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:
DIVISION OF BOND FINANCE
STATE BOARD OF EDUCATION
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 Tuesday,
June 12, 2001, commencing at approximately 9:12 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
CHARLES H. BRONSON
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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June 12, 2001
I N D E X
ITEM ACTION PAGE
DIVISION OF BOND FINANCE:
(Presented by J. Ben Watkins, III,
Director)
1 Approved 5
2 Approved 8
STATE BOARD OF EDUCATION:
(Presented by Wayne V. Pierson,
Deputy Commissioner)
1 Approved 9
2 Approved 49
3 Approved 49
4 Approved 50
BOARD OF TRUSTEES OF THE
INTERNAL IMPROVEMENT
TRUST FUND:
(Presented by David B. Struhs,
Secretary)
1 Approved 51
Substitute 2 Approved 53
Substitute 3 Approved 54
Substitute 4 Approved 61
Substitute 5 Approved 62
Substitute 6 Approved 65
7 Approved 97
8 Approved 99
9 Approved 99
Substitute 10 Deferred 100
11 Approved 101
12 Approved 112
13 Approved 113
Substitute 14 Approved 114
15 Deferred 116
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June 12, 2001
I N D E X
(Continued)
ITEM ACTION PAGE
DEPARTMENT OF AGRICULTURE
AND CONSUMER SERVICES:
(Presented by Sherman R. Wilhelm, III,
Division Director)
Substitute 1 Approved 117
2 Approved 117
STATE BOARD OF ADMINISTRATION:
(Presented by Tom Herndon,
Executive Director)
1 Approved 119
2 Approved 134
3 Approved 184
4 Approved 189
CERTIFICATE OF REPORTER 190
* * *
ACCURATE STENOTYPE REPORTERS, INC.
DIVISION OF BOND FINANCE 5
June 12, 2001
1 P R O C E E D I N G S
2 (The agenda items commenced at 10:02 a.m.)
3 GOVERNOR BUSH: Division of Bond Finance.
4 MR. WATKINS: Good morning, Governor.
5 Item Number 1 is approval of the minutes of
6 the May 30th meeting.
7 TREASURER GALLAGHER: Motion.
8 COMPTROLLER MILLIGAN: Second.
9 GOVERNOR BUSH: Moved and seconded.
10 Without objection, it's approved.
11 MR. WATKINS: Item Number 2 is a resolution
12 authorizing the issuance of up to
13 twenty-three-and-a-half million dollars of
14 Board of Regents revenue bonds on behalf of the
15 Florida State University Research Foundation
16 for construction of facilities to be used in
17 connection with research and development.
18 GOVERNOR BUSH: Do you know what it's used
19 for specifically?
20 MR. WATKINS: Well, one of the projects is
21 the electric engine propulsion, the Navy
22 contract. They've got a 21 million dollar,
23 three-year contract. And that's going to be
24 the primary facilities for -- for that
25 initiative.
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June 12, 2001
1 And then the second facility, it's not
2 definitively decided who's going to be
3 relocated, but it's the distance learning
4 people, it is geology people, and part of the
5 medical school.
6 GOVERNOR BUSH: How -- out of courtesy, how
7 does -- how do you finance these -- who --
8 what's the dedicated source of revenue for
9 these bonds?
10 MR. WATKINS: Interestingly enough, the --
11 the Florida State University Research
12 Foundation is guaranteeing -- the structure is
13 a lease between the Foundation and the Board --
14 and FSU, and those monies will be dedicated.
15 But the real source of revenue are the
16 Taxol revenues from -- from the drug that's
17 licensed to Bristol-Myers Squibb, the cancer
18 drug. And so that money is providing a
19 guarantee for these bonds.
20 So, in effect, it's leveraging that revenue
21 stream, that it's the ultimate security for
22 repayment of --
23 GOVERNOR BUSH: This is --
24 MR. WATKINS: -- the debt.
25 GOVERNOR BUSH: -- the second -- I brought
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June 12, 2001
1 it up, because I thought that's what it was --
2 what the source of refinance -- or the source
3 of payment off the -- the debt is.
4 And I think University of Florida has a
5 very similar arrangement.
6 And it just points out the incredible
7 potential of taking research -- basic research
8 and applied research, and getting it out into
9 the marketplace that benefits the universities
10 to allow them to continue to expand into these
11 areas.
12 Because are -- we're -- I know that -- I'm
13 looking at the budget. University of Florida,
14 there's a large genetics building that's going
15 to be financed partially -- the -- the
16 University's portion is being financed by
17 revenue from investments in -- in start-up
18 companies that have taken hold.
19 MR. WATKINS: Right.
20 They also have Gatorade and an
21 additional -- and I can't recall the name, but
22 it's an eye drop for glaucoma and revenues
23 generated from that down at Florida in
24 connection with that transaction.
25 GOVERNOR BUSH: Is there a motion?
ACCURATE STENOTYPE REPORTERS, INC.
DIVISION OF BOND FINANCE 8
June 12, 2001
1 COMMISSIONER BRONSON: So move.
2 TREASURER GALLAGHER: Motion.
3 COMPTROLLER MILLIGAN: Motion.
4 ATTORNEY GENERAL BUTTERWORTH: Second.
5 GOVERNOR BUSH: Moved and seconded.
6 Without objection, it's approved.
7 Thank you.
8 MR. WATKINS: Thank you, sir.
9 (The Division of Bond Finance Agenda was
10 concluded.)
11 * * *
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16
17
18
19
20
21
22
23
24
25
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STATE BOARD OF EDUCATION 9
June 12, 2001
1 GOVERNOR BUSH: State Board of Education.
2 How are you doing, Wayne?
3 TREASURER GALLAGHER: Motion on the
4 minutes.
5 MR. PIERSON: Good.
6 GOVERNOR BUSH: Moved and seconded.
7 Without objec--
8 Is there a second?
9 COMMISSIONER BRONSON: Second.
10 GOVERNOR BUSH: Moved and seconded.
11 Without objection, it's approved.
12 MR. PIERSON: Item 2 is Empowering Young
13 Minds Academy, Incorporated, versus
14 Duval County School Board. This is a charter
15 school appeal which was deferred at the last
16 meeting.
17 The Cabinet had asked for additional
18 information on student progress. And with us
19 today, we have Diane McCain, and
20 Dr. Alex Penn Williams to present information
21 to you on student progress.
22 MS. McCAIN: Good morning.
23 My name is Diane McCain, and I'm the
24 Director --
25 Can you hear me -- can you hear me
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June 12, 2001
1 all right?
2 -- I'm the Director of the Choice Office
3 for the Department of Education. And in
4 addition to this distinguished body, I work
5 with perhaps the most important people in
6 Florida, parents.
7 I have with me Dr. Alex Penn Williams that
8 we introduced at your last meeting. And she is
9 available to provide both data and
10 clarification to that data that she has
11 provided.
12 And unless you have questions from me, I
13 would like to -- to certainly turn the podium
14 over to Dr. Williams, because she has the
15 important information that you asked us to
16 provide.
17 GOVERNOR BUSH: Any -- any questions for
18 Diane?
19 Or do you want to wait till --
20 TREASURER GALLAGHER: I -- I couldn't
21 figure out what it meant. So if she wants to
22 tell -- tell us -- try to tell us what it
23 means, I looked -- looked it over, and -- just
24 real hard for me to understand it.
25 So maybe we could have a slight explanation
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June 12, 2001
1 of what it does.
2 GOVERNOR BUSH: Doctor, would you like to
3 just give us a summary of what -- what we have
4 in front of us?
5 DR. WILLIAMS: I'd be happy to. Thank you.
6 My name is Alex Penn Williams, and I'm with
7 the Florida Charter School Resource Center.
8 And the -- the question that was posed at
9 the last Board meeting was the question of
10 student gains. And I'm -- I'm so pleased that
11 that question came up, because that is
12 paramount to -- to accountability, and to the
13 success of charter schools.
14 What -- what we did was took two cohorts of
15 students, two groups of students; that is,
16 those that entered in 1997-98, and those that
17 entered in 1998-99, and then we subdivided
18 those two groups so that there were actually
19 four groups: One having stayed at the school
20 for three years, those were entering
21 6th graders; one staying at the school for
22 two years, those were entering 7th graders.
23 On average, there were about 40 students in
24 each of those groups. That's on average. Of
25 those students, about 30 percent of them were
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June 12, 2001
1 ESE students, Exceptional Student Education
2 students; and about 90 percent of those
3 students fell at or below the 50th percentile
4 on a standardized test -- the District
5 standardized test when they entered the school.
6 And that was a test they took as either
7 5th graders or 6th graders, respectively.
8 And then about 75 percent of those students
9 fell at or below the 25th percentile.
10 To -- I will kind of get to the -- the
11 bottom line in the interest of time.
12 And in getting back to the initial question
13 that -- the -- the big question, whether or not
14 there was learning that went on, we can only do
15 that by comparing students to themselves in
16 terms of -- and the only statistic that I had
17 to -- to use was the national percentile.
18 So we used that, and we compared the
19 students to themselves. In -- in the first
20 group; that is, the -- the group that was --
21 the first cohort remaining three years,
22 entering 6th graders, there was greater than
23 one year's worth of gains in reading, as
24 measured by mean NP scores; and less than one
25 year's worth of gains in math, slightly less.
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June 12, 2001
1 The second cohort -- I'm sorry. Once
2 again, the first cohort, but those remaining
3 two years, entering 7th graders, actually made
4 an increase of one year's worth of -- of growth
5 in one year's worth of time in both reading and
6 in math.
7 The third group, which is the second
8 cohort, those students entering the school the
9 second year of its operation and remaining
10 three years, those students did not -- did not
11 show a -- an increase, or they had less than
12 one year's worth of gains in reading.
13 And -- and let me just qualify. When I say
14 didn't show growth, there was some growth, but
15 not an entire year's worth of growth.
16 And in the fourth group, which was the --
17 the students entering again in the second year
18 of the school's operation, but they only
19 remained two years because they were entering
20 7th graders, those students did actually
21 demonstrate one year's worth of gains in
22 reading and math as measured by the mean
23 national percentile scores.
24 GOVERNOR BUSH: How do you measure a year's
25 worth of growth in -- in learning comparing
ACCURATE STENOTYPE REPORTERS, INC.
STATE BOARD OF EDUCATION 14
June 12, 2001
1 where -- where kids are to the -- to a
2 national, you know, norm reference.
3 DR. WILLIAMS: Well, you do it very
4 inaccurately, sir.
5 GOVERNOR BUSH: Oh.
6 DR. WILLIAMS: It's not gravity. And --
7 and if we had a normal curve equivalent, we
8 could do a better job of that. And so it is a
9 very gross estimate.
10 The other thing that I should really
11 mention is that gathering the data was -- was a
12 litt-- was tough, because we did it
13 retrospectively.
14 And the -- the District, while I -- I
15 obtained a lot of the data from the District,
16 I -- I made sure that I matched it with the
17 data that I got from the school, or the
18 students that the school said were there for at
19 least two years, or at least three years,
20 because the District didn't have exact
21 withdrawal dates.
22 And -- and also there was missing data.
23 There was a lot of missing data. There were
24 students that did not sit all of the exams
25 because of absences.
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June 12, 2001
1 And as you know, the school -- it's the
2 responsibility of the school to give the --
3 give the test for the absentee students. But
4 if the students miss it on that second day,
5 then there's no way for them to make it up.
6 Also the 2001 FCAT scores were not given to
7 me by the District, so I didn't have those
8 either.
9 TREASURER GALLAGHER: Well, they're on the
10 Internet. So --
11 DR. WILLIAMS: Not by individual students,
12 sir.
13 TREASURER GALLAGHER: Not -- no. Not by
14 individual students.
15 DR. WILLIAMS: And that's -- that's the
16 only way you can compare a student to him or
17 herself.
18 TREASURER GALLAGHER: I understand that.
19 My concern is that the FCAT scores for the
20 school that are on the Internet shows that
21 Empowering Young Minds in both reading and math
22 scored at the absolute bottom of all the
23 schools in Duval County.
24 And the mean for reading was 630, the State
25 average is 659, Duval's 657; median was 23, the
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STATE BOARD OF EDUCATION 16
June 12, 2001
1 State is 49, Duval is 47; in math you have the
2 mean at 632, statewide is 662, Duval County is
3 655.
4 Median in math is 32; State, 61; Duval, 54.
5 And that's of -- of -- of somewhat concern.
6 And I -- I know we are interested in how each
7 student, and what we would have liked to have
8 had was -- and what I had hoped that you had
9 gotten for us is the FCAT changes by student
10 year-to-year, which is what we've been using to
11 measure schools now for the last three years,
12 and it would have helped I think to do that.
13 DR. WILLIAMS: The FCAT scores are not
14 available for the last three years in all
15 grades --
16 TREASURER GALLAGHER: Right.
17 DR. WILLIAMS: -- and certainly not the
18 national percentile.
19 In some cases, we had only raw scores, and
20 there was no way for me to norm them. So there
21 is not a year-to-year progression of FCAT
22 scores. I would have loved for there --
23 TREASURER GALLAGHER: Well, it's --
24 DR. WILLIAMS: -- to have been that.
25 TREASURER GALLAGHER: -- next year we
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June 12, 2001
1 should have that.
2 DR. WILLIAMS: I hope so. That'll make my
3 job easier.
4 TREASURER GALLAGHER: But my -- my concern
5 is that to have the -- the students in this
6 particular school, in the particular tests we
7 have, score so low compared to the other
8 schools.
9 DR. WILLIAMS: Uh-hum.
10 TREASURER GALLAGHER: That -- that --
11 I mean, I don't know what to do about that. It
12 is a big concern.
13 DR. WILLIAMS: Is that something you'd like
14 me to respond to?
15 TREASURER GALLAGHER: Sure.
16 DR. WILLIAMS: If you remember the numbers
17 that I gave you, these students, about
18 90 percent of them, came in under the
19 50th percentile, and about 75 percent of them
20 came in under the 25th percentile.
21 So while they did, in most cases, make a
22 year's worth of learning in a year's worth of
23 time, they still did not catch up.
24 Because, remember, these are students that
25 entered in the 6th grade. They're already
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June 12, 2001
1 behind about three -- three or four grade
2 levels in some cases.
3 TREASURER GALLAGHER: Well, my concern is
4 is that if they're behind three grade levels,
5 and they got promoted to the next grade, who --
6 what -- what's going on?
7 I mean, how can -- how can these students
8 make it?
9 I mean, why did this school allow these
10 students that are three years behind, to move
11 to the next grade level, and obviously they're
12 still three years behind, if they only got one
13 year's worth of knowledge.
14 SECRETARY HARRIS: They should have gone --
15 DR. WILLIAMS: That's not part of my study.
16 I can't answer that one.
17 GOVERNOR BUSH: Secr-- Secretary.
18 SECRETARY HARRIS: I -- it's difficult for
19 us to make this kind of analysis. I mean,
20 you're -- you're in this -- this business, if
21 you will, of education.
22 I don't know, when you said in most cases
23 they progressed at least one year's worth of
24 learning, versus in one -- one year's worth of
25 learning in one year's worth of time, but only
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June 12, 2001
1 in one case did they actually do that in -- in
2 math and reading.
3 And -- and in -- in the largest case,
4 within those numbers, they actually received
5 less than one year's learning. And -- and so
6 across-the-board it wasn't most cases.
7 I thought we were going to get some kind of
8 regression analysis to -- to be able to look at
9 this. It's very difficult for us not being in
10 this -- you know, looking at these statistics.
11 But when you're saying that they're coming
12 in, and 75 percent were under the 25 percent
13 level, 70 were, and -- and the other -- the
14 other percentage -- what -- what did I write
15 down -- were under the 50 percent level, can
16 you at least compare that type of entrance with
17 other schools that that's occurring?
18 Because it just seems like -- this is not a
19 model. If we wanted to say, we want a model
20 charter school, and we wanted a place to send
21 these students where -- where 75 percent under
22 the -- are under the 25 percentile, and,
23 you know, all the other statistics, we wouldn't
24 choose this -- this -- this school where the
25 vast majority haven't progressed one year's
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STATE BOARD OF EDUCATION 20
June 12, 2001
1 worth of learning in one year -- one year's
2 time.
3 And it's -- it's -- to me, this doesn't
4 seem like it's a -- a model or a successful
5 charter school.
6 DR. WILLIAMS: Commissioner Harris, had
7 these students been gaining a year's worth of
8 learning in a year's worth of time from the
9 time they entered the Duval District schools,
10 then they wouldn't have been three or
11 four years behind.
12 I would --
13 SECRETARY HARRIS: Is that --
14 DR. WILLIAMS: -- say that at least in this
15 school, for the most part, they have been
16 learning. And if -- if you --
17 SECRETARY HARRIS: There's only one case,
18 in one of the -- in the four quadrants you
19 broke it down into, there's only one case where
20 they weren't -- learned more than one year's
21 learning --
22 DR. WILLIAMS: More --
23 SECRETARY HARRIS: -- than --
24 DR. WILLIAMS: -- than. Correct.
25 SECRETARY HARRIS: More than.
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June 12, 2001
1 DR. WILLIAMS: Yes. More than.
2 SECRETARY HARRIS: In one case, they got
3 one year's -- one year learning. In another
4 case, they only got it in reading; and in the
5 final case, they didn't get it -- get it at
6 all.
7 DR. WILLIAMS: They did it both, yes.
8 There's -- in the first case, they -- they --
9 they had a -- a greater than year's worth of
10 gains in reading, but a -- a slightly less in
11 math.
12 In the sec-- in the second --
13 SECRETARY HARRIS: Right.
14 DR. WILLIAMS: -- group, they gained in
15 both reading and math; the third --
16 SECRETARY HARRIS: -- in neither.
17 DR. WILLIAMS: -- they -- they did not; and
18 then in the fourth, they did gain in both
19 reading and math.
20 SECRETARY HARRIS: They didn't gain. They
21 were -- they got one year. Yeah.
22 DR. WILLIAMS: Yeah. Right.
23 GOVERNOR BUSH: One -- one of the --
24 Commissioner Gallagher made reference to the
25 lack of social promotion.
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June 12, 2001
1 The last time we were gathered here, the
2 head mistress, I believe -- is it the head --
3 is it a woman?
4 DR. WILLIAMS: It -- yes.
5 GOVERNOR BUSH: Because I -- I may have got
6 the schools mixed up, because there were two
7 schools.
8 But I believe this school talked about that
9 night having an 8th grade graduation where a
10 significant number of the kids were not going
11 to graduate --
12 DR. WILLIAMS: Uh-hum.
13 GOVERNOR BUSH: -- which I applaud,
14 frankly.
15 And -- and -- but -- but, look, I mean, if
16 you're starting out with a significant
17 percentage of your student body already several
18 grades behind, and then there's -- but there's
19 prog-- you know, there's improvement -- I mean,
20 you're -- you're playing catch-up.
21 But that would have been better than the
22 progression of where those students were prior
23 to going to this school.
24 And, you know, while the data is not the --
25 the best for all sorts of reasons, to -- to
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June 12, 2001
1 blame a charter school for the lack of social
2 promotion policies for students that -- for
3 the -- for the fact that the previous school
4 that these kids went to didn't have a social
5 promotion policy, allowed them to progress, I
6 don't think is particularly fair.
7 SECRETARY HARRIS: I have a question.
8 Would you say that this is the type of --
9 let's say that we had this -- this group of
10 students that had been in the social -- been
11 promoted, a social promotion, and 90 percent
12 were under the 50 percentile, and 70 were at
13 25.
14 Is this the type of school that you would
15 want to send them to that you could feel
16 confident that they could move forward?
17 I mean, is this the type of charter school
18 that -- is these the -- are these the kind of
19 results that we can expect from charter schools
20 that are receiving the -- this -- this --
21 DR. WILLIAMS: I --
22 SECRETARY HARRIS: -- group of students?
23 DR. WILLIAMS: -- think -- I think it's
24 important to note that this is a school for
25 at-risk students, that low achieve-- academic
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June 12, 2001
1 achievement may be the least of the student's
2 problems, and that those kinds of at-risk --
3 the -- these kinds of at-risk students, that
4 there are other variables that impact their
5 academic achievement, and not just -- not just
6 their inability or the -- the fact that they
7 have not been gaining a year's worth of
8 learning in a year's worth of time for the last
9 five years.
10 SECRETARY HARRIS: My concern is two-fold:
11 Once it came back to us because we have to make
12 a decision today.
13 DR. WILLIAMS: Uh-hum.
14 SECRETARY HARRIS: And our decision needs
15 to be based on -- on the fact, are they -- are
16 these students being educated as well as can be
17 expected. Is it -- is it better, is it worse.
18 And, secondly, are there other criteria we
19 should be -- be looking at. I mean, we
20 discussed that in the last Cabinet meeting,
21 that perhaps it's not only academic
22 progression, it's these other types of things.
23 But my concern is how we're making these
24 decisions without enough information.
25 DR. WILLIAMS: Well, the information, al--
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June 12, 2001
1 albeit, not exact; and, albeit, is a sample of
2 perhaps an entire population, does show that
3 the students have, for the most part, been
4 learning more in this school than they were
5 learning in schools prior to having come to
6 Empowering Young Minds.
7 SECRETARY HARRIS: That's the question.
8 DR. WILLIAMS: Yes.
9 TREASURER GALLAGHER: And this is without
10 the 2001 student data?
11 DR. WILLIAMS: Correct.
12 TREASURER GALLAGHER: Well -- I mean,
13 I'm sorry, but that's sort of what I thought we
14 were going to get. I mean, that's what I think
15 we expected to get --
16 DR. WILLIAMS: But --
17 TREASURER GALLAGHER: -- because --
18 DR. WILLIAMS: -- the --
19 TREASURER GALLAGHER: -- two years back and
20 three years back --
21 DR. WILLIAMS: The first cohort -- the
22 first cohort, you have all -- all three years
23 worth of scores. In fact, you have four years
24 worth of scores, because we took their baseline
25 data.
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June 12, 2001
1 Half of the students that have been
2 reported graduated last year. The other half
3 graduated this year.
4 COMMISSIONER CRIST: Governor --
5 GOVERNOR BUSH: Yes.
6 COMMISSIONER CRIST: -- I -- I -- I think
7 it's important to bear in mind the summary that
8 the Doctor gave us indicating that in most
9 instances, either the learning was a year's
10 worth of learning in a year's worth of time, or
11 more.
12 And I think it's also important to bear in
13 mind something else she said at the outset,
14 that I -- and I think the number was 90 percent
15 of the students that came to this school were
16 at or below national average when they came to
17 the school.
18 So I think what the charter school was able
19 to accomplish, given the population, is pretty
20 extraordinary.
21 They did very well, it seems to me. And
22 I -- well, I'll ask your opinion.
23 I mean, do you think they're learning more
24 in the environment that they're in currently
25 than where they were before they came to the
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June 12, 2001
1 school? And I think that's sort of the bottom
2 line here.
3 DR. WILLIAMS: The -- the data would
4 suggest that the answer to that question is
5 yes.
6 And -- it is also noteworthy that you have
7 such an inordinate amount of students
8 performing at or below the 50th percentile,
9 when if you take a District school anywhere
10 else in this state, you would -- you would see
11 the normal bell curve, or for the -- unless it
12 is a school specifically for at-risk, or for
13 ESE students.
14 Our schools followed the bell curve -- the
15 normal bell curve. This school does not. It
16 is very, very skewed to the lower limits.
17 GOVERNOR BUSH: General Butterworth.
18 ATTORNEY GENERAL BUTTERWORTH: Thank you.
19 This particular school I believe did have
20 some financial problems. At least a couple of
21 weeks ago, we -- we were going through some of
22 those.
23 One of them I think was with the building
24 they're in now.
25 Are they -- are they still housed in the
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1 same location, or are they moving?
2 DR. WILLIAMS: They are -- they have moved,
3 as I understand it. But I would suggest that
4 someone else answer that question.
5 MS. McCAIN: We have a gentleman
6 representing the school that's able to speak to
7 that directly.
8 ATTORNEY GENERAL BUTTERWORTH: Oh, okay.
9 I'm sorry.
10 GOVERNOR BUSH: Do we have a representative
11 from the Duval County School?
12 Oh, you're back.
13 MS. CHASTAIN: Hi.
14 GOVERNOR BUSH: Good.
15 Well, you may want to come up and speak to
16 what you've heard here, too. I think it might
17 be appropriate.
18 Go ahead.
19 MR. DuVAL: Yes. I'm Steve DuVal with
20 DuVal Horne --
21 GOVERNOR BUSH: Welcome back.
22 MR. DuVAL: -- and Company.
23 Thank you.
24 The school terminated their lease with
25 it -- at the current location on June 1st.
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1 They have signed a new lease at a separate
2 location as of June 11th, and they -- to
3 downsize the school and move it to an area
4 that's more appropriate, and with rents that
5 are a little bit more appropriate for -- for
6 their level.
7 So the school has a location at -- as we
8 speak, and it's contingent upon these
9 proceedings.
10 ATTORNEY GENERAL BUTTERWORTH: How far --
11 I mean, you obviously went to this lease
12 yesterday.
13 How far away is it from the -- the old
14 school?
15 MR. DuVAL: It's about two-and-a-half miles
16 from the old school. It's -- it's in a similar
17 area though.
18 ATTORNEY GENERAL BUTTERWORTH: It's in a
19 shopping center, right? It's not like --
20 MR. DuVAL: Yes, sir.
21 ATTORNEY GENERAL BUTTERWORTH: What's
22 happening to that particular location that
23 would -- that they went out of -- who is
24 leasing that now?
25 MR. DuVAL: My understanding, without
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1 looking at the lease, and what the landlord
2 told me, who happens to be Terry Woods, that
3 Horizons Learning Center, which is another
4 charter school, has moved in there.
5 They were informed several months ago that
6 that place would be available. And when the --
7 Empowering Young Minds was faced with a -- the
8 problem, either you let us know for sure you're
9 going to be in here, or you need to terminate
10 this lease, because you'll become personally
11 liable, she terminated that lease and allowed
12 Horizons to move in.
13 And then immediately started looking with a
14 landlord, and with their help for another
15 location.
16 I think it was a prudent thing for her to
17 do financially.
18 GOVERNOR BUSH: Are you saying that she --
19 that this lease is contingent upon approval
20 here?
21 Because that wouldn't be very prudent since
22 the School District ultimately has the say on
23 this, not the State Board of Education.
24 MR. DuVAL: Well, it's al-- it's also based
25 on what Duval County School systems would --
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1 GOVERNOR BUSH: Okay.
2 MR. DuVAL: -- do, too.
3 The -- the landlord, we -- we've worked
4 with them very closely over the years, and they
5 understand the situation. And Terry is a -- a
6 former City Councilman.
7 GOVERNOR BUSH: Any other questions?
8 Would you -- would y'all like to hear from
9 the representative from the Duval County School
10 District?
11 TREASURER GALLAGHER: Uh-hum.
12 ATTORNEY GENERAL BUTTERWORTH: I think it'd
13 be appropriate.
14 COMMISSIONER BRONSON: Governor, if -- if I
15 could, one of the things I would like to hear,
16 too, from the School District.
17 I was hoping to see a comparison of how
18 these children did in the public school system,
19 and their -- kind of track what they did there,
20 as compared to where they are now.
21 And I don't remember seeing that to give me
22 some idea of -- of how they tracked within the
23 system -- within the public school system so we
24 could use it as a comparison of whether they're
25 doing better or worse. And I didn't --
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1 GOVERNOR BUSH: Well, let me -- I -- I
2 just -- let me remind the members of the
3 State Board of Education that the 3 through
4 10 grading did not --
5 TREASURER GALLAGHER: Right.
6 GOVERNOR BUSH: -- take place for it to --
7 to have relevant data for most of the kids in
8 this school.
9 I mean, that's -- that's more a forward
10 looking thing. So it's -- I'm not sure the
11 School District or the school can be too
12 criticized for not having the information that
13 we were seeking, because it just wasn't -- it
14 didn't exist.
15 COMMISSIONER BRONSON: Well, Governor, I
16 agree that the current system does not exist.
17 And I -- you know, let me clarify that.
18 But they have been given tests of various
19 types. I took them when I was in school, hated
20 them, but I took them. And I didn't exactly
21 excel in any of them either.
22 But -- but -- but it does give some
23 indication as to -- I mean, most teachers by
24 the end of 1st grade, certainly by the
25 2nd grade, most public school teachers can tell
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1 you exactly when a child is going to have
2 problems, both from a learning standpoint, and
3 whether there's -- there are things going on at
4 home that are causing it, or whether there is a
5 disability type problem there for learning
6 disability. And most teachers can tell you
7 that in the public school or in the private
8 school.
9 So that's the reason why I was kind of
10 hoping to see some of that, to give us a little
11 better idea.
12 MS. CHASTAIN: Thank you.
13 My name is Karen Chastain. I'm with the
14 Office of General Counsel, City of
15 Jacksonville, and I represent the Duval County
16 School District in this matter.
17 I thank you for your time this morning.
18 With respect to Commissioner Bronson's
19 question, I'm sorry, sir, I didn't understand
20 that you were expecting that of the District.
21 I thought the direction was for DOE to
22 prepare a report and provide some analysis to
23 you.
24 As Governor Bush indicated, I'm not a
25 testing and research expert, I'm a -- a mere
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1 lawyer.
2 But I --
3 GOVERNOR BUSH: Hope you didn't take
4 offense?
5 MS. CHASTAIN: Pardon me?
6 GOVERNOR BUSH: Never mind.
7 MS. CHASTAIN: No one takes offense?
8 But I would submit to you --
9 GOVERNOR BUSH: I'm not --
10 MS. CHASTAIN: -- that that data might be
11 difficult to provide and give you a real
12 correlation, because the way I understand it,
13 whether tests are given every year, not
14 necessarily the same types of tests are given.
15 And, therefore, it would be difficult to --
16 without correlation tables which may or may not
17 exist, to give you the accurate read for which
18 you'd be looking for.
19 With respect to Alex Penn Williams' report,
20 we received it at about 4:45 yesterday, just
21 before I was heading in my car to drive over
22 here through the storms.
23 So I didn't have much opportunity, nor did
24 the testing and research office of the
25 Duval County School District, to study and
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1 evaluate the report that's given to you.
2 But we do note a number of concerns about
3 the methodology and the assumptions that were
4 made. Again, with different tests from
5 year-to-year and no correlation tables, it's
6 difficult to give you an accurate read of this.
7 And I think even Alex Penn Williams
8 mentioned that these are gross and not precise
9 and pinpointed summaries provided to you.
10 But -- but even taking the summary of
11 results at face value, one thing that comes to
12 mind is that for the -- the different cohorts,
13 that being groups of students, whether it's
14 two years at the Academy, or three years, and
15 she's given you four cohorts, where there is
16 gain -- however that's defined, we're not sure
17 about that -- but howev-- wherever there's
18 gain, those are in more -- years further back
19 than years that are more recent.
20 For example, you look at group 3 where
21 there's less than one year's worth of gains in
22 reading and math, that cohort are students who
23 entered in 1998-1999, 1999-2000, 2000-2001.
24 Where you see the greater year's worth of
25 gain, again, whatever that means, those are the
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1 students -- that cohort is three years that
2 entered 199-- 1997, excuse me, further back in
3 time.
4 One thing that the District is concerned
5 about, looking at this data that -- that this
6 report doesn't address is that whether there --
7 there's gain or not, it doesn't take into
8 account that the Academy had more favorable
9 demographics than other traditional public
10 schools that -- that the -- sometimes this
11 Academy is compared to at the District.
12 For example, the percentage of at-risk
13 students at the Academy is lower than other
14 public schools which the Academy is frequently
15 compared to on a percentage basis.
16 I think I have that data with me. I think
17 the Academy is roughly about 75 percent, and
18 the others in the District jump about to
19 82 percent, and up to 90 percent.
20 So you don't exactly have surrounding these
21 students the same population base.
22 GOVERNOR BUSH: How do you --
23 TREASURER GALLAGHER: Could you name --
24 GOVERNOR BUSH: -- define --
25 TREASURER GALLAGHER: -- one of the --
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1 Oh.
2 GOVERNOR BUSH: I'm sorry. Go ahead.
3 MS. CHASTAIN: I'm sorry.
4 TREASURER GALLAGHER: Could you name what
5 schools you're talking about?
6 MS. CHASTAIN: Matthew Gilbert and
7 Eugene Butler --
8 TREASURER GALLAGHER: That were middle?
9 MS. CHASTAIN: -- are specific -- yeah.
10 Both are middle.
11 TREASURER GALLAGHER: And Eugene Butler,
12 middle.
13 MS. CHASTAIN: Right.
14 I'll --
15 GOVERNOR BUSH: Can you -- when you say
16 "at-risk," what are you -- is this --
17 MS. CHASTAIN: Free -- free and reduced
18 lunch --
19 GOVERNOR BUSH: Okay.
20 MS. CHASTAIN: -- being the definition.
21 Thank you.
22 TREASURER GALLAGHER: Well, let me just --
23 now that you brought that up, because I'm
24 trying to be fair here.
25 MS. CHASTAIN: Yes, sir.
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1 TREASURER GALLAGHER: Of course these
2 things are pretty close. Gene Butler Middle,
3 their mean score was 628 --
4 MS. CHASTAIN: Uh-hum.
5 TREASURER GALLAGHER: -- Matthew Gilbert
6 was 631, and Empowering Young Minds was 630.
7 On the median, Gene Butler was 21,
8 Matthew Gilbert was 24, and Empowering Young
9 Mind (sic) was 23.
10 MS. CHASTAIN: Uh-hum.
11 TREASURER GALLAGHER: So they're pretty
12 close here, 6-- in -- in mathematics, it's 627
13 at Butler, and 627 at Matthew, with a 632 in
14 math at EYM. And the median in math was 28 at
15 Butler, Gilbert was 27, and Empowering Young
16 Mind was 32.
17 And I guess your answer is that there is a
18 higher at-risk student in those other two
19 schools than at this one.
20 MS. CHASTAIN: Correct. On a
21 percentage-wide basis.
22 Another factor that leads to favorable
23 demographics at the Academy is that the
24 mobility factor, students entering and exiting
25 the school, the mobility factor at Empowering
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1 Young Minds is about 34 or 35 percent.
2 At the two schools I've just cited that --
3 that you just went through, it's almost double
4 that. So you have a lot more turnover, if you
5 will, and -- and fewer students to draw from to
6 create a cohort of the mobility factor is an
7 indication as to the demographics of the school
8 and --
9 GOVERNOR BUSH: Isn't that a good --
10 MS. CHASTAIN: -- disability --
11 GOVERNOR BUSH: -- thing that they're
12 not -- the mobility factor --
13 TREASURER GALLAGHER: Yeah.
14 GOVERNOR BUSH: -- for like kind students
15 is lower?
16 MS. CHASTAIN: Well, it -- it should be.
17 And -- and actually this -- this leads to my
18 point, that it is of concern to the District
19 that given the -- a more favorable set of
20 demographics at the Academy, again, however
21 gain is defined and -- and we're not sure
22 that -- that we understand that, but that the
23 gain is minimal. With the favorable
24 demographics, it should have been greater.
25 And we are concerned that absent an
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1 explanation of this, that for students to be at
2 the Academy with favorable demographics, that
3 there's less than one year's worth of gain;
4 even-steven, one year for one year; or minimal
5 gain, there should be, given these favorable
6 demographics, we think, more significant gain
7 than this.
8 I mean, all the factors that lead to this
9 seem to be in place. But apparently that's --
10 that's not what would happen. We don't know
11 why that is. But one reason might be the lack
12 of certified teaching personnel in the
13 classrooms. We're really not sure.
14 TREASURER GALLAGHER: Let -- let me ask
15 you, too --
16 COMMISSIONER CRIST: How significant do you
17 think the gain should have been?
18 MS. CHASTAIN: I -- I don't know. I can't
19 answer that with precision. But we're --
20 COMMISSIONER CRIST: Okay.
21 MS. CHASTAIN: -- concerned that it wasn't
22 more significant.
23 TREASURER GALLAGHER: Two things.
24 One -- one of the things that I managed to
25 learn over my two years over at the Department
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1 of Education is that the mobility rate is
2 pretty much of a misnomer as opposed to what we
3 ought to call a stability rate.
4 Because --
5 GOVERNOR BUSH: That's true.
6 TREASURER GALLAGHER: -- you take a
7 mobility rate of 60 percent, you would take a
8 school that starts with 1,000 students, and you
9 would be led to believe that at the end of that
10 year, it would be 600 different students there,
11 and we came to find out that that just isn't
12 true.
13 But that's what you're led to believe by
14 that kind of a number.
15 What you might find out is that there's a
16 group of 20 percent of the students that turned
17 over three times, and that's how you got your
18 60 percent. And the truth of the matter is
19 that there are 80 percent of the students are
20 the same ones that are there in the beginning
21 that there are in the end.
22 And -- and we really ought to quit this
23 mobility stuff and start talking about
24 stability. But that's not to be decided here.
25 GOVERNOR BUSH: Would you like to make a
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1 motion?
2 TREASURER GALLAGHER: What I'm wondering is
3 is that, when, in fact, if -- if the school
4 closes, these students are going to be moved.
5 And my thoughts are, they're probably going to
6 be moved to Matthew Gilbert and Eugene Butler.
7 MS. CHASTAIN: Actually, sir, I remind you,
8 two weeks ago I described that, you know, this
9 is about parent choice, and there are three
10 other charter middle schools in Duval County
11 that operate in compliance with the law, one of
12 which is moving into the same premises that the
13 Academy vacated on May 31.
14 Another one is located in the same shopping
15 center.
16 And the third one is located within a few
17 miles. They all three of those serve at-risk
18 students, so you have the same -- you don't
19 have any barriers as to the type of student --
20 GOVERNOR BUSH: You'll have a --
21 MS. CHASTAIN: -- population --
22 GOVERNOR BUSH: -- capacity problem --
23 MS. CHASTAIN: -- that are --
24 GOVERNOR BUSH: -- at this last moment if
25 you go from four to three. And I think
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1 Commissioner Gallagher's point's a good one.
2 They're going to go to these -- which is not a
3 bad thing necessarily, but they're going to go
4 to other public schools.
5 TREASURER GALLAGHER: Well, let me --
6 MS. CHASTAIN: May I --
7 TREASURER GALLAGHER: -- would you --
8 MS. CHASTAIN: -- remind --
9 TREASURER GALLAGHER: -- give me the names
10 of the -- the other charter schools that --
11 MS. CHASTAIN: Yes, sir.
12 Horizons Unlimited --
13 TREASURER GALLAGHER: Okay.
14 MS. CHASTAIN: -- SOS Academy, and
15 Daniel Payne Academy.
16 And may I remind you that last week, we
17 talked about we're working with these three
18 charter schools, that student enrollment caps
19 will not be an issue. We will work and do what
20 every-- everything we can to ensure that given
21 the choice -- and also the facility. Horizons
22 is moving to a much larger facility. They're
23 moving into Empowering Young Minds' facility.
24 This gives them the opportunity to achieve
25 a much greater student population than they
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1 previously enjoyed.
2 GOVERNOR BUSH: Any other questions?
3 COMMISSIONER CRIST: Yeah.
4 GOVERNOR BUSH: Yes.
5 COMMISSIONER CRIST: Did you say you work
6 for the Mayor of Jacksonville?
7 MS. CHASTAIN: Do I work for the Mayor?
8 He's one of many clients.
9 I'm with the City of Jacksonville, and I
10 represent many of the agencies in -- in fact,
11 I'm --
12 COMMISSIONER CRIST: I'm just trying to get
13 a handle on --
14 MS. CHASTAIN: Uh-hum. Why I'm here?
15 COMMISSIONER CRIST: Well, no. No. I'm --
16 MS. CHASTAIN: I am, too.
17 COMMISSIONER CRIST: No, no. You're --
18 TREASURER GALLAGHER: If she had a choice,
19 she'd probably be doing something else today.
20 COMMISSIONER CRIST: It's great to have you
21 here.
22 MS. CHASTAIN: Thank you.
23 COMMISSIONER CRIST: I'm just trying to
24 figure out, you know, who you serve.
25 MS. CHASTAIN: I -- I represent the
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1 Duval County School District. We have a
2 consolidated government --
3 COMMISSIONER CRIST: Yes, ma'am.
4 MS. CHASTAIN: -- and historically we've
5 represented -- the Office of General Counsel
6 has represented the Duval County School
7 District.
8 COMMISSIONER CRIST: But you also are
9 employed by the Mayor's office, is that what
10 you said at the outset?
11 MS. CHASTAIN: Well, I'm repre-- I'm
12 employed by the City of Jacksonville --
13 COMMISSIONER CRIST: Okay.
14 MS. CHASTAIN: -- and we serve a number
15 of -- of the agencies and the clients.
16 COMMISSIONER CRIST: Okay. Thank you very
17 much.
18 GOVERNOR BUSH: You do a darn good job,
19 too, by the way.
20 MS. CHASTAIN: Thank you, sir.
21 GOVERNOR BUSH: General.
22 ATTORNEY GENERAL BUTTERWORTH: I was just
23 going to explain the -- the charter of
24 Duval County --
25 GOVERNOR BUSH: Oh.
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1 ATTORNEY GENERAL BUTTERWORTH: -- and the
2 importance of the independence of the
3 General Counsel, and how they serve all the
4 different roles.
5 But I will not bore you with that today.
6 So --
7 GOVERNOR BUSH: It sounds like an
8 interesting --
9 ATTORNEY GENERAL BUTTERWORTH: It's a very
10 good way -- it's a very good concept of how
11 they do it, and they've saved a lot of money.
12 And it's -- it's --
13 GOVERNOR BUSH: Any other questions or
14 comments?
15 MS. CHASTAIN: Thank you.
16 GOVERNOR BUSH: Thank you.
17 So what we have in front of us is -- is
18 what exactly?
19 TREASURER GALLAGHER: A yes or no really.
20 GOVERNOR BUSH: To vote yes -- I just want
21 to make sure the -- when I vote at least that I
22 don't mess up here.
23 COMMISSIONER CRIST: Is there a motion
24 already, Governor?
25 GOVERNOR BUSH: There isn't a motion yet,
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1 but I want to --
2 TREASURER GALLAGHER: -- read into the
3 record what we're doing?
4 GOVERNOR BUSH: Yeah.
5 Wayne, what are --
6 TREASURER GALLAGHER: Wayne sort of does
7 that -- did that last time. Maybe you should
8 redo that, if you have it.
9 GOVERNOR BUSH: Can you just -- we are
10 voting to remand this back to the Dade -- the
11 Duval County School District.
12 MR. PIERSON: You'd either be voting to --
13 to approve the appeal, or to remand it --
14 GOVERNOR BUSH: Okay. Approve the
15 appeal --
16 MR. PIERSON: -- the Board.
17 GOVERNOR BUSH: -- then. You've got to
18 tell me which, so I know how to vote.
19 TREASURER GALLAGHER: Which is which?
20 MR. PIERSON: Do you want to tell what the
21 Department's recommendation is?
22 TREASURER GALLAGHER: No. I want --
23 GOVERNOR BUSH: No. I want to --
24 TREASURER GALLAGHER: -- to hear --
25 GOVERNOR BUSH: -- know what the motion --
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1 when the motion is made, what the motion will
2 be.
3 TREASURER GALLAGHER: What it means.
4 COMMISSIONER CRIST: Well, why don't -- why
5 don't I make --
6 TREASURER GALLAGHER: -- what our job is.
7 COMMISSIONER CRIST: -- a motion?
8 TREASURER GALLAGHER: You know the -- you
9 know the disclaimer you read before we start
10 these?
11 MR. PIERSON: Yeah. You have to remind me.
12 If -- if you vote to -- to remand it back
13 to the School Board, you're upholding the
14 appeal of the charter school.
15 GOVERNOR BUSH: All right. So the
16 motion --
17 Commissioner Crist, would you like to make
18 a motion?
19 COMMISSIONER CRIST: I'd be delighted.
20 I make a motion we remand the application
21 back to the School Board for approval of the
22 renewal for the charter school.
23 GOVERNOR BUSH: Is there a second?
24 COMPTROLLER MILLIGAN: Second.
25 GOVERNOR BUSH: Moved and seconded.
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1 All in favor of the motion, say aye.
2 THE CABINET: Aye.
3 GOVERNOR BUSH: All opposed?
4 ATTORNEY GENERAL BUTTERWORTH: No.
5 TREASURER GALLAGHER: No.
6 GOVERNOR BUSH: The ayes have it.
7 We appreciate you coming again.
8 And I would ask that the Department of
9 Education attend the School Board hearing at
10 least to represent what happened at the State
11 Board of Education, if we can make sure that
12 happens.
13 Item -- Item 3.
14 MR. PIERSON: Item 3 is Rule 6A-4.0021,
15 Florida Teacher Examination Amendment.
16 TREASURER GALLAGHER: Motion.
17 COMMISSIONER CRIST: Second.
18 GOVERNOR BUSH: Moved and seconded.
19 Without objection, it's approved.
20 MR. PIERSON: Item 4 is an amendment to
21 Rule 6A-4.00821, Florida Educational Leadership
22 Examination.
23 TREASURER GALLAGHER: Motion.
24 COMMISSIONER CRIST: Second.
25 GOVERNOR BUSH: Moved and seconded.
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1 Without objection, it's approved.
2 Thank you.
3 MR. PIERSON: Thank you.
4 (The State Board of Education Agenda was
5 concluded.)
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1 GOVERNOR BUSH: State Board of Trustees.
2 TREASURER GALLAGHER: Motion on the minutes
3 from April 10th and April 24th meetings.
4 COMMISSIONER CRIST: Second.
5 GOVERNOR BUSH: Moved and seconded.
6 Without objection, it's approved.
7 Item 2.
8 Where is --
9 Hello.
10 TREASURER GALLAGHER: I guess he's trying
11 to negotiate --
12 GOVERNOR BUSH: Anybody home?
13 TREASURER GALLAGHER: -- a final -- back
14 there.
15 GOVERNOR BUSH: Eva, you want to take over?
16 TREASURER GALLAGHER: We're on Item 2.
17 ATTORNEY GENERAL BUTTERWORTH: I think you
18 have four votes, Governor.
19 MS. ARMSTRONG: Good morning. Thank you.
20 He will be right back.
21 Item 2 is acceptance of an offer to sell
22 a piece of property that is in Georgia. This
23 is something we are doing for the
24 Department of Corrections.
25 If you'll recall a couple meetings ago, we
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1 were selling the Glenbeigh property. This
2 piece of property is in the same situation. It
3 was included in the 2000 law that Corrections
4 can sell it and then use the proceeds to fix
5 current problems within their facilities.
6 It was one of three parcels that we took to
7 bid. The other two were too low to bring to
8 you today. But we wanted to move forward with
9 this one, with Correction's agreement on this.
10 It is because -- because we got a price
11 that is between two val-- appropriate
12 appraisals, about halfway between the two,
13 $346,000, and we have a -- a deadline on this,
14 as we do with the hospital, which is, it has to
15 be closed by June 30, or Corrections does not
16 get this money to use in that manner.
17 I have appraisal staff here if you have
18 questions about that, or additional historical
19 questions I can answer.
20 COMMISSIONER BRONSON: I'd like to move it.
21 GOVERNOR BUSH: There's a motion.
22 Is there a second?
23 COMMISSIONER CRIST: Second.
24 ATTORNEY GENERAL BUTTERWORTH: Second.
25 GOVERNOR BUSH: Any discussion?
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1 Moved and seconded.
2 Without objection, it's approved.
3 Eva, you did a fantastic job.
4 Thank you.
5 MS. ARMSTRONG: Thank you.
6 MR. STRUHS: I apologize. I stepped into
7 the men's room.
8 GOVERNOR BUSH: Thanks for putting that on
9 the record. That's great.
10 TREASURER GALLAGHER: Your timing was
11 excellent.
12 MR. STRUHS: Sorry about that.
13 Thank -- thank you, Eva.
14 Item 3 is a -- seeking approval subject to
15 receipt of an easement acceptable to the DEP
16 for the Florida Gas Transmission Company.
17 This is five 50-year nonexclusive utility
18 easements, and two three-year temporary
19 easements.
20 TREASURER GALLAGHER: Motion.
21 ATTORNEY GENERAL BUTTERWORTH: Second.
22 GOVERNOR BUSH: Didn't we just do this? Or
23 is this another --
24 TREASURER GALLAGHER: No.
25 GOVERNOR BUSH: -- last week -- two weeks
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1 ago --
2 COMPTROLLER MILLIGAN: It was a different
3 one.
4 GOVERNOR BUSH: -- we did a different --
5 COMPTROLLER MILLIGAN: Different one.
6 MR. STRUHS: Different -- different
7 easements.
8 TREASURER GALLAGHER: Different company.
9 COMPTROLLER MILLIGAN: Second.
10 GOVERNOR BUSH: Moved and seconded.
11 Without objection, it's approved.
12 MR. STRUHS: Substitute Item 4 is an
13 interesting case. There is a property known as
14 Katie's Landing, which has for many years been
15 a canoe launch and recreational vehicle park.
16 The owners are now looking to sell that
17 property, and it would make an excellent
18 amenity in addition to the nearby
19 Wekiva Springs State Park.
20 That way we guarantee we get to continue to
21 use it as a canoe launch, which is sort of
22 mid-river, and is an appropriate spot for
23 providing that access to the existing
24 State Park.
25 We're recommending approval for this item.
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1 It's an option agreement to acquire the
2 6 acres. The intention to use the property is
3 to continue using it as a canoe launch facility
4 for access in and out of the park.
5 It will not be operated as an RV park in
6 the future. It's for day use only. There
7 won't be any camping there.
8 COMMISSIONER CRIST: No more camping?
9 MR. STRUHS: No more camping. It's in a
10 residential area actually. It's -- it's two
11 lots, about 6 acres in the middle of a
12 residential area along the riverfront.
13 GOVERNOR BUSH: Let me ask you, David. The
14 zoning is what on this property?
15 MR. STRUHS: This -- this specific property
16 is a nonconforming legal use. It has been
17 there for many, many years. The neighborhood
18 is residential, but the larger zoning area is
19 agricultural.
20 GOVERNOR BUSH: So the zoning is
21 agriculture, and the land use is --
22 TREASURER GALLAGHER: So these guys have --
23 GOVERNOR BUSH: -- that provides what --
24 what density?
25 MR. STRUHS: I'm not sure what the house
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1 lot sizes are --
2 GOVERNOR BUSH: One per --
3 MR. STRUHS: -- there.
4 GOVERNOR BUSH: I do.
5 MR. STRUHS: One for three probably. My
6 guess is one --
7 GOVERNOR BUSH: No. One per acre, isn't
8 it?
9 MR. STRUHS: One -- one per --
10 MEMBER OF THE AUDIENCE: One per acre.
11 MR. STRUHS: Is it one per acre?
12 GOVERNOR BUSH: So when was the land use
13 created; do you know?
14 MR. STRUHS: For Katie's Landing?
15 GOVERNOR BUSH: Yeah. I'm -- I'm getting
16 to a point here. I just --
17 MR. STRUHS: How long -- how long were they
18 there?
19 MEMBER OF THE AUDIENCE: Twenty-five years.
20 MS. ARMSTRONG: Twenty-five years.
21 MR. STRUHS: Twenty-five years.
22 GOVERNOR BUSH: Okay. All right.
23 MS. ARMSTRONG: For that site.
24 GOVERNOR BUSH: All right. Good.
25 I -- I -- this is 2 dollars a foot for
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1 property. It's pretty extraordinary -- it's --
2 it must be a beautiful part of the world.
3 And it must be in a place where there's
4 significant development of very high end
5 residential property; is that correct?
6 MR. STRUHS: Correct.
7 GOVERNOR BUSH: I -- I would be
8 concerned -- I'm not concerned about this if
9 it's 25 years ago, this land use was
10 established.
11 I'd be concerned if we got into a
12 situation, which we have in the past, where
13 land use decisions are made at the local level,
14 closer to the present tense that elevate values
15 automatically, and then appraisers come in,
16 based on that, and we buy the land for
17 something that isn't used for that --
18 MR. STRUHS: Right.
19 GOVERNOR BUSH: -- that -- you know, to --
20 remotely close for that valuation.
21 I mean, a boat ramp would not be worth
22 2 bucks a foot --
23 MR. STRUHS: No.
24 GOVERNOR BUSH: -- for its use. It just
25 happens to be in an area where the alternative
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1 use is -- is higher. But it's an extraordinary
2 price.
3 TREASURER GALLAGHER: But --
4 GOVERNOR BUSH: We're going to run out of
5 gas here pretty quick if we start buying
6 property at 2 bucks a foot, instead of,
7 you know, hundreds of dollars per acre.
8 TREASURER GALLAGHER: But if you're the
9 owner and you have a right to use the land, you
10 can sell --
11 GOVERNOR BUSH: That's true.
12 TREASURER GALLAGHER: -- that right to
13 the next buyer, and actually had a -- had
14 an offer for 1.1 million in 2000 from
15 Arvida --
16 GOVERNOR BUSH: That's true.
17 TREASURER GALLAGHER: -- that because you
18 got that inherent right, you know --
19 GOVERNOR BUSH: Well, he should have taken
20 it, for starters. If it's double the price, I
21 would have taken that in a heartbeat.
22 TREASURER GALLAGHER: Well --
23 MR. STRUHS: I think -- I think part of
24 what is -- is here is the owner,
25 Mr. and Mrs. Moncrief, her name is actually
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1 Kathleen, and it's named after her. It's
2 Katie's Landing.
3 And they are at a point in their lives
4 where they -- they have to sell the property.
5 And I think there's a desire on their part to
6 see the land continue to be used --
7 GOVERNOR BUSH: Yeah.
8 MR. STRUHS: -- for that purpose.
9 GOVERNOR BUSH: Which is their decision.
10 I'm just saying that if -- if local governments
11 make decisions that increase valuation, and
12 then shortly thereafter, we're here --
13 MR. STRUHS: Yes, sir.
14 GOVERNOR BUSH: -- buying that land at a
15 higher price, I'm going to oppose it every
16 time. That's why I asked the question of land
17 use decisions.
18 Makes me feel a little bit better that --
19 because we're encour-- we end up encouraging
20 these higher prices sometimes by not
21 challenging local governments with their land
22 use decisions.
23 And at some point, we're going to have to
24 have some reforms in that regard.
25 TREASURER GALLAGHER: Let -- let me just
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1 straighten out for the record.
2 I -- what I said was offered -- they
3 offered to sell it for them for a million one,
4 not an offer to buy. So I want to get that --
5 GOVERNOR BUSH: Oh --
6 TREASURER GALLAGHER: -- on the record
7 straight.
8 GOVERNOR BUSH: Arvida broker? Not
9 Arvida --
10 TREASURER GALLAGHER: Arvida Realty offered
11 for sale for the owners at a million one in
12 2000, not they offered to buy the property. So
13 I want to --
14 GOVERNOR BUSH: Any other discussion?
15 TREASURER GALLAGHER: -- I got that
16 straightened out, and I want to make sure
17 everybody else did, too.
18 COMMISSIONER BRONSON: Governor, I --
19 you know, having dealt with these issues in the
20 legislative process, the one thing that I've
21 noticed is -- that -- what you're saying is
22 going to happen time and time again, as the
23 next decades go down as we develop more and
24 more of the state, or the state is being
25 utilized, and we increase to 17 million in --
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1 in 12 years, instead of 16, exactly what you're
2 saying is going to happen.
3 And I'm not sure, unless we do really
4 address this issue, or -- or find the pieces of
5 property that the State has looked at, and --
6 and go ahead and put those down, this is going
7 to happen to us everywhere.
8 And I -- it's just going to get worse, it's
9 not going to get better. So -- so I agree with
10 you, if we're going to address it, we certainly
11 need to get on it and address it pretty quick
12 with the counties because it's going to happen
13 at a faster pace.
14 GOVERNOR BUSH: Yeah. It's just -- it's an
15 important policy -- this -- this relates to the
16 whole growth management reform that our state
17 needs to look at.
18 Anyway.
19 Is there any other discussion?
20 Is there -- there's a motion.
21 Is there a second?
22 COMMISSIONER BRONSON: Second.
23 GOVERNOR BUSH: Moved and seconded.
24 No objections?
25 It passes.
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1 MR. STRUHS: Item 5, recommending approval.
2 This is an addition and inholding to the
3 Fakahatchee Strand Preserve State Park.
4 TREASURER GALLAGHER: Motion.
5 COMMISSIONER BRONSON: Second.
6 GOVERNOR BUSH: Moved and seconded.
7 Without objection, it's approved.
8 MR. STRUHS: Item 6, we're recommending
9 approval. It's an option agreement to acquire
10 7,307 acres within the Kissimmee Prairie
11 Preserve State Park from the National Audubon
12 Society.
13 And Stuart Strahl is here with some of his
14 colleagues from Florida Audubon to speak to the
15 issue, if you have questions.
16 GOVERNOR BUSH: Well, I think Mr. Strahl
17 could -- should come to -- to speak since he's
18 been -- he's got so dressed up for us.
19 MR. STRAHL: Better than last time.
20 GOVERNOR BUSH: Exactly.
21 I think the last time I was with him, I was
22 with the President of the United States, and he
23 was wearing sandals. It shows he's got more
24 respect for the Cabinet.
25 MR. STRAHL: I was showing my green roots.
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1 TREASURER GALLAGHER: Well, at least he
2 wasn't wearing shorts.
3 GOVERNOR BUSH: Welcome.
4 MR. STRAHL: This is a parcel that we
5 acquired back in 1980 at a price of about
6 $660 per acre -- or $600 per acre. I'm --
7 excuse me.
8 And this parcel has been managed by us
9 since that time. It's the headwaters of the
10 Latt Maxcy Preserve, the Kissimmee State
11 Preserve, and a critical piece of that
12 ecosystem.
13 When we purchased this property, it was the
14 available parcel of wire grass prairie in the
15 state of Florida, a critically endangered
16 habitat. And we raised the money, took the
17 opportunity to buy it.
18 And since that time, have supported the
19 State's effort to -- to acquire Latt Maxcy
20 property, which, as I say, it's the headwaters
21 of. So we feel that you all are much better
22 managers -- land managers than we are.
23 And, therefore, this provides a win-win
24 opportunity for us, and for the State.
25 COMMISSIONER CRIST: Governor --
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1 GOVERNOR BUSH: Yes.
2 COMMISSIONER CRIST: -- the
3 State of Florida are -- are better land
4 managers than the Audubon Society?
5 MR. STRAHL: Well, we're not really in the
6 land management business. We have on many
7 occasions purchased properties --
8 COMMISSIONER CRIST: Yes, sir.
9 MR. STRAHL: -- that have been -- formed
10 the nucleus for a larger property acquisition,
11 Rookery Bay National Estuarine Preserve, the --
12 this is one; also Chassahowitzha, and other
13 places; Hope Sound National Wildlife Refuge,
14 which we then -- you know, when -- when the
15 larger preserve is founded, we -- we then
16 relinquish our piece of property, sell our
17 piece of property. And this is a -- a
18 precedent we've had in the past.
19 COMMISSIONER CRIST: And that was the only
20 question I had. I mean, you know, y'all have a
21 very good reputation about preservation, and
22 things of that nature.
23 But if you think we're better at it --
24 MR. STRAHL: I think so. You have --
25 COMMISSIONER CRIST: -- I move.
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1 MR. STRAHL: -- your -- your -- your
2 property is about I think seven or
3 eight times -- eight times our property size.
4 COMMISSIONER CRIST: Well, I know we have a
5 lot more.
6 MR. STRAHL: Yes.
7 COMMISSIONER CRIST: That wasn't the issue.
8 GOVERNOR BUSH: Any other dis--
9 COMMISSIONER BRONSON: I'll -- I'll second
10 the motion.
11 GOVERNOR BUSH: Any other discussion?
12 Moved and seconded.
13 Without objection, it's approved.
14 Thank you, Stuart, for coming --
15 MR. STRAHL: Thank you.
16 GOVERNOR BUSH: -- so well dressed up.
17 COMMISSIONER BRONSON: It was worth
18 seconding just to see him dressed up.
19 MR. STRUHS: Governor, and members of the
20 Cabinet, I know you're eager to get going with
21 the next item, but on -- on Item 6, I'd just
22 like to -- to note that the Audubon Society is
23 taking a good portion of the proceeds from this
24 sale, and putting it in a trust fund.
25 And, in fact, they will be reinvesting back
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1 into the management of this property in
2 perpetuity. So not all of our sellers take the
3 proceeds, and then put it right back --
4 GOVERNOR BUSH: Not all of our sellers sell
5 it for less than what they bought it for.
6 MR. STRUHS: Right.
7 GOVERNOR BUSH: In fact, it's normally the
8 other way around, as evidenced by the
9 conversation we had on the item previously.
10 TREASURER GALLAGHER: Which is, of course,
11 the American way.
12 GOVERNOR BUSH: It is.
13 MR. STRUHS: Speaking of high prices --
14 GOVERNOR BUSH: Oh, no.
15 MR. STRUHS: -- Item -- Item --
16 GOVERNOR BUSH: Good segue.
17 MR. STRUHS: -- Item 7 is -- Item 7 I think
18 to be fair is -- is a --
19 GOVERNOR BUSH: Oh, yeah.
20 MR. STRUHS: -- is -- is a close call. And
21 this is a residential community.
22 The DRI was done for this community back in
23 1978. The value -- the average value is
24 $127,000 per acre. It's on St. George Island,
25 on the bay side.
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1 The purpose for the acquisition is to be
2 part of a long-term plan to preserve the
3 ecosystem, and particularly the water quality
4 in Apalachicola Bay.
5 This area of Apalachicola Bay represents
6 the third largest flow of freshwater into the
7 Apalachicola Bay system.
8 These four option agreements would result
9 in the acquisition of five acres within this
10 management strategy.
11 The cost is -- total cost is $636,750.
12 We do have a couple of folks here who would
13 like to speak to the item and share with you
14 their point of view.
15 Woody Miley is here from -- from the bay.
16 He -- he is the manager of the Apalachicola Bay
17 National Estuarine Reserve.
18 And we also have Mr. Bobby Jones here, who
19 is an oysterman and fisherman who fishes on the
20 waters there in Apalachicola.
21 TREASURER GALLAGHER: Can I ask you a
22 question --
23 MR. STRUHS: Yes, sir.
24 TREASURER GALLAGHER: -- before you -- have
25 you looked back since this -- these -- this
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1 property was subdivided, and see how many sales
2 have taken place on these properties?
3 MR. STRUHS: We have done that, but I can't
4 recall it offhand. But there -- there aren't
5 that many lots here, and I don't believe there
6 have been that many transactions.
7 But I could find out for you --
8 TREASURER GALLAGHER: We know why --
9 MR. STRUHS: Why don't I -- why don't I get
10 that answer while --
11 TREASURER GALLAGHER: Okay.
12 MR. STRUHS: -- while Woody --
13 GOVERNOR BUSH: Please. Come up and -- we
14 welcome you.
15 MR. JAMES: All right. I'll do it.
16 All right. This is -- I guess what they
17 want me to talk about --
18 GOVERNOR BUSH: Can you say who you are for
19 a sec?
20 MR. JAMES: Bobby James, oysterman,
21 crabber, fisherman.
22 GOVERNOR BUSH: Welcome.
23 MR. JAMES: How you doing, sir?
24 They wanted me to talk about all of this in
25 here. All this you see is oyster bars in here
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1 and stuff. And crabs and fish and oysters and
2 shrimp all go in here all the time.
3 And this year alone, it's been, like, some
4 of the best fishing I've seen in there in
5 years. It's, like, we've been catching a lot
6 of juvenile grouper in there on our bait traps
7 and stuff, and pinfish and redfish and trout.
8 And it's just -- it's just like an
9 estuarine in here. It's all -- grows all in
10 this -- is all together right in here.
11 And I'm a little nervous. But --
12 GOVERNOR BUSH: Don't be nervous. You know
13 more about this than anybody in this room, I
14 promise you.
15 MR. JAMES: Yeah.
16 Well, what happens is when they develop
17 this land, like this right here, you see this
18 piece right here.
19 This is one house that one boat has dredged
20 right here using -- you'll see -- you've got a
21 map up there. But they have dredged this, and
22 that's what happens to it.
23 All this kills the oyster bars and stuff in
24 there. And so all the fish and oysters in here
25 move away. There's nothing in there.
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1 And they take this over here the same way.
2 And you can see where these little gullies go
3 in here and stuff, and this land comes to,
4 there's like little channels in there. And
5 they put their docks out there, and they dredge
6 it, it covers all that up.
7 GOVERNOR BUSH: Has it already been
8 destroyed by the --
9 MR. JAMES: No. That's --
10 GOVERNOR BUSH: -- the lots that have been
11 developed?
12 MR. JAMES: No. It's -- that's all --
13 right now is the best I've ever seen it. But
14 if they start building in there and they're
15 putting their docks out there, they're going to
16 destroy all of it.
17 GOVERNOR BUSH: But there already are
18 docks, right?
19 MR. JAMES: No. Just one dock. It's right
20 here where --
21 GOVERNOR BUSH: Okay.
22 MR. JAMES: -- he's got it --
23 GOVERNOR BUSH: I'm sorry.
24 MR. JAMES: -- right here.
25 GOVERNOR BUSH: I misunderstood. So the --
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1 in the --
2 MR. JAMES: Over here?
3 GOVERNOR BUSH: There's no docks.
4 MR. JAMES: There's none -- none in there
5 at all. No docks at all.
6 TREASURER GALLAGHER: Is there a reason
7 that we haven't made this some kind of a
8 reserve?
9 I -- I don't know whether you all know, or
10 maybe we need to find out --
11 MR. MILEY: Excuse me. Mr. Gallagher --
12 TREASURER GALLAGHER: -- from the
13 Secretary.
14 MR. MILEY: -- it will be part of the
15 National Estuarine Research Reserve.
16 And the Nick's Hole acquisition has been
17 the number one acquisition recommendation from
18 the Research Reserve for 16 or 17 years.
19 And, yes, sir, if we bought it earlier, we
20 could have paid less money for it. We can pay
21 less money for it today than we can next year,
22 and it is a critical acquisition for the
23 productivity of Apalachicola Bay.
24 Apalachicola Bay is one of, if not the most
25 productive estuarine systems in the northern
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1 hemisphere. And per acre, Nick's Hole is the
2 most productive spot in the most productive
3 estuarine system in the northern hemisphere.
4 TREASURER GALLAGHER: But --
5 MR. MILEY: Yes, it's expensive.
6 TREASURER GALLAGHER: -- it's not -- but
7 what I'm talking about is the water around it
8 as a reserve, not the land.
9 Is there a reason why it's not in our
10 highly protected reserve area that we do in --
11 you know, certain waters around the state?
12 MR. MILEY: Part of it is, sir. This area
13 that's in green, everything --
14 GOVERNOR BUSH: Can you show us?
15 MR. MILEY: -- to the west side of -- to
16 the west side of the air strip --
17 This is the same map that's -- that's up
18 there for you.
19 The -- the stuff that's in green here is in
20 State ownership, and is managed as part of the
21 National Estuarine Research Reserve.
22 TREASURER GALLAGHER: Now, the -- you're
23 talking about the green that's on the water
24 side, or the land side?
25 MR. MILEY: The land side, sir.
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1 TREASURER GALLAGHER: Well, my concern is
2 what's happening on the water side.
3 MR. MILEY: The water side is part of the
4 National Estuarine Research Reserve, it is an
5 aquatic preserve, it's Outstanding Florida
6 Waters, and it's part of the Biosphere Reserve
7 in UNESCO'S Man and the Biosphere Program.
8 TREASURER GALLAGHER: So you have -- people
9 aren't supposed to be putting any docks on it.
10 MR. MILEY: No, sir. They have property
11 rights, and docks are routinely permitted in --
12 in this area.
13 ATTORNEY GENERAL BUTTERWORTH: Ripar--
14 TREASURER GALLAGHER: All right.
15 MR. MILEY: And some -- we have docks in
16 this area that cross 400, 500 feet of marsh,
17 and fragment marsh.
18 COMPTROLLER MILLIGAN: They -- they cannot
19 dredge though.
20 MR. JAMES: Well, they do it, you know --
21 COMPTROLLER MILLIGAN: By prop dredging,
22 yes.
23 MR. JAMES: Yeah.
24 COMPTROLLER MILLIGAN: But they can't do
25 the dredging that you pointed out there in the
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1 lower left --
2 MR. JAMES: No.
3 MR. MILEY: Not legally, sir. But if you
4 look at this one --
5 TREASURER GALLAGHER: That's a prop dredge.
6 MR. MILEY: -- you can see how extensive
7 illegal dredging can be --
8 COMPTROLLER MILLIGAN: Yeah.
9 MR. MILEY: -- just by prop dredging.
10 COMPTROLLER MILLIGAN: The --
11 TREASURER GALLAGHER: Get a big tug.
12 COMPTROLLER MILLIGAN: -- in -- in talking
13 about the pieces of property that we're talking
14 about today, I notice the one out at the point
15 is still yellow, and I understand that's going
16 to be built on. That's the lower finger.
17 And two lots that we are not purchasing
18 just to the lower right of it are going to be
19 built on.
20 And then there are I guess six lots out on
21 the other finger that are -- one already built
22 on, and the others are going to be built on.
23 Is that a fair statement?
24 MR. MILEY: There are two that are built on
25 now.
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1 COMPTROLLER MILLIGAN: Two that are built
2 on, and --
3 MR. MILEY: Yes, sir.
4 COMPTROLLER MILLIGAN: -- the others are --
5 MR. MILEY: -- and there are others
6 available.
7 COMPTROLLER MILLIGAN: And none -- and they
8 don't want to sell those lots to us, presuming
9 that they're going to be built on.
10 MR. MILEY: That's a safe assumption, sir.
11 COMPTROLLER MILLIGAN: I think it is, too.
12 So we're talking about paying -- in that
13 upper right-hand finger, buying one lot -- one
14 lot there that's $250,000; and then six next to
15 it, two have already been built, and obviously
16 the other four will be built on; is that right?
17 MR. MILEY: One out there has been built
18 on.
19 COMPTROLLER MILLIGAN: One out there.
20 MR. MILEY: Yes, sir.
21 COMPTROLLER MILLIGAN: But the others will
22 be built on.
23 MR. MILEY: Well, that's possible. The --
24 the folks that have built, own at -- at least
25 one more lot, and it is their intention to
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1 never build on it.
2 But who knows in the future? Their --
3 their idea is to build --
4 COMPTROLLER MILLIGAN: Do -- do we have to
5 buy all four of these packages, or can we buy
6 two or three of them?
7 MR. MILEY: Of the lots that are available
8 now?
9 COMPTROLLER MILLIGAN: Yeah. Of the ones
10 that are before us right now, the packages that
11 we have of -- four packages basically.
12 MR. MILEY: Well, General, I -- I can't
13 tell you how much land we've got to have there
14 to protect Nick's Hole.
15 I can tell you, we can get too much
16 development there, and lose an incredibly
17 productive ecosystem. But I can't tell you
18 where the line is.
19 What we're doing here is trying to err on
20 the conservative side, and trying to reduce
21 density enough that we have a chance to protect
22 the most productive spot in the most productive
23 bay.
24 COMPTROLLER MILLIGAN: Well, as -- as I
25 thought the Governor made a point earlier, that
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1 this is not an unlimited pot of funds, and we
2 have to be -- you know, buy where we can, when
3 we can, and -- and do the best we can with the
4 resources we have.
5 We're going to, I know, approve another one
6 here in Franklin County that -- on the other
7 side of the bay that's a large purchase, and --
8 MR. MILEY: Yes, sir.
9 COMPTROLLER MILLIGAN: -- and very
10 important also.
11 MR. MILEY: Yes, sir.
12 COMPTROLLER MILLIGAN: And so you've got
13 limited resources to buy all of this stuff.
14 And -- and I'm just trying to determine right
15 now if you need -- if this is a four-piece
16 package, or whether we can take pieces of it,
17 David.
18 In other words, could we buy the D's Design
19 and Equity Management, and, say, the
20 Tidal Investments, and not the
21 Waterside Holdings.
22 MR. STRUHS: I'm sorry, General?
23 COMPTROLLER MILLIGAN: Could we buy the
24 Tidal Investments, which is -- averages out
25 about, what, 125,000 per acre; the D's Design,
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1 which is 80,000 per acre; the Equity
2 Management, which is 90,000 an acre; and forego
3 the Waterside Holding, which is a quarter of a
4 million dollars an acre.
5 MR. STRUHS: The -- the answer, of course,
6 is -- is yes. Each one of these is an
7 individual contract. So they -- they can be --
8 COMPTROLLER MILLIGAN: Uh-hum.
9 MR. STRUHS: -- you -- you can choose from
10 that list.
11 And -- and you're --
12 (Secretary Harris exited the room.)
13 MR. STRUHS: -- also correct, General,
14 to -- to note that there's a larger critical
15 acquisition coming up on your agenda I believe
16 in August for the other side of that --
17 COMPTROLLER MILLIGAN: Yeah.
18 MR. STRUHS: -- Nick's Hole.
19 COMPTROLLER MILLIGAN: Which -- which
20 I think is critical to that particular effort
21 that Woody's very proud of, and he should be.
22 MR. STRUHS: Yeah. You're correct.
23 COMPTROLLER MILLIGAN: I -- I just have
24 a -- I just have a hard time continuing to pay
25 these elevated prices.
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1 And while I recognize that this is a
2 developing area, and the prices are going up
3 rapidly, I -- I'd be willing to -- and I will
4 move that we purchase the Tidal Investments,
5 D's Design, and Equity Management, and -- and
6 forego the Waterside Holding.
7 GOVERNOR BUSH: What -- can you explain on
8 this sheet what -- which one is --
9 TREASURER GALLAGHER: You say leaving it --
10 leave Waterside out.
11 COMPTROLLER MILLIGAN: We'd be -- we'd be
12 purchasing essentially these packages here.
13 GOVERNOR BUSH: Not that one?
14 COMPTROLLER MILLIGAN: Not that one.
15 TREASURER GALLAGHER: What -- what you're
16 getting with --
17 COMMISSIONER BRONSON: I -- I have a --
18 TREASURER GALLAGHER: Which one is
19 Waterside, can somebody tell --
20 ATTORNEY GENERAL BUTTERWORTH: Four is
21 Waterside.
22 TREASURER GALLAGHER: Four is Waterside.
23 COMPTROLLER MILLIGAN: Waterside is Lot 8.
24 TREASURER GALLAGHER: Eight. Okay.
25 COMMISSIONER BRONSON: I have a question.
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1 If we do it this way -- Governor, I have a
2 question, too.
3 And that is, are we creating an -- an
4 inholding situation, number one?
5 Number two, if the State buys only a -- a
6 portion of the lots, and leaves one, are we
7 creating any potential legal ramifications of
8 rules and regulations of DEP as to -- compared
9 to State lands, and those private lands
10 adjacent to it, which is something they're not
11 having to face right now, but will face if --
12 if we acquire only a portion of these.
13 I -- I -- I think those are concerns that
14 need to --
15 GOVERNOR BUSH: Secretary --
16 COMMISSIONER BRONSON: -- be addressed.
17 GOVERNOR BUSH: -- Struhs, do you have an
18 answer to that?
19 COMMISSIONER BRONSON: And I'm assuming,
20 Secretary, that --
21 I'm assuming, Mr. Secretary, that all of
22 these lots are using -- are not on any kind of
23 sewer hookup, but are -- are using --
24 (Secretary Harris entered the room.)
25 COMMISSIONER BRONSON: -- individual sewage
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1 disposal treatment areas, right?
2 MR. STRUHS: Yes, sir.
3 GOVERNOR BUSH: Can you answer the
4 Commissioner's question?
5 You weren't -- can -- you want to repeat it
6 again?
7 COMMISSIONER BRONSON: Well, the --
8 MR. STRUHS: I'm sorry. I was -- I was
9 actually trying to determine -- to make sure we
10 were all on the same map to decide --
11 COMMISSIONER BRONSON: Okay. That --
12 MR. STRUHS: -- which parcels were being
13 affected by the amendment.
14 COMMISSIONER BRONSON: If we adopt what the
15 General is proposing -- and I'm not saying I'm
16 opposed to that. I just need to find out, are
17 we creating an inholding situation by adopting
18 the lots that the General has identified, and
19 leaving the one or two; and are we creating --
20 with the potential of State sovereignty and
21 some other issues that go with the lots that
22 will be acquired, are we creating more rule and
23 regulation and potential problems for those who
24 do stay, as compared to the lots that we're
25 buying?
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1 MR. STRUHS: Right.
2 I -- I -- there will be by definition
3 inholdings within this larger project. As --
4 as there already are.
5 COMMISSIONER BRONSON: So we --
6 MR. STRUHS: And there -- there already
7 are, and there -- there likely always will be.
8 That should not have any effect, positive
9 or negative, in terms of any sovereign
10 submerged land --
11 COMMISSIONER BRONSON: So what you're
12 saying is, we're going to pay more money for
13 those four if we try to buy them out, because
14 we have created our own inholding situation.
15 GOVERNOR BUSH: Of course.
16 COMMISSIONER BRONSON: So -- okay.
17 GOVERNOR BUSH: You've made it more
18 valuable because it's less dense.
19 I mean, the guy on the point here is loving
20 this, I assume.
21 COMPTROLLER MILLIGAN: And -- and he'd
22 really love it if we pay him a quarter of a
23 million for that Lot 8.
24 TREASURER GALLAGHER: It -- it's
25 interesting to note that the lot -- Waterside
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1 lot at the two hundred and thirty-three is in a
2 period of five years of doubling of value -- at
3 least would be if we bought it.
4 And that's probably a -- I don't know, 10,
5 11 percent compound return in five years I
6 would think? That's a -- that's pretty strong.
7 GOVERNOR BUSH: It's a beautiful place.
8 TREASURER GALLAGHER: It probably is.
9 COMPTROLLER MILLIGAN: Well, there --
10 there's no question that the -- that the market
11 has risen quite rapidly in this area.
12 And -- and I think it's just a question of
13 whether or not we have sufficient resources to
14 pay this kind of price, or whether we want to
15 conserve some of these resources, and -- and
16 buy other pieces of property, like the one that
17 we'll talk about here shortly, Item 9, and the
18 one we're going to talk about here in a month
19 or two, that are perhaps more important, and --
20 and don't really send a signal that I don't
21 think is a good signal to keep sending.
22 MR. STRUHS: Right.
23 COMPTROLLER MILLIGAN: Quarter of a
24 million dollars for this Lot 8, with six of
25 them that are going to be developed at --
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1 developed, in all probability, right adjacent
2 to it. Doesn't make any sense to me.
3 At least these four lots that I suggest
4 we're buying are contiguous, they do expand the
5 State holdings, they do make some sense in
6 terms of State holdings.
7 MR. STRUHS: That -- that -- this is
8 exactly why I presented this item as a close
9 call, because it -- it's very difficult I think
10 for anybody to determine precisely what water
11 quality benefits long-term are going to be
12 derived from acquiring or not acquiring a
13 single specific parcel.
14 It's just beyond our -- our ability --
15 GOVERNOR BUSH: Commissioner Bronson.
16 MR. STRUHS: -- to comprehend that.
17 COMMISSIONER BRONSON: Well, I -- I don't
18 want to lose sight of what we're really trying
19 to do here. And -- and I know the money issue
20 is a big issue, and whether we're going to get
21 hung out to dry in later years because people
22 are buying up some very nice pieces of property
23 on water, which everybody likes to do.
24 But I guess the real prize at the end of
25 this picture is that piece of waterfront, and
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1 how important it is as either a -- a breeding
2 ground estuary for oysters, and -- and other
3 marine life that we're -- really the focus
4 point of buying these properties is to protect
5 the environmental integrity of -- of what we've
6 had for eons, and now we realize it's being
7 threatened.
8 So could you tell us, what is the total
9 viability of that piece of shoreline properties
10 for future environmental marine life resources
11 for the State of Florida?
12 MR. MILEY: No, sir. It can't be divided
13 up that way.
14 But to put it in perspective for you, at
15 the consumer level, the seafood harvest out of
16 our little bay is a seventy to eighty million
17 dollar a year industry to the economy at the
18 consumer level.
19 And what we're telling you is, Nick's Hole
20 is the biological hot spot for its size. Now
21 you guys are going to hear about the East Bay
22 acquisition later. East Bay is the major
23 nursery ground for all of Apalachicola Bay.
24 But for its size, Nick's Hole is more
25 biologically hot. I'm -- so it'd be -- it's --
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1 it's just a question of whether or not we can
2 spend these limited resources for such a small
3 piece of dirt.
4 GOVERNOR BUSH: There you go.
5 MR. MILEY: And I -- I can certainly
6 understand that position. But Nick's Hole is
7 just incredible. And I can certainly live with
8 the -- with the General's suggestion.
9 COMMISSIONER BRONSON: Well, we've --
10 MR. MILEY: But we've got to do something
11 there. Nick's Hole is the --
12 TREASURER GALLAGHER: I still have a
13 question.
14 MR. MILEY: -- most critical place, the
15 most susceptible place to pollution in all of
16 Apalachicola Bay.
17 At the mouth of Nick's Hole, there's a
18 shallow sill. So the pollution coming into
19 Nick's Hole will sit in Nick's Hole and not
20 flush. Flushing in Nick's Hole is basically
21 limited to the upper layer of water.
22 So if we have a lot of development on the
23 hill through groundwater, we get the nitrogen
24 and the phosphorus in there, it won't flush
25 well because of that sill at the mouth.
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1 It's the most --
2 GOVERNOR BUSH: Why are we buying the
3 property that says private -- that's more
4 adjacent to Nick's Hole then --
5 MR. MILEY: We --
6 GOVERNOR BUSH: -- instead of the property
7 that's --
8 MR. MILEY: We are, sir.
9 COMPTROLLER MILLIGAN: Mahr -- Mahr
10 property is the one we've been talking about
11 coming up.
12 MR. MILEY: Yes, sir.
13 COMPTROLLER MILLIGAN: That -- that small
14 piece. It's a relatively --
15 MR. MILEY: More property right on it.
16 COMPTROLLER MILLIGAN: -- small piece. But
17 it is an important piece. And that'll be --
18 MR. MILEY: But there is a biological
19 connection, and a -- a groundwater connection
20 with the property you're considering today
21 with -- with Nick's Hole. And even if
22 Nick's Hole weren't right there, Mr. James can
23 tell you that the -- the area you're -- you're
24 discussing is incredibly productive.
25 That whole section right in there is the
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1 biological -- biological hot spot per acre for
2 Apalachicola Bay.
3 COMMISSIONER BRONSON: Well, that -- my
4 point was, if we leave those, sir, and we don't
5 buy the -- we don't buy it all, what chance of
6 someone coming in and going ahead and building
7 a house, putting in a septic tank, and,
8 therefore, we have another problem on our
9 hands, that's one more septic tank during flood
10 times to overflow, and all of that fecal bac--
11 bacteria killing all of the shellfish in that
12 area.
13 I mean, we -- it looks like we're in a
14 catch-22 here. We pay a higher price, buy the
15 property, keep the -- keep the septic tanks
16 from going in; or we only buy a piece of it,
17 let them build more houses and septic tanks;
18 and then we still have a degradation of the
19 shellfish area.
20 MR. MILEY: Yes, sir. Yes, sir. You're
21 right on target.
22 COMPTROLLER MILLIGAN: But that's my --
23 that's my point, too, Commissioner. They --
24 we're not going to buy all that property.
25 MR. MILEY: That's a fact.
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1 COMPTROLLER MILLIGAN: Now, you've already
2 got houses built there, you've got houses that
3 are going to be built there. And I just don't
4 think I want to pay a quarter of a
5 million dollars for one more acre in there.
6 I'll buy the others -- or support buying
7 the others because they make sense. But --
8 GOVERNOR BUSH: Commissioner Gallagher, do
9 you have a question?
10 TREASURER GALLAGHER: Yeah.
11 I was going to ask Secretary Struhs what --
12 on Lots 19, 20, and 22, can you tell me what
13 the story is -- are they just privately owned,
14 and going to be built on, or already built on,
15 or -- those are the ones adjacent to the
16 four lots.
17 MR. STRUHS: Nineteen, twenty, and
18 twenty-two?
19 TREASURER GALLAGHER: Right.
20 MR. STRUHS: They are -- they are privately
21 owned. I don't believe they have been
22 developed yet, although I think
23 General Milligan is -- is correct to assume
24 that someday they -- they -- they would be.
25 COMPTROLLER MILLIGAN: Well, I'm -- I'm led
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1 to believe that very definitely one is planned
2 to be built on. And two are already built on,
3 one of them out on the point, and -- and one of
4 them in closer to the --
5 TREASURER GALLAGHER: So you're going to
6 go ahead and build on your lots there?
7 Just kidding.
8 COMPTROLLER MILLIGAN: Yeah. Yeah. I --
9 I -- I bought it -- I bought it for -- for
10 $249,000.
11 COMMISSIONER BRONSON: Now that Audubon has
12 got plenty of money, they're selling this other
13 one, maybe we can ask them to step in.
14 MR. STRUHS: I would -- I'd like to --
15 if -- if I could --
16 TREASURER GALLAGHER: Can you give me a
17 little history on how we acquired these other
18 lots that are -- the State owns?
19 Do you know -- we have the tip of one; and
20 we have what, one, two, three, four lots on one
21 side; and one, two, three, four on the other.
22 MR. STRUHS: This is the result of a
23 willing seller program. And -- and it's
24 something that we've been focusing on for a
25 number of years.
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1 And as they -- as they -- as the owners
2 become willing sellers, and -- and we pursue
3 that, that's how we have this sort of patchwork
4 quilt.
5 TREASURER GALLAGHER: Well, that's --
6 that's an interesting process, because what
7 ends up happening is you can hold it for a
8 while, and get a compound return at 10,
9 12 percent --
10 GOVERNOR BUSH: Then come to us.
11 TREASURER GALLAGHER: -- and then,
12 you know, when you're ready to cash in, you
13 just give you a call, right, and you bring it
14 over here, and then you have to wait for
15 somebody else to come along.
16 We're already set to buy whenever you want
17 to bring them.
18 MR. STRUHS: Well, I -- no, I -- I actually
19 think that, you know, the -- the sellers
20 recognize that they have to go through this
21 public needs test, that -- that everything
22 is -- is subject to.
23 I wanted to get back --
24 TREASURER GALLAGHER: I'll second
25 General Milligan's -- if somebody didn't
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1 already.
2 MR. STRUHS: I wanted to -- before you make
3 your final decision, I wanted to share a couple
4 of observations.
5 To -- to try to answer your question,
6 Mr. Gallagher, I went back to check on the
7 frequency of the turnover of these properties.
8 Specifically on that peninsula, there have
9 been none that we can find in -- in -- in
10 recent history. But if you look -- if you step
11 back and look at the larger St. George
12 Plantation area, there were 12 sales over the
13 past year. And they used those 12 sales as --
14 as the comps.
15 And we actually have that available for the
16 Board if you -- if you care to see it.
17 TREASURER GALLAGHER: Twelve sales of
18 different lots.
19 MR. STRUHS: Yes, sir.
20 TREASURER GALLAGHER: Not one --
21 MR. STRUHS: That's right.
22 So that -- that's available.
23 The other thing, just full and fair
24 disclosure, one of the things that, frankly,
25 causes me some problems with -- with the agenda
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1 item, although I do support the staff
2 recommendation to acquire it, is that this is a
3 gated community. And --
4 GOVERNOR BUSH: It's a gated community?
5 MR. STRUHS: A gated community.
6 And -- and I know that you all share our
7 strong belief that if you're using public
8 resources to buy land and make it public, there
9 should be public access to it.
10 And in this instance, that would be
11 problematic. And I just wanted to be fair
12 and --
13 TREASURER GALLAGHER: Well, if --
14 MR. STRUHS: -- disclose that.
15 TREASURER GALLAGHER: -- if we're one -- if
16 we're an owner in there, can't we give all the
17 citizens of Florida the -- the code?
18 MR. STRUHS: That was -- that was
19 actually -- that was my observation as well.
20 TREASURER GALLAGHER: That's the way I see
21 it.
22 GOVERNOR BUSH: The price just went down.
23 TREASURER GALLAGHER: Just give --
24 GOVERNOR BUSH: The price just went down.
25 TREASURER GALLAGHER: Send them an e-mail,
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1 you know, and say, hey, here's the code this
2 year, they just changed it this month, anybody
3 wants to go by.
4 Or put a sign out there, here's the code,
5 any resident of the State of Florida, just go
6 right on in.
7 MR. STRUHS: Well, I -- I appreciate that.
8 There -- there will be -- there will be
9 public access to the -- there is now, and there
10 will be better access for the public into the
11 Nick's Hole area with the availability of a
12 kyack and -- and canoe launch there.
13 SECRETARY HARRIS: It's a gated -- gated
14 community to Lot 8, or to the other four lots?
15 I mean --
16 MR. STRUHS: All -- all of them.
17 TREASURER GALLAGHER: All of them.
18 SECRETARY HARRIS: All of it.
19 COMPTROLLER MILLIGAN: All of them.
20 GOVERNOR BUSH: This is a deal.
21 MR. STRUHS: I just felt I owed it to --
22 TREASURER GALLAGHER: See that little
23 common property spot down there?
24 GOVERNOR BUSH: There is a motion and a
25 second.
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1 Any other discussion?
2 General Milligan, would you like to restate
3 the motion, just to make sure we're -- we're
4 all on the same page?
5 COMPTROLLER MILLIGAN: The motion was to
6 purchase the two lots -- 2 acres associated
7 with Tidal Investments for 255,000,
8 approximately, 125,000 an acre; D's Design,
9 1 acre for 80,000; Equity Management, 1 acre
10 for 90,000; and not purchase the
11 Waterside Holding of 1 acre for 249,000.
12 GOVERNOR BUSH: Commissioner Gallagher, you
13 seconded?
14 TREASURER GALLAGHER: I did. I did second
15 that.
16 GOVERNOR BUSH: Any disc-- any additional
17 discussion?
18 ATTORNEY GENERAL BUTTERWORTH: Yes,
19 Governor.
20 Could we possibly call this Camp Milligan,
21 and have a -- a Governor/Cabinet retreat there?
22 COMPTROLLER MILLIGAN: We need the code.
23 GOVERNOR BUSH: Gallagher's going to
24 handle --
25 TREASURER GALLAGHER: Got to get --
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1 GOVERNOR BUSH: -- that I think.
2 TREASURER GALLAGHER: -- the code. It'll
3 be on a big sign. We'll put it right out front
4 there.
5 GOVERNOR BUSH: There's a motion and a
6 second.
7 All in favor, signify by saying aye.
8 THE CABINET: Aye.
9 COMPTROLLER MILLIGAN: I -- I need to
10 clarify that those were the appraised values.
11 The purchase prices will be eighty-five five
12 for the ninety; and seventy-six for the eighty;
13 and two forty-two two fifty for the
14 two fifty-five.
15 TREASURER GALLAGHER: Right.
16 And -- I've -- I've got a question.
17 Obviously if you have a gated community,
18 you probably have some kind of a dues and
19 stuff. When the State owns it, do we have
20 to -- I mean, we're not --
21 GOVERNOR BUSH: We haven't --
22 TREASURER GALLAGHER: -- once we buy it,
23 we're out of that, right?
24 MR. STRUHS: No dues.
25 GOVERNOR BUSH: I -- I'm -- I'm voting no.
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1 Everybody else voted yes, so the motion --
2 motion passes.
3 MR. STRUHS: Item 8.
4 GOVERNOR BUSH: But I will come to the
5 annual condominium association meeting if --
6 MEMBER OF THE AUDIENCE: You wanted to --
7 GOVERNOR BUSH: -- you invite me.
8 MEMBER OF THE AUDIENCE: -- you didn't want
9 to buy it, or --
10 GOVERNOR BUSH: I didn't want to buy any of
11 it.
12 MEMBER OF THE AUDIENCE: Oh.
13 GOVERNOR BUSH: I just don't -- I don't --
14 COMPTROLLER MILLIGAN: You -- you might
15 have found some support for that, Governor.
16 GOVERNOR BUSH: I'd rather spend the money
17 to -- to really protect the estuaries that --
18 this is an incredible asset for our State.
19 I just think it's a little late in the game to
20 be buying lots that are -- are being developed
21 all around them.
22 TREASURER GALLAGHER: Well, that --
23 GOVERNOR BUSH: Anyway. That's --
24 TREASURER GALLAGHER: -- that wasn't an
25 offered option.
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1 GOVERNOR BUSH: Hmm?
2 TREASURER GALLAGHER: Somebody could have
3 made that an option.
4 GOVERNOR BUSH: It didn't look like we were
5 going that way, so --
6 COMPTROLLER MILLIGAN: No. I -- I have to
7 support what Woody's trying to do down there.
8 I think this does make a difference.
9 But we -- we don't need to be stupid, I
10 don't think, and --
11 GOVERNOR BUSH: Yeah.
12 Item --
13 MR. STRUHS: Item Number 8.
14 GOVERNOR BUSH: -- 8.
15 MR. STRUHS: Acceptance of an assignment of
16 an option agreement to acquire 249 acres within
17 the Highlands Hammock State Park. This is an
18 additions and inholdings.
19 ATTORNEY GENERAL BUTTERWORTH: Motion.
20 TREASURER GALLAGHER: Second.
21 GOVERNOR BUSH: Moved and seconded.
22 Without objection, it's approved.
23 MR. STRUHS: Item 9 is acceptance of an
24 assignment of an option agreement to acquire
25 3,450 acres within the Tate's Hell
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1 State Forest.
2 TREASURER GALLAGHER: Motion.
3 MR. STRUHS: This is also an additions and
4 inholding.
5 COMMISSIONER BRONSON: Second.
6 COMPTROLLER MILLIGAN: I want -- I want you
7 to note that there are 4 -- over 4 miles --
8 almost 5 miles of frontage on East Bay, which
9 is just on the other side of where we purchased
10 this property in the preceding.
11 And we're paying less than $2,000 an acre
12 for that support of a fishery system.
13 GOVERNOR BUSH: There's a motion and a
14 second.
15 COMMISSIONER BRONSON: Second.
16 GOVERNOR BUSH: Without objection, it's
17 approved.
18 That's a beautiful purchase.
19 ATTORNEY GENERAL BUTTERWORTH: That is a
20 beautiful purchase.
21 COMPTROLLER MILLIGAN: It is.
22 SECRETARY HARRIS: It's a great --
23 ATTORNEY GENERAL BUTTERWORTH: We now own
24 two-thirds of Franklin County, Governor.
25 GOVERNOR BUSH: St. Joe Paper owns the
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1 other --
2 TREASURER GALLAGHER: You know, as -- as
3 soon as Franklin County got popular and didn't
4 have the worst economy in the world, and the
5 property values go up, and they get good income
6 for the County to run them, we buy all the
7 property.
8 ATTORNEY GENERAL BUTTERWORTH: And take it
9 off the roll.
10 TREASURER GALLAGHER: And take it off the
11 tax roll.
12 SECRETARY HARRIS: It adds value to
13 Tate's Hell.
14 GOVERNOR BUSH: Oh, this is definitely part
15 of paradise.
16 MR. STRUHS: On Item 10, we're seeking a
17 deferral.
18 TREASURER GALLAGHER: Defer to June 26th,
19 motion.
20 GOVERNOR BUSH: There's a motion to defer.
21 SECRETARY HARRIS: Second.
22 GOVERNOR BUSH: Second.
23 Without objection, the motion is deferred.
24 Is this that same property that
25 General Milligan and I --
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1 TREASURER GALLAGHER: Own. No.
2 GOVERNOR BUSH: -- the triangle thing?
3 MR. STRUHS: Yes, sir.
4 GOVERNOR BUSH: It still -- that's --
5 TREASURER GALLAGHER: It's still deferred.
6 GOVERNOR BUSH: You're lucky you didn't
7 bring it up today for some reason --
8 TREASURER GALLAGHER: This is the --
9 GOVERNOR BUSH: -- I think.
10 TREASURER GALLAGHER: -- third deferral.
11 GOVERNOR BUSH: Item 11.
12 MR. STRUHS: Item 11 is authorization to
13 acquire an undivided 50 percent interest --
14 TREASURER GALLAGHER: Motion.
15 MR. STRUHS: -- of 1800 acres in the
16 Jennings State Forest.
17 ATTORNEY GENERAL BUTTERWORTH: Second.
18 GOVERNOR BUSH: There's a motion.
19 Is there a second?
20 SECRETARY HARRIS: Second.
21 GOVERNOR BUSH: Moved and seconded.
22 Without objection, it's approved.
23 MR. STRUHS: Item 12, we have a number of
24 speakers who would like to address the Board
25 about this item.
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1 It's a purchase agreement to acquire
2 approximately 611 acres. But it's actually
3 better to think of it in terms of a linear
4 acquisition --
5 (Commissioner Crist exited the room.)
6 MR. STRUHS: -- of forty-eight-and-a-half
7 miles of abandoned railroad rights that run
8 between Palatka and Lake Butler.
9 There's -- there's an interesting history
10 here, and I -- I'd like to quickly share it
11 with you.
12 If you go back to March of 1996, the Board
13 of Trustees actually approved a contract to
14 acquire this property.
15 And over the next four years and a few
16 months, I -- the State became involved working
17 with Rails to Trails and the seller on some
18 very complicated title work.
19 And when you're dealing with a linear
20 facility like that, there are a lot of adjacent
21 landowners that you have to work out some very
22 complicated title issues.
23 Because of the delay, going back to 1996,
24 the -- the seller, which is the Southern
25 Georgia Florida Railroad Company, withdrew from
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1 that contract.
2 And -- and rather than pursuing that
3 through litigation, the staff regrouped, and --
4 and tried to renegotiate something that would
5 work better.
6 And what they came up with was a two title
7 deal. So rather than having to do titles on --
8 on every adjacent landowner for that 48-mile
9 linear tract, they would simply do two titles:
10 One for the corridor to the State of Florida;
11 and then for all the encroachments, that would
12 be done in a single title to Rails to Trails,
13 and then Rails to Trails would work through
14 those issues, and turn over any encroachments
15 to the adjacent landowners.
16 The -- the result is there would be no
17 takings or perceived takings from fences, or
18 half of a garage, or a garden that might be
19 encroaching on the -- the railway corridor.
20 With that out of the way, they were then
21 able to -- to renegotiate and came up with a
22 contract, which is now before you for your
23 approval.
24 That contract is for one million three
25 hundred and seventy-five thousand dollars.
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1 That is unfortunately $450,000 more than
2 the contract that was originally negotiated
3 back in 1996. And that is obviously troubling
4 to all of us.
5 But there's a silver lining to the cloud.
6 GOVERNOR BUSH: Good.
7 MR. STRUHS: And -- and the silver lining
8 is that in the intervening time, the
9 Federal Government has made additional
10 resources available to actually take the
11 property and develop it and build the
12 infrastructure.
13 And through the Federal Government's
14 T-21 Program, this project will be eligible for
15 up to 7 million dollars of investment from the
16 Federal Government to make those kinds of
17 infrastructure investments.
18 And, as you know, the State of Florida has
19 an excellent track record in actually acquiring
20 those -- those Federal resources from the
21 transportation program.
22 So while it's unfortunate that this has
23 been in the works going all the way back to
24 1996, and that in the intervening time, the
25 cost has gone up by $450,000, I would argue
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1 that in the final analysis, the State has
2 probably ended up being better off.
3 TREASURER GALLAGHER: Motion on 12.
4 (Commissioner Crist entered the room.)
5 COMPTROLLER MILLIGAN: Second.
6 MR. STRUHS: Before --
7 GOVERNOR BUSH: Moved and seconded --
8 MR. STRUHS: -- and before you vote, I -- I
9 would just -- do want to --
10 GOVERNOR BUSH: Oh, there are some
11 speakers.
12 MR. STRUHS: There are some speakers. And
13 I'd especially like to recognize that the
14 Vice-Mayor of Palatka, Mary Lawson Brown, is
15 here. I think she'd like to speak just --
16 GOVERNOR BUSH: Sure.
17 MR. STRUHS: -- very briefly to this
18 project.
19 GOVERNOR BUSH: Welcome, Vice-Mayor.
20 (Commissioner Bronson exited the room.)
21 MS. LAWSON BROWN: Good morning.
22 GOVERNOR BUSH: Good morning.
23 MS. LAWSON BROWN: I think I've seen some
24 of you in our county of Putnam visiting, so you
25 know how lovely it is.
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1 And I'm very glad to be here with you today
2 to tell you that the three -- the four counties
3 that touch this Rails and Trails have come
4 together and have had several meetings, and
5 what we can do to enhance it.
6 If you look at Union, Putnam, Bradford, and
7 Clay Counties, we are probably some of the
8 poorest counties, and have a hard time
9 recruiting large businesses to our area.
10 We have targeted I think now doing --
11 having people come in to visit us and do the
12 things that we would like to have people do as
13 citizens.
14 Most of our activities we have in the state
15 that people come to, they pay large prices to
16 go and see. But if we had rails and trails
17 going, it would be available facilities that
18 would impact us economically and enhance us.
19 And it would help us to have somewhere for
20 people to come that they could have recreation
21 with their families and children that they
22 not -- would not have to pay large dollars for.
23 I was fortunate enough to serve on
24 Greenways and Trails Committee to help form the
25 area and look at what we could do with the
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1 area. And there are so many things and so much
2 beauty there that enhances us that people never
3 get to see because they sit in offices with you
4 all all the time to work.
5 I'd like to invite all of you down to have
6 fun once we get it going.
7 We are also part of the Heritage River.
8 And that will help enhance bringing people in.
9 Palatka is called the Gateway to Northeast
10 Florida's Greenways and Trails. And it would
11 enhance us to bring people there.
12 I think the way that we could help all of
13 Florida is by seeing how many people we could
14 bring together. The Florida League of Cities
15 is now -- have a -- has a group of people to do
16 international trade and communication. And
17 I think that we have tried to promote tourism.
18 And an excellent way for us to do so would
19 be by bringing people to our towns, to our
20 cities, to our state to enjoy simple pleasures
21 that people forget.
22 I'd like to thank you for your time and
23 your consideration. And we hope that you will
24 help us to make this dream come true for --
25 GOVERNOR BUSH: Thank you.
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1 MS. LAWSON BROWN: -- the counties and I.
2 GOVERNOR BUSH: Thank you so much for
3 coming.
4 MR. STRUHS: Thank you, Mayor.
5 One -- one other speaker, Mr. Pardue,
6 Howard Pardue, from the Florida Trails
7 Association. And he's brought a special guest
8 with him.
9 MR. PARDUE: Good morning.
10 My name is Howard Pardue. I'm with the --
11 (Commissioner Bronson entered the room.)
12 MR. PARDUE: -- Florida Trail Association.
13 That's the nonprofit, 5,500 member association
14 that puts in about 40,000 hours a year in
15 Florida --
16 (Treasurer Gallagher exited the room.)
17 MR. PARDUE: -- building and maintaining
18 trail, particularly the Florida National Scenic
19 Trail.
20 The nature of business being as it is
21 today, I'm going to ignore my -- the rest of my
22 prepared comments, but take the -- a moment to
23 introduce a very special lady, a lady who, as
24 you may remember from the material provided
25 you, at the age of seventy, decided to
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1 celebrate her seventieth birthday by walking
2 the entire length of Florida, walking the
3 Florida National Scenic Trail.
4 GOVERNOR BUSH: Oh, my God.
5 MR. PARDUE: And the lady, since getting
6 off the trail, decided to commit more time to
7 the trail, other than just walking it, and is
8 now serving as an officer in our association.
9 I'm pleased to introduce to you
10 Mrs. Joan Hobson.
11 GOVERNOR BUSH: Welcome.
12 (Applause.)
13 MS. HOBSON: Thank you very much. I'm glad
14 to be here today.
15 I'm particularly interested in the -- in
16 the Lake Butler -- the Palatka to Lake Butler
17 Rail Trail because it is a major gap in a piece
18 of our Florida trail.
19 The times that I have walked through there,
20 I've had to walk on the roads all the way up
21 Route 100 from the -- the air park all the way
22 up to Lake Butler. And if you don't -- if
23 you've ever walked on Route 100, I think you'll
24 understand why it would be very important for
25 us to be able to close this major gap in our
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1 trail by buying this piece of property.
2 GOVERNOR BUSH: Thank you so much.
3 How long did it take you to walk -- you've
4 got to come tell us how you did this.
5 MS. HOBSON: Thank you very much.
6 How long did it take me?
7 I started on January 14th, and finished on
8 April 11th. Just a little bit over
9 two-and-a-half months.
10 GOVERNOR BUSH: Wow.
11 MS. HOBSON: It's eleven hundred -- it's
12 1276 miles is what I walked, including the road
13 walks --
14 (Treasurer Gallagher entered the room.)
15 MS. HOBSON: -- which is --
16 GOVERNOR BUSH: How much is -- how much is
17 trail, and how much is gaps that --
18 MS. HOBSON: The gaps are about -- the road
19 gaps are still about 250 miles. Most of that's
20 up in this area.
21 GOVERNOR BUSH: That's very impressive.
22 Did you -- did you want a picture with us;
23 is that right?
24 COMMISSIONER CRIST: Governor --
25 GOVERNOR BUSH: Can we have -- how about --
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1 can we have a picture with you?
2 MS. HOBSON: That would be --
3 GOVERNOR BUSH: Can we?
4 MS. HOBSON: -- fine.
5 Thank you.
6 COMMISSIONER CRIST: Governor --
7 GOVERNOR BUSH: Would you let us do that?
8 COMMISSIONER CRIST: I think she's
9 Walkin' Hobson.
10 MS. HOBSON: Yes.
11 COMMISSIONER CRIST: That's quite an
12 accomplishment.
13 MS. HOBSON: Thank you.
14 GOVERNOR BUSH: Why don't you come up here,
15 and then we'll have --
16 (Discussion off the record.)
17 MR. STRUHS: One last speaker, Mr. Larson,
18 who's the President of the Putnam County
19 Chamber of Commerce.
20 GOVERNOR BUSH: Wes, I want you to match
21 that.
22 MR. LARSON: No.
23 I would like to be able to match that. I'm
24 afraid I'm too old to do that.
25 Governor and Cabinet, we want to thank you
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1 for your consideration of this trail this
2 morning. On behalf of the Putnam County
3 Chamber of Commerce, we want you to know, we
4 support it.
5 The Putnam County Board of County
6 Commissioners also asked me to convey to you
7 their full support of this project.
8 Both of us have been with this project
9 since its conception, and we're still behind it
10 today, and we would appreciate your voting
11 these funds through this trail with.
12 And, Governor, on behalf of rural Florida,
13 thank you for 1225.
14 GOVERNOR BUSH: You're welcome.
15 Any other discussion?
16 Is there a motion?
17 TREASURER GALLAGHER: There was.
18 GOVERNOR BUSH: And a second?
19 COMPTROLLER MILLIGAN: Yep.
20 ATTORNEY GENERAL BUTTERWORTH: Second.
21 GOVERNOR BUSH: Without objection, it's
22 approved.
23 Thank you all for coming.
24 MR. STRUHS: Item 13 is an exchange
25 agreement. It's a value for value agreement.
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1 We'd seek your approval.
2 TREASURER GALLAGHER: Motion.
3 MR. STRUHS: It's on the Withlacoochee --
4 COMMISSIONER BRONSON: Second.
5 MR. STRUHS: -- Cross Florida Greenway
6 Trail.
7 GOVERNOR BUSH: Moved and seconded.
8 Without objection, it's approved.
9 MR. STRUHS: Item 14, seeking your approval
10 of a Settlement Agreement. This is actually --
11 this is actually a remarkably interesting case
12 from an historical perspective.
13 It goes all the way back to a Spanish land
14 grant, and had to go back to the original
15 documents to work out a settlement between the
16 Board of Trustees' interests, and some private
17 property owners.
18 This is a -- a fair and equitable statement
19 that is historically interesting. And if you
20 care to learn more about it, we do have the
21 attorney here who was involved in it.
22 GOVERNOR BUSH: Is there a motion?
23 TREASURER GALLAGHER: Motion.
24 COMMISSIONER BRONSON: Second.
25 COMMISSIONER CRIST: Second.
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1 GOVERNOR BUSH: Moved and seconded.
2 Without objection, it's approved.
3 MR. STRUHS: Item 15 is the issue of siting
4 fiber optic cables. We are seeking a deferral
5 on this item. And I understand that some of
6 the members may wish to --
7 SECRETARY HARRIS: Yes.
8 MR. STRUHS: -- have --
9 SECRETARY HARRIS: I'd --
10 MR. STRUHS: -- a discussion.
11 SECRETARY HARRIS: -- I would move that we
12 have a deferral until we have more information.
13 I'm only concerned that any applications
14 would be held up in the process, so we'll need
15 to stay sensitive to that issue.
16 MR. STRUHS: Yes -- yes, ma'am.
17 And we have no pending applications. And
18 from our now regular conversations and
19 communications with the industry, there are no
20 expected applications coming in for the next
21 year. We're clearly going to get this job done
22 far -- far sooner than that.
23 Being conservative, we're looking at a
24 six-month horizon, although realistically the
25 work that we have planned should be done
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1 sometime probably in the month of September.
2 And if you care to, I can describe to you
3 sort of where we've been and -- and where we
4 think we'd like to go, if that would be useful
5 to the Board.
6 TREASURER GALLAGHER: I think we pretty
7 much know that. I -- I'd move to defer it till
8 the Department's ready to bring it back.
9 ATTORNEY GENERAL BUTTERWORTH: Second.
10 SECRETARY HARRIS: With an eye to keep
11 Florida competitive, and all those things that
12 we've said in the past.
13 MR. STRUHS: Yes, ma'am.
14 We -- we think we had a very good proposal,
15 but by working closely with the industry, we
16 think we may have actually developed an idea
17 that would actually better protect the
18 environment; and at the same time, provide them
19 even more flexibility and predictability in
20 getting these things sited at a low cost.
21 SECRETARY HARRIS: I'm confident that you
22 and your staff will come up with a wonderful
23 alternative.
24 MR. STRUHS: Thank you.
25 GOVERNOR BUSH: There's a motion to defer
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1 and a second.
2 Any other discussion?
3 Without objection, the motion is deferred.
4 MR. STRUHS: Thank you.
5 GOVERNOR BUSH: Thank you, David.
6 (The Board of Trustees of the Internal
7 Improvement Trust Fund Agenda was concluded.)
8 * * *
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1 GOVERNOR BUSH: Department of Agriculture.
2 TREASURER GALLAGHER: Motion on the
3 minutes.
4 COMMISSIONER BRONSON: Second.
5 SECRETARY HARRIS: Second.
6 GOVERNOR BUSH: Moved and seconded.
7 Without objection, it's approved.
8 Item 2.
9 MR. WILHELM: Is a request by
10 Philip Cochran, Jr., for a ten-year lease to
11 raise clams and oysters on 3.7 acres in
12 St. Johns County.
13 TREASURER GALLAGHER: Motion.
14 COMMISSIONER BRONSON: Second.
15 GOVERNOR BUSH: Moved and seconded.
16 Without objection, it's approved.
17 MR. WILHELM: Thank you very much.
18 GOVERNOR BUSH: Thank you.
19 (The Department of Agriculture & Consumer
20 Services Agenda was concluded.)
21 * * *
22
23
24
25
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June 12, 2001
1 GOVERNOR BUSH: You guys don't want to
2 stick around for the tobacco discussion?
3 ATTORNEY GENERAL BUTTERWORTH: You'll do
4 the right thing, Governor.
5 TREASURER GALLAGHER: We'll do the right
6 thing.
7 GOVERNOR BUSH: Oh, come on. Stick around.
8 You can if you want. You actually have an
9 interest in this.
10 (Secretary Harris exited the room.)
11 GOVERNOR BUSH: State Board of
12 Administration.
13 MEMBER OF THE AUDIENCE: Went to the
14 restroom.
15 GOVERNOR BUSH: Certainly. That's a trend.
16 I'm going to do it as well.
17 I'll be right back.
18 (Governor Bush exited the room.)
19 (Discussion off the record.)
20 (Governor Bush entered the room.)
21 MR. HERNDON: Governor --
22 GOVERNOR BUSH: Mr. Herndon.
23 MR. HERNDON: -- members of the State Board
24 of Administration.
25 Item 1 is --
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1 TREASURER GALLAGHER: Motion on the
2 minutes.
3 COMPTROLLER MILLIGAN: Second.
4 GOVERNOR BUSH: Moved and seconded.
5 Without objection, it's approved.
6 MR. HERNDON: Item Number 2 is to revisit
7 the -- the discussion that you have had
8 previously regarding the elimination of the
9 non-statutory based restrictions on the
10 investment authority of the State Board of
11 Administration.
12 We provided your offices and your staff
13 with whatever additional information we could
14 get regarding the cost implications associated
15 with removing the restriction on the FRS, and
16 leaving it on the Chiles Endowment, and
17 so forth.
18 I -- it's -- it's fairly straightforward,
19 and, unfortunately, I don't know that it is
20 overwhelmingly definitive one way or the other.
21 It's -- the cost is fairly modest in terms of
22 the additional costs that you incur, around
23 $40,000.
24 There are some complications associated
25 with running some of those indexes.
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June 12, 2001
1 And quite frankly, I should probably say
2 that -- that the -- the vendors who have
3 published these customized indexes, which we
4 use, have consistently over the last several
5 months expressed a concern about the viability
6 of those products going forward.
7 But we have no indication that they plan on
8 pulling the plug any time in the near future.
9 But that is always a possibility.
10 So we just need to be -- be aware of that.
11 We can create some of that ourselves. But
12 it -- but it's a cumbersome process, and,
13 again, I just -- so that you're aware that
14 there's some staff resources and time that's
15 associated with that.
16 But having said that, the recommendation to
17 you is to remove those restrictions.
18 I know that the folks from the Lung
19 Association are here, Ms. Olsen, Mr. Patrick,
20 probably would like to make some comments.
21 So --
22 GOVERNOR BUSH: We welcome our other fellow
23 Cabinet members.
24 MR. KENNEDY: Thank you, Mr. Herndon.
25 I am Patrick Kennedy. I am the Public
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June 12, 2001
1 Advocacy Director for the Florida/Puerto Rico
2 Affiliate of the American Heart Association.
3 With me is Brenda Olsen, who -- whom you
4 might remember from two weeks ago, the
5 Assistant Executive Director of the American
6 Lung Association of Florida.
7 And we would just like to make some
8 statements, you know, in response to concerns
9 expressed by members of the State Board of
10 Administration regarding the investment of the
11 funds, specifically from the Lawton Chiles
12 Endowment in tobacco and tobacco related
13 securities.
14 Now, we are pleased that the State Board of
15 Administration recognized that investing funds
16 from the Lawton Chiles Endowment in tobacco
17 related securities is problematic for both
18 moral and ethical reasons. We agree with that
19 assessment, and believe that should also be the
20 view taken towards other State funds.
21 Some have argued that State investment
22 policies should not be a vehicle for social
23 policy and social change.
24 However, it should be noticed -- noted that
25 there are times when behavior of certain
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June 12, 2001
1 entities represents the vilest and most
2 egregious of human behavior.
3 These entities, in turn, should be shunned
4 and avoided until such time that their behavior
5 has been reversed.
6 The tobacco industry is one such entity
7 whose business practices are so morally
8 reprehensible that they are beyond compare with
9 any other industry.
10 In keeping with that view, we would like to
11 strongly reaffirm our opposition to the
12 investment of any State funds in tobacco
13 related securities.
14 And I would like to point out specifically
15 when I say "our," I am including the Florida
16 Division of the American Cancer Society as
17 well. Together we function as the triagency
18 coalition on smoking or health.
19 Unfortunately, the Cancer Society was not
20 able to have a -- a representative with us
21 today.
22 But we would also like to point out one --
23 that there is a major difference between
24 receiving money from the tobacco industry via
25 the tobacco settlement, or excise taxes, and
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1 investing in tobacco companies. Simply put, to
2 receive money from a lawsuit against big
3 tobacco is to receive some compensation for
4 damages.
5 But to invest money in tobacco industry
6 securities is to say, in effect, we believe in
7 you, and hope that your future is bright.
8 So again, we would ask for your
9 leadership --
10 GOVERNOR BUSH: Can I --
11 MR. KENNEDY: -- and urge you to reject the
12 proposal to remove the non-statutory limitation
13 on State investment and tobacco stocks, not
14 only in the Lawton Chiles Endowment, but in all
15 State investments.
16 GOVERNOR BUSH: Do you have any other
17 industries that you might -- that you'd put in
18 that category?
19 MR. KENNEDY: We've discussed that
20 actually, and we do not. Because we believe
21 the -- the single defining point here is that
22 tobacco is the only product we know of that is
23 currently marketed legally in the
24 United States, when used correctly, will cause
25 death.
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1 And will -- and when used as described by
2 the manufacturer, will most certainly cause the
3 death of the individual using that product.
4 GOVERNOR BUSH: Thank you.
5 MR. KENNEDY: Thank you.
6 GOVERNOR BUSH: Thank you for being here.
7 MR. KENNEDY: Thank you.
8 TREASURER GALLAGHER: Is that the only
9 speaker?
10 MR. HERNDON: As far as I know, yes, sir.
11 TREASURER GALLAGHER: Well, Governor, I'd
12 like to make a motion, if I may.
13 I certainly recognize what these people
14 have presented is very important to them,
15 and -- and makes a -- you know, a very strong
16 argument.
17 I -- I also feel that we -- because it is a
18 legal entity, like it or not, that we
19 shouldn't -- should carry out our fiduciary
20 responsibility to get the highest return we can
21 on the pension funds.
22 I also believe that the Lawton Chiles
23 Endowment doesn't have that same prudent man
24 rule attached to it, and because of where that
25 money came from and because of the uses of it,
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1 could well be looked at from a different point
2 of view.
3 And so I would like to move that we do
4 remove the limitation from the pension fund
5 investments, but leave it there for the
6 Lawton Chiles Endowment.
7 COMPTROLLER MILLIGAN: I -- I -- I'll make
8 a comment first, if I may, Governor.
9 I went back and -- and reviewed a lot of
10 the fiduciary responsibility discussions that
11 we had when we were dealing with this issue
12 initially in trying to really come to grips
13 with this situation, which is -- is different
14 when you consider the Lawton Chiles Endowment
15 Fund, than it was back whenever that was.
16 But I -- I -- I did fall back to a
17 memorandum that was put together back in 1996.
18 And I -- I read a piece of it:
19 Appropriate consideration with respect to
20 an investment course of action includes the
21 following actions by the responsible fiduciary:
22 The design of the portfolio, including the
23 investment, must be reasonable for the purposes
24 of the plan.
25 Which clearly sets, in my mind, the
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1 Lawton Chiles Endowment Fund aside from what we
2 would view as our fiduciary responsibilities in
3 dealing with the FRS.
4 And, therefore, I second the motion.
5 TREASURER GALLAGHER: Good.
6 GOVERNOR BUSH: Any other discussion?
7 Tom, if the -- if the State Board of
8 Administration, four, five, or six years ago,
9 whenever it was, the -- did not do what they
10 did, and the investments continued, what
11 would -- was -- have y'all done an analysis of
12 what the increase or decrease in the investment
13 was?
14 MR. HERNDON: Yes, sir, we have.
15 GOVERNOR BUSH: Do you want to give me
16 that?
17 Or do you just want to keep it to yourself?
18 TREASURER GALLAGHER: Oh, he didn't want
19 that question.
20 MR. HERNDON: Well --
21 GOVERNOR BUSH: I just think it's important
22 to know --
23 MR. HERNDON: Yes. It could --
24 GOVERNOR BUSH: -- if we're dealing with --
25 this is -- this is --
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1 TREASURER GALLAGHER: Sure.
2 GOVERNOR BUSH: -- this is an issue that's
3 going to generate a lot of attention.
4 And it's legitimately going to generate
5 attention, because this is a public health
6 issue, it's a political issue, and we have this
7 fiduciary responsibility.
8 And a lot of times in public life, you
9 don't have, you know, the -- it isn't just
10 black and white, it isn't just yes or no. It
11 is competing policy interests.
12 And so I think it's appropriate to ask the
13 question and have it be made public. I --
14 in fact, I don't know. I mean, I -- I've been
15 busy with other stuff, so I haven't -- I'm sure
16 you've given it to me, and I just don't know
17 what it is.
18 TREASURER GALLAGHER: I don't think he has.
19 GOVERNOR BUSH: Oh.
20 MR. HERNDON: If I -- if I can set the
21 stage, Governor, just --
22 GOVERNOR BUSH: -- that question.
23 MR. HERNDON: -- just very briefly so
24 that -- so that you understand the context in
25 which this answer's given.
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1 The -- the fairest way to make this
2 assessment, and to produce the kind of number
3 that you are suggesting, is to take a look at
4 the index that we would have invested in with
5 tobacco in 1997, in May of 1997, and how it
6 would have performed against the same index
7 without tobacco --
8 TREASURER GALLAGHER: Right.
9 MR. HERNDON: -- over the same --
10 TREASURER GALLAGHER: Exactly.
11 MR. HERNDON: -- period of time.
12 This is a very end point sensitive
13 analysis. If you had done the analysis and cut
14 it off a year ago, or a month ago, you get
15 totally different figures.
16 But using that beginning point and
17 comparing the two products side-by-side, the
18 Florida Retirement System missed an opportunity
19 to increase its net asset value by about
20 300 million dollars. That's what being out of
21 tobacco cost us during that period of time.
22 GOVERNOR BUSH: But -- and that could have
23 been in some points in time negative, and
24 some --
25 MR. HERNDON: In fact, it was at some
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1 points negative. If you look from May of '97,
2 for example, until early of 1999, we were
3 better off having been out of tobacco than
4 otherwise.
5 But in the last two years -- 18 months to
6 two years, the tobacco stocks have ballooned up
7 in value, and they surpassed all of that prior
8 history, and have added -- would have added
9 300 million dollars in value.
10 GOVERNOR BUSH: Okay.
11 Well, I'm -- I'm sorry if I asked the wrong
12 question. But --
13 TREASURER GALLAGHER: No. I mean, I think
14 it's something that -- that -- I mean, we have
15 a responsibility to get the highest return we
16 can get on those pension funds.
17 GOVERNOR BUSH: Or allow the State Board to
18 make mistakes.
19 TREASURER GALLAGHER: Make those decisions.
20 Well, or make --
21 GOVERNOR BUSH: I mean, it's --
22 TREASURER GALLAGHER: -- mistakes.
23 GOVERNOR BUSH: -- it's -- it really
24 relates more to the -- not knowing what the
25 future looks like, to allow the professionals
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1 to make investment decisions for the people
2 that we represent, the pensioners.
3 General Butterworth, I know you're not a
4 member of the SBA, but you do have a lot of
5 history with this, and I think if -- if you --
6 if you'd like, I -- it would be appropriate for
7 you to comment as well.
8 ATTORNEY GENERAL BUTTERWORTH: Governor,
9 thank you for the opportunity.
10 Personally, I mean, I'm glad I'm not voting
11 on this, because I probably would not vote
12 thinking about the dollars. I still -- I
13 fought the war, with others, against tobacco,
14 and I think it's the most repugnant industry
15 we've ever had in this country.
16 We are still fighting the battle with a
17 couple of the tobacco companies who -- who,
18 in essence, are giving tobacco to start
19 tobacco, selling tobacco to start tobacco, and
20 basically coming in through the back door, and
21 costing us again millions of dollars more than
22 we would have gotten from the settlement.
23 So I have a problem there.
24 But the -- Tom's right, we did get out of
25 it at the right time. And when you see
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1 Philip Morris go down almost 85 percent in
2 value, I think that it was the right decision.
3 Looking at it now, these companies have
4 diversified, and they're selling more different
5 type products.
6 The tobacco -- at that point in time,
7 let's say Philip Morris, for example, was worth
8 $40. What the experts were telling us as we
9 were preparing for trial was that the tobacco
10 stock with -- the stock without tobacco is
11 worth $44, but with tobacco company -- with
12 tobacco, it's -- it's worth less because of
13 the -- of the liability.
14 There's still a lot of potential liability
15 out there, but I'm sure the experts who -- who
16 will actually be doing the investing will --
17 will take all of that into consideration.
18 I think taking out the Lawton Chiles part
19 of it I think is -- is good, and -- and is --
20 is the absolute right thing to do.
21 But when it's all said and done, as we --
22 we're preparing for trial a number of years
23 ago, I know I was ready to pick the jury, I
24 knew the first question would be asked by -- by
25 somebody was, well, the State of Florida owns
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1 at that time 900 million dollars worth of
2 tobacco stock.
3 And it's kind of hard to go to trial
4 when -- I don't know what percentage that was,
5 maybe about 1 or 2 percent of the entire
6 portfolio.
7 And I think we were -- we were one of the
8 larger tobacco owners I think in the whole
9 world.
10 So that -- so I think that that played a
11 role also in -- in what happened.
12 So today it's worth a little more than it
13 would have been. But for awhile, it was way
14 down.
15 GOVERNOR BUSH: Right.
16 ATTORNEY GENERAL BUTTERWORTH: And it --
17 and -- and that -- when Florida did that, that
18 sent a very strong message, I believe, not only
19 to Floridians, but -- but really to the whole
20 world about the whole tobacco issue.
21 And we're dealing with a different set of
22 circumstances now, because tobacco now -- at
23 that time, they didn't -- but tobacco now has
24 admitted that their product is addictive, and
25 that smoking is harmful to your health.
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1 They've already admitted that.
2 So that was one of the big things that --
3 that we were dealing with when we had the --
4 the -- the seven CEOs raise their right hands
5 in Congress and say, tobacco's not addictive,
6 and -- and smoke does not hurt your -- your
7 health.
8 So --
9 TREASURER GALLAGHER: Which is why they
10 settled.
11 ATTORNEY GENERAL BUTTERWORTH: Which is why
12 they settled, right. And -- and Florida,
13 of course, had a won-- very wonderful
14 settlement at that point in time.
15 So -- so circumstances are entirely
16 different right now, and I really could argue
17 either way.
18 But my heart is one place, but my head is
19 somewhere else. So --
20 GOVERNOR BUSH: I appreciate you hanging --
21 ATTORNEY GENERAL BUTTERWORTH: Thank you --
22 GOVERNOR BUSH: -- around.
23 ATTORNEY GENERAL BUTTERWORTH: -- for
24 letting me say --
25 GOVERNOR BUSH: Any other discussion?
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1 There's a motion and a second to -- to
2 maintain the restrictions in the
3 Chiles Endowment, but lift them for the
4 general pension fund.
5 All in favor, say aye.
6 THE CABINET: Aye.
7 GOVERNOR BUSH: All opposed?
8 No one.
9 Motion passes.
10 MR. HERNDON: Item number 3 is to request
11 your preliminary approval of the next seven
12 unbundled investment products in the new
13 optional retirement plan.
14 And I wonder, Governor, if it would be
15 worthwhile at this particular stage in this
16 discussion to give you a little bit of a status
17 report on where we are --
18 (Commissioner Crist and
19 Commissioner Bronson exited the room.)
20 MR. HERNDON: -- and maybe set the stage
21 for this discussion that's going to come in a
22 little bit more detail on each of these
23 products.
24 As you'll recall, we --
25
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1 (Attorney General Butterworth exited the
2 room.)
3 MR. HERNDON: -- proposed starting back in
4 Panama City in the late summer of last year,
5 and on through this year, that the investment
6 line-up of the new optional retirement plan be
7 composed of unbundled investment products, and
8 some number of bundled products to be
9 determined. And we are still in that process.
10 And right now, as we had originally
11 contemplated, there are several -- there are
12 12 individually discrete investment products,
13 some of which have more than one component to
14 them, that we're in the process of selecting
15 for your review.
16 Concurrent with that, we have received from
17 18 vendors, 258 proposed bundled products for
18 their -- for our consideration. We've gone
19 through the first stage of analysis of those
20 that Callan and Associates did. We wound up
21 eliminating about a dozen of the 258.
22 The -- the individual vendors are now
23 tasked with reducing their list of proposals
24 down to their best of class nine. And that
25 hopefully will reduce the number down
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1 substantially below 200.
2 That --
3 TREASURER GALLAGHER: You asked the -- the
4 vendors to cut themselves to nine?
5 MR. HERNDON: Absolutely. Yes, sir.
6 TREASURER GALLAGHER: We had no restriction
7 when they first bid, is that what --
8 MR. HERNDON: That's --
9 TREASURER GALLAGHER: -- what happened?
10 MR. HERNDON: -- correct.
11 Well, they --
12 TREASURER GALLAGHER: -- a few out?
13 MR. HERNDON: -- they had multiples of
14 nine, up to -- three multiples of nine, so they
15 could have submitted 27. And they were
16 restricted by the category of the investment
17 product. But that was the -- essentially it.
18 TREASURER GALLAGHER: All right. Now, you
19 knocked a few out --
20 MR. HERNDON: Right.
21 TREASURER GALLAGHER: -- already --
22 MR. HERNDON: Right.
23 TREASURER GALLAGHER: -- before you told
24 them to cut themselves to nine; is that --
25 MR. HERNDON: That's correct.
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1 TREASURER GALLAGHER: -- correct?
2 Okay. Now you've come back and said, give
3 us your best nine.
4 MR. HERNDON: Give us your best nine --
5 TREASURER GALLAGHER: So we --
6 MR. HERNDON: -- and they --
7 TREASURER GALLAGHER: -- is this -- is this
8 so we don't have to go analyze 8 billion of
9 them?
10 MR. HERNDON: Well, hopefully that's the
11 case.
12 TREASURER GALLAGHER: Now, some may be
13 offering the same product. Is that --
14 MR. HERNDON: In fact, there are
15 duplicates. There are about --
16 TREASURER GALLAGHER: Some --
17 MR. HERNDON: -- forty some odd --
18 TREASURER GALLAGHER: -- real high
19 performers are going to be on everybody's list,
20 or a good many of them.
21 MR. HERNDON: That's right.
22 There are forty some odd duplicates in that
23 total number. And Mercer and Associates is
24 about to begin that second stage of evaluation.
25 So the schedule contemplates that we come
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1 back to you in late fall, after we -- not late
2 fall, but in late September, after we go
3 through our advisory councils and so forth,
4 with the preliminary list of unbundled products
5 that you have been reviewing, and have in front
6 of you, some of them today; and the bundled
7 provider products that the staff and the
8 Advisory Council is endorsing at that point.
9 And essentially a recommendation -- and
10 it's been suggested it's kind of akin to a
11 Chinese buffet, that you're -- you're going to
12 have the opportunity to construct at that point
13 the investment line-up, the product line-up
14 that you think makes the best sense using some
15 of the bundled products, if that's suitable,
16 the unbundled products if that's suitable, but
17 to ultimately craft that number of investment
18 products that you think works best for the
19 members.
20 That's -- that's where the investment side
21 of that process is.
22 TREASURER GALLAGHER: Let me ask you a
23 question.
24 Are we giving these bidders the opportunity
25 to pay for the analyzation that's being done by
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1 Mercer?
2 MR. HERNDON: We have not, no. We've --
3 we've decided to take that upon ourselves as
4 the -- probably the most equitable arrangement.
5 It's -- it's --
6 TREASURER GALLAGHER: This is -- well,
7 you know, you analyze all those individual
8 funds. I mean, I know it costs a lot to do the
9 ones that --
10 MR. HERNDON: Yes, sir.
11 TREASURER GALLAGHER: -- we're putting out.
12 But these -- I mean, what is it going to cost
13 us to analyze all these?
14 MR. HERNDON: Well, we don't have the final
15 bills from Mercer at this point, but it -- it
16 will cost you in the millions of dollars before
17 this process is done, to have gone through all
18 this analysis of 258 bundled products, and
19 the --
20 TREASURER GALLAGHER: Well, I'm --
21 MR. HERNDON: -- substantial number of --
22 TREASURER GALLAGHER: -- I'm sort of
23 thinking that --
24 MR. HERNDON: -- unbundled products --
25 TREASURER GALLAGHER: -- that we may be
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1 able to help clear the field for those that
2 wouldn't want to pay -- pay for the -- if they
3 didn't think they had a shot anyway, they
4 wouldn't have to pay for the -- you know, for
5 the cost of doing all this analyzation, we
6 might have a lot less to analyze.
7 MR. HERNDON: Well, we certainly have not
8 suggested nor required that of any of the
9 vendors at this point.
10 TREASURER GALLAGHER: That's probably too
11 late if they didn't have it in the front end
12 bid deal.
13 Should have -- I'm always late on my
14 thoughts. I should have thought of it sooner.
15 MR. HERNDON: Let me just -- to -- to round
16 out the picture, what we've just described as
17 the -- as the investment product selection, on
18 the recordkeeper side of things, as you know,
19 we've selected CitiStreet.
20 We are in serious contract negotiations,
21 defining the scope of work with CitiStreet and
22 the -- the Division of Retirement. And those
23 two other entities are the recordkeepers for
24 both the DB plan and the DC plan.
25 And we've -- we've, in fact, just this
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1 morning transmitted scope of work documents to
2 both of those organizations, and that's coming
3 along pretty well.
4 GOVERNOR BUSH: Is that a -- is that an
5 opportunity for a little efficiency here, a
6 little savings to the State?
7 MR. HERNDON: Absolutely. We -- we're
8 sincerely hopeful that that's, in fact, the
9 case.
10 TREASURER GALLAGHER: Is -- is this --
11 GOVERNOR BUSH: Is this one of --
12 TREASURER GALLAGHER: -- going to be
13 driven --
14 GOVERNOR BUSH: -- those evil outsourcing
15 things?
16 MR. HERNDON: Beg your pardon?
17 GOVERNOR BUSH: Never mind.
18 TREASURER GALLAGHER: Is this train going
19 to be driven by the -- the Division
20 of Retirement is going to, you know, send what
21 their figures are, and these people are going
22 to keep them; or are they going to put them
23 together, or is the new group going to take
24 over what the Division of Retirement has
25 traditionally done?
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1 I mean, we're -- we're -- how is this
2 working out?
3 MR. HERNDON: Well, recognize now that the
4 Division of Retirement has never maintained
5 individual investment accounts. They have
6 maintained an individual person's file. They
7 would have a file for you. But certainly no
8 investment account --
9 TREASURER GALLAGHER: My file would only
10 have what my defined benefit is --
11 MR. HERNDON: Years of service --
12 TREASURER GALLAGHER: -- not how much money
13 is there.
14 MR. HERNDON: -- and so forth. That's
15 correct.
16 TREASURER GALLAGHER: But there's some --
17 there's -- only -- only thing you need is a
18 mathematical equation to figure that out,
19 once --
20 MR. HERNDON: That's correct.
21 TREASURER GALLAGHER: -- you make -- once
22 you figure out what the what-ifs are.
23 MR. HERNDON: That's correct.
24 What we've done is basically work with our
25 consultants to articulate the set of tasks that
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1 have to be done by the recordkeeper, and then
2 given it to both organizations.
3 The Division of Retirement has said, we are
4 uniquely capable of doing these things. And
5 CitiStreet has said, we're probably more
6 capable of doing these things.
7 And there are a few spots in the middle
8 where we're still talking with both
9 organizations. But by in large, it has worked
10 fairly well.
11 What the Division of Retirement is most
12 capable of doing is processing the payroll,
13 because you've got payrolls coming in it from
14 800 employers for DB, and payrolls coming in
15 from the same employers for DC.
16 So they're going to be the front end
17 processor of that payroll; send it to
18 CitiStreet, who will then move it to
19 individually maintained investment accounts at
20 various organizations.
21 TREASURER GALLAGHER: Huge job.
22 Now, who sets the amount of money that
23 exists in everyone's account today? Is that
24 something that -- what we say is the -- the --
25 the funded amount becomes that dollar, or the
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1 funded amount plus the 10 percent --
2 I think it was 10 percent y'all voted
3 before I got here, wasn't it, as a cushion?
4 GOVERNOR BUSH: Yeah.
5 MR. HERNDON: Oh, for the --
6 TREASURER GALLAGHER: Or does that stay as
7 the cushion? How much -- where do we come with
8 a number that is going to be used for how much
9 the, you know, 750,000 people have in their
10 account?
11 MR. HERNDON: The statute is very clear.
12 It proscribes the formula that you use to
13 calculate the present value.
14 So you take the individual DB member's
15 accumulated benefit obligation -- their years
16 of service, their salary, their high five,
17 et cetera, et cetera -- and applying the
18 formula in the statute, you calculate a present
19 value based on the time that they are
20 earmarking to make this their personal
21 switch --
22 TREASURER GALLAGHER: Now, is that present
23 value -- then what you're telling me is that
24 present value is not based on dollars sitting
25 invested and available, it's based on their
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1 defined benefit is what --
2 MR. HERNDON: That's correct.
3 TREASURER GALLAGHER: -- I think what
4 you're telling me.
5 MR. HERNDON: That's correct.
6 TREASURER GALLAGHER: So it would not
7 matter if we were underfunded or overfunded,
8 the retirees don't get an advantage of an
9 over -- and, of course, they don't get punished
10 for an under.
11 MR. HERNDON: That's correct.
12 TREASURER GALLAGHER: Okay.
13 MR. HERNDON: Once you give that individual
14 that statement of their present value, that's
15 the figure that is used for --
16 TREASURER GALLAGHER: Moving.
17 MR. HERNDON: -- initial transition
18 purposes.
19 And then the law contemplates a true-up
20 period, because the effective date of the
21 transfer may not be the day that they -- that
22 they think it is. So the -- the present value
23 moves a little bit. So you have a period of
24 time to true it up, and that amount of money
25 goes into the individual's account.
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1 And then from that point forward, it -- it
2 continues on however it does.
3 TREASURER GALLAGHER: An overfunded --
4 then -- when that -- when that's set, if we end
5 up being overfunded, which could easily happen
6 when all that moves out over a period of time,
7 because that --
8 MR. HERNDON: We most assuredly will be.
9 TREASURER GALLAGHER: In the past, the
10 Legislature has allowed, and I think it still
11 exists, that a retiree can collect so much
12 money a month for health insurance.
13 MR. HERNDON: Correct.
14 TREASURER GALLAGHER: What happens to those
15 that go in, do they still get that same
16 opportunity, those people that are in a
17 defined contribution?
18 MR. HERNDON: No.
19 TREASURER GALLAGHER: So they don't -- that
20 is something that they lose.
21 MR. HERNDON: They have to still -- and one
22 of the -- one of the issues is still on the
23 table is the disability benefits that you
24 currently receive under the defined benefit
25 plan.
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1 But the health insurance subsidy that an
2 individual receives, if they retire from the
3 DB plan --
4 TREASURER GALLAGHER: Right.
5 MR. HERNDON: -- is not available to a
6 retiree in the DC plan.
7 TREASURER GALLAGHER: Well, that's a
8 sizable amount of money. Is that -- that's
9 going to be --
10 MR. HERNDON: Maximum is $150 a month.
11 TREASURER GALLAGHER: Well, think about --
12 MR. HERNDON: That --
13 TREASURER GALLAGHER: -- that. You retire
14 in 30 years, that's --
15 MR. HERNDON: Right.
16 TREASURER GALLAGHER: -- I mean, you take a
17 present value of that, that's a -- is that
18 going to be part of the educational process
19 that somebody has to know before they make
20 their --
21 MR. HERNDON: Yes.
22 TREASURER GALLAGHER: -- decision?
23 GOVERNOR BUSH: Absolutely.
24 TREASURER GALLAGHER: I mean, that alone, I
25 could tell you would be a -- I mean, there's a
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1 lump sitting there that the present value is
2 huge.
3 MR. HERNDON: Well, the present value of
4 that $3 for every -- or $5 for every 30 years,
5 or for 30 years is not calculated in the DB
6 benefit at the time that you're moving out.
7 You only begin to receive that after you
8 retire.
9 TREASURER GALLAGHER: I understand that.
10 But because you will receive it, and it is
11 a right for you to receive it if you're in the
12 defined contribution -- or in the
13 defined benefit plan, there's a -- there's a
14 lump value of that the day you retire.
15 I mean, depending on how long you live,
16 what it's worth, and it can be --
17 MR. HERNDON: Potentially.
18 TREASURER GALLAGHER: So it's just -- it's
19 something that needs to be part of the
20 educational process.
21 MR. HERNDON: Yes, sir.
22 So just finish this thought with respect to
23 the --
24 TREASURER GALLAGHER: Sorry.
25 MR. HERNDON: -- the recordkeepers and so
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1 forth.
2 So we're, I think, in pretty good shape
3 with respect to CitiStreet and DOR and
4 ourselves, we're working very well together.
5 On the education program, we have retained
6 Financial Engines, we've completed a contract
7 with them. They are the content provider,
8 essentially will provide all of the calculating
9 tools and educational content for members of
10 the plan.
11 Ernst & Young, the accounting firm, will be
12 providing the face-to-face education and
13 information workshops, and maintaining a
14 1-800 line that's up virtually all of the time
15 that -- that you would want to provide specific
16 education to members.
17 And we're currently contracting,
18 for example, for 3,000 face-to-face workshops
19 for the members of the FRS. That's assuming
20 that we do 100 workshops times 3,000 --
21 excuse me -- 100 people times 3,000 workshops.
22 So we're looking at 300,000 members. We're
23 looking at a 50 percent penetration rate for
24 the total plan. We're assuming that we will
25 not have 100 percent response.
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1 Finally, Ketchum is the public relations
2 firm, and they are, in fact, in the field
3 today, and -- and have been for the last
4 10 days or so, on a survey trying to determine
5 what the level of knowledge is of the members
6 of the FRS about their pension plan, about
7 defined contribution, about retirement, about
8 investing, and so on and so forth.
9 One of the things that we especially liked
10 about Ketchum was that their work is all
11 research based, it's tied directly to a
12 specific survey result. And so they're doing a
13 5,000 survey completion project, and will --
14 it'll be very, very interesting to see that
15 information.
16 And from that will spring how this program
17 is described, and -- and put forward, and how
18 do we motivate the members out there to,
19 in fact, pick up the brochure, or go to the
20 website, and -- and take advantage of the
21 content that's there.
22 TREASURER GALLAGHER: Am -- am I correct
23 in -- in my belief, or -- at least I hope my
24 belief is correct -- that when you have the
25 educational product up and available, that the
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1 software that has been designed and -- and been
2 perfected by Financial Engines, one of the
3 best, to plan one's future retirement and
4 investments for their particular needs where
5 you can plug in what you may have in
6 real estate, or you may have in bonds, or you
7 may have, you know, in your retirement fund, or
8 in a 401 -- you know, it could be so many
9 different places, that you can put all that
10 into Financial Engines' available website for
11 your own account.
12 MR. HERNDON: Yes, sir.
13 TREASURER GALLAGHER: And -- for free,
14 because the pension -- the SBA's paying for it,
15 get back recommendations on -- on what the --
16 you know, the prudent man advisor would give
17 you.
18 Is that going to be available to the
19 750,000 -- but not the already retired ones I
20 guess.
21 MR. HERNDON: Yeah. It's not available to
22 the retirees. It is available to the active
23 members.
24 And basically what Financial Engines
25 software does is it educates you about how to
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1 plan for your retirement, what you need to be
2 thinking about.
3 And then based on your specific individual
4 circumstances and the data that you load in, it
5 will tell you how likely it is under reasonable
6 sets of expectations, that you will achieve
7 your desired retirement goal, whatever that is.
8 If you want an income of $100,000 a year,
9 or $10,000 a year, or whatever you're striving
10 for, it will tell you based on what you put in
11 it, how likely it is that you're going to
12 achieve it.
13 And if it's unlikely that you're going to
14 achieve it, it'll tell you what you have to do
15 to your asset allocation mix to improve the
16 probability that you're going to achieve it.
17 TREASURER GALLAGHER: Well, it might tell
18 you to get another job if you want too high --
19 MR. HERNDON: That's -- that's a
20 possibility.
21 TREASURER GALLAGHER: But this is a --
22 this -- you know, for all the exercise we go
23 through, this is, I think, one of the -- a
24 really great benefit for State employees, which
25 probably would have never been able to come
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1 their way had we not started to take these
2 steps. No matter which decision they make, to
3 move or not move it out, et cetera.
4 So I -- I'm thrilled that that's going to
5 be --
6 GOVERNOR BUSH: You know, it --
7 TREASURER GALLAGHER: -- a result.
8 GOVERNOR BUSH: -- might be -- it might be
9 useful to have a -- at one of our meetings,
10 whenever this program is developed, or if it
11 already is, just to show maybe at the -- the
12 Knott Building have better video, so it'd be
13 easier to do -- next month or two, to -- to
14 show us how it works.
15 MR. HERNDON: Be happy to.
16 GOVERNOR BUSH: Take us through the -- as
17 a -- as a --
18 TREASURER GALLAGHER: Yeah. It's a
19 wonderful product. And --
20 MR. HERNDON: We can --
21 TREASURER GALLAGHER: -- it's great for us.
22 MR. HERNDON: -- we can walk you through
23 the Financial Engines. And, in fact, it's a
24 very powerful tool.
25 It'll be available during the transition,
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1 and it'll be available -- and one of the nice
2 things about it, frankly, is it will be
3 available on a permanent basis to members of
4 the FRS.
5 As --
6 TREASURER GALLAGHER: That's a great thing.
7 MR. HERNDON: -- as Commissioner Gallagher
8 pointed out, a hugh benefit. Now, it's not
9 cheap. I mean, I -- we -- we need to bear that
10 in mind. I mean --
11 TREASURER GALLAGHER: Twenty-nine million
12 dollars the first --
13 MR. HERNDON: The transition costs first
14 year are about 29 million dollars. And they
15 fall in --
16 TREASURER GALLAGHER: Eighteen.
17 MR. HERNDON: -- the out-years, but they
18 don't go away, you're still looking at a huge
19 number of people that are being serviced.
20 But to put it in perspective, that
21 29 million dollars is 3 basis points on the
22 current fund, or 3/100 of 1 percent of the
23 asset value of the FRS.
24 So it's fairly straightforward in that --
25 in that respect.
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1 What we have for you today is unbundled
2 investment products 4 through 10. I'd like to
3 ask Ms. Susan Schueren, who's the Chief of our
4 Domestic Equities Division, and the Co-Chair of
5 the ISIG team that did this, to walk you
6 through these.
7 And if you don't mind, I'm going to
8 interrupt her at a couple of points to just
9 address a couple of issues of controversy that
10 came up during the selection process that we've
11 further worked on.
12 MS. SCHUEREN: Thanks, Tom. I'm going to
13 move this just to --
14 GOVERNOR BUSH: Good afternoon.
15 MS. SCHUEREN: Hello.
16 On April 24th, we brought you
17 recommendations on the three investment
18 products that comprise the active bond fund and
19 the high yield active fund.
20 Today we're bringing you recommendations on
21 seven products that will form the basis of
22 three active U.S. equity funds as described in
23 the Investment Policy Statement.
24 The process we employed in producing these
25 recommendations is the same process that has
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1 been described to you previously.
2 Callan Associates used the approved
3 selection and evaluation criteria to screen
4 their database, and provide us with a list of
5 high quality candidates for interview.
6 Generally the interviews lasted for about
7 2 hours per candidate, and were immediately
8 followed by a team discussion and scoring
9 process.
10 And as -- as Tom has pointed out, after
11 these seven recommendations, we will still be
12 bringing you four additional unbundled, and all
13 of the bundled recommendations.
14 TREASURER GALLAGHER: About how many
15 applicants did you have for each one of -- of
16 these products?
17 MS. SCHUEREN: Generally Callan brought us
18 somewhere between three and five candidates for
19 interview.
20 TREASURER GALLAGHER: And -- oh, they had
21 already -- when they went through, did they go
22 through from people that applied, or did you
23 just go to the market and say who's available,
24 and do it?
25 MS. SCHUEREN: It is not an application
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1 process. Callan has a large database. And --
2 and, of course, entry in their database is
3 free. You simply have to provide them with the
4 information.
5 They screened all of the products that were
6 in their database to come up with the
7 candidates for interview.
8 TREASURER GALLAGHER: Now, how do -- how do
9 we know -- and -- and, of course, Callan know
10 that the information that's given them by these
11 managers is valid and correct?
12 Is there some kind of validation to this?
13 MS. SCHUEREN: There is a validation
14 process that Callan goes through on the data.
15 As far as the specifics of it, I -- I could let
16 Callan speak to that if that's of interest to
17 you.
18 TREASURER GALLAGHER: Well, I'm just
19 wondering, if -- you know, somebody wants to
20 get on there, and said, well, I manage,
21 you know, 5 billion dollars, and it's in a
22 small cap, and, you know, here's my return --
23 MS. SCHUEREN: Uh-hum.
24 TREASURER GALLAGHER: -- you know, that's
25 all well and good. It's sort of like everybody
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1 that comes to see you tells you they're in the
2 top quartile.
3 You know, I'm trying to figure out who's in
4 the bottom three quartiles.
5 I'm --
6 MS. SCHUEREN: It changes every --
7 TREASURER GALLAGHER: -- I've never met --
8 MS. SCHUEREN: -- quarter --
9 TREASURER GALLAGHER: -- one of them.
10 MS. SCHUEREN: -- doesn't it?
11 TREASURER GALLAGHER: I never met one of
12 them. They're always the ones that are in the
13 top quartile. So I'm just wondering --
14 MS. SCHUEREN: Yes.
15 TREASURER GALLAGHER: -- more like that
16 they do it, and that it's valid. You're
17 comfortable with that.
18 MS. SCHUEREN: That's correct. Yes.
19 Are we ready to talk about the first of the
20 recommendations?
21 GOVERNOR BUSH: Yes.
22 MS. SCHUEREN: Okay.
23 The small cap broad core product is part of
24 the U.S. small stock active fund. The four
25 firms interviewed as candidates to provide the
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1 product were Batterymarch Financial, Fidelity
2 Management Trust Company, T. Rowe Price, and
3 Wellington Management Company.
4 Each of the managers selected for interview
5 has a strong record of providing an actively
6 managed small cap broad product with
7 performance that compares favorably to the
8 Russell 2000 index.
9 Batterymarch was unique in their
10 quantitative implementation of fundamental
11 investment ideas, and in their degree of
12 success in providing risk adjusted returns in
13 excess of the index performance.
14 Batterymarch possessed both the highest
15 overall returns, and the lowest downside risk
16 within this group of candidates, which was
17 really quite impressive.
18 In addition, their unique application of
19 quantitative tools to implement fundamental
20 investment ideas provided the strongest
21 assurance of a consistent repeatable process.
22 GOVERNOR BUSH: Can you tell me how the
23 fees work?
24 MS. SCHUEREN: Yeah. Hold on a second
25 here.
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1 The fees generally are steps, depending on
2 the assets. And in the materials we provided
3 to you, we had a page on fees.
4 Looking at the -- this particular search,
5 we calculated fees based on 180 million
6 dollars, which was -- which took the 8 billion
7 dollar PEORP estimate, then looked at the
8 assumed allocation to small cap, and then the
9 percentage of that fund that would likely be
10 the small cap broad.
11 GOVERNOR BUSH: How are fees paid --
12 TREASURER GALLAGHER: They --
13 GOVERNOR BUSH: -- I mean --
14 TREASURER GALLAGHER: -- they bid -- they
15 bid their fees with the --
16 GOVERNOR BUSH: They bid it. But it's
17 based on increases in value, or is it based
18 on --
19 MS. SCHUEREN: Generally, the -- the fees
20 are stepped, and there's a schedule that at
21 different sizes of assets under management, the
22 more money you have with them generally, the
23 cheaper it is on a basis point basis, but --
24 but certainly more dollars in --
25 GOVERNOR BUSH: But it's -- it is what it
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1 is. It's 72 basis points of whatever the value
2 that they're managing. If it goes --
3 TREASURER GALLAGHER: No.
4 MS. SCHUEREN: Yes.
5 GOVERNOR BUSH: -- down, they get 72 basis
6 points of a smaller amount; if it goes up --
7 TREASURER GALLAGHER: No -- if they -- if
8 it goes up, they're going to give you a smaller
9 basis points, although they'll end up with more
10 cash.
11 MS. SCHUEREN: The first 25 million in the
12 case of Batterymarch is 85 basis points, the
13 over 25 million is 70 basis points.
14 So we calculated 72 basis points on
15 180 million.
16 GOVERNOR BUSH: This is an average.
17 MS. SCHUEREN: Right.
18 GOVERNOR BUSH: Okay.
19 MS. SCHUEREN: Okay?
20 GOVERNOR BUSH: Yes.
21 MS. SCHUEREN: Okay.
22 The ISIG team recommends that Batterymarch
23 be chosen as the small cap broad product
24 provider for the U.S. small stock active fund.
25 And I'd be happy to take any questions
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1 on -- on that particular search, or go on to
2 the next search, as you prefer.
3 TREASURER GALLAGHER: Are you -- are you --
4 you're waiting for our approval obviously.
5 Do you want us to do it one by one, or why
6 don't you go through them all, and if somebody
7 has --
8 COMPTROLLER MILLIGAN: Well, this is not
9 really an approval. These are proposed. They
10 still have a --
11 GOVERNOR BUSH: You're approving?
12 COMPTROLLER MILLIGAN: -- process to go
13 through. We approve them as proposed, and
14 that's it, you know.
15 MS. SCHUEREN: It's a preliminary approval
16 as how we're understanding it, pending the
17 recommendation --
18 GOVERNOR BUSH: The final --
19 MS. SCHUEREN: -- at the end of September
20 with --
21 GOVERNOR BUSH: -- Chinese menu.
22 MS. SCHUEREN: -- all of the products.
23 Right.
24 COMPTROLLER MILLIGAN: That's right.
25 TREASURER GALLAGHER: Well, this is the
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1 first step of approval basically.
2 COMPTROLLER MILLIGAN: Yeah.
3 TREASURER GALLAGHER: So do we want to wait
4 till the end of them all, and do it?
5 COMPTROLLER MILLIGAN: I would recommend
6 that.
7 MS. SCHUEREN: Okay.
8 On and on.
9 The second product in the active small cap
10 fund is the small cap growth product. The four
11 firms interviewed as candidates to provide a
12 small cap growth product were Columbia
13 Management Company, HLM Management Company,
14 Mazama Capital Management, and Westwood
15 Management Corporation.
16 Each of the managers selected for interview
17 has a strong record providing an actively
18 managed small cap growth product, with
19 performance that compared very favorably to the
20 Russell 2000 growth index.
21 Columbia and Westwood both provide
22 excellent risk adjusted returns. Columbia's
23 absolute returns were a bit higher; and the
24 portfolio management team, somewhat deeper.
25 Westwood's performance was more consistent
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1 with more tightly controlled risk statistics.
2 The selection of Batterymarch or -- or the
3 recomm-- the selection of Batterymarch as the
4 recomm-- recommended product in small cap broad
5 suggested the use of Columbia in this slot,
6 rather than Westwood as the small cap growth
7 product provider.
8 These strong risk controls at Batterymarch
9 made the risk controlled aspect of the Westwood
10 product less crucial within the mix, and the
11 higher incremental risk adjusted return of
12 Columbia, therefore, took precedence.
13 The ISIG team recommends that Columbia be
14 chosen as the small cap growth product provider
15 for the U.S. small stock active fund.
16 TREASURER GALLAGHER: Well, I have --
17 MS. SCHUEREN: Any questions on that?
18 TREASURER GALLAGHER: -- a sheet here where
19 the -- this is -- that recommendation is made
20 after you did the interview results and the
21 points and the average scores and --
22 MS. SCHUEREN: Correct.
23 TREASURER GALLAGHER: -- all of that,
24 right?
25 Or actually that -- Westwood did come out
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1 number one on that.
2 MS. SCHUEREN: Yeah. And --
3 TREASURER GALLAGHER: But you just
4 recommended Columbia.
5 MS. SCHUEREN: We recommended Columbia,
6 yes, we did.
7 The -- the scores were close for Columbia
8 and Westwood. And the -- the group felt that
9 based on the -- the risk and return
10 characteristics of the other products within
11 the fund mix would -- would kind of prove the
12 tie breaker between the two of them.
13 TREASURER GALLAGHER: I think I saw a
14 matrix in here where you've done the --
15 GOVERNOR BUSH: This isn't a formula where
16 you, you know, you crank out a -- a formula at
17 the end, there's a -- a value, and you say you
18 get -- give it to the highest value, because
19 tomorrow the investment strategy of whatever
20 fund you have may not be so -- so hot.
21 MS. SCHUEREN: Yeah.
22 The -- all of these returns are -- are,
23 of course, so end point sensitive. And -- and
24 the team did not recommend in every case that
25 the product with the highest return be
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1 selected.
2 GOVERNOR BUSH: Nor did --
3 MS. SCHUEREN: We looked at --
4 GOVERNOR BUSH: -- you recommend the -- the
5 one with the lowest fee.
6 MS. SCHUEREN: Nor necessarily the one with
7 the lowest fee. That's right. We -- we tried
8 to balance return considerations --
9 TREASURER GALLAGHER: Managers --
10 MS. SCHUEREN: -- concerns about --
11 TREASURER GALLAGHER: -- experience --
12 MS. SCHUEREN: -- risk, fees, the whole
13 thing.
14 And, of course, we will -- we will do a
15 reevaluation even after the assumption of a --
16 of a final approval from the Trustees in
17 September, we, of course, will continue to look
18 at and monitor these companies prior to the
19 actual funding.
20 GOVERNOR BUSH: Okay.
21 Onward.
22 MS. SCHUEREN: Okay. The last of three
23 products in the active small cap fund is the
24 small cap value product.
25 The four firms interviewed as candidates to
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1 provide a small cap value product were
2 Ark Asset Management Company, Boston Company
3 Asset Management, Investment Counselors of
4 Maryland, and Schroder Investment Management
5 North America.
6 Each of the managers selected for interview
7 has a performance record of providing an
8 actively managed small cap value product with
9 performance that has added value over the
10 Russell 2000 value index.
11 Although the candidates as a group were
12 strong with respect to the standard risk and
13 return statistics provided in the Callan
14 briefing documents, differences of degree in
15 risk adjusted net performance form the basis of
16 this recommendation.
17 The group was impressed with both Schroder
18 and Ark, citing good risk adjusted performance
19 and clarity and communication of the investment
20 philosophy and process.
21 However, in the discussion and scoring, Ark
22 edged passed Schroder because of the somewhat
23 higher five-year performance, along with a more
24 attractive fee schedule.
25 And would you care to --
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1 MR. HERNDON: Thank you.
2 You may recall that there was some
3 controversy at the Investment Advisory Council
4 meeting -- and I -- I should point out that all
5 of these recommendations that we're bringing to
6 you today have gone through the Investment
7 Advisory Committee.
8 And, in fact, all of them were concurred
9 with, except the last one that we'll have an
10 opportunity to discuss when we get to that.
11 But the controversy surrounding Ark has to
12 do with litigation that was present at that
13 time between the Illinois teachers and
14 Ark Asset Management.
15 It was known to our consultants, but for a
16 variety of reasons, they were unable, or did
17 not make that information known to us.
18 The folks from Callan are here today if
19 you'd like to ask them about that.
20 In addition, the representatives from Ark
21 are here as well, who would like to speak if --
22 if you feel the need.
23 What we did based on the indication of
24 controversy was made the recommendation before
25 you today contingent on conducting an
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1 evaluation and investigation of our own, our
2 compliance officer followed through with that,
3 made a number of inquiries, and the -- and the
4 report is in front of you now.
5 It is clear from that report that Ark is
6 well regarded. There's no doubt about that.
7 It's also clear from that report that there
8 was some communications complications between
9 Ark and Illinois teachers that gave rise to the
10 litigation. That has now been settled.
11 And as you might expect, the terms of the
12 settlement don't permit either of the parties
13 to discuss the specifics.
14 So we don't really know exactly what the
15 circumstances were. However, we have talked
16 with other clients of Ark, and we've talked as
17 obliquely as we could with Illinois teachers
18 staff, and have been assured that it is not an
19 ongoing problem.
20 So we're comfortable in reinforcing that
21 recommendation. And the members of the
22 Advisory Council did endorse that
23 recommendation as well.
24 TREASURER GALLAGHER: Are -- are -- are
25 they managing any money for the Illinois
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1 teachers union at this time?
2 MR. HERNDON: Not that I -- no, I don't
3 believe so. And I -- as I said, the Ark
4 representatives are here if you'd like to talk
5 with them, or hear their perspective.
6 Okay.
7 TREASURER GALLAGHER: I read the report
8 that you had done, and that's pretty complete.
9 MS. SCHUEREN: The next product under
10 consideration this morning is the large value
11 broad core product. It's intended to provide
12 excess return for the U.S. large value stock
13 active fund.
14 The four firms interviewed as candidates
15 were Capital Guardian Trust Company, Chartwell
16 Investment Partners, Institutional Capital
17 Corporation, and Wellington Management Company.
18 Each of the managers selected for interview
19 has a positive record of providing some
20 positive returns relative to the Russell 1000
21 value index, but -- but certainly not the kinds
22 of returns in excess of the indices that we've
23 seen in some of the small cap products.
24 Wellington's more diversified stock
25 selection employs quantitative risk control,
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1 and centers on stock selection as their only
2 source of value-added.
3 ICAP provides a more traditional and
4 concentrated stock selection process, with more
5 moderate risk levels and the use of a
6 macroeconomic overlay for risk control.
7 The -- the candidates were not evenly
8 matched with respect to their performance
9 record. Callan noted that the marketplace
10 doesn't contain many large cap value products
11 that have achieved such consistent long-term
12 success as Wellington, particularly given
13 their -- their strong risk controls in place.
14 Because of the complimentary nature of the
15 Wellington and ICAP products, the group viewed
16 them as an attractive product mix should more
17 than one manager be required.
18 And the ISIG team recommends that
19 Wellington and ICAP be chosen as large value
20 broad core product providers for the U.S. large
21 value stock active fund.
22 Questions on -- on that search?
23 Okay.
24 Next is large growth broad core product.
25 It fills the same role, except it's in the
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1 U.S. large growth stock active fund. The four
2 firms interviewed are Aeltus Investment
3 Management, Dresdner RCM Global,
4 Nicholas-Applegate Capital Management, and
5 State Street Research & Management Company.
6 Each of the managers selected for interview
7 has a strong positive record of providing
8 active returns relative to the Russell 1000
9 growth index.
10 Dresdner and State Street Research
11 distinguished themselves by the clarity with
12 which they explain their process and the
13 obvious care with which they evaluate and
14 control risk.
15 The two products are attractive complements
16 to each other, with the Dresdner pure stock
17 selection balanced by State Street's
18 combination of stock specific and industry
19 relative exposures.
20 Because of the complementary nature of the
21 two products, the group viewed them as an
22 attractive complement.
23 And the team recommends that Dresdner and
24 State Street Research be chosen as large growth
25 broad core product providers for the U.S. large
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1 growth stock active fund.
2 Okay.
3 The last --
4 GOVERNOR BUSH: You're --
5 MS. SCHUEREN: -- two products --
6 Pardon?
7 GOVERNOR BUSH: You're cruising right
8 along.
9 MS. SCHUEREN: Right.
10 The last two products are the enhanced
11 index funds. There is within each of the
12 U.S. large stock active funds an enhanced index
13 component. And -- and it is that component of
14 each fund that is -- that was addressed in this
15 particular search.
16 The role of the enhanced index is to
17 provide capacity and risk control, along with a
18 strong -- a small contribution to excess return
19 over benchmark.
20 The five firms interviewed were Barclays
21 Global Investors, Intech, Franklin Portfolio
22 Associates, Goldman Sachs, and Jacobs Levy
23 Equity Management.
24 There are few currently available enhanced
25 index products targeted to the Russell style
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1 indices. The Russell 1000 and Russell 1000
2 value and growth are the targets for these two
3 funds.
4 Callan, therefore, used data on the S&P 500
5 enhanced index funds to screen candidates for
6 our consideration. And each of the managers
7 selected for interview has a good record of
8 providing a disciplined enhanced index product
9 targeted to the S&P 500.
10 However, few products are directly
11 comparable to the product being sought because
12 of high levels of relative risk; the targeting
13 of a benchmark other than the Russell style
14 benchmark; an extremely short product history
15 live; or the fact that the performance was
16 based on simulated, rather than -- than real
17 live performance record.
18 It became apparent to the evaluation team
19 that the enhanced index products under
20 consideration were much less impressive as a
21 group than some of the other candidate
22 products.
23 Callan noted that the marketplace had not
24 created demand for these relatively risk
25 controlled products during the recent
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1 bull market when riskier strategies were more
2 popular.
3 Goldman Sachs was eliminated from
4 consideration because of disappointing risk
5 adjusted returns.
6 Intech had a strong S&P 500 product, but no
7 live enhanced product targeted to the
8 Russell indices.
9 And because of a policy decision to
10 eliminate simulated products, Intech was
11 removed from further consideration.
12 Franklin had recently experienced some
13 staff turnover, and has only one year of live
14 performance for the products.
15 The evaluation team thought it prudent to
16 consider -- reconsider the relatively
17 significant 485 percent weight of these
18 enhanced index products within the fund given
19 our lack of conviction and -- and comfort level
20 with the -- with the products compared to some
21 of the active products we'd evaluated.
22 The work is currently in progress, and we
23 hope to bring you back product design
24 recommendations on September 11th, along with
25 the last four unbundled product
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1 recommendations.
2 However, based on product scores and
3 currently available information, the ISIG team
4 recommends the further consideration of
5 Jacobs Levy as enhanced index product for the
6 growth stock fund, and BGI for the U.S. large
7 value stock fund.
8 MR. HERNDON: Here, too, there was some
9 controversy at the Investment Advisory Council
10 meeting.
11 The representative from Intech came to the
12 meeting and made a presentation regarding the
13 performance of their particular product.
14 We have an existing relationship with
15 Intech on the DB side of the FRS. They're a
16 very fine firm, and they do a good job for us,
17 and we're very pleased with them.
18 But there was some confusion about the
19 information that they handed out that
20 particular afternoon.
21 No one had -- had an opportunity to review
22 it up to that point, and as a consequence, the
23 Advisory Council members, looking at this
24 information, took it to mean, I think,
25 something that it didn't really portray. It
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1 was a different product than what was being
2 sought in these searches.
3 As a consequence, they made a
4 recommendation that we include Intech into the
5 selection of the two other firms that we just
6 provided and articulated.
7 On Monday and following after we had a
8 chance to talk with the Intech representatives,
9 and we learned that it was a different product
10 than what we had been searching for, and we
11 went through that analysis with Intech, they
12 decided to withdraw the product, and we
13 certainly think that was probably the
14 appropriate thing to do.
15 And, again, we don't have any ill will
16 toward Intech. As I said before, they're a
17 fine firm and -- and do a good job for us.
18 But I wanted to make that clear, because
19 the Advisory Council did make a suggestion to
20 include them, and the product that they were
21 looking at was not what we were looking for in
22 the search process.
23 So that I think brings us to the completion
24 of the investment products that we're proposing
25 for your preliminary approval this morning.
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1 Bear in mind, I think, as both
2 Commissioner Gallagher, and -- and the General
3 have -- have commented, it's -- it -- this
4 would mark the end of the search process for
5 these particular products pending your
6 decisions later on in September.
7 And so these particular ones would be -- we
8 would work with between now and then, as we
9 head into that decision making process.
10 So --
11 GOVERNOR BUSH: Any -- any questions,
12 comments?
13 COMPTROLLER MILLIGAN: I don't think so.
14 I -- I'll talk to you about something else
15 later on.
16 TREASURER GALLAGHER: I'll move approval,
17 Item 3.
18 COMPTROLLER MILLIGAN: Second.
19 GOVERNOR BUSH: There's a second.
20 I -- Tom, what will the person that's going
21 to be making these decisions about
22 investment -- I'm talking about the pensioners
23 now, the -- the people in our -- the pension
24 system that opt into the defined contribution
25 plan, what are they going to see?
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1 Are they going to see the -- you know,
2 generic -- what's it going to look like?
3 MR. HERNDON: A private label.
4 GOVERNOR BUSH: A private label. That's a
5 better way of describing it.
6 MR. HERNDON: A private label, U.S. large
7 stock --
8 GOVERNOR BUSH: It'll be a generic --
9 MR. HERNDON: -- next, for example --
10 GOVERNOR BUSH: -- a generic name --
11 MR. HERNDON: -- there -- there would be a
12 set of generic names; or, alternatively, some
13 lifestyle -- generic lifestyle products, which
14 are part of that mix.
15 Or alternatively, and again, this is a
16 function of your decisions later on in
17 September, they may see a set of Vanguard funds
18 or a set of funds that VALIC has proposed, or a
19 set of funds --
20 GOVERNOR BUSH: Right.
21 MR. HERNDON: -- that Fidelity has
22 proposed. But that's where that crafting of
23 the line-up comes into play.
24 GOVERNOR BUSH: Put aside the bundled
25 provider side --
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1 MR. HERNDON: Right.
2 GOVERNOR BUSH: -- which I -- I assume that
3 they would see nine investment options that
4 would mirror the nine investment options
5 that -- that the private label will have.
6 MR. HERNDON: Yes, sir.
7 GOVERNOR BUSH: The private label though
8 will be in these -- in these categories, which
9 we've now gone through --
10 MR. HERNDON: Yes, sir.
11 GOVERNOR BUSH: -- all of them I guess,
12 haven't we?
13 MR. HERNDON: We've got four more of
14 them --
15 GOVERNOR BUSH: Four more?
16 MR. HERNDON: -- that we will bring to you
17 in September. And some of them are divided
18 into subcategories. But when we put them
19 together, they'll be standing there as one --
20 one style product.
21 GOVERNOR BUSH: Will they -- will they know
22 who the invest-- if they -- if they want to --
23 MR. HERNDON: No. They can if they want
24 to. But it would not be --
25 GOVERNOR BUSH: How will they know -- if --
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1 if they want to know that it's Ark -- I mean,
2 I'm not sure that would matter to me too much,
3 but --
4 MR. HERNDON: It -- it would be --
5 GOVERNOR BUSH: -- would they have the
6 right to know that?
7 MR. HERNDON: Absolutely. They'll have --
8 GOVERNOR BUSH: In their --
9 MR. HERNDON: -- they'll have that right,
10 and they'll have information on the firm
11 available to them. But the product itself is
12 not labeled Ark, blank, blank, blank --
13 GOVERNOR BUSH: If they wanted to know what
14 Ark was investing in, would they get to know
15 that.
16 MR. HERNDON: Absolutely.
17 GOVERNOR BUSH: That would be in a
18 prospective or --
19 MR. HERNDON: As part of --
20 GOVERNOR BUSH: -- just on-line, or
21 something?
22 MR. HERNDON: That's exactly right. It's
23 on-line, all --
24 GOVERNOR BUSH: Okay.
25 MR. HERNDON: -- all of that information is
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1 available.
2 TREASURER GALLAGHER: Not -- not
3 specific -- not specific purchases, but the --
4 the global area of small cap --
5 MR. HERNDON: Well --
6 TREASURER GALLAGHER: -- growth, et cetera.
7 MR. HERNDON: -- they'll be able to
8 determine their style, role --
9 TREASURER GALLAGHER: Their holdings aren't
10 going --
11 MR. HERNDON: -- their --
12 TREASURER GALLAGHER: -- to be --
13 MR. HERNDON: -- and their holdings will be
14 available as well.
15 TREASURER GALLAGHER: On the Internet?
16 MR. HERNDON: Sure.
17 TREASURER GALLAGHER: But as what -- if
18 they make a buy and a sell, they've got to put
19 it on there, and everybody knows what they own
20 at any given time?
21 MR. HERNDON: At some point, the
22 holdings --
23 GOVERNOR BUSH: My --
24 MR. HERNDON: -- will come up as part of
25 that information that's available when you make
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1 the purchase and as part of the prospectus.
2 TREASURER GALLAGHER: As of certain periods
3 of time, or -- or as they make the --
4 MR. HERNDON: We're -- we're going to have
5 to go through and figure out how frequently
6 those are updated and so forth, and that's
7 something that we're still in the process of
8 doing. So --
9 TREASURER GALLAGHER: But you --
10 MR. HERNDON: -- I don't know. But --
11 TREASURER GALLAGHER: Within the SBA, you
12 will be monitoring every single --
13 MR. HERNDON: Absolutely.
14 TREASURER GALLAGHER: -- holding that they
15 have at any given time.
16 MR. HERNDON: Absolutely.
17 TREASURER GALLAGHER: So the -- the -- your
18 third party administrator is going to be
19 watching that also, is that part of their
20 responsibility?
21 MR. HERNDON: It's part of their
22 responsibility --
23 TREASURER GALLAGHER: -- to see to it that
24 it's in the right --
25 MR. HERNDON: -- it's part of ours to make
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1 sure that, in fact, what we hired them to do
2 is --
3 TREASURER GALLAGHER: They're doing.
4 MR. HERNDON: -- what they're doing, that
5 they're a small cap value, and that's what
6 they're doing.
7 TREASURER GALLAGHER: So technically, the
8 TPA on an Internet style when one could go in
9 and check their accounts, could go pick the
10 manager, and say, what are they holding right
11 now.
12 MR. HERNDON: Yes.
13 TREASURER GALLAGHER: Interesting.
14 GOVERNOR BUSH: Do you need approval from
15 us, what do you need?
16 MR. HERNDON: Yes, sir.
17 COMPTROLLER MILLIGAN: Yeah.
18 TREASURER GALLAGHER: We just --
19 MR. HERNDON: Preliminary.
20 TREASURER GALLAGHER: -- moved and
21 seconded. We need to --
22 GOVERNOR BUSH: Without objection, it's
23 approved.
24 TREASURER GALLAGHER: There you go.
25 MR. HERNDON: The last item on the agenda
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1 is our annual budget for FY 01-02.
2 And it is presented to you in two parts per
3 the statute that requires that we separate out
4 the defined contribution budget.
5 Basically what you have in front of you is
6 a general budget for the defined benefit plan
7 that contemplates approximately 3 percent
8 increase over the prior year. There are no new
9 positions requested.
10 The bulk of the 3 percent is the
11 two-and-a-half percent COLA adjustment, and
12 some additional dollars that we're proposing to
13 adjust some pay grades that are misaligned
14 within the Board staff.
15 We're also bringing to you, as part of the
16 more traditional budget of the Board, the
17 budget of the Division of Bond Finance, which
18 we bring to you as a matter of routine for --
19 on their behalf.
20 And here again, their budget is a very
21 modest -- in fact, in this case, it's a
22 decrease of a 1.3 percent.
23 And the college savings program component
24 budget for the Florida Prepaid College Savings
25 Program is also presented to you. And in their
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1 case, the budget is also a 1.9 percent
2 increase.
3 I should also add that we are bringing the
4 Hurricane Catastrophe Fund budget to you. And,
5 again, kind of in the same vein as being the
6 more traditional budgets, it's a 2.3 percent.
7 Again, the vast bulk of the budget is the COLA.
8 None of the Board entities are asking for
9 any new positions. The expenses and so forth
10 are fairly straightforward in all -- in all of
11 those budget areas.
12 The other budget that is before you, and as
13 someone said earlier, it's a work in progress,
14 is the defined contribution budget.
15 We've tried, as best we could, in both the
16 detail here, and in some supplemental
17 memorandum that we provided to your offices, to
18 give you some insight into how these monies are
19 going to be spent, and what specific products
20 and so forth you're buying for each one of
21 these. It is a significant increase.
22 Your current budget for the
23 defined contribution program, for example, is
24 about 4 million dollars. It's going to jump to
25 29 million dollars next year, and maintain
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1 something in that neighborhood for -- for the
2 near term.
3 It will be in the twenty million dollar or
4 so range for -- for a few years.
5 The vast bulk of that is education and
6 information, as I -- we indicated earlier. As
7 you look at the various organizations that we
8 have under contract and -- in the case of
9 Financial Engines, for example, they're
10 receiving an estimated 3 million dollars; a
11 little bit over 9 million to Ernst & Young for
12 all the workshops, the 1-800 line;
13 8 million dollars to Ketchum, who's doing all
14 of the materials.
15 Just the postage alone in this program is
16 not going to be cheap when we start doing
17 mailouts of brochures and everything else.
18 So that's -- that is the budget. We've
19 also tried to give you our best sense of some
20 of these estimates on a per person basis. We
21 know that some of these figures are a little
22 high. And we expect them to come down as we
23 finalize some of these contract negotiations.
24 But we are, as we see it at the moment at
25 least, on time and under budget when you look
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1 at the revenues that were projected by the
2 Legislature as being sufficient to fund this
3 program.
4 So --
5 GOVERNOR BUSH: Very good.
6 Is there a motion?
7 You just -- yeah, it's for approval.
8 TREASURER GALLAGHER: I'll move it.
9 COMPTROLLER MILLIGAN: Moved.
10 TREASURER GALLAGHER: Second.
11 GOVERNOR BUSH: Moved and seconded.
12 Any other discussion?
13 MR. HERNDON: I do need to make one
14 clarification.
15 Commissioner Gallagher, I am mistaken when
16 I said that the health insurance subsidy is not
17 part of the DC program. It is. When a person
18 retires from the DC program, they are eligible
19 for the $5 a year for every year of service
20 health insurance subsidy.
21 So that does tend to balance out the
22 concerns that you were expressing about being a
23 disproportionate benefit on the one side. And
24 they are --
25 TREASURER GALLAGHER: That itself could
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June 12, 2001
1 keep a lot of people from making a decision to
2 move if it wasn't going to be there.
3 MR. HERNDON: That's correct.
4 GOVERNOR BUSH: Now it sounds like it's a
5 better benefit for the other way, since the
6 vesting is --
7 TREASURER GALLAGHER: It's -- it's locked.
8 GOVERNOR BUSH: Well, and the vesting's a
9 lot earlier, too. I mean, the benefit comes
10 quicker.
11 MR. HERNDON: That's correct.
12 TREASURER GALLAGHER: Day one.
13 GOVERNOR BUSH: There's a motion and a
14 second.
15 Without objection, it's approved.
16 MR. HERNDON: Thank you.
17 GOVERNOR BUSH: Thank you all very much.
18 TREASURER GALLAGHER: Thank you.
19 (The State Board of Administration Agenda
20 was concluded.)
21 * * *
22 (The Cabinet meeting was concluded at
23 12:39 p.m.)
24
25
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190
June 12, 2001
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 189 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 25TH day of JUNE, 2001.
18
19
20
21
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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