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                         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, February 26, 2004
               commencing at approximately 9:55 a.m.



                                    Reported by:

                                  SANDRA L. NARGIZ

                          Registered Professional Reporter
                              Registered Merit Reporter
                             Certified Realtime Reporter


                         ACCURATE STENOTYPE REPORTERS, INC.
                              2894 REMINGTON GREEN LANE
                       TALLAHASSEE, FL  32301   (850)878-2221



.                                                                      2


                         Representing the Florida Cabinet:

                         JEB BUSH

                         CHARLES H. BRONSON
                         Commissioner of Agriculture

                         CHARLIE CRIST
                         Attorney General

                         TOM GALLAGHER
                         Chief Financial Officer

                                       * * *















.                                                                      3


                                      I N D E X

               (Presented by J. Ben Watkins, III
               ITEM                ACTION              PAGE
               1                   Approved             9
               2                   Approved            10


               (Presented by Dave Westberry)
               ITEM                ACTION              PAGE

               1                   Approved            11
               2                   Approved            13
               3                   Deferred            13

               BOARD OF TRUSTESS
               (Presented by David Struhs)

               1                   Approved            14
               2                   Approved            18
               3                   Approved            19
               4                   Approved            20
               5                   Approved            25
               6                   Approved            84
               7                   Approved            84

               (Presented by Coleman Stipanovich)
               1                   Approved            86
               2                   Approved            86
               3                   Approved            86



               CERTIFICATE OF REPORTER                 88



.                                                                      4

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

           2             (The agenda items commenced at 9:55 a.m.)

           3             GOVERNOR BUSH:  We now have the appointment of

           4        the Secretary of the Department of Environmental

           5        Protection.

           6             ATTORNEY GENERAL CRIST:  Governor, the chair

           7        is yours.

           8             GOVERNOR BUSH:  Thank you, that's right.  We

           9        now have the appointment of the Secretary of the

          10        Department of Environmental Protection.

          11             CFO GALLAGHER:  I move Colleen Castille.

          12             ATTORNEY GENERAL CRIST:  Second.

          13             GOVERNOR BUSH:  There is a motion and a

          14        second.  Would anybody like to say anything?

          15             CFO GALLAGHER:  I would like to say one thing,

          16        Governor, that Colleen first started in state

          17        government with the Department of Insurance back

          18        when I was there in 1989 and was a cabinet aide.

          19        And during many meetings, once in a while I

          20        remember we would talk about what different people

          21        that worked in our cabinet office and other offices

          22        would aspire to do.  And I remember that Colleen

          23        Castille, who was our newest cabinet member,

          24        cabinet aide, at the time said that she aspired to

          25        be head of DEP.
.                                                                      5

           1             GOVERNOR BUSH:  Or DER maybe back then, maybe,

           2        wasn't it?

           3             CFO GALLAGHER:  It was Environmental

           4        Regulation.  And it looks like she is a few seconds

           5        away from having that job.

           6             GOVERNOR BUSH:  Kind of reminds me of the FFA

           7        speech that vision, plus action, means dreams come

           8        true.

           9             CFO GALLAGHER:  That's it, and she's certainly

          10        done both.

          11             GOVERNOR BUSH:  There is a motion and a

          12        second.  All in favor say aye.

          13             THE CABINET:  Aye.

          14             GOVERNOR BUSH:  All opposed?

          15             Secretary, would you like to say anything?

          16             MS. CASTILLE:  I would, sir.

          17             First of all, I would like to say thank you

          18        very much for your confidence in me, Governor, in

          19        appointing me, and the confidence of your fellow

          20        cabinet members by approving that nomination.

          21             I didn't -- it seems like just yesterday I

          22        make that silly little statement, that I would like

          23        to be head of the Department of Natural Resources

          24        at the time.  And it was certainly a long overnight

          25        success.
.                                                                      6

           1             And it came with many people and the help of

           2        many people, because the agencies that we work

           3        with, the offices that we work with, are

           4        partnerships.  They are partnerships in the

           5        Governor and Cabinet, they are partnerships between

           6        agencies, and the partnerships have grown under

           7        your leadership, Governor.

           8             We have become much closer in working with our

           9        other agencies.  Department of Community Affairs

          10        and Department of Environmental Protection have

          11        been hand-in-hand in the last year in helping guide

          12        the growth of our communities.

          13             I can only hope that the partnership that I

          14        have with my family members and my husband and the

          15        staff of the Department of Community Affairs

          16        continue on.

          17             The families are always there; and it doesn't

          18        matter what those newspaper articles say about you,

          19        they are always there to tell you that you have

          20        done good on each and every day when you come home.

          21        And that's the most important part.

          22             And I would like to recognize my husband,

          23        Jesse Bostick, he is here, my sister and

          24        brother-in-law, Danielle and Dick Shaw, and my

          25        other sister, Cathy Henley, who is also a public
.                                                                      7

           1        servant in the Department of Revenue.

           2             And the position of the Department of

           3        Community -- of I am sorry, Department of

           4        Environmental Protection is very -- is a very

           5        public position, and each and every day the

           6        department brings items to the Governor and Cabinet

           7        each and every week that you don't realize how

           8        important it is until you step away from the

           9        Cabinet.

          10             And I have been away from the Cabinet process

          11        for a year and realized every Wednesday or Friday,

          12        when the meetings are on Thursday and you open the

          13        newspaper and you see what grand things that you

          14        all have done.

          15             And I hope to -- I have some huge shoes to

          16        fill with Secretary Struhs; he has been a great

          17        friend as his wife and family, and I'll miss them.

          18        And I will also miss the people at the Department

          19        of Community Affairs, but I know that they will

          20        carry on with your policies, Governor, and continue

          21        to initiate the Quality Communities Initiative and

          22        bringing all of the important elements to a

          23        community that make it -- that make Florida what it

          24        is:  The environmental protection, the recreation,

          25        the cultural affairs, the public safety that our
.                                                                      8

           1        other agencies bring.  It's all about Florida

           2        communities and it's all about making Florida a

           3        better place to live.

           4             And I want to thank you again, and to promise

           5        you that I will fairly and honestly represent all

           6        of the issues that come before you for the next

           7        three years.

           8             GOVERNOR BUSH:  Thank you, Colleen, I have --

           9        Colleen has been a joy to work with, both as the

          10        Chief Cabinet Aide as well as Secretary of the

          11        Department of Community Affairs, and she is really

          12        what best is in public service.

          13             The only problem is that she knows me well

          14        enough -- not that David didn't know me, but I

          15        think David was always a little surprised by my

          16        stealth attacks at the Cabinet meetings.  I don't

          17        think Colleen will toler -- I think she will

          18        probably anticipate them better, so I might have to

          19        be on better behavior.

          20             MS. CASTILLE:  I just want to remind you that

          21        there are four other executive directors that come

          22        before you, and you can check on them first.

          23             GOVERNOR BUSH:  I know, but yours is a lot

          24        more fun.

          25             CFO GALLAGHER:  You have the issues.
.                                                                      9

           1             GOVERNOR BUSH:  Anyway, I am excited about the

           2        continued efforts of the department.  I know that

           3        you will work well with the great people in the

           4        department, and we look forward to seeing you on

           5        the next Cabinet which will be Tuesday, March 9th.

           6             MS. CASTILLE:  Yes, sir.  I will also be

           7        continuing to present on the Keys item on that day.

           8             GOVERNOR BUSH:  Good.

           9             MS. CASTILLE:  It's a partnership that I don't

          10        believe I can extricate myself from that

          11        partnership, and nor would I want to.

          12             GOVERNOR BUSH:  Very good.

          13             MS. CASTILLE:  Thank you, gentlemen.

          14             GOVERNOR BUSH:  Thank you.

          15             (Applause)

          16             GOVERNOR BUSH:  The next Cabinet meeting will

          17        be Tuesday, March 9, 2004.

          18             Division of Bond Finance.

          19             CFO GALLAGHER:  Motion on the minutes.

          20             ATTORNEY GENERAL CRIST:  Second.

          21             GOVERNOR BUSH:  There is a motion and a second

          22        on item 1.  Without objection, the motion passes.

          23        Item 2.

          24             MR. WATKINS:  Item number 2 is a resolution

          25        authorizing the issuance and competitive sale of a
.                                                                     10

           1        combined new money and refunding for housing

           2        facility revenue bonds, $16,550,000 of new money

           3        for renovation of Landis Hall at Florida State

           4        University and $7.2 million refunding piece to

           5        achieve debt service savings.

           6             ATTORNEY GENERAL CRIST:  Motion on 2.

           7             COMMISSIONER BRONSON:  Second.

           8             GOVERNOR BUSH:  Moved and seconded.  Without

           9        objection, the item passes.
















.                                                                     11

           1             GOVERNOR BUSH:  Department of Highway Safety

           2        and Motor Vehicle.

           3             CFO GALLAGHER:  Motion on the minutes.

           4             ATTORNEY GENERAL CRIST:  Second.

           5             GOVERNOR BUSH:  Moved and seconded.  Without

           6        objection, item 1 passes.

           7             Item 2.

           8             MR. WESTBERRY:  Good morning, Governor.  I

           9        appreciate the opportunity to pinch hit for Fred

          10        this morning.  I am sure he will be happy to know

          11        that Colleen is willing to share the barbs with

          12        everybody else.

          13             Item 2 is our quarterly report for the quarter

          14        ending December 2003.  I don't believe you'll find

          15        any large surprises there in terms of motor

          16        services.

          17             Our numbers continue to increase.  It looks

          18        like we are able to focus a majority of those folks

          19        into our E-Commerce, that's the up side.  The down

          20        side is we still have a lot of folks out there that

          21        we are trying to serve.

          22             The highway safety numbers look pretty good.

          23        They are continuing to show some improvement in

          24        those areas as well.

          25             GOVERNOR BUSH:  I see our new specialty plate
.                                                                     12

           1        out on the road, the one with the orange and

           2  It's --

           3             MR. WESTBERRY:  Yes, sir, it is.  We've tried

           4        to have the tax collectors use as much of the

           5        existing inventory as we could.  It looks like they

           6        are now beginning to run out of that and issue the

           7        new plates, you will see a few on the roads.  I

           8        know there are some here in Leon County.

           9             GOVERNOR BUSH:  Any questions?

          10             COMMISSIONER BRONSON:  Governor, I got

          11        questioned, when we got that tag design with the

          12        oranges with the blossoms on them, about whether or

          13        not anybody really sees that.

          14             And we were down in Okeechobee on tour, Lake

          15        Okeechobee, some of the restoration projects that

          16        we were working on, and there were about three

          17        groves that down far south that the weather has

          18        been pretty mild and the whole grove was full of

          19        blooms and oranges.

          20             GOVERNOR BUSH:  Should have taken a digital

          21        picture.

          22             COMMISSIONER BRONSON:  We'll get one.

          23             GOVERNOR BUSH:  We just figured if

          24        Commissioner Bronson says it's accurate, it's

          25        accurate.  I am not going to argue.
.                                                                     13

           1             MR. WESTBERRY:  We appreciate his leadership

           2        and that of the Cabinet members as well to help us

           3        put that design together.  I think it is getting

           4        some good responses from our citizens.

           5             GOVERNOR BUSH:  It's a pretty plate. Is there

           6        a motion on item 2?

           7             ATTORNEY GENERAL CRIST:  Motion.

           8             COMMISSIONER BRONSON:  Second.

           9             GOVERNOR BUSH:  Moved and seconded.  Without

          10        objection --

          11             CFO GALLAGHER:  Motion to defer item 3.

          12             ATTORNEY GENERAL CRIST:  Second.

          13             GOVERNOR BUSH:  There is a motion to defer

          14        Item 3 and a second.  Without objection, the item

          15        is deferred.

          16             Thank you very much.









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           1             GOVERNOR BUSH:  Board of Trustees.

           2             COMMISSIONER BRONSON:  Moved the minutes.

           3             CFO GALLAGHER:  Second.

           4             GOVERNOR BUSH:  There is a motion and a second

           5        of Item 1.  Without objection, the motion passes.

           6             Item 2.

           7             SECRETARY STRUHS:  Item 2, we recommend

           8        acceptance of the 2004 Florida Forever report and

           9        approval of the priority list.

          10             CFO GALLAGHER:  Motion.

          11             ATTORNEY GENERAL CRIST:  Second.

          12             GOVERNOR BUSH:  There is a motion and a

          13        second.

          14             Secretary, is the Harris School purchase, does

          15        that fit within the statutory guidelines of the

          16        Florida Forever law?

          17             SECRETARY STRUHS:  Yes, I believe it does

          18        although --

          19             GOVERNOR BUSH:  A one-acre tract of land with

          20        a building on it that's for historical restoration

          21        purposes?

          22             SECRETARY STRUHS:  I think it could be argued

          23        that it would fit within those parameters.  Of

          24        course, you as the Cabinet would have the final say

          25        so if and when that would ever come before you as
.                                                                     15

           1        an opportunity to purchase that.  It is an unusual

           2        site.  It's not the typical site.

           3             GOVERNOR BUSH:  Do we get credit for our 93

           4        million dollar commitment to the Keys with this?

           5             SECRETARY STRUHS:  Yes.

           6             MS. ARMSTRONG:  No.

           7             GOVERNOR BUSH:  No?

           8             SECRETARY STRUHS:  I would take it.

           9             GOVERNOR BUSH:  You've lost all credibility,

          10        Son.  This is not part of the 93 million, Eva?

          11             SECRETARY STRUHS:  No, it's not.

          12             GOVERNOR BUSH:  As I understand it, there is a

          13        foundation that has committed a sizeable sum of

          14        money for refurbishing this.  I am just curious why

          15        can't they just refurbish it and have the school

          16        district continue to own it?

          17             SECRETARY STRUHS:  I think that's a good

          18        question and it's one we would obviously put to

          19        them if and when we enter into any kind of

          20        negotiations.  It's the Rodel Foundation, and they

          21        apparently proposed spending as much as $6 million

          22        to rehabilitate the property.

          23             GOVERNOR BUSH:  I am just setting the stage

          24        for whenever it comes back.

          25             CFO GALLAGHER:  Well, does this need to come
.                                                                     16

           1        back?

           2             GOVERNOR BUSH:  This is on the priority list.

           3        We are not buying anything; we are just, as I

           4        understand, we -- some things have moved off the

           5        priority one list and some moved up, some of them

           6        moved down, related on whether people are willing

           7        buyers, and how far along we are in the ecosystem.

           8             SECRETARY STRUHS:  This is basically the

           9        department's work list for the year ahead.  Some of

          10        them will come to fruition, many won't.

          11             CFO GALLAGHER:  I guess the decision is:  Do

          12        we want to leave it on the list now or take it off

          13        and add it later if we come back when it's

          14        something we need to add?

          15             SECRETARY STRUHS:  I did ask the question as

          16        to whether or not this Harris School property would

          17        not make more sense under the Florida Communities

          18        Trust Program, which is part of the formula under

          19        the Florida Forever project.

          20             GOVERNOR BUSH:  It's a little more

          21        competitive.

          22             SECRETARY STRUHS:  And apparently the project

          23        just would not rank highly enough in that process

          24        and that's why it's coming before you for inclusion

          25        on the Florida Forever list.
.                                                                     17

           1             CFO GALLAGHER:  But it might rank higher than

           2        if it isn't on this one at all?  If we take it off,

           3        it's going to be a lot better on another one, isn't

           4        it?

           5             SECRETARY STRUHS:  Actually not.

           6             GOVERNOR BUSH:  If I can recommend that we

           7        keep it on, because apparently the foundation has

           8        stated if we don't purchase it, their seven or

           9        $6 million commitment goes away.

          10             And before we -- before it comes to the

          11        agenda, maybe to get a better explanation of how

          12        that could be; it just seems there are some facts

          13        missing that would lead me -- I would like to know

          14        more.  I don't want them to leave the game

          15        completely, but there has to be some explanations.

          16             SECRETARY STRUHS:  This is an opportunity I

          17        think to be very creative and innovative in terms

          18        of perhaps a partnership approach.

          19             GOVERNOR BUSH:  Very good.

          20             CFO GALLAGHER:  What's the prices?

          21             SECRETARY STRUHS:  Its tax assessed value is

          22        $3.7 million.

          23             CFO GALLAGHER:  But the school board owns it?

          24             SECRETARY STRUHS:  That's correct.

          25             CFO GALLAGHER:  There may be a trade
.                                                                     18

           1        somewhere, they are always looking for a place to

           2        build schools or to expand.  You may want to look

           3        at that, too.

           4             SECRETARY STRUHS:  (Nods affirmatively.)

           5             GOVERNOR BUSH:  Sounds like a good future

           6        Cabinet meeting.  We'll videotape it, David.

           7             SECRETARY STRUHS:  Send me the tape.

           8             GOVERNOR BUSH:  Is there an acceptance of the

           9        Florida Forever report, approval of the priority

          10        list?

          11             CFO GALLAGHER:  We voted.

          12             GOVERNOR BUSH:  Motion made and a second.

          13        Without objection, it's accepted.

          14             SECRETARY STRUHS:  I think it's only

          15        appropriate Colleen's first item would be in the

          16        Florida Keys.

          17             GOVERNOR BUSH:  Wipe the smile off your face

          18        and keep going.

          19             SECRETARY STRUHS:  Item 3, recommend approval

          20        of a 32-year ground sublease agreement between the

          21        University of South Florida and the CAUSF Research

          22        Corporation, a similar sublease agreement between

          23        the Southwater Research Foundation, Incorporated,

          24        and CAUFS.

          25             A standard ground sublease agreement for the
.                                                                     19

           1        future use by the University and the Southwater

           2        Research Foundation, Incorporated, and pursuant to

           3        Chapter 253, Florida Statutes, delegation of

           4        authority to the Secretary of DEP or designee to

           5        approve future ground sublease agreements within

           6        the University of South Florida's Research Park.

           7             This is a very similar arrangement to what we

           8        have with the Florida State University in

           9        Innovation Park here in Tallahassee.

          10             COMMISSIONER BRONSON:  Move item 3.

          11             ATTORNEY GENERAL CRIST:  Second.

          12             GOVERNOR BUSH:  Moved and seconded.  Without

          13        objection, the item passes.

          14             SECRETARY STRUHS:  Thank you.

          15             Item 4 I think is an important item because

          16        what this would do is to put into state ownership

          17        the entranceway into Ochlockonee River State Park.

          18        Currently the access to that state park is via a

          19        easement over property that's owned by the St. Joe

          20        company.

          21             This is an opportunity to put in state

          22        ownership the entranceway into that park.  We

          23        recommend approval of this item.

          24             ATTORNEY GENERAL CRIST:  Motion.

          25             CFO GALLAGHER:  Second.
.                                                                     20

           1             GOVERNOR BUSH:  Moved and seconded.  Without

           2        objection, the item passes.

           3             SECRETARY STRUHS:  Item 5 is the item I

           4        referred to earlier when I was speaking.  This is a

           5        property near Camp Blanding, and it is the first

           6        example of any state taking advantage of President

           7        Bush's really remarkable leadership in making

           8        defense dollars available to deal with encroachment

           9        issues at military bases.

          10             And I am delighted to have with us today

          11        General Doug Burnett, as well as Major Cecil Cauley

          12        and Mr. Paul Catlett from Camp Blanding.  And we

          13        are going to have Colonel Jeffrey Hetherington, who

          14        is the commander at Camp Blanding speak to this

          15        item for you.

          16             COLONEL HETHERINGTON:  Governor Bush, members

          17        of this Cabinet and other distinguished guests,

          18        good morning.

          19             The Camp Blanding Joint Training Center is

          20        recognized as the best, if not the best, in the

          21        National Guard, in particular due to its many

          22        accomplishments.  And today, I'm pleased to

          23        announce a first ever for Camp Blanding and the

          24        State of Florida.  We are a Department of Defense

          25        success story.
.                                                                     21

           1             Section 2811 of the FY '03 Defense

           2        Authorization Act authorizes the service's

           3        secretaries to enter into agreements with state and

           4        local governments or private conservation

           5        organizations to limit encroachment in the vicinity

           6        of a military installation.  The agreement allows

           7        the Services to provide O&N funds to the partner

           8        who, in turn, will purchase title or conservation

           9        easements on tracts of lands that surround the

          10        installation to buffer the installation from

          11        encroachment forces.  The army now defines such a

          12        zone around an installation as an army compatible

          13        use buffer.

          14             In September, the Army National Guard

          15        partnered with the Florida Department of

          16        Environmental Protection and we entered into an

          17        agreement, a memorandum agreement, to acquire lands

          18        adjacent to Camp Blanding for conservation and

          19        encroachment buffering purposes.  We called this

          20        the Camp Blanding Forever Initiative.

          21             And our vision is to establish a 3-mile buffer

          22        of compatible land use around the boundary of Camp

          23        Blanding, and it is shown on the slide highlighted

          24        in yellow.  That is the 3-mile buffer.

          25             The acquisition that's being presented today,
.                                                                     22

           1        this project shares several common traits required

           2        under the new legislation.  One is willing

           3        partners, mutual interests, valued lands possessing

           4        important biodiversity, in some way threatened by

           5        encroachment pressures and proximity to a military

           6        facility important to the nation's military

           7        readiness mission.

           8             The successful obligation of $500,000 of

           9        federal funds, leveraged with $12.9 million of

          10        Florida Forever funding to purchase 9,000 acres

          11        along the eastern boundary of Camp Blanding as part

          12        of the Northeast Florida Timberlands Project, is

          13        the first official use of Section 2811 of the

          14        FY '03 Defense Authorization Act that anyone has

          15        achieved throughout the services.

          16              Sir, this was, I've got to tell you, a

          17        monumental task and a totally collaborative effort

          18        on the part of an orchestrated program of partners,

          19        including Camp Blanding, Florida Department of

          20        Environmental Protection, the Nature Conservancy,

          21        National Guard Bureau, Department of the Army and

          22        Department of Defense.  Many people worked

          23        tirelessly to accomplish all the key tasks in order

          24        to develop the required agreements, instruments and

          25        proposals, pass the required legal scrutiny and
.                                                                     23

           1        obligate the federal funds for implementing the

           2        first ever Army Compatible Use Buffer.

           3             The success of our mutual partnership in this

           4        endeavor is important for many reasons.

           5             First, Camp Blanding and the State of Florida

           6        are recognized as the leaders in the nation for

           7        private lands initiative.

           8             Second, together we have paved the way for all

           9        other military installations throughout the country

          10        to enter into agreements in order to limit

          11        encroachment.

          12             Third, the Camp Blanding Forever Initiative

          13        has energized other Army National Guard training

          14        sites and military installations across the country

          15        to develop their own Army Compatible Use Buffers

          16        Initiatives to address the encroachment pressures.

          17             But most importantly this enduring committed

          18        partnership has helped facilitate Camp Blanding's

          19        relevance into the future by implementing an

          20        effective encroachment plan that will ensure the

          21        installation's ability to accomplish its military

          22        mission well into the future.

          23             We appreciate your support for this project.

          24        And we are grateful to the State of Florida for

          25        working with us and the National Guard Bureau to
.                                                                     24

           1        leverage the Florida Forever Program to help

           2        protect the military mission and natural resources

           3        of Camp Blanding.

           4             Officials at the National Guard Bureau asked

           5        me to convey two things.

           6             First, they remain totally committed to

           7        continue to work with the State of Florida, the

           8        Nature Conservancy, the Florida National Guard, our

           9        local communities and Camp Blanding to achieve the

          10        vision set forth in the Camp Blanding Forever

          11        Initiative.

          12             And second, the acquisition of the Dallas

          13        Pension Fund Parcel that's shown here by the

          14        Florida Board of Trustees will positively influence

          15        the National Guard Bureau's ability to garner

          16        additional federal funds to support the next parcel

          17        that's being pursued by the Department of State

          18        Lands in the Camp Blanding Buffer Zone.

          19             We plan to leverage as we did with these funds

          20        the follow-on federal funds with state funds from

          21        the Osceola to Camp Blanding Greenway acquisition.

          22             Thank you.

          23             GOVERNOR BUSH:  Thank you very much.  It's an

          24        exciting project.  We have done the --

          25             CFO GALLAGHER:  Motion.
.                                                                     25

           1             GOVERNOR BUSH:  There is a motion.

           2             COMMISSIONER BRONSON:  Second.

           3             GOVERNOR BUSH:  Moved and seconded.  Without

           4        objection, the item passes.

           5             COMMISSIONER BRONSON:  One thing I would like

           6        to, and I talked with DEP about this, on these

           7        types of -- there was a hiccup or two in this

           8        process, and it would be good if the potential

           9        managing agency can work a little closer with DEP

          10        about any potential glitches that they might find

          11        that may need to be corrected, so that the proper

          12        management can be -- procedures can be done on

          13        these properties.

          14             And I think it will make it a little bit

          15        easier next time so we don't have some of the

          16        potential hiccups we had this time.  I think they

          17        have taken care of, or at least it's been assured

          18        they have been.  And if we can get a little closer

          19        working relationship with those managing agencies,

          20        it will help.

          21             SECRETARY STRUHS:  Commissioner, I agree with

          22        that completely.  This was on the agenda, you might

          23        recall, two weeks ago.  The reason it was delayed

          24        is because we did have some issues we needed to

          25        work through.  And the folks at the Department of
.                                                                     26

           1        Agriculture were especially helpful in working

           2        through some of those mineral interest questions.

           3             And had we done so earlier on in the process,

           4        we could have done this two weeks ago.  So advice

           5        is well taken.

           6             On items 6 and 7, Governor, I would like to

           7        recommend --

           8             GOVERNOR BUSH:  Since we have the Adjunct

           9        General of the Florida National Guard, I just want

          10        to thank him and his team for the incredible work

          11        they are doing.

          12             I just got back from Washington from the

          13        National Governor's Association meeting and

          14        Governor Kempthorn was there talking about how in

          15        the case of Idaho, up to 50, probably 50 percent of

          16        the Guard will be overseas, will be called up,

          17        nevertheless, will be called up in either Iraq or

          18        Afghanistan, which is now the new reality that we

          19        are facing.

          20             And he is concerned, as all of us are, about

          21        retention and about morale and about all that.  And

          22        because of the efforts of the leadership of the

          23        Guard, we're -- I am just really proud of how our

          24        men and women have served and the morale is high;

          25        they win every efficiency and quality award or
.                                                                     27

           1        close to it.

           2             It's just an extraordinary group of people,

           3        and this is but one example, this environmental

           4        purchase, which is great.  But across the board,

           5        the Guard has served this state with just

           6        incredible distinction.

           7             And I wanted to -- the General doesn't come

           8        here very often, and I wanted to pay tribute to him

           9        and his team for a job well done.  We just

          10        appreciate you.

          11             (Applause.)

          12             CFO GALLAGHER:  I know that we have quite a

          13        few people moving out and back over to some pretty

          14        dangerous places.  I guess, General, how many

          15        troops do we have from our guard serving now?  I

          16        think we might like a little report on that, if you

          17        don't mind giving it to us.

          18             GENERAL BURNETT:  Governor, Treasurer

          19        Gallagher, in response to that, we recently had

          20        3,000 soldiers and airmen in Iraq or Afghanistan.

          21        We've brought back about 800 three weeks ago.  This

          22        weekend another 350 will return after a year and

          23        three months, I would point out, the longest

          24        serving National Guard in Iraq.

          25             So right now we probably have 1800 over there,
.                                                                     28

           1        looking at 100 or so in Afghanistan, the rest still

           2        in Iraq.  We just mobilized eight more units, six

           3        will go to Iraq and two to Afghanistan.

           4             Our Apache helicopters were mobilized to go to

           5        Bosnia and other companies mobilized to go to

           6        Afghanistan.

           7             So it's an ongoing process for us and we are

           8        managing that.  And I would have to say that the

           9        National Guard recently recognized us for being

          10        able to manage that flow in and out so we can

          11        respond to further callings and that's occurring

          12        everyday.

          13             CFO GALLAGHER:  General, with that happening,

          14        I know that Governor Bush mentioned what other

          15        governors were worried about, recruitment.  How are

          16        we doing on the recruiting side here in Florida?

          17             GENERAL BURNETT:   Sir, we are very proud to

          18        say that our recruiting team -- it was like said

          19        earlier by the young lady, president of the state

          20        association, of a vision with action, and also as

          21        Secretary Struhs pointed out very well, that things

          22        happen when teams come together and work together.

          23             Our recruiting team and our retention team is

          24        really a hand-picked bunch of folks and we emersed

          25        that with our leadership team from the top to the
.                                                                     29

           1        bottom.

           2             End result is retention that's well below the

           3        National Guard standard.  The average is about

           4        22 percent turnover in the Army National Guard

           5        across the US.  The goal is 18 percent.  Florida

           6        stands at about 15.4 percent as we speak today.

           7             And on the Air Guard, the average is about

           8        14 percent; we run about 8 percent and we are about

           9        6 and a half.  And this is not due to stop loss;

          10        it's due to young Floridians answering the call to

          11        serve and leadership taking care of these young

          12        Floridians.

          13             GOVERNOR BUSH:  General, you may want to also

          14        mention, we always talk about the major commitment

          15        for these men and women that go overseas to Iraq

          16        and Afghanistan principally, but they are also in

          17        Bosnia, and have been at least --

          18             GENERAL BURNETT:  Yes, sir, we have been in

          19        stabilization forces in Bosnia and other areas in

          20        that region.  We have been doing that before 9/11

          21        and we still maintain that in an ongoing fashion,

          22        much as the Cabinet does all those things --

          23             GOVERNOR BUSH:  And at night, flying over our

          24        coasts.

          25             GENERAL BURNETT:  Yes, sir, the F15s out of
.                                                                     30

           1        Jacksonville and down in Homestead fly over every

           2        shuttle launch at the Cape.  We also have missions,

           3        commonly air patrol for Washington and New York and

           4        the Crawford Ranch as well which is part of our

           5        mission.

           6             GOVERNOR BUSH:  They do the -- they defend our

           7        shores at night; they are the ones that get called

           8        if there is a need to scramble.  That's been going

           9        on for a long time, so there is, quietly without a

          10        lot of fan fare, they don't do it for the fan fare,

          11        but they are just an incredibly talented group of

          12        men and women that are serving as citizen soldiers.

          13             CFO GALLAGHER:  I think an F15 can sort of

          14        protect a hundred miles, is that about right?

          15             GENERAL BURNETT:  Actually we can reach out to

          16        several hundred just with internal field, but we

          17        have contingencies for inflight refueling, so that

          18        could go on for seven or eight hours with that

          19        piece and routinely it's four, five or six.

          20             The intercept mission is a very dangerous

          21        mission.  We started with 1958, the Florida Air

          22        National Guard on alert, we flew the F102 for a

          23        period of time.  In fact --

          24             GOVERNOR BUSH:  Who else was there from F102?

.                                                                     31

           1             GENERAL BURNETT:  Sir, as I left the F102

           2        combat training school in Houston, Texas, in

           3        December 1970, my colleague and classmate ahead of

           4        me was sitting alert in an armed and lettered F102

           5        and his name was Lieutenant George W. Bush.

           6             GOVERNOR BUSH:  Small world.

           7             COMMISSIONER BRONSON:  Governor, I just wanted

           8        to mention that we have been very fortunate to get

           9        back with one of our own, out of the legislative

          10        process, First Sergeant Kerry Baker has come back

          11        with us.

          12             And yesterday I had him for about an hour and

          13        a half talking about budget issues.  So he has now

          14        gotten back home and going into another type of

          15        shell shock, of going through the Florida budget.

          16        But it was good to have him back and working with

          17        him yesterday as well.

          18             GOVERNOR BUSH:  General, you would have been

          19        pleased to -- I met with Lamar Alexander, who is

          20        the subcommittee chairman for Children and Families

          21        in the Senate, and concerned about military

          22        families, which is a major issue now with this new

          23        reality, both enlisted men and women as well as the

          24        Reserve and Guard.  And he asked us what we were

          25        doing.
.                                                                     32

           1             And we basically, with the efforts underway in

           2        the legislature this year that I think will pass

           3        and what we have done already with our basic

           4        commander structure and what the legislature has

           5        done, we are the -- we have created the blueprint

           6        on how to adjust and adapt our policies to make

           7        sure that families are taken care of.

           8             We still have to implement some things, but in

           9        terms of -- this is more related to enlisted

          10        groups, but certification of nurses, teachers,

          11        other professions, when they come, when people come

          12        to Florida or leave, the rent, the insurance

          13        policies, all the things we have done to give them,

          14        give people support.  And I know that the tuition

          15        issue is a huge issue for retention for the Guard.

          16        We covered a lot of the issues that are being

          17        looked at in the national level.  And Lamar --

          18             CFO GALLAGHER:  They are going to take them

          19        over, are they?

          20             GOVERNOR BUSH:  Well, they are not going to

          21        federalize that.  But they are going to encourage

          22        other states to follow suit.  I told him we would

          23        give up our trade secrets after the brag process.

          24             GENERAL BURNETT:   Yes, sir, that tuition

          25        program, when I was in Iraq in December, Governor,
.                                                                     33

           1        I talked to a lot of young enlisted troops, and

           2        obviously in combat, you grow up over night.  And

           3        these young folks were saying:  I am going to stay

           4        with you, General, and tell the Governor thanks for

           5        the Tuition Assistance Program.  That's a huge

           6        recruiting and retention program goal for us.  And

           7        I know that funding has been well supported.

           8             And I saw Representative Baker in Iraq last

           9        month as well, and I agreed with him that he was

          10        the last solder off the airplane the last flight

          11        that returned, such as he should have been.

          12             GOVERNOR BUSH:  One final thing:  The staff

          13        person for Congressman Young, when I was up there I

          14        thanked him, I gave him a hug and thanked him for

          15        his efforts at the midnight hour to get our guys

          16        back.

          17             GENERAL BURNETT:  Yes, sir, and they did that

          18        and we start that again this weekend.  Hopefully

          19        that's become more efficient.  But that did help,

          20        Governor, and thanks for your sanction for us to go

          21        forth and open a few doors here to get our soldiers

          22        home.

          23             GOVERNOR BUSH:  Thank you, General.

          24             GENERAL BURNETT:  Thank you.

          25             GOVERNOR BUSH:  Thank you, David, for your
.                                                                     34

           1        patience.

           2             SECRETARY STRUHS:  Thank you.

           3             Just in wrapping up, Governor, I am going to

           4        recommend it might be more efficient to reverse

           5        items 6 and 7.

           6             7 is the more substantive item.  6 is a

           7        corollary issue.

           8             I would like to just introduce it by saying

           9        this is an -- I think this is a success story; it's

          10        a success story because what you have is the

          11        Department of Environmental Protection officially

          12        on the document recommending I think this item for

          13        denial, and yet we have the Water Management

          14        District here to argue as to why you should proceed

          15        with the purchase.  And I'll tell you a little

          16        story.

          17             As I was preparing for this meeting, I met

          18        with the DEP staff, and they were getting primed on

          19        this particular item.  And I went around the table

          20        and I asked them:  If you were to vote on this

          21        item, would you vote to acquire it or would you

          22        vote not to acquire it?  We went around the table

          23        in the DEP conference room.  And to a person,

          24        everybody voted to acquire the property.  And my

          25        follow up question --
.                                                                     35

           1             GOVERNOR BUSH:  I am going to show

           2        self-restraint.

           3             SECRETARY STRUHS:  My follow up question was:

           4        Well, if that's the case, then why is this

           5        presented to you as a denial?

           6             And the answer was:  Because we are very

           7        sensitive to value, we are very sensitive to price,

           8        and we are sensitive to public reception.

           9             I think what that reflects, Governor, is that

          10        it may have taken longer than you would have liked,

          11        but after five years, you have a department that

          12        thinks about price, value, public perception.

          13             CFO GALLAGHER:  As soon as you are leaving?

          14             SECRETARY STRUHS:  The fact that it's

          15        recommended as a denial I think reflects well on

          16        their sensitivity to husbanding the public

          17        resources.

          18             GOVERNOR BUSH:  Their heart says yes, but

          19        their minds say --

          20             CFO GALLAGHER:  Their pocketbook.

          21             GOVERNOR BUSH:  We'll see.  I appreciate the

          22        honesty.

          23             SECRETARY STRUHS:  What I wanted to do is to

          24        let you know that there is no daylight between the

          25        Water Management District and DEP; this has been a
.                                                                     36

           1        very collaborative exercise.

           2             GOVERNOR BUSH:  Can I make a point about that,

           3        though, or maybe the Water Management District

           4        would like to comment on this.

           5             Why was it that we weren't -- I thought there

           6        was a policy if there is no daylight, that they

           7        come to us in anticipation of purchasing rather

           8        than after the fact?

           9             SECRETARY STRUHS:  And I wish they would have

          10        come to us much sooner.

          11             GOVERNOR BUSH:  There was a little daylight

          12        then?

          13             SECRETARY STRUHS:  There was, but it has since

          14        been closed.

          15             CFO GALLAGHER:  After the fact?

          16             SECRETARY STRUHS:  After the fact.  But I

          17        would like to present Robert Christiansen here to

          18        tell you the story as to how this parcel became

          19        available to the state and how they acted

          20        responsibly to make this opportunity available to

          21        you.

          22             MR. CHRISTIANSEN:  Thank you, Governor.  I

          23        would like to address some of the specific

          24        questions that came up.  But first, if I might just

          25        give a brief background on the significance of this
.                                                                     37

           1        project.

           2             What the picture in front of you shows is in

           3        blue the subject parcel and the pokadotted pattern

           4        that goes to the west and south from there is the

           5        boundary of the Northeast Florida Timberlands

           6        Project, which is the state's priority project.

           7             What you can see is this strategic location of

           8        blue parcel as sort of the cornerstone of the

           9        eastern front of this Northeast Florida Timberlands

          10        Parcel.

          11             I am not going to go through any more charts

          12        than this, less you worry, or going to go through

          13        the whole book in front of you.

          14             I want to just zoom in a little bit on this.

          15        This shows the four creeks which converge and

          16        become the Nassau River within the boundaries of

          17        this project area, hence the name, the Four Creeks

          18        Forest.  It's called a forest because it's been

          19        managed as a timber operation for many years, and

          20        it's anticipated to become a new state forest upon

          21        acquisition.

          22             This property is located in Nassau County

          23        along the county boundary.  The Thomas Creek, which

          24        is the southern boundary of the project is the

          25        county boundary with Duval.
.                                                                     38

           1             It's about 15 miles west of the ocean, 5 miles

           2        north of the Jacksonville Airport.  You can see the

           3        little symbol of the airport there that shows its

           4        proximity.  It's within one of our project areas,

           5        we call it the Upper Nassau River Project Area.

           6        This is what I would characterize as sort of one of

           7        our top five parcels that we have been working to

           8        undertake for many years now.

           9             It's an extremely high priority project from

          10        the standpoint of its water resource values with

          11        these creek systems converging to become the Nassau

          12        River.  And so it's a great interest for protect

          13        this land by our governing board.

          14             It is within the Northeast Florida Timberlands

          15        Project as we already noted and has a significant

          16        interplay with the sovereign submerged lands which

          17        occur on either side of the creek systems, and so

          18        those fit together glove-in-hand to form a very

          19        significant resource boundary.

          20             The acquisition in front of you is 9504 acres,

          21        the purchase price of just over $25 million.  I

          22        think you see in your item reflected the appraised

          23        values is at just over 26 million and just below

          24        28 million.  We feel that's a good purchase price

          25        in relation to those appraised values.  Just as a
.                                                                     39

           1        side note, those values do include just over

           2        $4 million in timber.

           3             I think the issues surrounding --

           4             GOVERNOR BUSH:  In this the net timber value?

           5        Is Rayonier going to stay on the property?

           6             MR. CHRISTIANSEN:  There are reservations for

           7        a couple years, two years after closing, those are

           8        not included in the value.  This is the net.  In

           9        fact, the timber value today as it stands is just

          10        under 7 million after the reserved timber --

          11             GOVERNOR BUSH:  Net present value of what

          12        could be harvested over whatever time?

          13             MR. CHRISTIANSEN:  Right.  So the appraisers

          14        did a discount factor on a large volume, and also

          15        in relation to what the likely use of the property

          16        would be, they discounted it further.  Some of the

          17        pre-merchantable timber will never come to value

          18        under a development scenario, so they discounted

          19        that 7 million down to just over 4 million; and

          20        that's the number that is included in the

          21        appraisal.

          22             GOVERNOR BUSH:  It's net of the land that's

          23        going to be developed for housing, net of the

          24        harvesting for the two or three years?

          25             MR. CHRISTIANSEN:  I think that's an accurate
.                                                                     40

           1        way to portray it, yes.  If you were a timber

           2        company and you were buying this property and you

           3        wanted to know what's the value today, it's

           4        7 million.

           5             GOVERNOR BUSH:  We are buying it and we are

           6        not a timber company, or the home builder is not a

           7        timber company, and they are not buying it for the

           8        timber value.  So you've netted out the land that

           9        won't be used for timber?

          10             MR. CHRISTIANSEN:  Yes.

          11             GOVERNOR BUSH:  And you've netted out what

          12        would harvested before we take full title?

          13             MR. CHRISTIANSEN:  That's correct, the

          14        appraisers did that.

          15             GOVERNOR BUSH:  And that's net present value,

          16        four-point?  Seems like a lot.

          17             MR. CHRISTIANSEN:   Yes.  One of the questions

          18        which has been a significant one is we have gone

          19        through this, and one you already expressed is:

          20        Why weren't we there sooner?  And what's been the

          21        relationship between the Water Management District

          22        and the Department in terms of making sure there is

          23        no daylight?

          24             As I mentioned, this has been a priority of

          25        ours for at least six years.  We have been working
.                                                                     41

           1        with Rayonier attempting to get the opportunity to

           2        make an offer on the property for that time.

           3             GOVERNOR BUSH:  Why didn't you?

           4             MR. CHRISTIANSEN:  I will try to answer that.

           5             We have done quite a few projects with

           6        Rayonier.  We have an active relationship with

           7        Rayonier.

           8             During that time frame we have done probably

           9        over a hundred million dollars in acquisitions with

          10        Rayonier, much of which has been in partnership

          11        with the state and the Water Management District.

          12        So we have an active, on-going relationship with

          13        Rayonier.

          14             During that time, Rayonier has been, up until

          15        very recently, organized in two divisions in terms

          16        of how they handle their real estate inventory for

          17        sales.  They've got a woodlands group and a real

          18        estate group.  All of our transactions have been

          19        with the woodlands group, which is the more forest

          20        type lands.

          21             They have made an internal decision from a

          22        decisional breakdown of marketing, those properties

          23        that they feel have the highest development value

          24        should be sold for development purposes, they have

          25        kept in their real estate group.
.                                                                     42

           1             We, as I mentioned, have worked with them for

           2        these five or six years to try to get the

           3        opportunity to make an offer on this purchase.

           4        They have declined to have us participate with them

           5        on this property, and I will just share with you

           6        what I know of their corporate decision-making.

           7             They have decided to leave it in their real

           8        estate group and market it on the open market for

           9        development purposes because they felt they could

          10        get presumably a higher yield.

          11             GOVERNOR BUSH:  You all didn't know about

          12        that?

          13             MR. CHRISTIANSEN:  Yes.

          14             GOVERNOR BUSH:  So why didn't you make an

          15        effort to buy it on the open market?

          16             MR. CHRISTIANSEN:  Let me assure you, we have

          17        gone back to them on a regular, continuing basis to

          18        work with them to give us the opportunity to go

          19        forward to make a fair offer on the property and

          20        they've declined to have us do so.

          21             GOVERNOR BUSH:  You just said it was on the

          22        open market.

          23             MR. CHRISTIANSEN:  Right.

          24             GOVERNOR BUSH:  So why, they wouldn't decline

          25        if you had an offer they would accept.  Did you
.                                                                     43

           1        make an offer?

           2             MR. CHRISTIANSEN:  We never got to the point

           3        of going through the appraisal process with them.

           4             The way our process works is we go to a

           5        landowner and we say:  Would you be willing to work

           6        with us on this project?  And they say yes or no.

           7        It's a willing seller program; we don't force

           8        ourselves upon them.

           9             GOVERNOR BUSH:  They were a willing seller?

          10             MR. CHRISTIANSEN:  They were a willing seller.

          11             GOVERNOR BUSH:  Okay.

          12             MR. CHRISTIANSEN:  But they were not willing

          13        to work with us through the process that we have in

          14        place.

          15             GOVERNOR BUSH:  Someone from Rayonier here?

          16             MR. CHRISTIANSEN:  No, sir.

          17             GOVERNOR BUSH:  David, why didn't DEP go

          18        directly go and try to buy it?  It's on our Florida

          19        Forever list.

          20             SECRETARY STRUHS:  I think Robert has it

          21        correct.  We were aware of the fact that the Water

          22        Management District had this on their list.  They

          23        were the lead agency in pursuing the properties

          24        with Rayonier, had a good track record in bringing

          25        a number of items before you successfully.  And
.                                                                     44

           1        knowing that they were sort of on the spot, on the

           2        project, we allowed them to continue to pursue

           3        that.

           4             GOVERNOR BUSH:  Treasurer?

           5             CFO GALLAGHER:  Why not have the Nature

           6        Conservancy go deal directly with them?

           7             SECRETARY STRUHS:  I think it's difficult for

           8        both Robert and me to speak to the decisions that

           9        were made within Rayonier.  I think, my perception

          10        is that they really wanted to sell it to a real

          11        estate developer; they did not want to sell it to

          12        the state.  I recognize --

          13             GOVERNOR BUSH:  Why?  They've sold a ton of

          14        stuff us to.  Why would they care?

          15             SECRETARY STRUHS:  It's a question you have to

          16        put them to them and they are not here.

          17             GOVERNOR BUSH:  Do they have an underlying

          18        interest in the going development?

          19             SECRETARY STRUHS:  Not that I am aware of.

          20             CFO GALLAGHER:  I think inside that company

          21        they have people that sort of deal with government

          22        and sell land, et cetera, and they have people that

          23        deal with private developers.  And the ones that

          24        deal with private developers don't like to deal

          25        with government.  So we are sort of hanging out.
.                                                                     45

           1             GOVERNOR BUSH:  This is my whole -- I hate to

           2        have this come up, David, for your last day, but it

           3        will bring fond memories back to you.

           4             Why should we act like a government when we

           5        are trying to buy land?  That's my point.

           6             It's not -- it's a great piece of property.  I

           7        am always qualifying everytime we have this

           8        conversation, it's not a question of the property

           9        has its conservation value.  I am sure it will

          10        be -- coincidentally, I think I drove by the site a

          11        couple of weeks ago.  It's in the path of

          12        development.  It's the kind of thing, our strategy

          13        is geared towards this type of property.  It's also

          14        great for home building; don't get me wrong, this

          15        is dynamite property.

          16             But it's in the open market.  It's there to be

          17        bought.  It seems like our systems broke down.  And

          18        you can't just tell me:  Well, because they don't

          19        want to sell it to government.  They've sold

          20        thousands and thousands of acres to us.

          21             My only concern about this is -- and I mean,

          22        the person who is selling this is just one of the

          23        most reputable persons in the business.  This is

          24        not -- this is all above board, and I am not making

          25        any -- I am not being accusatory here.
.                                                                     46

           1             But there seems to be -- and we'll get to

           2        this -- there seems to be -- because he could buy

           3        it and we couldn't, there seems to be a profit made

           4        in that regard.

           5             And God bless him, God bless America for the

           6        entrepreneurial spirit.  But what is wrong with us,

           7        not being able to have the agility that a private

           8        developer has, it's troubling to me.  Both you

           9        guys --

          10             MR. CHRISTIANSEN:  Governor, I think it's an

          11        issue we struggle with every day.  I think we are

          12        very agile.  Once the landowner came to us with

          13        this transaction, within 60 days we had a contract.

          14             So I think we have proven the ability to be

          15        quick and responsive when we have someone that

          16        wants to work with us.

          17             Rayonier is a very large company, they own

          18        over a million acres of land.  What I can tell you

          19        is how we have worked with Rayonier.

          20             We have looked at their inventory, which is

          21        rather extensive, and we have gone through each of

          22        their holdings and said that's not in our priority,

          23        that is in our priority.

          24             And we have actually worked on informally a

          25        sequence of working project-by-project.  We did
.                                                                     47

           1        Baker County three years ago; we did Volusia County

           2        two years ago; we did the St. Johns County -- Marsh

           3        last year.

           4             In other words, they have preferred to have an

           5        orderly process with respect to how they deal with

           6        us as a buyer.  At every point, we have done what

           7        we could do to attempt to get this one on the

           8        table.

           9             There probably are sideways, pathways,

          10        intermediaries, with whom we could deal.  But the

          11        fact that this is a very large landowner with whom

          12        we have a continuing relationship and they didn't

          13        come to the table willingly on any of this.  They

          14        said we are very nervous about doing government

          15        purchases.  Quite frankly, they had some bad

          16        experiences 10, 12 years ago.

          17             GOVERNOR BUSH:  But they haven't had bad

          18        experiences with us when we have written them huge

          19        checks over the last four years.

          20             MR. CHRISTIANSEN:  That's right, we have been

          21        bringing gradually --

          22             GOVERNOR BUSH:  Relocated to Florida, the

          23        corporate headquarters.  We've worked with them.

          24        This is a reputable company, and you are not making

          25        sense about why we couldn't buy, why we couldn't
.                                                                     48

           1        buy it in venture with Mr. Stokes, or why we

           2        couldn't have bought it ourselves and sold off, or

           3        whatever.

           4             I am missing the point.  And I am also missing

           5        why DEP wasn't brought in as the procedures allow

           6        us.  To be honest with you, if you were interested

           7        in this and you were working with DEP, another

           8        scenario would have been that David would have been

           9        aware of it, to let me know so that I could call

          10        the guy up and say:  We want to be a buyer, let us

          11        compete with the folks.

          12             MR. CHRISTIANSEN:  I will try to address that

          13        point.

          14             Let me, just before I get to that point, tell

          15        you that there was another contract on this

          16        property two years ago by a different private

          17        buyer.  We were in discussions with him about doing

          18        a partnership acquisition where we would buy

          19        primarily easements.  He would retain part of it

          20        unencumbered and part of it encumbered by an

          21        easement.  We got pretty far along.

          22             That contract fell apart, so we haven't been

          23        standing idlely by.  And we have attempted to do

          24        just what you suggested, which is to join up with

          25        another buyer.  We think that's a good, creative
.                                                                     49

           1        way to get to the end.

           2             With respect to the involvement with the

           3        department, on this track, our discussions have

           4        been over the last years that we would -- the Water

           5        Management District would take the lead on this

           6        because we do have a relationship with Rayonier and

           7        we felt like we have the best likelihood of getting

           8        success on this track, all knowing that Rayonier up

           9        to that point was unwilling to go forward.

          10             So we had the lead on that.  We attempted, as

          11        I just mentioned, to work with this other buyer and

          12        we felt like that was moving forward; that one fell

          13        apart.  This was late or mid 2002.

          14             It's our understanding that Rayonier entered

          15        in negotiations with Mr. Stokes, the ultimate

          16        buyer, in late 2002.  During the course of that

          17        time, we were working through our contacts with

          18        Rayonier on a continuing basis to try to get a shot

          19        at it.  There were points in time when they said we

          20        are working on this.  If this one doesn't go

          21        forward, we'll talk again.

          22             So we were -- we felt we were in line moving

          23        forward.  All the while, informal discussions

          24        continued with the department.

          25             Fast forward to summer of 2003, last summer:
.                                                                     50

           1        The contract was executed between the Stokes

           2        company and Rayonier.  Again, we were unaware of

           3        the contract at that point.  Shortly thereafter,

           4        Mr. Stokes contacted us.  The day or day after we

           5        got contacted by Mr. Stokes we did two things.

           6             We went up and met with him and we called the

           7        department and said:  Looks like we might have an

           8        opportunity to be in play on this project.

           9             We went to meet with Mr. Stokes, and the

          10        reality is things have moved very rapidly.  As I

          11        said from the day we met him until the day we had a

          12        contract in front of our board was 60 days.  That's

          13        pretty -- that's moving right along.

          14             GOVERNOR BUSH:  I wish the same speed had

          15        occurred prior.

          16             MR. CHRISTIANSEN:  Once we get to go, we go.

          17        Having stated that, throughout that 60-day

          18        period --

          19             GOVERNOR BUSH:  Just a second.  Isn't it the

          20        policy -- the policy relates to -- maybe I am

          21        wrong, maybe I don't understand it -- that once you

          22        have -- prior to putting something under contract,

          23        don't you need to -- if you are asking us for

          24        50 percent -- to get our approval?

          25             MR. CHRISTIANSEN:  Approval in what respect?
.                                                                     51

           1        Let me make sure.  Of the purchase price?

           2             GOVERNOR BUSH:  Yeah.

           3             MR. CHRISTIANSEN:  It's normal that we go to

           4        our board first and then bring it to you.

           5             CFO GALLAGHER:  Right, but nobody brought it

           6        to us.

           7             MR. CHRISTIANSEN:  The normal sequence --

           8             GOVERNOR BUSH:  You are bringing it --

           9             CFO GALLAGHER:  -- after the fact, sort of,

          10        you are trying to be after the fact.

          11             GOVERNOR BUSH:  After the fact, that's the

          12        part I am missing; maybe I am wrong.

          13             MR. CHRISTIANSEN:  The way the process is set

          14        out is we work with the department through the

          15        appraisal and negotiation period at the staff

          16        level.  We come up with a contract with the seller.

          17        We take that contract to our board; they approve it

          18        or not.

          19             If they approve it, we then bring it to you.

          20        And that's the process we followed in this case.

          21        It's been a very compressed time frame, but we have

          22        followed that process.

          23             Where I think there has been some daylight is

          24        during the course of the 30 days, when we were

          25        doing the appraisals, we did not have DEP join us
.                                                                     52

           1        on the appraisal tour as we would normally do if we

           2        had more time.  And the discussions and

           3        negotiations were pretty sketchy.

           4             CFO GALLAGHER:  So where are you guys sitting

           5        now when we deny it?  What happens?

           6             MR. CHRISTIANSEN:  The contract will

           7        terminate, and we'll move on to the next priority.

           8             GOVERNOR BUSH:  Go ahead, General.

           9             ATTORNEY GENERAL CRIST:  I don't think we've

          10        met.  Who do you work for?

          11             MR. CHRISTIANSEN:  I am sorry, I am Robert

          12        Christiansen with the St. Johns River Water

          13        Management District.

          14             ATTORNEY GENERAL CRIST:  What's your role in

          15        this scenario?

          16             MR. CHRISTIANSEN:  I am representing the

          17        district and bringing this as a partner to the

          18        state for 50/50 acquisition on this.

          19             Our governing board has voted for their

          20        50 percent participation, and we are requesting

          21        that you join us in the acquisition.

          22             ATTORNEY GENERAL CRIST:  Did you present

          23        before the Division of State Lands?

          24             MR. CHRISTIANSEN:  Did I present?  Yes, sir.

          25             ATTORNEY GENERAL CRIST:  And they are the ones
.                                                                     53

           1        recommending we do not do this?

           2             MR. CHRISTIANSEN:  That's correct.

           3             ATTORNEY GENERAL CRIST:  Okay.  Then you are

           4        not the right guy to answer that question.

           5             SECRETARY STRUHS:  If I might, General, the

           6        ordinary course of business would be for the

           7        agreement -- to enter into a partnership

           8        acquisition between the Water Management District

           9        and Board of Trustees would be exercised before

          10        they would bring the option to you.

          11             This is unusual because it's being -- the cart

          12        is before the horse, and that's unfortunate and it

          13        should not have happened.  And I can't think of any

          14        other examples where that has been the case.

          15             So it is unusual and it shouldn't happen

          16        again.

          17             In terms of the recommended denial, what that

          18        reflects is DEP's staff analysis and concern about

          19        the flipping nature, the acquisition, then very

          20        quickly turning it over for what could be perceived

          21        by some as a substantial profit.  There is nothing

          22        wrong with it.  In fact --

          23             GOVERNOR BUSH:  Profit is a good thing.

          24             SECRETARY STRUHS:  It's a wonderful thing, and

          25        it was done completely above board and completely
.                                                                     54

           1        transparent.  But because of the compressed time

           2        frame, because of the perception issues, we wanted

           3        to make sure that you all were alert to that

           4        because we are sensitive to that.

           5             Having said that, we also recognize the

           6        important natural resource value of the property.

           7             GOVERNOR BUSH:  Secretary.  Yes, General.

           8             ATTORNEY GENERAL CRIST:  Thanks.  It seems, I

           9        think the gentleman might want to -- it's your call

          10        actually, but thanks, I appreciate that.  I would

          11        like him to come back to that after.

          12             GOVERNOR BUSH:  Do we have any speakers?

          13             SECRETARY STRUHS:  We do.  We have Mr. Stokes,

          14        who is the current owner.

          15             GOVERNOR BUSH:  He's chomping at the bit to

          16        get here, I know.

          17             Good morning.

          18             MR. STOKES:  Good morning.  Frankly, I feel a

          19        little uncomfortable being up here today and

          20        probably more so after the conversations I've heard

          21        this morning but --

          22             GOVERNOR BUSH:  Before you start, before you

          23        start, don't be offended, don't --

          24             MR. STOKES:  Oh, I am not offended.

          25             GOVERNOR BUSH:  Don't be uncomfortable.  This
.                                                                     55

           1        is my way -- we have the largest land purchasing

           2        program in the country.  And this is my way to

           3        bring some of the business acumen that you have

           4        successfully implemented in your own lives to

           5        public sector.

           6             So part of it is the -- you may not like it

           7        but part of it is the management style I have to

           8        force people who have not been challenged the way

           9        they need to be challenged in the past; so don't

          10        take offense.

          11             MR. STOKES:  And I totally appreciate where

          12        you are coming from.  And let me, just before I get

          13        into the specifics of this deal, let me just tell

          14        you a couple of things that I have observed.

          15             We run across the state as our competitor in

          16        buying land all the time.  Have you got the slide

          17        you just had up there on the other piece of land?

          18        Could you stick it back up there for me?  The

          19        Putnam three piece, Putnam County.  I want to show

          20        you something.

          21             I am going to tell you a story and this is

          22        going to dumbfound you.

          23             This piece of land you just bought was part of

          24        a 120,000-acre breakup of Gillman Paper Company.

          25        Now I don't know how to point -- just point?
.                                                                     56

           1             You see these with the vertical lines?

           2             GOVERNOR BUSH:  Yes, sir.

           3             MR. STOKES:  I happen to own those two pieces.

           4        I also, as part of this purchase, bought

           5        9,000 acres just to the south of it, signed the

           6        contract, had it under contract.

           7             What happened, a pension fund contracted to

           8        buy the entire 120,000 acres, a guy named Bill

           9        Aquakohler (ph) was hired by them and put together

          10        various and sundry groups to buy various and

          11        certain pieces of this property.

          12             I particularly wanted these two pieces to the

          13        north here.  In order to buy those two pieces, I

          14        had to contract to buy -- these two pieces are

          15        9,000 acres.  I had to buy 16,000 acres down here

          16        to be able to get the bulk price I was looking for.

          17             I turned around, and these names may mean

          18        nothing, but Bill Aquakohler and Sandy MacArthur,

          19        nephew of former Senator MacArthur -- I don't know

          20        if any of you look old enough to remember Senator

          21        MacArthur -- he was a great friend of mine; he was

          22        one of the finest people we've ever had in state

          23        government.  They bought the 9,000 acres to the

          24        south here, a simultaneous closing, on the day we

          25        closed on ours, the exact same price.
.                                                                     57

           1             I turned around and flipped it on the same

           2        day, but I didn't make a penny on it because what

           3        it did, it accomplished what I wanted to do; it

           4        gave me the two pieces of land I was looking for at

           5        bulk land prices.

           6             Now I bet you if you went back and looked at

           7        what this piece sold for, you are going to find out

           8        that as part of the Gillman, you paid a lot; I

           9        would be willing to bet you paid at least twice and

          10        probably at least three times as much it was sold

          11        for back then.

          12             I know that you are interested in this

          13        property that we have flipped for not 1 dollar

          14        profit.  And it just already sold for more than

          15        double what we sold it for.  And we just flipped

          16        it, didn't make any money on it.

          17             Now the state calls me all the time wanting to

          18        put my land on the list to acquire.  I tell them I

          19        am not interested, I am not interested in selling

          20        those two pieces of land.  If I wanted to flip it

          21        with the state, I can make a huge amount of money

          22        and I know that.  That's not what I am about.

          23             You obviously don't know me.

          24             GOVERNOR BUSH:  Why do you say that?

          25             MR. STOKES:  We started looking at this piece
.                                                                     58

           1        of land and what -- what we felt uncomfortable

           2        about was the heat that Robert and your Department

           3        of Environmental Protection was getting because I

           4        know that this land was not available.  It's been

           5        under contract; we are the third person that had it

           6        under contract.  Morgan Stein had it under

           7        contract, then Tony Slayman had it under contract.

           8             Rayonier was looking for somebody to buy it.

           9        They know me, I bought land from them for years.

          10        They know that they can show me something, and then

          11        five minutes I can tell them yes or no; I am

          12        interested in it.  If I tell them I am going to buy

          13        it, they know I am going to close on it.

          14             So we saw this piece of land.  We knew before

          15        the contract, the prior contract was released, that

          16        it was going to be released.  The expiration date,

          17        we jumped on it because we wanted to buy it.

          18             So the state really never had -- and I am just

          19        telling you, these guys are not at fault for that.

          20        We were all over Rayonier.  We wanted to buy this

          21        piece of land.  We were only interested in the

          22        small corner that we are retaining.  Rayonier said

          23        we want to sell the thing --

          24             GOVERNOR BUSH:  I am sorry, would you put the

          25        picture back up?
.                                                                     59

           1             MR. STOKES:  I have to get this one back up

           2        here.

           3             GOVERNOR BUSH:  That may not be the best one.

           4        Go ahead.

           5             MR. STOKES:  We were basically interested in

           6        this piece right here.  We are currently developing

           7        this land right in here.  We paid how much -- we

           8        paid exactly 9,000 an acre for this piece of land

           9        in here, we're developing 600 and something lots I

          10        believe.

          11             We have under contract the back piece of land

          12        today, we have not closed on, at 5,000 an acre.

          13        But the difference in the two, the nine and five,

          14        the 9,000 an acre was fully engineered, ready to

          15        go; we can start development the next day.

          16             This back here has -- the comp plan is in

          17        place, so we know we can use it.  It just doesn't

          18        have the zoning and the engineering and all that.

          19        That's the difference in the two prices.

          20             We wanted to be able to continue on on this

          21        tract of land right here.

          22             Rayonier wanted to sell the entire tract.  So

          23        we said that's a big acquisition for us.  The

          24        acquisition that I was talking -- showing you

          25        before was, I think we paid $22 million for
.                                                                     60

           1        16,000 acres, turned around and flipped 9,000 -- I

           2        mean flipped 7,000 and kept 9,000.

           3             This particular tract, we just said that's a

           4        big bite for us, so we better bring in a partner.

           5             The other piece of land, I had one partner.

           6        My best friend outside of my family is a guy named

           7        Hallway Smith.  Hallway and I bought it together,

           8        he was my little brother fraternity from Georgia

           9        Tech.  We have been 40 years best friends.

          10             This particular piece of land, I guess maybe I

          11        committed the cardinal sin.  Once I went up and

          12        looked at it, I said:  This is probably one of the

          13        neatest pieces I've ever seen, it's got some

          14        incredible waterfront on it.

          15             So I sort of had a vision of how we could put

          16        this thing together.  We had -- we started

          17        negotiations in October of 2002 with Rayonier, came

          18        to a deal by December that was on paper, and

          19        submitted a contract with a deposit.

          20             I guess we actually submitted the deposit in

          21        March of 2003.  It was a very complicated deal that

          22        I am not sure they ever could have worked out with

          23        the state and maybe they could have.

          24             But we didn't buy a piece of land.  We had to

          25        buy a company.  It was a very complicated thing for
.                                                                     61

           1        them from a tax standpoint.  So they're dealing

           2        with an individual here that can make decisions,

           3        and I don't have to ask anybody what I want to do.

           4             GOVERNOR BUSH:  We are -- if you want to --

           5        the one question I think that I have that might be

           6        the main question is are we getting the same deal

           7        you with --

           8             MR. STOKES:  I got something here that I

           9        hope --

          10             GOVERNOR BUSH:  Let me ask the question, make

          11        sure it's the same one that you are going to

          12        answer.

          13             Are we getting the same deal that you did on

          14        the Camp Blanding deal where you are flipping it at

          15        the same basis?

          16             MR. STOKES:  We don't believe so.  We believe

          17        we are making $25 an acre, for which -- for which

          18        we are giving you a conservation easement on

          19        877 acres that I assure you -- where is one of the

          20        brochures that has the photo on the front?  You see

          21        this aerial photo right here, this frontage?

          22             GOVERNOR BUSH:  Yes, sir.

          23             MR. STOKES:  We can cut this up right now

          24        today in hundred-foot lots, and I assure you we can

          25        sell them for in the 500,000-dollar range easily.
.                                                                     62

           1        The piece of land that we are retaining has

           2        frontage just like this, 877 acres.  I know I can

           3        get 30 lots on it that I know I can sell for

           4        $15 million.

           5             Now for either what we believe is a 300,000

           6        profit or what the Water Management District is a

           7        million-three in profit, we are putting a

           8        conservation easement on that 30 million-dollar;

           9        just that little frontage is worth $30 million to

          10        us.  This is the most incredible no brainer I've

          11        ever seen for the state, in my opinion.

          12             GOVERNOR BUSH:  If you get back there; it's

          13        not a no brainer if, with the information I have,

          14        is that there is -- that you are flipping this to

          15        get to what you want, which is the property that

          16        you initially wanted to develop.

          17             And again, I haven't been in the private

          18        sector, now being in the public sector; don't take

          19        personal offense to this.

          20             MR. STOKES:  I am not taking anything to

          21        heart.

          22             GOVERNOR BUSH:  You are taking a little bit of

          23        personal offense, I sense it.

          24             What we have got in our information is that

          25        there is a million 600,000-dollar difference
.                                                                     63

           1        between what you are -- what we are paying for it

           2        and what you bought it for.  If that's wrong, focus

           3        on that to help me; because other than, that

           4        everything else, it's a great piece of property.

           5             MR. STOKES:  Let me ask you this question.

           6        You are not paying anything for me giving up the

           7        877 acres.  That's certainly worth than 600,000 or

           8        300,000 or a million-three.  We are putting a

           9        conservation easement on something for nothing.

          10        And so that's the point that I think nobody is

          11        grasping.

          12             GOVERNOR BUSH:  I want to grasp it.

          13             CFO GALLAGHER:  If I may.  Then that should

          14        be, if that's true, we pay cash, which drives me

          15        crazy, and big cash for conservation easements.

          16        And if that's part of the deal, and you are

          17        throwing it in, then that should be part of the

          18        numbers that were given us on this deal.  And they

          19        aren't.

          20             MR. STOKES:  That's what I would like to hand

          21        out to you.

          22             GOVERNOR BUSH:  Please do.  And then maybe you

          23        can go back and point where the conflict -- one

          24        more time. Thank you.

          25             MR. STOKES:  I think it will make you clearly
.                                                                     64

           1        understand --

           2             GOVERNOR BUSH:  Is this, the conservation

           3        easement, is that something that was recently

           4        negotiated?

           5             MR. STOKES:  John, come up.  I have a little

           6        trouble, I don't hear that well, so I am going to

           7        get John.  John Kunkle, is my chief financial

           8        officer, he will help field the questions and

           9        understands some numbers.

          10             GOVERNOR BUSH:  John, can you state who you

          11        are?

          12             MR. KUNKLE:  John Kunkle with Stokes and

          13        Company.  I think the question was about the

          14        conservation easement.

          15             There is language within our contract with the

          16        Water Management District that spells out that this

          17        837 acres will be held without any development

          18        other than I believe 75,000 square feet of

          19        improvements.

          20             CFO GALLAGHER:  I have a question.  I know it

          21        doesn't matter to you all, because government is

          22        government.  But it does matter to me.

          23             And this may be -- this really may be out of

          24        your context and it's to deal with the Water

          25        Management District.  But my belief is this
.                                                                     65

           1        conservation easement is with the Water Management

           2        District as opposed to with the state.

           3             And do you know the answer to that?  Do you

           4        know, there is a conservation easement to the

           5        government because you are giving away the deal.

           6        But my guess is that that's retained by the Water

           7        Management District?

           8             MR. CHRISTIANSEN:  Let me try to answer the

           9        whole conservation easement issue.

          10             It was part of the negotiations, came up late

          11        in the negotiation, that this 800 some acres was

          12        something that they would like to keep.  And we

          13        said:  We don't want to wind up with it holding the

          14        donut of condos.  We need to make sure it's

          15        conserving land use.

          16             If you agreed to put a conservation easement

          17        over it, we'll agree to exclude it from the deal.

          18             And they said:  Well, that's fine but we want

          19        to make sure that if we grant a conservation

          20        easement over this tract, we can use it for

          21        mitigation for other properties.

          22             And we said:  Well, that seems okay.  But

          23        inasmuch as we were not providing a financial

          24        consideration for that easement, and they were

          25        retaining the mitigation rights to it, we felt like
.                                                                     66

           1        it was cleaner to just not include that as part of

           2        the consideration, but rather to have it as a

           3        contingency for closing, that we receive the

           4        conservation easement.

           5             CFO GALLAGHER:  Hold on.  That's nice to say,

           6        but it doesn't get anything for that.  So I was

           7        ready to go with you when I thought we were getting

           8        something, but now we are getting a neutral.

           9             MR. CHRISTIANSEN:  Governor, if I may, there

          10        are different numbers.  There is probably 10

          11        different ways to look at what's the profit in this

          12        transaction.

          13             Mr. Stokes has shared with you I think the $25

          14        an acre.  That's on a gross acreage purchase basis.

          15             GOVERNOR BUSH:  The $25 an acre is for what

          16        part of this?

          17             MR. STOKES:  Basically if you take the entire

          18        property, on a gross acreage basis, average per

          19        acre, take what we are keeping and what you are

          20        keeping, we end up with a basis, a cost basis and

          21        what we are left with of $23 -- $24.50 an acre,

          22        less than what your basis is in your property.  But

          23        877 acres of our land has a conservation easement

          24        on it.  So we have a cost basis of about a million

          25        four.
.                                                                     67

           1             GOVERNOR BUSH:  That's a trade for mitigation

           2        down the road for development, right?

           3             MR. STOKES:  Right.

           4             GOVERNOR BUSH:  And are we buying land we

           5        already own through sovereign submerged lands?

           6             MR. CHRISTIANSEN:  No, sir.  If I might, the

           7        difference in the numbers which have been reported

           8        to you on how we calculated profit relate directly

           9        to your question.

          10             Rather than take a gross acreage purchase

          11        allocation on an acre by acre basis, we separated

          12        out all the potential sovereign lands from both

          13        transactions, so we could have apples and apples.

          14        Somewhere around 3500 acres of the close to

          15        15,000 acres we deem to be potential sovereign

          16        lands.  So we stripped that out.

          17             And we said:  Not only that, but an acre is

          18        not an acre; there is uplands; there is wetlands

          19        the developable acres, it's important to

          20        distinguish.  So we also allocated it to

          21        transaction on an uplands/wetlands basis.

          22             GOVERNOR BUSH:  Which we would then get a

          23        better deal because we have a lower -- I assume we

          24        have more wetlands?

          25             MR. CHRISTIANSEN:  That's right.  So having
.                                                                     68

           1        done that allocation, there is a worksheet in the

           2        packet that everybody has seen that the bottom line

           3        comes out to about $1.3 million in what we believe

           4        to be the profit at closing in February of '05 off

           5        of their basis.

           6             That's why there are different numbers.  Some

           7        people look at it one way.  We felt like we needed

           8        to look at it, get the sovereign lands out of the

           9        question.

          10             GOVERNOR BUSH:  That's the right of doing it.

          11             MR. STOKES:  I think the important thing for

          12        you to understand is we have title insurance that

          13        says we own the land that the state is claiming.

          14        Actually our title insurance company looked at it,

          15        said the state is wrong.  So who knows what the

          16        number is?

          17             I think the bottom line though is -- you need

          18        to understand the transaction.  We have a group of

          19        partners; I felt so strongly, and I wish you could

          20        have been a fly on the wall.

          21             If you vote not to buy this today, you are

          22        going to make a lot of people in my company happy.

          23        I had to ask myself -- the way my company operates,

          24        we have a group of partners.  We sit down and we

          25        are violating the Golden Rule on this particular
.                                                                     69

           1        deal because our rule has always been:  If we don't

           2        all want to do something, we don't do it.  We do

           3        not have a unanimous group in wanting to make this

           4        sale to the state.

           5             But fortunately on this one, I have the

           6        tie-breaking vote, and it was something that I felt

           7        very strongly about.

           8             I have taken my 13-year old out there.  I am

           9        at a point in my career, I am not trying to make

          10        any money on this thing, that's not what motivates

          11        me any more.  The piece of land I just showed you

          12        in Putnam County that we own down there, the state

          13        bugs me to death about buying it.  I am not

          14        interested in selling it.

          15             Now I did just donate 468 acres to a thing

          16        called Sea Mart Ranch, it's going to be a home for

          17        abused kids.  You may have heard of one up with in

          18        Alabama called Big Oak Ranch.  So I've got all the

          19        money I need, I promise you that.  And I got enough

          20        to take care of my family forever.

          21             So that's not what this transaction is about.

          22        This transaction is about preserving an incredible

          23        piece of land for the people of Northeast Florida.

          24        And what I am looking to get out of it is for

          25        generations to come, my family and the families in
.                                                                     70

           1        my company are going to be able to enjoy that 800

           2        and some acres and have a 12,000-acre pristine

           3        backyard.  That's really important to me.  That's

           4        my motivation to do this thing.

           5             So we have a financial part.  When we leave

           6        here today, I am going to have to do one of two

           7        things.

           8             I am either going to have to go with my hat in

           9        my hand and tell my 13-year old I was wrong, this

          10        is not going to happen; or I am going to have to go

          11        with my hat in my hand and tell my partners:  Guys,

          12        you are not going to be a 50 percent partner in

          13        this deal -- because they are our insurance; if you

          14        don't buy it, they become 50 percent partners, they

          15        contributed 12 million in equity potentially, if

          16        you don't buy it.

          17             If you do buy it, they don't have to

          18        contribute any equity and they get 15 percent

          19        ownership.  They are dying -- our partners are very

          20        young Louisiana guys, very wealthy family, ages 29

          21        to 42; they'd love to see this thing develope over

          22        30 years.

          23             It's a situation where -- it's been a tough

          24        deal for me going against what some of the younger

          25        people in my company want to do.
.                                                                     71

           1             But anyway, I would just tell you I think this

           2        will go down in history as one of your greatest

           3        acquisitions ever, if you decide to do it.

           4             The other thing that's come up is a question

           5        that apparently -- and I didn't understand clearly

           6        until this morning, Deanna took me up to your

           7        attorney and explained it to me.

           8             There is a question on condemnation on some

           9        right-of-way with the DOT.  Apparently-- apparently

          10        the road out there is being four-laned.  The DOT

          11        aligned the road and is negotiating a rate in a

          12        condemnation lawsuit to take the right-of-way they

          13        needed.

          14             Apparently, after we contracted the land we

          15        contracted for, there was some question about some

          16        kind of a historical railroad or something out

          17        there.  So they now need additional right-of-way

          18        from our land.

          19             We are not trying to make any money at all on

          20        that.  We have no problem with giving the state

          21        whatever kind of easement they need on our

          22        property.

          23             I went -- the way I look at it, we're dealing

          24        with the state.  Obviously you have a DOT and you

          25        have the Water Management District.  But, you know,
.                                                                     72

           1        if the Water Management District has this thing

           2        under contract, and for some reason the DOT needs

           3        the land, I am totally committed to giving the DOT

           4        the easements they need at no costs.  So that's not

           5        an issue in this whole thing as far as we are

           6        concerned.

           7             GOVERNOR BUSH:  You concur with the St. Johns

           8        Water Management District's assertion that if you

           9        take away the conservation easement, separate that

          10        out because that is mitigation for the development

          11        to be on your property that you want to develop,

          12        that what you -- and I don't know if you concurred

          13        with their allocation of values based on wetlands

          14        and uplands.  But what we are purchasing is a

          15        million-three more than what you just closed on?

          16        Do you concur with that?

          17             MR. STOKES:  As far as total -- it's an

          18        allocation question, and I could probably make a

          19        much, much stronger argument that you are getting

          20        all the valuable waterfront land other than the

          21        little piece we are keeping.  You are getting

          22        120 miles of marsh front, and I think that's the

          23        number I heard, of marsh front and creek front.  I

          24        could make the argument you are by far getting the

          25        better value than we are keeping.  So it's
.                                                                     73

           1        semantics.

           2             GOVERNOR BUSH:  Could you develop it?

           3             MR. STOKES:  Pardon?

           4             GOVERNOR BUSH:  Could you develop it, the

           5        marsh front and the wetlands?

           6             MR. STOKES:  Most certainly we could develop

           7        it.  We have done a wetlands assessment.  Half of

           8        it, about 50/50 wetlands/upland.  So we got

           9        7500 acres there.

          10             We've run the numbers; we didn't make this

          11        decision lightly.  Our projected sales on this

          12        project is a billion and a half dollars.

          13             It's not -- that's not what it's about.  It's

          14        about something that I happen to passionately

          15        believe is good for the state.

          16             So we are fortunate, we are going to win

          17        either way.  It's going to be a good deal for the

          18        state, and I am going to happy, and the folks in

          19        our company are going to be happy.

          20             Thanks for your consideration.

          21             GOVERNOR BUSH:  Any other questions?

          22             CFO GALLAGHER:  Governor, I have been watching

          23        this.  And I think my biggest problem is whether

          24        this is a piece of property that would be a

          25        wonderful thing for the people of Florida to own.
.                                                                     74

           1             My problem has been on how we were informed

           2        that this was taking place more than anything else.

           3        This was -- though I think the Water Management

           4        District made a mistake and gone through appraisals

           5        and other things without including our knowledge

           6        and nobody -- the last week is the first time I

           7        even knew any of this was going on.

           8             The timing of it, a flip real quick, if it's

           9        $25 an acre, or whatever it is that we are paying,

          10        I look at it as we are -- I look at it as if I were

          11        buying it for myself as well as buying it for

          12        myself and everybody else in the State of Florida.

          13             So I have to look at it:  Is it the kind of

          14        deal we should preserve?  And I feel this.  But I

          15        am just not happy the way it came to us and the

          16        perception of how it looks.

          17             And you want to address that, David?

          18             SECRETARY STRUHS:  I do want to respond to

          19        that because I've had two conversations with the

          20        executive director at the Water Management

          21        District, Kirby Greene, about that very issue; not

          22        so much the option before you, but the process as

          23        to how it transpired.

          24             And I have his assurance, and I think I can

          25        relay to you on his behalf, that this won't happen
.                                                                     75

           1        again; that he will make sure that the Water

           2        Management Districts have -- is it called a 161

           3        agreement?  Yeah, have the 161 agreements, which is

           4        the cost/share arrangement with the Board of

           5        Trustees, in place well prior to bringing any

           6        options to purchase before the board.

           7             I think you have that assurance.

           8             One other thing I do want to note that Eric

           9        Draper from the Florida Audubon Society also wanted

          10        to speak to the issue.

          11             MR. DRAPER:  Governor, Members of the Cabinet,

          12        Erick Draper, Audubon of Florida.

          13             I appreciate you taking a minute to listen to

          14        me.  I commend you, Governor, for bringing

          15        accountability to this process.

          16             When I sit at these Cabinet meetings and

          17        listen to you ask these questions and raise these

          18        issues, I am pleased to see that you are trying to

          19        stretch the dollars that are in the Florida Forever

          20        Program and make sure they go further.

          21             I am to -- I am trying to think as I listen to

          22        the debate about what I can say to you, the

          23        Cabinet, to help you bring this in for a landing.

          24             We believe that this is an exceptional piece

          25        of property; clearly that's been established to
.                                                                     76

           1        you, it's established in the report.  We are very

           2        concerned about this piece being so close to the

           3        development that's coming out of Jacksonville and

           4        the airport.

           5             The fact that it's got a lot of wetlands on a

           6        lot of sovereign submerged land; you know, some

           7        developers look at that and say that will make it

           8        hard to develop; some people will say that's future

           9        waterfront.  Wetlands don't stop land from getting

          10        developed.

          11             You can mitigate off of it, that impact, and

          12        move on.  And I think that if for some reason you

          13        did let this one get away today, even though I

          14        recognize the objection about the money, that we

          15        are looking at future DRIs and Planned Unit

          16        Developments out there, and we'll lose the

          17        opportunity to take these four creeks that go into

          18        the Nassau River.  And just a biological jump.

          19             GOVERNOR BUSH:  You got any thoughts about the

          20        title insurance issue?

          21             MR. DRAPER:  I don't have thoughts about that.

          22             GOVERNOR BUSH:  Good judgment on that.

          23             MR. DRAPER:  The point is that you can go into

          24        these arguments about these sovereign submerged

          25        lands and the wetlands, and ultimately that issue
.                                                                     77

           1        will play itself out away from the Cabinet except

           2        when they come back here on that.  And chances are

           3        the lawyers and who are the best lawyers could best

           4        field in the process.

           5             Anyway, the circumstances of this are what

           6        they did; whether the district handled it as well

           7        as they could or not, I was involved in the

           8        legislative process that created the 161 process

           9        about 10 years ago.

          10             It's a good thing that you got the district

          11        and the state working together.  I wished the State

          12        of Florida -- certainly in the Everglades where we

          13        do a lot more work -- was much more aggressive

          14        adept at getting land before it went up in value.

          15        And it just pains me to see why we thought this

          16        could go for one price, go for another price; and

          17        the dollars don't go as far as the -- forces us to

          18        go back and process and try to get more money from

          19        the state to accomplish the state's biological and

          20        conservational goals.

          21             But I would ask you to overlook the money on

          22        this one and let this one go forward.  You held a

          23        meeting in this room about a year ago, and I

          24        thought it was a really good meeting in which you

          25        examined what we are doing here.  I tried to make
.                                                                     78

           1        the point at that time that we need to make the

           2        land acquisition agencies much more adept and much

           3        more businesslike in how they do this and get in

           4        front of the speculate as to pressures that are

           5        going in Florida right now.  I will end there.

           6        Thank you very much for listening to me.

           7             GOVERNOR BUSH:  Thank you, Eric.

           8             Can I ask the fellow from the St. Johns Water

           9        Management District to come back one more time?

          10             CFO GALLAGHER:  There is less of him each time

          11        he comes up.

          12             GOVERNOR BUSH:  He is doing all right.

          13             I appreciate you being here and taking our

          14        grief; this is part of our process.

          15             If you -- I am going to call the CEO of

          16        Rayonier and have a conversation with him because

          17        the notion we are not -- are not capable of dealing

          18        with us is just bogus.

          19             We have bought incredibly fine pieces of

          20        property in the northeast Florida area on a regular

          21        basis, almost on a quarterly basis; it seems

          22        through you or through us, we could have purchased

          23        this property.  Would we have bought the whole

          24        property?

          25             MR. CHRISTIANSEN:  I believe so.
.                                                                     79

           1             GOVERNOR BUSH:  Okay.

           2             CFO GALLAGHER:  Let me just mention one thing.

           3             I think one of the complications with Rayonier

           4        doing business with us as the state -- and I don't

           5        know if anybody can fix this -- is that they want

           6        to do a stock transfer for tax reasons.  And

           7        correct me if I am wrong; they created a

           8        corporation, put the land in the corporation, and

           9        made a stock switch with you all so that they could

          10        do their taxes the way they want to do them.  I

          11        don't know that we've ever done a deal like that in

          12        the state.  Have you ever done that with the Water

          13        Management District?

          14             MR. CHRISTIANSEN:  We have done one.

          15             CFO GALLAGHER:  It's possible --

          16             MR. CHRISTIANSEN:  With extensive due

          17        diligence and at great costs to the seller.

          18             CFO GALLAGHER:  Then probably that's not what

          19        they are interested in, is a whole bunch of costs.

          20             They are interested to find a developer who

          21        will say:  Fine, I will switch some stocks with you

          22        and you can do what you want with it.  So I think

          23        that's one of the things that's made this as

          24        complicated as it is.  I am not happy with that

          25        but --
.                                                                     80

           1             GOVERNOR BUSH:  That doesn't change the fact

           2        that we have bought property from, thousands and

           3        thousands of acres from them in the past.  Are we

           4        prohibited from buying stock companies which is why

           5        that --

           6             SECRETARY STRUHS:  That's correct.

           7             GOVERNOR BUSH:  Why is the county government

           8        possible -- how is the -- can you all do it?

           9             MR. CHRISTIANSEN:  It wasn't a stock purchase.

          10        It was a business purchase.  It was crafted

          11        carefully by a law firm in Orlando, and I can't

          12        speak specifically to how we --

          13             GOVERNOR BUSH:  You all can do it but we

          14        can't?

          15             MR. CHRISTIANSEN:  We were able to do

          16        something similar to where we bought a company

          17        whose sole asset was the land.

          18             GOVERNOR BUSH:  So you could have bought those

          19        business as well?

          20             MR. CHRISTIANSEN:  That may have been a

          21        different fact scenario.  I don't know.

          22             CFO GALLAGHER:  They have a company that sold;

          23        apparently what they did here is bought the assets

          24        out of the corporation and left the corporation

          25        account?
.                                                                     81

           1             MR. STOKES:  Actually purchased the companies.

           2             MR. CHRISTIANSEN:  It may be possible.

           3             Governor, just one point.  I think it didn't

           4        come across very clear.

           5             I believe all the transactions we have done

           6        with Rayonier with us together have been approved

           7        by the woodlands division.  And they have this --

           8        they had, up until very recently, this corporate

           9        decision-making on sales that split the properties

          10        to the different divisions.  That has changed in

          11        the last three months.  I think that now they have

          12        got one unit, and I am hopeful that this issue

          13        won't be here again with us, but that's the

          14        situation.

          15             GOVERNOR BUSH:  Any other questions?

          16             CFO GALLAGHER:  I am ready to move to purchase

          17        this.  I don't know if we are going to get enough

          18        votes because I think it takes at least three of us

          19        to do this, if not four, three of us.

          20             So I am going to move that we do it.  And I

          21        hope this exercise lets people in the department

          22        know and this Water Management District for sure

          23        know, but I hope the other water management

          24        districts get informed of what the outcome of this

          25        almost came to be.
.                                                                     82

           1             We have a responsibility, we have an

           2        opportunity and responsibility to do what we can

           3        for the people of the state.  And I think this is

           4        an absolutely gorgeous piece of property.  So I am

           5        going to move that we do it at this point and not

           6        set a precedent that this is the way we are going

           7        to do it all the time.

           8             COMMISSIONER BRONSON:  I will second it.

           9             GOVERNOR BUSH:  There is a motion and a

          10        second.  Any other discussion?

          11             ATTORNEY GENERAL CRIST:  Question.  Eva, do

          12        you have the State Department of Lands?  Can I ask

          13        you some questions?

          14             MS. ARMSTRONG:  Absolutely.

          15             ATTORNEY GENERAL CRIST:  I am fascinated by

          16        the machinations of the deal, but I am concerned

          17        about -- I think you recommended we not do it?

          18             MS. ARMSTRONG:  Yes, sir.

          19             ATTORNEY GENERAL CRIST:  I just want to make

          20        sure I understand.

          21             MS. ARMSTRONG:  Okay.  It was because of my

          22        concern about past discussions by the Board of

          23        Trustees over the appearance of a landowner making

          24        a profit when they have held the property for a

          25        short period of time.
.                                                                     83

           1             And I was being sensitive to those concerns,

           2        policy discussions that this board has had in the

           3        past.  And that was my concern.

           4             And I didn't feel comfortable bringing it

           5        forward under those circumstances.  That's why.

           6             ATTORNEY GENERAL CRIST:  Do you still feel

           7        that way?

           8             MS. ARMSTRONG:  Well, as the Secretary said,

           9        he took a poll when we briefed him on it.  And I

          10        was one -- I was the first one who said, when you

          11        look at this, the value that was negotiated by the

          12        water management district is a good value,

          13        particularly when you look at the development in

          14        the area.  The adjacent comparable sales are much

          15        higher than what they negotiated.  The contract

          16        itself is very good.

          17             For those sovereignty lands that are in

          18        question, I think did a very conservative line

          19        around the sovereignty lands in favor of the state.

          20             And the provision in the contract says that

          21        when we go out and do that mean high water survey,

          22        if any of those acres, in fact, are determined to

          23        be upland acres, we don't pay the additional

          24        acreage up to 2000 acres.

          25             So it's a very well negotiated contract.  And
.                                                                     84

           1        the conservation value of four creeks running into

           2        the Nassau River is very high.

           3             So in my mind, if you guys are comfortable,

           4        and I wanted you all to have this discussion; if

           5        you folks felt comfortable acquiring the property,

           6        knowing what your concerns were spending public

           7        dollars with a quick turn around on behalf of the

           8        seller, then you should buy the property.

           9             ATTORNEY GENERAL CRIST:  How do you feel about

          10        it?

          11             MS. ARMSTRONG:  I think it should be bought.

          12             ATTORNEY GENERAL CRIST:  That's the question.

          13        I am convinced it's good land.  It's beautiful.  I

          14        have seen it.  It's a treasure; there is no

          15        question.  Is the price right?

          16             MS. ARMSTRONG:   Yes, sir, it's a good price.

          17             ATTORNEY GENERAL CRIST:  Okay.  Thank you.

          18             GOVERNOR BUSH:  Eva.  All in favor say aye.

          19             THE CABINET:  Aye.

          20             GOVERNOR BUSH:  All opposed?

          21             The resolution passes.  Let's go back to

          22        number item 6.  Item 6.  Is there a motion?

          23             CFO GALLAGHER:  Motion.

          24             ATTORNEY GENERAL CRIST:  Second.

          25             GOVERNOR BUSH:  Motion and a second.  Any
.                                                                     85

           1        discussion?  Without objection, the item passes.

           2             SECRETARY STRUHS:  Thank you very much.

           3             GOVERNOR BUSH:  Mr. Stokes, congratulations.

           4        Welcome to our world.

           5             CFO GALLAGHER:  I bet you don't want to come

           6        back any time soon.

           7             GOVERNOR BUSH:  By the way, General Burnett is

           8        coming to talk to you about that purchase.

















.                                                                     86

           1             CFO GALLAGHER:  We have SBA yet.  Motion on

           2        the minutes.

           3             ATTORNEY GENERAL CRIST:  Second.

           4             GOVERNOR BUSH:  Motion and second on item 1.

           5        Without objection, the item passes.

           6             Item 2.

           7             MR. STIPANOVICH:  Item number 2, request for

           8        approval of fiscal sufficiency of an amount not to

           9        exceed 16,550,000, State of Florida, Florida

          10        Education System, University Housing Facility

          11        Revenue Bonds.

          12             ATTORNEY GENERAL CRIST:  Motion on 2.

          13             CFO GALLAGHER:  Second.

          14             GOVERNOR BUSH:  There is a motion and a

          15        second.  Without objection.

          16             MR. STIPANOVICH:  Did we skip item number 1,

          17        the minutes?

          18             GOVERNOR BUSH:  We got it.

          19             MR. STIPANOVICH:  Final item, item number 3,

          20        is request for approval of fiscal sufficiency of an

          21        amount not exceeding, $7,200,000, State of

          22        Florida --

          23             CFO GALLAGHER:  Motion on 4.

          24             ATTORNEY GENERAL CRIST:  Second.

          25             GOVERNOR BUSH:  Moved and seconded.  Without
.                                                                     87

           1        objection, the item passes.

           2             Thank you, Coleman.

           3             (Proceedings concluded at 11:25 p.m.)






















.                                                                     88


           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, nor

          15   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 11th

          19   day of March, 2004.



          22                       ______________________________

          23                       SANDRA L. NARGIZ, RMR, CRR
                                   2894 REMINGTON GREEN LANE
          24                       TALLAHASSEE, FL  32308