.
13
Now after the WCI item, we decided to go back and
14 take a look at that
fee structure and do some workshops to
15 see if it needed to
be tweaked or if there needed to be
16 anything changed
about it and we heard three interesting
17 comments that came
out of it. The first comments -- or
18 basically three
different sizes. We heard a number of
19 people say that they
would like to see us completely
20 eliminate the 6
percent charge and go to a straight square
21 footage charge.
22
Then we heard a number of people say that they would
23 actually like to see
an elimination of the square footage
24 charge and go to a 6
percent charge. But then what we
25 found out is that the
overwhelming majority of folks
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1 thought that there
really isn't anything wrong with our
2 rules so don't fix
them. And I think after going through
3 this exercise we came
to the conclusion that that latter
4 is probably the more
accurate statement. Our rules really
5 aren't broke.
6
While going through this process, we did find out
7 that there were some
glitches in there that we probably
8 needed to tweak a
little bit and tighten up a little bit.
9 And so basically,
that's what this rule is. It's more of
10 a glitch rule -- or a
glitch fix than anything else. And
11 first of all, what
we're going to do is redefine the word
12 "income".
13
What we've been finding through this process is that
14 folks have been
getting fairly creative when it comes to
15 the 6 percent charge
and how they were calculating what
16 6 percent of their
revenue was. And they were starting to
17 come up with saying
things like, Well, we're not -- you
18 know the lease in and
of itself that we're giving to
19 somebody isn't just
for the slip, it's for a pool. And in
20 one instance, we
found out that somebody was actually
21 saying, Well, we're
not actually charging for the slip so
22 you're not entitled
to 6 percent because what we're doing
23 is selling a parking
space for your car out there. If you
24 buy a parking space
from us, you get a free slip in the
25 water so we don't owe
you anything.
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1
So we decided to go back and look at the definition
2 of "income" and fix
that, kind of make sure that that's
3 tightened up better
and it covers revenues associated with
4 the sovereignty
submerged lands and tries to prevent
5 people from being so
creative in trying to avoid paying us
6 our fair share.
7
The second thing that we did was to go back and
8 redefine "first come,
first serve". Currently, the way
9 it's written, it says
first come, first serve means first
10 come, first
serve. It's circular. So when we saw that we
11 thought, you know
what, I think it's probably something we
12 need to fix. We
had a number of people that were actually
13 selling slips for a
long-term basis over 25 years saying,
14 Hey, we just put in
this marina. We decided to sell a
15 slip. We're
opening it up to the general public, whoever
16 is the first person
to come in, they can buy their slip
17 for 25 years.
That's open to the public. We don't have
18 to pay it. We
should be entitled to the 30 percent
19 discount for being
open to the general public.
20
So we've tightened that up to say that if somebody is
21 open to the public on
a first-come, first-serve basis
22 means it's a
short-term lease. Somebody that's leasing
23 their facility is out
for no more than a year. So that's
24 to try to tighten up
that glitch.
25
The second, as Treasurer Gallagher just pointed out,
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1 is the Clean Marina
Program. One of the incentives to try
2 to get people into the
Clean Marina Program, and what that
3 is, that's a program
that's administered by DEP and it has
4 a number of specific
criteria, very rigid criteria that
5 you must meet to be
able to be part of this program.
6
If you are able to get a clean marina status and
7 become part of this
Clean Marina Program or Clean Boatyard
8 Program, we're going
to give you an additional 10 percent
9 discount. And we
are also going to waive a 25 percent or
10 a lease fee or,
excuse me, a lease application charge for
11 extended term
leases. A lot of people who come to the
12 Clean Marina Program
want to have a longer term lease up
13 to 25 years. If
they want to do that, we're going to
14 waive the application
fee if they are in the Clean Marina
15 Program.
16
But one of the things we did do is tie the Clean
17 Marina Program to the
actual leases and that is if
18 somebody violates the
term of our leases, not only if they
19 are kicked out of the
Clean Marina Program, but if they
20 violate the term of a
lease which isn't tied to the Clean
21 Marina Program, they
will lose that discount. So if we
22 have somebody who
isn't paying us rent or somebody who is
23 parking outside of
their lease boundaries, they'll lose
24 that 10 percent
discount for the Clean Marina Program.
25
And, finally, one of the things that came up in WCI
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1 that was an amendment
by Treasurer Gallagher in the WCI
2 item was to require
additional 6 percent or additional
3 charge of fees for
every subsequent transfer. So, in
4 other words, if we
issue a lease to a facility owner, he
5 subleases it, when
that sublessee sells that interest,
6 another 6 percent
comes back to the Board of Trustees. We
7 have now included that
back into the lease as we did in
8 the WCI item. So
that's what we are doing -- those are
9 the changes to this
lease, our rule.
10
THE GOVERNOR: All right. Do we have speakers?
11
MS. ARMSTRONG: Yes. John Sprague and then Sylvia
12 Alderman, please.
13
MR. SPRAGUE: First of all, I'd like to thank staff
14 for working on this
rule with us. This is not easy, it's
15 complicated and it
has a lot of implications. We concur
16 with trying to
tighten up the stuff when people are
17 supposed to pay their
6 percent, they need to. We do have
18 still, some concerns
on the language that it's capturing
19 other things that
they admit that they don't intend to
20 capture either.
But it's difficult to come up with that
21 language to
accomplish both tasks in one view.
22
Clean Marina Program, very good program. It was
23 voluntary. Real
tough to get that certification, but we
24 are trying to get all
of our public marinas, boatyards and
25 whatever in the state
of Florida signed up. We appreciate
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1 those
incentives. Helps us to get them, as a business
2 decision, to join that
process. There is one thing we
3 would like you to add
to that, however. We do have a
4 problem with
live-aboards around the state of Florida.
5
THE GOVERNOR: Call them what?
6
MR. SPRAGUE: Live-aboards around the state of
7 Florida. It is a
major issue. It has all kinds of
8 different
components. You presently have a policy or
9 whatever that says,
Live-aboards cannot be on State-owned
10 waters for any more
than six months.
11
What we would like you to do is add this and remove
12 it that we bring them
into our marinas in the Clean Marina
13 Program. Where
we have them anchored all over the state
14 where we can't
control whether they're discharging their
15 garbage and all other
issues. If we bring them into our
16 marinas we can ensure
that environmental compliance. But
17 we've got a present
-- we have a rule or policy that
18 blocks this from the
one place that we can stop pollution
19 at. So we would
ask you if you would include that.
20
Secondly is the extended term lease fees. If you're
21 going to waive the
fees, I and everybody else are going to
22 come and apply for an
extended term lease. Think about a
23 standard 25-year
clean marina standard lease. If you
24 violate lease
positions or leave the Clean Marina Program,
25 you will revert back
to a standard lease and lose it. We
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1 believe that incentive
is enough to make sure that
2 everybody keeps
complying because that extended term for
3 banking reasons and
all kinds of reason.
4
I remember when AG Butterworth, his concern was, How
5 do I know that you are
a good environmental partner to
6 give you a long-term
extended lease. The Clean Marina
7 Program is the answer
to that. We recertify every single
8 year and we can show
you as Governor and cabinet, sitting
9 as trustees that we
are good partners and deserve that
10 25-year extended
lease. That's it. I appreciate it. The
11 staff has been very
good. We're working on this.
12 Complicated
issues. Thank you.
13
CFO GALLAGHER: Let me just mention after that. I
14 happen to agree with
what he's saying with live-aboards.
15 If you set it at six
months, then what ends up happening
16 is people anchor
out. They can anchor out whatever they
17 want. You've
got no control what they are pumping out or
18 what they are
doing. And we'd be much better off having
19 them at a marina
where we know they're not doing it
20 because the marina is
going to be in charge of making sure
21 they're not
discharging and pumping. And if you have a
22 six-month rule what
happens is they keep replacing
23 different people
every six months so you still have the
24 live-aboards
there.
25
So to me, something doesn't make sense in that and I
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1 wish you all would try
to get to the bottom of it.
2
MS. ARMSTRONG: Well, I think we have two problems
3 here. One,
technically, we're on the fee rule.
4 Live-aboards are on a
different rule that we haven't even
5 opened up here.
But the bigger issue, and it's one that
6 the cabinet is going
to -- the staff is wrestling with now
7 because we're not sure
what to do, is it's becoming the
8 alternative for
affordable housing. Big time in the Keys.
9 We're seeing it in
Apalachicola River, but it is
10 everywhere. If
you use that, use your picture in your
11 head, it is not a
pretty picture if all of a sudden the
12 affordable housing
alternative for Florida is the water.
13 Imagine what the
state would look like if you took John
14 Cristo's (phonetic)
pink islands and you turned it into
15 house boats.
The Keys would no longer exist the way we
16 see them today.
17
So I don't think live-aboards is the answer. And
18 we've got to find
one. But today the fee rule is not the
19 place to put
live-aboards. So --
20
CFO GALLAGHER: Well, I mean, I understand that. But
21 you can set some
rules on what a live-aboard is too. It
22 doesn't have to be
some kind of shack sitting on a barge.
23 And if you step right
outside of Coconut Grove in Miami,
24 you will see some of
the most derelict things you could
25 imagine that people
are living on. And, I guess, you
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1 know, a hurricane
comes through once in awhile and cleans
2 them out. But
somebody else ought to be cleaning them out
3 before the hurricane
does. And I would expect it's
4 somebody's
responsibility. I don't know whether it's the
5 City of Miami, or Dade
County, or DERM or you guys or who,
6 but somebody.
7
MS. ARMSTRONG: Board of Trustee staff. Right.
8 We're going to bring
you Card Sound Road as soon as we get
9 it --
10
CFO GALLAGHER: There's another place. I mean,
11 there's things that I
don't even know how they're floating
12 and people are living
on them --
13
MS. ARMSTRONG: In many cases, they aren't.
14
CFO GALLAGHER: -- with their dogs.
15
MS. ARMSTRONG: Big problem.
16
CFO GALLAGHER: I mean, they are living on them with
17 their dogs and their
cats and they row themselves in.
18 It's crazy.
19
THE GOVERNOR: Firmly the foundation is the crud that
20 comes off the bottom
of it.
21
CFO GALLAGHER: They're probably sitting on the
22 bottom for all I
know.
23
MS. ARMSTRONG: Gave me an opportunity so I thought
24 I'd open the door
just a crack.
25
CFO GALLAGHER: Thank you.
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1
THE GOVERNOR: All right. Thank you.
2
MS. ALDERMAN: Good morning. My name is Sylvia
3 Alderman. I'm
with Ackerman Senterfitt and I'm here
4 representing MLG
Capital LLC and Sunset Harbor Marina,
5 Incorporated.
And we believe --
6
THE GOVERNOR: Where are they from? Can you tell me
7 where they are from
just so we can --
8
MS. ALDERMAN: Jacksonville.
9
We believe that the State is entitled to its fair
10 share for the use of
sovereignty lands and we agree that
11 the rule works as was
stated earlier. However, we also
12 understand that there
are a couple of loopholes that you
13 should want to cover
and address. Unfortunately though,
14 the attempt to deal
with the loopholes has resulted in or
15 will result in
unanticipated and unfair charges to certain
16 clients. And so
we would request that you give us the
17 opportunity through
rulemaking to discuss an alternative
18 approach in talking
about membership fees and subleases
19 because you're
capturing some things that you don't need
20 to capture in there
and allow us to discuss at prevailing
21 market rate
approach. Thank you.
22
THE GOVERNOR: The rulemaking process allows that to
23 happen, right?
24
MS. ARMSTRONG: Absolutely. Yes, sir.
25
THE GOVERNOR: Okay. Thank you.
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1
MS. ARMSTRONG: Those are the speakers.
2
THE GOVERNOR: Any other discussion?
3
CFO GALLAGHER: Move it.
4
THE GOVERNOR: There's a motion.
5
COMMISSIONER BRONSON: Second.
6
THE GOVERNOR: And a second. Any other discussion?
7 Without objection, the
item passes.
8
MS. ARMSTRONG: Thank you, sir.
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1
THE GOVERNOR: State Board of Administration.
2
CFO GALLAGHER: Motion on the minutes.
3
GENERAL CRIST: Sec.
4
THE GOVERNOR: There's a motion and a second.
5 Without objection,
Item 1 passes.
6
MR. STIPANOVICH: Thank you, Governor and members.
7 Item No. 2 is a
request for approval of fiscal
8 determination of
amount not exceeding 100 million Florida
9 Housing Financing
Corporation homeowner and mortgage
10 revenue bonds.
11
GENERAL CRIST: Motion on 2.
12
CFO GALLAGHER: Second.
13
THE GOVERNOR: Moved and seconded. Without
14 objection, the item
passes.
15
MR. STIPANOVICH: Item No. 3 is request for approval
16 of fiscal
determination of amount not exceeding 19,965 tax
17 exempt Florida
Housing Finance Corporation multifamily
18 mortgage revenue
bonds.
19
THE GOVERNOR: Is there a motion?
20
CFO GALLAGHER: Motion on 3.
21
GENERAL CRIST: Second.
22
THE GOVERNOR: Moved and seconded. Without
23 objection, the item
passes.
24
MR. STIPANOVICH: Item No. 4 is an item that is
25 similar to what you
do with the pension plans investment
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1 policy statement where
Tom Wallace, executive director of
2 the Florida Prepaid
Program has two comprehensive
3 investment plans, the
Florida Prepaid College Program,
4 which is A under Item
4 and B, the Florida College Savings
5 Program and they are
revising those two comprehensive
6 investment plans and
I'm presenting on behalf of Tom
7 Wallace. Mr.
Nicholson, Bill Nicholson is here to answer
8 any questions if you
have questions.
9
The proposed changes were recommended by the prepaid
10 college staff and
Watson Wyatt, the national renowned
11 consultant and the
Florida Prepaid College Board approved
12 the investment
advisor which is part of the process. And
13 on October 5th of
2004 the State Board of Administration
14 investment staff has
reviewed the recommendations and
15 supports the
changes. I'll be happy to answer any
16 questions.
17
CFO GALLAGHER: Motion on 4.
18
GENERAL CRIST: Second.
19
THE GOVERNOR: Moved and seconded. Without
20 objection, the item
passes.
21
MR. STIPANOVICH: Thank you, Governor.
22
Item No. 5 is a good cause item the treasurer asked
23 to be put on the
agenda. It's a conceptual proposal that
24 addresses the
concerns that many of you would have
25 regarding the
deductible for policyholders and the
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1 Catastrophe Fund might
play a role in that. And we have
2 this on the agenda
item for discussion only and would be
3 happy to answer any
questions. I have Dr. Nicholson with
4 me from the Cat
Fund.
5
THE GOVERNOR: Maybe -- would it make sense,
6 Treasurer, that we get
a quick review of what the Cat Fund
7 looks like these days
after getting hit by four storms.
8
CFO GALLAGHER: I think that would be a very good
9 thing if Dr. Nicholson
could give us that. He probably
10 has that right in his
head.
11
THE GOVERNOR: Good afternoon.
12
DR. NICHOLSON: Good afternoon. Can --
13
THE GOVERNOR: Move it just a little bit, if you
14 could.
15
DR. NICHOLSON: This is an update of the four storms
16 this season.
And I've got several numbers here but I'd
17 like to clarify what
they are. The first numbers on
18 Hurricane Charley,
the 6 billion was the modeled estimated
19 loss from all the
models that we used. So the first
20 number you see there
for each of the hurricanes is an
21 average of the
modeled losses.
22
The second number, the 4.9 billion for Hurricane
23 Charley, is the
number that the companies have reported to
24 us in their
preliminary claim -- their loss reports for
25 the residential loss
in Florida. So these are all Florida
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1 residential
losses. They are not total insured losses.
2 The slash then after
Charley, the 1.4 billion is what we
3 would expect the Cat
Fund to pay for Hurricane Charley
4 claims.
5
THE GOVERNOR: Now, the difference between the 6
6 billion and the 4.9 is
it's still work in progress or are
7 those models
incorrect?
8
DR. NICHOLSON: Yeah, I wouldn't want to say the
9 models are necessarily
incorrect because we're not going
10 to know until the end
of the day what the actual ultimate
11 losses are going to
be. And the 4.9 actually includes
12 some model losses
itself because we got those reports from
13 companies. One
company may be using the RMS model, one
14 might be using the
EPICAT model. One may be using --
15
CFO GALLAGHER: What the difference is, correct me if
16 I'm wrong, 6 billion
models that the Cat Fund staff came
17 up with based on the
average. The 4.9 billion is what the
18 companies have with
real losses and with their modeling
19 think they are going
to have and the 1.4 is the amount
20 after you take the
4.5 out there is 1.4 left that the Cat
21 Fund is probably
going to have to pay.
22
DR. NICHOLSON: Right.
23
THE GOVERNOR: So there is a big difference --
24 there's a $1.1
billion difference between the model and
25 the actual.
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1
CFO GALLAGHER: That's the guesstimate.
2
DR. NICHOLSON: Yeah, and this is a work in progress.
3 We're one-fifth of the
way through this hurricane in terms
4 of paying
claims. And that holds for the industry as well
5 as the Cat Fund.
6
THE GOVERNOR: The other hurricanes look a little
7 closer except for
Jeanne which has still got a long way to
8 go.
9
DR. NICHOLSON: Jeanne, two of the models are really
10 high on that.
One of the models is a little lower. So I
11 think that accounts
for that high number. But I think
12 in -- when you add up
the total hit to the Cat Fund on all
13 these hurricanes,
it's greater than what we'll have to pay
14 because what happens
is that some of the companies will
15 cap out their losses
in an earlier storm. Their limited
16 on how much they can
get out of the Cat Fund. So that
17 number is estimated
to be about $2 billion. That's a
18 reduction of the 3
billion that we were talking about
19 earlier, Treasurer
Gallagher. Because this is actually
20 some reports we
received last Friday and have just
21 compiled.
They're reports from insurance companies.
22
CFO GALLAGHER: So I see you reestimated down a
23 billion.
24
DR. NICHOLSON: Right.
25
So the total losses, and this is total residential,
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1 14.5 billion, it's a
model number. The 11.4 billion is
2 what we're getting
from the insurance companies. That may
3 or may not be a model
number but that's the raw report
4 from the insurance
companies that we're getting.
5
CFO GALLAGHER: Now for whatever it's worth, in
6 Hurricane Andrew, the
insurance companies kept lowballing
7 time after time until
it finally got up to the $16
8 billion. I think
because of the models -- and I'm not
9 saying they did it on
purpose. But, you know, they just
10 kept hoping it was
better than it was. With the modeling
11 now, and if they use
a pure model, it looks like they are
12 overestimating from
the small amount of experience we've
13 had which I think
will be a better outcome. I'd rather
14 see them over and
make sure they have enough money and
15 then it be less and
have them underestimate and find out
16 we take 12 of them
into receivership which is what we had
17 to do in Hurricane
Andrew. So all in all, I think we're
18 probably closer to
estimates than we were back then.
19
DR. NICHOLSON: I have another --
20
THE GOVERNOR: But the Cat Fund over the weekend
21 saved a billion
dollars.
22
CFO GALLAGHER: They can go up a billion too. Don't
23 be spending that,
Governor. We got another season coming.
24 Actually, we're not
finished with this one.
25
DR. NICHOLSON: This slide illustrates of the 232
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1 companies
participating in the Cat Fund that signed
2 contracts on June 1,
225 that have reported to us. Seven
3 have not
reported. That may be because some of those are
4 petitioning to get out
of the Cat Fund. They don't have
5 exposure or
whatever. At any rate, of those of 225, 191
6 have had losses and
about 34 have not had losses, 33 or
7 34.
8
THE GOVERNOR: How could you not have a loss this
9 year just out of
curiosity? Not a single --
10
DR. NICHOLSON: You got to understand. Some of these
11 companies don't write
a lot of business. They have a very
12 small Cat Fund
premium. They may write accommodation
13 business.
They're mainly in the commercial lines area but
14 they'll write the
chief executive's home in Duval County
15 or something maybe
didn't have a loss.
16
CFO GALLAGHER: Sitting in Dade County or something.
17
DR. NICHOLSON: These are very small companies in
18 terms of the Cat Fund
premium.
19
CFO GALLAGHER: And the premium would be very small.
20
DR. NICHOLSON: The next column shows that of the
21 companies that had
losses, 191, 123 triggered the Cat Fund
22 and about 102 did not
trigger the Cat Fund.
23
CFO GALLAGHER: These are companies.
24
DR. NICHOLSON: Companies.
25
THE GOVERNOR: Do you have a copy of this for us
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1 afterwards so I can
--
2
DR. NICHOLSON: Yeah, I wasn't sure you were going to
3 ask me but I'll give
you a copy of all this.
4
And in the last column it shows of those that
5 triggered the Cat Fund
coverage how many exhausted their
6 limit and there's 44
that exhausted the limit under all
7 storms and 48 that did
not exhaust their limit.
8
CFO GALLAGHER: How about explaining an exhausted
9 limit to us.
10
DR. NICHOLSON: Each company has a certain amount of
11 coverage provided in
the Cat Fund. That coverage is
12 defined by a
retention or a deductible, if you will. And
13 it's basically their
share of a $4.5 billion industry
14 deductible. So
whatever premium they pay, it's basically
15 allocated or prorated
based on the premium.
16
THE GOVERNOR: Shouldn't the 44 and 48 be equal to
17 the 123 or not?
I mean, why is that number smaller than
18 the triggered?
Did I misunderstanding that?
19
DR. NICHOLSON: It may be a math error on my part.
20 I'll check that.
21
THE GOVERNOR: Should it be?
22
DR. NICHOLSON: It should be. Exactly. It should be
23 123 and I apologize
for that. I messed up really big
24 there. I think
it's the 44 subtracted from the 123 that
25 should be the number
instead of the 48 and 9 exhausting.
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1 It should be a bigger
number there.
2
CFO GALLAGHER: Sixty something.
3
THE GOVERNOR: So you think only 44 will access cash
4 from the Cat Fund?
5
DR. NICHOLSON: No. There's 123 that will access
6 cash but only --
7
THE GOVERNOR: I'm sorry, only 44 will get to
8 whatever their
preestablished total amount --
9
DR. NICHOLSON: Their maximum amount, right.
10
THE GOVERNOR: The rest of them were creeping up.
11
DR. NICHOLSON: Right. And they could have done that
12 under Hurricane
Charley, for example. I have numbers for
13 Charley and so
forth.
14
CFO GALLAGHER: When you say "nonexhaustive" what you
15 really mean is they
have not applied for the amount that
16 they are limited
to?
17
DR. NICHOLSON: Right.
18
CFO GALLAGHER: Does that mean because they can't or
19 they haven't yet?
20
DR. NICHOLSON: They haven't yet.
21
CFO GALLAGHER: But they will?
22
DR. NICHOLSON: They probably won't in terms of the
23 reports they've given
us and what their losses are. They
24 probably won't
trigger the Cat Fund based on their own
25 estimates.
Excuse me, they probably won't exhaust the Cat
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1 Fund based on their
estimate. They will trigger the Cat
2 Fund.
3
CFO GALLAGHER: They just won't go to the max because
4 they had smaller
losses in the particular areas hit than
5 the industry had?
6
DR. NICHOLSON: Right. Right.
7
THE GOVERNOR: So it's the actual -- the reason
8 why -- the Cat Fund is
not accessed globally so therefore
9 the amount going out
would be less than the cumulative, if
10 you look at it from a
cumulative amount.
11
DR. NICHOLSON: Yeah. What I was explaining earlier.
12 The retention of the
deductible is basically an allocation
13 of that 4.5
billion. So there is a deductible every
14 company has to absorb
for each storm. It's a per event
15 deductible. But
the overall coverage is their share --
16 each company's share
of the 15 billion capacity. So it's
17 that 15 billion
capacity that 44 -- their share of that
18 pie -- I always
explain it like we have a pizza here and
19 we all had a certain
share of that pizza -- that's all we
20 get to eat.
Forty-four of those companies have eaten
21 their piece basically
and they get no more. And that's
22 for the entire
season, how that's explained.
23
CFO GALLAGHER: What do you mean entire season?
24 That's by per
storm. The 15 billion is by season?
25
DR. NICHOLSON: By season, right. It's a multiple of
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1 24 times --
2
CFO GALLAGHER: And that's what we need to look at in
3 order to figure out
how we have a by season but also
4 change what the by
storm is for --
5
DR. NICHOLSON: Well, you can't change the by season
6 without increasing the
capacity of the Cat Fund because
7 it's a fixed
capacity. So that is basically allocated to
8 each company for that
season. And then once it's gone,
9 it's gone. But
that's what private reinsurance is for, to
10 fill in the gaps and
coordinate.
11
CFO GALLAGHER: Right. Then how would we change the
12 retention on a per
storm basis? We can do that without
13 changing the per
season gross?
14
DR. NICHOLSON: Right. And this is something that
15 you and I talked
about and it's been mentioned. The
16 problem, just like
with multiple homeowners deductibles,
17 insurance companies
have multiple Cat Fund deductibles.
18 And one of the things
that we can do, it would take
19 legislation to do
this, is to limit after so many storms
20 the amount of
deductible or retention they pay. One of
21 the ideas that was
suggested is in order of fairness and
22 so the order of
storms will not complicate things is to
23 apply two full
retentions or two full deductibles to the
24 highest storm events
for each insurer.
25
And then for the third and fourth and so forth, to
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1 drop that to about a
quarter or a third or something like
2 that so that those
retentions are easier to meet and
3 therefore we'd be
paying more out for claims. And the
4 probability of four
events is very small anyway. So that
5 would not affect the
calendar --
6
CFO GALLAGHER: Unless you're Governor Bush and then
7 you get to have them
all.
8
DR. NICHOLSON: It does happen.
9
CFO GALLAGHER: Okay. And one of the things I think
10 we should do at one
of these meetings, I don't know when,
11 when you get a chance
to get us all educated, is to make a
12 recommendation for
the Legislature. And one of the
13 issues, and correct
me if I'm wrong, but I want my
14 colleagues to at
least understand where I'm coming from on
15 this is that
reinsurance for companies is negotiated for
16 the year in
January. And most of those treaties have a
17 replenishment, second
storm, what do we call that?
18
DR. NICHOLSON: Restatement.
19
CFO GALLAGHER: Restatement. So if a company is
20 buying reinsurance
for the first four and a half billion
21 dollars and they pay
$100 million in premium, or let's say
22 they are buying $100
million worth of coverage and they
23 are paying $10
million for premium and they have a $50
24 million loss, they
can reinstate by paying $5 million and
25 get back to $100
million in coverage for the next storm.
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1 But they don't really
get that for a third one. There is
2 no third bite.
3
So if we're going to make sure that the companies
4 pass on to their
policyholders by law that they can't hit
5 them with a triple
deductible in one season, they would
6 hit them with a
percentage deductible for a storm and
7 maybe a fixed
thousand-dollar max from a second and third
8 storm, we wouldn't
have the Cat Fund match the reinsurance
9 they are buying by
saying first storm, like you said X
10 number of dollars, 3
billion or something like that.
11
Second storm, 3 billion and then drop to 750 million
12 after that.
That's something that we should do prior to
13 the negotiations in
January, whatever that would be if we
14 could get the
Legislature to do that so that the companies
15 aren't paying twice
for -- in other words, they wouldn't
16 negotiate a contract
in January and then let's say if
17 session comes up and
they have to renegotiate that. And
18 usually when you're
forced to renegotiate, you get shorted
19 on the short end of
the stick. So I think there's two
20 issues that I would
be interested in seeing pushed
21 forward. One
would be a choice by someone what their
22 deductible is.
One, two, three, four, 5 percent. And a
23 small second third
storm deductible, $500,000. Because I
24 do think they need
skin in the game. That would be one
25 side of it.
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1
And the other side would be that we would set up our
2 reinsurance State fund
to match what's available out in
3 the private
marketplace. And those two things, I think,
4 would be important for
us to ask the Legislature to look
5 at in a special
session that would come because I think
6 they are timely and
the planning and the renewal of
7 policies in order to
get -- you know, it takes a year to
8 get these policies all
changed for people for the next
9 season. And the
sooner you start changing, the better off
10 everybody is.
11
THE GOVERNOR: What you're suggesting maybe I
12 misunderstood.
There was a -- included in that is also
13 the elimination of
the single-event deductible --
14
CFO GALLAGHER: Multiple.
15
THE GOVERNOR: That you would go -- it would be per
16 season.
Individuals would buy insurance per season.
17
CFO GALLAGHER: Right.
18
THE GOVERNOR: Or per --
19
CFO GALLAGHER: Per season. I think you do it -- you
20 get one
deductible. You pick 1 to 5 percent. You get a
21 5 percent
deductible. And then if there's another storm
22 coming then you're
down to a thousand dollars and then
23 next one a thousand
dollars and you'd have still some skin
24 in the game.
But you wouldn't be -- and we've seen people
25 hit with two
15,000-dollar deductibles. And now they're
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1 sitting with $30,000
which they can't get their hands on
2 and that's the issue
here. Nor did they have a choice of
3 what they
bought. They were sort of forced by the law and
4 what the companies
interpreted that law to be and that's
5 the way it was.
And then there's a whole bunch of people
6 saying, Well, I didn't
know I was getting that and, My
7 agent didn't tell me,
et cetera.
8
If they have to actually sign and say, I am buying a
9 1 percent deductible,
I am buying a 5 percent deductible,
10 there is no, I didn't
know. They made that decision. And
11 I think that's the
kind of thing we ought to make
12 available to the
citizens of Florida and let them make
13 that choice for a
season. And then the smaller annual
14 deductible.
15
THE GOVERNOR: Can you -- based on -- I agree with
16 the treasurer on the
concept. Can you develop some
17 suggestions that we
could submit? I mean, we could do it
18 individually or we
could do it as the state board. First
19 of all, the one
question I had, there's been some
20 confusion about what
does the State Board of
21 Administration have
in its own authority to do and what
22 is -- what requires
statute change? You may need to
23 answer that
first.
24
DR. NICHOLSON: We've got a couple of lawyers here
25 that can help me out
with that. But let me go ahead and
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1 try to address that
first. I think, first of all, as the
2 State Board of
Administration, you have a trustee duty to
3 the Cat Fund and to a
trust fund, that is to manage it in
4 a way that was
contemplated by the law within the statutes
5 and so forth. So
there's a limitation, I would think, and
6 certainly on how you
use the money because it's specified
7 in the law how the
money can be used, enumerated how it
8 can be used. And
there's certain requirements, for
9 example, you must
charge an actuarially, an annual
10 actuarially indicated
premium. So that is a requirement
11 in the law.
12
CFO GALLAGHER: As provided by a consultant.
13
THE GOVERNOR: Which we do every year.
14
DR. NICHOLSON: Which you do every year. So those
15 limitations, I think,
and it's basically from a trustee
16 standpoint, of us
giving you advice. Basically our advice
17 is always going to be
pointed in that direction. You'd
18 have other hats that
might broaden the scope of what you
19 want to do. But
I think our advice to you would have to
20 be limited. You
want more from the attorneys on that
21 or --
22
THE GOVERNOR: Yeah, I would. Because there's a
23 little friction here
on the --
24
CFO GALLAGHER: Well, my friction is slowing down a
25 lot
unfortunately. I've done some research with some of
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1 our lawyers just to
see how far we can go and without
2 having a great big
bloody court battle. I think there are
3 some things we can ask
the Legislature to do but there's
4 probably a limit to
what we could do and maybe should.
5
THE GOVERNOR: There may be practical things. I
6 think the Legislature
should be fully engaged in these
7 things out of -- it
was a big deal. This event impacts a
8 lot of their
constituents. I think it's important to have
9 them there. But,
having said that, I'd kind of like to
10 know what authority
we have to act in case they don't.
11
CFO GALLAGHER: Yes, sir.
12
MS. ALLEN: My name is Tracy Allen. I'm the attorney
13 for the Florida
Hurricane Catastrophe Fund. I don't know
14 the parameters of the
authority. I do know Paragraphs 3,
15 4, and 5 of 215.555
--
16
THE GOVERNOR: Whoa. What is that in English? Is
17 that the law?
18
MS. ALLEN: This is our governing statute. We have
19 one statute that
governs the Florida Hurricane Catastrophe
20 Fund.
21
THE GOVERNOR: Thank you.
22
MS. ALLEN: And it does provide some limitations, as
23 Jack said.
Paragraph 3 says that money in the fund cannot
24 be expended, loaned
or appropriated except to pay
25 obligations under our
reimbursement contracts. The
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1 mitigation provided
for in the statute, the revenues, debt
2 service on revenue
bonds and reinsurance and
3 administrative costs
of the fund. So if we took money out
4 of the fund, there is
some statutory problems.
5
In addition, as Jack mentioned, if you take money out
6 of the fund, we've got
this problem with the actuarially
7 indicated annual
premium. That would also -- I mean,
8 that's as an
aside. It wouldn't cause us IRS problems but
9 it does cause the
insurers IRS problems. We worked with
10 several insurers that
were being audited by the IRS and
11 they were basing the
disallowance of their deduction for
12 the Cat Fund
premium. The IRS felt it might not be
13 actuarially
indicated. I have a tax degree and I worked
14 in the -- I was a
litigator in the tax division of the
15 justice department
and I worked with our actuary in these
16 -- the actuary for
the IRS in Boston and showed them that
17 this is an
actuarially indicated premium. That each year,
18 we figure our
premiums based upon the services we're
19 providing just like
any other reinsurer. So that issue
20 has gone away for all
these participating insurers. So
21 that doesn't affect
the Cat Fund but that's just something
22 to keep in mind when
you work with actuarially indicated
23 premiums.
24
The other issue is if you alter the premiums that
25 they pay, by statute,
you're altering the amount of payout
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1 they get because it's
based on the premiums paid. So if
2 you're reducing the
amount of premiums paid, you're
3 reducing their
payout. So these are just some limitations
4 to keep in mind.
That without legislative change, it
5 makes it difficult to
accomplish what I understand your
6 objective is.
But with legislation, we still have to be
7 really careful so that
we do something good for the
8 insurers and the
policyholders and not inadvertently cause
9 IRS problems or
anything else. It's not going to cause
10 IRS problems for the
Cat Fund but I mean for the insurers.
11
CFO GALLAGHER: Well, I was looking to do the exact
12 opposite of that and
that would be reduce a premium
13 obligation to
increase payout which that would do back to
14 the consumer.
So that we could -- I mean, my goal is to
15 eliminate the payment
out of double deductibles. Now,
16 we're doing a pretty
good job at the Division of Consumer
17 Services with strong
cooperation from the Office of
18 Insurance Regulation
on an individual basis -- just so
19 you-all know
this. When, in fact -- there's a few things
20 working into this
dynamics. When you have two storms and
21 one neighbor gets hit
-- they both get hit with two storms
22 and one had an
adjuster go by and the other one didn't.
23 And because the
adjuster went by one, then he writes down
24 two storms and gives
the person two deductibles and the
25 other person didn't
have an adjuster come by. Not that he
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1 didn't want one, they
just didn't come. Now they had two
2 storms and he's got
one and he's got one deductible. Now
3 there's something
wrong in the marketplace with that and I
4 think there's --
5
THE GOVERNOR: We met the exact circumstance
6 yesterday in
Stuart. And --
7
CFO GALLAGHER: I think that's a market problem that
8 companies could be
punished for -- I mean, they are not
9 treating everybody
fairly. They can say they didn't know
10 but --
11
THE GOVERNOR: Well, here's a case this morning when
12 we started the
discussion this morning on insurance, we
13 were urging the
adjusters to get out quickly. Now, at
14 noon we're saying if
the adjusters didn't come out it's
15 unfair because --
16
CFO GALLAGHER: When they did it was unfair.
17
THE GOVERNOR: When they did it was unfair and it's
18 true. How do
you know -- you-all have a duty to -- you
19 work for the Fund and
the Fund is -- there are statutory
20 requirements to make
sure it's solvent and we're the
21 fiduciaries and all
that. But we also have an obligation,
22 I think, to the
people that eventually are supposed to be
23 benefitting from the
Cat Fund.
24
And I went around when the Cat Fund was created. But
25 I don't think there
was any discussion, you know, in 2004
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1 when four storms hit
us and there are places where you
2 have three events, we
need to factor that into the
3 legislation when it
was passed.
4
CFO GALLAGHER: It was never considered. And the
5 truth of the matter
is, I wasn't around in '96 when they
6 allowed 5 percent
deductibles either. And I guarantee you
7 nobody was thinking
three storms and what it was going to
8 do to the
individuals. Now maybe some insurance companies
9 figured that and said,
Boy, this is wonderful, we'll never
10 have to worry about
it. But I can tell you, the
11 legislators weren't
told, By the way, this could happen,
12 guys. Three
storms are going to hit. A guy is going to
13 get, 45-, $60,000
deductible and an impossible situation
14 where he can't even
get the mortgage to pay. He can get a
15 higher mortgage or a
new mortgage.
16
THE GOVERNOR: Hindsight is easy. I mean, I can see
17 why they wouldn't
have thought it.
18
CFO GALLAGHER: Well, it's not supposed to happen.
19
THE GOVERNOR: I'm still scratching my head wondering
20 how it happened.
21
But in any case, we, I guess, my request is that you
22 develop some
recommended strategies to deal with this
23 multi-event problem
that consumers have, that individuals
24 have that was not
anticipated, give us the best possible
25 solutions, there may
be more than one, so as not to create
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1 a problem with our
fiduciary responsibilities regarding
2 the Cat Fund.
3
CFO GALLAGHER: Which I think you mean would include
4 what we could or
couldn't do but also what statutory
5 changes we should
recommend.
6
THE GOVERNOR: Yeah. I'm assuming that it will
7 require statutory
change.
8
CFO GALLAGHER: I am convinced of that now although I
9 tried to get around
that.
10
THE GOVERNOR: Well, and even if it didn't, I think
11 it's the right thing
to do because this, again, is such a
12 big deal it's
important to have the Legislature involved.
13 So going forward any
recommendations to deal with
14 uniqueness of what
we've experienced is certainly part --
15 and your suggestions,
I think, at least from my
16 perspective, are
right on target there. And then dealing
17 with the aftereffect,
after-the-fact problem.
18
Now, as I understand it, there are probably a couple
19 of ways to deal with
this through the Cat Fund and there's
20 certainly a way to
deal with it directly through the
21 Legislature which is
to just write a check out of the
22 treasury. The
problems I have with that is that we don't
23 know how much money
that is yet and any help that you can
24 provide in that
regard would be very helpful in the next
25 few weeks.
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1
And, secondly, it may reward -- or may penalize the
2 good behavior that
insurance companies, as I understand
3 it, many insurance
companies have voluntarily not applied
4 the double deductible
or triple deductible, they've
5 considered this one
event. So you don't want to reward
6 their good behavior,
if you will, or penalize their good
7 behavior. So
there has to be some recognition of that.
8
CFO GALLAGHER: Well, in regard to the discussion we
9 had earlier about
transparency, it would be my goal as we
10 work through these
issues of double and multiple
11 deductibles on an
individual basis with the companies and
12 we end up with
certain companies that choose to treat
13 different customers
different ways based on when an
14 adjuster got
there. That's a market conduct issue in my
15 opinion. And
maybe we should discuss who they are and
16 what they're
doing. And if they'd like, they can come in
17 here and explain why
they're doing what they're doing.
18
But I think there's some public knowledge that needs
19 to go on these as we
move forward and let people know in
20 our opinion these
companies did not take care of their
21 customers in a fair
manner. They took care of some like
22 this and some like
this. And I think that's an issue that
23 can cause lawsuits
and it may be one that we have to bring
24 instead of letting
somebody else do it for whatever that's
25 worth.
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1
THE GOVERNOR: General, do you have any comments?
2
GENERAL CRIST: I think you're on the right track.
3
THE GOVERNOR: Any other?
4
DR. NICHOLSON: That last chart here shows what we
5 paid.
6
THE GOVERNOR: Can you put the title of that chart
7 down so I can see what
it says?
8
CFO GALLAGHER: Cumulative weekly reimbursements.
9
THE GOVERNOR: Can you now expand it back so I can
10 see it again?
11
CFO GALLAGHER: So what those are are September 23rd,
12 30th, October 7th,
14th, and 21st.
13
THE GOVERNOR: Oh, those are the dates down there.
14
CFO GALLAGHER: And now a little bit so I can read
15 what the colors
mean. Net advances, reimbursements and a
16 total.
Okay. So you've done some advances to companies.
17 Reimbursement and
total amount out on a weekly basis. So
18 you're getting money
out to the insured, the insurance
19 company, so they can
keep paying their claims.
20
DR. NICHOLSON: But within one week of submitting
21 loss reimbursement or
in advance, we've been able to turn
22 it around and get
money to --
23
THE GOVERNOR: Jack, before we finish, there's one
24 other question that I
had, which is as it relates to the
25 underwriting criteria
of the Cat Fund, there is a
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1 $10 million amount
that comes out of the Cat Fund every
2 year for a bunch of
things, tie-downs, research, shelters,
3 mitigation across the
spectrum. And then there is -- but
4 you also underwrite an
additional 10 million even though
5 it's not taken out of
the fund? You factor that in when
6 you create the --
7
DR. NICHOLSON: Let me explain. There is a minimum
8 that has to come out
of 10 million to meet our IRS
9 responsibilities to be
a tax exempt trust fund. They want
10 10 million to come
out. That money is allocated already
11 to DCA who then
breaks it down on what they use it for.
12 But the Legislature
can also appropriate 35 percent of our
13 investment income,
our total investment income for any
14 other mitigation
projects. And the amount of money that
15 we earned as of June
30th last year was $58 million.
16 We're earning like
1.7 percent because this is a very --
17 highly liquid assets
that we have. 1.7 percent,
18 $58 million, 38
percent -- 35 percent of that is about
19 $20,420,000. So
10 is already gone so that leaves another
20 10. I think
that's the 10 you're referring to.
21
THE GOVERNOR: Right.
22
DR. NICHOLSON: But that can only be mitigation.
23
THE GOVERNOR: And we've not -- except in one case
24 when the Cat Fund
generously allowed for the flooding
25 issues in Sweetwater
and west Miami to be taken care of.
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1 That money has been --
even though it's factored, you
2 assume that that money
will be spent on mitigation of some
3 kind in terms of how
you set the rates. It hasn't been
4 spent until --
5
DR. NICHOLSON: We assume that the 10 million is
6 going to come out
automatically every year.
7
THE GOVERNOR: I understand.
8
DR. NICHOLSON: The rest of it, we're actually
9 discounting our
rates. So that's what happens.
10
CFO GALLAGHER: But what does -- what could happen
11 here is -- I
personally have been a strong advocate of not
12 spending any more
than that 10 million and I'm probably an
13 advocate at this
point to spend the 10 million somewhere
14 else, I'll just let
you know that. I don't think it
15 matters to you where
it goes, you know it's gone. That is
16 something I think
that should be discussed where that
17 should go and there's
some different ideas people have.
18
And maybe even add the other ten to it and help with
19 affordable housing,
help with people to fix their homes,
20 individual homes
better, maybe set up something over at
21 the Florida Housing
Agency, something like that, to get
22 people low cost loans
and those kinds of things should be
23 looked at.
24
THE GOVERNOR: Well, I'm going to ask the secretary
25 of the Department of
Community Affairs to give us, if
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1 you-all are interested
-- give you-all a briefing as well.
2 But I'm going to get a
briefing on the efficacy of the
3 existing programs,
some of which I think have worked
4 quite -- expanding
shelter space was important. That's
5 part of this.
Tie-downs for mobile homes, it's incredibly
6 expensive. You
take the number of mobile homes that have
7 been tied down
compared to how much has been spent. That
8 review will be done in
the next few weeks. And then I
9 guess if you-all could
give us some sense if you did
10 spend -- take out the
extra 10 million, what impact would
11 that have on rates,
it would be helpful for me at least.
12
CFO GALLAGHER: Now, the other thing is, I think,
13 Jack, you're going to
have to work on, there is quite a
14 savings available to
be passed on to our customers to
15 counter whatever, you
know, annual increases would
16 normally come in if
we lower the retention somewhat. I
17 can start at 3
billion and other people might want to say
18 it's three and a half
or whatever. And use that in order
19 to really guarantee
-- and at the same time, make sure we
20 don't have the
multiple deductibles and that's sort of
21 where I'm coming from
on that. And that ends up costing
22 less money for the
insureds. And so it might be good to
23 know how much, a
little comparison, buying in the private
24 market compared to
buying it in the Cat Fund. If you
25 could give us those
numbers.
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1
THE GOVERNOR: In fact, it would be very helpful to
2 have that information
because there is some concerns about
3 the concept and I
don't necessarily have a position on it
4 because I don't quite
understand what the consequences
5 are. If we do
lower the retention, there could be -- puts
6 us vulnerable for
significant exposure. On the other
7 hand, I have no clue
what the insurance rates are going to
8 be for property owners
coming up. I assume --
9
CFO GALLAGHER: I don't know. But I can tell you
10 after disasters, two
things happen. The price goes up for
11 reinsurance around
the world and it does it because they
12 attract capital and
promise 30 percent returns to people
13 which means they have
to charge a lot of money for it.
14 And until the market
levels out and they realize they're
15 only going to get
about a 15 percent return, there's
16 plenty of money
available but it's very expensive. And we
17 can counter that for
our citizens by having a bit of a
18 lower retention.
19
THE GOVERNOR: But you could --
20
CFO GALLAGHER: But we need some numbers to look at.
21
THE GOVERNOR: Could you give us different scenarios
22 to show how that
would change?
23
DR. NICHOLSON: Yeah. I mean, and I've done this.
24 In the legislative
session we looked at it and we looked
25 at some numbers
recently. The Cat Fund premium itself
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1 would go up by about
30 percent, if it went from 4.5 to 3
2 billion. Now if
it's offsetting private reinsurance at
3 that level, I think
that depends on how you look at it. I
4 mean, some companies
look at it maybe as a benefit, others
5 don't. So the
school is out mixed on that. But the cost
6 of private reinsurance
below the Cat Fund is very
7 expensive. It's
probably about six times the cost of the
8 Cat Fund on
average.
9
CFO GALLAGHER: So what he's basically saying is
10 there is a cost of
about $300 million to the industry in
11 premium. And
there would be a cost of 18 -- 108 -- no 18
12 million.
13
THE GOVERNOR: 1.8 billion?
14
CFO GALLAGHER: 1.8 billion in the private industry.
15 I think you're right,
300 million six times, 1.8 billion.
16 So there's a huge
amount of savings that would be
17 available. Now
there are some companies that are very
18 large that would --
well, they insure -- they're parent
19 because they made all
little pups. They're parent
20 reinsurers and they
pay the money to their parent for that
21 reinsurance. So
they'd want to keep the money in the
22 companies as opposed
to having to go into the Cat Fund.
23 But that's their
choice. They can put it in the Cat Fund
24 too if they want.
25
Actually, they have to put it in the Cat Fund instead
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1 of the parent if we
change the retention, wouldn't they?
2
DR. NICHOLSON: Right.
3
CFO GALLAGHER: Which makes the Cat Fund bigger and
4 stronger.
Anyway, those are issues that I think we should
5 learn about because I
think it's necessary for us to
6 understand them and
advocate something somewhere along
7 that line to the
Legislature. And if we're going to
8 change it, we should
advocate it for the special session.
9
THE GOVERNOR: And if you could get this information
10 to us, we would --
within the next few weeks, it would be
11 great.
12
DR. NICHOLSON: We'll do that.
13
THE GOVERNOR: All right. Thank you. Thanks for the
14 discussion.
15
(Thereupon, the proceedings adjourned at 12:40 p.m.)
16
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20
21
22
23
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1
2
CERTIFICATE OF REPORTER
3
4 STATE OF FLORIDA )
5 COUNTY OF LEON )
6
7
I, KRISTEN L. BENTLEY, Court Reporter, certify that
8 the foregoing proceedings were taken before me at
the time and
9 place therein designated; that my shorthand notes
were
10
thereafter translated under my supervision; and the foregoing
11
pages numbered 1 through 160 are a true and correct record of
12
the aforesaid proceedings.
13
14
I further certify that I am not a relative, employee,
15
attorney or counsel of any of the parties, nor am I a relative
16
or employee of any of the parties' attorney or counsel
17
connected with the action, nor am I financially interested in
18
the action.
19
DATED this 11th day of November, 2004.
20
______________________________
21
KRISTEN L. BENTLEY, Court
Reporter
Notary Public
22
850-878-2221
23
24
25
ACCURATE STENOTYPE REPORTERS,
INC.
.
Cabinet
Affairs
