Click here to MyFlorida Home Page  
Clear Dot Image Cabinet Affairs






                                T H E   C A B I N E T

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



                              DIVISION OF BOND FINANCE
                                DEPARTMENT OF REVENUE
                            DEPARTMENT OF LAW ENFORCEMENT
                                  BOARD OF TRUSTEES
                            STATE BOARD OF ADMINISTRATION

                         The above agencies came to be heard before
               THE FLORIDA CABINET, Honorable Governor Bush presiding,
               in the Cabinet Meeting Room, LL-03, The Capitol,
               Tallahassee, Florida, on Thursday, June 26, 2003
               commencing at approximately 9:40 a.m.

                                    Reported by:

                                  SANDRA L. NARGIZ

                          Registered Professional Reporter
                              Registered Merit Reporter
                             Certified Realtime Reporter

                         ACCURATE STENOTYPE REPORTERS, INC.
                                   100 SALEM COURT
                       TALLAHASSEE, FL  32301   (850)878-2221



                         Representing the Florida Cabinet:

                         JEB BUSH

                         CHARLES H. BRONSON
                         Commissioner of Agriculture

                         CHARLIE CRIST
                         Attorney General

                         TOM GALLAGHER
                         Chief Financial Officer

                                       * * *


                                      I N D E X

               (Presented by J. Ben Watkins, III)
               ITEM                ACTION              PAGE

               1                   Approved            30
               2                   Approved            31
               3                   Approved            31
               4                   Approved            31
               5                   Approved            32
               6                   Approved            34
               7                   Approved            34
               8                   Approved            40
               9                   Approved            41

               (Presented by James A. Zingale)
               ITEM                ACTION              PAGE
               1                   Approved            41
               2                   Approved            42
               3                   Deferred            42

               (Presented by James T. Moore)
               ITEM                ACTION              PAGE
               1                   Approved            43
               2                   Approved            43
               3                   Approved            50


               (Presented by Sherman Wilhelm)
               ITEM                ACTION              PAGE
               1                   Approved            52
               2                   Approved            52
               3                   Approved            52

               BOARD OF TRUSTEES
               (Presented by Eva Armstrong)
               ITEM                ACTION              PAGE
               1                   Approved            75
               2                   Deferred            76
               3                   Deferred            102
               4                   Deferred            103
               5                   Approved            104
               6                   Approved            104
               7                   Approved            144
               8                   Approved            145

               (Presented by Coleman Stipanovich)
               ITEM                ACTION              PAGE
               1                   Approved            146
               2                   Approved            146
               3                   Approved            146
               4                   Approved            147
               5                   Approved            147
               6                   Approved            147
               7                   Approved            148
               8                   Approved            148
               9                   Approved            148
               10                  Approved            149
               11                  Information         149
               12                  Approved            150
               13                  Approved            150

               CERTIFICATE OF REPORTER                 151


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

           2             (The agenda items commenced at 9:40 a.m.)

           3             GOVERNOR BUSH:  Division of Bond Finance.

           4        The next meeting is August 12, 2003.  I am sorry,

           5        not only that; where is Kevin, Kevin McCarty,

           6        before we start the agenda.  I am sorry, Kevin, I

           7        was going back to my childhood.

           8             MR. McCARTY:  It made me reach for the agenda

           9        because I didn't know where I was on the agenda at

          10        that point.

          11             GOVERNOR BUSH:  I thought it would be

          12        appropriate for you to give us an update on the

          13        insurance legislative activities, particularly

          14        medical malpractice since --

          15             MR. McCARTY:  Certainly, Governor.  Thank for

          16        the opportunity to provide an update regarding the

          17        activities of the legislature concerning insurance

          18        and insurance-related activities.

          19             Despite a very challenging agenda before

          20        the legislature this year, with very vexing and

          21        complex problems from class size to budget

          22        woes, we had a number of very important

          23        legislative initiatives dealing with insurance

          24        and that affected the consumers of Florida.

          25             Despite a very busy agenda, the

           1        legislature enacted 12-plus bills affecting

           2        insurance, four of which were very significant

           3        in terms of affecting the lives of Floridians,

           4        but also enhancing competition; one of which we

           5        mentioned at a former Cabinet meeting,

           6        Governor, is the out-of-state group regulation

           7        which did provide -- protect 59,000 Floridians

           8        from predatory rating practices.  But they also

           9        dealt with a very complex and challenging quest

          10        to solve the workers' comp dilemma in Florida,

          11        Florida having one of the -- among the highest

          12        rates in the nation and among the lowest

          13        statutory benefits, the legislature did enact a

          14        very comprehensive reform promising rate relief

          15        for the employers of the State of Florida.

          16             They continue their struggle with PIP

          17        reform to provide the tools for the Attorney

          18        General's Office and the fraud offices to

          19        continue to combat fraud in Florida which

          20        affects the rates of all Floridians.

          21             And furthermore, the legislature really

          22        wrestled with a very difficult and

          23        controversial issue of credit scoring, which

          24        has really risen as a merging issue.  So the

          25        legislature recognized the importance of credit

           1        scoring as an underwriting tool, at the same

           2        time provide consumer protection from potential

           3        abuse.

           4             I think there are a number of other

           5        issues, unfortunately, that the legislature did

           6        not get to address this session, one of which

           7        was one very important to the Office of

           8        Insurance Regulation, which is our Solvency

           9        Enhancement Bill which provided the Office of

          10        Insurance Regulation with greater tools to

          11        protect consumers against future insolvencies.

          12             I know Governor Bush has been very

          13        supportive of our efforts with that, and we

          14        appreciate that; and hopefully as part of our

          15        package next year we'll be able to continue to

          16        address that issue.

          17             Certainly the bill that -- I sent a letter

          18        to the legislature as well as to you, Governor

          19        Bush, hoping that we would be able to enact

          20        legislation to expand the capacity of the CAT

          21        Fund which would bring greater stability and

          22        certainty in the marketplace, particularly in

          23        south Florida which is an area of greater

          24        concern in terms of risk of hurricane loss.

          25             And, of course, as we now we are currently

           1        in a special session with probably the most

           2        vexing problem to date, and the legislature is

           3        dealing with both in the House and Senate.  The

           4        Office of Insurance Regulation has worked with

           5        the Governor's Commission and Task Force with

           6        regard to recommending changes to the system

           7        for medical malpractice and will hopefully be

           8        able to come up with some solutions to address

           9        that problem, because not only does it affect

          10        the cost of insurance, but it will affect the

          11        availability of health care for all Floridians.

          12             We have provided testimony most recently.

          13        Mr. Roddenberry testified before the Senate on

          14        the 16th addressing some of the issues of

          15        concern of our office that have to do with --

          16        actually a lot of it has to do with education

          17        and debunking some of the myths that are out

          18        there.

          19             And I was fortunate to be on National

          20        Public Radio a few weeks ago, and one the

          21        callers called in and says:  Well, you know, we

          22        are just tired of insurance companies recouping

          23        their losses from Wall Street, giving an

          24        opportunity for me to say that there are very

          25        important provisions in the Florida Insurance

           1        Code that protect against just those kinds of

           2        recoupments from consumers.

           3             First of all, insurance companies are very

           4        limited in what they can invest in in the

           5        securities market.  And it's to protect against

           6        the vagaries of the stock market.  Furthermore,

           7        there is specific language within --

           8             GOVERNOR BUSH:  What percentage, what's the

           9        limit?

          10             MR. McCARTY:  No more than 15 percent of

          11        admitted assets can be invested in stocks; no more

          12        than 10 percent of the admitted assets can be

          13        invested in a common stock, and no more than

          14        3 percent of any admitted asset can be invested in

          15        any one stock.

          16             Florida, along with the rest of the

          17        nation, has very conservative requirements so

          18        that we can prevent those kinds of fluctuations

          19        in the markets and equities market from

          20        affecting the long-term solvency of insurance

          21        companies.  And these have been on the books

          22        for a number of years.

          23             Not only that, Governor, but you are

          24        prohibited under Florida law, under 627 of the

          25        Insurance Code, you are prohibited from loading

           1        that in your rates.

           2             If I could, if you would just bear with me

           3        for a second, 627 provides in relevant part,

           4        "that rates shall be deemed excessive if the

           5        rate structure provides for replenishment of

           6        surplus from premiums when the replenishment is

           7        attributable to investment losses."

           8             So that's already prohibited in Florida

           9        and we have, I am proud to say, in our office

          10        one of the most vigorous reviews of rates in

          11        the country when it comes to these issues.  And

          12        the issue is not a matter of economic losses

          13        from investments.  What's driving the rising

          14        costs of insurance in Florida is the loss ratio

          15        and the loss ratio is attributable to higher

          16        settlements, which are much higher than the

          17        national average.

          18             GOVERNOR BUSH:  Treasurer.

          19             CFO GALLAGHER:  You might touch base on the

          20        risk base capital that exists also, Kevin, where

          21        the two have to match, and I think that's of

          22        interest because that's more of a modern way of

          23        doing the capitalization of insurance companies

          24        and risk.

          25             MR. McCARTY:  Yes, Treasurer.  In addition to

           1        limitations, specific limitations on investments,

           2        there are various ratios that are put into place

           3        by the National Association of Insurance

           4        Commissioners in order to maintain your

           5        accreditation.

           6             These are monitoring tools to ensure that

           7        whatever investments that companies are

           8        investing in that have a higher risk of loss

           9        will be reflected in that, which would put them

          10        on an action, a company action list, which

          11        would prevent them from writing any new

          12        business.

          13             So there are many tools in place on both

          14        in the solvency analytical basis as well as

          15        statutory provisions which Florida has in

          16        combination with the other states to prevent

          17        that.

          18             In addition, as I already stated, even

          19        without the investment portfolio prohibitions,

          20        rates are made prospectively.  You cannot

          21        recoup or retrospectively build in those

          22        investment losses.

          23             So we feel comfortable that a lot of

          24        attention and a lot of -- has been paid to Prop

          25        103 in California, and they are saying that

           1        Prop 103 may have played a role in reducing the

           2        rates.

           3             Well, Florida law is not that much

           4        different than Prop 103.  The standard for

           5        review of a rate filing in California and the

           6        standards in Florida are the same.  The rates

           7        cannot be excessive, inadequate or unfairly

           8        discriminatory.

           9             As I said to you before, I am very proud

          10        we have a staff that really scrubs these rate

          11        filings before they are approved.  We have

          12        approved fairly significant increases in

          13        Florida, as they have around the nation, but

          14        those rates have been justified, not based on

          15        investment, but based on the losses due to

          16        claims.

          17             GOVERNOR BUSH:  How would you -- give me the

          18        two or three ways, best ways to measure the

          19        strength of an insurance market, whether it's

          20        medical malpractice or any of the other products

          21        that are sold.

          22             MR. McCARTY:  There are a number of ways to

          23        measure the strength in the insurance market, and

          24        many of those are very similar to any economic

          25        model you are to look at.

           1             Certainly can be the number of entrants

           2        into the marketplace; certainly the more

           3        entrants, the more people that are

           4        participating, the more insurance company is an

           5        indicator of a healthy market.

           6             The more products that they are putting

           7        out is an indicator of a healthy market.

           8             GOVERNOR BUSH:  How many in the medical

           9        malpractice insurance arena, how many companies

          10        are writing insurance now, and how many were three

          11        years ago, four years ago?

          12             MR. McCARTY:  Well, there were at least 15

          13        companies in the mid 1990s.  Mr. Roddenberry in my

          14        office recently completed a survey of companies

          15        doing business in Florida, and just to -- of the

          16        remaining 12 companies that have more than

          17        9 million in premium, six have said they are not

          18        writing any new business, four responded they are

          19        writing business but on a limited basis, and only

          20        two are really writing.  There is another two that

          21        are leaving the market.

          22             So there is definitely evidence of

          23        contraction of primary insurance companies

          24        doing business in Florida.  And we also have

          25        noticed a fairly significant increase in the

           1        losses which is indication that the market is

           2        no longer very competitive.

           3             CFO GALLAGHER:  I think it might be worth

           4        noting that the largest writer in the country was

           5        St. Paul, and they have left the market

           6        nationwide.  But their last year they were writing

           7        here, their loss ratio was 2.29 to 1, which means

           8        they lost $2.29 for every dollar of premium they

           9        took in.

          10             That, on top of not -- if they had doubled

          11        their investment money, they might not have

          12        been so bad.  But this is in a down market, was

          13        their last year, and so that's rather

          14        significant, because they were the largest

          15        writer in the country and a huge writer here in

          16        Florida.  And they left a huge void when they

          17        pulled out of the marketplace.  And they left

          18        it because they had tremendous losses, and they

          19        didn't have enough premium to cover it.

          20             That would mean that they would -- if they

          21        stayed, they would have had to double their --

          22        more than doubled their premium to break even.

          23             GOVERNOR BUSH:  That is just breaking even

          24        and they have expenses and other things as well.

          25             CFO GALLAGHER:  Right.  That's just pure

           1        out-of-pocket, pay-out-cash compared to pure

           2        premium come in.

           3             Now there is some investment income that

           4        should be figured in that, but that's obviously

           5        why they are not writing any more business.

           6        And I guess when you look at them today, they

           7        still have losses.  They are still covering the

           8        tail that exists; it's got a long tail in

           9        medical malpractice.

          10             Right now they are not taking any

          11        premiums.  So their losses would be out of --

          12        you can't even figure them because one side is

          13        zero.  But that's why we have a very

          14        unfortunate market for people who have to buy

          15        the product.

          16             GOVERNOR BUSH:  If you assume for a moment,

          17        which I think is a safe assumption, that our

          18        doctors are as good or better than doctors in

          19        others states -- I think that's a fair assumption,

          20        I would say they are better because they are from

          21        Florida, but I have a bias towards my state.  But

          22        we are no worse.

          23             So clearly, if that's the case then, the

          24        claims, the volume of claims and the size of

          25        the claims is disproportionately higher here

           1        than other places.  What would be the factors

           2        that drive that?

           3             CFO GALLAGHER:  I just want to mention one

           4        thing, and I am not going to say it still exists

           5        today, but we did have a little problem when I was

           6        over at the Department of Professional Regulation

           7        with -- we have a tremendous number of doctors

           8        that move to Florida and they don't start here, a

           9        lot of come when they are in the mid of their

          10        practice.

          11             A percentage, I am not going to say it's

          12        huge, but a percentage move here when they are

          13        having a problem back in their home state and

          14        they come in here before they actually get

          15        adjudicated guilty of something.  And the case

          16        already gets dropped where they were because

          17        some states are rather lazy in their pursuit of

          18        those; and when the person leaves, they just

          19        sort of forget it.

          20             And they would slide themselves on in

          21        here, and obviously they are going to be a

          22        problem here, too, and become one.  And then

          23        only in retrospect you -- in retrospect you go

          24        back and realize:  Well, there really wasn't

          25        anything we could have done about it because it

           1        wasn't -- you can only do something if they had

           2        been convicted of something back in the other

           3        jurisdiction or lost their license or something

           4        like that.

           5             So there is a percentage of that that

           6        probably still goes on; and so that may add a

           7        little bit to some of our problem.  I am not

           8        sure I have an answer to fixing it, but I can

           9        tell you it's an anecdote as to what may be

          10        contributing to it.

          11             MR. McCARTY:  The Governor's Commission and

          12        Governor's Task Force came up with 60 plus

          13        recommendations, and I think it would be

          14        irresponsible of us to think that there is just

          15        one silver bullet that fixes this.  It is a

          16        comprehensive fix that looks at the quality of

          17        health care to ensure that there are adequate

          18        safeguards in place to ferret out doctors that are

          19        malpracticing.

          20             Over three-quarters of the doctors have

          21        never had any issue or had a case filed for

          22        malpractice.  There are doctors out there that

          23        are malpracticing, and certainly most everyone

          24        who's testified, it is preferred public policy

          25        that we take whatever disciplinary action is

           1        necessary against malpracticing doctors.

           2             GOVERNOR BUSH:  One of the ways to do that is

           3        that you change the standard for burden of proof

           4        for discipline, which right now is higher than it

           5        is for a lawsuit.  So we have it backwards.

           6             We are not -- you have to have a burden

           7        that is higher for these egregious acts for the

           8        Board of Medicine to act and they are required

           9        by statute to sit on the side lines.  And

          10        meanwhile, victims hire lawyers, and they are

          11        seeking many times -- what they want to do is

          12        make sure that that doctor is punished, not

          13        seeking some kind of economic gain; and we

          14        can't do that.

          15             That, there is no problem at least in the

          16        House and Senate versions and what we propose,

          17        I think everybody is in sync on that.

          18             CFO GALLAGHER:  To me, one of the issues, at

          19        least in the hospital-based problems of

          20        malpractice, is that the peer review process works

          21        backwards.  Most doctors don't want to do a true

          22        peer review on their colleagues because, one, they

          23        get sued by their colleagues when they, in fact,

          24        try to remove them from their practice.

          25             So they don't want to get in the middle of

           1        that.

           2             Two, I think we ought to be working the

           3        other way around and that is every quarter or

           4        every six months you have to be approved to

           5        continue to operate in a hospital in a

           6        proactive way and that you couldn't be -- you

           7        couldn't sue if you weren't given that

           8        permission on an automatic basis; in other

           9        words, it wasn't an automatic right, it was

          10        something, a privilege you would have to get

          11        renewed every six months through a peer review

          12        that way, so it's proactively, you can stay

          13        because you haven't been doing things wrong or

          14        we do like your practice and we do want you

          15        there.

          16             I think that that would make it much

          17        easier for -- if you know doctors that are

          18        there in the hospital and there are people that

          19        are operating in that hospital, that they would

          20        not allow their family to be worked on by that

          21        particular professional, and they tell you

          22        that, and so your question would be:  Why are

          23        they even allowed to operate on anybody?

          24             Well, you know, nobody really wants to say

          25        anything.  To turn that burden around the other

           1        way, I think that would save a lot of

           2        malpractice lawsuits, to eliminate people that

           3        are operating when their colleagues know they

           4        shouldn't be, but yet nobody wants to stand up

           5        to the plate because they get sued.

           6             And so that I think would help at least on

           7        the hospital-based malpractice suits.  But I

           8        think those are probably 50 percent of the

           9        suits now because now we are getting into

          10        diagnostic lawsuits, into, you know, someone

          11        didn't tell me last year when I got a mammogram

          12        that I had a problem; the guy told me this

          13        year, so therefore, I am suing the guy who

          14        didn't tell me last year.  So now doctors don't

          15        want to read mammograms any more.

          16             So we are ending up with insurance

          17        companies don't want to insure people that read

          18        mammograms, so they charge a lot of money for

          19        it.  The thing keeps snowballing.

          20             GOVERNOR BUSH:  Our bill -- I don't know if

          21        the Senate, House bill -- Kevin, you may know --

          22        they may not have taken this up, but we added a

          23        second -- some hospitals do prospective peer

          24        review, they do peer review for prospective

          25        action, which I think your point is a good one.

           1        But the boards of directors or boards of trustees

           2        of hospitals around our state have a

           3        responsibility for this as well, and they are not

           4        empowered to take independent action.  And our

           5        bill proposed that they would have that ability,

           6        because that takes it once removed away from the

           7        medical community and the peer pressure that might

           8        inhibit more self-regulation.

           9             So that's another element of this, but the

          10        problem right now is recruiting doctors to be

          11        on staff.  It's not kicking them off, some

          12        specialties you can't -- in my travels around

          13        the state recently, just story after story

          14        where specialists, particularly, are pulling

          15        back; so you have one pediatric neurosurgeon in

          16        then all of West Palm Beach; for example, with

          17        400, 500,000 people, we have one person, 24/7

          18        that's available within a 10-mile radius.

          19             That's not -- that's very dangerous and it

          20        creates worse outcomes than the combined effect

          21        of medical malpractice.  So access to care now

          22        is being imperiled, and we've got to get this

          23        done.

          24             One of the frustrating things, Kevin, is

          25        your world, and Tom's, this insurance world is

           1        foreign, its language is different.  The data

           2        on the medical malpractice side is different

           3        than say workers' comp where you can call up

           4        NCCI or whatever and say, Here's the

           5        circumstance, what do you think this will do?

           6        We don't have an independent place to go to get

           7        data that everybody can say, Here's the

           8        information that everybody can agree on and we

           9        don't have a place to say if you do this --

          10             CFO GALLAGHER:  Right.  That's because the

          11        rates are based on the individual company's

          12        experience.  So a company that wouldn't write high

          13        risks, there are some companies that say, Look, we

          14        only write general practitioners; we aren't going

          15        to write anything else, and that's their choice.

          16        They would have a rate that would be driven by

          17        that particular book of business.  Other ones

          18        might say, We write the high risk guys and, of

          19        course, their rate is going to be driven on that,

          20        and that makes it very hard to say an individual

          21        thing; whereas workers' comp, everybody is writing

          22        the exact same risk because the law says what the

          23        risk is and says what the benefits are, and there

          24        is a -- the thing about insurance is

          25        predictability.  And that's what we are missing in

           1        markets that have trouble.

           2             And we have a troubled market in medical

           3        malpractice, we had trouble markets in

           4        homeowners and it's not exactly the most level.

           5        We have a PIP automobile insurance problem.

           6        And the planets have lined up, for every

           7        problem that could happen in insurance happened

           8        in Florida this year.  And most of those

           9        problems are driven by the lack of

          10        predictability, which is what actuaries work on

          11        to make rates stable.  And that's been a

          12        problem.

          13             MR. McCARTY:  I would agree.  Clearly there

          14        has been a number of markets in Florida in

          15        distress as they have been in the nation, and a

          16        number of things have to be done to return

          17        stability and predictability to the marketplace;

          18        because until you have some kind of a certainty in

          19        the marketplace, you are not going to attract the

          20        capital.  If you don't attract the capital, you

          21        won't have the competition.  If you don't have the

          22        competition, you won't have availability and

          23        affordability of products.  It's pretty axiomatic

          24        to the doctrines of a free market system.

          25             GOVERNOR BUSH:  Any other thoughts?

           1             MR. McCARTY:  No.  We continue to remain

           2        available to the Financial Services Commission and

           3        House and Senate to provide education and data and

           4        input as appropriate.  And we certainly look

           5        forward to a positive resolution of this issue for

           6        the long-term benefit of Floridians.

           7             GOVERNOR BUSH:  One last concern I have had.

           8        I basically laid -- created some parameters for a

           9        final deal without giving enough room for

          10        everybody to negotiate to get to the place where

          11        we need to get.  But one of the things that I am

          12        completely opposed to is a government capitalized

          13        solution to this, kind of the easy way out for us

          14        since we have got the taxpayers' monies in all

          15        these nooks and crannies around here, is to say,

          16        Since there is no private market, we'll just

          17        create our own mutual fund, capitalized by us and

          18        the losses will be paid for by some appropriation

          19        or we'll take the surplus from -- what's the name

          20        of that baby --

          21             CFO GALLAGHER:  NICA.  I saw that floating

          22        through --

          23             GOVERNOR BUSH:  It's a cash surplus, but not

          24        actuarial surplus to the same amount, and we'll

          25        just take it from there, we'll capitalize it, we

           1        won't reform, and then we'll have the huge losses

           2        shifted over to the Governor once the doctors

           3        rebel, I guess; I don't know what they would do.

           4             So I just want to be on record again

           5        saying that the best indication to me is -- the

           6        best indication of whether reforms are going to

           7        work is whether private capital moves back into

           8        the state to take the risks in a robust kind of

           9        way so that there is an alternative for

          10        doctors.  Without that --

          11             CFO GALLAGHER:  They will do it when, in

          12        fact, the industry has a predictable loss.

          13             MR. McCARTY:  That may come many years after

          14        the enactment of reform.  We have to be able to

          15        manage our expectations in this because when

          16        California enacted MICRA, its reform package in

          17        1975, the final court litigation really wasn't

          18        completed until about 10 years later.  Hopefully

          19        we won't have to wait 10 years to get rate relief,

          20        and they did not have to wait 10 years to start to

          21        get relief in California.  But you have to

          22        understand there has to be some return of -- that

          23        the law you put in place is, in fact, going to be

          24        in place.

          25             GOVERNOR BUSH:  Sure, but the benefit that we

           1        have, ironically, I guess is that many of the

           2        insurance companies that would come back, may not

           3        have a book of business, may not have a tail, so

           4        they would start fresh, and would have a greater

           5        chance of seeing those reforms work.  If we don't

           6        bring in new insurance companies, then we are in

           7        for a long, long haul.

           8             MR. McCARTY:  You are right.

           9             CFO GALLAGHER:  There is a battle here and

          10        that is for whatever is passed to be believable

          11        reform.  And that's our job, when it's finished,

          12        is to hopefully have two things.

          13             One, that it is true reform and that it's

          14        perceived to be true reform so that capital

          15        will come back.  And I don't know how we get

          16        over that except we got to work it.  It's not

          17        easy because nobody is going to commit to

          18        something that they think is going to be

          19        predictable, but they don't believe it will.

          20             And we have three entities right now that

          21        are public entities doing malpractice issues.

          22        We have NICA, which handles the neurologically

          23        impaired children which are low-birth babies

          24        which, through no fault of any doctor, these

          25        children have a problem, and they are covered

           1        so that these are things that aren't a

           2        malpractice, they are an outcome.  And doctors

           3        were getting sued and it was a -- huge things

           4        we're doing and what was ended up happening is

           5        you got the finest baby hospital in the world

           6        and each baby that's a problem, they want to

           7        re-invent that for that particular baby as

           8        opposed to getting them to the finest place.

           9             And so NICA has gotten them to the finest

          10        place, making sure every one of these babies

          11        are taken care of without a lawsuit.

          12             So it's been a positive effect for those

          13        fine things that are not by somebody doing

          14        something wrong, but it's because of an outcome

          15        that's nobody fault; it's not the parents',

          16        it's not the doctors', it's not the hospital's,

          17        it's nobody's fault.  So that's what NICA takes

          18        care of.

          19             We have a Patients Compensation Fund,

          20        which is still in run off for the last 10 or 12

          21        years, that was a failed attempt of government

          22        to run an insurance company that didn't work.

          23        And so I would like to point that out and

          24        before they re-invent it, just say, Look, we

          25        have been there.

           1             The third one is the Joint Underwriting

           2        Association, which exists today and has existed

           3        for a long time; it's expensive, but it is a

           4        last resort for doctors that would like to have

           5        the coverage that they can go into the JUA.

           6        And it has obviously picked up quite a bit of

           7        business over the last year or so because of

           8        the market crisis that exists.

           9             So I am not certainly an advocate to set

          10        up another government program.  If we can fix

          11        what is a perceived and a real instability in

          12        the ability to predict losses, then we will

          13        have -- and it doesn't matter what the level

          14        is.  Once it's predictable, high or low, the

          15        companies will come in and participate because

          16        they can get a return on their money.

          17             GOVERNOR BUSH:  The last element of this

          18        that's important, really doesn't relate

          19        necessarily to the medical malpractice insurance

          20        issue, relates to the cost issue though, because

          21        hospitals end up now paying hundreds of millions

          22        of dollars in claims and many of them are

          23        self-insured; and any of the reforms that we are

          24        talking about, structured the right way, would

          25        yield significant benefits for hospitals as well.

           1             At a time when we have these reimbursement

           2        challenges, where reimbursement rates for

           3        Medicare, Medicaid, private insurance are

           4        either flat, in some cases declining -- we went

           5        up a little bit in Medicaid this year for some

           6        procedures -- if they have these uncontrolled

           7        costs, ultimately we are going -- it shifts

           8        back to us, it shifts back to us and so there

           9        is another element of this that doesn't get the

          10        attention, but actually probably is a higher --

          11        I am speculating here, but I think it's

          12        probably a higher outflow in terms of payments

          13        of these lawsuits related to hospitals and

          14        doctors perhaps.

          15             CFO GALLAGHER:  It's interesting because

          16        workers' comp was one of the receivers of the cost

          17        shifting, workers comp, hospital --

          18             GOVERNOR BUSH:  Yes, it was higher --

          19             CFO GALLAGHER:  -- reimbursement than most

          20        any other reimbursement that had gone on and

          21        that's one of the things that --

          22             MR. McCARTY:  I think both Treasurer

          23        Gallagher and the Governor have alluded to, the

          24        issue it's not really who is paying it.  It's the

          25        amount of the lost cost.  And until you are able

           1        to get a check on the ultimate settlement on the

           2        payouts, it doesn't really matter whether you

           3        shift it to the taxpayers or you shift it to the

           4        private sector or to some facility or joint

           5        underwriting association.  There is no free lunch.

           6        It has to be paid.  You either rein in the costs

           7        or you are going to continue to have a crisis of

           8        availability of health insurance.

           9             GOVERNOR BUSH:  Thank you, Kevin.  Any other

          10        comments or questions?

          11             The next Cabinet meeting, if I didn't say

          12        this, is Tuesday, August 12.  We have a month

          13        of no Cabinet meetings.

          14             Division of Bond Finance.

          15             CFO GALLAGHER:  Motion on the minutes of

          16        May 28.

          17             GENERAL CRIST:  Second.

          18             GOVERNOR BUSH:  There is a motion on item 1

          19        and a second.  Without objection, the item passes.

          20             MR. WATKINS:  Item number 2 is a resolution

          21        authorizing the competitive sale of up to

          22        $363,400,000 in PECO bonds, which is the remainder

          23        of the current fiscal year's appropriation of

          24        613 million.

          25             CFO GALLAGHER:  Motion on 2.

           1             COMMISSIONER BRONSON:  Second.

           2             GOVERNOR BUSH:  Moved and seconded.  Without

           3        objection the item passes.

           4             MR. WATKINS:  Item number 3, a resolution

           5        authorizing the issuance and the competitive sale

           6        of up to $210 million in PECO refunding bonds.

           7             CFO GALLAGHER:  Motion.

           8             GENERAL CRIST:  Second.

           9             GOVERNOR BUSH:  Moved and seconded.  Without

          10        objection, the item passes.

          11             MR. WATKINS:  Item number 4 is a multiple

          12        part resolution authorizing the competitive sale

          13        of up to $24,045,000 in Housing Facility Revenue

          14        Bonds for Florida Atlantic University as well as

          15        the issuance and competitive sale of $14,850,000

          16        of refunding bonds.

          17             COMMISSIONER BRONSON:  Motion on 4.

          18             GENERAL CRIST:  Second.

          19             GOVERNOR BUSH:  Moved and seconded.  Without

          20        objection, the item passes.

          21             MR. WATKINS:  Item number 5 is a resolution

          22        authorizing the competitive sale of up to

          23        $350 million in Turnpike Refunding Bonds.

          24             COMMISSIONER BRONSON:  Motion.

          25             GENERAL CRIST:  Second.

           1             GOVERNOR BUSH:  Moved and seconded.  Without

           2        objection, the item passes.

           3             MR. WATKINS:  Item number 6 is a resolution

           4        authorizing the issuance of up to a billion

           5        dollars in right-of-way acquisition and bridge

           6        construction bonds.

           7             The purpose for this is the authorization

           8        initiates the validation which gives us

           9        authorization for -- this is anticipated to

          10        fund DOT's Work Program over the next five

          11        years or so.

          12             We will bring back to you sale resolutions

          13        in pieces as these bonds are sold, driven by

          14        the need to fund DOT's work program.  So you

          15        will see this again when we get ready to sell

          16        the bonds.  This is just to get authorization

          17        to get the validation out of the way.

          18             GENERAL CRIST:  Maybe it's happened, I just

          19        don't recall it, where we have done a billion

          20        before.  Is that customary?

          21             MR. WATKINS:  It is only unusual in the sense

          22        that it doesn't occur very often.

          23             GENERAL CRIST:  That's another way of saying

          24        it.

          25             GOVERNOR BUSH:  That's a clear definition.

           1             GENERAL CRIST:  That's what I am talking

           2        about.

           3             MR. WATKINS:  But we are going to bring it

           4        back in pieces.  We have done it before.  We have

           5        done it this way before.  And the real reason for

           6        doing it is just to get the legal proceedings out

           7        of the way so that we don't get held up when we

           8        need to sell the bonds, having to go through a

           9        legal proceeding to get the authorization.

          10             We just get the broad authorization today

          11        for a large amount so we don't have to

          12        duplicate the same effort every time we want to

          13        sell a small piece of bonds.  So it's one step

          14        of the two-step process.

          15             GOVERNOR BUSH:  You are not seeking authority

          16        for something that the legislature hasn't

          17        authorized?

          18             MR. WATKINS:  That's correct.  This hasn't

          19        even been built into the budget yet.  So we'll get

          20        it approved ahead of time.  As they authorize it

          21        included in the budget, then I bring the pieces to

          22        you to sell the bonds to fund the appropriation.

          23        So it's a long way to go before actual bonds get

          24        issued from an authorization standpoint.

          25             GOVERNOR BUSH:  Okay.  Is there a motion?

           1             CFO GALLAGHER:  Motion.

           2             GENERAL CRIST:  Second.

           3             GOVERNOR BUSH:  Moved and seconded.  Without

           4        objection, the item passes.

           5             MR. WATKINS:  Item number 7 is a resolution

           6        authorizing the redemption prior to maturity of

           7        bonds issued on behalf of the Jacksonville

           8        Transportation Authority.

           9             CFO GALLAGHER:  Motion on 2.

          10             GENERAL CRIST:  Second.

          11             GOVERNOR BUSH:  Moved and seconded.  Without

          12        objection, the item passes.

          13             MR. WATKINS:  Item number 8 is a report of

          14        award on the competitive sale of $157,140,000 of

          15        Florida Forever Refunding Bonds.

          16             The bonds were awarded to the low bidder

          17        at a true interest cost of approximately

          18        2.53 percent, generating gross debt service

          19        savings of 18.2 million, or on a present value

          20        basis, 15.9 million, assuming that the

          21        refunding bond proceeds are invested at the

          22        bonds yield.

          23             CFO GALLAGHER:  You want to talk a bit about

          24        how we are doing that now?

          25             MR. WATKINS:  We have encountered -- because

           1        of unusual market conditions and extraordinarily

           2        low short-term interest rates, these bonds won't

           3        be called for one year.  Our normal methodology on

           4        the refunding is to lock down both the borrowing

           5        costs as well as the reinvestment rate at the time

           6        we execute the transaction.

           7             So the economics of the transaction are

           8        locked down at a single point in time.  Because

           9        we are borrowing at 2.53 percent, and our

          10        reinvestment rate on those monies over the next

          11        year would be about 1 percent, there is

          12        economic, negative economic consequences; it

          13        reduces the amount of savings that we would

          14        otherwise realize on this transaction.

          15             So in order to address that particular

          16        dynamic in the market, what we have done is

          17        rather than reinvest it at 1 percent, locking

          18        in a loss, which reduces the savings on the

          19        refunding, we are investing the money with the

          20        treasurer, because the treasurer's yields, they

          21        take all monies for the state and invest those

          22        pursuant to investment policies, and the yields

          23        on those monies are significantly higher than

          24        we could get in the open market on treasury

          25        securities on a one-year investment.

           1             So that's the technique that we are using,

           2        which is a bit unorthodox, in implementing

           3        refunding transactions but in my judgment, a

           4        very reasonable risk to take, reinvestment

           5        risk, over a relatively short-term period of

           6        time in order to avoid locking in a loss today

           7        which reduces the savings to us.

           8             GOVERNOR BUSH:  What's the anticipated

           9        investment, the reinvestment return?

          10             MR. WATKINS:  Under federal tax law, we can

          11        only earn the bond yield; so if we can earn 2.53

          12        percent over the next year --

          13             GOVERNOR BUSH:  Is that what you expect?

          14             MR. WATKINS:  Yes, we expect to earn in

          15        excess of that.  The return last month, for

          16        example, Governor, it changes every month but the

          17        blended rate on the entire portfolio of the

          18        treasurer was 4.32 percent.

          19             CFO GALLAGHER:  But if they don't want any

          20        more than the minimum, we'll be glad to give them

          21        the minimum, the two-point, whatever it is.

          22             GOVERNOR BUSH:  What do we do with the rest

          23        of the money?

          24             CFO GALLAGHER:  Actually all of it is

          25        invested and we put this in what we call our

           1        special purpose fund.  This is any government or

           2        quasi-government pot of money, the university

           3        systems can keep their money with us if they

           4        choose to or they can put it somewhere else and

           5        most of them have chosen to put it with us because

           6        they can't even come close to anywhere else to the

           7        yield we have.

           8             GOVERNOR BUSH:  If you have a prohibition for

           9        a positive arbitrage, I guess that would be

          10        arbitraging the money, and the benefits don't go

          11        to the bond transaction, they go to another entity

          12        of government, do the Feds allow you to do that?

          13             CFO GALLAGHER:  It's how much he gets back.

          14             GOVERNOR BUSH:  Say he stays higher than the

          15        2.3 or whatever the bond rate is, he can't go

          16        higher than that; what do you do with the surplus

          17        earnings?

          18             CFO GALLAGHER:  We are just doing this first

          19        one.  I don't know what -- he has the authority to

          20        do what he wants with it.

          21             THE WITNESS:  We will actually under federal

          22        tax law have to pull the money out.  We will

          23        monitor the reinvestment rate on a monthly basis,

          24        and we have to roll it in with the Bureau of

          25        Public Debt with the Federal Reserve and earn

           1        0 percent to blend down the yield.

           2             CFO GALLAGHER:  Take it out of low yield when

           3        he needs to so that it breaks even, that's what he

           4        wants to do.

           5             GOVERNOR BUSH:  What time does all this

           6        refinancing yield a better debt service ratio in

           7        terms of our -- it looks like our general revenues

           8        numbers may be a little bit higher, and it looks

           9        like our debt service numbers are dropping because

          10        of interest rates.  Next time you show us your

          11        data affordability, are we going to see a little

          12        bit better --

          13             MR. WATKINS:  Slightly better, Governor,

          14        because we've refinanced, just in the six-month

          15        period, from January through June 30, we have

          16        executed a billion seven in refinancing.  And

          17        that's against total debt outstanding in the state

          18        of about 20 billion.  And we saved the state on a

          19        gross basis about $210 million in foregone --

          20        avoided interest costs over the duration of the

          21        loan.

          22             So it will be an incremental help when we

          23        look at the numbers at June 30, because we'll

          24        run the numbers off the June 30 numbers; when

          25        we do the data affordability study next fall

           1        the savings resulting from these refundings

           2        will be included in those numbers.  We will

           3        reduce our future anticipated debt service cost

           4        by the amount of the refunding and the reduced

           5        debt service requirements.

           6             CFO GALLAGHER:  By the way, I just take

           7        advantage to mention that last year, last fiscal

           8        year, the treasury returned on the $13 billion

           9        that we had invested 5.33 percent.  That was way

          10        above any other state in the union.

          11             GOVERNOR BUSH:  How did you do it?

          12             CFO GALLAGHER:  Magic.  No.  We have a pretty

          13        good manage process we go through.  And as a

          14        matter of fact, we just lost a fellow that was

          15        with us for 39 years -- we had a resolution at the

          16        last meeting; the fellow started as a clerk typist

          17        and did the first -- other than buy a CD or

          18        treasury into the things that we do, and part of

          19        it is that -- and it will come down, already this

          20        part of the year it's down a little bit, quite a

          21        bit -- because we bought things when they were up

          22        and we are still holding them and we have a large

          23        enough pot of that so that everybody, like these

          24        refundings, that continues to have cash to put in

          25        and it's totally liquid to them, can continue to

           1        work with us on that.  And it's basically a carry

           2        back that we have had.  But that's $400 million

           3        plus, in excess of $4 million that basically is

           4        money available to be spent instead of taxing

           5        people.

           6             GOVERNOR BUSH:  Well done.  Where are we

           7        here?

           8             MR. WATKINS:  Motion on 8.

           9             GOVERNOR BUSH:  That's what I thought.

          10             GENERAL CRIST:  Move 8.

          11             GOVERNOR BUSH:  Is there a second?

          12             GENERAL CRIST:  Second.

          13             GOVERNOR BUSH:  Moved and seconded.  Without

          14        objection, the item passes.

          15             MR. WATKINS:  Item number 9 is a report of

          16        award on the competitive sale of $315,525,000 of

          17        PECO bonds.  The bonds were awarded to the low

          18        bidder at a true interest cost of 4.03 percent.

          19             The transaction had two components, new

          20        money bonds of approximately $112,600,000 and a

          21        refunding piece of approximately $203 million.

          22        The refunding piece generated gross debt

          23        service savings of about $41.2 million, or on a

          24        present value basis 28.3 million.

          25             GENERAL CRIST:  Motion on 9.

           1             CFO GALLAGHER:  Second.

           2             GOVERNOR BUSH:  Moved and seconded.  Without

           3        objection, the item passes.

           4             Thank you, Ben.

           5             GOVERNOR BUSH:  Department of Revenue.

           6             CFO GALLAGHER:  Motion on the minutes of

           7        May 28.

           8             GENERAL CRIST:  Second.

           9             GOVERNOR BUSH:  There is a motion on a second

          10        on item 1.  Motion passes.  Jim, good morning.

          11             MR. ZINGALE:  Good morning.

          12             GOVERNOR BUSH:  How are you doing?

          13             MR. ZINGALE:  Granddad, so it's a great time.

          14             GOVERNOR BUSH:  Oh, don't bring that up

          15        again.

          16             CFO GALLAGHER:  It will be a long time before

          17        I am one, I can tell you that.  I hope I am still

          18        around to see it happen.  You got a lot more

          19        chance than I do.  Mine is four and a half years

          20        old; I got a long way to go.

          21             MR. ZINGALE:  But when that time comes, just

          22        remember:  All needs and wants are met with a

          23        single cry.  It's an amazing experience.  You just

          24        huddle around that little communication.

          25             CFO GALLAGHER:  If the Governor could only do

           1        that.  If he could only do with that with medical

           2        malpractice, one cry.

           3             MR. ZINGALE:  Item number 2 are some rule

           4        changes, primarily dealing with incorporating 2002

           5        law changes, deleting some unnecessary

           6        provisions -- it's part of our normal review --

           7        providing some clarity and guidance to taxpayers.

           8        Uncontroversial rule changes.

           9             CFO GALLAGHER:  Motion on 2.

          10             GENERAL CRIST:  Second.

          11             GOVERNOR BUSH:  There is a motion and a

          12        second.  Without objection, the item passes.

          13             MR. ZINGALE:  Item number 3 requires no

          14        action.  We are delaying it until the August 26

          15        Cabinet meeting.

          16             CFO GALLAGHER:  Motion to delay until the

          17        26th on 3.

          18             GENERAL CRIST:  Second.

          19             GOVERNOR BUSH:  Motion to delay or defer?

          20        There is a motion to defer/delay.

          21             CFO GALLAGHER:  Either way; hold off until

          22        the 22nd.

          23             GOVERNOR BUSH:  The item passes.

          24             MR. ZINGALE:  Thank you.


           1             GOVERNOR BUSH:  Department of Law

           2        Enforcement.

           3             CFO GALLAGHER:  And the final for

           4        Commissioner Moore.

           5             Motion on the minutes.

           6             COMMISSIONER BRONSON:  Second.

           7             GOVERNOR BUSH:  Item 1, there is a motion and

           8        a second.  Without objection, the item passes.

           9        Item 2.

          10             COMMISSIONER MOORE:  Item 2 is a quarterly

          11        report, Governor, for the second quarter of the

          12        fiscal year.  It's in your package with the

          13        details highlighted there.

          14             CFO GALLAGHER:  Motion for approval.

          15             GENERAL CRIST:  Second.

          16             GOVERNOR BUSH:  Moved and seconded.  Without

          17        objection, the item passes.

          18             COMMISSIONER MOORE:  Item 3 is the quarterly

          19        report for the third quarter.

          20             CFO GALLAGHER:  I move that, but we are sort

          21        of in a DNA lab technician crisis, sort of, aren't

          22        we?  They seem to outsource them now because you

          23        can't keep up with --

          24             COMMISSIONER MOORE:  We are beginning to see

          25        another spike in the loss of our DNA scientists.

           1        You recall, Governor -- you had this three years

           2        ago with the pay increase but the army lab right

           3        now among others is offering upwards of 50 percent

           4        pay increases for our expert DNA scientists, and

           5        they are going in a workload where there is no

           6        pressure.  Our scientists are handling huge

           7        workloads, testifying as expert witnesses, are

           8        getting easier work and higher pay.  But the

           9        retention package --

          10             GOVERNOR BUSH:  Kind of like what you are

          11        going to be doing?

          12             COMMISSIONER MOORE:  Hypothetically, in a

          13        green world, yes, I hope so.

          14             CFO GALLAGHER:  Are you an example of the

          15        problem that's happening in the rest of your

          16        organization?

          17             COMMISSIONER MOORE:  It's only unusual in

          18        that we have not done it often in the past, to

          19        quote Ben Watkins.

          20             On the question of outsourcing, Treasurer

          21        Gallagher, we are outsourcing principally and

          22        only at this point in time the nonsuspect rape

          23        cases, which is critically important.  That

          24        constitutes a large percentage of our backlog.

          25        If the local agencies don't have a suspect in a

           1        rape case, often times that gets put on a lower

           2        wrung in some of the police agencies.  We are

           3        seeing that, frankly, in Miami-Dade County

           4        right now.

           5             What we have done in Florida, and unlike a

           6        lot of other states, is we approach nonsuspect

           7        rape cases with the same degree of importance,

           8        with the same sense of urgency.  So we have

           9        outsourced a large percentage of the nonsuspect

          10        rape cases and let our scientists then work on

          11        cases where there are suspects.

          12             CFO GALLAGHER:  I need to get, I guess,

          13        informed here.  Whose DNA do you do in a

          14        nonsuspect rape case?

          15             COMMISSIONER MOORE:  Well, you don't know who

          16        it is, but you know from body fluids left at the

          17        scene of the crime, either blood, semen or saliva,

          18        so you know you have a suspect.  But unless you

          19        know who that is, first thing we do is search it

          20        against the database.

          21             CFO GALLAGHER:  When you say nonsuspect, I

          22        thought you meant there wasn't any.  That's why I

          23        asked the question.

          24             COMMISSIONER MOORE:  You don't know who the

          25        suspect is.  You know there is one, you don't know

           1        whose --

           2             CFO GALLAGHER:  You don't know whose you got,

           3        but you got somebody.

           4             COMMISSIONER MOORE:  Exactly.

           5             COMMISSIONER BRONSON:  Evidence, but no

           6        people.

           7             COMMISSIONER MOORE:  That's exactly right.

           8        And often you have to link what's happening in

           9        Miami, you will link the evidence from several

          10        scenes; you know it's the same person, you just

          11        don't know who that person is.

          12             GOVERNOR BUSH:  What happened down in Miami

          13        with their -- they had some problems internally in

          14        their crime lab?

          15             COMMISSIONER MOORE:  They did.  As you know,

          16        Florida's crime lab system is -- we run seven

          17        regional labs that handles a ton of evidence every

          18        year but there is a system of local labs in Dade,

          19        Broward, and Indian River Counties that operate on

          20        their own.  Good labs, I need to be clear on that;

          21        very good labs.

          22             GOVERNOR BUSH:  Does the city have a separate

          23        one from Miami-Dade?

          24             COMMISSIONER MOORE:  The city of Miami

          25        collects a lot of their samples, DNA and other

           1        evidentiary samples, and the Dade County lab

           2        processes most of them.

           3             What was happening is if the police agency

           4        did not have a suspect in a rape case, that

           5        didn't get sent over immediately to the

           6        laboratory or if it did, as I understand it,

           7        Dade County lab didn't immediately process that

           8        on a par with the other cases where they did

           9        have a named suspect.  That's not unusual.

          10        That happens in every state in this country.

          11             I am proud of the fact, though, because of

          12        the funding you helped us get, we were able to

          13        move out a large portion of those nonsuspect

          14        rape cases to private providers and are getting

          15        a huge turnaround time on them now.

          16             What that means is work has to be done on

          17        that sample to get it loaded into the DNA

          18        database.  So you obviously want to get that

          19        sample in that database as soon as you can and

          20        not have it sitting over there unworked on the

          21        bench.

          22             But the short answer, we are beginning to

          23        have a concern about losing our DNA scientists.

          24        We are working with that on our existing

          25        resources to keep it from happening as best we

           1        can.  And we are continuing to outsource to add

           2        value to what we do.

           3             COMMISSIONER BRONSON:  Governor, the one

           4        thing that probably I would think Tim is running

           5        through right now is the same thing we are running

           6        through in the Department of Ag with some of our

           7        DNA people and all.  And we actually do run DNA on

           8        citrus canker and everything else to find out

           9        where it came from and how it got there.

          10             But some of the schools and universities

          11        and other people, other states that are trying

          12        to get into the DNA programs, are coming to the

          13        states that already have scientists, that have

          14        been working on this for quite sometime and

          15        then they pull them out from under us by

          16        offering them pretty exorbitant increases; and

          17        it's hard for them to turn down and they end up

          18        leaving us.  And I would assume you are running

          19        into the same thing we are running into.

          20             COMMISSIONER MOORE:  We are.  We really try

          21        to be smart about this in a business sense.  If a

          22        scientist is offered a 10 or $15,000 pay raise to

          23        leave and that scientist has been with us for 10

          24        years or so and getting someone to replace them

          25        would cost us $50 or $75,000, the best we can, we

           1        try to meet that because that's a good business

           2        decision.  We can't meet a 50 percent increase

           3        though.

           4             CFO GALLAGHER:  It seems to me that -- I

           5        don't know if you do it with the DNA scientists,

           6        but if you bring in somebody into law enforcement,

           7        you run through certain training that you all have

           8        at FDLE, even though they may have been certified

           9        before.  And you make them sign that if they leave

          10        within a period of time, they've got to pay the

          11        money back it costs to train them.  Do we do the

          12        same thing --

          13             COMMISSIONER MOORE:  We do.  We are doing the

          14        exact same thing with the scientists.  In fact, it

          15        was the scientists that prompted that policy,

          16        where they signed a contract with us saying they

          17        got to stay with us at least two years beyond

          18        their designation as an expert witness or they

          19        have to pay us back.

          20             CFO GALLAGHER:  But my understanding is we

          21        are not doing real good on chasing after them and

          22        collecting on that.

          23             COMMISSIONER MOORE:  Well, we haven't had a

          24        lot of them since we put that in place.  It will

          25        take a year or so for a scientist to get in and

           1        get expert status and be real productive, and they

           2        satisfy the year, and most the people leaving are

           3        more senior people.  They are not the green

           4        scientists.  But we'll get over that.

           5             CFO GALLAGHER:  So we are losing senior

           6        people because other states want senior people to

           7        open their DNA program?

           8             COMMISSIONER MOORE:  Absolutely.  That's a

           9        good problem to have, because they want to mirror

          10        the effort that we put forth over here.  It's

          11        not -- I don't want to overstate it, it has not

          12        got us on our knees, but it's something I think

          13        we'll have to deal with in the future.

          14             CFO GALLAGHER:  Sounds like great opportunity

          15        for promotions for people.

          16             COMMISSIONER MOORE:  Yes, it is that.

          17             CFO GALLAGHER:  Hopefully they have the

          18        experience to take on the job.

          19             GOVERNOR BUSH:  There is a motion.

          20             COMMISSIONER BRONSON:  Second.

          21             GOVERNOR BUSH:  And a second.  Any other

          22        discussion?  Without objection, the item passes.

          23        Thank you, Tim.

          24             COMMISSIONER MOORE:  Thank you, Governor.

          25             GOVERNOR BUSH:  Come on back and visit us

           1        once in a while.

           2             COMMISSIONER MOORE:  I will, sir.
























           1             GOVERNOR BUSH:  Department of Agriculture.

           2             CFO GALLAGHER:  Motion on the minutes.

           3             COMMISSIONER BRONSON:  Second.

           4             GOVERNOR BUSH:  There is a motion and a

           5        second.  Item 1 passes without objection.  Item 2.

           6             CFO GALLAGHER:  Motion on 2.

           7             MR. WILHELM:  Item number 2 is, we are

           8        seeking authority to issue a 10-year, 1-acre lease

           9        to raise limerock in Wakulla County.

          10             CFO GALLAGHER:  Motion on 2.

          11             COMMISSIONER BRONSON:  Second.

          12             GOVERNOR BUSH:  There is a motion and second.

          13        Without the objection, the items passes.

          14             MR. WILHELM:  Item number 3 is we are seeking

          15        approval to renew a 10-year lease for clam in St.

          16        Johns County for 2.31 acres.

          17             CFO GALLAGHER:  Motion on 3.

          18             COMMISSIONER BRONSON:  Second.

          19             GOVERNOR BUSH:  Moved and seconded.  Without

          20        objection, the item passes.

          21             MR. WILHELM:  That is all.  Thank you very

          22        much.




           1             GOVERNOR BUSH:  Board of Trustees.

           2             MS. ARMSTRONG:  Eva Armstrong in for the

           3        Secretary this year.

           4             Item number 1 is an easement for

           5        Georgia-Pacific.  And I have Mario Taylor who

           6        is the new district director for DEP in

           7        Jacksonville with us this morning to walk you

           8        briefly through the item.

           9             Mario comes to us by way of the City of

          10        Jacksonville.  He ran their regulatory program.

          11        So with that, Mario.

          12             MR. TAYLOR:  Good morning, Governor, Members

          13        of the Cabinet.  Eva, thank you for that

          14        introduction.

          15             On behalf of the Secretary I am here to

          16        present the applicant's request for this

          17        easement which is a component of the existing

          18        administrative order.

          19             The vice president, Mr. Ted Kennedy, is

          20        here to make a presentation to you, and I

          21        believe he also has a couple of speakers for

          22        you as well.

          23             He will also address several issues of

          24        concern about the item, including the timing

          25        and the why now and those sorts of things as

           1        well.

           2             If I can present the applicant to give you

           3        specific information.

           4             GOVERNOR BUSH:  Please.  Mr. Kennedy.

           5             MR. TAYLOR:  Excuse me, Governor, I think we

           6        were surprised the agenda moved faster than

           7        anticipated, getting it here.

           8             Ted Kennedy.

           9             MR. KENNEDY:  I apologize for that entrance.

          10        Commissioner Bronson, Treasurer Gallagher,

          11        Attorney General Crist, and Honorable Governor Jeb

          12        Bush, I am Ted Kennedy, vice president of

          13        operations for Georgia-Pacific Palatka Pulp and

          14        Papermill and general manager for our Kraft Paper

          15        Division.

          16             To begin with, I would like to publicly

          17        recognize your staff for the time, energy and

          18        efforts spent to understand this issue.

          19             Their patience and professionalism had

          20        been outstanding and has given us a positive

          21        impression of the Florida government system.

          22             On behalf of the 1200 workers at the

          23        Palatka Pulp and Paper Mill and the executive

          24        leadership of Georgia-Pacific, I would also

          25        like to thank you for your service to the

           1        citizens of Florida in reviewing our urgent

           2        need for a submerged lands easement.

           3             Georgia-Pacific needs a submerged lands

           4        easement to, one, ensure compliance with

           5        Florida water quality standards and the

           6        execution of the administrative order as

           7        outlined in our current NPDS permit; and two,

           8        to provide assurance that the investment of

           9        $74 million into the Palatka facility will meet

          10        Georgia-Pacific shareholders' objectives while

          11        providing secure jobs for generations to come.

          12             The packet before you describes in detail

          13        the history and the plan to solve this issue.

          14        I would refer to the packet from time to time

          15        for better understanding.

          16             Georgia-Pacific is a multinational

          17        consumer products and building products company

          18        with operating facilities worldwide, many of

          19        which manufacture the same products that we do

          20        in Palatka.

          21             Georgia-Pacific's Palatka operations is an

          22        integrated paper and pulp facility located in

          23        the Putnam County, Town of Palatka.  We began

          24        operations in Palatka in 1947 as Hudson Pulp

          25        and Paper, manufacturing pulp and craft paper.

           1             Georgia-Pacific purchased the operation in

           2        1979 and expanded manufacturing of the consumer

           3        towel and tissue products.  Today we

           4        manufacture more than half a million tons of

           5        paper products and 18 million cases of consumer

           6        products a year using local fiber resources and

           7        local talent.

           8             Our products include grocery bags, butcher

           9        paper and multiwall sack craft papers as well

          10        as bathroom tissue and paper towels and

          11        napkins.

          12             GOVERNOR BUSH:  Mr. Kennedy, can I -- we are,

          13        at least I am a huge fan of what you are doing in

          14        Palatka County.  I appreciate the fact that you

          15        make all this stuff.

          16             Maybe we can just get right to the

          17        easement question, why it's important and what

          18        the agreement was between the department and

          19        the company several years ago that initiated

          20        this.

          21             MR. KENNEDY:  Absolutely.  I have a little

          22        history.

          23             GOVERNOR BUSH:  All I need to look at is you

          24        got 1200 employees and the average hourly wage is

          25        $20.12 cents in 2001. Good for the Putnam County.

           1        Case closed.

           2             CFO GALLAGHER:  When the Governor stands up,

           3        that means hurry up.

           4             GOVERNOR BUSH:  Absolutely.  We love

           5        Georgia-Pacific from that perspective and I know

           6        you are great in the community, and you got great

           7        workers; I met quite a few of them.

           8             But the issue is in this complex water

           9        quality -- help us with the importance of this

          10        easement and how it relates to your hundred

          11        million dollar plus investment in improving the

          12        water quality in the tributary which hopefully

          13        will allow -- will make the easement not even

          14        relevant.

          15             MR. KENNEDY:  Absolutely.  It stems from our

          16        interest in renewing our NPDS discharge permit in

          17        1993.

          18             In 1993 an interpretation was made

          19        regarding tidal influence in Rice Creek, which

          20        is where we discharge, a small tributary of the

          21        St. Johns River, that we would not meet water

          22        quality standards at that time.  At that time

          23        both the Department of Environmental Protection

          24        and Georgia-Pacific proposed a relocation of

          25        our discharge to the St. Johns River through a

           1        4-mile pipeline, costing at that time roughly

           2        $15 million.

           3             However, recognizing that there was a

           4        better way to do that, the DEP, EPA and

           5        Georgia-Pacific got together and developed a

           6        plan which included an investment of

           7        $74 million in in-plant technologies which

           8        would, in essence, reduce load, pollutant load

           9        coming from Georgia-Pacific into Rice Creek.

          10        The hope, of course, was that it would meet

          11        water quality standards in Rice Creek and avoid

          12        the need for relocation.

          13             Frankly, Georgia-Pacific has no interest

          14        in relocation, and a new pipeline into the St.

          15        Johns River is at a cost of roughly

          16        $20 million; so that's added to the $74 million

          17        we talked about before.

          18             So in order to meet or comply with our

          19        NPDS permit, we entered into an administrative

          20        order with the Department of Environmental

          21        Protection which called for these new

          22        technologies being implemented over a

          23        seven-year period of time to end in 2008.

          24             And if you would like to refer to your

          25        handout, which I see you are doing, the

           1        spending schedule for that -- and actually, the

           2        history is listed on page 12, and the spending

           3        schedule is listed on page 21.

           4             If you look at page 21, the spending

           5        schedule for the administrative order elements

           6        is listed there.

           7             Being in 2003, as you can see, we have not

           8        reached the significant load of spending that

           9        we expect to do in order to attempt to meet

          10        water quality standards in Rice Creek.

          11        However, as part of the administrative order,

          12        the DEP, EPA and Georgia-Pacific agreed that

          13        post installation of the technologies and

          14        subsequent optimization and testing period of a

          15        year each, we would test as to whether we could

          16        meet water quality standards in Rice Creek.

          17        And if we could not, as a backup plan we would

          18        be allowed to construct a pipeline relocating

          19        our discharge into the St. Johns River.

          20             GOVERNOR BUSH:  As I understand it, there

          21        is -- at least maybe the department can answer

          22        this -- there is 80 percent, you believe, based on

          23        current technology and based on the plans that

          24        Georgia-Pacific has embarked on, that there is a

          25        80 percent chance this will be self--- that water

           1        quality standards will be met at the current

           2        discharge location in Rice Creek?

           3             MR. TAYLOR:  That is correct.

           4             GOVERNOR BUSH:  And in the event that the

           5        20 percent kicks in, then the need for

           6        construction of a pipeline would become necessary.

           7        And in that case, you need the easement now, even

           8        though that's down the road 10 years or whatever

           9        it is so that you can have the certainty for

          10        investment?

          11             MR. KENNEDY:  That's correct.

          12             GOVERNOR BUSH:  Because if you can't invest,

          13        if you don't have that, then you can't make the

          14        necessary investments which will hopefully yield

          15        the 80 percent result which is that we won't need

          16        the pipeline at all?

          17             MR. KENNEDY:  That is correct.

          18             As you see the spending schedule, the

          19        mother load starts in 2004, which the approval

          20        process for that is late this year.

          21             So I will be venturing to our board of

          22        directors in an attempt to get approval, gain

          23        approval for funding for the bulk of the 74

          24        million dollar expenditures which is roughly 66

          25        over the next two years.

           1             GOVERNOR BUSH:  Can you comment on the St.

           2        Johns water quality issues?  Assume for the moment

           3        you make the 75 million-dollar investment or plus,

           4        up to 95 I guess; you still can't get to where the

           5        law requires, where the agreement requires you.

           6        So a pipeline is built.  You are discharging

           7        still, I assume it's less polluted waters than

           8        today whether it's discharged into Rice Creek or

           9        into St. Johns.

          10             MR. KENNEDY:  That's correct.

          11             GOVERNOR BUSH:  What's the environmental

          12        impact of discharging in that larger body of

          13        water?

          14             MR. KENNEDY:  Two things to keep in mind.

          15        One, this whole project results in a reduction of

          16        pollutants to St. Johns River, as what we

          17        discharged to Rice Creek at the moment eventually

          18        goes to the St. Johns River.

          19             Additionally, because of the mixing zone

          20        opportunities that exist in the St. Johns River

          21        that do not exist in Rice Creek there will

          22        actually be a benefit, if we were to get an

          23        environmental benefit, if we were to get to the

          24        pipeline option because of better mixing in the

          25        St. Johns River where the diffuser will be

           1        located.

           2             So if we were to get to the pipeline

           3        option, not only would we have the benefit of

           4        the 74 million-dollar investment improvements;

           5        we would also have the benefit of better mixing

           6        as a result of the relocation.

           7             I don't know if that answered your

           8        question.

           9             GOVERNOR BUSH:  It did.  Mixing, you mean

          10        there is a larger volume in which to mix

          11        because --

          12             MR. KENNEDY:  Higher velocity, where the

          13        discharge would be from the diffuser pipe in the

          14        St. Johns.

          15             GENERAL CRIST:  The Governor hit on my

          16        question.

          17             How do you define a mixing zone?  You said

          18        the St. Johns would be a better mixing zone.

          19        Could you elaborate on that a little bit?

          20             MR. KENNEDY:  If I could ask, actually, one

          21        of my employees, Myra Carpenter, an environmental

          22        manager, to answer that, she would have a better

          23        technical explanation than I would.  Myra.

          24             GOVERNOR BUSH:  Do we have any other speakers

          25        here that are in opposition?  You all are here

           1        for?  How many people are here from Palatka?

           2        Welcome to the Capitol.

           3             CFO GALLAGHER:  How many don't work for

           4        Georgia --

           5             GOVERNOR BUSH:  I see one that doesn't.

           6             MS. CARPENTER:  The St. Johns River flow

           7        patterns are quite different than they are in Rice

           8        Creek.  There is a lot more flow in general in the

           9        river.

          10             The differences between the two discharge

          11        locations is the fact that Rice Creek is a very

          12        small, low-flow stream, so when the water comes

          13        out of the creek, it kind of hugs along the

          14        western shoreline because it just sort of

          15        sloshes back and forth because it, too, is

          16        tidal.

          17             So the opportunity for mixing because of

          18        just the flow in the river and the way -- and

          19        the fact there is a higher base flow in the

          20        system means that there is a better opportunity

          21        for the effluent to mix much quicker than it

          22        does in Rice Creek.

          23             And the fact that Rice Creek is a very

          24        small stream, at times, particularly in the

          25        spring, it's an effluent dominated system, so

           1        it's more effluent than it is natural flow.

           2             COMMISSIONER BRONSON:  Governor, also, I was

           3        going to remind you also that the system that is

           4        being used here is similar to the system that's

           5        being used in the Everglades, and that is

           6        settlement ponds to pull out the heavier

           7        materials; they settle out and they take the

           8        cleaner water that's at the top of these ponds to

           9        be released in the future, not straight out of the

          10        system.

          11             It is going to be a system of settlement

          12        and clarification areas.  And then the water

          13        would be released.  It's not all at one time.

          14             MS. CARPENTER:  That's correct.  There is a

          15        thousand acres of settling ponds and treatment.

          16             GOVERNOR BUSH:  General?

          17             GENERAL CRIST:  So I guess mixing means

          18        greater volume creates a better mix?

          19             MS. CARPENTER:  And flow; it moves quicker,

          20        just the velocity as well as the volume.  It's how

          21        quick the water moves and disburses.

          22             GENERAL CRIST:  Thank you.

          23             CFO GALLAGHER:  Governor, I move this item

          24        with the understanding that the easement will not

          25        take effect unless and until the required process

           1        improvements are completed; and after those

           2        improvements, the effluent still does not meet the

           3        quality standards.

           4             With that understanding, I recognize the

           5        importance of Georgia-Pacific to Palatka and

           6        the surrounding communities, and view the

           7        easement and the pipeline as the last resort to

           8        ensure the continued function of Rice Creek and

           9        the St. Johns River as well as Georgia-Pacific

          10        Palatka.

          11             COMMISSIONER BRONSON:  Question on the

          12        motion?

          13             CFO GALLAGHER:  Yes.

          14             GENERAL CRIST:  Do you have a copy I can look

          15        at it?

          16             COMMISSIONER BRONSON:  I am trying to

          17        remember in my mind everything you just said and

          18        how the progression would go.

          19             Will that motion cover the fact that

          20        Georgia-Pacific is going to have to go to their

          21        leadership with some type of guarantees that if

          22        they spend an extra 74 million for these

          23        improvements, which could be 94 million by the

          24        time they come to -- if they do have to put the

          25        pipeline in, is this -- I need to ask

           1        Georgia-Pacific this.

           2             Is this going to give you time under these

           3        conditions to get all of that done with

           4        potential approvals from your board rather than

           5        closing down your operation here to move it

           6        into Georgia, which is going to be really

           7        costly for Florida?

           8             GOVERNOR BUSH:  That's not going to happen.

           9             COMMISSIONER BRONSON:  So I want to find -- I

          10        want to get the full knowledge of what's going to

          11        happen if this motion takes full effect.

          12             MR. KENNEDY:  Absolutely.  I would actually

          13        appreciate seeing the words in the motion and

          14        reviewing it, if I could, for a second.

          15             CFO GALLAGHER:  The motion reflects the staff

          16        recommendation.

          17             MR. KENNEDY:  Reflects the staff

          18        recommendation?  If that's the case, then I

          19        believe that would provide the certainty to the

          20        board of directors to say we do have a backdrop to

          21        the administrative order if those elements do not

          22        work to meet water quality standards in Rice

          23        Creek.

          24             CFO GALLAGHER:  I just wanted to hear that.

          25             GOVERNOR BUSH:  Thank you.  There is a

           1        motion.

           2             COMMISSIONER BRONSON:  Second.

           3             GOVERNOR BUSH:  Any other discussion?

           4        Questions?

           5             GENERAL CRIST:  Does it address -- and only

           6        because I haven't had a chance to look at it.  I

           7        am concerned about the pollution level, and there

           8        is a distinction to be made between the

           9        standards -- and I love Georgia-Pacific, it's a

          10        great company.  I love Palatka, I love Putnam

          11        County, glad you are here.

          12             Representative, I returned your call

          13        yesterday.  I am sorry we didn't have a chance

          14        to chat, but you are a great man.  But anyway,

          15        having said all of that --

          16             CFO GALLAGHER:  You can tune it on the

          17        Internet, replay it, if you want.

          18             GENERAL CRIST:  If you are really bored some

          19        day.  At any rate, the issue for me is not to

          20        increase the level of pollution here.

          21             And I understand if you mix it in a bigger

          22        pot, it dilutes, the standard is easier to

          23        meet.

          24             My only concern is that there not be an

          25        increase in the pollution as a result of a

           1        bigger pipe going into the St. Johns.

           2             Treasurer, if you could explain your

           3        motion, which I think is along the lines of

           4        what I anticipated making, I would appreciate

           5        it.

           6             CFO GALLAGHER:  What happens is they have

           7        agreed to change with the 73 plus million dollars

           8        to be spent to use present known ways to clear up

           9        the effluent and have it clean enough to pass the

          10        test.

          11             This allows them -- if by chance, if they

          12        spend all this money, all in good faith, to get

          13        this done, and it doesn't meet it for the

          14        creek, then we allow them to take this clean

          15        water that just doesn't meet it and run it into

          16        the St. Johns which can take it a lot easier

          17        than the Rice Creek can.

          18             GOVERNOR BUSH:  So in no circumstances would

          19        there be increased pollution over the next eight

          20        years or whatever?

          21             CFO GALLAGHER:  It's got to be less because

          22        what was running down Rice Creek right now is

          23        going into St. Johns, and a heck of a lot worse

          24        than it will be down the road.

          25             GENERAL CRIST:  Why is there a need for a

           1        pipe?

           2             MR. KENNEDY:  Again, because of the size of

           3        Rice Creek and mixing capability versus the size

           4        and mix capability of the St. Johns.

           5             GENERAL CRIST:  With all due respect, that's

           6        where you lose me, because if it's the same

           7        amount, if it's not any more pollution, why do you

           8        need to affect the mixing capability issue, if all

           9        you are going to do is do the same stuff?  And

          10        maybe not at all; if the treatment part in the

          11        permit that's in litigation right now works out

          12        and you guys are able to address it, which I have

          13        great confidence in -- but trust but verify is

          14        important to me.

          15             So my concern is why would you need to

          16        have -- what's the difference?  If you are not

          17        going to increase the flow of what you are

          18        putting out of the plant, why are we here?

          19             MR. KENNEDY:  If I could ask the department

          20        to answer that question, that would be --

          21             MR. TAYLOR:  General, there was a staff

          22        person who was with this from the beginning that

          23        can explain the NPDS requirements and your

          24        question goes to whether or not water quality --

          25             GENERAL CRIST:  If you could not use

           1        acronyms.

           2             MR. SIEBOLD:  Thank you.  My name is Vince

           3        Siebold, administrator of industrial waste water

           4        section for DEP.  And I think your issue boils

           5        down to meeting water quality standards.

           6             They are unable to meet it in Rice Creek

           7        at this time, so we asked for the

           8        administrative order and the process changes.

           9        If they still can't attain water quality

          10        standards in Rice Creek, that's where the

          11        pipeline comes in.

          12             GENERAL CRIST:  You hit my issue, my issue

          13        is, I understand there is a difference between

          14        water quality standards and the load, or in other

          15        words, the bad stuff that goes out of a plant, to

          16        put it in laymen's terms.  Is that accurate?  Is

          17        there a difference?  Is there a distinction?

          18             MR. SIEBOLD:   Yes.

          19             GENERAL CRIST:  I am concerned about the bad

          20        stuff coming out of a plant more than I am about

          21        it being diluted in St. Johns which I care about

          22        deeply.

          23             MR. SIEBOLD:  When we reviewed this

          24        application and for the pipeline as well, we went

          25        through the extent of engineering and modeling to

           1        assure we had reasonable assurances they could

           2        meet water quality standards in the St. Johns with

           3        the pipeline.

           4             So those assurances have been provided.

           5        But we said, let's go through everything we can

           6        to see if they can attain water quality

           7        standards in Rice Creek.

           8             The pollutant loading is not changing.

           9        Actually they are decreasing their average

          10        daily flow and maintaining the same loading, so

          11        they are not going to be increasing pollutant

          12        loading at all.

          13             GENERAL CRIST:  Okay.

          14             GOVERNOR BUSH:  General, this may help as

          15        well, that the '93 solution was to put a pipeline

          16        in the St. Johns.  New guys come into town, new

          17        Department of Environmental Protection, trying to

          18        seek a better solution, and Georgia-Pacific steps

          19        up to the plate and says, Okay.  We will change

          20        our plans to invest $75 million to lower the

          21        amount of pollutants leaving the plant, which is

          22        your concern.

          23             So we have gone from early 1990s pipeline

          24        into St. Johns to the company making a major

          25        investment to clean the water quality

           1        irrespective of whether it goes into Rice Creek

           2        or to the St. Johns River.

           3             And in the case of the St. Johns River, it

           4        meets water quality standards the way that the

           5        alternative that we hoped doesn't have to

           6        happen comes in.

           7             So to me, and the 20.15 jobs an hour

           8        stays, I think this is -- we have the three big

           9        paper pulp plants in north Florida, none of

          10        which were meeting EPA and DEP requirements.

          11        And by just not acting in the past we were

          12        allowing the pollution to go in.

          13             Georgia-Pacific was the first company of

          14        the three to come up with a creative solution,

          15        and I appreciate the fact they are doing it.

          16             GENERAL CRIST:  Me, too.  Maybe I can offer a

          17        friendly amendment that might satisfy me and get

          18        me to yes as well, which would be to add on to

          19        what Treasurer Gallagher added so long as the

          20        load, pollutant, doesn't increase too.  Then I am

          21        a happy guy.

          22             GOVERNOR BUSH:  From today?  Mr. Kennedy.

          23             MR. KENNEDY:  Let me answer that.  First of

          24        all, the pollutant load is regulated by the

          25        Department of Environmental Protection, and

           1        frankly this whole process will actually reduce

           2        the pollutant load over time.

           3             In the event that the pollution load or

           4        pollutant load would need to be increased for

           5        whatever reason, we would have to, as a

           6        corporation, go back to the Department of

           7        Environmental Protection and ask for a permit

           8        change in order to make that happen.

           9             So it would be regulated by the

          10        department.

          11             GOVERNOR BUSH:  It would come to us.

          12             MR. KENNEDY:  No, it would not, it would have

          13        public -- it would be open to the public and be

          14        available for public input.

          15             COMMISSIONER BRONSON:  If I could clarify

          16        too.  Mr. Kennedy, isn't this also going to be --

          17        it's not just DEP that you are going to have to

          18        satisfy in the end; you got to satisfy EPA, the

          19        Federal Corps of Engineers and our own water

          20        management district for that area, so you are

          21        having to meet the criteria of four different

          22        state and federal agencies to be able to do it

          23        anyway; isn't that correct?

          24             MR. KENNEDY:  That's correct.  I think, again

          25        speaking to the certainty, we want to be sure that

           1        there aren't more openings for input that could

           2        lead to more hearings and more time delays for us

           3        to get on with this environmental improvement

           4        effort.

           5             So four, these four have taken us 10 years

           6        to do.  If we add more, then it will take 10

           7        more years, and 10 more years and that's a very

           8        difficult position to put a business in for a

           9        long-term future.

          10             GENERAL CRIST:  Understood.  But I want to

          11        offer my friendly amendment so long as the load

          12        design doesn't increase.  And you can vote it up

          13        or down.

          14             GOVERNOR BUSH:  That will require three

          15        votes, just as the agenda item will as well.

          16        There is an amendment to the motion.  All in favor

          17        say aye.

          18             GENERAL CRIST:  Aye.

          19             GOVERNOR BUSH:  All opposed?

          20             CFO GALLAGHER:  No.

          21             COMMISSIONER BRONSON:  No.

          22             GOVERNOR BUSH:  The motion does not pass.

          23        Now we are back to the agenda item.  There is a

          24        motion and second.  Any other discussion?  All in

          25        favor say aye.

           1             CFO GALLAGHER:  Aye.

           2             COMMISSIONER BRONSON:  Aye.

           3             GOVERNOR BUSH:  All opposed.

           4             GENERAL CRIST:  No.

           5             GOVERNOR BUSH:  Thank you all very much.

           6        Representative, thank you; Mayor, Commissioners,

           7        all of you.

           8             MS. ARMSTRONG:  Also, my apologies,

           9        Representative Pickins was also here.  He wanted

          10        to say thank you.

          11             REPRESENTATIVE PICKENS:  No, I know when to

          12        waive my time in support of something that already

          13        passed.

          14             GOVERNOR BUSH:  Good lesson learned.

          15             REPRESENTATIVE PICKENS:  I have a resolution

          16        from the Putnam County legislative delegation

          17        which is proof that Senators and Representatives

          18        can agree on something.  So that's of the record.

          19             CFO GALLAGHER:  Thanking us for our vote?

          20             MR. TAYLOR:  Governor and Cabinet, you do

          21        have a resolution from the City of Palatka, and on

          22        behalf of the mayors' office, thank you so much.

          23             GOVERNOR BUSH:  Thank you.  Item 2.

          24             CFO GALLAGHER:  Move to defer to August 12.

          25             MS. ARMSTRONG:  Correct.

           1             GOVERNOR BUSH:  No problem.  There is a

           2        motion to defer.  Is there a second?

           3             COMMISSIONER BRONSON:  Second.

           4             GOVERNOR BUSH:  There is a second.  Without

           5        objection, the item is deferred until when?

           6             CFO GALLAGHER:  August 12.

           7             I would like to defer item 3 also to

           8        August 12, so we can get them done at the same

           9        time.

          10             MS. ARMSTRONG:  We have a series of speakers

          11        and we are ready to move forward.  It's your call,

          12        sir.

          13             GOVERNOR BUSH:  People have come up to talk

          14        about it?

          15             MS. ARMSTRONG:  Yes, we have at least one

          16        from out of town, perhaps more.

          17             GOVERNOR BUSH:  We got our guy with the

          18        cowboy tie, too, I know he wants to speak.

          19             MS. ARMSTRONG:  Yes, sir, he is always ready

          20        to speak.

          21             This is our telecommunications rule, the

          22        fiberoptic rule that we have been working on

          23        now for quite some time.  I have Mike Sole who

          24        is prepared to lay out the issues as it has

          25        developed for final adoption.  If you are

           1        prepared or we can defer.

           2             GOVERNOR BUSH:  I am ready.  One of the

           3        questions I have is, why would we have to do the

           4        teleport one if the general rule is approved?  If

           5        they comply with the rule, then do they come back

           6        and -- why do we have a rule?

           7             MS. ARMSTRONG:  You want to explain it?  I am

           8        going to let Mike Sole explain why we are

           9        deferring number 2 and then moving forward on

          10        number 3.

          11             MR. SOLE:  Again Mike Sole, Department of

          12        Environmental Protection.  Governor, I think the

          13        question is why bring Florida teleport forward --

          14             GOVERNOR BUSH:  Before the rule.

          15             MR. SOLE:  -- before the rule.  And that was

          16        actually a suggestion made by several others, and

          17        that it would probably be best if we talk about

          18        the rule, let's lay the framework of the rule out

          19        first and subsequently bring items for

          20        consideration.

          21             GOVERNOR BUSH:  Very good.  Thank you.  You

          22        want to discuss what this rule is?

          23             MR. SOLE:  Yes, sir.  Again this item

          24        requests consideration to adopt amendments to

          25        Chapter 1821, Florida Administrative Code,

           1        regarding offshore telecommunications lines.

           2             As you may recall, the Board of Trustees

           3        approved publication of notice of proposed rule

           4        making in December 2002.  Subsequent to that we

           5        had a rule hearing workshop or hearing in West

           6        Palm, got some input from folks in

           7        February 2003, made a few amendments.  Those

           8        have been published and based upon those, we

           9        bring the current rule form to you.

          10             In general, the rule provides for the

          11        creation of special consideration or gaps as

          12        areas to bring and encourage telecommunication

          13        lines to come through on the southeast reach.

          14        Can we get the overhead?

          15             Thank you.

          16             GOVERNOR BUSH:  That's not going to work.

          17        This works but you got to be 12 years old to read

          18        it.

          19             MR. SOLE:  The rule establishes five of these

          20        gaps in the southeast part of the state.  This is

          21        primarily gaps where, or excuse me, where

          22        telecommunications lines have landed in the past.

          23        These gaps were created, you may recall a colorful

          24        discussion Dr. Ray McAllister provided us in

          25        December, the gentleman went out and helped us

           1        identify these gaps.

           2             We've also gone through and done some

           3        validation diving from the district staff.  If

           4        we can get the next image, it gives you a feel.

           5        This is data which is basically the bathymetry

           6        of the region.  You can see the very clear and

           7        distinct gaps in the reef.

           8             And the concept of establishing these

           9        corridors or these special consideration areas

          10        is to facilitate protection of this reef

          11        resource.  By identifying these gaps, we are

          12        saying, hey, here is a safe place to land in

          13        Florida without adversely affecting this

          14        offshore reef.

          15             The other thing that is important to note

          16        is we are not mandating the use of the gaps.

          17        We are encouraging the use of the gaps and we

          18        are doing that encouragement through three

          19        incentives.

          20             One of them is to allow the additional

          21        placement of spare conduits if you use a gap

          22        and I will explain the conduits in a second.

          23        The other incentive is to allow an applicant to

          24        come in with a sketch of their proposal instead

          25        of full-blown survey, so it should save them

           1        some money up front.

           2             And finally, the third incentive was to

           3        allow delegation to the Department of

           4        Environmental Protection to act on behalf of

           5        the Board of Trustees as long as we provide the

           6        Board of Trustees notice of the action and the

           7        Trustees obviously have the ability to request

           8        that the item be brought to them.

           9             Those are the primary incentives for these

          10        gaps.

          11             GOVERNOR BUSH:  Is there anybody here

          12        representing the companies that -- I'd just like

          13        to get a sense on how proscriptive the department

          14        has gotten.

          15             It seems to me that in my reading of it,

          16        maybe I am wrong -- you can comment as well --

          17        it appears that the department may have kind of

          18        gone back to the old way of environmental

          19        regulation, which is input focussed rather than

          20        outcome results oriented.

          21             In other words, I would hope that the

          22        objective here isn't to try to prescribe how

          23        people do their business, like the number of

          24        conduits and the number of this and that; but

          25        the focus is we want to protect the coral reefs

           1        and we want to make sure that this is done in a

           2        way that, in terms of engineering, is sound, to

           3        avoid what may have occurred with the examples

           4        with AT&T cable in the Bahamas or some place

           5        where the movement destroyed coral reef and we

           6        wanted to avoid that.

           7             MR. SOLE:  Yes, I believe the answer is yes.

           8        We are not trying to proscribe to industry, here

           9        is how you do your business.  We are trying to lay

          10        out a framework on how the resources can be

          11        protected.

          12             Again, one of the ways that we have done

          13        this is identified these gaps.  We acknowledge

          14        there are potentially other gaps out there that

          15        are available and viable.  And if industry

          16        wants to use those, that's great.  And if

          17        industry has other ways to ensure protection of

          18        the resources, that's fine too.

          19             GOVERNOR BUSH:  Here's my concern.  The one

          20        specific place, and I guess it related to what

          21        would have been the applicant on the agenda item

          22        before this.

          23             This notion of building in anticipation of

          24        a business plan or business market, I don't

          25        know what the plan was, but to have a cable

           1        that would have conduits or subconduits, if you

           2        will, so that you can run different lines

           3        through one delivery, one pipe if you will.

           4        And we were starting, however, installations

           5        using subconduits within a conduit shall be

           6        allowed up to six conduits and one additional

           7        conduit.  Why do we care how many conduits are

           8        inside of a pipe when the objective is to make

           9        sure the coral reef isn't hurt?

          10             MR. SOLE:  That's a good question.  Let me

          11        try to touch on that and kind of bring you there.

          12             The conduit concept is, the rule requires

          13        as it stands today, based upon technology, that

          14        when you do a landing in Florida, you have to

          15        drill under the first reef resources.  And you

          16        can see there is, on the drawing there is a

          17        reef resource nearshore.

          18             Horizontal -- you can't see my pen.

          19        Horizontal directional drilling technology can

          20        only go so far out.  So right now there is a

          21        scenario where we request or are requiring --

          22             GOVERNOR BUSH:  Which gap is this?

          23             MR. SOLE:  This is the Sea Turtle or Lake

          24        Worth gap.  So they are required to drill under

          25        the reef from the landing site.

           1             GOVERNOR BUSH:  Can you point where you are

           2        talking about.  The first reef is the one -- thank

           3        you.

           4             MR. SOLE:  Right.  And they will punch out in

           5        between the first reef and second reef probably

           6        under normal circumstances.

           7             You can see the second reef as well.  That

           8        drilling is a bore.  And what they do is they

           9        install a conduit in that bore.  That way they

          10        can pull the line when it comes in.  So that's

          11        the conduit, when we talk about conduits that

          12        we are discussing.

          13             To get to your direct question, why does

          14        the department specifically establish in this

          15        rule how many subconduits an applicant can

          16        have?

          17             There's two other provisions in the rule

          18        that we're somewhat concerned about, and that's

          19        how many cables are coming into this landing

          20        site upfront?

          21             As you might be able to tell, there is a

          22        lot of resources in the area.  The rule says

          23        look, for each landing site, there should only

          24        be six telecommunication lines coming in on a

          25        normal basis.

           1             The rule --

           2             GOVERNOR BUSH:  Okay.  Why would you care

           3        what lands?

           4             MR. SOLE:  To address the resources.  As you

           5        might -- I always like to draw on these drawings

           6        if you don't mind.

           7             COMMISSIONER BRONSON:  I have a question,

           8        too, while you are going to go ahead and answer

           9        this, and that is with new science and technology

          10        developing every day, the conduit pipe could be

          11        this big now, but you are saying you can only have

          12        six; but they may develop ways of doing this, it

          13        may even be better than what they have today, they

          14        could put a pipe in this big, which means it has

          15        the capability of holding a whole lot more

          16        telecommunications equipment in there going

          17        through one pipe.

          18             So why -- the Governor's question is right

          19        on the money.  Why are we telling business how

          20        to run their business rather than worrying

          21        about protecting the resources, which is what

          22        we are really here to talk about?

          23             MR. SOLE:  I understand the question,

          24        Commissioner.  The issue of why we establish a six

          25        subconduit limit --

           1             GOVERNOR BUSH:  Write on your little picture

           2        there.

           3             MR. SOLE:  If the landing site is here and

           4        they do a bore here, the analysis that the

           5        department anticipates reviewing is if you come

           6        in -- I got one line and I am going to do a

           7        conduit as well.  We are going to look at the

           8        individual run that they go through the gap.

           9             And we need to evaluate that run to make

          10        sure it is able to avoid the resources here or

          11        minimizes impacts to the resources and the

          12        second reef and resources even within the gap.

          13             GOVERNOR BUSH:  Keep going.

          14             MR. SOLE:  The concept of looking at limiting

          15        a landing site to generally six lines is that the

          16        capacity here is envisioned to automatically be

          17        able to hold six lines on an environmental basis.

          18        Additionally, there is a concern about how many

          19        preemptions we are going to authorize somebody

          20        automatically.

          21             GOVERNOR BUSH:  Why do you say preempt?  That

          22        shouldn't be your business.  We have five -- it

          23        would be your business -- assume presumption means

          24        that --

          25             MR. SOLE:  -- protecting other submerged

           1        lands.

           2             GOVERNOR BUSH:  -- that other people couldn't

           3        come -- you are not worried about -- I hope you

           4        are not worried about the telecommunications

           5        market.

           6             MR. SOLE:  Preemption of sovereign submerged

           7        lands.

           8             GOVERNOR BUSH:  We have five different entry

           9        points, so it seems to me if you could create a

          10        system that is technologically feasible where you

          11        have a broader number of conduits that would come

          12        in one, that you would lessen the environmental

          13        impact.

          14             So by using your term preemption, I am not

          15        sure that's preempting, but you are actually

          16        creating more, a greater chance.  If you have

          17        to bore under a reef more than once, there is a

          18        greater chance of a problem, isn't there?

          19             MR. SOLE:  Absolutely.  Again, I think we

          20        have written the rule to actually encourage what

          21        you just said; in that if you can drill one hole

          22        underneath the reef, which has an environmental

          23        risk, and bring in six lines, that's great.  I

          24        think that's fantastic.

          25             GOVERNOR BUSH:  Why limit to six?

           1             MR. SOLE:  The limit to six, again, codifies

           2        to how many lines are we looking at upfront?  Not

           3        just the conduit in the bore, but there is two

           4        impacts we are talking.

           5             GOVERNOR BUSH:  Are you saying -- if the

           6        conduits only exists underneath when they are in

           7        the boring portion of the easement?

           8             MR. SOLE:  I apologize, say that again.

           9             GOVERNOR BUSH:  I am envisioning that you

          10        would have six subconduits in an -- I am going to

          11        call it a pipe -- and that from the point that you

          12        bore to the shoreline, it would be in a pipe.

          13        That's not accurate?

          14             MR. SOLE:  That's accurate.

          15             GOVERNOR BUSH:  How many lines you have

          16        doesn't matter.  Where does it matter?

          17             MR. SOLE:  This is where I am going to show

          18        you why the lines matter.  The issue of how many

          19        lines matters as it relates to the point from the

          20        boring in the ocean as you go out.

          21             Suddenly, if I have got more than six

          22        lines -- and we are looking at an application

          23        right now for one line, we are going to say,

          24        yeah, you can have six subconduits just as a

          25        general feature with your one line.

           1             I can reasonably conclude what the impact

           2        is going to be.  If suddenly it's 25, like

           3        Treasurer Gallagher pointed out or Commissioner

           4        Bronson, I am sorry, if it is suddenly 25, but

           5        they only have one line, then am I technically

           6        saying yes, this can take 25 lines throughout

           7        this area.

           8             GOVERNOR BUSH:  We got your point.

           9             MR. SOLE:  That is the basis for why we said,

          10        look, upfront let's limit it to six because that's

          11        what we envision the capacity of the resources can

          12        handle.  It doesn't say it will limit it in the

          13        future.  It merely says as an upfront review, six

          14        is a number that we envision we can handle.

          15             GOVERNOR BUSH:  If you want to go past six,

          16        the applicant can show -- can justify it?  That's

          17        in the rule as well.

          18             MR. SOLE:  The answer to that question is

          19        yes, because right now what we are suggesting is

          20        the conduit itself -- I don't tell them how many

          21        individual subconduits per conduit.  The answer is

          22        if you are coming in with one cable, you can have

          23        up to six spare subconduits.  But if you come in

          24        with six cables, then you have obviously the need

          25        and capacity for more subconduits and they can add

           1        on to it.

           2             GOVERNOR BUSH:  But they can justify it so as

           3        not to jeopardize the outer reef?

           4             MR. SOLE:  Absolutely, yes, sir, and it does

           5        provide that opportunity.

           6             CFO GALLAGHER:  Here's another thing.  Each

           7        time these people are asking for two lines or two

           8        main conduits, right?  And the reason is -- you

           9        don't want to put 25 in one because if it gets

          10        cut, somehow you lose them all.

          11             So we want to have a backup to be a

          12        separate one; if one gets cut, you got a whole

          13        different one going through and they are all

          14        applying for at least two of those, and that's

          15        the max we are going to let them do or can they

          16        have more than that?

          17             MR. SOLE:  Say the last part again.

          18             CFO GALLAGHER:  Two big conduits coming in,

          19        you have the subs inside; that's what we are

          20        allowing now, right?

          21             MR. SOLE:  What the rule provides for now,

          22        you mean what we are proposing in the rule?

          23             CFO GALLAGHER:  Right.

          24             MR. SOLE:  What the rule provides for now is

          25        if you come in with one line -- and we'll use

           1        Florida Teleport as an example since that's one we

           2        recently looked at.

           3             If they come in with one line, one real

           4        line, they can install one conduit that have

           5        six subducts, and they can install another

           6        conduit as that backup spare but doesn't have

           7        any subducts.  It's empty right now.  If they

           8        have capacity demands in the future, sure, they

           9        can pull those subducts back in.  So they have

          10        the capacity to modify and increase that.

          11             CFO GALLAGHER:  The theory of this, at least

          12        the way I see it is, when you have all the

          13        equipment out there to be drilling these holes,

          14        it's a heck of a lot cheaper to drill two of them

          15        than it is to bring them all out there again to

          16        drill another one.  So you give them a second one

          17        there, say don't use it until something goes wrong

          18        with the other one, then it's already drilled.

          19             MR. SOLE:  That's correct.

          20             GOVERNOR BUSH:  Would anybody like to speak

          21        against the rule, or express concerns, however you

          22        want to say it, a different way?

          23             MR. BRIGHTMAN:  Or somewhere inbetween,

          24        Governor.

          25             Good morning, Governor, Members of the

           1        Board, I am Richard Brightman, from Hopping,

           2        Green and Sams.  I am here today on behalf of

           3        NASCA, North American Submarine Cable

           4        Association.

           5             It's a trade association of companies who

           6        are actually engaged in the business of

           7        installing and operating these international

           8        cables.

           9             I think all of you will recall that this

          10        has been a long and occasionally bumpy road to

          11        develop this rule.  And the one thing that I

          12        would like to remind you is that the Governor

          13        has always said don't hurt this industry.

          14             GOVERNOR BUSH:  It has enough problems as it

          15        is.

          16             MR. BRIGHTMAN:  That's whole other story,

          17        Governor.  There is one thing that is in this rule

          18        today that hurts the industry, and it's exactly

          19        the issue that you are talking about, the number,

          20        the limitation on the number of conduits that can

          21        be installed.

          22             It's difficult to discuss this in the

          23        context of subducts because subducts is an

          24        entirely new technology, one that has never

          25        been used before in Florida nor anywhere in the

           1        world that we are aware of, that the

           2        traditional technology has not been to use

           3        subducts largely for the security reason that

           4        Treasurer Gallagher mentioned; you don't want

           5        to have all of your cables in one place.

           6             The traditional technology has been to

           7        install a smaller conduit and put one cable in

           8        one conduit.  And then you install the series

           9        of additional conduits; the practice over the

          10        past 10 or 15 years has been approximately six

          11        spares for every cable, that allows not only

          12        for the repairs in an emergency situation

          13        should there be a disruption, but also allows

          14        these companies to plan into the future for

          15        growth of capacity.

          16             You have the ducts already -- the conduits

          17        already in place.

          18             And it does make environmental sense, if

          19        you are going to go out there and mobilize to

          20        install a single conduit, to go ahead and

          21        install the spares at the same time rather than

          22        coming back in the future and remobilizing with

          23        all that expense, and so forth.

          24             So the limitation on the number of

          25        conduits themselves, I am not talking about

           1        subducts, I am talking about the pipe yourself

           2        as you referred to it; currently the rule says

           3        you can only have two spares if you are in one

           4        of the special consideration areas, and you can

           5        only have one spare if you are somewhere

           6        outside of the five recognized special

           7        consideration areas.

           8             GOVERNOR BUSH:  This very detailed scientific

           9        depiction of what happens on this picture right

          10        here, you disagree with that, that visual --

          11             MR. BRIGHTMAN:  I think it's a little

          12        overblown.  I don't think any company would intend

          13        to install that many cables that close together

          14        for the very security reasons we discussed.

          15             That's why over history there has been

          16        approximately -- it has varied some --

          17        approximately six spare conduits for every

          18        actual cable that has been installed; not the

          19        25 that you see in this marvelous rendering.

          20             By limiting the number of spare conduits,

          21        the way it hurts the industry is it prevents

          22        the industry from doing the kind of long-term

          23        planning for these major capital projects that

          24        you would expect a responsible company to do.

          25             Because they can only install a single

           1        spare.  They can't plan for 10 years into the

           2        future and predict what the capacity is going

           3        to be and construct one time to accommodate

           4        that capacity.

           5             What the industry is asking, and I

           6        circulated some draft language to the staff, we

           7        are not asking that you authorize a larger

           8        number at this time.  What we are asking is

           9        that you reserve to yourselves the discretion

          10        in a proper case in the future upon a

          11        demonstration by the applicant that more is

          12        appropriate, so you don't limit yourselves to

          13        the maximum of two in a special consideration

          14        area and one outside of a special consideration

          15        area.

          16             There is a little quirk of administrative

          17        law that you are probably aware of but let me

          18        remind you.  Because the Trustees act in their

          19        proprietary capacity, the normal ability to

          20        come to -- to petition for a variance or a

          21        waiver of a rule requirement is not available.

          22        There is a recent court case that decided that.

          23             So if you limit yourself to two and there

          24        is a project that comes around in five years,

          25        then it is clear to everybody that five are

           1        justified, you wouldn't be able to improve it

           2        because you couldn't grant a waiver.

           3             So what we are suggesting is to add some

           4        additional language to the rule to preserve

           5        your discretion in a proper case in the future

           6        to authorize additional conduits.

           7             I suggested some language both to staff

           8        and to the Cabinet aides which we think will

           9        accomplish that, and that's what we would

          10        request that you do, is to amend the proposed

          11        rule to preserve that discretion.

          12             GOVERNOR BUSH:  Any questions or comments?

          13             COMMISSIONER BRONSON:  I do have, Governor.

          14        I am trying to get my hands around this.

          15             Now there is nothing in the proposed rule

          16        that I have seen yet that would indicate at

          17        some point in time -- I know there has been

          18        some mention of giving discretion to DEP on

          19        some issues, which I am -- not that I don't

          20        have -- I don't have anything against DEP,

          21        but --

          22             GOVERNOR BUSH:  I hope not, Commissioner.

          23             COMMISSIONER BRONSON:  -- things that are

          24        supposed to come to the Cabinet for approval, I

          25        would like to kind of take a look at those things

           1        myself if the Cabinet is supposed to approve those

           2        issues.

           3             However, I want to make sure that there is

           4        no implication here that there would be -- if a

           5        company comes in and -- this is the reason for

           6        my banner here, is the whole purpose of these

           7        types of programs, just like we have now where

           8        we hook up different hookups underneath bridges

           9        that go across rivers and everything else is

          10        for the public good, is that correct?

          11             This is usually a public -- for the public

          12        good process of bringing in, whether it's cable

          13        or water lines or power lines or whatever it

          14        is, it's in the public interest, public good,

          15        even though private companies may do the actual

          16        application to run the lines.

          17             I just want to make sure that we don't

          18        have this potential for six lines in this

          19        sleeve that we are talking about and then all

          20        of a sudden, you have a company that wants to

          21        go in at Point A here, because that's where

          22        their location is for their business, but yet,

          23        they say just up the road here, 20 miles there

          24        is a sleeve, and you can run your line through

          25        there.  I want to make sure there is not a

           1        forcing of a business to have to reroute their

           2        whole process.  That's one thing I want to be

           3        clear here.

           4             MR. SOLE:  Commissioner Bronson, that's a

           5        legitimate question.  And the answer is no, there

           6        is not a forcing of, encouraging one private

           7        entity to use another entity's spare.  That would

           8        be an economic decision that that private entity

           9        would need to make, whether it was worthwhile to

          10        bore their own hole or use one that is existing.

          11             GOVERNOR BUSH:  Any other discussion?  How

          12        far along are you?

          13             MR. SOLE:  Governor, there is one issue on

          14        this issue of how many spare conduits should be or

          15        should not be authorized.  I want to present one

          16        more piece of information.

          17             When we looked at -- when we wrote this

          18        rule, we did look at industry practice and what

          19        transpired over basically the last several

          20        years.  And while we acknowledge that AT&T's

          21        activities, where they installed two lines and

          22        a total of seven empty conduits would not meet

          23        the rule, I do want to point out that the

          24        subsequent three projects built in Florida

          25        would all meet the rule if they are in a

           1        special consideration area or, at a minimum,

           2        one of them would not meet it if they were

           3        outside a special consideration area.

           4             So this demand for six spares is something

           5        that's -- it's been a consistent voice from

           6        industry, so I don't want to say it's a new

           7        concept.  But looking at trying to ensure we

           8        minimize the impact of those resources on

           9        speculative ventures is the one thing that we

          10        are trying to do.

          11             GOVERNOR BUSH:  We are back now to what your

          12        role here is.  Is your role to determine what is

          13        speculative and what's market oriented, all that

          14        stuff, or is your role to protect the reefs?

          15             MR. SOLE:  I believe the role is to protect

          16        the reefs.  And the reason why I bring up the word

          17        speculative, sir, is that each time we do drill a

          18        hole under the reef, it is a risk to that reef,

          19        there are threats to the reef.

          20             And while we acknowledge industry needs

          21        spare conduits to be able to provide service,

          22        timely repairs, at what point do we say it's

          23        okay to drive six holes under the reef for this

          24        one line?

          25             GOVERNOR BUSH:  With all due respect to -- by

           1        the way, you are one of the best presenters that

           2        we have, so this is not personal, don't take it

           3        that way.

           4             I am not sure I want the Department of

           5        Environmental Protection determining what is

           6        speculative in a market.  It's not your job.

           7        The skill sets are the resource itself.  And

           8        that's what you guys are very good at.

           9             And so I think that it costs money to bore

          10        under a reef; it sounds like to me it costs a

          11        lot of money.  And the determination ought to

          12        be, when you do it, here are the specifications

          13        and here's the cost and here's the penalty if

          14        you do it poorly, which I assume is all part of

          15        the contract, all part of the easement.

          16             And if you are doing it just to be

          17        speculative, you are probably going to lose

          18        money.  That's their decision, it's not yours,

          19        is it, so long as the resources are protected.

          20             There is a point past which you have to

          21        say no.  And there is another point to this,

          22        which is the -- how long have we been doing

          23        this rule thing here?  It's been going on for a

          24        while, and the objective was to try to create

          25        an inducement for the companies to go to the

           1        places we want them.

           2             And the more -- so the more you induce,

           3        the greater chance they will do it.  Because

           4        Commissioner Bronson is right; a lot of the

           5        determination on the telecom side, or whatever

           6        the user is, is where you land, how you connect

           7        to whatever the infrastructure is you are

           8        trying to expand.  And so there could be other

           9        considerations way beyond the sovereign

          10        submerged lands part of this.

          11             MR. SOLE:  Yes, sir.

          12             GENERAL CRIST:  The Governor brings up a good

          13        point.

          14             Are there any other ways we can

          15        incentivize going to the gaps other than just

          16        speeding up the process?  Is there any economic

          17        incentivizing we can do, or is that only a

          18        legislative thing?  That's what I am talking

          19        about, is money.

          20             MR. SOLE:  I think the decision on the

          21        economics is yours as it relates to the amount of

          22        fees that are applied.  Those are established in

          23        this rule itself.

          24             GOVERNOR BUSH:  They are?

          25             MR. SOLE:  They are not incentives.  The

           1        actual fees for these projects are established in

           2        this rule making.  And the fees currently do not

           3        provide an incentive to use the special

           4        consideration areas.

           5             GENERAL CRIST:  I have an idea.  Maybe as an

           6        amendment to what we do here is to those companies

           7        who go through the gap, not have to pay a fee.  We

           8        are trying to encourage good behavior and sound

           9        environmental support and to do it with economics

          10        and speed in the process.

          11             I throw that out for discussion among my

          12        colleagues.

          13             CFO GALLAGHER:  In the discussion here, we've

          14        got about two or three or fourth issues.  We have

          15        delegation of the authority issue, we have how the

          16        many conduit issue, we have a fee issue.

          17             And rather than sit here all afternoon

          18        trying to work each one of those out, I think

          19        it would be better off to put it behind us

          20        until the next meeting and let them all work

          21        with us and come up with a -- take care of

          22        those issues in a tiny little Cabinet work

          23        group, instead of us trying to work -- I think

          24        each one of those needs to be looked at.  I am

          25        not -- I don't know exactly where I want to be

           1        on every one of them, and I don't know that

           2        everybody else does.  And I just assume do it

           3        for the next -- that's where I started, if you

           4        remember.

           5             GOVERNOR BUSH:  I think there is a motion to

           6        punt and a second until August 12.  Any other

           7        discussion?

           8             The motion to defer to August 12 passes

           9        unanimously.  I would just voice my opinion on

          10        the fee issue.

          11             I concur I think with General Crist that

          12        either a very, very low fee or no fee would be

          13        the dominant inducement that you could come up

          14        with, I would think.

          15             Now in my opinion that's only for the

          16        linear foot grant, or whatever we are calling

          17        it, not the application fee which probably -- I

          18        assume is to cover the costs of determining the

          19        viability and feasibility of the --

          20             MR. SOLE:  That is correct, yes, sir.

          21             GOVERNOR BUSH:  15,000, if that's costs for

          22        you, then that would be fair.

          23             CFO GALLAGHER:  Better keep it coming, we are

          24        using up all the general revenue.

          25             MR. SOLE:  Thank you.

           1             GOVERNOR BUSH:  Thank you all very much.

           2             By the time I finish my tenure as

           3        Governor, we'll have some system in place for

           4        sovereign submerged lands.

           5             CFO GALLAGHER:  I would like to take item 4

           6        and also defer it until August 12.  Load up

           7        August 12.

           8             GOVERNOR BUSH:  There is a motion to defer.

           9        Is there a second.

          10             GENERAL CRIST:  Second.

          11             GOVERNOR BUSH:  Moved and seconded.  Without

          12        objection the item is deferred until August 12.

          13             MS. ARMSTRONG:  On items 5 and 6, they are

          14        both sale of Murphy Act Land.  I wanted to point

          15        out on these that in both instances, while these

          16        normally we will just get an apprising value and

          17        sell them individually, because there is not a lot

          18        of value to these, there was interest ahead of

          19        time in both and we bid them and sold them to the

          20        highest bidder on both of these.

          21             I know this is of specific interest to

          22        Treasurer Gallagher, so I wanted to point it

          23        out.  In one we got another third higher above

          24        appraised value and then the second one we got

          25        three times the -- two times the appraised

           1        value.

           2             So item 5 is in Nassau County and

           3        item 6 -- they are both in Nassau County.

           4             CFO GALLAGHER:  Motion on 5 and 6.

           5             GOVERNOR BUSH:  There is a motion on 5 and 6.

           6        Is there a second?

           7             GENERAL CRIST:  Second.

           8             GOVERNOR BUSH:  Moved and seconded.  Without

           9        objection, both items pass.

          10             MS. ARMSTRONG:  Item 7, I think we have

          11        actually come to an agreement on this issue of

          12        statutory way of necessity.

          13             This item has been before you several

          14        times.  The last time we deferred it was about

          15        a year ago.  Mr. Andress owns several lots in

          16        Cayo Costa State Park.  They are landlocked and

          17        he is entitled to a statutory waive of

          18        necessity, and the issue is where that the

          19        access should occur.

          20             The state's position is that it ought to

          21        go across already disturbed roadway and what is

          22        actually kind of an ATV trail.  He in the past

          23        has argued for a way that would go across a

          24        totally undisturbed area of land.

          25             He is here today with his attorney.  I

           1        thought I would let them speak first because I

           2        think we've come to an agreement where that

           3        access ought to be.

           4             GOVERNOR BUSH:  All right.  Can you get a map

           5        out.

           6             MS. ARMSTRONG:  Mr. Bill Hyde.

           7             CFO GALLAGHER:  If you all have agreed, I

           8        would like to move the agreement.  And if it works

           9        out, great; and if it doesn't, then you will have

          10        to come back.

          11             MR. HYDE:  Well, I think there is a

          12        third-party objector that may want to speak

          13        against our proposal, so I would like to briefly

          14        outline what we are here for today.

          15             CFO GALLAGHER:  Then we are going to hear

          16        from them, too.  I am sorry. I am ahead of myself.

          17             MR. HYDE:  By way of introduction, my name is

          18        William Hyde.  I am a long-time environmental

          19        attorney here in Tallahassee, Florida.  And I

          20        represent the applicants in this case, Noel and

          21        Karen Andress, who are in the audience here today,

          22        if they could stand up briefly.

          23             GOVERNOR BUSH:  Good morning.

          24             MR. HYDE:  I just wanted to establish the

          25        Andress's bona fides in appearing before you

           1        today.

           2             Mr. Andress has personally sold to the

           3        state some 26 lots on Cayo Costa Isle at below

           4        market prices as part of the state's

           5        acquisition on lots of that island.  They

           6        several years ago also donated to Lee County a

           7        4-acre gulf front tract for a public park.

           8             They have been in this process for two

           9        years almost.  They have spent literally

          10        thousands of dollars in consultants and

          11        attorneys fees trying to work this process out.

          12        In fact, we were about to come before you last

          13        fall on this easement when we were persuaded by

          14        the objectors and by the staff to consider a

          15        proposed land swamp for some other lands in

          16        Cayo Costa.

          17             That did not bear fruit.  We did not think

          18        we were getting value for value.  And we also

          19        thought that the lands being proposed had their

          20        own access problems.  But in any event we were

          21        delayed by some five to six months.

          22             I think that Ms. Gallagher has stated it

          23        very clearly -- not Ms. Gallagher, Eva

          24        Armstrong, I apologize.  Ms. Armstrong.

          25             GOVERNOR BUSH:  What did you call her?

           1             MR. HYDE:  You did work for him at one point,

           2        didn't you?

           3             MS. ARMSTRONG:  I did.

           4             GOVERNOR BUSH:  But I don't think they are

           5        married.

           6             MR. HYDE:  My mistake.

           7             We are clearly entitled to some statutory

           8        waive of necessity because absent an easement,

           9        there is no practical means of access to our

          10        property.

          11             We have sought a shorter easement of about

          12        375 feet, direct east/west easement, that would

          13        connect to an existing platted easement.  The

          14        staff has opposed that for environmental

          15        reasons that we don't necessarily think are

          16        valid.  But we are here today willing to accept

          17        the staff's option, which is about, for our

          18        practical purposes, about half a mile long.

          19             There is one problem with it that I want

          20        to bring to your attention.  There is a deed

          21        restriction on one of the lots.  It's lot 30.

          22        And lot 30 basically says it can't be used as a

          23        way of access to a road.  The state's

          24        attorneys, that is the DEP attorneys have

          25        offered the opinion to me that this is not

           1        something that would necessarily -- could not

           2        create a problem for us.

           3             I am not so sure that that's the case.  I

           4        have asked that if we do get stuck with this

           5        particular easement that goes over the platted

           6        lot that has this deed restriction, which by

           7        the way you own, that we not be required to

           8        agree to any attorney's fee reimbursement

           9        provision in the easement document itself.

          10             Our long-time preference has been our

          11        option which is the straight east/west one,

          12        it's about 1/6th the length.  The staff has

          13        said there is environmental objections.  We

          14        think they are invalid, but we are trying to be

          15        conciliatory here, we tried to be conciliatory

          16        in the past.

          17             We agreed to consider a land swap; it

          18        didn't work out.

          19             This easement that we have before you

          20        today, the staff is proposing for you today, is

          21        supported by case statutory law.  It's

          22        supported by your own consistent policies over

          23        the years.

          24             And there are some objectors to it, but I

          25        consider these objections to be in the nature

           1        of drawbridge environmentalism.  The objectors

           2        are other lot owners on Cayo Costa Island who

           3        have their own private place in the sun and

           4        they want to preserve that private park.  And I

           5        understand where they are coming from.

           6             GOVERNOR BUSH:  The American way.

           7             MR. HYDE:  Yeah, that is the American way

           8        these days, but they have leveled some historical

           9        and inaccurate charges about my clients.

          10             My clients are not big developers; they

          11        own two lots on Cayo Costa Island.  They sold a

          12        lot of lots to the state at below market

          13        prices.  They donated a 4-acre gulf front tract

          14        to Lee County.

          15             I think they are entitled to reasonable

          16        access and I hope you will agree today.  Thank

          17        you, unless you have any questions.

          18             GOVERNOR BUSH:  I don't think so.  We have

          19        other speakers.  We would love to hear from them.

          20             MS. ARMSTRONG:  Terrell Arline.

          21             MR. ARLINE:  Good morning, Governor Bush, I

          22        am glad to be here.

          23             My name is Terrell Arline, I represent a

          24        woman named Carol Sellers who, yes, she lives

          25        on the island.  She will be 90 years old on

           1        Monday, and she has lived there for 30 years.

           2             GOVERNOR BUSH:  We wish her a happy birthday.

           3             MR. ARLINE:  It is her request these

           4        easements not be granted and explain to you sort

           5        of the background.

           6             You've never granted an easement on Cayo

           7        Costa.  This will be the first one.  And I know

           8        that you will consider this very carefully.

           9        And in a sense what I hope to convince you

          10        today is that your decision to authorize either

          11        one of these easements makes it easier to

          12        develop these properties.  And is that a policy

          13        that you want to do?

          14             And I will explain to you that it's not

          15        necessary to grant the easements.

          16             Cayo Costa is the largest undeveloped

          17        barrier island in Florida.  It's located in Lee

          18        County on the gulf.  It's further from the

          19        mainland than most any other barrier island.

          20             GOVERNOR BUSH:  How far is it from -- I know

          21        I have flown over it.

          22             MR. ARLINE:  It's about three or four miles

          23        as the crow files.  It's beyond Ucipia, if you've

          24        been to Ucipia; it's west of Ucipia.  It's about a

          25        mile and a half wide, seven miles long.  There are

           1        no homes on the beach right now.  There is a park

           2        campground on the north end of the island.  Pretty

           3        significant archaeological and environmental

           4        resources.

           5             The area that we are talking about is in

           6        an area of the island that is pristine and

           7        undeveloped.  Cayo Costa has no bridges, no

           8        public roads, no water, no sewer, no

           9        electricity, no paved roads, it's a COBRA

          10        island.

          11             GOVERNOR BUSH:  What?

          12             MR. ARLINE:  Coastal Barrier Resources Act

          13        Island, if there ever was one.  And the state has

          14        had a long commitment in Cayo Costa of making it a

          15        state park.  Since the '70s, the state has spent

          16        $27 million under Environmental Endangered Lands

          17        Program, the Coral Program and now Forever

          18        Florida, which has resulted in about 97 percent of

          19        the island being acquired now in state ownership.

          20        There is 176 privately-owned parcels out there.

          21             We believe that this easement, either one

          22        of them, could potentially add 10 residences to

          23        the island.

          24             This is the part of the island that we are

          25        talking about, this lot here is Mr. Andress'.

           1        This lot is Mr. Andress' partners, his name is

           2        McKenzie.  This lot is owned by -- Mr. Andress

           3        is a realtor, and he arranged to sell -- to

           4        acquire this lot to a fellow named Mr. Floyd,

           5        who is his client, and we believe he has a

           6        listing on one of these two lots here.

           7             There is nothing in this part of the

           8        island.  You can see it's just an overlay of

           9        lot, paper plat over the terrain and there is

          10        nothing there.

          11             GOVERNOR BUSH:  Are there any houses on the

          12        island now?

          13             MR. ARLINE:  There of 25 houses scattered

          14        around the entire island.  Most of them tend to be

          15        at the south end of the island right near Captiva

          16        Island, the pass down there.  There is seven --

          17        some of them are not really houses, they are

          18        really structures, but some are houses in the

          19        middle of the island to the north of here.

          20             But in this part of the island -- this is

          21        about five or 600 acres that is untouched, and

          22        we think that your decision here could lead to

          23        a house on the beach and some of these other

          24        homes being added to the middle of the site.

          25             Mr. Andress, I attached in my materials

           1        here a listing in which he is proposing to sell

           2        one of the lots on Cayo Costa fronting the gulf

           3        for $285,000.  So there is serious money

           4        involved in this, and I think this is what is

           5        probably going on behind this easement request.

           6             Ms. Sellers sold her land to the state

           7        years ago, she moved out there 30 years ago

           8        with her husband.

           9             GOVERNOR BUSH:  Where is her home?

          10             MR. ARLINE:  You can just barely see it.

          11        It's up here in the subdivision to the north,

          12        which is called LaCosta Isle; it's back against a

          13        little canal that's there.  She took back a life

          14        estate, and it is her request that you not grant

          15        the easement.

          16             Let me give you two reasons why you

          17        shouldn't.

          18             One, is that I believe -- and this opinion

          19        is also that Mr. Andress' attorney -- not

          20        Mr. Hyde, but another attorney name Ken

          21        Jones -- there already is an easement for all

          22        of these lots in this subdivision that's called

          23        Isle of Grove.

          24             First, let me locate you a space if I

          25        might.  This is the Island Grove subdivision,

           1        Mr. Andress' lot is about right here.  This is

           2        a subdivision to the north, it's just a paper

           3        plat, but you can see the lots and this is

           4        Carol Sellers' lot is over here.

           5             So I am going to show you a blow up of

           6        this Island Grove subdivision.  This is the

           7        plat for Island Grove subdivision.  And it

           8        is -- you can tell by looking at the legal

           9        description for all the lots, each lot has a

          10        30-foot easement on the north side or south of

          11        the parcel, so there is roads, paper roads

          12        running through the entire subdivision.  That's

          13        how it's platted.

          14             And there is an easement here for 66,

          15        30-foot wide easement, and the survey for

          16        Island Grove subdivision shows this line

          17        extends to the beach.

          18             And I have previously provided your staff

          19        with the opinion of Mr. Jones which attaches

          20        some sales brochures from the '50s when the

          21        subdivision was originally sold, showing that

          22        that, in fact, was the access point to the

          23        beach and there was a dock and there was going

          24        to be a beach and beach house and all this

          25        stuff.

           1             The point of that is that the law on

           2        easements by necessity are that you only give

           3        them if there is no other access by common law

           4        implication or by expressed grant.

           5             There is an expressed grant in this

           6        subdivision.  And I think that is enough to say

           7        we don't have to give you an easement.  Now

           8        what has been requested --

           9             CFO GALLAGHER:  I can see how lots 62, 4, 5

          10        6, 71 and 72 and 71A -- is there something moving

          11        back and forth this way, all the way at the end,

          12        far end or where?

          13             MR. ARLINE:  Let me explain to you.

          14        Essentially what you have got is all the lots in

          15        the subdivision have a 30-foot easement either on

          16        the north or south lot, so there is roads running

          17        east and west.  They connect to this long skinny

          18        rectangle here, which the state bought and paid

          19        $500,000 for this rectangle, and it is an

          20        easement.  So essentially the way this sub--

          21        developer of the --

          22             CFO GALLAGHER:  You are telling me the state

          23        went and bought the road, and we did it to make it

          24        an easement?

          25             MR. ARLINE:  It was an easement.

           1             CFO GALLAGHER:  So now we own it, and it's

           2        not an easement any more.

           3             MR. ARLINE:  I think it still is an easement

           4        because it was an easement and the property owners

           5        in this subdivision, including Mr. Andress, have

           6        the same rights that they had previously; even

           7        though you are the owner, you didn't extinguish

           8        their easement rights.

           9             CFO GALLAGHER:  Has it got a road on it?

          10             MR. ARLINE:  No, it's a paper road.

          11             CFO GALLAGHER:  Does anybody know why we

          12        bought this thing, why we bought one long strip?

          13        When did we do that?

          14             MR. ARLINE:  You acquired several pieces.

          15             CFO GALLAGHER:  From who?  The original

          16        developer?

          17             MR. ARLINE:  Various property owners.  What

          18        you see here in the Island Grove, the yellow dots

          19        are the only private parcels left; you bought

          20        everything else.  When you bought a piece of

          21        property that had an easement on it, you're

          22        subject to the rights of the easement.

          23             CFO GALLAGHER:  So your argument at this

          24        point, these are the only ones that are owned.

          25        Where is our applicant's property?

           1             MR. ARLINE:  Right here.

           2             CFO GALLAGHER:  So your argument is that he

           3        walks out his -- he walks down south on his

           4        property -- I don't know what's north and south

           5        here -- and he heads down there to the state land,

           6        and he goes down the road there, makes a left and

           7        heads on out to a thing; is there a dock out

           8        there?

           9             MR. ARLINE:  No.

          10             CFO GALLAGHER:  You feel that he has a right

          11        to build a dock out there?

          12             MR. ARLINE:  No, I don't.

          13             CFO GALLAGHER:  Who gets to build one out

          14        there?

          15             MR. ARLINE:  I don't think the easement by

          16        necessity on an island means you have a right to a

          17        dock.  I think it means you can get to the water.

          18             GOVERNOR BUSH:  Can we get the department

          19        back?

          20             CFO GALLAGHER:  Are you going to swim over or

          21        what?

          22             MR. ARLINE:  The statute that you are

          23        operating under speaks to ferries.  Actually

          24        that's how people are brought back and forth, they

          25        are dropped off right on the beach.

           1             CFO GALLAGHER:  A ferry with a front end that

           2        drops down and let's you off on the beach?

           3             MR. ARLINE:  The boats will drive up and

           4        allow people to get off and on.  Now there is a

           5        dock to the north, up here, that is, to be honest,

           6        there is a canal right here; Mr. Andress has an

           7        easement agreement with the owner of that dock to

           8        use it personally for himself.  Mr. Andress, in

           9        fact, owns --

          10             CFO GALLAGHER:  Slide that down a little bit.

          11             MR. ARLINE:  There is a canal right here

          12        called Sellers Canal, and there is a private dock

          13        in there.  Mr. Andress has an agreement with the

          14        property owner to use that dock.  It's personal to

          15        him, and Mr. Andress, for point of clarification,

          16        owns that lot.

          17             GOVERNOR BUSH:  Ms. Gallagher, can you --

          18             MS. ARMSTRONG:  Emphatically, no.

          19             GOVERNOR BUSH:  What is the department's

          20        position regarding the contention that there is

          21        already an existing easement?

          22             MS. ARMSTRONG:  The one that he is referring

          23        to --

          24             GOVERNOR BUSH:  The first --

          25             MS. ARMSTRONG:  Down here, there is no

           1        easement; it does not exist.  It was a line on a

           2        sales brochure and our title staff says there is

           3        no easement down there.

           4             GOVERNOR BUSH:  Okay.

           5             CFO GALLAGHER:  Was there an easement down in

           6        the other property we bought?

           7             GOVERNOR BUSH:  The one we bought for

           8        500,000?

           9             CFO GALLAGHER:  Yeah, is that an easement?

          10        What's our staff say on that?

          11             GOVERNOR BUSH:  The long --

          12             MS. ARMSTRONG:  Yes, the other areas we can,

          13        in fact, we do have easements on.  The other

          14        easements that are in place, we do have.  We don't

          15        distinguish --

          16             CFO GALLAGHER:  The only one is that one that

          17        does go down to lot 66; it just doesn't go further

          18        than that, are you saying?  It's got to be behind

          19        66?

          20             MS. ARMSTRONG:  Correct.  I am looking at the

          21        numbers here.

          22             GOVERNOR BUSH:  Look at the map.

          23             CFO GALLAGHER:  Look at your map on the

          24        screen.

          25             MS. ARMSTRONG:  Right.  It just doesn't go

           1        outside of that to the water.  They clearly made

           2        the distinction between the lots on paper inside

           3        and getting to the edge of the water.  For

           4        whatever reason, they did not, when they platted

           5        it, they didn't take it to the water.

           6             CFO GALLAGHER:  Who is they?

           7             MS. ARMSTRONG:  The original developer who

           8        platted those lots.

           9             CFO GALLAGHER:  They platted, but it's not

          10        recorded?

          11             MS. ARMSTRONG:  Correct.

          12             CFO GALLAGHER:   So you are saying -- all it

          13        means is they did or didn't draw some lines there

          14        at this point.

          15             MS. ARMSTRONG:  Correct, there is no legal

          16        easement.  He has it come in for a right of

          17        access.

          18             CFO GALLAGHER:  Somebody says they do have

          19        lines there, and you are saying they don't.

          20             MS. ARMSTRONG:  I am saying -- I am telling

          21        you Mr. Arline is incorrect in his assertion that

          22        there is an easement there.

          23             CFO GALLAGHER:  Okay.

          24             GOVERNOR BUSH:  Eva, the purchase of that --

          25        this is a little off the beat and path, but the

           1        purchase of an easement, the 500,000-dollar

           2        purchase of a long skinny piece of property that

           3        was an easement, when we buy easements that we

           4        don't want them to -- I assume the strategy here

           5        is to turn as much of this -- for the state to

           6        own, to operate a state park here?

           7             MS. ARMSTRONG:  Correct.

           8             GOVERNOR BUSH:  So when we buy an easement,

           9        don't we extinguish-- I am confused about how --

          10        why would we keep that easement available to

          11        property owners as a matter of course?  Wouldn't

          12        it be part of the strategy to --

          13             MS. ARMSTRONG:  -- extinguish them when we

          14        don't need them?

          15             GOVERNOR BUSH:  Why do we buy it?  If it's

          16        going to be an easement, why would we need to buy

          17        it?

          18             MS. ARMSTRONG:  Well, when we go in to buy a

          19        large piece of property like this, if we are the

          20        owner, we will extinguish whatever we don't need.

          21        For example, for Southern Goldengate Estates,

          22        think of those road, right; as we are getting the

          23        public out of there, we'll get rid of those roads.

          24             GOVERNOR BUSH:  In this case we have private

          25        property owners; but is the intention to buy the

           1        entire island?

           2             MS. ARMSTRONG:  That is our goal.  We have

           3        not been totally successful in buying.  You see

           4        the map; there are owners in there.  Until you get

           5        rid of all those other owners, we would not go

           6        after extinguishing all those roads.

           7             Now these are not publicly dedicated

           8        roads.  So there is not something for us really

           9        to extinguish.  They are coming into us and

          10        saying, I own property here; you own everything

          11        around it.  I have a statutory right to get to

          12        my property.  So that's a little different from

          13        a public road.

          14             CFO GALLAGHER:  You want to use the one

          15        that's already established as opposed to have them

          16        just drive anywhere they want.

          17             GOVERNOR BUSH:  If the strategy is to buy --

          18        to create this fully integrated state park, I

          19        would -- the last purchase I would make is the

          20        easement since --

          21             CFO GALLAGHER:  I agree, except if it was

          22        available.

          23             GOVERNOR BUSH:  Of course, it's available.

          24        We are just paying for something that property

          25        owners already had the right to use.  Hello.

           1        Anyway, that's not the subject here.

           2             MS. ARMSTRONG:  That's not the subject at

           3        hand.

           4             GOVERNOR BUSH:  I hope for the future --

           5             CFO GALLAGHER:  For fun, do you know when we

           6        bought the easement?  Was it part of another big

           7        purchase or something from the developer?

           8             MS. ARMSTRONG:  '83 I am told.

           9             CFO GALLAGHER:  None of us were here in '83,

          10        not even me.

          11             MS. ARMSTRONG:  It was part of a bigger

          12        acquisition, to be clear.

          13             MR. ARLINE:  If I may, I will conclude.  If

          14        the idea is to go the northern route, to take the

          15        path that staff is recommending, which is

          16        essentially to connect from north of the easement

          17        up to this subdivision, you go through a lot

          18        called lot 30.  And lot 30 has this deed

          19        restriction on it:  This lot shall never be used

          20        for road or street right-of-way, to connect with

          21        or to any road or street right-of-way in any

          22        adjoining property, provided that this restriction

          23        may be released by the grantors herein, their

          24        heirs and assigns.

          25             CFO GALLAGHER:  It said can be released?

           1             MR. ARLINE:  Can be released.

           2             CFO GALLAGHER:  We now own the lot, right,

           3        the state?

           4             MR. ARLINE:  But not -- all of the other

           5        property owners in that subdivision I believe has

           6        some rights and interest in that restriction

           7        because that's in their subdivision.  I think the

           8        intent of the developer of that subdivision was to

           9        operate those two subdivisions.

          10             CFO GALLAGHER:  I am sure that was his

          11        intent, but when he sold it to the state, the

          12        state now has the rights he gave the person that

          13        owned it and the future owners which you just

          14        read.

          15             MR. ARLINE:  That's a point of --

          16             CFO GALLAGHER:  If the state wants to give

          17        them, based on what they are doing, the access to

          18        it, then somebody, other landowners around there

          19        can take a shot at suing, but I don't think they

          20        are going to get very far.

          21             GOVERNOR BUSH:  Wait until we find out.

          22             MR. ARLINE:  That's what lawyers get to

          23        complain about.

          24             Let me just close in saying that Cayo

          25        Costa is an extremely special place.  The state

           1        has a lot of investment out there, and we would

           2        highly recommend that you not make it real easy

           3        and more advantageous to develop out there than

           4        it currently already is.  There currently

           5        already is an opportunity to get to that

           6        property, and you don't need to do this.  Thank

           7        you.

           8             COMMISSIONER BRONSON:  Governor, if I can

           9        ask, and I happen to be one person who has land

          10        that's landlocked.  And we actually have to get an

          11        easement from our neighbor to get on to our

          12        property, which by Florida law -- I can't remember

          13        exactly how that law is written, it does say that

          14        a person who buys property, titled, and so forth,

          15        that has a proscriptive right to get on to their

          16        property at some point.  Now it doesn't have to

          17        be the one that you want; it has to be a

          18        legitimate -- and the courts have ruled many

          19        times, you can't make somebody drive 45 miles to

          20        get to his property that he could get to within a

          21        mile or two from a main road.

          22             So there are some court cases hanging out

          23        there that has been adjudicated that has said

          24        you have to give people rights to their

          25        property.

           1             So what is the legal aspect of -- you are

           2        telling me there is no formal access easement

           3        on this island, that everyone that's shown here

           4        you are saying really is on paper, that doesn't

           5        exist, is that correct?

           6             MS. ARMSTRONG:  He has a right to get a way

           7        of access, absolute legal right to get access.

           8        Mr. Arline's -- to be fair, Mr. Arline's client

           9        would like to find a way to delay to give somebody

          10        time to buy the property.

          11             The county is looking at perhaps

          12        condemning; that's their business.  I am here

          13        to tell you it's only fair, this man is a

          14        property owner.  We have a statute that says we

          15        surround his property, we have to give him a

          16        way to get to his property.

          17             GOVERNOR BUSH:  Did we try to buy his

          18        property?

          19             MS. ARMSTRONG:  We have tried.  We tried to

          20        swap.  We weren't able to work it out.  So in my

          21        mind, he's agreed to the route we proposed.  We

          22        say it's the least intrusive to the natural

          23        resources out there.

          24             I would suggest to you that if he has

          25        agreed to our option two, which is outlined in

           1        the staff's recommendation, in the staff item,

           2        that that is the way to go.  And that's in

           3        fairness to him; it's the shortest distance

           4        between two points, pardon the pun.

           5             COMMISSIONER BRONSON:  Governor, on this map

           6        that I am seeing here, that means that that line A

           7        will go all the way out to the water where they

           8        are going to be unloaded from whatever carrier

           9        they have to bring them over, so that that is a

          10        direct line easement.

          11             MS. ARMSTRONG:  Yes, sir.  He also has an

          12        easement in that canal for a boat.  He has an

          13        easement there.  He has access there already.

          14             COMMISSIONER BRONSON:  Okay.

          15             CFO GALLAGHER:  If he already has access,

          16        then he is not going to get very far in the legal

          17        aspect of it.

          18             MS. ARMSTRONG:  He is okay there with A.

          19             CFO GALLAGHER:  He is asking us, based on

          20        some legal standard that he has to have access to

          21        his property; and if he's already got it, how is

          22        he going to get more?

          23             MR. HYDE:  He has access to a dock that's in

          24        this existing canal.  And this easement we are

          25        requesting would basically run west and then south

           1        down to the property.

           2             We proposed a different proposal where our

           3        lot is just to run straight in from the bay

           4        which would be considerably shorter.  But the

           5        state doesn't like that option.

           6             GOVERNOR BUSH:  You can see why we wouldn't,

           7        because that is probably the one that maximizes

           8        the value.  And since we are ultimately I guess

           9        the purchasers of first and last resort here, as a

          10        strategic --

          11             MR. HYDE:  My client, he is willing to go

          12        this longer route.  He can live with it.  He can

          13        use the dock in the canal, and then he can get

          14        access to his property in an area that the state

          15        believes is already impacted.

          16             I just wanted to clarify for you, there

          17        are six houses on the beach out there, one new,

          18        one built within the last year.  To say that

          19        there are no houses on the beach is misleading.

          20             The listing that was supposedly in my

          21        client's benefit for a gulf front lot, first of

          22        all, he doesn't own it and he doesn't have the

          23        listing for it.

          24             I just wanted to make those

          25        clarifications.

           1             We are willing to go with the state's

           2        preference here.  I would ask you if you do

           3        that, to waive the requirement that we pay the

           4        state's attorneys fees, if we get into

           5        litigation over it, because I do think there is

           6        a distinct possibility that we will get in

           7        litigation over it.  And I would prefer not to

           8        have to saddle my clients with that cost, too.

           9        That's within your discretionary.

          10             CFO GALLAGHER:  What you are saying is we go

          11        make a decision that gives you an initial access

          12        point and we get sued, and you want to make sure

          13        that you don't pay the fees that you basically

          14        caused us to have?

          15             MR. HYDE:  No.  I think that if you went our

          16        route, you wouldn't have any worry about a

          17        lawsuit.  And I don't believe the lawsuit would be

          18        successful as you suggested earlier,

          19        Mr. Gallagher.

          20             What I am concerned about -- and this

          21        isn't a big point, but I just don't think it's

          22        fair to have us pay our fees, and then your

          23        fees too, if litigation ensues.  That's all.

          24        We hope it won't ensue.

          25             GOVERNOR BUSH:  We are not going to sue you.

           1        Isn't that the point?  So we are not going to sue

           2        you, so the only reason litigation would start is

           3        if it's started by somebody else.  Not by the

           4        applicant, but by somebody else you are saying?

           5             MR. HYDE:  Right.

           6             GOVERNOR BUSH:  That's different.

           7             CFO GALLAGHER:  But other people are going to

           8        sue.

           9             MS. ARMSTRONG:  Let me be clear.  What we are

          10        now recommending instead of denial of his request,

          11        which was option one, is that you would approve

          12        option two which is just line B, this, line B

          13        would be the easement.

          14             GOVERNOR BUSH:  There already is an easement

          15        going east/west?

          16             MS. ARMSTRONG:  Correct, that is a road in

          17        there which is a big -- he has an easement on the

          18        canal.

          19             GOVERNOR BUSH:  Is there a motion?  I think

          20        we discussed this.

          21             CFO GALLAGHER:  I am almost at the point, I

          22        have been around and around a little on this.  I

          23        am almost at the point where I believe there is

          24        access already.  He already has it.  And my gut is

          25        to deny putting an additional --

           1             GOVERNOR BUSH:  Where does he have access?

           2             CFO GALLAGHER:  To the canal.

           3             GOVERNOR BUSH:  But he doesn't have the

           4        north/south.

           5             MS. ARMSTRONG:  He needs north/south, he

           6        needs B.

           7             CFO GALLAGHER:  That's the land we own;

           8        that's already an easement.

           9             MS. ARMSTRONG:  He doesn't have the legal

          10        easement that he needs on B.

          11             MR. HYDE:  There is an existing east/west

          12        easement.  This section labeled B on this map is

          13        what you would technically be granting to us here

          14        today.

          15             MS. ARMSTRONG:  He needs that.

          16             MR. HYDE:  He needs that.  There is no other

          17        way to get from our property or to our property.

          18             COMMISSIONER BRONSON:  He has a 30-foot

          19        easement that goes from his property back to B,

          20        but he does not have legal easement from A down to

          21        B.

          22             MR. ANDRESS:  Let me clarify some

          23        misconceptions that have been thrown out here

          24        today.

          25             CFO GALLAGHER:  I can believe that.

           1             MR. ANDRESS:  What we have is at one time we

           2        had a gentleman name Mr. Philip Rasmussen, he is

           3        about 85, 86 years old.  He developed this

           4        subdivision.

           5             In the late '70s and early '80s, the state

           6        and Lee County placed a moratorium on any

           7        building on Cayo Costa.  During that frame of

           8        time, that time period, the state went to

           9        Mr. Rasmussen and said, We know you have got

          10        this hundred lot subdivision called Island

          11        Grove.  But none of these lots are buildable.

          12        So, therefore, why don't you sell us all the

          13        property 360 degrees around this subdivision,

          14        including all of the easements.

          15             And Mr. Rasmussen said, sure, I will do.

          16        So that's what he did.

          17             All these people that he had sold property

          18        to, he did not reserve any easements whatsoever

          19        for them to get to their property.  This

          20        50-foot strip of land, they didn't pay $500,000

          21        for that.  The state bought all of the

          22        beachfront and all of the other seven parcels,

          23        360 degrees around this subdivision, and did

          24        away with all of the easements.

          25             There is no easements recorded, period.

           1        When they purchased that land, there were no

           2        easements reserved.  So that's why this

           3        subdivision now, you have people out there that

           4        have owned this property for 40, 50 years, they

           5        bought these properties back in the '50s.  They

           6        still think to this day they have, the other

           7        owners, that they have access because

           8        Mr. Rasmussen represented that they did.

           9             There is no access to this subdivision.

          10        We proposed something we thought would be very

          11        reasonable, is to come in from where it was

          12        originally.  We only have to go 370 feet to get

          13        to the boundary line of the subdivision from

          14        the bay.

          15             That has less impact than anywhere out

          16        there.  But we paid $7,500 for a study to --

          17        because some of the people, the park service,

          18        they have been overzealous here in terms of

          19        this whole issue, and they didn't want us to

          20        come in from the bay.  The only way you can get

          21        there is by boat.

          22             So as a compromise, we offered the first

          23        two compromises, the first that we would trade

          24        the property, but the park services said we

          25        don't want to trade the property in an area

           1        where all the greatest conveyance of lots are

           2        that are still privately owned.

           3             There is an area of LaCosta Isle

           4        Subdivision, which is this subdivision right

           5        here, all almost all of the lots out in this

           6        area, probably 20, 30 lots, are still privately

           7        owned.

           8             So we offered to trade in that area where

           9        we could cluster the development and reduce the

          10        impact.

          11             I am a fifth generation Florida native.  I

          12        don't want this island destroyed.  And I made

          13        that commitment financially by giving millions

          14        of dollars worth of property out there to the

          15        state.

          16             But the park service has their set mind.

          17        And after we spent all this money, we withdraw

          18        from the agenda, spent almost a year now with

          19        appraisals and everything; no, the only thing

          20        we are willing to trade you for is something

          21        north of your lot.  My lot is over here in this

          22        area.  And so, therefore, they trade me

          23        something over in LaCosta Isle subdivision

          24        where the state owns a hundred percent of the

          25        property.  Makes absolutely no sense

           1        whatsoever.

           2             But that's the position that the state has

           3        taken in terms of a trade.

           4             CFO GALLAGHER:  Can we ask Eva how come

           5        that's the trade instead of over there in that

           6        place where there is a bunch of other houses?

           7             MR. ANDRESS:  We don't understand.

           8             CFO GALLAGHER:  Let her try to tell us why.

           9             MS. ARMSTRONG:  Actually I think we were

          10        swapping for anything -- we were going to swap for

          11        anything we own which is pink.

          12             GOVERNOR BUSH:  We can't see that.  Come on.

          13             CFO GALLAGHER:  Put it on the thing because

          14        we can't see colors here.  Al Gregory, I want

          15        people talking that know about it.

          16             MR. GREGORY:  I am Albert Gregory.  We made a

          17        great job making this --

          18             GOVERNOR BUSH:  You need to be a little

          19        louder.

          20             MR. GREGORY:  We've done a marvelous job of

          21        making this a very complicated issue.  Let me see

          22        if I can simplify it.

          23             GOVERNOR BUSH:  Get closer to the microphone

          24        if you could.

          25             MR. GREGORY:  This is the central portion of

           1        Cayo Costa State Park.  You saw the large map that

           2        puts you in geographical context.  Mr. Andress,

           3        this is Mr. Andress' property right here.

           4        Mr. Andress --

           5             GOVERNOR BUSH:  Get back on the chart.

           6             MR. GREGORY:  This is Mr. Andress' property

           7        right here.  Mr. Andress presently accesses his

           8        property by way of this canal, called Sellers

           9        Canal, down a public road right-of-way called

          10        Costa Drive, down to roughly this point at which

          11        the interstate lands are an existing Jeep trail,

          12        dirt road.  He comes down roughly there, and then

          13        over land on state land, he reaches this property.

          14             All that we are suggesting is to give

          15        Mr. Andress an easement over the route which he

          16        presently uses, rather than to create a whole

          17        new access in an undisturbed area through

          18        mangroves, through hammock, through an

          19        archaeological site.

          20             CFO GALLAGHER:  We got that.

          21             MR. ANDRESS:  And that's not even a correct

          22        statement because this 2600 feet of road does not

          23        even exist; it's through a pristine area; there is

          24        no trail there.  We never accessed through that

          25        way.

           1             GOVERNOR BUSH:  How do you access your

           2        property?

           3             MR. ANDRESS:  We don't.

           4             CFO GALLAGHER:  He doesn't have anything --

           5             GOVERNOR BUSH:  Do you ever go see your

           6        property?

           7             MR. ANDRESS:  When I go there, I land a boat

           8        right here, at this point right here, and go

           9        370 feet from the bay over to the property where

          10        the old easement used to be.

          11             CFO GALLAGHER:  Is there a structure?

          12             MR. ANDRESS:  No, structure.

          13             CFO GALLAGHER:  The reason why we got you up

          14        here -- I am glad you told us that, but where is

          15        the trade deal you offered them?

          16             MR. GREGORY:  We offered to explore and comb

          17        Cayo Costa Bay Park for lots to trade.  These pink

          18        shaded areas are the outstanding private

          19        ownerships up in La Costa Isle subdivision.  The

          20        only lots that Mr. Andress wanted on Cayo Costa

          21        Island were five -- not quite ocean front lots, as

          22        you can see, they are not directly on the ocean

          23        but they have a nice -- they are in this area

          24        right here, I believe.

          25             MR. ANDRESS:  In between two existing houses.

           1             MR. GREGORY:  These are the only lots he was

           2        interested in swapping for, the ones that had good

           3        beach view.  And one of our management objectives

           4        there is to try to limit the number of houses

           5        which you can see from the beach in order to try

           6        to preserve the park experience.

           7             People have property out there; they have

           8        the right to develop their properties.  We are

           9        not suggesting that we are trying to obstruct

          10        him from developing his property, but we don't

          11        feel like we have an obligation to facilitate

          12        the development of state lands that are on the

          13        beach, you can see from the beach.

          14             We were willing to swap Mr. Andress most

          15        anything, but he asked for lots that we didn't

          16        feel were in the best interest of the state.

          17             CFO GALLAGHER:  The pink ones are privately

          18        owned, right?

          19             MR. GREGORY:   Yes.

          20             CFO GALLAGHER:  We own everything else?

          21             MR. GREGORY:  The county's ownership is in

          22        blue here.

          23             CFO GALLAGHER:  Where are these two houses

          24        between -- that he wanted to be between?

          25             MR. ANDRESS:  There is a house right there,

           1        and there is a house right there.  So we thought

           2        we could cluster this.  We took a look at the

           3        environmental impacts; there is no trees on the

           4        property.  There is almost -- there are no gopher

           5        tortoises or endangered species on the property.

           6             CFO GALLAGHER:  You want to be on that road

           7        between those two houses, not down there on the

           8        other road?

           9             MR. ANDRESS:  We thought this would be one

          10        place to go, and they said no to that.  Then we

          11        went up here to this area right here.  You see all

          12        the pink houses right here?

          13             We said we will trade you for these lots

          14        right in here inbetween all these houses.  I

          15        proposed that to Tracy for the DEP.  And she

          16        came back again and said no, we are firm here,

          17        the only place that we will trade you any lots

          18        is over in this area here where all the lots

          19        are owned by the state.  So our hands were

          20        tied.  What could we do?

          21             CFO GALLAGHER:  Listen, guys, whoever.

          22        Aren't we better off having all the houses

          23        together than building -- putting -- having people

          24        put a house over there where there isn't anything

          25        else?

           1             MR. GREGORY:  Absolutely.

           2             MR. ANDRESS:  I am not asking you.  I am

           3        asking our staff people that do this stuff?

           4             MR. GREGORY:  That's where all the houses out

           5        there are.

           6             CFO GALLAGHER:  That's where I would want to

           7        be.  I don't want to be over by the swamp there

           8        and that looks like where all the mosquitos are.

           9        I've got this marked, I am calling this dude up to

          10        get me a lot.

          11             GENERAL CRIST:  I would like to make a motion

          12        on option B.

          13             CFO GALLAGHER:  But what I would rather do is

          14        get this guy a lot over there where the other lots

          15        are and not have to do an easement way out to

          16        somewhere else.

          17             MR. ANDRESS:  Mr. Gallagher, not only would

          18        that solve the problem with me, but I talked to

          19        Mr. McKenzie, I talked to Mr. Floyd, and we were

          20        willing to take our 1.1-acre parcels and trade for

          21        one and a half and have a stipulation, deed

          22        restriction, we can only build one house; we can

          23        move three of these lots out of here, over here on

          24        these five lots.  We would trade these five lots

          25        for these three lots and would solve the problem.

           1        It's a simple solution.  And the houses are all

           2        clustered.

           3             GOVERNOR BUSH:  You'd get a better view over

           4        there.  Why wouldn't you want to do that?

           5             MS. ARMSTRONG:  I think that's part of the

           6        problem, that at least from a staff and park

           7        perspective, while solving a problem for

           8        Mr. Andress, we didn't want to be giving better

           9        state land up, far better state land up and, you

          10        know --

          11             GOVERNOR BUSH:  You would have to meet the

          12        wrath of the Governor.  Oh, it looks better.  If

          13        it wasn't better, you wouldn't want it.  You seem

          14        like a smart guy.

          15             MR. ANDRESS:  I would rather have a house

          16        over here because it's not -- it's off by itself,

          17        it's secluded, it's more private, it's 10 and a

          18        half foot elevation, it's covered with beautiful

          19        oak trees.  It's a much more beautiful building

          20        site.  These sites have nothing on them.  You are

          21        right there next to all the houses.

          22             GOVERNOR BUSH:  You are also right next to

          23        paradise there, the Atlantic, I mean the Gulf of

          24        Mexico and the beautiful beach, it looks like.

          25             Anyway we can discuss that.  The question

           1        at hand here is not the swapping issue.  The

           2        question at hand is this property owner has a

           3        right to access his property.  And maybe by

           4        giving him that right, he will have better

           5        leverage to get whatever he wants to get from

           6        the department; maybe he won't.  But that's for

           7        a later day.  We'll probably have a lively

           8        discussion about that purchase in the future.

           9             COMMISSIONER BRONSON:  I would second the

          10        motion.

          11             CFO GALLAGHER:  Let me ask a question here.

          12        He already -- if we just let him drive around and

          13        do it without any daggone easements, what's the

          14        problem?  If he wants to build something, maybe he

          15        will utilize that road.

          16             MR. HYDE:  I will tell you why.  Bill Hyde

          17        for the applicant.

          18             I guess you could probably take half the

          19        tracts out there and drive all over the place

          20        and incur the wrath of people.  But the bottom

          21        line is if you want to borrow money to build a

          22        structure, you have to have a legal right of

          23        access.

          24             By the way, this is not some ploy to drive

          25        up the price to get the state to buy it.  The

           1        Andresses legitimately want to build a house

           2        out here; that's why they are going through

           3        this rigmarole.

           4             CFO GALLAGHER:  Let me just say here, I think

           5        to the staff here, and somebody is going to have

           6        to educate me maybe inbetween meetings here --

           7        that we would be a lot better off giving these

           8        people the better -- if you want to call it --

           9        property on that road and get these outparcels out

          10        of there rather than having houses build out in

          11        that other area.

          12             Why don't we get -- if these five guys

          13        that have those lots are willing to take it on

          14        theirs as a lump sum deal, give them some

          15        lumps -- let all the people be on one street,

          16        and get those other things in the state's

          17        interest.

          18             GOVERNOR BUSH:  That's not a question, that's

          19        homework for another day.

          20             COMMISSIONER BRONSON:  Commissioner

          21        Gallagher's point, now by approving B, he is going

          22        to be able to get to that place where he says he's

          23        got the oak trees, a lot better place, higher

          24        elevation.  He is going to build a house there if

          25        we don't give him any other option.

           1             So this could be -- we are going to pay

           2        now or pay later; we are going to end up

           3        dealing with this one way or the other.

           4             GOVERNOR BUSH:  So there is a motion and a

           5        second for alternative B of the agenda item, and I

           6        assume we know what that means.  There is no more

           7        discussion.

           8             CFO GALLAGHER:  Which is the staff

           9        recommendation.

          10             GOVERNOR BUSH:  The staff recommendation, the

          11        new staff recommendation.

          12             CFO GALLAGHER:  Any agreement made with the

          13        applicant -- when I started about --

          14              GOVERNOR BUSH:  -- an hour ago.  Any other

          15        discussion?

          16             Without objection, the item passes.  Thank

          17        you all.  Thank you for coming up.  Thank you,

          18        sir.

          19             MR. HYDE:  Thank you, Governor, Members of

          20        the Cabinet.

          21             MS. ARMSTRONG:  One more item.  Item

          22        number 8.  This is six option agreements for

          23        conservation easements within the Green Swamp Area

          24        of critical state concern.  They are at or just

          25        below 90 percent of appraised value.

           1             GOVERNOR BUSH:  Is there a motion?

           2             COMMISSIONER BRONSON:  Motion.

           3             CFO GALLAGHER:  Second.

           4             GOVERNOR BUSH:  Moved and seconded.  Without

           5        objection, the item passes.

           6             MS. ARMSTRONG:  Thank you, sir.  That's it.




















           1             GOVERNOR BUSH:  State Board of

           2        Administration.

           3             Is there a motion on item 1?

           4             CFO GALLAGHER:  Motion on the minutes.

           5             GENERAL CRIST:  Second.

           6             GOVERNOR BUSH:  There is a motion and second.

           7        Without objection, item 1 is approved.

           8             Good afternoon, Coleman.  Item 2.

           9             MR. STAPANOVICH:  Good morning, Governor,

          10        Members.

          11             Item 2, approval of fiscal sufficiency of

          12        an amount not exceeding 363,400,000.

          13             CFO GALLAGHER:  Motion on 2.

          14             GENERAL CRIST:  Second.

          15             GOVERNOR BUSH:  Moved and seconded.  Without

          16        objection, the item passes.

          17             MR. STAPANOVICH:  Item number 3, approval of

          18        fiscal sufficiency of an amount not exceeding

          19        24,045,000, State of Florida, Florida Education

          20        System, Florida Atlantic University.

          21             GENERAL CRIST:  Moved.

          22             CFO GALLAGHER:  Second.

          23             GOVERNOR BUSH:  Moved and seconded.  Without

          24        objection, the item passes.

          25             MR. STAPANOVICH:  Item number 4, approval of

           1        fiscal sufficiency of an amount not exceeding

           2        $14,850,000.

           3             CFO GALLAGHER:  Motion on 2.

           4             GENERAL CRIST:  Second.

           5             GOVERNOR BUSH:  Moved and seconded.  Without

           6        objection, the item passes.

           7             MR. STAPANOVICH:  Item 5, approval of fiscal

           8        sufficiency of an amount not exceeding

           9        $350,000,000, State of Florida, Department of

          10        Transportation Turnpike Revenue Refunding Bonds.

          11             GENERAL CRIST:  Moved.

          12             CFO GALLAGHER:  Second.

          13             GOVERNOR BUSH:  Moved and seconded.  Without

          14        objection, the item passes.

          15             MR. STAPANOVICH:  Item number 6, approval of

          16        fiscal sufficiency of an amount not exceeding

          17        $210,000,000 --

          18             CFO GALLAGHER:  Motion on 6.

          19             GENERAL CRIST:  Second.

          20             GOVERNOR BUSH:  There is a motion and a

          21        second.  Without objection, the item passes.

          22             MR. STAPANOVICH:  Item number 7, approval of

          23        fiscal determination of an amount not exceeding

          24        $16,855,000 tax exempt Florida Housing Finance

          25        Corporation Multifamily Revenue Bonds.

           1             GENERAL CRIST:  Motion.

           2             CFO GALLAGHER:  Second.

           3             GOVERNOR BUSH:  Moved and seconded.  Without

           4        objection, the item passes.

           5             MR. STAPANOVICH:  Item number 8, approval of

           6        fiscal determination of amounts not exceeding

           7        $16,840,000 --

           8             CFO GALLAGHER:  Motion on 8.

           9             GENERAL CRIST:  Second.

          10             GOVERNOR BUSH:  There is a motion and a

          11        second.  Without objection, the item passes.

          12             MR. STAPANOVICH:  Item number 9, approval

          13        fiscal determination of an amount not exceeding

          14        $15,850,000 Tax Exempt Florida Housing Finance

          15        Corporation Multifamily Mortgage Revenue Bonds.

          16             GENERAL CRIST:  Motion.

          17             CFO GALLAGHER:  Second.

          18             GOVERNOR BUSH:  Moved and seconded.  Without

          19        objection, the item passes.

          20             MR. STAPANOVICH:  Item number 10, approval

          21        fiscal determination of an increase of an amount

          22        not exceeding $350,000 tax exempt Florida Housing

          23        Finance Corporation Multifamily Mortgage Revenue

          24        Bonds.

          25             GENERAL CRIST:  Motion.

           1             CFO GALLAGHER:  Second.

           2             GOVERNOR BUSH:  Moved and seconded.  Without

           3        objection, the item passes.

           4             MR. STAPANOVICH:  Item number 11 is

           5        information only, Governor, Members; it's State

           6        Board of Administration Mutual Fund Proxy

           7        Guidelines.

           8             We have mutual fund voting guidelines that

           9        are posted on the Internet.  We had these

          10        guidelines in place for many years on the

          11        domestic equities and the international

          12        equities.  We'll be adding these guidelines as

          13        well; and as a result of the fine contributions

          14        program, it's very similar to what we do on the

          15        DB side.

          16             CFO GALLAGHER:  Move item 12; it's just for

          17        information.

          18             GOVERNOR BUSH:  There is a motion.  Well,

          19        it's just information.  Never mind.

          20             Item 12.  Excuse me.

          21             MR. STAPANOVICH:  Appointment of a chair to

          22        the Florida Commission on Hurricane Loss

          23        Projection Methodology.  It's a recommendation

          24        that you appoint Dr. Gulati.

          25             CFO GALLAGHER:  Motion.

           1             GENERAL CRIST:  Second.

           2             GOVERNOR BUSH:  There is a motion to

           3        reappoint Dr. Gulati.  Is there a second?

           4             GENERAL CRIST:  Second.

           5             GOVERNOR BUSH:  Moved and seconded.  Without

           6        objection, the item passes.

           7             MR. STAPANOVICH:  Governor, the final item is

           8        13, appointment of a member to the Investment

           9        Advisory Council, the appointment of John Jay, by

          10        Attorney General Crist.

          11             CFO GALLAGHER:  Motion.

          12             GENERAL CRIST:  Second.

          13             GOVERNOR BUSH:  Moved and seconded.  Without

          14        objection, the item passes.

          15             Thank you very much, Coleman.

          16             (The proceedings concluded at 12:15 p.m..)











           2                 CERTIFICATE OF REPORTER




           6   STATE OF FLORIDA         )

           7   COUNTY OF LEON           )


           9             I, SANDRA L. NARGIZ, RMR, CRR, certify that I

          10   was authorized to and did stenographically report the

          11   proceedings herein, and that the transcript is a true

          12   and complete record of my stenographic notes.

          13             I further certify that I am not a relative,

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

          15   nor am I a relative or employee of any of the parties'

          16   attorney or counsel connected with the action, nor am I

          17   financially interested in the action.

          18             WITNESS my hand and official seal this 2nd

          19   day of July, 2003.



          22                       ______________________________

          23                       SANDRA L. NARGIZ, RMR, CRR
                                   100 SALEM COURT
          24                       TALLAHASSEE, FL  32301