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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 the 11th day of May, 2004 commencing at approximately
               9:30 a.m.


                                        Reported by:

                                     KRISTEN L. BENTLEY
                                  Certified Court Reporter


                             ACCURATE STENOTYPE REPORTERS, INC.
                                  2894 REMINGTON GREEN LANE
                           TALLAHASSEE, FL  32308   (850)878-2221







                         Representing the Florida Cabinet:

                         JEB BUSH

                         CHARLES H. BRONSON
                         Commissioner of Agriculture

                         CHARLIE CRIST
                         Attorney General

                         TOM GALLAGHER
                         Chief Financial Officer

                                           * * *
















                                   ACCURATE STENOTYPE REPORTERS, INC.


                                          I N D E X

               (Presented by TERESA TINKER)

               ITEM                  ACTION                 PAGE
               1                     Approved               4
               2                     Approved               4
               3                     Approved               4
               4                     Approved               5
               5                     Approved               5

               (Presented by COLLEEN CASTILLE)

               ITEM                  ACTION                 PAGE

               1                     Approved               6
               2                     Approved               39
               3                     DEFERRED               40
               4                     DEFERRED               40
               5                     DEFERRED               41
               6                     Approved               41
               7                     DEFERRED               41

               (Presented by COLEMAN STIPANOVICH)

               ITEM                  ACTION                 PAGE

               1                     Approved               43
               2                     Approved               45
               3                     Approved               47








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                FL LAND & WATER ADJUDICATORY COMM. - MAY 11, 2004          4

          1                              PROCEEDINGS

          2              THE GOVERNOR:  The next cabinet meeting will be

          3         Tuesday, May 25th, 2004.

          4              The Florida Land and Water Adjudicatory Commission.

          5              CFO GALLAGHER:  Motion on the minutes from March 9th.

          6              GENERAL CRIST:  Second.

          7              THE GOVERNOR:  Moved and seconded.  Without

          8         objection, Item 1 passes.

          9              MS. TINKER:  Item No. 2, recommend approval of the

         10         proposed final rule establishing the Pine Island Community

         11         Development District in Lake County.

         12              CFO GALLAGHER:  Motion on 2.

         13              COMMISSIONER BRONSON:  Second.

         14              THE GOVERNOR:  Moved and seconded.  Without

         15         objection, the motion passes.

         16              MS. TINKER:  Item No. 3, recommend approval of the

         17         proposed final rule establishing the Arborwood Community

         18         Development District in Fort Myers.

         19              CFO GALLAGHER:  Motion on 3.

         20              GENERAL CRIST:  Second.

         21              THE GOVERNOR:  Moved and seconded.  Without

         22         objection, the item passes.

         23              MS. TINKER:  Item No. 4, recommend approval of the

         24         proposed final rule establishing the Connerton West

         25         Community Development District in Pasco County.
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                FL LAND & WATER ADJUDICATORY COMM. - MAY 11, 2004          5

          1              CFO GALLAGHER:  Motion on 4.

          2              GENERAL CRIST:  Second.

          3              THE GOVERNOR:  Moved and seconded, without objection,

          4         the item passes.

          5              MS. TINKER:  Item No. 5, recommend approval of the

          6         proposed final rule establishing the villages of Westport

          7         Community Development District in the city of

          8         Jacksonville.

          9              CFO GALLAGHER:  Motion on five.

         10              GENERAL CRIST:  Second.

         11              THE GOVERNOR:  Moved and seconded.  Without

         12         objection, the item passes.

         13              MS. TINKER:  Thank you.

         14              THE GOVERNOR:  Thanks, T-square.











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                         BOARD OF TRUSTEES - MAY 11, 2004                  6

          1              THE GOVERNOR:  Board of Trustees.

          2              MS. CASTILLE:  Good morning, Governor, members of the

          3         cabinet.

          4              THE GOVERNOR:  Good morning.

          5              MS. CASTILLE:  Item 1 is consideration of an option

          6         agreement to acquire perpetual conservation easement

          7         within the Green Swamp Florida Forever Project.

          8              THE GOVERNOR:  Is there a motion?

          9              CFO GALLAGHER:  Motion on 1.

         10              GENERAL CRIST:  Second.

         11              THE GOVERNOR:  Moved and seconded.  Without

         12         objection, the item passes.

         13              Yes, Treasurer.

         14              CFO GALLAGHER:  You know, before we get to the next

         15         one, one of the things that we talked about in the past --

         16         and it's because the next one is an option agreement for a

         17         conservation easement -- is spelling out what we're

         18         getting, either what they're retaining or what we're

         19         buying for the money that we spend -- we had a discussion

         20         on that about a year, about six, eight months ago.  Where

         21         are we on that?

         22              MS. CASTILLE:  Well, we have -- we did have that

         23         discussion about a year ago, I think it was.  And

         24         ultimately, it turned out that we have not been very

         25         successful in the negotiations on conservation easements
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                         BOARD OF TRUSTEES - MAY 11, 2004                  7

          1         with a conservation easement that spells out exactly what

          2         they are allowed to do versus what they are prohibited

          3         from doing.  The landowners believe that it's their land,

          4         the underlying fee is theirs, they have been good stewards

          5         of it historically, and that is consequently why we choose

          6         a conservation easement, because they have been good

          7         stewards of it.

          8              CFO GALLAGHER:  Well, but they can sell it subject to

          9         the conservation easement.  And at that point, we may not

         10         have somebody that's -- I mean, I agree with what you're

         11         saying as far as past owners.  Most of them have been --

         12         many of these lands, I mean, Fisheating Creek, for

         13         example, has been in the family for -- probably when

         14         Florida started.  So that family has been great.

         15              But some of these other ones, somebody can buy the

         16         property and have a whole different idea what to do with

         17         it than those that hold it and that's where my concern has

         18         been from the beginning, not so much with the people we're

         19         dealing with but somebody down the road.  So, I mean, you

         20         can't do one that says, by the way, this is the list of

         21         things that happens after they sell it.  It's what do we

         22         do in case that happens.

         23              THE GOVERNOR:  You could do that.

         24              CFO GALLAGHER:  What happens if you sell it, sure.

         25         That would be a condition I'd like less as an owner than I
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                         BOARD OF TRUSTEES - MAY 11, 2004                  8

          1         would -- just do it right in the first place.

          2              MS. CASTILLE:  I think one of the things that we

          3         struggled with is if the property owner does decide to

          4         sell the property what value can they get out of it and

          5         what use can they use out of it.  And what we're trying to

          6         work -- one of the -- I think a solution to what you

          7         suggested may be that we have a -- that we become a player

          8         in the sale of the property so that there is an

          9         understanding that it is a conservation easement for

         10         protecting that property in perpetuity.

         11              THE GOVERNOR:  Treasurer Gallagher's point is right

         12         on target.  And the fact that an owner would have

         13         reluctance of putting conditions on use for something

         14         that, in effect, we're paying for, I mean, it's a

         15         conservation easement.  But remember, we're buying this at

         16         anywhere from, what, 50 to 70 percent of value?  The point

         17         of this is to conserve what they do now, not to allow any

         18         potential other uses.  And if they have a problem with

         19         that, then they don't have to provide an easement to us.

         20         And they don't have to sell it.  I'm not talking about

         21         this specific piece of property, by the way.

         22              CFO GALLAGHER:  That's why I brought it up before we

         23         were on this issue.

         24              THE GOVERNOR:  Ron, you want to speak?  Come on up to

         25         the microphone.  We're going to have a policy discussion
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                         BOARD OF TRUSTEES - MAY 11, 2004                  9

          1         since there's nothing on the agenda today.

          2              MS. CASTILLE:  There are some prohibitions on the

          3         property and on some of the leases we negotiate.  For

          4         instance, on both of the two properties that we have,

          5         there are prohibitions against cutting cypress down.

          6         There are prohibitions on cutting hardwoods, specifically

          7         cypress.  There are -- there's provisions for -- let me

          8         see.  On the first one, there is a prohibition for mining

          9         and excavation.  Prohibitions for a certain amount of

         10         things that would change the character of the land.

         11              On the second one, there is an allowance for row

         12         crops but on pasture lands alone.  So that the character

         13         of the land remains the same and the ecosystem that we

         14         purchase the land for that is a functioning ecosystem

         15         remains the same.

         16              THE GOVERNOR:  So, in fact, you do have owners that

         17         will be willing to --

         18              MS. CASTILLE:  We do.

         19              CFO GALLAGHER:  Well, we did see a list -- I mean, on

         20         this one, one of the reasons I didn't bring it up on this

         21         particular one is that there are some, at least in my

         22         review, are some specific prohibitions like you mentioned

         23         including commercial water wells and trash dumping and

         24         cutting, removing, and mowing and spraying pesticides and

         25         new construction of any --
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                         BOARD OF TRUSTEES - MAY 11, 2004                 10

          1              THE GOVERNOR:  Got a prohibition of a fish pond

          2         that's 160 acres?

          3              CFO GALLAGHER:  I didn't see any fish ponds but I

          4         don't think they can dig a hole so it's hard to have a

          5         fish pond without digging.

          6              Then there is some permitted things.  And so this one

          7         is a little different than what, at least I've seen given

          8         to us in the past, the one that's coming up.

          9              THE GOVERNOR:  Mr. Richman, would you like to speak?

         10              MR. RICHMOND:  It's Ron Richman and Item No. 2 is not

         11         my item.  But, Mr. Gallagher, they have changed this a

         12         lot.  There are -- there is a section of what you can do

         13         and a section of what you can't do and they pretty well

         14         jive.  And then you have a baseline document which is done

         15         after you see it.  But it draws out all this and you

         16         can't -- for instance, you can't change the roads in

         17         there.  You can use the existing roads, jeep roads or

         18         whatever.  And that is all done on a baseline document.

         19              Then when they fly over it annually or go on the

         20         property, they see exactly and can compare and can come

         21         back and have a conversation with the owner.  You will

         22         have, for instance, most of these leases, conservation

         23         easements allow for hunting.  We know exactly where the

         24         food plots are going to be and that's where they got to

         25         be.  So it comes out to baseline document.  So it really
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                         BOARD OF TRUSTEES - MAY 11, 2004                 11

          1         is pretty tight right now.

          2              THE GOVERNOR:  Thank you.

          3              MS. CASTILLE:  Thank you, Ron.

          4              THE GOVERNOR:  Any other comments, conversation on

          5         this important subject?

          6              COMMISSIONER BRONSON:  Well, I would like, Governor,

          7         if this appears to be appropriate at this time, I just

          8         want to make sure that whatever agreements are set in

          9         place, that it's agreed to by the landowner at the time

         10         these easements are put in place and somebody doesn't come

         11         in ten years from now under a new administration or a new

         12         leadership in DEP and says, Well, we've decided now we

         13         want to change all this and we want to add some of these

         14         other criteria to this property.

         15              Because once a person has put their property in

         16         perpetuity in one of these easements, knowing that they're

         17         going to be able to either raise cattle or whatever their

         18         farming operation is, and most of these are going to be

         19         farms of some type, or if they end up doing an easement on

         20         the swamps and the cypress ponds but yet they are doing

         21         timber which is a legitimate silviculture, agriculture

         22         process, that they don't start changing the rules after

         23         the signature.  That's one of my biggest fears.  If you

         24         want agriculture to stay in business, to keep open lands

         25         and all this where the State doesn't have to buy
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                         BOARD OF TRUSTEES - MAY 11, 2004                 12

          1         everything, they got to know they have the capability of

          2         making a living.  Otherwise, they're going to unload.  And

          3         that's what's happening right now, quite frankly,

          4         Governor.

          5              And I want the Cabinet to understand this and the

          6         House and Senate and newspapers and everybody in the state

          7         of Florida, agriculture is under big pressure right now.

          8         And some of them have decided to try to stay in business

          9         and their family, do conservation easements.  Others have

         10         been pressured by three and four different provisions of

         11         life.  One is environmental issues.  One is trade issues

         12         abroad that has affected their businesses.  And many times

         13         that pressure has caused these people to want to give

         14         their land up to say, I'm tired of it.  I can't do it

         15         under these conditions.

         16              And quite frankly, the provisions that was talked

         17         about that I saw some, I thought some real wrong reporting

         18         on because I think people got the wrong information on, is

         19         these agriculture enclaves, simply because on one hand,

         20         yes, you like to keep those open spaces.  Well, if you do,

         21         buy them and make them parks.

         22              But the point is, agriculture cannot be surrounded by

         23         development and then those people who move in say, I don't

         24         want you to spray your crops.  I don't want you to put

         25         this kind of fertilizer on.  I don't want you to do all
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                         BOARD OF TRUSTEES - MAY 11, 2004                 13

          1         this.  They cannot survive in agriculture in the state of

          2         Florida under those conditions.

          3              THE GOVERNOR:  You want me to sign that bill?

          4              COMMISSIONER BRONSON:  Well, I can tell you right

          5         now, I'd love to sit down with you and really talk to you

          6         about what's happening to agriculture in this state.  And

          7         it's not a pretty sight, especially for families.

          8              Now corporations tend to handle things a little

          9         different.  But farm families can't take that kind of

         10         pressure.  They're just not making that kind of money in

         11         agriculture to be able to do that.  So before people go

         12         off and write these stories about how bad it is because

         13         some organization came and talked to them about it, I'd

         14         like for them to come talk to us and let's sit down and

         15         talk about the facts of what's going on in agriculture in

         16         this state.  And I think you'll see, as Paul Harvey said,

         17         there's a whole rest of the story here that isn't being

         18         talked about.

         19              THE GOVERNOR:  Secretary, would you like to comment?

         20              MS. CASTILLE:  I agree with you, Commissioner.

         21              CFO GALLAGHER:  Good move.

         22              (Laughter.)

         23              MS. CASTILLE:  I have spent the last month visiting

         24         some farms and talking with some of the folks who are

         25         engaged in agriculture and I went to, all day on Saturday,
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                         BOARD OF TRUSTEES - MAY 11, 2004                 14

          1         I visited dairies in the Suwannee area with my new pair of

          2         dairy boots.  So I could visit your farm any time you'd

          3         like now, Commissioner.

          4              There is a huge pressure on agriculture and we do

          5         want to keep agriculture in this state.  In looking at

          6         what other countries do, the commissioner brings up a very

          7         good point.  When we're looking at what other countries

          8         do, other countries subsidize their agriculture so that

          9         they can keep those open spaces.  But I don't think that's

         10         a policy we wanted to engage in in this state.  What we've

         11         tried to do is to keep agriculture in business and we've

         12         tried to do that with these conservation easements.

         13              What we try to do is to have best management

         14         practices engaged upon when we have these conservation

         15         easements and as we move towards, I think, higher growth

         16         in this state, we're going to be faced with more of our

         17         agriculture being under pressure and so that is one of the

         18         reasons why this board has followed it a policy of

         19         supporting conservation easements and allowing them to, if

         20         they're engaged in ranching right now and there are -- and

         21         there is pasture land, to take that pasture land and to

         22         move it into row crops.

         23              And we talked about protecting the land from

         24         pesticides as much as possible.  And row crops, I believe

         25         you're working on best management practices for row crops
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                         BOARD OF TRUSTEES - MAY 11, 2004                 15

          1         now.  Am I right, Commissioner?

          2              COMMISSIONER BRONSON:  (Nods affirmatively.)

          3              MS. CASTILLE:  And we're working together with the

          4         commissioner to accomplish those.

          5              COMMISSIONER BRONSON:  To follow up, and I understand

          6         the challenges that DEP is under too.  But let me tell you

          7         that right now cattle prices are pretty good.  We usually

          8         run about a one in seven year cycle.  And probably four of

          9         the seven years are not good at all.  As a matter of fact,

         10         you're at least at break even or maybe a little worse.  So

         11         people have to look for other avenues to go to.

         12              You've got a piece right now that you can put under

         13         conservation easement, there may be cattle on it.  But 20

         14         years from now when the dynamics change again in the world

         15         marketplace, they may need to go to row crop or something

         16         to be able to stay in agriculture business with part of

         17         their pasture land.  They should have some availability to

         18         do that or you're not going to have agriculture sustain

         19         itself and stay in business.

         20              You have to be able to fluctuate with the market

         21         pressures of the world.  It's -- agriculture is one of the

         22         few places -- few industries left in this country that is

         23         an absolute supply and demand issue.  If the demand is not

         24         there, you're not going to get anything for your crop,

         25         whatever that crop is.  And you're at the mercy of the
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                         BOARD OF TRUSTEES - MAY 11, 2004                 16

          1         markets of the world.  And so if you want people to be

          2         able to do this and stay in business and put these

          3         conservation easements on -- and let me tell you about how

          4         this is shaping up.

          5              You got conservation easements being put in today by

          6         families who, in their opinion, will stay in agriculture

          7         forever given the opportunity to make any kind of living.

          8         But what's going to happen is when that conservation and

          9         perpetuity goes into place, then the children that come up

         10         and the IRS and the taxes due after the head of the family

         11         dies, all of that hits at the next generation.  Where it

         12         really hits is the second generation after this easement

         13         goes in because the grandkids are going to get hit again

         14         with what to do and how they're going to make a living on

         15         that same property under certain conditions.

         16              That's why, Madam Secretary, I want to make sure

         17         nobody is playing around with what happens over the next

         18         20 to 30 years when these successive generations on these

         19         family properties take over.  Because if you start

         20         limiting what they can do in their own family agriculture

         21         operations, you have destroyed the ability to make a

         22         living.

         23              CFO GALLAGHER:  If they got paid --

         24              THE GOVERNOR:  Exactly.

         25              CFO GALLAGHER:  They are getting paid now.  What if
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                         BOARD OF TRUSTEES - MAY 11, 2004                 17

          1         they sold their land?  The kids aren't going to be raising

          2         anything.

          3              COMMISSIONER BRONSON:  No, no.  But you don't

          4         understand here.  What's happened is in these agricultural

          5         situations, they are giving or taking a conservation

          6         easement which is being paid for by the State, that's

          7         true.  And it says whatever this area is, based on the

          8         conditions set forth in that conservation easement, you

          9         will never be able to develop any of that land.  They

         10         understand that.  That part they understand.

         11              What they are having a problem with and what they are

         12         afraid of is coming back and putting regulations on the

         13         land they can farm because it's next to the land you gave

         14         a conservation easement on and now you've changed the

         15         whole scope --

         16              THE GOVERNOR:  Commissioner, if a conservation

         17         easement is granted, you can't -- I guess theoretically,

         18         another part of DEP could come back and hammer them or a

         19         law could be passed that could provide some burden for

         20         some use that might be accepted in the easement.  But the

         21         easement itself can't be renegotiated on a one-sided way.

         22         It's a transfer of title.  So your direct concerns, I

         23         think, are -- will be taken care of by the legal document

         24         once it's signed.  Your point though, in general, is a

         25         good one.  As a state and as a nation, we're putting huge
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                         BOARD OF TRUSTEES - MAY 11, 2004                 18

          1         pressures on agriculture.

          2              And then the response, of course, is the government

          3         comes in to provide more subsidy and more -- except we

          4         don't get as much subsidy as the other farmers in other

          5         parts of the country.  But -- so we're getting government

          6         more involved through more regulation, through more rules,

          7         and then through more subsidies, and what was probably the

          8         greatest, most efficient production machine ever created

          9         since the beginning of mankind now has got huge, huge

         10         problems.

         11              CFO GALLAGHER:  Here's my problem.  What these

         12         easements do is they list prohibited uses and permitted

         13         uses.  And then anything -- and correct me if I'm wrong --

         14         anything that's not specifically mentioned ends up

         15         being -- sort of comes out of the purposes statement and

         16         you sort of refer to that and, I guess, have your

         17         arguments on whether it is or whether it isn't based on

         18         the purposes statement.

         19              MS. CASTILLE:  Right.

         20              CFO GALLAGHER:  What I believe that we should be

         21         paying for and getting is that the permitted uses are

         22         listed.  In other words, we're buying all the uses except

         23         what we're going to permit them to do on their property

         24         because we're paying them for that and we should list what

         25         those things are.  If it's farm, then it's farm.  I think
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                         BOARD OF TRUSTEES - MAY 11, 2004                 19

          1         they ought to get to farm.

          2              If they're allowed to take, you know, grow pine trees

          3         and cut them, that's fine.  Whatever we negotiate.  But

          4         whatever we don't negotiate is prohibited because

          5         otherwise, down the road, things happen that weren't

          6         expected to have happened.  And that's what ought to be

          7         negotiated.  What do you want to do with your property?

          8         Well, I want to do this, this, and this.  I want to make

          9         sure that my family down the road can do this, this, and

         10         this.  And either that's agreeable to us or it's not.  And

         11         if is, then we pay them and we get the conservation

         12         easement.  If it's not, then we probably shouldn't be

         13         buying it.

         14              MS. CASTILLE:  Well, what I'm hearing is I'm hearing

         15         two different points of view coming from you,

         16         Commissioner -- Treasurer Gallagher, and you, Commissioner

         17         Bronson.  I'm hearing, Commissioner Bronson, that what you

         18         would like us to do is to provide a more flexible way for

         19         people to make a living in the future for farming

         20         practices -- with farming practices.

         21              And commissioner -- Treasurer Gallagher, what I'm

         22         hearing you say is that you rather us specifically say you

         23         can engage in row crops -- I mean, we take all of the

         24         development rights away.  What ends up not being

         25         negotiated is specific agricultural activities.
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                         BOARD OF TRUSTEES - MAY 11, 2004                 20

          1              CFO GALLAGHER:  Well, if that's all you're talking

          2         about, then you can allow just specifically say what

          3         agricultural activities are allowed.  I mean, I'm not

          4         going to say what they are.  They can be any agriculture

          5         activity.  But the idea is that's what the owner should

          6         look if they are worried about the future of their family

          7         and what they might do, they ought to put language in

          8         there that's going to protect that.  And if that's fine

          9         with us, that's what we agree to as opposed to leaving it

         10         some nebulous thing that is decided under a purpose

         11         statement.

         12              MS. CASTILLE:  Well, I think the concern that we have

         13         and the difficulty that we have to overcome is trying to

         14         determine what the agricultural market is going to be in

         15         the next ten years or five years or, you know, 15 years.

         16              CFO GALLAGHER:  Well, yeah, but --

         17              THE GOVERNOR:  We're not talking -- saying you're

         18         prohibiting --

         19              CFO GALLAGHER:  I mean, I'm not saying you can only

         20         grow soybeans.  I mean, my goodness, let them grow

         21         whatever they want to grow.  I'm not against it.  I don't

         22         have a problem with that.  But I think we ought to let --

         23         that should be the negotiations, you know, what do you

         24         want to do.  Let them tell you.

         25              THE GOVERNOR:  That's pretty much, just listening to
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          1         Colleen talk, that's pretty much what is going on right

          2         now.  I think they did listen to you the last time we had

          3         this --

          4              CFO GALLAGHER:  Well, the difference is they're doing

          5         permitted uses.  Actually, they are doing what's

          6         prohibited and what's permitted, they're spelling those

          7         out.  And then they are referring to a purpose statement

          8         as opposed to what I would like is, Here are the permitted

          9         uses and everything else is not.

         10              THE GOVERNOR:  Representative, would you like to say

         11         something?  Good morning.

         12              REPRESENTATIVE SAUNDERS:  Good morning, Governor and

         13         cabinet.  Dean Saunders, Saunders Real Estate.

         14              THE GOVERNOR:  How come you guys are here, by the

         15         way?  Is this your item?

         16              REPRESENTATIVE SAUNDERS:  Actually, I have -- one of

         17         the conservation easements you're considering today is one

         18         of my clients.

         19              THE GOVERNOR:  Okay.  Thank you.

         20              REPRESENTATIVE SAUNDERS:  Typically, Treasurer

         21         Gallagher, what the Department has done in the past is

         22         provided some, in the improved pasture areas, those areas

         23         that are already disturbed, allowed the farmer, a rancher

         24         to have, say, 25 percent of that area that in any one

         25         calendar year he could either sod and/or farm.  I will
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          1         tell you that a lot of what the ranchers will do is

          2         typically use -- they may -- you know, money may be tight

          3         or they may be wanting to renovate their pasture.  You

          4         know, if Bahia sits around for seven or eight years, it

          5         gets a little stale and it needs to be renovated.  A lot

          6         of times they'll go in and plant a hundred acres of

          7         watermelons, sod the grass, plant the watermelons behind

          8         it and plant grass behind that because it's good and

          9         fertile then and it's just part of a pasture replenishing.

         10              And I can tell you that I have seen some concern

         11         expressed from y'all as to the ability to row crop.  And

         12         that has expressed itself vis-a-vis your department, as it

         13         should, and in their negotiations with clients of mine who

         14         are interested, maybe not in really row crop farming

         15         necessarily, but perpetuity is forever.  And, you know,

         16         they've seen up and down markets and they want to preserve

         17         as much latitude as possible to earn a living.  And, you

         18         know, a 25 percent restriction is not particularly that

         19         great.  You know, 75 percent of it's got to remain in

         20         grass while the other 25 percent of it could either be cut

         21         sawed or row cropped.

         22              I'd submit to you that I think that's very

         23         reasonable.  I've not found any of my clients who've been

         24         interested in doing more.  Frankly, if they are running a

         25         cattle operation, they don't have enough pasture, you
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          1         know, to run their cattle on if they are doing more than

          2         that, they'd have to cut back on their herd, so.  And I

          3         would tell you that on the permitted uses, again, just

          4         philosophically, I understand where you're coming from but

          5         understand where my clients are coming from.  You know,

          6         they are going to be selling, you know, the goody (sic) to

          7         their land.

          8              And you also need to understand the number one reason

          9         my clients do this is not because of the money, it really

         10         is because they want to protect the land.  And I always

         11         thought it would be -- you know, the number one reason

         12         would be they want the money.  The money is certainly an

         13         interest.  I'm working with one right now who's primarily

         14         interested in getting the property transferred from his

         15         mom and daddy to him.  Okay.  And he's got siblings and

         16         all that.

         17              So it needs to be treated fairly.  That's his number

         18         one reason to do it.  He wants the land protected but it

         19         also affords him the ability to continue his lifestyle.

         20         It's an estate planning issue for him.  There's a lot of

         21         that going on.

         22              But the number one reason they want to do it really

         23         is to protect the land.  But they also don't want to end

         24         up doing something then later on their kids end up having

         25         to declare bankruptcy because they don't have the
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          1         flexibility to make a living off the land.  So I would

          2         submit to you, particularly as to the row crop issue, that

          3         I think your department has done a good job in trying to

          4         negotiate a reasonable amount that affords somebody the

          5         flexibility to make a living and affords you the

          6         protection that you're looking for.

          7              CFO GALLAGHER:  Wouldn't the farmer be better off

          8         having it spelled out as to what's permitted as opposed to

          9         leave it nebulous so down the road somebody can't come

         10         back to the next buyer and say, By the way, we're not

         11         looking at it that way anymore, you can't do that?  I

         12         mean, I think it's good for both sides.

         13              REPRESENTATIVE SAUNDERS:  The problem with that,

         14         Treasurer Gallagher, is, from my perspective, the

         15         agriculture market will change.  There will be new crops.

         16         We'll be doing new things in Florida.  I mean, it just

         17         will change.  And so if you allow certain row crop

         18         farming -- by the way, that typically leaves out perennial

         19         crops, citrus and those kinds of things that are there

         20         permanently.  So that is one thing, again, that your staff

         21         has done.  And most of my clients are willing to give up.

         22         In some cases, they've actually negotiated, you know, a

         23         certain amount of acreage that could be planted in a

         24         perennial crop.

         25              But I think as long as you allow some row cropping
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          1         and allow the flexibility for the landowners to figure out

          2         what crops he might plant, I think you mentioned that you

          3         weren't really interested in saying they only could plant

          4         soybeans.

          5              CFO GALLAGHER:  No, not at all.

          6              REPRESENTATIVE SAUNDERS:  Giving them the

          7         flexibility.

          8              CFO GALLAGHER:  I want them to have that kind of

          9         flexibility but I also want them to know and us to know

         10         what that is.

         11              THE GOVERNOR:  General Crist.

         12              GENERAL CRIST:  Thank you.  I just had a question, I

         13         guess to Colleen.  And I think the Treasurer raises a very

         14         good point.  It seems to me, you know, what's the point in

         15         having conservation easements at all?  What's the goal?

         16              MS. CASTILLE:  The goal is to keep the land in the

         17         stewardship in which we found it which is generally

         18         excellent stewardship, otherwise we don't engage in a

         19         conservation easement with the owner.  And to allow the

         20         owner to make -- the flexibility to have a good living and

         21         to not dictate that.  I mean if you take --

         22              GENERAL CRIST:  I mean, are we trying to preserve

         23         land or are we trying to allow farming or don't we know?

         24              MS. CASTILLE:  Both.  We are trying to do both.

         25              GENERAL CRIST:  Seems like we're kind of half
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          1         pregnant on this thing to me.

          2              MS. CASTILLE:  And we are.  And that is what we are

          3         trying to do.  It is a policy of the governor and cabinet

          4         that you have determined that --

          5              GENERAL CRIST:  Well, it's legislative too, isn't it,

          6         Colleen?

          7              MS. CASTILLE:  Conservation easements were actively

          8         spelled out in the Florida Forever Program.

          9              THE GOVERNOR:  Also we don't have -- it's not our

         10         money so it's easy to spend 300 million a year for this,

         11         100 million a year for that.  And we're all proud we're

         12         doing it, but it's a lot of money.  We're buying more land

         13         than any government entity in the United States, probably

         14         in the world.

         15              COMMISSIONER BRONSON:  More than the United States in

         16         general.

         17              THE GOVERNOR:  More than the federal government.

         18         This is a way to expand, to leverage a good public policy

         19         which is to instead of buying something for 100 percent or

         20         98 percent of appraised value, we buy it for 60 percent.

         21         And it preserves a way to allow people to manage their

         22         properties far better than the State could ever do.

         23              To me it's a win/win.  And we've expanded it

         24         dramatically, this cabinet has, as a question of good

         25         policy and I think we should continue to do it.
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          1              And Treasurer Gallagher's concern, both your

          2         concerns, are right on target.  And I think actually the

          3         middle ground is what we're doing now may accomplish --

          4         achieve the objective of mitigating both your concerns.

          5         Hate to be the guy in the middle (laughter), it's making

          6         me nervous.

          7              COMMISSIONER BRONSON:  Governor, it is a

          8         philosophical debate and hopefully based on science and

          9         technology as the process grows.  And I understand where

         10         the treasurer is coming from.  But if you were to try to

         11         write in what is permissible today as new technologies are

         12         being developed by the universities and by the federal

         13         government and other people as to what you can use and

         14         can't use and how you're going to control it under best

         15         management practices, the perfect example I can give you,

         16         and all the horse organic matter I've been reading and

         17         hearing about the dairies in the Suwannee River area, and

         18         I happened to see some editorials indicating that effluent

         19         was flowing directly into the Suwannee River out of these

         20         dairies.  There is nothing further from the truth of what

         21         I saw in those articles.  Someone has got the idea based

         22         on somebody's conversation that's going on.  It's not

         23         going on.

         24              As we have developed best management practices, we

         25         have cut down in that area.  Because of a voluntary
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          1         program, we're ahead of schedule on the federal

          2         government's Clean Water Program to clean waters in those

          3         areas to keep nitrogen and other things out of that water

          4         and it's not all coming from agriculture.  You know, the

          5         16 1/2 million people who live in this state are part of

          6         the problem.  It's not all agricultures.  So what I'm

          7         getting to is, I've already seen this type of back and

          8         forth comments about agriculture is the big bad polluter

          9         when actually agriculture is so far ahead of the general

         10         public in trying to stop runoff and so forth as to the

         11         best management practices put into place.

         12              As new best management practice come on line,

         13         development by universities and others, we want

         14         agriculture to adopt those.  We put that in our water

         15         policy for agriculture, that's in there.  We have asked

         16         that our agriculture people, as they can develop and adopt

         17         these new programs, to add that so that we are ahead of

         18         schedule on doing our share of stopping pollution from

         19         going into the rivers, from causing major problems.  And

         20         I, you know, it goes back to what the Treasurer wants do.

         21         If you say today here are the things that we're going to

         22         allow you to do and something new is developed that says

         23         you can do another crop, another program in the next 30

         24         years, that may be doable, since it's not written in

         25         there, you can't do it.  And I don't want to limit within
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          1         the scope of working with DEP -- and here's something else

          2         I don't want.  I don't want a staff person for DEP who

          3         does not have the background in agriculture and

          4         agriculture production and fertilizers and chemicals and

          5         all the things that when I graduated from school I had to

          6         take all those science courses that included chemistry and

          7         water hydrology and a number of things.

          8              I don't want somebody at DEP who's a regulator

          9         saying, I don't think that looks good so we're not going

         10         to allow this.  I want it to be based on factual science

         11         which means we need to be talking between our department

         12         of agriculture and our chemists and our people who are

         13         qualified in that field talking with DEP to make those

         14         decisions, not having someone in DEP make it without any

         15         conversation with our department whatsoever on those

         16         issues.  Because, to me, you can't make a justifiable

         17         position by taking one side without all the facts behind

         18         it.  And so if we're going to do this, and I agree,

         19         Treasurer, if you're going to pay this kind of money from

         20         the State for conservation, you want to make sure nobody

         21         is violating the conservation agreement.  But the point is

         22         you also don't want to limit that family who's giving up

         23         that property their ability to make a living without

         24         either the State coming in and finish buying that property

         25         or something happening there so that that family will
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          1         survive in agriculture if they wish to do so.

          2              THE GOVERNOR:  Treasurer Gallagher?

          3              CFO GALLAGHER:  I think we can get where we both want

          4         to go.  I don't know that there's anything that stops this

          5         cabinet or future cabinets from looking at a conservation

          6         easement and saying what they believe it says they can do

          7         or can't do or even for that matter changing it at the

          8         request of the other party.

          9              MS. CASTILLE:  The conservation easements are not

         10         unilateral.  They are signed by both parties.

         11              CFO GALLAGHER:  And can be changed by both parties.

         12              MS. CASTILLE:  Well, if the landowner doesn't want to

         13         change them.

         14              GENERAL CRIST:  Only with mutual consent.

         15              CFO GALLAGHER:  Exactly.

         16              MS. CASTILLE:  Right.

         17              CFO GALLAGHER:  And so who's going to speak for

         18         future cabinets?  I don't certainly have a problem with

         19         spelling out in a conservation easement that we can look

         20         at through the department requests for different crops or

         21         different practices, best practices that have been agreed

         22         to by the normal way they do them through the

         23         universities, et cetera, that can be brought, you know, in

         24         the future to a cabinet at the request of the landowner I

         25         don't have a problem with those kinds of things.  I just
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          1         think we ought to be specific about them instead of having

          2         it open to a purpose statement.  That's where I'm coming

          3         from.

          4              THE GOVERNOR:  We don't have any -- Secretary, we

          5         don't have any -- do we have any litigation right now

          6         based on interpretation of conservation easements?  Do we

          7         have any disputes?  Is there any concerns?  I mean, we're

          8         talking this is a policy discussion about the future as we

          9         expand this practice.  But are there any -- do we have any

         10         practical real-world examples other than Dean mentioned

         11         perhaps in the negotiations there may be these come up and

         12         it may impact the signing of the easement itself.  But do

         13         we have any problems right now?

         14              MS. CASTILLE:  I have people shaking their head yes

         15         over here and people shaking their head no over here.

         16         (Pause.)  Not in Florida.

         17              CFO GALLAGHER:  Not in Florida.  That would lead one

         18         to believe --

         19              MS. CASTILLE:  What is the problem?

         20              MS. STOCKWELL:  The litigation we've seen -- I'm

         21         Sandra Stockwell, I'm with the office of general counsel

         22         at DEP.  The litigation we've seen is coming out of the

         23         Northeast and what we're learning from that litigation

         24         currently simply is that a conservation easement will be

         25         enforced if the landowner has given away in the
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          1         conservation easement a right, the courts will enforce

          2         that against them.  So that's what we're learning in the

          3         current litigation.  But we haven't had any in Florida and

          4         none surrounding this issue.

          5              CFO GALLAGHER:  Well, see, that's the reason I want

          6         us to be specific as to what we bought.  Because that's --

          7         if we're not specific, then the courts can make a decision

          8         on what we bought for us.  And that's why I'm pushing for

          9         more specifics than these.  And I'm not saying what they

         10         ought to be.  I just want the money we pay to be equal to

         11         what we are getting and have it be specific.  And I think

         12         if do have some court cases, that is going to be an

         13         important part of it.

         14              THE GOVERNOR:  Why don't we do this.  See if this --

         15              CFO GALLAGHER:  We've pretty much beaten this up.

         16              MS. CASTILLE:  Governor, may I make --

         17              COMMISSIONER BRONSON:  Really, the discussion has

         18         been great because it shows that there is a pull and tug

         19         on this issue as to what's right and what's wrong and

         20         what's in the middle.  And what we've got to determine is

         21         what's best based on the leases, based on the land and

         22         based on Florida's future, however long that's going to

         23         be.  And there's only one probably that's going to be able

         24         to determine that and we don't have direct contact with

         25         him.
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          1              But the fact of the matter is we've got to be able to

          2         determine and quite frankly even though we're putting

          3         cypress swamps in all these things, in these easements,

          4         and saying, You cannot disturb it, what if you have an

          5         invasive species that goes into these swamps -- and by the

          6         way, in central Florida we already have the old world vine

          7         that's killing and about to kill off trees by the

          8         thousands if we're not very careful here -- to go in and

          9         take care of those problems.  You're going to have to go

         10         into those areas and disturb them based on an agreement

         11         you said you weren't going to do just to do the job of

         12         taking care of invasive species.

         13              CFO GALLAGHER:  Those things should be able to be

         14         approved by the Department or by this --

         15              THE GOVERNOR:  Why don't we do this --

         16              COMMISSIONER BRONSON:  That's why flexibility needs

         17         to be in there.

         18              CFO GALLAGHER:  I'm not against being able to change

         19         an agreement that's been agreed to by two parties.  But

         20         that has to be agreed to by the two parties.

         21              THE GOVERNOR:  Treasurer, how about this for a

         22         suggestion.  How about if you get someone from your staff

         23         and, General, if you would like to do so as well and if

         24         our team wants to volunteer, they can as well.

         25              CFO GALLAGHER:  Don't forget Bronson's.
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          1              THE GOVERNOR:  No, he's the big dog here.  Get your

          2         guys and let's see if we can create a template, see what's

          3         wrong with what we got.  Because I'm not sure it's

          4         necessarily -- it may be the best of all worlds.  But

          5         let's thoughtfully attempt to create a template to make it

          6         easier for the Department to deal with your concerns,

          7         Commissioner, and deal with yours, Treasurer, to see if

          8         it's possible to have -- now, that will be adjusted based

          9         on each property being unique and different.  But maybe we

         10         could look at the standard starting point, see if it needs

         11         to be adjusted, to take into consideration that we're

         12         using this tool now far more than we did when the document

         13         was probably created.  Does that make sense?

         14              CFO GALLAGHER:  My guess, my hope is that the

         15         Department is using some kind of a template to do this as

         16         it is.  So we ought to start with what -- we should

         17         understand what theirs is to begin with instead of

         18         reacting to it, which I'm admittedly doing.  And if we got

         19         in the beginning and understood exactly what the template

         20         is and everything else, everybody would be happy.

         21              THE GOVERNOR:  That's kind of what I was saying.

         22              CFO GALLAGHER:  You're right.

         23              MS. CASTILLE:  Historically, we did start with a

         24         template.  Our first conservation easement was with the

         25         Lykes brothers and we specifically had a conservation
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          1         easement that did what you are asking, Treasurer.

          2              CFO GALLAGHER:  Yes, you did.

          3              THE GOVERNOR:  Well, that was a unique conservation

          4         easement.  That was the mother of all conservation

          5         easements.

          6              MS. CASTILLE:  Here's what's happened on the ground

          7         with our acquisition agents.  Keep in mind that the folks

          8         we're generally buying conservation easements from are

          9         folks who've have been in agriculture in this state for a

         10         very long time.  And I don't mean any offense by this, but

         11         this is a group of people who generally say, DEP, leave us

         12         alone.  We really don't want you here.  We don't want you

         13         walking on our property.

         14              THE GOVERNOR:  Colleen, there are a few people

         15         outside the longstanding ranchers and farmers of the state

         16         that believe the same thing.

         17              MS. CASTILLE:  Yes.

         18              (Laughter.)

         19              CFO GALLAGHER:  Probably 99 percent.

         20              THE GOVERNOR:  It's the nature of your job.  Don't be

         21         offended by that.

         22              MS. CASTILLE:  But the point is is that we just

         23         engaged in negotiations with a number of property owners.

         24         We are successful in 40 percent of those negotiations, in

         25         part because we have been more flexible on our
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          1         conservation easements.  When we go to a property owner,

          2         we begin negotiations and we say, Here is what we will

          3         allow you to do on your property.  They're offended by

          4         that.

          5              CFO GALLAGHER:  Why would it be:  Here's what we're

          6         not buying from you.  In other words, we're paying you 50,

          7         60 percent of the value of the property.  Here's what

          8         we're buying.  Here's what we're not buying.  So you get

          9         to keep what we're not buying.  I mean, that's really what

         10         we're doing.  This is what we're buying.  And that's sort

         11         of where I'm coming from.

         12              MS. CASTILLE:  That's what we're doing.

         13              CFO GALLAGHER:  All right.  Well, we'll look at it.

         14              MS. CASTILLE:  Mr. Draper has asked to respond on

         15         this issue.

         16              THE GOVERNOR:  Mr. Draper, and then we'll move on

         17         maybe to the rest of the agenda.

         18              MR. DRAPER:  Eric Draper with Audubon.  I wanted to

         19         add one other point, which the Legislature passed

         20         legislation a few years ago dealing with this issue that

         21         specifically said there is a distinction between a

         22         conservation easement, as you're doing under Florida

         23         Forever, and an agricultural conservation easement.  As

         24         I've listened to this debate -- which has been very good,

         25         by the way -- it seems to me that you might want to
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          1         include in your investigation looking at that other type

          2         of easement that was created under 570 which would allow

          3         specifically for an easement intended to protect the

          4         agricultural values on the land but also protect the

          5         wildlife watershed values as opposed to the more

          6         environmentally based traditional conservation easement

          7         you've been doing under Florida Forever.

          8              You know, there's different tools you can develop for

          9         different outcomes that you want.  And I think as we've

         10         looked at the loss of over 150,000 acres a year,

         11         agricultural land over the past several years, kind of

         12         anticipating more of that in the future, in some cases you

         13         want to do a conservation easement to protect the

         14         environmental values and in some cases you want a

         15         conservation easement to protect the agricultural values

         16         where that is an important thing to do.

         17              Typically, an agricultural-based conservation

         18         easement is going to cost less to the taxpayers but allow

         19         more economic activity on the land than a more traditional

         20         environmental-based conservation easement.  Anyway, those

         21         are found within the statutes right now.  And,

         22         Commissioner Bronson, you may remember that you published

         23         a report on this a few years ago talking about protecting

         24         world lands.  It's just as important to protect those

         25         agricultural values as it is to protect the environmental
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          1         values.  Thank you.

          2              COMMISSIONER BRONSON:  Governor, if I might.  Eric,

          3         out of that 150,000 acres, how much of that became state

          4         land?

          5              MR. DRAPER:  That's conversion to agriculture

          6         according to the University of Florida study.  I think the

          7         actual rate is increasing.  And most of that is the kind

          8         of landscapes we want to protect in the state.  It's ranch

          9         land and timberland.  But that's actual conversion to

         10         agriculture, not conversion to public land, public

         11         ownership.

         12              THE GOVERNOR:  Conversion from agriculture?

         13              CFO GALLAGHER:  No, to.

         14              MR. DRAPER:  Conversion from agriculture to

         15         development.

         16              CFO GALLAGHER:  That was strictly at the development

         17         figures, not what the state buys for conservation land and

         18         taken out of agriculture.

         19              MR. DRAPER:  No, that's the development figure.

         20         That's conversion from agriculture to development.  And

         21         there's updated statistics on that that was just released

         22         by the University of Florida a few months ago.  I just

         23         don't have those numbers at hand.  But the rate of loss to

         24         the agricultural land is fairly significant.  And I think

         25         what you want to look at here are two issues.  One is
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                         BOARD OF TRUSTEES - MAY 11, 2004                 39

          1         protecting the environmental values that are on the lands,

          2         that's very important, Florida Forever.  But you also want

          3         to look at the place where you've got important

          4         agricultural features that you want to maintain also.  I

          5         would point specifically, Commissioner Bronson, to your

          6         ranching economy which is a very, very important part of

          7         Florida's economic and cultural history.  And that is

          8         vanishing very, very quickly.

          9              COMMISSIONER BRONSON:  For a number of reasons which

         10         I gave earlier, that's the reason why we need to work

         11         these issues out or you're going to lose more of it.  And

         12         we're not going to be able to save it even under

         13         conservation easements if we're not careful.

         14              THE GOVERNOR:  Okay.  Where are we?

         15              MS. CASTILLE:  We're on Item No. 2, which we --

         16              CFO GALLAGHER:  Item 2.

         17              THE GOVERNOR:  Do we need a motion?

         18              CFO GALLAGHER:  Motion on 2.

         19              COMMISSIONER BRONSON:  Second.

         20              THE GOVERNOR:  Moved and seconded.  Without

         21         objection, the item passes.  Thank you, gentlemen.

         22              Item 3.

         23              MS. CASTILLE:  Item 3 is -- we're withdrawing this.

         24         We've got a couple of problems on boundary amendments and

         25         some lease confusions on the property.  So we'd like to
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          1         defer it until we get those worked out.

          2              COMMISSIONER BRONSON:  Governor, I'd like to

          3         recommend that we defer this to the June 24th meeting

          4         instead of withdrawing it, using it as a deferral to

          5         June 24th so they can work on a number of issues that they

          6         are trying to work out.

          7              CFO GALLAGHER:  Second.

          8              MS. CASTILLE:  Commissioner, I'd like to ask that we

          9         defer it until August because we won't be able to get

         10         these worked out by June.  We've got to go through some

         11         title searches and straighten out some --

         12              COMMISSIONER BRONSON:  Then I will amend it to

         13         August -- the first meeting in August.

         14              MS. CASTILLE:  The first meeting in August.

         15              CFO GALLAGHER:  Second.

         16              THE GOVERNOR:  There's a motion to defer to the first

         17         meeting in August and a second.  Without objection the

         18         item passes -- or the item is deferred.

         19              CFO GALLAGHER:  Motion to defer Item 4 to June 24th.

         20              COMMISSIONER BRONSON:  Second.

         21              THE GOVERNOR:  There's a motion to defer Item 4 until

         22         June 24th and a second.  Without objection, the item

         23         passes.

         24              CFO GALLAGHER:  Motion to withdraw Item 5.

         25              GENERAL CRIST:  Second.
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                         BOARD OF TRUSTEES - MAY 11, 2004                 41

          1              MS. CASTILLE:  Again, Item 5, the applicant has asked

          2         to defer it until June 24th.

          3              THE GOVERNOR:  There's a motion to defer until

          4         June 24th and a second.  Without objection the motion

          5         (sic) is deferred.

          6              MS. CASTILLE:  Item 6 is an application for the

          7         conveyance of some formerly submerged lands and the

          8         acceptance of the donation of two parcels of privately

          9         owned lands.

         10              CFO GALLAGHER:  Motion on 6.

         11              COMMISSIONER BRONSON:  Second.

         12              THE GOVERNOR:  There's a motion and a second.

         13         Without objection, the item passes.

         14              CFO GALLAGHER:  A motion on 7 to defer to May 25th.

         15              THE GOVERNOR:  Or April 29th -- oh, yes.

         16              COMMISSIONER BRONSON:  Second.

         17              THE GOVERNOR:  There's a motion to defer until

         18         May 25th, Item 7, and a second.  Without objection, the

         19         motion passes.

         20              Anything you want to say or do you want to be quiet

         21         about it?

         22              MS. CASTILLE:  I'd like to be quiet about it.

         23              THE GOVERNOR:  All right.

         24              MS. CASTILLE:  Thank you.

         25              THE GOVERNOR:  I just -- this is a place where the
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          1         Commissioner, I think is -- Commissioner Bronson has been

          2         justifiably making the point that there needs to be

          3         greater cooperation with his department and the Department

          4         of Environmental Protection on issues related to

          5         agriculture and the impact on farming and ranching.  I

          6         would urge, similarly, that as it relates to some of these

          7         issues where there is a clear established policy, in this

          8         case, the restoration of the Everglades, that we work

          9         together as a team as well.

         10              The stumbling block on this property is there is a

         11         commercial mining operation which may or may not have all

         12         of the proper permits, leave that for someone else to

         13         decide.  But if this was a high priority as it was

         14         obviously a huge complicated purchase of all this land,

         15         then we need to work together and anticipate these things

         16         a little better too.  That's just an editorial comment.

         17              MS. CASTILLE:  Thank you, sir.

         18              THE GOVERNOR:  There is a -- we already did the

         19         motion to defer.

         20              MS. CASTILLE:  We did.  That's the end of our agenda.

         21              THE GOVERNOR:  Thank you.  You weren't counting on

         22         spending so much time with us today, were you, Colleen?

         23              MS. CASTILLE:  I wasn't but it's always fine.


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                   STATE BOARD OF ADMINISTRATION - May 11, 2004           43

          1              THE GOVERNOR:  State Board of Administration.

          2              CFO GALLAGHER:  Motion on the minutes.

          3              GENERAL CRIST:  Second.

          4              THE GOVERNOR:  Moved and seconded.  Without

          5         objection, the item passes.

          6              Item 2.

          7              CFO GALLAGHER:  Motion on 2.

          8              THE GOVERNOR:  Item 2, Coleman.

          9              MR. STIPANOVICH:  Yes.  Thank you, Governor, members.

         10              THE GOVERNOR:  Good morning.

         11              MR. STIPANOVICH:  Good morning.  Governor, Item

         12         No. 2, we're bringing back to you which was on the

         13         previous cabinet agenda.  Having to do with actual

         14         legislation that you signed this morning.

         15              THE GOVERNOR:  Yes, I did.

         16              MR. STIPANOVICH:  And it should be of a benefit.  I

         17         know you've been interested in this particularly as well

         18         as everyone in general, benefit to the consumer.  And

         19         we're looking for an emergency rule so that we can get

         20         these contracts out and signed by June 1 which is what the

         21         law requires.

         22              THE GOVERNOR:  So the intent is to get the rules done

         23         in the next few weeks?

         24              MR. STIPANOVICH:  Yes, sir.  That's right.  Exactly.

         25         We're kind of reversing the order of things.  What we will
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                   STATE BOARD OF ADMINISTRATION - May 11, 2004           44

          1         do is go ahead and get out the contracts and come back.

          2         And it's usually 90 days or less, we'll come back with

          3         workshops and bringing the rules back to you-all.  But in

          4         the meantime, we can get out the contracts and get them

          5         back and get them signed.

          6              THE GOVERNOR:  Treasurer, do you have any comments?

          7              CFO GALLAGHER:  No, except that I think that this is

          8         a very good thing for the insurance homeowners' market in

          9         the state of Florida.  It will assist the private sector

         10         in writing additional business.  We had letters from a

         11         group of companies that probably added 30, 40,000 policies

         12         that they will write because of the ability for them to

         13         get this reinsurance that we are adding in capacity which

         14         hopefully will encourage more private sector businesses to

         15         write in Florida and have a smaller input into citizens'

         16         property insurance, which is now way in excess of 800,000

         17         policies.

         18              So that's our goal to encourage the private sector to

         19         continue to make more business and to have less in

         20         citizens and this will, with any luck at all, at least

         21         slow down the influx in the citizens' property insurance

         22         and allow other writers to write business.  So that's why

         23         I made the motion.

         24              GENERAL CRIST:  Second.

         25              THE GOVERNOR:  Moved and seconded.  Without
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                   STATE BOARD OF ADMINISTRATION - May 11, 2004           45

          1         objection, the item passes.

          2              MR. STIPANOVICH:  Thank you, Governor.

          3              Item 3 has to do with a non-FRS defined contribution

          4         programs policy statement and it specifically addresses

          5         three programs, the State University System Optional

          6         Retirement Program, which is under the Department of

          7         Management Services, Division of Retirement, and the

          8         Senior Management Service Optional Annuity Program under

          9         DMS, Division of Retirement.  And then the State of

         10         Florida Deferred Compensation Program under the CFO's

         11         office.

         12              What we're looking to do here is really just

         13         officialize (sic), so to speak, what we've been doing

         14         pretty much all along and that we would have this policy

         15         statement that I would ask that you approve so that we can

         16         move forward with some rulemaking having to do with our

         17         responsibilities in these three areas.  And part of that

         18         would be we would enter into interagency agreements with

         19         these two offices and would be some nominal charge for

         20         providing these services.  But basically, we're there to

         21         assist as the law addresses to assist these offices with

         22         these non FRS defined contribution programs.

         23              THE GOVERNOR:  General?

         24              GENERAL CRIST:  Thank you.  Just reading here on the

         25         last line, it says about nominal fees versus no fees.
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                   STATE BOARD OF ADMINISTRATION - May 11, 2004           46

          1         Which would this do?

          2              MR. STIPANOVICH:  It will be service-based and, for

          3         example, last year, we went back and said if we were

          4         charging 200, which is reasonable or an hourly basis,

          5         based on the people that would be involved in providing

          6         this service, if last year, for example, if you took the

          7         Treasurer's office, the Chief Financial Office,

          8         it probably would cost, for providing support, would have

          9         been about $3,000, total.

         10              For Department of Management Services, which had an

         11         extraordinary kind of year, I think we reviewed 21

         12         products, whether it would be approving or termination of

         13         products, 21 different reviews that would have amounted to

         14         about 7,500.  I think that's probably an extraordinary

         15         kind of year.  So we're not talking about much money at

         16         all in terms of providing services.  And the reason that

         17         is important, General, is, as you well know, as the

         18         fiduciaries of the pension plan, we are paid out of

         19         separate trust funds.  And so the people that are working

         20         on this are paid out of the Defined Contribution Trust

         21         Funds as well as the Defined Benefit Trust Fund and we're

         22         providing professional services for non FRS programs.  So

         23         to avoid any kind of criticism from an audit, we need to

         24         be compensated for providing these services.

         25              CFO GALLAGHER:  Motion on 3.
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                   STATE BOARD OF ADMINISTRATION - May 11, 2004           47

          1              GENERAL CRIST:  Second.

          2              THE GOVERNOR:  Moved and seconded.  Without

          3         objection, the item passes.  Thank you very much.

          4              (Thereupon, the proceedings concluded at 10:20 a.m.)





















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          2                        CERTIFICATE OF REPORTER


          4    STATE OF FLORIDA    )

          5    COUNTY OF LEON      )


          7              I, KRISTEN L. BENTLEY, Court Reporter, certify that

          8    the foregoing proceedings were taken before me at the time and

          9    place therein designated; that my shorthand notes were

         10    thereafter translated under my supervision; and the foregoing

         11    pages numbered 1 through 47 are a true and correct record of

         12    the aforesaid proceedings.


         14              I further certify that I am not a relative, employee,

         15    attorney or counsel of any of the parties, nor am I a relative

         16    or employee of any of the parties' attorney or counsel

         17    connected with the action, nor am I financially interested in

         18    the action.

         19              DATED this 18th day of May, 2004.

         20                              ______________________________

         21                             KRISTEN L. BENTLEY, Court Reporter
                                        Notary Public
         22                             850-878-2221



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