T H E C A B I N E T
S T A T E O F F L O R I D A
Representing:
ETHICS COMMISSION PROBABLE CAUSE
STATE BOARD OF EDUCATION
DEPARTMENT OF VETERANS' AFFAIRS
FLORIDA LAND AND WATER ADJUDICATORY COMMISSION
BOARD OF TRUSTEES OF THE
INTERNAL IMPROVEMENT TRUST FUND
DEPARTMENT OF AGRICULTURE
AND CONSUMER SERVICES
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 Thursday,
March 29, 2001, commencing at approximately
10:17 a.m.
Reported by:
LAURIE L. GILBERT COX
Registered Professional Reporter
Certified Court Reporter
Certified Realtime Reporter
Registered Merit Reporter
Notary Public in and for
the State of Florida at Large
ACCURATE STENOTYPE REPORTERS, INC.
100 SALEM COURT
TALLAHASSEE, FLORIDA 32301
850/878-2221
2
APPEARANCES:
Representing the Florida Cabinet:
JEB BUSH
Governor
TERRY L. RHODES
Commissioner of Agriculture
BOB MILLIGAN
Comptroller
KATHERINE HARRIS
Secretary of State
BOB BUTTERWORTH
Attorney General
TOM GALLAGHER
Treasurer
CHARLIE CRIST
Commissioner of Education
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ACCURATE STENOTYPE REPORTERS, INC.
3
March 29, 2001
I N D E X
ITEM ACTION PAGE
ETHICS COMMISSION PROBABLE CAUSE:
5
STATE BOARD OF EDUCATION:
(Presented by Wayne V. Pierson,
Deputy Commissioner)
1 Deferred 6
2 Approved 6
3 Approved 7
4 Approved 7
5 Approved 8
6 Deferred 12
7 Approved 13
8 Approved 13
9 Withdrawn 14
10 Approved 14
11 Withdrawn 14
12 Approved 15
DEPARTMENT OF VETERANS' AFFAIRS:
(Presented by Robin Higgins,
Executive Director)
1 Approved 16
2 Approved 17
3 Approved 17
4 For Information Only 19
FLORIDA LAND AND WATER
ADJUDICATORY COMMISSION:
(Presented by Teresa Tinker,
Secretary)
1 Approved 24
2 Approved 24
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March 29, 2001
I N D E X
(Continued)
ITEM ACTION PAGE
BOARD OF TRUSTEES OF THE
INTERNAL IMPROVEMENT
TRUST FUND:
(Presented by David B. Struhs,
Secretary)
1 Approved 28
2 Approved 41
Substitute 3 Approved 42
Substitute 4 Approved 44
Substitute 5 Deferred 44
Second
Substitute 6 Deferred 44
Third
Substitute 7 Withdrawn 45
8 Approved 46
9 Approved 63
10 Approved 64
DEPARTMENT OF AGRICULTURE
AND CONSUMER SERVICES:
(Presented by Sherman R. Wilhelm, III,
Division Director)
1 Approved 67
STATE BOARD OF ADMINISTRATION:
(Presented by Tom Herndon,
Executive Director)
1 Approved 71
2 Approved 90
3 Deferred 91
4 Approved 114
5 Withdrawn 116
6 Approved 118
7 Approved 118
CERTIFICATE OF REPORTER 122
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ETHICS COMMISSION PROBABLE CAUSE 5
March 29, 2001
1 P R O C E E D I N G S
2 (The agenda items commenced at 10:29 a.m.)
3 GOVERNOR BUSH: The first item on the
4 agenda is the Ethics Commission Probable Cause.
5 And I'm supposed -- Colleen's asked me to read
6 this.
7 Probable cause findings in the case of
8 Stephen MacNamara. Without objection from the
9 Cabinet, I'd like to forward the complaint to
10 the Division of Administrative Hearings for
11 further proceedings.
12 ATTORNEY GENERAL BUTTERWORTH: I have a
13 letter that I've -- I've submitted to you,
14 Governor, and the Cabinet members. Like to
15 have it as part of the record.
16 GOVERNOR BUSH: Okay.
17 (The Ethics Commission Probable Cause
18 Agenda was concluded.)
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21
22
23
24
25
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STATE BOARD OF EDUCATION 6
March 29, 2001
1 GOVERNOR BUSH: Board of Education.
2 MR. PIERSON: Item 1 is deferred -- or
3 request deferral.
4 COMPTROLLER MILLIGAN: Move deferral.
5 GOVERNOR BUSH: Motion to defer.
6 Is there a second?
7 COMMISSIONER CRIST: Second.
8 GOVERNOR BUSH: Moved and seconded.
9 Without objection, it's -- it's deferred.
10 MR. PIERSON: Item 2 is a request by
11 Broward Community College for establishment of
12 a special purpose center in Miramar.
13 In the audience is Tony Stallworth (sic),
14 Vice President for Facilities and College
15 Services.
16 COMMISSIONER CRIST: Move.
17 COMPTROLLER MILLIGAN: Second.
18 GOVERNOR BUSH: Moved and seconded.
19 Without objection, it's approved.
20 MR. PIERSON: Item 3 is a request by
21 Seminole Community College for establishment of
22 a special purpose center in Seminole County.
23 And in the audience is Dr. Ann McGee,
24 President.
25 COMMISSIONER CRIST: Move approval.
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STATE BOARD OF EDUCATION 7
March 29, 2001
1 ATTORNEY GENERAL BUTTERWORTH: Second.
2 GOVERNOR BUSH: Moved and seconded.
3 Without objection, it's approved.
4 Where's President McGee? I can't see here.
5 MS. McGEE: Right here.
6 GOVERNOR BUSH: Hi.
7 MR. PIERSON: Item 4 is a request by
8 St. Petersburg Junior College for establishment
9 of a special purpose center in downtown
10 St. Petersburg.
11 And in the audience is Ms. Susan Reitor,
12 Director of Facilities Planning and
13 Institutional Services.
14 COMMISSIONER CRIST: Motion to approve.
15 ATTORNEY GENERAL BUTTERWORTH: Second.
16 GOVERNOR BUSH: Moved and --
17 COMPTROLLER MILLIGAN: Second.
18 GOVERNOR BUSH: Moved and seconded.
19 Without objection, it's approved.
20 MR. PIERSON: Item 5 is a request by
21 Central Florida Community College for
22 establishment of a special purpose center in
23 Marion County.
24 And in the audience is Dr. Charles Hayes,
25 Vice President for Administration and Finance.
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STATE BOARD OF EDUCATION 8
March 29, 2001
1 COMMISSIONER CRIST: Motion to approve.
2 COMMISSIONER RHODES: Second.
3 ATTORNEY GENERAL BUTTERWORTH: Second.
4 GOVERNOR BUSH: Moved and seconded.
5 Without objection, it's approved.
6 MR. PIERSON: We request deferral of
7 Item 6.
8 However, Mr. Pat Tornillo, representing the
9 United Teachers of Dade, has requested to speak
10 to you today about concerns he has regarding
11 the amendment.
12 GOVERNOR BUSH: Mr. Tornillo. Welcome.
13 MR. TORNILLO: Thank you, Governor,
14 Commissioner Crist, members of the Cabinet.
15 I address you this morning, Governor, in
16 the spirit of the great prayer breakfast we
17 attended earlier; and on behalf of my passion,
18 and I certainly hope yours, the children of
19 Florida.
20 So first I would like to commend
21 Commissioner Crist for his scholarship proposal
22 for prospective teachers. It is the right way
23 to reduce the teacher shortage crisis that we
24 face in Florida, and certainly in the nation.
25 And I commend him for it. And we will
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STATE BOARD OF EDUCATION 9
March 29, 2001
1 support that.
2 Second, I would like to commend our first
3 lady, Laura Bush --
4 This may be a first, Governor --
5 GOVERNOR BUSH: I'm -- there's a recorder
6 on somewhere, Pat, so --
7 MR. TORNILLO: Yeah.
8 GOVERNOR BUSH: -- we're listening.
9 MR. TORNILLO: -- for her call for retired
10 military personnel to start new careers in
11 teaching.
12 There is no doubt that in San Diego when
13 she made that call -- and I also commend her
14 for encouraging the President to increase the
15 amount that is devoted to that from 3 million
16 to 30 million -- that she is right on target in
17 terms of another major initiative to reduce the
18 teacher shortage crisis.
19 Many of those retired military have science
20 and math and engineering degrees. And they
21 also represent a role model with a sense of
22 duty and honor and country that, God's knows,
23 our children need today.
24 But I did want you to know that ten years
25 ago, we had that proposal in Florida.
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STATE BOARD OF EDUCATION 10
March 29, 2001
1 Senator Jack Gordon passed the alternative --
2 an alternative education bill for retired
3 military.
4 We did that in collaboration with the
5 University of Miami in Florida -- in -- in
6 Dade County, and it was very successful. Half
7 of the time, they were in the classroom; half
8 of the time they were at the
9 University of Miami.
10 So you might ask, why aren't you now doing
11 that? And the simple reason was, the money was
12 withheld. It does cost more money to do that,
13 and to do it right. And we did it without
14 sacrificing any quality of retired military
15 personnel.
16 Those that we found that could teach,
17 they're still teaching. Those that we found
18 could not, they're doing something else.
19 But that was a very successful program, and
20 it's something that we should do.
21 What we should not do is the deferred rule
22 that you have before you -- or will have before
23 you in which you're being asked to dumb down
24 standard -- teacher standards.
25 When I say dumb down, whether you are being
ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 11
March 29, 2001
1 asked to allow someone to be considered
2 teaching in field with a minor, not a major, in
3 math or science, that's dumbing down.
4 When you are being asked to have
5 67 different school boards set standards for
6 what is effective in the classroom, you could
7 wind up in Florida with 67 different standards.
8 That's not -- that's wrong. That is not right.
9 Also the rule that you're being -- will be
10 asked to affect notification to parents, and
11 guardians of teachers being out of field. It
12 eff-- will affect teacher financial aid, and
13 critical shortage area designations.
14 Now, I have a solution: Reject the rule,
15 send it back -- I've already talked to
16 Commissioner Crist. Representative Ralph Arza
17 is carrying a teacher quality bill.
18 Let's work with the Commissioner to remove
19 any negative lowering of standards, and put
20 some real alternatives in there that will
21 maintain the high standards for teaching that I
22 know you want, and we want.
23 This is not the way to do it. We'll be
24 happy -- we -- I'm glad you're deferring the
25 bill, because it -- the rule. It gives us a
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STATE BOARD OF EDUCATION 12
March 29, 2001
1 chance then to work to do something to fix this
2 particularly really bad bill.
3 And I just wanted the opportunity to let
4 you know that it's the -- the right way to do
5 it is to recruit military, and others. We have
6 no problem.
7 If there are others who have retired, and
8 they want to become teachers, then we ought to
9 encourage them. But we ought to do it without
10 lowering the standards for children in the
11 classroom.
12 Thank you very much, Governor.
13 GOVERNOR BUSH: Thank you.
14 MR. TORNILLO: Commissioner.
15 GOVERNOR BUSH: Thank you, sir.
16 There's a motion to defer?
17 Have we -- have we had a motion yet?
18 COMMISSIONER CRIST: Motion.
19 ATTORNEY GENERAL BUTTERWORTH: Second.
20 COMMISSIONER RHODES: Second.
21 GOVERNOR BUSH: Motion to defer and second.
22 And it passes without objection.
23 The deferral will be until April 10th.
24 Commissioner, is that --
25 COMMISSIONER CRIST: Yes, sir.
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March 29, 2001
1 GOVERNOR BUSH: Okay.
2 MR. PIERSON: Item 7 is amendment to
3 Rule 6A-1.09412, course requirements for a 6 to
4 12 basic, and adult secondary programs.
5 COMMISSIONER CRIST: Motion to approve.
6 COMMISSIONER RHODES: Second.
7 GOVERNOR BUSH: Moved and seconded.
8 Without objection, it's approved.
9 MR. PIERSON: Item 8 is an amendment to
10 Rule 6A-1.09441, requirements for programs and
11 courses funded through the FEFP, Florida
12 Education Finance Program, and for which the
13 student may earn credit through high school
14 graduation.
15 COMMISSIONER CRIST: Motion to approve.
16 GOVERNOR BUSH: Is there a second?
17 COMMISSIONER RHODES: Second.
18 GOVERNOR BUSH: Moved and seconded.
19 Without objection, it's approved.
20 MR. PIERSON: We request withdrawal of
21 Item 9.
22 COMMISSIONER CRIST: Motion to withdraw.
23 COMMISSIONER RHODES: Second.
24 GOVERNOR BUSH: There's a motion to
25 withdraw and a second.
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STATE BOARD OF EDUCATION 14
March 29, 2001
1 Without objection, it's withdrawn.
2 I don't even know if you have to do that.
3 Do you?
4 I guess you do.
5 COMMISSIONER CRIST: It's on my sheet.
6 MR. PIERSON: Item 10 is an amendment to
7 Rule 6A-20.0131, critical teacher shortages.
8 COMMISSIONER CRIST: Motion to approve.
9 COMMISSIONER RHODES: Second.
10 GOVERNOR BUSH: Moved and seconded.
11 Without objection, it's approved.
12 MR. PIERSON: Request withdrawal of
13 Item 11.
14 GOVERNOR BUSH: Motion --
15 COMMISSIONER CRIST: Motion to withdraw.
16 GOVERNOR BUSH: Motion to withdraw.
17 Is there a second?
18 SECRETARY HARRIS: Second.
19 GOVERNOR BUSH: Without objection, it's
20 approved.
21 MR. PIERSON: Item 12 is an amendment to
22 Rule 6A-14.030, Instruction Awards in Community
23 Colleges.
24 COMMISSIONER CRIST: Motion to approve.
25 SECRETARY HARRIS: Second.
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STATE BOARD OF EDUCATION 15
March 29, 2001
1 GOVERNOR BUSH: Moved and seconded.
2 Without objection, it's approved.
3 A little more enthusiasm, Cabinet.
4 ATTORNEY GENERAL BUTTERWORTH: Kristin is
5 reporting on this.
6 GOVERNOR BUSH: I know.
7 Right now -- about one quarter of the way
8 the Cabinet meeting, this is going to be a
9 pretty boring report, don't you think?
10 Well, we'll -- I'll figure out a way to
11 liven it up.
12 COMPTROLLER MILLIGAN: There will be
13 opportunities.
14 GOVERNOR BUSH: There will be?
15 COMPTROLLER MILLIGAN: Oh, yeah.
16 GOVERNOR BUSH: Good.
17 (The State Board of Education Agenda was
18 concluded.)
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DEPARTMENT OF VETERANS' AFFAIRS 16
March 29, 2001
1 MS. HIGGINS: I hope this is not the
2 opportunity.
3 GOVERNOR BUSH: Department of
4 Veterans' Affairs.
5 Colonel Higgins, how are you?
6 MS. HIGGINS: I'm doing well this morning,
7 Governor.
8 How are you?
9 GOVERNOR BUSH: Great.
10 MS. HIGGINS: I -- the first is I'd like to
11 recommend acceptance of the minutes of the
12 November 29th, 2000, Cabinet meeting.
13 GOVERNOR BUSH: Is there a motion?
14 COMPTROLLER MILLIGAN: Motion.
15 COMMISSIONER RHODES: Second.
16 GOVERNOR BUSH: Moved and seconded.
17 Without objection, it's approved.
18 GOVERNOR BUSH: Thank you.
19 ATTORNEY GENERAL BUTTERWORTH: Enthusiasm.
20 MS. HIGGINS: Thank you.
21 The next item is I'd like to request --
22 recommend acceptance of our quarter-- second
23 quarterly report for 2000-2001 fiscal year.
24 GOVERNOR BUSH: Is there a motion?
25 ATTORNEY GENERAL BUTTERWORTH: There is a
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March 29, 2001
1 motion, Governor.
2 COMMISSIONER CRIST: Second.
3 COMMISSIONER RHODES: Second.
4 GOVERNOR BUSH: Moved and seconded.
5 Without objection, it's approved.
6 MS. HIGGINS: The third item is I'd like to
7 give you just a short update of our outsourcing
8 project in our nursing homes -- in our nursing
9 home in Broward County. I've been trying to
10 keep most of you informed.
11 And I'm pleased to say that as of this
12 morning, we will have signed contracts for the
13 three major areas that we've been looking at.
14 And we believe that these contracts -- the bids
15 that we got back, and the contracts that we're
16 signing will, indeed, afford us the same, or,
17 in fact, I think better quality than we now
18 have, and will allow us to save the State
19 money -- about 11 percent over -- over a
20 three-year period.
21 So we're very pleased with that. I've been
22 keeping the veterans organizations informed and
23 up-to-date. And I think -- I think we're going
24 to have a very good successful program.
25 GOVERNOR BUSH: Can I ask you a question,
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March 29, 2001
1 Robin?
2 MS. HIGGINS: Yes, sir.
3 GOVERNOR BUSH: The -- the one concern that
4 the veterans --
5 First of all, I want to commend you on this
6 effort, because it's a model of how to
7 competitively bid out services and keep people
8 who might be concerned about it in the loop,
9 and constantly communicate.
10 And you see from the savings that they're
11 pretty significant. Those are annual savings
12 that generate a half a million dollars that can
13 be reinvested in other things.
14 One of the concerns that -- that I've had,
15 and I -- and I know the veterans groups were
16 concerned when we met with them, related to
17 health services.
18 How do we maintain the quality assurance
19 for nursing home patients and their families
20 for the -- the -- what are called CNAs?
21 MS. HIGGINS: Yeah.
22 That was -- that was the one issue that
23 those people who were concerned about our
24 program, were most concerned about, is how we
25 maintain or improve, in fact, the quality of
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March 29, 2001
1 care when we are outsourcing some -- many of
2 our certified nursing assistants, the CNAs in
3 the home. And that was really the bone of
4 contention.
5 Thanks to input from certain legislators,
6 and some of -- some of you, and from -- from
7 veterans groups, we were able to write into the
8 Invitations to Bid, and then into the contract,
9 some real quality standards that I think will
10 improve quality.
11 And some of those, for example, are that we
12 are requesting that every CNA be -- that is
13 assigned to the home, have one-year experience
14 in the field.
15 That's something that right now, we don't
16 require of State employees in our other homes.
17 And I think that will help a great deal.
18 The other is that we're requiring that they
19 are able to perform their duties in English.
20 And I understand that that's been a problem in
21 the past, that -- make sure that we can
22 maintain the communication between the
23 patient -- the resident, and the -- and the
24 certified nursing assistant.
25 The other is that we are providing for --
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March 29, 2001
1 financial incentives for low turnover rates,
2 and financial disincentives for high turnover
3 rates.
4 And the -- the last is that we requested in
5 our Invitations to Bid, references from the --
6 and recommendations for each of the bidders.
7 And, in fact, the one that we selected had
8 just really outstanding references. And,
9 in fact, provide -- are currently providing,
10 and have for about a dozen years, I think,
11 quality healthcare to many people, clinics
12 and -- and hospitals up and down the east coast
13 to include active duty military facilities.
14 So they are used to the people that they
15 will be caring for. And we're very excited
16 about the opportunity to -- to go -- go forward
17 with. And so are the -- so is the company as
18 well.
19 GOVERNOR BUSH: Thank you.
20 MS. HIGGINS: And if there are no other
21 questions then, the fourth item is -- is merely
22 an informational item.
23 We put together a two-year accomplish--
24 Commissioner, did you have a question?
25 COMMISSIONER CRIST: I did.
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March 29, 2001
1 Governor, may I --
2 GOVERNOR BUSH: Yeah. Please.
3 COMMISSIONER CRIST: -- one.
4 I was cur-- I noticed that at Lake City,
5 you've --
6 I want to commend you, too. Great savings.
7 Thanks.
8 MS. HIGGINS: Thank you.
9 COMMISSIONER CRIST: At Lake City, you've
10 used some prison labor, and wanted to see if
11 maybe you're exploring that at some other
12 facilities as well.
13 MS. HIGGINS: We have, in fact. And we
14 were very fortunate at Lake City, and it's
15 working very well.
16 We have explored it a little bit, and we're
17 going to continue to explore it in this home;
18 and, of course, in the two future nursing homes
19 as well.
20 We were a little concerned about this
21 particular facility for a couple of reasons.
22 We did explore the use of a juvenile justice
23 facility that is on the same grounds.
24 But because we found that this facility
25 serves -- serves sexual offenders, youthful
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March 29, 2001
1 sexual offenders, we thought that at least for
2 right now, until we know what kind of neighbors
3 they are, that this would probably be
4 inappropriate --
5 GOVERNOR BUSH: Good thinking.
6 MS. HIGGINS: -- for a beginning program.
7 And --
8 COMMISSIONER CRIST: Very.
9 MS. HIGGINS: -- in the future though --
10 and the other thing is, because there was some
11 concern about a new program, we wanted to make
12 sure that we had no problems, that we had good
13 solid contracts.
14 We have, in fact, on that -- on that lawn
15 service contract, are saving 26 percent. So
16 there's already a significant serv-- savings.
17 But we will, in fact, be looking into that,
18 because we think that that can be useful, not
19 only for cost savings, but helping to employ
20 prison labor that I think, you know, will
21 help -- help them as well.
22 So we'll -- we will be exploring that.
23 COMMISSIONER CRIST: Thank you.
24 MS. HIGGINS: And the -- the last issue, as
25 I said, is we just prepared a two-year
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March 29, 2001
1 accomplishments list.
2 As you can see from that, we have a lot
3 more to do. But I thought, you know, halfway
4 into our term here, it was probably a good idea
5 to look back and see what kinds of things we
6 were able to accomplish, thanks to your help,
7 the legislators' help, and, of course, the help
8 of many veterans around the state.
9 I'm real pleased with -- with the
10 accomplishments lists. As I said, we have a
11 lot more to do. But this gives us a guideline
12 of those kinds of things that can be
13 accomplished if we all work together.
14 GOVERNOR BUSH: Thank you.
15 MS. HIGGINS: Thank you.
16 (The Department of Veterans' Affairs Agenda
17 was concluded.)
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FL LAND/WATER ADJUDICATORY COMMISSION 24
March 29, 2001
1 GOVERNOR BUSH: The Florida Land and Water
2 Adjudicatory Commission.
3 That's a first. I got that right.
4 MS. TINKER: Good morning.
5 Item Number 1, recommend approval of the
6 minutes of the November 29th, 2000, meeting.
7 COMPTROLLER MILLIGAN: Move the minutes.
8 COMMISSIONER RHODES: Second.
9 GOVERNOR BUSH: Moved and seconded.
10 Without objection, it's approved.
11 MS. TINKER: Item Number 2, recommend
12 approval of the proposed final rule amending
13 the boundaries of the Tampa Palms Community
14 Development District.
15 COMPTROLLER MILLIGAN: Motion.
16 COMMISSIONER RHODES: Second.
17 COMMISSIONER CRIST: Second.
18 GOVERNOR BUSH: Moved and seconded.
19 Without objection, it's approved.
20 MS. TINKER: Thank you.
21 GOVERNOR BUSH: Theresa, why don't you
22 describe what this is for -- for our friend
23 from Lincoln High School?
24 MS. TINKER: The Tampa Palms Community --
25 GOVERNOR BUSH: No. The --
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March 29, 2001
1 MS. TINKER: -- Development.
2 GOVERNOR BUSH: -- Florida Land and Water
3 Adjudicatory Commission.
4 MS. TINKER: Oh, the Florida Land and Water
5 Adjudicatory Commission?
6 GOVERNOR BUSH: I've had my --
7 MS. TINKER: The Commission --
8 GOVERNOR BUSH: -- doubts. I was just --
9 if I asked it for you maybe -- then I would
10 know.
11 MS. TINKER: The Commission --
12 The Commission serves -- serves as an
13 oversight body for land and water issues that
14 basically deal with development in communities.
15 You have oversight for areas of Critical
16 State Concern, development of community
17 development districts that exceed 1,000 acres
18 in size, comprehensive plan changes,
19 developments of regional impact.
20 You basically sit as a super
21 County Commission --
22 GOVERNOR BUSH: Thank you.
23 MS. TINKER: -- on these issues.
24 GOVERNOR BUSH: Any other questions?
25 MS. TINKER: Thank you.
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March 29, 2001
1 GOVERNOR BUSH: See ya.
2 (The Florida Land and Water Adjudicatory
3 Commission Agenda was concluded.)
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TRUSTEES/INTERNAL IMPROVEMENT TRUST FUND 27
March 29, 2001
1 GOVERNOR BUSH: Board of Trustees.
2 MR. STRUHS: Good morning.
3 Allow me to begin, if I could, by thanking
4 all of you for recognizing Anne Harvey this
5 morning. Obviously that meant a lot to her,
6 and it means a lot to all of the park
7 professionals.
8 I'd also add -- I can't allow
9 Veterans' Affairs to talk about some of their
10 outsourcing successes, without sharing just one
11 with you very quickly.
12 And because we were talking about parks
13 this morning, you may recall that we were able
14 to at DEP get an appropriation for
15 nine-and-a-half million dollars last year to
16 build 143 new cabins in all of the new State
17 parks that you as Trustees have been approving
18 and -- and supporting.
19 And one of the great sources of pride is
20 that we were able to outsource the construction
21 of all 143 cabins using private capital,
22 meaning that that 9.5 million dollars now,
23 rather than going into building buildings, can
24 be invested in improving the ecosystems and
25 improving the land in those State parks.
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1 So it's a real win-win in terms of getting
2 the private sector involved as a partner, and
3 freeing up more money for actually restoring
4 the -- the actual environmental resource.
5 So that's the kind of work that Anne and
6 others are involved in.
7 There are some cabins in the park that
8 Anne Harvey manages.
9 Thank you for indulging me.
10 GOVERNOR BUSH: Thank you, David.
11 MR. STRUHS: Item 1, approval of the
12 minutes.
13 COMPTROLLER MILLIGAN: Move the minutes.
14 COMMISSIONER RHODES: Second.
15 GOVERNOR BUSH: Moved and seconded.
16 Without objection, it's approved.
17 MR. STRUHS: Item 2, there is a landowner
18 here, Eric Olsen, who would like to speak in
19 objection to this item. And I just wanted to
20 note that at the beginning, before you act too
21 quickly.
22 The issue here is a --
23 GOVERNOR BUSH: We're known to do that, so
24 I appreciate you saying that.
25 MR. STRUHS: The issue here is, this is not
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1 a sovereign submerged land lease, and I want to
2 make that very clear. This is not a lease.
3 This is instead a management agreement
4 between two governments, between the State of
5 Florida and Stuart.
6 There are mooring facilities off the coast.
7 Phase I and Phase II have already been built
8 and improved and are managed well, on your
9 behalf by the City of Stuart. They're now
10 ready to move into Phase III.
11 Phase III mooring is about 312 feet off the
12 property line of the individuals here who are
13 speaking in objection to the item.
14 They raise a number of riparian concerns,
15 not so much as it relates to ingress and
16 egress, but more to the obstruction or the
17 change of their waterfront view. Instead of
18 having open water to look at, they will have
19 moorings in -- in front of their home.
20 But, again, it's 312 feet off. And there
21 is an existing natural navigation channel
22 between the water's edge -- the land's edge and
23 the mooring site.
24 So I just wanted to give you a picture of
25 what we're talking about.
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1 Our recommendation to the Board is to
2 approve this item subject to special
3 conditions, and recognizing that the City of
4 Stuart has been a good partner in -- in
5 managing this for you.
6 I'd like to invite then Mr. Eric Olsen to
7 represent his objections.
8 GOVERNOR BUSH: Welcome, Mr. Olsen.
9 MR. OLSEN: Thank you.
10 Eric Olsen, Hopping, Green, Sams & Smith.
11 I am not the land owner. I'm here
12 representing Ted Guy, who is the landowner.
13 Mr. Guy wishes he could have been here in
14 person, but unfortunately he had a conflict,
15 and couldn't make it here today, and is sorry
16 that -- that he wasn't able to do that.
17 As indicated by Secretary Struhs, Mr. Guy
18 is a riparian landowner where owning land in
19 which this mooring field will be located.
20 To give you a bit of background, the city
21 already has two mooring fields on the south
22 fork of the St. Lucie River, which are called
23 Phase I and Phase II. Both of these mooring
24 fields are located in front of City property.
25 And Mr. Guy has no objection to those
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1 mooring fields, and, in fact, supported the
2 establishment of those mooring fields.
3 The City is now seeking authority to
4 establish a third mooring field called
5 Phase III. This third mooring field will be
6 located in front of Mr. Guy's property, as well
7 as in front of the property of several other
8 private land owners.
9 We suggest -- and the City will charge a
10 fee for individuals to moor their boats to the
11 mooring field. And for those of you who may
12 not be intimately familiar with navigation type
13 components for boat facilities, a mooring field
14 is simply a series of permanent anchoring
15 devices mounted out in a river or a -- in this
16 case, a -- an estuary type system where people
17 who are traveling with boats, can tie their
18 boat up to an established floating device,
19 sometimes a little buoy floating in the water,
20 instead and dropping their own anchor, and
21 anchoring their own boat on the bottom.
22 The reason for establishing mooring fields
23 is usually environmental, to keep people from
24 constantly anchoring in the water body, but
25 instead, use permanent devices, and reduce the
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1 chance of bottom -- bottom damage.
2 And again, we don't have any problem with
3 Phase I and Phase II mooring fields which are
4 in place and established.
5 These mooring fields, I am told, are not
6 full. In fact, of the 69 moorings available,
7 only 22 are used right now. And that seems to
8 have been --
9 GOVERNOR BUSH: Sixty-nine -- twenty-two
10 out of sixty-nine?
11 MR. OLSEN: Twenty-two out of sixty-nine.
12 Yes, Governor.
13 GOVERNOR BUSH: Is that because they're
14 smaller, or is there a particular reason?
15 Well, we'll find out, I'm sure.
16 MR. OLSEN: People don't want to pay to use
17 the mooring field. They'd rather -- there's
18 just not that much of a demand.
19 And some individuals still don't -- even
20 though the mooring field's available, still
21 don't want to use it, and want to anchor their
22 boats outside of the mooring field.
23 The Phase III mooring field will be between
24 my client's property and the dredge navigation
25 channel of this river. We're concerned about
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1 that, because, number one, the City is not the
2 riparian owner, and in our pos-- in our
3 opinion, does not have the right to seek this
4 type of authorization for the mooring field.
5 Secondly, by locating the field in between
6 our property and the main dredge navigation
7 channel, the mooring field will interfere with
8 our riparian rights, our ability to navigate
9 from our property, to the dredge channel.
10 Now, there is deeper water between our
11 property and where the mooring field will be,
12 which is the channel Secretary Struhs was
13 referring to. But that's not the dredge
14 navigation channel.
15 This mooring field will be between our
16 property, and the dredge navigation channel,
17 and will interfere with our rights to navigate
18 out there. It will interfere with our view to
19 the navigation channel, which we submit is part
20 of our riparian rights.
21 And we're also concerned that --
22 GOVERNOR BUSH: Are views part of riparian
23 rights?
24 MR. OLSEN: Yes. Under -- a riparian owner
25 has a right to unobstructed view of the
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1 navigable channel under Florida's riparian
2 rights law. And we submit this will be located
3 in front of that, and it will interfere with
4 that.
5 There was a case a while back where DOT
6 built a bridge that obstructed a riparian
7 owner's view of the navigation channel. The
8 riparian owner sued DOT for inverse
9 condemnation and taking, and won.
10 The Court said, yes, they deprived the
11 owner of their riparian right to an
12 unobstructed view of the channel. And this is
13 all in the same --
14 GOVERNOR BUSH: Great country.
15 MR. OLSEN: -- same type of lines.
16 But on a -- on a pragmatic sense, we're
17 concerned about the -- the possibility of
18 interference with our abilities to navigate to
19 the channel, and our ability to use this open
20 water for recreation.
21 And more importantly, that the mooring
22 field -- since the existing mooring fields are
23 not used fully, the new mooring field will also
24 not be used fully.
25 And people who don't want to pay will do
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1 what they can to avoid the mooring field, which
2 means locating their boats closer to our
3 property line to anchor in the nonmooring field
4 area, and that'll present a greater chance of
5 derelict vessels coming in and interfering with
6 our docking facilities.
7 So we would ask you that you deny this. As
8 a compromise, we're willing to offer that if
9 some riparian owners are acceptable to this
10 mooring field, then reduce the size of it to be
11 located in front of the property of the
12 riparian owners who do favor it or support it.
13 Next to my client's property is a large
14 condominium. Many of the condominium owners
15 there, I'm told, have signed a petition
16 supporting the mooring field.
17 To the extent the mooring field is located
18 in front of their riparian rights, that'd be
19 fine. We don't have any objection to that.
20 But to the extent it's located --
21 GOVERNOR BUSH: Do you think that --
22 MR. OLSEN: -- in front of our --
23 GOVERNOR BUSH: -- would sign up if that
24 was the case?
25 MR. OLSEN: -- we would -- we would not
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1 like to have it in front of our property.
2 GOVERNOR BUSH: Probably not.
3 MR. OLSEN: That, in summary, is our
4 argument against it. It's not needed, it
5 interferes with our riparian rights.
6 We'd ask that you deny it or reduce its
7 size. And be happy to answer any questions.
8 And if you'd like, I can explain what the BOT
9 does, the Board of Trustees.
10 GOVERNOR BUSH: I -- I need to know that,
11 too, probably. But --
12 I didn't know about riparian rights with
13 the views being -- of property rights. That's
14 pretty good.
15 MR. OLSEN: It is.
16 GOVERNOR BUSH: David, you want to come
17 and --
18 COMPTROLLER MILLIGAN: Let -- let me ask a
19 quick question. I --
20 MR. OLSEN: Sure.
21 COMPTROLLER MILLIGAN: -- I understand that
22 that area is used for mooring today.
23 MR. OLSEN: It is.
24 COMPTROLLER MILLIGAN: Routinely.
25 MR. OLSEN: Right.
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1 COMPTROLLER MILLIGAN: What rights do the
2 owners that possess riparian rights have to
3 move or force the movement of people who just
4 come in there and moor anyway?
5 MR. OLSEN: I think under the navigation
6 law, I'm not -- afraid I'm not the total expert
7 in maritime.
8 But you have a right to use the open water
9 for navigation. To the extent that somebody
10 had anchored their boat right in front of my
11 client's property to interfere with his
12 navigation, to the extent he could prove that,
13 he could have the right to, in a private
14 action, have that individual remove that boat
15 to -- to support his riparian rights.
16 So the same thing would occur if people
17 anchored so many boats in front of the property
18 that you couldn't have access. You'd have a
19 private cause of action against those
20 individuals, since that would be not a
21 government sanctioned event --
22 COMPTROLLER MILLIGAN: But it would be --
23 it's a navigation issue.
24 MR. OLSEN: Right.
25 COMPTROLLER MILLIGAN: The boats that do
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1 moor up and use that area for mooring, are you
2 better served in terms of your concerns about
3 derelict boats, or boats who are breaking
4 loose, and drifting in, and destroying peers,
5 or whatever?
6 Are you better served having mooring
7 points, as opposed to people just dropping
8 anchor?
9 MR. OLSEN: We're better served by the City
10 enforcing the existing derelict vessel law to
11 remove derelict vessels out there. And to the
12 extent that -- that that's not going to occur,
13 but instead, the mooring field will be
14 installed, we're better served by the mooring
15 field not being there, because in our opinion,
16 people who have derelict vessels out there, who
17 aren't actively maintaining the vessel, will
18 not certainly want to pay to attach the vessel
19 to a mooring field that costs money, but will
20 instead, move their vessels out of the mooring
21 field area, closer to our property, and
22 increase the probability of those vessels
23 breaking loose and damaging our dock.
24 COMPTROLLER MILLIGAN: Well, it's not just
25 derelict vehicles that can break loose --
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1 MR. OLSEN: It can be any vessel, right.
2 But again the -- the irresponsible boat
3 owner, if you will, will be less inclined to
4 tie their boat up to a mooring field that costs
5 money, and will be more likely --
6 (Treasurer Gallagher entered the room.)
7 MR. OLSEN: -- to move out of the mooring
8 field, closer to the riparian property owners,
9 to avoid that very instance.
10 COMPTROLLER MILLIGAN: How accurate is your
11 22 out of 69? Is that a -- the routine number
12 approximate use of the -- of the -- of the
13 mooring field?
14 MR. OLSEN: Well, my client indicates
15 he's -- he contacted the City to get the
16 registration information recently, and that's
17 his estimate of -- of what it is.
18 COMPTROLLER MILLIGAN: Okay. Thanks.
19 GOVERNOR BUSH: Any other questions?
20 David?
21 Why are -- why is -- why are we expanding
22 this, or why is the City -- whoever's managing
23 it, why are they expanding this if there's
24 vacancies in the other mooring fields?
25 MR. STRUHS: I think the answer, in part,
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1 Governor, is that Phase I and II have not yet
2 been I guess you could say officially opened to
3 the public.
4 The City is planning a grand opening to
5 advertise the fact that these new mooring
6 facilities in Phase I and II are going to be
7 available to the boating public. They haven't
8 marketed it yet, they haven't sort of done the
9 ribbon cutting.
10 The City believes, and I think with good
11 reason, that once their availability becomes
12 known, that the entire 69 moorings will be used
13 regularly. And, indeed, they're trying to get
14 this in front of the Board of Trustees in
15 anticipation of what they expect will be
16 growing demand.
17 So I think they're actually trying to be
18 prudent and -- and plan ahead for -- for that
19 expectation.
20 I would also point though, in terms of some
21 of the other issues as it relates to riparian
22 rights, the way we view and, indeed, I think
23 the way most people view riparian rights is
24 it's a bundle of rights. Some of them are more
25 important than others.
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1 The issues of navigation in terms of
2 ingress and egress are, of course, the most
3 important.
4 The riparian right to a -- to a view is one
5 of those rights, but it's typically considered
6 less of a right.
7 Specifically it's governed by the location
8 of the channel. And one could think,
9 for example, if you were on a river, and you
10 were looking all the way across the river, and
11 somebody decided to put a pulp and paper mill
12 there, that would obviously change your view,
13 but it would not affect your riparian rights
14 because, indeed, it's on the other side of the
15 channel.
16 In this instance, there is a channel that
17 is regularly used for navigation between the
18 land's edge and the mooring facility. And I
19 would also suggest that moored sailboats and
20 motorboats are -- are not a gross insult to
21 the -- to the existing view.
22 GOVERNOR BUSH: David --
23 Excuse me, General.
24 ATTORNEY GENERAL BUTTERWORTH: Governor,
25 Martin County and the City of Stuart I think
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1 have been wonderful planners of -- of
2 facilities and -- and the land growth
3 management and everything --
4 GOVERNOR BUSH: They have.
5 ATTORNEY GENERAL BUTTERWORTH: -- probably
6 more so -- definitely more so than my own
7 county.
8 I'll move the item as recommended.
9 GOVERNOR BUSH: Is there a second?
10 COMMISSIONER CRIST: Second.
11 GOVERNOR BUSH: Any other discussion?
12 Is there any objections?
13 COMPTROLLER MILLIGAN: I object.
14 GOVERNOR BUSH: I object as well.
15 So it passes.
16 Onward.
17 MR. STRUHS: Okay.
18 Substitute Item 3, recommending approval
19 subject to special lease conditions and the
20 payment of $8,705.95.
21 There is -- if I can just give you a little
22 bit of background on this.
23 This is the creation of 30 wet slips. As
24 part of that, they're getting rid of dry
25 storage. The net balance in terms of number of
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1 vessels is -- is zero. It's a wash.
2 We have, as part of this item though, begun
3 discussions with the Fish and Wildlife
4 Conservation Commission, U.S. Fish and Wildlife
5 Service, and the County, and Save the Manatee
6 Club regarding potential improvements and
7 clarification of understanding in terms of what
8 manatee habitat actually is in this part of the
9 St. Johns River.
10 And those meetings and -- and discussions
11 will be scheduled shortly.
12 But as it relates to this specific item, we
13 don't have any objections to it.
14 GOVERNOR BUSH: Is there a motion?
15 COMPTROLLER MILLIGAN: I'll move the item.
16 TREASURER GALLAGHER: Second.
17 COMMISSIONER RHODES: Second.
18 GOVERNOR BUSH: Moved and seconded.
19 Any discussion?
20 Without objection, it's approved.
21 MR. STRUHS: Item 4, recommending approval
22 of the subject special to -- subject to special
23 approval conditions, special lease conditions,
24 and payment of $11,794.10.
25 This is an expansion of slips, an expansion
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1 of 17, from 97 to 114. The number of slips on
2 sovereign submerged lands increases from 41 to
3 58. So it's all on State property.
4 One of the issues that is critical to
5 understanding this item is recognizing that
6 fuel will be dispensed from this facility for
7 marine use. This requires a variance, because
8 it is in an Outstanding Florida Water. The
9 applicant has, in our opinion, demonstrated a
10 navigation hardship, and it should be approved.
11 I would point out that as part of it, the
12 applicant has agreed to remove septic systems,
13 which will improve water quality in the area;
14 and providing pump-outs for all the vessels
15 that are using non-CCA treated pilings as
16 they -- as they construct the facility; they're
17 providing public education; and are providing a
18 slip to manage spill response in the event that
19 there was a contingency.
20 GOVERNOR BUSH: Where is the spill response
21 vessel located normally?
22 MR. STRUHS: I don't know.
23 GOVERNOR BUSH: Port of Miami or --
24 MR. STRUHS: I don't know, Governor. I can
25 find out.
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1 GOVERNOR BUSH: That's all right. It's not
2 a trick question. I mean --
3 TREASURER GALLAGHER: I'll -- motion on the
4 item.
5 GOVERNOR BUSH: Is there a second?
6 COMMISSIONER RHODES: Second.
7 GOVERNOR BUSH: Any discussion?
8 Moved and seconded.
9 Without objection, it's approved.
10 MR. STRUHS: We are seeking to defer
11 Items 5.
12 TREASURER GALLAGHER: Motion to defer until
13 April 24th.
14 ATTORNEY GENERAL BUTTERWORTH: Second.
15 GOVERNOR BUSH: Motion to defer and a
16 second.
17 Without objection, it's deferred.
18 MR. STRUHS: We're seeking to defer
19 Item 6 --
20 TREASURER GALLAGHER: Motion to defer it
21 till May 15th.
22 COMMISSIONER CRIST: Second.
23 GOVERNOR BUSH: There's a motion to defer
24 and a second.
25 Without objection, it's deferred.
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1 TREASURER GALLAGHER: Motion to --
2 COMPTROLLER MILLIGAN: All we --
3 TREASURER GALLAGHER: -- withdraw nu--
4 COMPTROLLER MILLIGAN: -- needed was the
5 Treasurer to speed things up, Governor.
6 TREASURER GALLAGHER: Motion to --
7 COMPTROLLER MILLIGAN: All we needed was
8 the Treasurer to speed things up a little.
9 GOVERNOR BUSH: I know.
10 TREASURER GALLAGHER: Motion to withdraw
11 Item 7.
12 COMMISSIONER CRIST: Second.
13 GOVERNOR BUSH: There's a motion to
14 withdraw and a second of Substitute Item 7.
15 Without objection, it's approved.
16 It's Port of Miami.
17 MR. STRUHS: Thank you.
18 GOVERNOR BUSH: Item 8.
19 MR. STRUHS: Item 8, we're seeking your
20 approval of the acquisition of 12.9 acres.
21 This is an in-holding in one of our more
22 popular State parks, Homosassa Springs Wildlife
23 State Park.
24 We're paying about 95 percent of the
25 appraised value at a cost of $3300 per acre.
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1 This is an important acquisition for a very
2 popular park. It's using what remains with the
3 Preservation 2000 dollars, and -- and is an
4 example of how that program has served the
5 State well.
6 GOVERNOR BUSH: It's timely you should
7 bring this here.
8 I'm glad that you brought this here on this
9 particular day, the day the Legislature is
10 passing a budget.
11 TREASURER GALLAGHER: Using up a bunch of
12 money.
13 GOVERNOR BUSH: Maybe we should have a
14 discussion about the impacts of the possible
15 legislative action on many of these programs
16 that we deal with.
17 Would that be appropriate, that we do that?
18 TREASURER GALLAGHER: Sure.
19 GOVERNOR BUSH: Is there a motion?
20 TREASURER GALLAGHER: I approve 8.
21 COMMISSIONER RHODES: Second.
22 GOVERNOR BUSH: Moved and seconded.
23 Without objection, it's approved.
24 GOVERNOR BUSH: David, do you want to give
25 us kind of a run-down on -- on the Senate's
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1 proposed action, and maybe the House? I'm not
2 sure what they're doing, and -- and the impacts
3 it might have on programs that in-fill the
4 purchases like this and others that -- that is
5 your business.
6 MR. STRUHS: Yes -- yes, sir.
7 As you know, Preservation 2000 is -- is
8 wrapping up. And we are now moving into the
9 Florida Forever Program.
10 The Preservation 2000 program has been a --
11 a national model -- indeed, an international
12 model of how to use resources well.
13 It's a program that is obviously very
14 popular with the public, has been operated for
15 a decade now without a hint of -- of scandal
16 or -- or any management problems. It is -- it
17 is winding down.
18 There is a small amount of money left out
19 of the 3 billion dollars that has been
20 committed through this program. The -- the
21 expectation and plan was to continue to work
22 through that Preservation 2000 list as we
23 transition into Florida Forever.
24 A recent budget amendment was introduced in
25 the Senate that would effectively stop that,
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1 and remove that money from the program to apply
2 towards the State's Everglades restoration
3 commitment in lieu of the ten-year sustainable
4 funding plan that had been proposed by you,
5 Governor, and endorsed almost unanimously by
6 the Legislature just one year ago.
7 A number of concerns that obviously arise
8 from that action. Among them is the potential
9 impression that the statewide commitment to
10 Everglades restoration could be eroding because
11 of the change in that ten-year formula in -- in
12 year number two.
13 It also potentially gives rise to some
14 regional issues. One of the reasons I think
15 we've been successful as a State in advancing
16 Everglades restoration is because it's been
17 recognized that while a high priority for the
18 State, it would not be done at the expense of
19 other important conservation and environmental
20 agendas in other regions of the state.
21 To the extent that this P-2000 money, which
22 would be funding projects around the State is
23 now going to be set-aside exclusively for
24 Everglades, will potentially give rise to some
25 of those regional differences, which could
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1 again long-term erode support for the overall
2 Everglades restoration agenda.
3 I'd also point out that, as you all know
4 well, that the Everglades partnership with the
5 Federal government is entirely different than
6 most water resource development projects.
7 Typically the State is responsible for the
8 land acquisition, the Federal government does
9 all the engineering, design, and construction.
10 By design, and -- and quite on purpose, we
11 felt that that's not how we wanted to move
12 forward with Everglades, it was too important,
13 we wanted to make sure the State's interests
14 were at the table at every point of the
15 decision making, and we were able to, through
16 negotiations with Congress, get the State in
17 the position of being a full partnership, not
18 just in acquiring land, but in terms of the
19 engineering and design and construction.
20 One of the problems, of course, with the
21 P-2000 money is that the bond covenants would
22 limit that money to be used exclusively for
23 land acquisition, and that could put -- create
24 a potential bad precedent in not having Florida
25 at the table as some of the early design work
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1 is -- is actually being done.
2 There are other points as well. But why
3 don't I stop there and address any questions
4 you may have.
5 GOVERNOR BUSH: Any questions?
6 What -- what is the balance -- that -- part
7 of the confusion that we've had is an apparent
8 disagreement of the balance of
9 Preservation 2000 monies that could be
10 available for use in a different way.
11 What is -- what is the balance that is
12 unencumbered right now? Or --
13 MR. STRUHS: Right.
14 GOVERNOR BUSH: -- I mean, right now
15 plus -- till July 1st. I mean, I'm curious to
16 know --
17 MR. STRUHS: As -- as you all know well, it
18 is difficult to say with precision exactly what
19 it will be down to the nickel because, in fact,
20 you as a Board of Trustees make decisions every
21 other week that affect what that number will
22 ultimately look like.
23 Our -- our most conservative projections
24 suggest that by the end of the fiscal year,
25 June 30th, there will be approximately 70 to
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1 71 million dollars left in that account.
2 I think it's important to put that number
3 in an appropriate context. If -- if you think
4 of this as a 3 billion dollar ten-year program,
5 and you're trying to manage the program so that
6 when you get to the finish line, you are as
7 close to zero as possible without going over,
8 this is about in that 2 percent range.
9 So it's -- it's not -- it's not -- not bad
10 in terms of getting close to where we need to
11 be. Of course, the problem is that that 70 to
12 71, 72 million dollars is now removed from that
13 project. That money is no longer available for
14 a number of projects that are in cue ready for
15 your consideration as a Cabinet for -- for
16 conservation.
17 GOVERNOR BUSH: Have you provided a list to
18 us and to the Legislature of -- of those
19 projects that would have to be deferred?
20 MR. STRUHS: Yes, we have. And I'd be
21 happy to make sure that all the members of the
22 Cabinet have it.
23 GOVERNOR BUSH: What is the out--
24 outstanding balance today? Put aside what --
25 MR. STRUHS: You know, I -- I -- I left it
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1 in my briefcase. I can't -- I can't recall the
2 precise --
3 COMPTROLLER MILLIGAN: Governor, while
4 they're -- while they're tracking that down,
5 you know, this is not a new conversation.
6 Recently we talked about how we were bonding
7 these dollars, and the fact that it appeared
8 that we had money hanging out.
9 And Ben Watkins is not here to -- to
10 perhaps readdress that issue.
11 But I -- I -- I think it's an issue that we
12 might not want to let die on how we do the
13 bonding, because if -- if they're going to
14 attack now, they'll attack again in the future
15 whenever there's a money crunch.
16 And -- and I think we can do a --
17 GOVERNOR BUSH: Absolutely.
18 COMPTROLLER MILLIGAN: -- better job at
19 protecting those resources, somewhat through
20 the bonding process that we use.
21 GOVERNOR BUSH: Absolutely.
22 Or staging purchases -- extending contracts
23 for purchase in the earlier part of the -- the
24 year, fiscal year, out longer; and shortening
25 the closings at the end part of the year so
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1 that -- or -- or -- you know, so that you have
2 simultaneous closings or as close as you can
3 between the issuance of the bonds and the
4 purchase of the land.
5 It might make for a long -- maybe change
6 our structure here a little bit. But I --
7 COMPTROLLER MILLIGAN: Yeah.
8 GOVERNOR BUSH: -- man, I think David, to
9 his cre-- I mean, I've been -- based on our
10 conversations that we've had in the past, have
11 gotten all over him on this actually.
12 COMPTROLLER MILLIGAN: Well --
13 GOVERNOR BUSH: And I think they've done a
14 little bit better job. But it's still
15 something that we need to do better on.
16 That's --
17 TREASURER GALLAGHER: If I -- if I can just
18 say, Governor.
19 I think if you would ask, how much money
20 are we going to need to finish the land
21 acquisition for environmental reasons, it's
22 unending.
23 I mean, there are a tremendous number of
24 acres in this state that -- that would make a
25 lot of sense for us to own that are still
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1 pristine, and -- and we could save them from --
2 from development.
3 And the problem always is to prioritize
4 those, which is on a continuing process. And
5 as soon as you grab money out of this process,
6 there are some things that are going to end up
7 on that priority list, and certainly on the
8 list that aren't going to get funded until a
9 long time from now, which means they could end
10 up being developed instead.
11 So it is a critical thing that we're doing
12 here, and -- you know, taking a million out --
13 out of it is not a good thing.
14 COMPTROLLER MILLIGAN: But I -- but I will
15 say again, Governor, I think that there is a
16 method that we can put in place on the bonding
17 side so that the resources come available as
18 they are needed, as opposed to sitting in a
19 trust fund --
20 GOVERNOR BUSH: Absolutely.
21 COMPTROLLER MILLIGAN: -- where they pop up
22 on the screen and be several hundred
23 million dollars that somebody thinks they can
24 lay their hands on.
25 TREASURER GALLAGHER: Well --
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1 COMPTROLLER MILLIGAN: So I -- I would move
2 that we -- that we ask Bond Finance to revisit
3 this issue, and come back to us with a -- a
4 means through which perhaps this next ten-year
5 process we can do a better and -- and cleaner
6 job on the bonding side.
7 TREASURER GALLAGHER: Well, if I may add to
8 that, we -- we could do, you know, smaller
9 issues more often.
10 But many times you get a better deal if
11 it's a larger issue. It's very easy to put in
12 the bond documents that this money's to be used
13 for, this program, period.
14 COMPTROLLER MILLIGAN: Well, that may very
15 well be the way we handle it. But --
16 GOVERNOR BUSH: By the way, is that what --
17 is it not in there now? That might be an
18 interesting --
19 TREASURER GALLAGHER: Well --
20 GOVERNOR BUSH: -- question --
21 TREASURER GALLAGHER: -- it's a land
22 acquisition. It doesn't aim it close enough I
23 think is the problem.
24 MR. STRUHS: Yeah.
25 COMPTROLLER MILLIGAN: Yeah. But that's a
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1 good comment, Tom. And -- and I think we -- we
2 need to have Bond Finance look at how we can
3 better seal the -- the bank on this
4 particular --
5 TREASURER GALLAGHER: That's -- that's one
6 thing. It doesn't -- that way we're not
7 restricted on -- because we want to go to the
8 market when the market's right, and get as much
9 as we can, and not, you know, do it every time
10 we have a project.
11 But if it was for only those that are on
12 this list and approved by us, that will put a
13 halt to this kind of --
14 COMPTROLLER MILLIGAN: Yeah. But there are
15 ways of phasing, we do phase now in a number of
16 bonding issues that work to our advantage. And
17 so that's a -- a tradeoff that I think we might
18 have to take a look at.
19 So I -- I move that we ask Bond Finance to
20 take a look at this issue, and come back with
21 us the best way that we can kind of --
22 GOVERNOR BUSH: Can we --
23 COMPTROLLER MILLIGAN: -- lock this up.
24 GOVERNOR BUSH: -- General, can we do it
25 also in the context of just receiving a review
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1 of how we purchase the land as well, so we have
2 both together?
3 COMPTROLLER MILLIGAN: Absolutely.
4 TREASURER GALLAGHER: I'll second his
5 motion, with that included.
6 GOVERNOR BUSH: There's a motion and a
7 second.
8 Any other discussion on --
9 MR. STRUHS: I -- I would --
10 GOVERNOR BUSH: It's not an agenda item,
11 but we're --
12 MR. STRUHS: Well, I would just add from --
13 from -- from the staff perspective, one of the
14 balances we -- we continually try to strike
15 is -- and -- and I think we have improved
16 substantially the -- the past couple of years,
17 but there's always room for more improvement.
18 I think the idea of -- of not bonding money
19 prematurely is -- is clearly something that
20 deserves further consideration.
21 On the other hand, I don't want to see our
22 land acquisition, land management agencies get
23 into the position where they are judge--
24 success is determined solely by how fast they
25 spend money.
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1 Because if you -- if you create the
2 dynamics that they're judged how quickly they
3 spend money, it -- it lessens their ability to
4 be more businesslike in seeking the very best
5 values for the State.
6 So it is -- it is requiring that kind of
7 balance.
8 COMMISSIONER CRIST: Governor --
9 GOVERNOR BUSH: Yes.
10 COMMISSIONER CRIST: -- I think -- I think
11 the concern I sense from you, and -- and
12 certainly one that I -- I have is that the
13 original intent of P-2000 is respected.
14 And that -- though we honor the integrity
15 of that plan, and I think that the General's
16 motion will -- will help us get there.
17 GOVERNOR BUSH: I -- I have -- I have three
18 concerns. I have the -- the concern about our
19 own responsibilities of cash management and
20 purchase of land, which is an ongoing
21 responsibility we all take very seriously.
22 I have a concern about our relationship
23 with Washington that is -- we've created -- I
24 don't think people fully appreciate the unique
25 relationship that has been created with this --
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1 with the Everglades Restoration Act. And
2 anything that sends a signal that imperils that
3 concerns me greatly.
4 I'm concerned about using bonded money for
5 things that should be paid for out of general
6 revenue. And I might add, recurring general
7 revenue.
8 Last year, we proposed in our budget,
9 recurring general revenue dollars to pay for
10 this, and 50 million I believe of it, was --
11 came back in the form of a nonrecurring source
12 of money, and so we proposed again using
13 recurring monies.
14 And now we're going away from even cash to
15 debt, which is effectively just saying,
16 you know, we're -- we're going to spend a lot
17 more money on other things. And further indebt
18 the State, which -- which is -- I'm concerned
19 about a lot of this stuff.
20 And, you know, the press has depicted our
21 budget being one of -- of -- of really lean
22 times. I think people in our state probably
23 think that we're actually cutting the budget
24 this year from last. The -- the size of this
25 year's budget is actually less than -- than
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1 last year's.
2 And, in fact, the Senate budget that
3 probably will be passed today is a 5.9 percent
4 increase, all funds budget; and the House
5 budget's about a 5 percent increase over last
6 year.
7 If family income grows that fast this year,
8 we'll celebrate.
9 And so I -- I just -- there -- there's
10 ample resources to do this the right way, and
11 I -- I -- as respectful as I can be to our
12 partners in our Legislature, we're asking them
13 to reconsider.
14 COMMISSIONER CRIST: Yes, sir.
15 ATTORNEY GENERAL BUTTERWORTH: Governor, I
16 think perhaps -- perhaps you're right on this
17 issue. The -- to fund the Everglades, we -- we
18 made a promise to the Federal government. And
19 I think we have to uphold that promise.
20 GOVERNOR BUSH: Any other comments?
21 David, did you ever get that answer to
22 that -- the mystery question? The briefcase
23 been found?
24 MR. STRUHS: Yes, sir.
25 What might be -- what might be most useful,
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1 if I -- if I would --
2 GOVERNOR BUSH: You don't want to answer my
3 question?
4 MR. STRUHS: No. I -- I'm --
5 GOVERNOR BUSH: It's a simple --
6 MR. STRUHS: -- I'm -- I'm happy -- I'm
7 happy to answer it.
8 GOVERNOR BUSH: Hence the problem.
9 TREASURER GALLAGHER: I know he wants to
10 answer it.
11 MR. STRUHS: The -- the issues -- these
12 things are always a bit more complex than --
13 GOVERNOR BUSH: I know.
14 MR. STRUHS: -- you would think. I'd be
15 happy to visit each one of you personally, and
16 explain this spreadsheet to you.
17 But remind me specifically what your --
18 GOVERNOR BUSH: The question was just what
19 today is the outstanding balance in
20 Preservation 2000, and what has -- what is
21 encumbered between now and July 1st?
22 And is there 100 million dollars, or are we
23 going to have to cut back on other projects --
24 it'll be three questions.
25 The first question though is what's the
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1 balance today?
2 MR. STRUHS: Well, it depends on whether or
3 not you approve Item 9, I guess.
4 GOVERNOR BUSH: What's the item yesterday?
5 What was the balance yesterday?
6 MR. STRUHS: I don't -- I don't have that
7 right in front of me. But --
8 GOVERNOR BUSH: All right.
9 MR. STRUHS: -- I can -- I can -- I can
10 tell you that the rate that the money's being
11 obligated, if you look at money encumbered,
12 agenda items that are before you today,
13 agreements that have already been signed,
14 projects in which price has already been
15 established and negotiated, that by June 30th,
16 there is not 100 million dollars in the
17 account.
18 So --
19 TREASURER GALLAGHER: That's seventy-one,
20 right?
21 GOVERNOR BUSH: Okay. That's -- that's the
22 answer to number three -- question number
23 three.
24 I was just curious to question number one,
25 because that's the question that I think the
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1 appropriators are looking at. The answer to
2 that question is what they -- they're looking
3 at, not what you're committing to now.
4 We'll -- later.
5 MR. STRUHS: We'll -- we'll get that to
6 you.
7 GOVERNOR BUSH: Okay. Thank you.
8 ATTORNEY GENERAL BUTTERWORTH: -- for the
9 government.
10 TREASURER GALLAGHER: Motion on Item 9.
11 ATTORNEY GENERAL BUTTERWORTH: Second.
12 MR. STRUHS: We're recommending approval on
13 Item 9, which will --
14 GOVERNOR BUSH: There's a motion and a
15 second.
16 Without objection, it's approved.
17 MR. STRUHS: Thank you.
18 Item 10 --
19 TREASURER GALLAGHER: Motion on 10.
20 ATTORNEY GENERAL BUTTERWORTH: Do you have
21 to go somewhere, Tom?
22 GOVERNOR BUSH: You got a -- going
23 someplace?
24 TREASURER GALLAGHER: I've got Cab-- I've
25 got a Legislature --
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1 GOVERNOR BUSH: Is there a --
2 MR. STRUHS: We -- we -- we've done the
3 math, it's just slightly over 100 million
4 dollars today.
5 GOVERNOR BUSH: Okay. Just -- I thought it
6 was appropriate to bring that up, because in
7 fairness to the appropriators, they're looking
8 at that.
9 And that's the -- that's the dilemma we
10 face, General, that you've brought -- pointed
11 out, and I --
12 COMPTROLLER MILLIGAN: Sure.
13 GOVERNOR BUSH: -- and I think it's worthy
14 of -- that's why the -- the -- the motion you
15 made and the -- the mission now that we have is
16 an important one for next year.
17 Thank you.
18 MR. STRUHS: Thank you.
19 GOVERNOR BUSH: There's a motion on
20 Item 10?
21 Is there a second?
22 ATTORNEY GENERAL BUTTERWORTH: Second.
23 GOVERNOR BUSH: Any discussion?
24 Moved and seconded.
25 Without objection, it's approved.
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1 MR. STRUHS: Thank you all.
2 GOVERNOR BUSH: Thank you, David.
3 (The Board of Trustees of the Internal
4 Improvement Trust Fund Agenda was concluded.)
5 * * *
6
7
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10
11
12
13
14
15
16
17
18
19
20
21
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25
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1 GOVERNOR BUSH: Department of Agriculture.
2 MR. WILHELM: Good morning.
3 GOVERNOR BUSH: Good morning.
4 MR. WILHELM: Item Number 1 is the
5 Alligator Harbor selection process. This item
6 was deferred from the February 27th Cabinet
7 meeting in Tampa.
8 Based upon the comments received there and
9 the comments of interested persons, staff
10 recommends the following motion be adopted by
11 the Board:
12 The application process for Alligator
13 Harbor be on a first-come, first-served basis,
14 with Franklin County residents having first
15 priority; Wakulla County residents, second
16 priority; and preference being given to
17 first-time leaseholders.
18 Staff believes this motion will assure that
19 this economic development project will reside
20 with the local constituency.
21 TREASURER GALLAGHER: Motion on one as
22 described.
23 COMPTROLLER MILLIGAN: Second.
24 GOVERNOR BUSH: Moved and seconded.
25 Any discussion?
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1 Without objection, it's approved.
2 I think it's a good strategy to provide
3 priority for the local residents.
4 MR. WILHELM: Just -- we did have from
5 Franklin County, Commissioner Cheryl Saunders
6 (sic) here --
7 GOVERNOR BUSH: Commissioner, where are
8 you?
9 MS. SANDERS: I'm right here.
10 TREASURER GALLAGHER: There she is.
11 GOVERNOR BUSH: Great to see you.
12 We already approved it.
13 You want to speak anyway.
14 MS. SANDERS: You know, Governor, I'm never
15 at a loss for words.
16 GOVERNOR BUSH: I --
17 MS. SANDERS: Now that's --
18 GOVERNOR BUSH: -- I realize that when --
19 MS. SANDERS: That's absolutely the truth,
20 being from Franklin County.
21 GOVERNOR BUSH: You came all the way to
22 Tampa, so you can come back and talk again.
23 MS. SANDERS: That's right. That's right.
24 And this -- like I said, I emphasized at
25 the beginning, and I'd like to say, I -- I'm
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1 proud to see Commissioner Rhodes here. She
2 wasn't down in Tampa. She was sick then. I'm
3 glad you're better.
4 This is a good project for Franklin County,
5 Governor, and Cabinet. I'm still working
6 behind it. And I'm still going to be working
7 behind it before it's all over with.
8 And, in fact, they're wanting to name it
9 Cheryl's Clams.
10 So if you -- if you go down 98, down there
11 at Alligator Harbor, and you see a big sign
12 that says Cheryl's Clams, when I'm dead and
13 gone, you'll know that this woman stood before
14 this Governor and Cabinet, and told you how
15 important it was for Franklin County.
16 GOVERNOR BUSH: Thank you, Commissioner.
17 MS. SANDERS: Thank you.
18 Do you use hot sauce on those clams? Do
19 you use, like hot sauce, or --
20 MS. SANDERS: Sir?
21 GOVERNOR BUSH: What do you put on your --
22 how do you --
23 MS. SANDERS: No. I have never --
24 GOVERNOR BUSH: You've never eaten them?
25 MS. SANDERS: That's oysters you do that.
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1 GOVERNOR BUSH: Oh, I put --
2 MS. SANDERS: Now, I know about --
3 GOVERNOR BUSH: -- hot sauce on everything,
4 girl.
5 MS. SANDERS: -- oysters, too.
6 Yeah. This is mainly going to be -- from
7 what I gather, it's going to be something like
8 pasta clams. Yeah.
9 And I never have ate --
10 GOVERNOR BUSH: Fru-fru food.
11 MS. SANDERS: -- pasta clams before.
12 This is a -- this is a -- this is a new
13 experience from Franklin County, and on --
14 GOVERNOR BUSH: You're going international.
15 MS. SANDERS: I know. I know.
16 GOVERNOR BUSH: That's great.
17 MS. SANDERS: But on -- I would like to say
18 this, because I am an ambassador from
19 Franklin County.
20 On April 11th, we will be having
21 Franklin County Day. And I'm going to set up a
22 booth with a coming attraction to
23 Franklin County, and that's the clams.
24 GOVERNOR BUSH: Excellent.
25 MS. SANDERS: So come down and see us on
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1 April 11th.
2 GOVERNOR BUSH: Thank you very much for
3 being here.
4 MS. SANDERS: See ya later.
5 GOVERNOR BUSH: Yes.
6 Did we have a motion and a second?
7 I think we did.
8 TREASURER GALLAGHER: Yeah, it's done.
9 GOVERNOR BUSH: It's done.
10 MR. WILHELM: Thank you.
11 That was all.
12 GOVERNOR BUSH: That's it.
13 MR. WILHELM: Yes, sir.
14 GOVERNOR BUSH: Thank you.
15 (The Department of Agriculture & Consumer
16 Services Agenda was concluded.)
17 * * *
18
19
20
21
22
23
24
25
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1 GOVERNOR BUSH: Y'all can leave if you --
2 unless you want to stick around and talk about
3 bundled providers.
4 State Board of Administration.
5 I'm sure --
6 TREASURER GALLAGHER: Motion on the
7 minutes.
8 COMPTROLLER MILLIGAN: I will second the
9 minutes.
10 GOVERNOR BUSH: There's a motion and a
11 second.
12 Without objection, it's approved.
13 MR. HERNDON: Item Number 2 is a report on
14 the alternative investment asset class, and
15 some recommendations for modification to the
16 total fund --
17 (Attorney General Butterworth and Secretary
18 Harris exited the room.)
19 MR. HERNDON: -- investment plan.
20 Governor and members, we had initially
21 planned to have a presentation this morning on
22 alternative investments to lead into Items 2
23 and 3.
24 We are recommending Item 3 be deferred.
25 But if it's agreeable, we'd still like to go
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1 ahead and give you this presentation on private
2 equity. I think it's important that you have
3 this backdrop.
4 And then a few brief remarks on the
5 amendment to the total fund investment plan.
6 I might add that this issue was discussed
7 in front of our Advisory Council a couple of
8 weeks ago, and was approved by them, and hence
9 is before you today.
10 With your permission, we'll go ahead and
11 ask Bill James, who's Chief of our alternative
12 investments asset class to come up.
13 And we've got some presentation booklets
14 for you --
15 GOVERNOR BUSH: Thank you.
16 MR. HERNDON: -- this morning.
17 I think you'll find this to be of interest.
18 It's not an asset class. It gets a lot of
19 attention, but a very unique investment.
20 And without any further delay, let me get
21 Bill James.
22 MR. JAMES: Thank you very much,
23 Governor Bush, Controller Milligan, and
24 Treasurer Gallagher.
25 As you know, in -- late in 1999, the Board
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1 passed an amendment to the investment plan of
2 the FRS, which created -- amongst other acts,
3 it created the alternative investments asset
4 class with an initial weighting of
5 two-and-a-half percent of the fund.
6 At that point in time, I was named head of
7 the department, and we funded that department
8 with about 2.4 billion dollars worth of private
9 equity holdings that formerly had been in the
10 domestic equity asset class.
11 So it was split out from the other side of
12 the operation.
13 And at this point in time, we thought it
14 was a good idea to give you a review of where
15 the asset class has gone from then, and to give
16 you a little perspective on alternative
17 investments, say, in the market in general.
18 On page 3 of the handout, you'll see we've
19 laid out what's traditionally considered to be
20 the investment types that you find in all --
21 alternative investments.
22 The first four, leverage buy-outs, growth
23 financing, venture capital, and Mezzanine
24 Capital generally are considered to be part of
25 traditional private equity.
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1 Most of our holdings are concentrated in
2 leverage buy-out positions, and we have a very,
3 very small position in Venture Capital.
4 There are a variety of other strategies
5 that are pursued, some of which are
6 derivative-based strategies, including hedge
7 funds and managed futures and investments in
8 timber, oil, and gas, and distress debt.
9 In addition to that, real estate quite
10 often is viewed by the market as being part of
11 alternative investments, but at the Board, it's
12 a separate asset class with its own allocation.
13 The graph shows over the past ten years how
14 much capital has been committed to alternative
15 investments as a whole. And you see during the
16 '90s, there was huge growth.
17 Early in the decade, it averaged about
18 10 billion dollars worth of commitments per
19 year.
20 And obviously in the late '90s, since the
21 market's really exploded, it was in the 100 to
22 150 billion dollar range.
23 Clearly 2001 is going to be a much slower
24 year in term of commitments.
25 TREASURER GALLAGHER: Could I -- could I
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March 29, 2001
1 interpret you just one second, if I may?
2 MR. JAMES: Sure.
3 TREASURER GALLAGHER: Governor, if I could,
4 I'd -- want to have our students here from the
5 2001 Presidents' Fest in the Park Essay Contest
6 winners.
7 GOVERNOR BUSH: Whew hoo.
8 TREASURER GALLAGHER: They're all sitting
9 right here. And --
10 (Applause.)
11 TREASURER GALLAGHER: The Presidents' Fest
12 in the Park Second Annual Public School Essay
13 Contest was conducted in all public elementary
14 schools and middle schools, which comprise the
15 Western Innovative Zone. The subject of the
16 essay contest this year was, appropriately,
17 Your Vote Counts.
18 The goal of the Presidents' Fest
19 Educational Committee was for students, with
20 the support of their teachers and families, to
21 utilize the skills which they have been taught
22 in the classroom to prepare their essay.
23 Guidelines for the essay contest were
24 distributed to each public school principal,
25 several community leaders, and representatives
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1 of local businesses involved in the Partners in
2 Education agreed to our -- serve as judges for
3 the contest.
4 The essays were reviewed for creativity,
5 organization, style, and reasoning.
6 And so we certainly welcome you to the
7 State Capitol, and we're very glad you're here.
8 And it's Caitlan Chase, Claire Ferguson,
9 Monica Martinez, Alana Murphy, Ursula Raygoza,
10 Nicholas Stiegler, Andrea Tahmooressi -- I'm
11 close there I guess maybe.
12 -- Devasia Washington, and Alex Eisenberg.
13 GOVERNOR BUSH: And Ken Plante.
14 TREASURER GALLAGHER: And Ken Plante. And
15 the trip chaperones are --
16 He's been writing a lot of essays since he
17 left the Governor's office, I know that.
18 And I also thank Doug Iscovitz and
19 Shari Stupp, Debi Levy, Joel Fass, and
20 Rhonda Murphy for being the trip chaperones.
21 Thank you for coming by and visiting our
22 Cabinet meeting.
23 GOVERNOR BUSH: Thanks for being here.
24 MR. JAMES: Page 4 of the presentation lays
25 out our peers in the public arena. And in
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1 general, as you can see, the allocations in the
2 target column for all of the pension funds are
3 generally at our level or higher.
4 What you see here on the right-hand column
5 is the total fund size to put it in
6 perspective.
7 The first ten public pension funds are the
8 top ten in order, including the Florida State
9 Board at number 4.
10 And allocations of that group probably
11 average in the 5 to 6 percent range. And as
12 you get into the funds that are in the 20 to
13 50 billion dollar range, it's not uncommon to
14 see alternatives allocations between 10 and
15 20 percent.
16 COMPTROLLER MILLIGAN: You mentioned that
17 real estate was included in alternative
18 investments, in most -- in many states, or all
19 states.
20 MR. JAMES: In many states. It's different
21 from fund to fund, but --
22 COMPTROLLER MILLIGAN: You know, I --
23 you know, I look at CalPERS, 6 percent. Is
24 that --
25 MR. JAMES: Does not include --
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1 COMPTROLLER MILLIGAN: -- do they include
2 real estate?
3 MR. JAMES: No. When we did the survey, we
4 intentionally excluded real estate so --
5 GOVERNOR BUSH: Okay. I --
6 MR. JAMES: -- there'd be an apples to
7 apples comparison.
8 COMPTROLLER MILLIGAN: Okay. Thank you.
9 GOVERNOR BUSH: When you say they're
10 target. I mean, our target's two-and-a-half.
11 But you're -- you're at 4 percent now?
12 MR. JAMES: We're about 3.7 at this point.
13 Depends on how the public markets are doing
14 from day to day.
15 GOVERNOR BUSH: Right.
16 I mean, this is more -- this -- this
17 particular area of investment is more -- the
18 percentages are more related to what's going on
19 with the denominator, not the numerator.
20 MR. JAMES: To a certain extent, that's
21 true, because of value.
22 TREASURER GALLAGHER: Right.
23 And you can't change the one year there.
24 It's not -- when you deal with the other --
25 COMPTROLLER MILLIGAN: Keep going --
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1 TREASURER GALLAGHER: -- asset classes,
2 when the stock market's going down, you buy,
3 and -- and when it's going up, you sell, to
4 keep them even.
5 You can't -- this one's sort of -- you've
6 made the investment, you hold it. You don't --
7 there's no market to sell it. But over the
8 period of time, it has a good return.
9 GOVERNOR BUSH: We hope.
10 TREASURER GALLAGHER: We hope.
11 COMPTROLLER MILLIGAN: We hope.
12 That's right.
13 TREASURER GALLAGHER: Well, if they make
14 the right decisions, they do.
15 GOVERNOR BUSH: So it's a little more of
16 a --
17 COMPTROLLER MILLIGAN: Well, when we talked
18 about -- about this back in '99, you know, the
19 discussion revolved around risk and -- and how
20 risky this was, and why we hadn't been involved
21 in it before was because of risk. We've
22 enjoyed obviously some pretty good return here.
23 But it is still risky.
24 MR. JAMES: Page 5 gives you an
25 introduction to the usual private equity deal
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1 structure.
2 We work through limited partnerships, or we
3 try to mimic limited partnerships, or have in
4 the past when we didn't have partnership
5 authority.
6 And the partnership generally is made up of
7 a general partner and a variety of limited
8 partners. We have as few as one, and as many
9 as 100 in some of these funds.
10 The role of the general partner is to
11 source investments, to sort through the
12 opportunities that are out there, and to make
13 purchase decisions on behalf of the limited
14 partners to manage those investments. And
15 these are generally control investments in the
16 LBO portfolios that predominate our portfolio.
17 And then to exit those investments, and
18 there are a variety of strategies there.
19 IPO, obviously an initial public offering
20 of stock. They then have to manage the exit
21 from the -- from the public stock position. A
22 strategic or financial sale to a -- to a buyer
23 is clearly what we prefer, because that
24 generally produces cash right away.
25 The LP role, that would be our role,
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1 includes obviously what they're most interested
2 in -- and that's a provision of capital. But
3 we also provide a very important due diligence
4 role in resolving valuation issues and
5 conflicts of interest.
6 Generally, these partnerships are ten years
7 in length. They can be extended a year or two
8 for the purposes of disposing of assets that
9 remain at the end of the time period.
10 The graph on the right will give you an
11 idea of generally the time frame of how funds
12 move in and out of those partnerships. The red
13 graph, as you can see, which starts at zero,
14 and generally goes back to zero by year 6, is
15 the time frame when the investments are made.
16 They're generally completed within the first
17 six years of the partnership's life.
18 So the money is -- is rolling out to the
19 general partner during that time period you get
20 invested.
21 Distributions from the account are in
22 green, and they generally start very, very
23 slowly, and -- and predominate from year 6 on,
24 resulting in the portfolio value graph that you
25 see that's in light blue, which peaks around
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1 year 6, and then falls off.
2 So if we made one investment in one general
3 partnership, generally what would happen is the
4 portfolio value would start at zero, we'd have
5 a commitment.
6 In this case, that graph was driven for
7 100 million dollar commitment.
8 And the portfolio value would peak
9 somewhere around 90 -- 90 million dollars, and
10 then would fall off and reach zero at the end
11 of the partnership length. So it's important
12 for us to continue to invest in partnerships
13 through time, to keep the percentage of the
14 fund stable.
15 Page 6 shows the normal path that the rate
16 of return of those portfolios follow. Given
17 the fact that there are very few distributions
18 early in the life of the partnership, and
19 valuation procedures are generally very, very
20 conservative, most investments are held at cost
21 through the first three to four years, it
22 generally has a negative rate of return for the
23 first two to three years, somewhere around zero
24 potentially.
25 If you hit an early home run with a -- a --
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1 a deal that matures quickly, you can beat your
2 benchmark during that time period.
3 But predominantly, year 5 and 6 is when you
4 begin to see a stabilization of the rate of
5 return for this long run value.
6 It's referred to as the J-curve because of
7 it's shape. And our benchmark is structured to
8 follow that.
9 Go on to page 7, you'll see the history of
10 the SBA's involvement. And -- and this is a
11 longer history than the asset class in private
12 equity, and then alternative investments.
13 The first -- the first partnership, which
14 we really invested as a side-by-side in an
15 investment management relationship is now
16 closed. Corporate Advisors was opened in
17 1988 --
18 TREASURER GALLAGHER: Wasn't that with
19 Lazard?
20 MR. JAMES: That was with Lazard.
21 TREASURER GALLAGHER: Right.
22 MR. JAMES: It's a strategy that's not one
23 that we would follow at this point in time.
24 We had a very difficult time getting into the
25 market then without having partnership
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1 authority.
2 And so we had a side-by-side -- generally,
3 there were public instruments, and we generally
4 do not invest in special situations, portfolios
5 of that type.
6 TREASURER GALLAGHER: But I -- I those --
7 at least the few that I knew about were quite
8 profitable. There may have been some that
9 weren't.
10 MR. JAMES: Uh-hum.
11 TREASURER GALLAGHER: The ones I remember
12 were very --
13 MR. JAMES: Well, I'd like to say that was
14 our experience.
15 Corporate Advisors fell significantly
16 behind its benchmark, and has pretty much
17 dominated our return history for the early --
18 early period of the asset class.
19 Liberty Partners was added in 1992. We're
20 the sole investor, and that's our core
21 relationship that we have in the portfolio.
22 Again, an investment management relationship.
23 Centre Partners, Cypress Equity, and
24 Carlyle Partners were added in '96. Still we
25 did not have partnership authority at that
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1 point.
2 But in '97, and on as I guess we would
3 consider at the modern era of the -- of the
4 asset class, we received the legislative
5 authority to enter into partnerships, and we
6 have made most of our investments since 1997 as
7 a result in the asset class.
8 Page 8 really just lays out the structure
9 of the portfolio. We kind of view it as a
10 three-legged stool. Liberty Partners is
11 1.2 billion of that, with preferred economics,
12 very good split for the limited partner.
13 Co-invest program, again great economics.
14 They invest side-by-side with other
15 partnerships and deals.
16 And the core portfolios, 1.75 billion of
17 the commitments are in the world class
18 partnerships that we're part of in the LBO
19 arena.
20 Current portfolio, page 9, shows
21 3.7 billion dollars committed, 2.9 billion of
22 that is invested -- and these are as of
23 December 31st of 2000.
24 We've received back 1.1 billion in
25 distributions. And our remaining market value
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1 is 3.6 billion.
2 Again you -- you know what that is, as a
3 percentage of the fund as a whole, right around
4 3.7.
5 Since October of '99, the FRS, excluding
6 alternatives, has had about a 5.4 percent
7 annualized rate of return over that same time
8 period. Alternatives, 23.5 percent annualized.
9 So we're -- our share of the overall
10 pension fund has been rising during --
11 GOVERNOR BUSH: Twenty-three percent
12 return?
13 MR. JAMES: Annualized, yes.
14 GOVERNOR BUSH: How does that relate to
15 other -- to the big dogs that are on page,
16 whatever it was, 2 -- 3 or 4?
17 MR. JAMES: I haven't done a direct
18 comparison, but I would imagine, given our
19 partnerships, that we're involved in, they're
20 very, very normal for the large pension funds.
21 So we're probably right in the arena.
22 It's a relatively young portfolio. Over
23 two-thirds of the commitments have been made in
24 the last three years.
25 We laid out on page 10 the progression of
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1 the portfolio. Just needless to say, we've
2 established all of the steps we had in mind
3 through creation of the separate asset class.
4 The next steps involve diversifying the
5 portfolio. Of course, with defined
6 contribution coming, we've had to modify our
7 view as to where we would be down the line, and
8 we're trying to accommodate that as time goes
9 on, and still have a world class portfolio.
10 Performance again, you have to remember
11 that half of the portfolio companies are still
12 valued at cost. The average age is 3.5 years.
13 So we generally have to look below the
14 performance numbers to look at the health of
15 the portfolio companies. We're very, very
16 happy with the portfolios -- where the
17 portfolio stands at this point in time.
18 And finally, on page 12, we wanted to
19 indicate how we've impacted the FRS's rate of
20 return. If you look on the excess return
21 column, this is what you do over or under your
22 target. The last 12 months, our asset class
23 has exceeded the benchmark by 8.87 percent.
24 Three -- over the three-year period by
25 2.6 percent annualized. And we've fallen
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1 behind the benchmark over a five-year period by
2 2.85 percent.
3 And there's a summary at the end that
4 basically covers all the topics. And I'd be
5 happy to entertain any questions you've got.
6 Thank you very much for your time.
7 GOVERNOR BUSH: Thank you.
8 Any questions?
9 COMPTROLLER MILLIGAN: No. That was good.
10 MR. HERNDON: Thank you.
11 The item that's before you is a
12 recommendation to increase the overall
13 allocation, the range up to 6 percent, and to
14 modify our midpoint target for assets,
15 Governor, from the two-and-a-half percent that
16 you were alluding to earlier, to 4.
17 And that is largely a recognition of what
18 has happened in the public markets, as they've
19 fallen. And as private equity valuations have
20 enhanced, we have simply been a victim of -- of
21 our own prosperity to a degree, and the
22 unfortunate lack of prosperity on the public
23 side.
24 We don't anticipate putting new money to
25 work here. As you may know, we've had an
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1 informal moratorium at the staff level for over
2 a year in private equity where we've
3 essentially said no new investments. We are
4 continuing to reinvest in our current
5 portfolios and our current managers where it's
6 appropriate from an investment point of view.
7 And we would intend to continue that same
8 philosophy, but no plans for new investments
9 beyond that until the DC situation is
10 clarified.
11 GOVERNOR BUSH: Okay.
12 All right.
13 COMPTROLLER MILLIGAN: I'll move Item 2 to
14 approve the expanded policy range and target.
15 TREASURER GALLAGHER: Second.
16 GOVERNOR BUSH: There's a motion and a
17 second.
18 Without objection, it is approved.
19 MR. HERNDON: Again, we'd -- recommending
20 deferring Item 3. It is a related topic, but
21 we'll come back to that in a couple of weeks
22 with your -- with your permission.
23 Item 4 is --
24 GOVERNOR BUSH: But we --
25 MR. HERNDON: -- a significant --
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1 GOVERNOR BUSH: -- haven't moved it.
2 MR. HERNDON: I'm --
3 GOVERNOR BUSH: Is there a motion?
4 COMPTROLLER MILLIGAN: Motion, deferral.
5 TREASURER GALLAGHER: Second.
6 GOVERNOR BUSH: Moved and seconded.
7 Without objection, it's deferred.
8 I would -- I would just state that I
9 thought the summary here, at least in my
10 package about the Investment Advisory
11 Committee's recommendation, expresses my views
12 on this subject remarkably well.
13 MR. HERNDON: Good.
14 GOVERNOR BUSH: I don't know if you all
15 have the same --
16 COMPTROLLER MILLIGAN: Yes.
17 TREASURER GALLAGHER: We do.
18 GOVERNOR BUSH: I'm glad that they're --
19 TREASURER GALLAGHER: Fully agree with
20 that.
21 GOVERNOR BUSH: Glad that they're worried
22 about our personal liability.
23 MR. HERNDON: They are, indeed.
24 GOVERNOR BUSH: That's very good.
25 MR. HERNDON: Item Number 4 is a
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1 significant milestone in the implementation of
2 the defined contribution program. Here we are
3 bringing before you a recommendation from our
4 internal selection team, and as well, a joint
5 meeting of the Investment Advisory Council, and
6 the Public Employee Optional Retirement Program
7 Advisory Council, to enter into contract
8 negotiations with an education advice vendor
9 for the defined contribution program.
10 The two firms that are contemplated here
11 are Financial Engines, and Ernst & Young.
12 Dr. Francis is here as Chairman of that
13 committee to give you a brief orientation as to
14 how we got to where we are.
15 And then we have representatives from both
16 firms here who would also like a minute or two
17 to address the Trustees as to how they see this
18 project unfolding.
19 So --
20 GOVERNOR BUSH: An SBA meeting without that
21 would be like a day without sunshine, Tom.
22 DR. FRANCIS: Good morning. It's still
23 morning.
24 GOVERNOR BUSH: Good morning.
25 DR. FRANCIS: Governor, Trustees.
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1 I do want to be mindful of your time. I --
2 I do have a few introductory remarks, as Tom
3 said. But just nod, and I'll quickly cut to
4 the chase.
5 The --
6 TREASURER GALLAGHER: That's a good thing.
7 DR. FRANCIS: This -- this process began
8 last summer. There was a substantial effort, a
9 great deal of investigation of valuation, the
10 most recent event in the process was that the
11 IAC and PEORPAC endorsed the recommendations
12 that we're bringing to you today. That
13 happened on March 16th.
14 The group that developed the recommendation
15 included a number of persons from outside the
16 SBA, including representatives from two Trustee
17 offices, from the school boards, from the
18 counties, from the Board of Regents, and from
19 the Division of Retirement.
20 Two lengthy RFIs were issued in the course
21 of this process. Twenty-one respondents --
22 there was a strong response rate -- initially
23 came in.
24 That was eventually pared down to three
25 lists of well-qualified finalists, and finally
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1 now to this pair of companies which we believe
2 are top rate in the field, and at the same
3 time, we believe are rather cost-effective.
4 As we all know, individuals must take
5 responsibility for themselves and their
6 retirement future. And that's irrespective of
7 whether they choose DC or DB.
8 Because as generous as our DB plan is for a
9 full 30-year term of service, relative to many
10 DB plans, it still replaces only about
11 50 percent of a person's preretirement income.
12 So if a person doesn't take charge,
13 irrespective of which way they go, and
14 effectively manage for their retirement future,
15 they're going to experience financial
16 discomfort.
17 The current law which we've said many times
18 is model legislation in many, many respects,
19 implicitly recognizes this in that the pro-- in
20 that the education program is for all FRS
21 participants, irrespective of whether they
22 choose DB or DC.
23 The law requires an ongoing education and
24 communications component to help members
25 prepare for retirement. It requires
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1 coordinated information with other tax deferred
2 savings and investment vehicles available to
3 participants, and so forth.
4 So this program will give participants, in
5 our belief, the essential support they need to
6 successfully plan, to save, and invest for
7 retirement.
8 How this will happen is through a
9 combination of education, counseling, guidance,
10 and advice.
11 Those -- those services will address four
12 key topics for participants. First DB/DC plan
13 fundamentals. People have to understand the
14 basics of the plan really to get past go.
15 Secondly, how to best choose between DB and
16 DC. And this -- this is an important issue.
17 It occurs not only in the obvious transition
18 period, but on an ongoing basis, because our
19 current law has a very valuable second election
20 option for employees that can be -- can be
21 exercised at -- once at any point in the future
22 on behalf of all participants.
23 Thirdly, it will help participants to
24 effectively invest for the long-term.
25 And, finally, participants will be guided
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1 on how to assess their retirement income needs
2 and stay on track to meet those needs.
3 All of this, as I said, will be addressed
4 comprehensively in the context of a person's
5 total resources.
6 Finally, just looking forward, another
7 element we foresee bringing into this program
8 in the future is guidance on how to effectively
9 manage assets and income during retirement
10 years.
11 Because in many ways, the challenge gets
12 more complex then. Tax considerations come
13 into place, annuitization considerations, the
14 degree to which you want to set off market and
15 mortality risks. And those things are all
16 immediate. And, as I say, in some ways more
17 complex, and we hope to incorporate that as
18 well.
19 Throughout this process, we have been very,
20 very sensitive to the obvious diversity of the
21 FRS participant base. We have designed the
22 program to comprehensively and fully meet the
23 needs of all participants from every stripe,
24 from every background, from every level of
25 education.
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1 To just hit some of the high points, there
2 will be web-based information and software
3 tools available for persons who tend to be
4 self-sufficient and comfortable in that medium,
5 there will be toll free telephone support for
6 people who value the comfort of personal
7 attention and guidance from a human being,
8 there will be workshops on a continuing basis
9 on a wide variety of investment and retirement
10 planning topics.
11 During the three-stage transition period,
12 workshops will cover the entire state, and,
13 of course, will focus on this critical choice
14 between the two plans.
15 Also for a fee to members, we will
16 periodically make available one-on-one
17 counseling. I should note at the same time
18 that that counseling is available at any time
19 by phone without a -- a direct charge to
20 participants.
21 There will be personalized benefit
22 comparis-- comparison statements for all
23 600,000 FRS members during the transition;
24 there will be support, as I said, of the highly
25 valuable second election option on an ongoing
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1 basis, there will be a wide array of printed
2 information, educational videos, a quarterly
3 newsletter, investor alerts, and so forth.
4 And, finally, these investors will work in
5 conjunction with a media firm, which the
6 decision -- the recommendation to you will be
7 finalized August 9th, whose principle
8 responsibility is to generate awareness and
9 appreciation for the significance of this
10 choice so that people, you know, actively
11 participate during the outreach -- the outreach
12 period.
13 And, finally, I think it's important to
14 mention what these two organizations will not
15 be doing.
16 These organizations will not be tilting
17 participants toward any particular set of
18 investment options, because they don't provide
19 any investment options.
20 There will be no misalignment whatsoever
21 between the economic interests of these
22 organizations, and the economic interests of
23 participants.
24 They will have a full fiduciary obligation
25 to participants, and they will carry the
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1 liability of any breach of that duty should it
2 occur.
3 And they won't be using the access that
4 this program gives them to FRS participants to
5 cross-sell, to market insurance products, or
6 any other thing of that nature, again, because
7 they do not provide them.
8 Finally, a quick mention of cost.
9 Compared to the other two finalist groups,
10 the other groups were 50 percent higher than
11 this group in their initial bids. And we have
12 since made further progress on -- on what we're
13 looking at in terms of prices.
14 In our judgment, and while we expect to
15 make additional progress on that score, in our
16 judgment, we will be able to deliver a highly
17 cost-effective service to participants without
18 sacrificing any quality, and give them
19 everything they need to take effective control
20 of their financial future.
21 The deliverables that I mentioned, and that
22 we've been able to sort of prenegotiate to this
23 point, reflect best practices in the 401(k)
24 corporate market. And the costs that we have
25 been able to prenegotiate compare favorably
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1 with those corporate plans.
2 So at this time, we recommend that you
3 grant us authority to negotiate contracts with
4 Financial Engines, who will serve as what we're
5 calling the Education Content Specialist.
6 Their responsibilities will be the text or
7 content of all the education materials; to
8 provide tools, software tools to participants;
9 and to support all the analytics that will go
10 on behind the scenes.
11 And, secondly, Ernst & Young --
12 excuse me -- who would be the Participant
13 Communication Specialist whose job is the phone
14 support, the workshops, the counseling, all the
15 direct contact with participants.
16 As Tom mentioned --
17 GOVERNOR BUSH: Question. Go ahead.
18 DR. FRANCIS: I'm sorry. I -- I can answer
19 questions now, or after we have remarks from
20 the two companies, whatever you prefer.
21 GOVERNOR BUSH: Oh, that's right. I forgot
22 we have our --
23 DR. FRANCIS: Okay. Yes. We have
24 representatives of both firms.
25 We have Mr. Jeff Maggioncalda first, who is
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1 CEO of Financial Engines.
2 GOVERNOR BUSH: Welcome, sir.
3 MR. MAGGIONCALDA: Thank you.
4 Governor Bush, Comptroller Milligan, and
5 Treasurer Gallagher, on behalf of
6 Financial Engines and our partners at
7 Ernst & Young, we are honored to be recommended
8 to serve as the education and advice vendor for
9 the State of Florida.
10 Financial Engines was founded by
11 Nobel Laureate, Bill Sharpe, who's done an
12 awful lot with the defined benefit pension
13 plans in California, and some larger
14 corporations.
15 We're a registered investment advisor, and
16 have been providing our services to help
17 individuals invest in their 401(k) plans for
18 quite some time.
19 Today about 50 million American employees
20 are investing about 2 trillion dollars in
21 401(k) plans, and other defined contribution
22 plans.
23 TREASURER GALLAGHER: A lot of money.
24 MR. MAGGIONCALDA: And Financial Engines
25 has been selected by hundreds of companies to
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1 help over half a million individuals invest
2 these defined contribution assets.
3 Soon 600,000, approximately, State
4 employees will be facing a choice whether to
5 participate in defined contribution plan or
6 not.
7 I think this is a -- a wonderful
8 opportunity for the State employees to take
9 control of the way that they want to invest
10 their money. And these important decisions
11 will impact the way they live the last third of
12 their lives in retirement.
13 It is a privilege for our firm to be given
14 the opportunity to help them make this --
15 this -- these decisions wisely. And I
16 personally commit, on behalf of myself and the
17 company, that we'll do everything possible to
18 make sure that the introduction of this new
19 DC plan is a success.
20 Thank you.
21 GOVERNOR BUSH: Thank you.
22 Where are you located?
23 MR. MAGGIONCALDA: We are in Palo Alto,
24 California.
25 GOVERNOR BUSH: Would you open up an office
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1 here, or would this just be done over the
2 transom? How's that -- how's that going to
3 work?
4 MR. MAGGIONCALDA: We -- we -- we virtually
5 opened up an office over the last few months
6 here.
7 We will be happy to staff as many people as
8 required.
9 I think mostly in the earlier stages, we
10 need to make sure that we really understand the
11 needs of the various groups of -- of
12 participants thought the state.
13 And we do have sales offices in Atlanta, we
14 have sales and support offices in Boston. And
15 if the program so requires, we'd be happy to
16 staff whatever resources are required to --
17 GOVERNOR BUSH: Let's put it this way:
18 If -- if y'all are the -- if -- you have a half
19 a million people that you -- that you --
20 MR. MAGGIONCALDA: In -- in corp-- in
21 corporate plans, we've rolled out -- we have
22 over the last --
23 GOVERNOR BUSH: Our -- and how big is
24 our -- our -- our account?
25 MR. MAGGIONCALDA: Approximately 600,000.
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1 Over the past year, we have --
2 GOVERNOR BUSH: You got your sales office
3 in a state where you just doubled your number
4 of people you're going to be providing
5 financial support for, if you get this, right?
6 MR. MAGGIONCALDA: Right.
7 Over the past year, we've had a
8 relationship with --
9 GOVERNOR BUSH: It's my last chance to do
10 this, so I'm going to --
11 TREASURER GALLAGHER: You're -- you're
12 still negotiat--
13 You're still negotiating with them, aren't
14 you, Tom?
15 MR. HERNDON: Yes.
16 TREASURER GALLAGHER: I'm sure you have
17 your structures.
18 MR. MAGGIONCALDA: We've had -- we've had
19 experience over the last year working with AOL.
20 We've actually provided our services to over
21 4 million unique individuals through the
22 services that we provide on-line, and totally
23 confident we'll make sure we have the capacity
24 to -- to make this program a success.
25 GOVERNOR BUSH: Is Ernst & Young the -- the
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1 part -- the part of the partnership that has
2 the direct contact with the --
3 MR. MAGGIONCALDA: Yes. Basically we're
4 going to be doing the -- the content. Really
5 the -- the -- the modeling, analytics, and the
6 presentation of the risk return trade off, and
7 the forecasting of how much you might have,
8 virtually all the human touch component, phone
9 and -- and worksite, will be taken care of by
10 the Ernst & Young force.
11 TREASURER GALLAGHER: That's the next
12 speaker.
13 GOVERNOR BUSH: Okay. I've just -- I've
14 got a few questions for them, too.
15 MR. MAGGIONCALDA: Great.
16 GOVERNOR BUSH: Thank you.
17 MR. MAGGIONCALDA: Thanks.
18 GOVERNOR BUSH: Thanks for coming.
19 MR. MAGGIONCALDA: Sure.
20 My -- my pleasure.
21 DR. FRANCIS: Next up, we have Mr.
22 Bill Arnone, who is the National Practice
23 Director for Ernst & Young's employee education
24 efforts.
25 MR. ARNONE: How do you do?
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1 On behalf of Ernst & Young, and my fellow
2 partner, Bart Francis, who runs our Florida
3 operations, I want to express our tremendous
4 excitement on what Jim mentioned was model
5 legislation creating this program. And we want
6 to make sure this program is a model program.
7 Six hundred thousand people have financial
8 futures at stake here, not just as Dr. Francis
9 said in making the right decision, but to use
10 this as a trigger to help them get motivated
11 and confident that they can take control about
12 their financial futures.
13 And we think, combining our high touch
14 approach with Financial Engines' high tech
15 approach, we'll be able to encourage and
16 motivate people to do what's best for their
17 futures.
18 And we would hope when they're more
19 confident about their financial future, there's
20 a spillover benefit to help them be more
21 productive focused State employees.
22 So we're tremendously excited about this
23 opportunity. We're eager to get started, and
24 hope at the end of the day, you'll say the
25 program was a success in the eyes of your
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1 employees, your over 800 employers, and you as
2 Trustees.
3 Thank you.
4 GOVERNOR BUSH: Any questions?
5 How -- how are y'all handling the multi--
6 the wonderfully diverse cultural group of
7 600,000 people?
8 One of the -- earlier in the presentation,
9 Colonel Higgins was talking about veterans
10 homes assuring that -- that CNAs are speaking
11 English.
12 The reverse possibly is true in -- in my
13 hometown at least, as it relates to State
14 workers, and -- are we -- are we prepared to
15 deal with the multicultural nature of --
16 MR. ARNONE: Yes, sir. We have --
17 GOVERNOR BUSH: -- the state?
18 MR. ARNONE: -- been -- first of all, we've
19 been very sensitized to that issue in the
20 course of our meetings with key players over
21 the past year.
22 We've committed to a diverse group of
23 workshop leaders that reflect the backgrounds
24 of the individuals, as we have done in private
25 sector programs as well.
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1 We pride ourselves on -- pride ourselves on
2 connecting with people. So multilingual
3 workshops were needed; telephone counselors, we
4 have enough who can handle Spanish calls; and
5 we have translation services for other
6 languages, should those be required as well.
7 GOVERNOR BUSH: Where -- where would you --
8 where would be your call center? I assume
9 there's going to be a centralized location --
10 MR. ARNONE: Yes. We -- yes. We have a
11 national financial planning call center in
12 New Jersey. It's where we have our staffing.
13 And it'll be operated hours that are
14 convenient for everybody here in Florida.
15 Our workshop teams, we will clearly do
16 whatever we can to make sure people on those
17 teams are people who can relate very clearly to
18 Floridians, and using as many of our
19 Florida-based counselors as --
20 GOVERNOR BUSH: Yeah. Not everybody from
21 Florida is -- used to be from New Jersey.
22 MR. ARNONE: I know.
23 TREASURER GALLAGHER: Not everybody speaks
24 New Jersey, do they?
25 GOVERNOR BUSH: How -- how --
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1 COMPTROLLER MILLIGAN: Now, wait a minute.
2 I'm from New Jersey.
3 TREASURER GALLAGHER: Well, there are
4 good --
5 COMPTROLLER MILLIGAN: Be careful.
6 TREASURER GALLAGHER: There you are. At
7 most, a third of the people are from
8 New Jersey.
9 GOVERNOR BUSH: Exactly.
10 How -- tell -- in all seriousness, how
11 does -- how -- what -- how big is your scope of
12 business in this -- in this area, and -- and
13 how would we rank in terms of customers?
14 MR. ARNONE: Yeah.
15 We've been providing these types of
16 services since the late '70s. We now have
17 about 70 major clients, ranging from several
18 thousand employees, to one that is over
19 400,000.
20 Our total base of employees that we've
21 covered in the last couple of years is over
22 2 million people who need some type of
23 financial assistance with some type of
24 decision.
25 But let me not make any mistake about it.
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1 You are the largest program of its kind in the
2 history of this country.
3 GOVERNOR BUSH: That's why I --
4 MR. ARNONE: So --
5 GOVERNOR BUSH: -- asked the question. I
6 was -- I was surmising that.
7 And is there a capacity issue here that --
8 Maybe I should ask that to Tom. I mean,
9 are we -- in both cases where we are -- we're
10 the first major pension company -- pension plan
11 to go through this, are we prepared to deal
12 with the pretty dramatic increase in capacity
13 that would be necessary?
14 MR. ARNONE: Yes.
15 I can address it. We look very carefully,
16 even deciding to approach this opportunity, at
17 the impact it would have.
18 And we have had similar periods of time
19 with other clients together that met the
20 potential demand we would expect here.
21 We've looked at it very carefully, we've
22 provided backup data to the State Board of
23 Administration, and we have no doubt that we'll
24 be able to handle it in terms of call volume,
25 adhering to performance standards that SBA has
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1 been very focused on.
2 And we've looked at the assumptions in the
3 workshops, and have no doubt that we would be
4 able to staff that, without even having to add
5 other people. We are going to add people to do
6 it. But we would not -- we would not have to
7 in order to meet the goals of the state of
8 Florida.
9 GOVERNOR BUSH: Any other --
10 TREASURER GALLAGHER: The bottom line is
11 you're not going to put a call center in
12 Florida.
13 GOVERNOR BUSH: Didn't sound like that.
14 But -- we'd like to talk -- when I take off my
15 SBA hat, and get back to being the chief
16 economic development officer of the state, I'm
17 going to call you, because if we are the --
18 others are looking at this.
19 And if we have, which we will have, shared
20 success, you're going to expand your business
21 because of our relationship, which we'll be
22 grateful for, but I hope that -- that that
23 would also be the possibility as you expand
24 capacity, that you consider hiring people here.
25 MR. BART FRANCIS: Governor Bush --
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1 GOVERNOR BUSH: Just say yes, and --
2 MR. BART FRANCIS: -- Bart Francis, no
3 relationship to Dr. Francis.
4 I'm the Florida PFC partner, Personal
5 Financial Counseling partner.
6 When you want to make that call to
7 Ernst & Young, please make it to me. I would
8 love to have it over in Tampa, or some other
9 location, as you see appropriate.
10 GOVERNOR BUSH: Fantastic.
11 Thank you.
12 MR. BART FRANCIS: Thank you.
13 MR. HERNDON: We're very mindful of the
14 capacity concerns that you've expressed.
15 I mean, we -- we realize full well that we're
16 going to see a dramatic increase in call
17 volume, website hits, demand for speakers,
18 locations that are out of the way, and -- and
19 perhaps inconvenient.
20 And we've tried to address that in all
21 facets. This is a very multimedia focused kind
22 of enterprise, and we hope to have something
23 for everyone ultimately out there, not just the
24 employees, but the employers.
25 And, again, let's not forget, we've got 800
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1 of those ranging from the State of Florida to
2 Water Management District or mosquito control
3 district with three employees. And we've got
4 to hit all of those, too, because they've got
5 to process payrolls, and -- and what have you.
6 So it is a huge undertaking. We're very
7 confident that both of these firms have stepped
8 up. They've committed the resources that we
9 need to make this program a success.
10 We are not finished negotiating by any
11 stretch. We still plan to do that, and I know
12 that you all are very sensitive to the question
13 about costs and where we're headed with this
14 program.
15 We now have two of the major employer
16 funded cost elements in hand, if you will.
17 We've got a -- a third party administrator that
18 we've -- that we're negotiating with, and we've
19 got the educating vendor -- at least a major
20 element of the education vendor in hand.
21 And it's our expectation that with -- we
22 haven't finalized contracts with either one of
23 these parties. But it's our expectation that
24 on the agenda in front of you next time, we
25 will have a discussion about the budget
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1 implications and where we are, where we project
2 to be, based on these contract negotiations as
3 well.
4 I can tell you now that we are very
5 confident that we're very much on the mark as
6 far as the budget is concerned, and what the
7 Legislature authorized. And we'll have that, I
8 hope, fleshed out for you in much greater
9 detail. With your action here this morning,
10 we'll be able to move forward with -- with
11 these two plans, and get you some pretty good
12 information.
13 TREASURER GALLAGHER: Motion on 4.
14 COMPTROLLER MILLIGAN: Second.
15 GOVERNOR BUSH: Moved and seconded.
16 Without objection, it's approved.
17 Tom, just on another note as we go forward
18 with these contracts, there was advertising or
19 PR was mentioned. I would hope that there'd be
20 some consideration for diversity as it relates
21 to our -- our partners and vendors as well.
22 MR. HERNDON: Yes.
23 GOVERNOR BUSH: These are huge
24 opportunities. And it may not be that in
25 the -- in the first two major contracts we've
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1 signed up, that it would be appropriate to have
2 minority vendors be the sole vendor in this
3 regard.
4 But I -- I do think that they can add
5 tremendous value and sensitivity and
6 understanding of our state and the people that
7 we're serving. So --
8 MR. HERNDON: Yes, sir.
9 GOVERNOR BUSH: -- I'd hope that would be
10 taken into consideration at least.
11 MR. HERNDON: Yes, sir, it is. And,
12 in fact, I know that at least with respect to
13 the two initiatives that we've begun thus far,
14 they both -- in both cases, they're looking at
15 some subcontracting assistance and so forth.
16 It wasn't feasible that the lead contractor
17 would necessarily be a minority vendor, but
18 we're -- we're certainly pursuing other --
19 other dimensions of that.
20 GOVERNOR BUSH: Thank you.
21 MR. HERNDON: Item Number --
22 TREASURER GALLAGHER: Motion to defer 5.
23 MR. HERNDON: Item Number 5 was -- was
24 proposed to be --
25 TREASURER GALLAGHER: Withdraw. Sorry.
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1 MR. HERNDON: -- withdrawn.
2 TREASURER GALLAGHER: Move to withdraw 5.
3 MR. HERNDON: Item Number 6 is a status
4 report on the defined contribution
5 implementation. And we've -- we've talked
6 about that to some degree already this morning.
7 I would just add that we are moving forward
8 with the transition broker. In fact, we have a
9 recommendation from staff at this point on the
10 transition broker.
11 We hope to have a review by our
12 Advisory Councils in the next couple of weeks,
13 and bring that to you before the month of April
14 is out.
15 We've begun the investment provider program
16 with some of the unbundled RFIs that are out on
17 the street.
18 The bundled RFI went out Monday evening.
19 It was posted on the website at 5:30 on Monday
20 evening. And we're looking forward to some
21 further work in that regard.
22 I know that there's some concern about the
23 timing of that --
24 TREASURER GALLAGHER: I -- I really would,
25 if I may, Tom, ask you to extend at least
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1 another week for the people to return those --
2 their RFIs, considering that it was out on the
3 street, people could ask -- only got a couple
4 days to ask questions.
5 My understanding is that they're supposed
6 to get the answers to those questions tomorrow?
7 MR. HERNDON: Correct.
8 TREASURER GALLAGHER: And then you're
9 expecting everybody to get their bids in on --
10 on Monday.
11 I don't -- I don't think that's -- I think
12 that to encourage people to be creative in how
13 they're going to take care of -- and -- and
14 offer their -- their services to us, I think
15 they're going to need a week of regular
16 daytime, instead of just weekend.
17 And some of the answers to the questions
18 could affect how their bid's done.
19 So would you commit --
20 MR. HERNDON: Yes.
21 TREASURER GALLAGHER: -- to us to do it --
22 to give them another week?
23 MR. HERNDON: No. That's fine. We'll be
24 glad to do that.
25 We'll -- we'll make those arrangements and
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1 make that announcement on the website so that
2 all the parties will be aware of that.
3 Governor, I'd -- other than accepting the
4 report, I don't think there's any action on --
5 on Item Number 6.
6 GOVERNOR BUSH: All right.
7 MR. HERNDON: On Item Number 7 is the
8 monthly fund activity analysis for the month of
9 January.
10 And I believe you've just been given the
11 summary of the report that it would be coming
12 to you in the next few days for the month of
13 February.
14 The -- the critical element here, and I
15 want to just give you this perspective is
16 market value, see the total for the FRS, at
17 98 billion dollars; the Chiles Endowment; and
18 then the other funds, 126 billion dollars in
19 total.
20 If you turn the page though, I think this
21 is an important dimension to -- to focus on. I
22 don't want to lose sight of the market value.
23 But this gives you a perspective on the FRS
24 for three measurement periods: Five years
25 ending February 28th, the end of -- the end of
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1 last month; 12 months, ending February 28th;
2 and the last eight months, or essentially the
3 fiscal year that we're currently in.
4 And so you'll see, for example, on the line
5 labeled total FRS, the column identified as
6 managed, that is our performance. That is what
7 we have accomplished during that five-year
8 period, or twelve-month period, or eight-month
9 period.
10 And then the target is the benchmark target
11 that you approve for us, and is incorporated in
12 our total fund investment plan.
13 So you'll see, for example, under the
14 column labeled value-added for the total FRS,
15 we're 20 basis points ahead of our target.
16 For value-added for the 12 months, we're
17 1.8 percent ahead of our target.
18 And for the eight-month period on a
19 value-added basis, we're 1 percent ahead of our
20 target.
21 Now, that's very relative performance.
22 We -- we're delighted that we're there. But in
23 absolute terms, as you are very well aware, the
24 market has dramatically fallen in the last 9 to
25 12 months, and you see that perhaps most
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1 vividly in the columns labeled twelve-month and
2 eight-month. You see the managed in the
3 targets at seven-and-a-half and
4 eight-and-a-half percent down for the total
5 FRS.
6 And down below, we've given you some of the
7 additional indices, the S&P 500 for 12 months,
8 down 9 percent; for the last eight months, down
9 14.6. And the NASDAQ, of course, is the horror
10 story of the year, down 52.8 percent for the
11 last 12 months, and so on.
12 There's no question that we are subject to
13 the vicissitudes of the market, with 65 percent
14 equity exposure between U.S. and international.
15 And both U.S. and international equity markets
16 have been hammered here in the last year.
17 We are also suffering from those same
18 results. But we are pleased at least that our
19 performance has been less painful than the
20 markets as a whole.
21 And that completes my report. I'd be happy
22 to answer any questions that you might have.
23 TREASURER GALLAGHER: Move we rise.
24 MR. HERNDON: Thank you.
25 GOVERNOR BUSH: Thank you very much, Tom.
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1 (The State Board of Administration Agenda
2 was concluded.)
3 * * *
4 (The Cabinet meeting was concluded at
5 12:12 p.m.)
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1 CERTIFICATE OF REPORTER
2
3
4
5 STATE OF FLORIDA:
6 COUNTY OF LEON:
7 I, LAURIE L. GILBERT COX, do hereby certify
8 that the foregoing proceedings were taken before me
9 at the time and place therein designated; that my
10 shorthand notes were thereafter translated; and the
11 foregoing pages numbered 1 through 121 are a true and
12 correct record of the aforesaid proceedings.
13 I FURTHER CERTIFY that I am not a relative,
14 employee, attorney or counsel of any of the parties,
15 nor relative or employee of such attorney or counsel,
16 or financially interested in the foregoing action.
17 DATED THIS 4TH day of APRIL, 2001.
18
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22
23
LAURIE L. GILBERT COX, RPR, CCR, CRR, RMR
24 100 Salem Court
Tallahassee, Florida 32301
25 850/878-2221
ACCURATE STENOTYPE REPORTERS, INC.
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