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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 7th day of December, 2004, commencing at approximately
               9:25 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 Ben Watkins)

               ITEM                  ACTION                 PAGE
               1                     Approved               19
               2                     Approved               20
               3                     Approved               20
               4                     Approved               20

               (Presented by Coleman Stipanovich)

               ITEM                  ACTION                 PAGE
               1                     Approved               22
               2                     Approved               22
               3                     Approved               22
               4                     Approved               23
               5                     Approved               24
               6                     Approved               24
               7                     Accepted               24

               (Presented by Lisa Miller)

               ITEM                  ACTION                 PAGE

               1                     Approved               28
               2                     Approved
               3                     For Information Only

               (Presented by JAMES ZINGALE)

               ITEM                  ACTION                 PAGE

               1                     Approved               37
               2                     Approved               45
               3                     Approved               47




                                   ACCURATE STENOTYPE REPORTERS, INC.


               (Presented by Fred Dickinson)

               ITEM                  ACTION                 PAGE

               1                     Approved               48
               2                     Approved               48
               3                     Approved               50

               (Presented by Barbara Leighty)

               ITEM                  ACTION                 PAGE

               1                     Approved               53
               2                     Approved               67
               3                     Approved               89

               (Presented by Barbara Leighty)

               ITEM                  ACTION                 PAGE

               1                     Approved               91
               2                     Approved               91

               BOARD OF TRUSTEES
               (Presented by Colleen Castille)

               ITEM                  ACTION                 PAGE

               1                     Approved               93
               2                     Approved               97
               3                     Approved               98
               4                     Approved               98
               5                     Approved               99
               6                     Approved               101
               7                     Deferred               107
               8                     Approved               119
               9                     Approved               122
               10                    Approved               137




                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1                              PROCEEDINGS

          2              THE GOVERNOR:  The next cabinet meeting is Wednesday,

          3         January 19th.  So I guess we're going to take a few weeks

          4         off.  We'll now start the agenda.

          5              The Division of Bond Finance.  Ben.  Happy holidays.

          6              MR. WATKINS:  Thank you, sir.  Good morning,

          7         Governor, cabinet.  It's that time of the year again.

          8         Time for our annual dose of debt so this is the annual

          9         debt affordability report that we prepare by way of

         10         background but really for the benefit of the audience.

         11              The Debt Affordability Study was first done back in

         12         1999 and provides a methodology for the State to keep

         13         track of its debt position.  It was subsequently embraced

         14         by the Legislature and is now included and required by

         15         statute and we prepare this report every year to provide

         16         an update of the information with respect to the State's

         17         debt position.

         18              The analysis adopted and the benchmarks established

         19         by the Legislature set forth a benchmark debt ratio of

         20         debt service to revenues available to pay with a target of

         21         6 percent and a cap of 7 percent.  The whole purpose of

         22         the debt affordability analysis is to provide a framework

         23         for measuring, monitoring, and managing the State's debt

         24         position and to provide the Legislature with information

         25         regarding the long-term financial impact of borrowing

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         decisions that they are confronted with.  And most

          2         fundamentally, it is a financial model used to calculate

          3         future bonding capacity based on two variables.  One is

          4         our existing debt burden and our expected future debt

          5         burden.  And the second is the revenues available to make

          6         the payments with.  So it's those two variables that drive

          7         the determination of what our future debt capacity is.

          8              The process for updating the debt affordability

          9         analysis and the information that's provided from that

         10         analysis is outlined here.  Step one is to calculate the

         11         total State debt that's outstanding, then to evaluate the

         12         growth in the debt over the last ten years and the growth

         13         in the annual debt service requirements associated with

         14         that debt.  Then we update the projections based on the

         15         most current information we have available with respect to

         16         future expected debt issuance and with respect to the

         17         revenues we expect to have available over the next ten

         18         years to make those payments with.

         19              Then we evaluate the impact of those changing

         20         dynamics on our projected benchmark debt ratio to evaluate

         21         our debt position and then calculate the change in future

         22         estimated debt capacity that we will have available both

         23         within the 6 percent target and the 7 percent cap.  And

         24         then lastly, we evaluate what our reserve -- our levels of

         25         reserves from a financial management perspective are very

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         important and we review our credit ratings.

          2              THE GOVERNOR:  This is pretty exciting stuff, huh,

          3         guys?  Show you what kind of nerd I am, I actually like

          4         these presentations.  Don't tell anybody though, okay?  It

          5         will ruin my reputation.

          6              MR. WATKINS:  The first thing we do is look at total

          7         State debt outstanding and we find that at the end of 2004

          8         we have total State debt outstanding of $21.2 billion.

          9         And the graph shows what programmatic area has been funded

         10         with the money that we borrowed.  And what we find is that

         11         over 12 billion, or more than half of all State debt, has

         12         been dedicated to financing the construction of education

         13         facilities followed by transportation and environmental

         14         protection.

         15              In looking at the growth and debt outstanding, you

         16         can see you're now familiar with the historical evolution

         17         and the increase in the long-term debt that we have

         18         outstanding and the trend in that analysis.  The growth in

         19         debt outstanding, debt is increased by $12 billion over

         20         the last ten years.  However, the increase over the last

         21         year was only $817 million which is less than the average

         22         annual increase of about $1.2 billion a year.

         23              THE GOVERNOR:  And why was that, Ben?

         24              MR. WATKINS:  Primarily using cash in lieu of bonding

         25         which was a proposal you advocated that the Legislature

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         embraced willingly.  I don't know whether it was willingly

          2         or strongarmed, but they reached the right conclusion,

          3         Governor, that's the important thing.  So it's because we

          4         used cash rather than bonding for our environmental

          5         programs, Everglades Restoration and Florida Forever, as

          6         well as using class -- for classrooms, construction on

          7         classrooms for kids.  So that helped to limit the amount

          8         of debt that we had increasing over the last year.

          9              Then we look at what is the impact on our annual

         10         recurring budgetary needs and we evaluate that by looking

         11         at the growth in the annual debt service requirements

         12         associated with that growth and debt and you can see that

         13         the annual debt service requirements and the increase in

         14         that mirrors the increase in the debt that we've had

         15         outstanding.

         16              The State now devotes slightly more than one and a

         17         half billion dollars to the payment of debt service on

         18         bonds.  And that's obviously on a recurring basis which is

         19         a very important indicator from a budgetary perspective

         20         because it's an indication of future financial flexibility

         21         and it basically tells you how much we are dedicating on a

         22         recurring basis to the long-term fixed cost associated

         23         with debt before we provide for other essential government

         24         services.

         25              Now that completes the look back and we start

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         gathering information with respect to the look forward in

          2         terms of updating the projections that we have.  And we

          3         find that in looking at the expected debt issuance over

          4         the next ten years for existing bond programs, we expect

          5         to issue about nine and a half billion dollars in debt

          6         over the next ten years.  And that's down by about a

          7         billion dollars over the prior year, primarily due to what

          8         the Governor has already mentioned, using cash in lieu of

          9         bonding as well as an additional year under our belt in

         10         terms of issuing debt for programs that were limited in

         11         nature.

         12              We did, however, add one new program this year in the

         13         projections of future expected debt issuance and that's a

         14         new program for the State infrastructure bank for funding

         15         transportation facilities.  The next graphic is put in

         16         here just to explain what I'm getting ready to show which

         17         is a change in the benchmark debt ratio from 2003 to 2004.

         18         And you see, this is a change in the revenue forecast.

         19         This is the other variable that we use in connection with

         20         evaluating the State's debt position and our benchmark

         21         debt ratio.

         22              And what we see is there is a 7 and 9 percent yearly

         23         increase in the revenues that we expect over the next ten

         24         years.  And the higher revenue estimates are a reflection

         25         of the strength in economy and the economic stimulus

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         provided from rebuilding the hurricane damage.  And

          2         additionally and it impacts the level of reserves we have,

          3         the actual revenue collections at the end of 2004 were

          4         actually greater than the expected revenue collections and

          5         those monies then drop straight to the bottom line and are

          6         held in reserve.  So when we start talking about the

          7         reserves at the end of this report, it, to a large extent,

          8         has been helped with revenue collections greater than what

          9         we had expected.

         10              Now we get to the projected benchmark debt ratio and

         11         this is where it all comes together.  The impact on the

         12         benchmark debt ratio of the most current information

         13         available for both expected debt issuance and future

         14         expected revenue collections and this is the graphic

         15         demonstrating what the historical development in that

         16         ratio has been and what the projection is expected to be

         17         from 2004 going forward.

         18              In 2003, we exceeded the benchmark debt ratio of

         19         6 percent for the first time at 6.12 percent.  However,

         20         the benchmark debt ratio improved and at the end of 2004,

         21         the benchmark debt ratio was 5.94 percent, slightly under

         22         our 6 percent target benchmark debt ratio.  So we have

         23         seen improvement in our benchmark debt ratio and it's

         24         important to note that the -- with our expected borrowing

         25         plans and our expected economic outlook, we are consistent

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         in -- with the 6 percent target that has been established

          2         over the long term.  So the current projections look very

          3         good.

          4              THE GOVERNOR:  But for the last little bullet, No. 5

          5         there.

          6              MR. WATKINS:  Right.  And there is actually good news

          7         embedded in that too, Governor.  In that last year we had

          8         two significant constitutional initiatives that we were

          9         looking at having to implement that had potential funding.

         10         One, high speed rail.  And one, the class size reduction.

         11         Fortunately, at least from an economic standpoint, high

         12         speed rail has been repealed.  So with respect to future

         13         challenges to the State, there remains one that we haven't

         14         formulated a spending plan for yet.

         15              So the one caveat is class size reduction and how

         16         that ultimately gets funded.  But we cut, by 50 percent,

         17         the amount of constitutional initiatives that could

         18         present a challenge for us from a debt standpoint.  Then

         19         we look at the available debt capacity within the 6

         20         percent target and the 7 percent cap and this is the

         21         expected future debt capacity within the 6 percent target.

         22         And what we see is that the available debt capacity

         23         increased by nearly $10 billion from last year when it was

         24         one and a half billion to this year when it's 11.9

         25         billion.  And the increase in that capacity is due to

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         several factors.  One is higher revenue estimates.  The

          2         second is the final maturity of the P2000 bonds in 2013.

          3         You can see out in 2013 there is an additional capacity of

          4         over $5 billion.  Less expected borrowing over the

          5         ten-year projection period and also using cash in lieu of

          6         debt last year when the picture did not look so good.

          7              But the important thing to note here is that debt

          8         capacity isn't available in the near term.  You can see

          9         over the next five years there is only $750 million in

         10         capacity available within the 6 percent target and really

         11         the increase in that number in available capacity is in

         12         the out years.

         13              Then we do the same analysis for the 7 percent cap

         14         and calculate the debt capacity available and you can see

         15         that the debt capacity available over the next ten years

         16         within the 7 percent cap is about 18 billion.  And again

         17         for the same reasons that we had increase in capacity for

         18         the 6 percent target we also have a corresponding increase

         19         for capacity within the 7 percent cap.  And the important

         20         point to note here and the message I would like to leave

         21         you with and the next graphic demonstrates that, is this

         22         capacity within the 6 and 7 percent really ought to be

         23         viewed as a cushion against downturns in the economy.  And

         24         it really ought to be viewed as scarce resources available

         25         only when the State is faced with critical infrastructure

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         needs.  And because, as you can see from the next slide,

          2         the change in our debt ratio and our debt position and

          3         where we expect to be is affected significantly by the

          4         revenues we expect to have available over that projection

          5         period.  And I can't tell you what the future holds but

          6         what I can tell you is that that picture will be different

          7         tomorrow than it is from today.  And I put this in here

          8         just to give you -- to compare to 2003 projections with

          9         the 2004 projections to indicate the volatility in the

         10         benchmark debt ratio by what the economy looks like going

         11         forward.

         12              And last year at this time, we were confronted with

         13         being over 6 percent and expecting to stay over 6 percent

         14         for an extended period of time approaching the 7 percent

         15         cap.  And primarily because of conservative financial

         16         management practices and a better economic outlook, we are

         17         now in a much better position from a prospective debt

         18         standpoint of being consistent with the 6 percent target

         19         that we've established for ourselves.

         20              THE GOVERNOR:  Ben, on the general revenue estimating

         21         that you use for this, are you using all general revenue

         22         or are you using recurring?

         23              MR. WATKINS:  All general revenue as well as

         24         dedicated revenue streams.  And that's obviously an issue

         25         from a budgetary standpoint that gets struggled with every

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                        DIVISION OF BOND FINANCE - 12/7/04

          1         year is structural balance in recurring revenues with

          2         recurring expenditures and that is not captured in the

          3         analysis in the sense that we try to address that issue.

          4              THE GOVERNOR:  We certainly have a lot of recurring

          5         nonrecurring money though.

          6              MR. WATKINS:  Right.  And the use of that money on a

          7         long-term basis, from a financial management standpoint,

          8         using cash in lieu of debt does a couple of things.  It

          9         maintains our debt position at its current level.  It

         10         preserves future capacity.  And even more importantly from

         11         a budgetary standpoint, it saves you that annual recurring

         12         cost to the debt service associated with that debt.

         13              THE GOVERNOR:  Plus it matches recurring --

         14         nonrecurring moneys with nonrecurring expenditures so that

         15         you don't have a gap if the economy turns south.

         16              MR. WATKINS:  Right.

         17              In looking at the level of reserves, the general fund

         18         reserves have grown substantially over the last ten years.

         19         And the traditional measure used by rating agencies and

         20         analysts is general fund reserves compared to general fund

         21         appropriations expressed as a percentage.  And this is

         22         probably the single most important measure of the fiscal

         23         health of a governmental entity.  And our general fund

         24         reserves totalled $3 1/2 billion at June 30, 2004 or

         25         15.8 percent of general revenues.

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1              THE GOVERNOR:  How does that compare to other states?

          2              MR. WATKINS:  It's absolutely phenomenal.  In looking

          3         at other states and how they balance their budget, if we

          4         look at our ten-state peer group, Governor, there are five

          5         states in deficit positions and five states with positive

          6         general fund balances.  But the average of that is more

          7         like 3 percent.

          8              THE GOVERNOR:  So we're the highest of the peer

          9         group.

         10              MR. WATKINS:  We are unprecedented or unparalleled in

         11         terms of our levels of reserves.

         12              THE GOVERNOR:  Slow down so Gary can write all this

         13         down.

         14              (Laughter.)

         15              MR. WATKINS:  I'm glad you're bringing up the

         16         important points, Governor, the highlights.  The

         17         highlights of the highlights.

         18              (Laughter.)

         19              We also expect to maintain that balance going into

         20         the end of the June 30, 2005 fiscal year at about

         21         $3 1/2 billion.  And the strong and stable reserves

         22         obviously distinguish it from other states who have -- in

         23         their financial position and is largely a reflection of

         24         the conservative financial management practices that have

         25         been deployed in formulating the budget over the '01/'03

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         recessionary period.

          2              Lastly are the State's credit ratings.  Florida has a

          3         very strong double A rating.  The ratings are important

          4         because they influence the amount of interest and the cost

          5         of the debt.  The ratings are based on four different

          6         factors which are enumerated here and the rating agencies

          7         view the way -- the debt affordability analysis and the

          8         way we're managing our debt position very favorably.  The

          9         current ratings, although we were placed on credit watch

         10         for a brief period of time after the events of 9-11, we

         11         were returned to a stable outlook within six months

         12         because of the quick action that was taken with respect to

         13         the budget two years ago.  And the rating agencies have

         14         finally, in my judgement, finally recognized the policies

         15         and the conservative financial management practices and

         16         the level of reserves and the level of debt we have in

         17         balancing our budget in a very prudent way and have

         18         actually put us on credit watch with a positive outlook

         19         looking to possibly upgrade the State's credit rating.

         20         And Moody's will be down --

         21              THE GOVERNOR:  When was the last time our credit

         22         rating was raised?

         23              MR. WATKINS:  You know, we went back and looked at

         24         that, Governor, and with respect to Moody's, it's been

         25         double A since 1973.  That's how far back our records go.

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         In other words, this doesn't happen very often at all.  It

          2         really takes a significant long-term recurring pattern of

          3         prudent financial management practices for them to sit up

          4         and take notice and they have done that.  And they are

          5         coming down to look at our credit rating.  We were

          6         upgraded by half a notch by Standard and Poor's in 1997,

          7         but it had been over 20 years since they had revisited the

          8         State's credit rating when they upgraded us to double A

          9         plus.

         10              So we have meetings set up on Friday where we're

         11         going to visit with the rating agencies, have been

         12         coordinating with your folks in the Office of Policy and

         13         Budget and look forward to meeting with them and sharing

         14         with them the good news from the State from a financial

         15         management perspective.

         16              In conclusion and really by way of review, the

         17         benchmark debt ratio improved to 5.94 percent, slightly

         18         under the 6 percent target for the fiscal year 2004.  The

         19         projected -- importantly, the projected benchmark debt

         20         ratio is expected to be maintained around the 6 percent

         21         target level over the next ten years.  And the news from

         22         last year to this year is that the projected benchmark

         23         debt ratio has improved significantly due to higher

         24         revenue collections and using cash in lieu of bonding.

         25              Then we review, there's $12 billion in available debt

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1         capacity within the 6 percent target over the next ten

          2         years with only 750 million being available over the next

          3         five years.  And there's 18 billion of capacity available

          4         within the 7 percent cap but that really should be viewed

          5         as a cushion against downturns in the economy.  The

          6         general fund reserves remain strong and the State credit

          7         ratings had been maintained because of the conservative

          8         financial management practices and hopefully we're going

          9         to get recognition of that with an upgrade from Moody's if

         10         we're successful and if they are satisfied with the

         11         information they get next week and debt is manageable at

         12         its current level.

         13              (Applause.)

         14              THE GOVERNOR:  You're applauding?  Go ahead.  That's

         15         the first Ben Watkins has ever gotten an applause for debt

         16         affordability report.

         17              MR. WATKINS:  Yeah, but, Governor, they are clapping

         18         because it's over.

         19              (Laughter.)

         20              CFO GALLAGHER:  Ben, what they're really applauding

         21         for is what you're telling them is we're not going to

         22         leave them a bunch of debt they're not going to be able to

         23         afford.  That's what they really like best.

         24              MR. WATKINS:  Thank you, Governor.

         25              THE GOVERNOR:  Thank you, Ben.  Don't you have the

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                        DIVISION OF BOND FINANCE - 12/7/04

          1         rest of your -- don't you have a presentation?

          2              MR. WATKINS:  Oh, we do have an agenda.

          3              THE GOVERNOR:  You were so excited about the debt

          4         affordability study you forgot the rest of your work here.

          5         And, Coleman, are you here?

          6              CFO GALLAGHER:  He is.

          7              THE GOVERNOR:  If you don't mind, maybe you could be

          8         next after Ben just so -- the Treasurer has to --

          9              CFO GALLAGHER:  I'll make a motion on the minutes.

         10              COMMISSIONER BRONSON:  Second.

         11              THE GOVERNOR:  There's a motion and a second on

         12         Item 1.  Without objection, the motion passes.  Thank

         13         you-all.  Merry Christmas.  Happy holidays.  You get extra

         14         credit for sticking through that, I promise you.

         15              Item 2.

         16              MR. WATKINS:  Thank you, Kent.  I came unprepared,

         17         Governor.

         18              THE GOVERNOR:  That's all right.

         19              CFO GALLAGHER:  He was so excited about that debt

         20         affordability study.

         21              MR. WATKINS:  The good news, I couldn't contain

         22         myself.

         23              Item No. 2 is adoption of a resolution authorizing

         24         the issuance and competitive sale of up to $340 million in

         25         PECO refunding bonds.

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                        DIVISION OF BOND FINANCE - 12/7/04

          1              CFO GALLAGHER:  Motion on 2.

          2              GENERAL CRIST:  Second.

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

          4         Without objection, the item passes.  Thank goodness the

          5         children have left now that we are creating more debt.

          6              (Laughter.)

          7              MR. WATKINS:  That's refunding.  That's to save them

          8         money, Governor.

          9              THE GOVERNOR:  Okay.  All right.

         10              MR. WATKINS:  No. 3 is a report of award on the

         11         competitive sale of $53,915,000 of housing facility

         12         revenue bonds for Florida International --

         13              CFO GALLAGHER:  Motion on 3.

         14              GENERAL CRIST:  Second.

         15              MR. WATKINS:  -- University.  The bonds were awarded

         16         to the low bidder at true interest cost of 4.28 percent.

         17              THE GOVERNOR:  There is a motion and a second.

         18         Without objection, the item passes.

         19              CFO GALLAGHER:  Motion to approve of the debt

         20         affordability report.

         21              GENERAL CRIST:  Second.

         22              THE GOVERNOR:  There's a motion to approve the debt

         23         affordability report and a second.  Without objection, the

         24         motion passes.  Ben, thank you so much.

         25              MR. WATKINS:  Thank you, Governor.

                                   ACCURATE STENOTYPE REPORTERS, INC.

                        DIVISION OF BOND FINANCE - 12/7/04

          1              THE GOVERNOR:  Happy holidays.  Merry Christmas.

          2              MR. WATKINS:  Thank you, sir.

          3              THE GOVERNOR:  Thanks for your service to the State.

          4         You did an incredible job.  See you on Friday.






















                                   ACCURATE STENOTYPE REPORTERS, INC.

                      STATE BOARD OF ADMINISTRATION 12/7/04

          1              THE GOVERNOR:  State Board of Administration.

          2              CFO GALLAGHER:  Motion on the minutes.

          3              THE GOVERNOR:  Is there a second?

          4              GENERAL CRIST:  Second.

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

          6         Without objection, Item 1 passes.  This is the State Board

          7         of Administration agenda.  Coleman, welcome.

          8              MR. STIPANOVICH:  Thank you, Governor, members.

          9              Item No. 2 is a request for approval of fiscal

         10         sufficiency of an amount not exceeding 340 million State

         11         of Florida, full faith and credit, State Board of

         12         Education public education capital outlay refunding bonds.

         13              GENERAL CRIST:  Motion.

         14              CFO GALLAGHER:  Second.

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

         16         Without objection, Item 2 passes.

         17              MR. STIPANOVICH:  The third item is a request for

         18         approval of fiscal determination of an amount not

         19         exceeding 13,700,000 tax exempt Florida Housing Finance

         20         Corporation multifamily --

         21              CFO GALLAGHER:  Motion on 3.

         22              MR. STIPANOVICH:  -- mortgage revenue bonds.

         23              GENERAL CRIST:  Second.

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

         25         Without objection, the item passes.

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                      STATE BOARD OF ADMINISTRATION 12/7/04

          1              MR. STIPANOVICH:  Agenda Item No. 4 is the request to

          2         repeal of a previous fiscal sufficiency resolution adopted

          3         on November 9th, 2004 for the proposed bond issue and

          4         approved approval of fiscal sufficiency of amount not

          5         exceeding 13,500,000 State of Florida, Florida Education

          6         System, University of Central Florida parking facility

          7         revenue bonds.

          8              CFO GALLAGHER:  Motion on 4.

          9              COMMISSIONER BRONSON:  Second.

         10              CFO GALLAGHER:  You can't second.

         11              THE GOVERNOR:  Wait a second.

         12              GENERAL CRIST:  Second.

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

         14         Without objection, the item passes.

         15              CFO GALLAGHER:  That was Crist seconding.

         16              THE GOVERNOR:  Thank you for the enthusiasm though.

         17              (Laughter.)

         18              COMMISSIONER BRONSON:  Ready to go.

         19              MR. STIPANOVICH:  Item 5 is request for repeal of

         20         previous fiscal sufficiency resolution adopted by the

         21         Board on November 9th, 2004 and approval of fiscal

         22         sufficiency of an amount not exceeding 5,350,000, State of

         23         Florida, Florida Education System, University of Central

         24         Florida parking facility revenue bonds.

         25              CFO GALLAGHER:  Motion.

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                      STATE BOARD OF ADMINISTRATION 12/7/04

          1              GENERAL CRIST:  Second.

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

          3         Without objection, the item passes.

          4              MR. STIPANOVICH:  Item 6 is request for reappointment

          5         of an investment advisory council member, Jim Dahl, one of

          6         our six members on the council.  Treasurer Gallagher

          7         appointee.  Requires full approval of the Board.

          8              CFO GALLAGHER:  Motion on 6.

          9              GENERAL CRIST:  Second.

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

         11         Without objection, the item passes.

         12              MR. STIPANOVICH:  Item No. 7 is information only.

         13         It's the submission of our annual report on corporate

         14         governance for fiscal year 2003/2004.

         15              THE GOVERNOR:  Do we have a motion?

         16              CFO GALLAGHER:  Acceptance, that's all.

         17              THE GOVERNOR:  Just an acceptance.  It's been

         18         accepted.

         19              Now, Coleman, can you answer a year-end question for

         20         us?

         21              MR. STIPANOVICH:  Sure.

         22              THE GOVERNOR:  I know that six months ago I think I

         23         read an article that the State -- the Florida pension,

         24         State pension system, was one of two state pension systems

         25         in the country, public pension plans, that has an

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                      STATE BOARD OF ADMINISTRATION 12/7/04

          1         actuarial surplus.  How is that going?  Are we still in

          2         the elite group?

          3              MR. STIPANOVICH:  Yes, sir.  We just got our official

          4         numbers about a month or two ago.  And we are at $11.6

          5         billion surplus.  And the study you're referring to,

          6         Governor, was a study done by Wilshire and Associates, an

          7         independent research organization.

          8              THE GOVERNOR:  What was it called?

          9              MR. STIPANOVICH:  Wilshire and Associates.  They did

         10         a study and looked at the pension funds in the country and

         11         Florida was ranked number one in the country in terms of

         12         surplus.  There were only two funds in the country with a

         13         surplus and Florida was ranked one.

         14              CFO GALLAGHER:  Who was the other?

         15              MR. STIPANOVICH:  North Carolina.  But the North

         16         Carolina data was a year stale and it was pretty much in

         17         the middle of the bear market.  So I don't know where they

         18         would be today.  We very well could be the only state in

         19         the country now with a surplus.  But at that point in

         20         time, based on that study, we were the number one fund in

         21         the country with a surplus and one of only two.

         22              CFO GALLAGHER:  But we got to watch where we're going

         23         in the future because it starts getting close.

         24              MR. STIPANOVICH:  Yes.  We, of course, always need to

         25         be very cognizant in terms of the things we do in working

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                      STATE BOARD OF ADMINISTRATION 12/7/04

          1         with the Legislature and contribution rates and rate

          2         stabilization mechanism and good investment returns.

          3              THE GOVERNOR:  Since we're giving out good kudos to

          4         public servants for a job well done, I think that is a

          5         testament to sound, conservative investment policies.  We

          6         don't try to socially engineer the monies.  We don't have

          7         a caliper's problem, you know, where that guy got --

          8         looked like one of the trustees got canned because of

          9         trying to gear monies towards political or social causes

         10         that may go against -- sometimes they may work but many

         11         times they go against the benefits to the 760,000 people

         12         that expected their report --

         13              CFO GALLAGHER:  And their meetings are usually only

         14         about two or three minutes long.

         15              THE GOVERNOR:  That too.  We don't try to -- I mean,

         16         I do view our job more as a protector of the professional

         17         staff to let them do their thing.

         18              MR. STIPANOVICH:  Governor, members, I can tell you

         19         that the State of Florida is the envy of the country in

         20         terms of our governance structure.  As an officer on the

         21         Council of Institutional Investors, which is the largest

         22         group that represents over $3 trillion in assets and

         23         pretty much all of the public funds in the country,

         24         private corporation funds, endowments are a member of this

         25         fund in terms of making investment decisions that aren't

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                      STATE BOARD OF ADMINISTRATION 12/7/04

          1         based on political decisions, social agendas, and economic

          2         development.  Our sole responsibility as a fiduciary is to

          3         act solely in the interest of the participants of

          4         beneficiaries of the plan.  And, under your leadership, we

          5         really are the envy of the country and I think that speaks

          6         volumes as to why we probably -- one of the reasons why we

          7         have a surplus.

          8              THE GOVERNOR:  Well, our predecessors, of course

          9         Gallagher, again, has been on this since the beginning of

         10         dirt.  But it's -- our predecessors established a policy

         11         and we've continued it.  This isn't new.  This has been

         12         ongoing and I do appreciate Tom's leadership on this.

         13              CFO GALLAGHER:  It works.

         14              THE GOVERNOR:  It does work.  And, Coleman, you do

         15         great work.

         16              MR. STIPANOVICH:  Thank you, sir.

         17              THE GOVERNOR:  Merry Christmas.  Happy holidays.

         18              MR. STIPANOVICH:  Thank you, Governor.  Thank you,

         19         members.







                                   ACCURATE STENOTYPE REPORTERS, INC.

                     FINANCIAL SERVICES COMMISSION - 12/7/04

          1              THE GOVERNOR:  Financial Services Commission, Office

          2         of Insurance Regulation.

          3              CFO GALLAGHER:  Motion on the minutes.

          4              COMMISSIONER BRONSON:  Second.

          5              THE GOVERNOR:  There's a motion and a second.  Item 1

          6         passes without objection.

          7              Good morning.

          8              MS. MILLER:  Good morning, Governor.  I'm Lisa

          9         Miller.

         10              THE GOVERNOR:  You're not Kevin McCarty.

         11              MS. MILLER:  I know.  A little bit taller.

         12              (Laughter.)

         13              It's my hair, a couple inches taller than his.

         14              THE GOVERNOR:  That will leave a mark.  Wherever

         15         Kevin is, he just got a hit in the rib.  What was that.

         16              MS. MILLER:  Don't tell him I said that.  He is

         17         actually --

         18              THE GOVERNOR:  Of course I will.

         19              MS. MILLER:  I'm Lisa Miller, deputy commissioner and

         20         have the pleasure of working with Kevin on a daily basis.

         21         He is chairing the Financial Conditions Committee at the

         22         National Association of Insurance Commissioners meeting.

         23         That committee meeting is right at this time and he could

         24         not come back --

         25              THE GOVERNOR:  Where is it?  Is it some fancy place?

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                     FINANCIAL SERVICES COMMISSION - 12/7/04

          1              MS. MILLER:  It's in a small, very demure town, New

          2         Orleans.  But there is some hot pressing issues going on

          3         there and Florida chairs that meeting and he had to be

          4         there so he asked me to meet with you today and share with

          5         you a couple of things on the agenda for this morning.

          6              We have -- first you've approved the minutes.  So our

          7         second agenda item is our hurricane reporting data, and

          8         affidavit, compliance reporting.  Governor, members of the

          9         commission, you weekly receive data.  And I can just go

         10         through the 11/24 notes for you which is the latest that

         11         we have and you'll have another report, I believe by

         12         Friday or Monday of next week.  You get these the end of

         13         this week, first of next week.

         14              For Hurricane Charley, we're at about 445,000 claims

         15         and 84 percent of those are closed.  About 27 days to

         16         adjust those claims.  Hurricane Frances had about 498,000,

         17         almost 500,000 claims.  About 75 percent of those are

         18         closed.  And with Hurricane Ivan, about 191,000, almost

         19         200,000 claims.  Nineteen days to adjust those claims.

         20         69 percent of those are closed.  And Hurricane Jeanne has

         21         about 370,000, 371,000 claims, 65 percent of those are

         22         closed, averaging 20 days to adjust and close those.

         23              THE GOVERNOR:  Is -- do you anticipate are we

         24         nearing -- I think the estimation was to have close to

         25         2 million claims.

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                     FINANCIAL SERVICES COMMISSION - 12/7/04

          1              MS. MILLER:  We're at about one and a half million

          2         right now.

          3              THE GOVERNOR:  Is that stable?  You don't expect now

          4         the 2 million number?

          5              MS. MILLER:  Well, we see the numbers increase every

          6         week.  In fact, what we'd like to do for you next week or

          7         maybe the following week is almost do like a chart since

          8         we started collecting the data and show you the trend

          9         lines and have some people working on that for us,

         10         Governor.  So we'll have that to you shortly.

         11              CFO GALLAGHER:  We still expect 2 million claims.

         12              THE GOVERNOR:  Still.  Okay.

         13              MS. MILLER:  You see the numbers increasing.  The

         14         affidavit compliance reporting, as many of you know, we

         15         had an emergency order that was released to the

         16         marketplace requiring companies -- I affectionately call

         17         this rule the reach out and touch rule, where companies

         18         were to send adjusters out to talk to their claimants and

         19         make a good faith effort to settle the claims that were

         20         facing them.  They had to advance additional living

         21         expenses and they had to evaluate and provide initial

         22         assessment of the claims.  And we're pleased to report

         23         that 100 percent of the companies have responded to that

         24         affidavit filing.

         25              There were 226 companies that were required to

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                     FINANCIAL SERVICES COMMISSION - 12/7/04

          1         respond.  Of course there were about 800 property and

          2         casualty companies with licenses in that particular area.

          3         But the rule particularly spoke to residential property

          4         and commercial property claims.  So as of last week

          5         though, on Wednesday, you may have read a report where

          6         there were about 45 companies that had not responded and

          7         we have gotten them to respond and they will, of course,

          8         face appropriate fines for their being tardy because the

          9         deadline was November 29th.

         10              GENERAL CRIST:  Question.

         11              THE GOVERNOR:  General?

         12              GENERAL CRIST:  Thank you.

         13              You said 100 percent responded to the affidavit.

         14         What did the affidavit ask for?

         15              MS. MILLER:  The affidavit asked them one of three

         16         things.  They had to show that they had reached out and

         17         touched all of their claimants.  If they had not, by the

         18         close of business tomorrow night, they have to provide to

         19         us a listing of those claimants that they have not reached

         20         and reasons why they have not.

         21              GENERAL CRIST:  If I could, on that point.  So did

         22         the affidavit they signed say that they had had adjusters

         23         visit all of the claimants or that they had --

         24              MS. MILLER:  They had made an initial assessment and

         25         evaluated the claim and made a good faith effort to reach

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                     FINANCIAL SERVICES COMMISSION - 12/7/04

          1         a settlement was what the rule required them to attest to.

          2              GENERAL CRIST:  So 100 percent of them said they did

          3         100 percent reaching out and touching their clients?

          4              THE WITNESS:  100 percent of the companies responded

          5         by completing the affidavit and sending it in to us.

          6              GENERAL CRIST:  What percent said they actually had

          7         done --

          8              MS. MILLER:  We have not been through all 200 --

          9              GENERAL CRIST:  -- have reached out and helped their

         10         customers?

         11              MS. MILLER:  We have not been through all 226 to see

         12         who falls in what buckets.  We're actually going through

         13         those right now.  They just came in last week but by the

         14         next meeting, we should have those numbers for you and be

         15         able to talk.

         16              GENERAL CRIST:  So we have the report card, but we

         17         don't have the grade yet.

         18              MS. MILLER:  You don't have the grade yet.  Much of

         19         the information, General, is confidential under Chapter

         20         624.  So we probably will not make those individual

         21         affidavits public but might provide you some general

         22         statistical information.

         23              GENERAL CRIST:  Well, as soon as you get it, I think

         24         that would be helpful.

         25              MS. MILLER:  Certainly.  Thank you.

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                     FINANCIAL SERVICES COMMISSION - 12/7/04

          1              THE GOVERNOR:  Yeah.  Don't wait for the next

          2         meeting, because that may be in February.

          3              MS. MILLER:  Okay.

          4              The third item on the agenda is the independent

          5         economic study.  Commissioner McCarty and many of the

          6         colleagues in the Office of Insurance Regulation wanted to

          7         take a look at how we have done, I guess you could say, in

          8         terms of the economic impact of these four storms on our

          9         insurance marketplace.  The report that you have in your

         10         packets today is a draft of that report.

         11              We expect to release the final report by the first of

         12         next week in time for the legislative session.  And that

         13         report is to be a tool for you, legislative policy makers,

         14         and any other interested parties as to where we were after

         15         Hurricane Andrew, where we are right now and what parts of

         16         our framework do we need to improve so that we can weather

         17         these storms in the manner in which we have done now but

         18         make any improvements that we need to do.

         19              The report touched on several facets.  I found most

         20         interesting the economist that helped us with this is a

         21         manager of a financial insurance market research group and

         22         he's well published.  And Commissioner McCarty had the

         23         pleasure of working with him a couple of years ago as

         24         Florida advocated a national catastrophe fund similar to

         25         our Florida Catastrophe Fund.  And the economist brought

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                     FINANCIAL SERVICES COMMISSION - 12/7/04

          1         to light several important things that I think you'll find

          2         in the report that's most interesting.

          3              First of all, he has projected that our population

          4         will exponentially increase to about 25 million by the

          5         year 2030.  Secondly, he actually showed some data that

          6         shows over the past 100 years the correlation between

          7         hurricanes that have hit our different counties and the

          8         population growth in those counties.  And I looked at

          9         Charlotte County, for example, and that's in Appendix 2 in

         10         your report and you'll see those graphs, Charlotte County,

         11         for example had hurricanes, Three and Four Cat hurricanes,

         12         hit their county but nobody lived there.

         13              And so what you see in those charts, they only go

         14         through the year 2000.  Of course that was the NOAA

         15         statistic that was available but it is very telling to us

         16         to realize the population growth and the migration to

         17         different counties in our state and what has caused the

         18         damage from the hurricanes and the economic impact that

         19         it's had.

         20              He makes some recommendations which I find are quite

         21         interesting.  One of which he proposes us to consider what

         22         he calls a deductible fund for consumers that perhaps

         23         might choose a lower percentage deductible and they would

         24         be able to, perhaps, fund an ancillary account to their

         25         insurance policy much like the president's HSA account

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                     FINANCIAL SERVICES COMMISSION - 12/7/04

          1         that dovetails the High Deductible Health Plan and how a

          2         consumer might do that in preparation for paying those

          3         deductibles.  Another idea he had, of course, was that we

          4         either maintained the flat dollar deductible which, of

          5         course, would come at a higher premium or, of course, with

          6         the percentage deductibles that I know the Legislature is

          7         considering.  So it's going to be a very good report.

          8              I think the most salient piece and the best

          9         recommendation out of all of it, I think, is the National

         10         Catastrophe Fund.  I was at the National Association of

         11         Insurance Commissioners meeting myself the past couple of

         12         days and met with the big six states, Florida, Texas,

         13         California, Illinois and others.  And the states were even

         14         talking about doing a coalition of catastrophe, you know,

         15         a coalition catastrophe fund.

         16              So we have a lot to do.  The report pointed out to us

         17         that we are in a pretty good place but that we could do

         18         better and we always want to do that.  Any other questions

         19         I could answer for you today?

         20              THE GOVERNOR:  Questions?

         21              CFO GALLAGHER:  Thank you, Lisa.

         22              MS. MILLER:  Thank you.

         23              THE GOVERNOR:  Thank you so much.

         24              MS. MILLER:  Yes, sir.

         25              THE GOVERNOR:  Not only are you taller, but you're a

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                     FINANCIAL SERVICES COMMISSION - 12/7/04

          1         very good presenter.

          2              MS. CASTILLE:  Thank you.  Happy holidays to you.

          3              THE GOVERNOR:  Likewise.























                                   ACCURATE STENOTYPE REPORTERS, INC.

                         DEPARTMENT OF REVENUE - 12/7/04

          1              THE GOVERNOR:  Department of Revenue.

          2              CFO GALLAGHER:  Motion on the minutes.

          3              GENERAL CRIST:  Second.

          4              THE GOVERNOR:  Dr. Zingale was so excited to get up

          5         to make his presentation he almost cut you off at the pass

          6         back there.

          7              DR. ZINGALE:  And I won't get a standing applause

          8         when we finish today, I know.  But it was really wonderful

          9         hearing --

         10              THE GOVERNOR:  That would be something quite

         11         remarkable if the guy who runs the tax collecting agency

         12         gets an applause.

         13              DR. ZINGALE:  Debt, pension and the tax agency.

         14         That's a dream someday.  The second item is --

         15              THE GOVERNOR:  We have an item -- a motion on --

         16              CFO GALLAGHER:  I made a motion on the minutes and

         17         you approved it already.

         18              THE GOVERNOR:  I didn't just approve it.  I hadn't

         19         done it with her.  There's a motion and a second.  Without

         20         objection, the item passes.

         21              DR. ZINGALE:  Thank you.  Item No. 2 is an

         22         administrative order.  You can remember we bring

         23         administrative orders in front of the cabinet when it is

         24         in excess of $250,000.  The tax filer is Sheridan Bal

         25         Harbour.  The issue deals with the taxation of parking

                                   ACCURATE STENOTYPE REPORTERS, INC.

                         DEPARTMENT OF REVENUE - 12/7/04

          1         space as it's delivered through a valet service by the

          2         hotel.  The taxpayer had collected under a single

          3         remittance about the 12 to 18-dollar charge and had

          4         requested a refund providing a new interpretation of the

          5         statute and is asking for a refund of $329,000.

          6         Representing the taxpayer today we have Joe Maffa

          7         (phonetic).  I'd like him to go first with your

          8         permission.

          9              THE GOVERNOR:  Sure.

         10              DR. ZINGALE:  Joe.

         11              THE GOVERNOR:  Good morning.

         12              MR. MAFFA:  Good morning.  Again, my name is Joe

         13         Maffa and I represent the Sheraton Bal Harbour Associates.

         14         A sales tax is a transaction tax.  And in this case the

         15         real question is:  Is valet parking services a service or

         16         is it a lease or license to use a parking space?  In the

         17         proposed order that they have in front of you,

         18         Paragraph 26, basically states that there is two separate

         19         aspects to the transaction.  One a service transaction and

         20         the other being the lease or license to use the parking

         21         space.  The danger with this paragraph, with paragraph 26

         22         is they're splitting a transaction or they're looking

         23         through the transaction and what they are saying is, Well,

         24         there is components of this and components of that.  And

         25         therefore, the transaction is taxable.

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                         DEPARTMENT OF REVENUE - 12/7/04

          1              If they analyzed any service transaction like that,

          2         virtually every service would be taxable.  This is a back

          3         door approach to a service tax.  In 1987, the State tried

          4         a service tax, it was not successful then.  One of the

          5         items specifically enumerated as a taxable service back in

          6         1987 was valet parking services.  Again, they are coming

          7         back today saying, Okay, it was a service back in 1987,

          8         but today it's a lease or license to use a parking space.

          9              If they use this analysis and you take it to the

         10         extreme, basically again any service transaction could be

         11         looked through.  So if you go to a lawyer's office for a

         12         meeting, they could take the position based on this type

         13         of analysis that a meeting requires a conference room,

         14         therefore there is a lease or license to use real

         15         property.  Go to a doctor's office for a medical exam,

         16         again, an exam room would be needed, they could

         17         potentially tax the doctor's services.

         18              People like to go fishing.  They go out, they hire a

         19         captain to go fishing, they'll pay him $500 to go in the

         20         Gulf.  That, right now, is a nontaxable service.  But

         21         clearly an essential element of that transaction is a

         22         boat.  And that's exactly the analysis they're using here

         23         with valet parking services.  I appreciate your time.  If

         24         you have any questions, I'd be glad to --

         25              THE GOVERNOR:  Commissioner?

                                   ACCURATE STENOTYPE REPORTERS, INC.

                         DEPARTMENT OF REVENUE - 12/7/04

          1              COMMISSIONER BRONSON:  I guess my question would be

          2         if a hotel or anyone puts this, quote, service on their

          3         bill and you have no options -- in other words, at the

          4         same time you're doing this, the individual doesn't have

          5         the option to say, I will take the valet service or I will

          6         go park my own vehicle.  So technically, whether you have

          7         someone get in the car and drive it around and put it in

          8         that space, the hotel automatically bills you for a

          9         parking space to go with your hotel.  Isn't that really

         10         the way it works?

         11              MR. MAFFA:  Well, I'm glad you asked that question

         12         because a person, when they go to a hotel, does have a

         13         choice.  They don't have to park or valet park at that

         14         hotel.  Many bring cabs, many use services from airports

         15         or limousines or people drop them off.  If it was a

         16         required charge, absolutely it would be taxable.  This is

         17         not a required charge.  For example, there is a case, a

         18         hotel/motel association case a number of years ago, tried

         19         to take the position that hotels are in the business of

         20         renting hotel rooms and renting furniture and renting

         21         everything inside the hotel rooms.  And there the courts

         22         looked at it and they said, No, there is one transaction,

         23         a service transaction.  We can't look through that.  The

         24         hotels and motels are trying to get out of paying sales

         25         tax on the furnishings and the consumables in a hotel

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                         DEPARTMENT OF REVENUE - 12/7/04

          1         room.  And the Court specifically said you don't look

          2         through it.  And that's the problem here is we're looking

          3         through a service transaction.  But that was a good

          4         question because it was a required charge.  Then that

          5         required charge should go on with whatever the charge was

          6         with the other charge and would be taxable or not

          7         depending on what the original charge was for.

          8              THE GOVERNOR:  Do you have self-service parking or is

          9         it all valet parking?

         10              MR. MAFFA:  It's all valet parking at that hotel.

         11         But again, people have the choice.  They can park on the

         12         street.  There's a large mall across the street --

         13              THE GOVERNOR:  Park on Biscayne Boulevard?

         14              MR. MAFFA:  No, but right behind Biscayne Boulevard

         15         there is parking.  There is some identified next --

         16              CFO GALLAGHER:  Now, wait a second.  Correct me if

         17         I'm wrong.  Probably at 3:00 in the morning you could park

         18         across the street at the shopping center.  But if I

         19         remember correctly, you're doing the overflow from the

         20         mall across the street in your hotel because there is a

         21         sign to that effect right there; is that correct?

         22              MR. MAFFA:  No, we use the mall across the street for

         23         overflow parking.  We only have limited number of spaces

         24         at the hotel.  So if we run out of spaces that we are

         25         parking with, then the valet parking -- the people that

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                         DEPARTMENT OF REVENUE - 12/7/04

          1         are doing the valet services will take the cars across the

          2         street, park at Bal Harbour shops, we pay a fee to the Bal

          3         Harbour shops and we pay sales tax on that fee because we

          4         are licensing a parking space from them.  But the people

          5         that come to the hotel, they have no idea where their car

          6         is parked, whether it be in the hotel or across the

          7         street.

          8              CFO GALLAGHER:  Right.  The people, when the mall's

          9         parking lot is full, they are coming across the street to

         10         your hotel.  And I don't know where you're parking the

         11         cars but --

         12              MR. MAFFA:  Well, I'm unaware of people coming to the

         13         hotel because the mall is full.  If that happens again, if

         14         we have available parking spaces, we allow visitors at the

         15         hotel and we do charge them to valet-park their car.  But

         16         no one can take their car and park it in any specific spot

         17         at the hotel.  The real question is:  Are we leasing or

         18         licensing a parking space or are we providing a service.

         19              And if the decision here was solely that, that would

         20         be appropriate for the courts to answer that.  But here,

         21         this ruling, if you read Paragraph 26, it's going way

         22         beyond whether or not we're leasing a parking space.

         23         They're basically saying -- they're acknowledging there is

         24         a service transaction, but they're looking through it to

         25         underlying factors.  And that's the danger in this order.

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                         DEPARTMENT OF REVENUE - 12/7/04

          1              CFO GALLAGHER:  Let me tell you where I am on this so

          2         you understand.  This is a complicated tax question which

          3         you have a solid argument for, Department of Revenue has a

          4         solid argument for.  We're not here to take testimony and

          5         do depositions and act as a court.  And so, to me, the

          6         only thing that I can do in my position here is to let

          7         this move on and have a court make a decision on whether

          8         or not you're correct or you're incorrect and let them do

          9         the depositions and you offer your evidence and the

         10         Department offer theirs.  And the only way we can get

         11         there is for us to deny you today getting that refund and

         12         letting a court go through all the tax law and come back

         13         to us with a recommended order.

         14              So that pretty much forces me to move it on, at least

         15         for my vote, and let this go through a process where the

         16         testimony is done and evidence is discovered, et cetera.

         17         So then it will revert back to us with a recommended

         18         order.  You need to know where I come from.

         19              MR. MAFFA:  I understand that.  I appreciate that.

         20         Again, I believe this is more from a political standpoint,

         21         is really an analysis of a disguised sales tax on service.

         22         If this order just said valet parking services is taxable

         23         as a lease or license to use real property or it was not,

         24         then I think that portion would go to court.

         25              CFO GALLAGHER:  Your interpretation of an existing

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                         DEPARTMENT OF REVENUE - 12/7/04

          1         law doesn't have anything to do with whether it's service

          2         tax or not service tax.  That's a red herring you're

          3         flapping in the air and it didn't bother me a bit.

          4              THE GOVERNOR:  I was going to validate what the

          5         treasurer said but he said it better than I could.

          6              MR. MAFFA:  Well, again, I appreciate the time.

          7              THE GOVERNOR:  Let's get Dr. Zingale up here.

          8              MR. MAFFA:  Again, I just wanted to point out to you

          9         this is a policy decision the Department is taking and,

         10         you, sitting as the head of the Department are agreeing

         11         with a policy.  If it was purely a legal issue --

         12              THE GOVERNOR:  No, we're, at least from my

         13         perspective, with all due respect, sir, we are, I think

         14         Treasurer Gallagher has said it very well, that it is

         15         appropriate -- the appropriate place to settle this is in

         16         the courts where there could be testimony and you'll make

         17         your case, the Department will make its case.  We're not

         18         making policy by moving this along the process.

         19              MR. MAFFA:  I understand that and I thank you for

         20         your consideration.

         21              THE GOVERNOR:  Dr. Zingale.

         22              DR. ZINGALE:  A couple of short points.  First, this

         23         particular issue, the Department doesn't have any plans of

         24         extending it or any other transactions under our

         25         authority.  We'd have to bring those in front of you on a

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                         DEPARTMENT OF REVENUE - 12/7/04

          1         case-by-case basis if we were planning on doing that.  I

          2         think from the words I've heard from the cabinet, we're

          3         making the argument that this is parking services.  This

          4         is parking.  It is taxable by the statute.  The taxpayer

          5         had the option of separately stating the service from the

          6         parking and allowing the visitor to park under just that

          7         parking fee.  If they wanted to save services for $16 and

          8         the remaining was for the parking too and they allowed a

          9         visitor staying there to park for $2, then it would only

         10         be a tax on the $2.  Okay.  So we're not trying to extend

         11         a brand-new concept.  We're calling it parking.  I think

         12         the correct statement is there are legal arguments on both

         13         sides.  The correct forum to have this in is in front of a

         14         district judge.  We recommend you move the administrative

         15         order.

         16              THE GOVERNOR:  Is there a motion?

         17              CFO GALLAGHER:  I move to move it on to a denial

         18         which is approval of the recommendation on Item 2.

         19              COMMISSIONER BRONSON:  Second.

         20              THE GOVERNOR:  There's a motion and a second.  Any

         21         other discussion?  (No response.)  Without objection,

         22         Item 2 passes.

         23              DR. ZINGALE:  Thank you.  The third item is our

         24         legislative concepts.  Having looked at your agenda, you

         25         have a packed agenda, I'm going to highlight a few.  The

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                         DEPARTMENT OF REVENUE - 12/7/04

          1         first set are our child support enforcement legislative

          2         concepts.  There are 12 of them, two dealing with

          3         paternity.  One allowing us to get access to records after

          4         a paternity was established administratively.  The second

          5         allows us to accept a paternity that was established in

          6         another state.

          7              A third one I would like to bring up, currently we do

          8         everything humanly possible to protect the social security

          9         numbers.  There has been some question that you might be

         10         able to get access to social security numbers through a

         11         public records request.  This concept would make it clear

         12         that you are protecting the social security numbers.

         13         There is another one that is providing sanctions on

         14         employers who fail to, upon proper notice, enroll a

         15         noncustodial parent for medical support.

         16              Those are the child support highlights.  We have two

         17         administrative ones.  One of them deals with, and it would

         18         be true for every State agency, to allow a State agency to

         19         use $100 per employee as an awards program.  No money

         20         would be appropriated.  This would come out of each

         21         agency's fund.  On the general tax side, we have 18

         22         concepts.  Six of them were in front of you last year.

         23         The bill got up to the last few moments of the session,

         24         some other things caused it not to pass.  They have been

         25         through the whole process.  The remaining 12 are primarily

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                         DEPARTMENT OF REVENUE - 12/7/04

          1         administrative.

          2              The last three deal with property tax.  One I'm going

          3         to highlight deals with our review of the property tax

          4         appraisers coming up with sales data to be used in these

          5         studies.  Right now, the procedure for reviewing that

          6         causes us in process to reject the data and a lot of

          7         hardship on the part of a property appraiser in process to

          8         try to fix that.  We're trying to shift that from our

          9         in-process review to our post audit review to give the

         10         property appraiser a year to help fix that.  Recommend

         11         moving our legislative concepts.

         12              GENERAL CRIST:  Motion.

         13              COMMISSIONER BRONSON:  Second.

         14              THE GOVERNOR:  Motion and second.  Without objection,

         15         the item passes.  Have a good holiday.  Happy holidays.

         16              DR. ZINGALE:  No applause.

         17              THE GOVERNOR:  Do you need --

         18              (Applause.)








                                   ACCURATE STENOTYPE REPORTERS, INC.

                      DEPARTMENT OF HIGHWAY SAFETY - 12/7/04

          1              THE GOVERNOR:  Do you need an applause too?  Do you

          2         have a self-esteem problem?

          3              MR. DICKINSON:  No, sir.

          4              THE GOVERNOR:  I didn't think so, Fred.

          5              (Laughter.)

          6              Department of Highway Safety and Motor Vehicles.

          7         Good morning.

          8              MR. DICKINSON:  Good morning, Governor, cabinet.  The

          9         first item is our minutes from the September 21st cabinet

         10         meeting.

         11              THE GOVERNOR:  Is there a motion?

         12              GENERAL CRIST:  Yeah.

         13              CFO GALLAGHER:  Second.

         14              THE GOVERNOR:  And a second.  Without objection, the

         15         item passes.  Item 2.

         16              MR. DICKINSON:  Item 2 is our quarterly report for

         17         what we're calling the hurricane quarter.  The highlights

         18         are that even though we had a hurricane, all of our

         19         statistics were pretty well skewed.  The good one is we

         20         were 12 percent off on our fatalities.  So even with less

         21         enforcement, we had good news on the fatality front.

         22              THE GOVERNOR:  Is there a motion?

         23              GENERAL CRIST:  Yes.

         24              CFO GALLAGHER:  Second.

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

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                      DEPARTMENT OF HIGHWAY SAFETY - 12/7/04

          1         Without objection, the item passes.  We're getting to the

          2         exciting part here.

          3              MR. DICKINSON:  Item 3 are the tags, Governor.  We

          4         have eight tags before you.  These are 8 of the 12 that

          5         passed last legislative session.  The other four will come

          6         to you next year.

          7              CFO GALLAGHER:  So we now have the record, right?

          8              THE WITNESS:  96 tags, no, sir, we'll still seventh.

          9              THE GOVERNOR:  Actually, we checked with Maryland, I

         10         believe it was.  Wasn't it Maryland?

         11              MR. DICKINSON:  500.

         12              THE GOVERNOR:  They couldn't count them all.  They

         13         lost count.  They literally lost count of the number of

         14         tags they have.  They can't keep up with it.

         15              MR. DICKINSON:  Fortunately, the Legislature did give

         16         us some relief for next year.  There should be about 20

         17         tags, if we calculate it today, that would come off

         18         because they haven't sold up through that threshold of

         19         1,000 tags for 12 consecutive months.

         20              THE GOVERNOR:  You think we'll be in a net loss

         21         situation or?

         22              MR. DICKINSON:  It's going to take some time before

         23         we get to that point but this year we probably will be.

         24         There have been no tags that have qualified for next

         25         legislative session.

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                      DEPARTMENT OF HIGHWAY SAFETY - 12/7/04

          1              THE GOVERNOR:  Well, there are some beautiful tags

          2         here.  How are we going to do this now?

          3              MR. DICKINSON:  If I might, if I can just list them

          4         and maybe we could do a blanket approval.

          5              THE GOVERNOR:  Sure.  We have some guests that have

          6         travelled far and wide to come.

          7              MR. DICKINSON:  Yes, sir.  Do you want to do the

          8         pictures before, ET?  You got film today?

          9              (Laughter.)

         10              CFO GALLAGHER:  He's electric now.  All he needs is a

         11         little disk.

         12              THE GOVERNOR:  Let's do the approval then we'll have

         13         the folks that have come and we'll take pictures.

         14              CFO GALLAGHER:  I'll move the item.

         15              COMMISSIONER BRONSON:  Second.

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

         17         Without objection, the item passes.

         18              Now, these tags have also all been approved for law

         19         enforcement purposes as well.

         20              MR. DICKINSON:  Yes, sir, they have.

         21              THE GOVERNOR:  And there is a serious element of this

         22         that the tags do need to have -- you know, you got to be

         23         able to understand that it's a Florida tag and you get the

         24         license plates, the numbers off of it.

         25              MR. DICKINSON:  They are all considered legible by

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                      DEPARTMENT OF HIGHWAY SAFETY - 12/7/04

          1         law enforcement.

          2              THE GOVERNOR:  There you go.

          3              MR. DICKINSON:  The first one is Animal Friend.  This

          4         is the Florida Animal Friend tag.  Do we have anybody

          5         here, Paula?

          6              Would you like to come up for your picture with the

          7         governor and cabinet for your tag?

          8              (Pause.)

          9              The next is the Discover Florida's Oceans - Hubbs

         10         Seaworld plate and Representative Altman is here from

         11         Brevard County.

         12              (Pause.)

         13              The next one is the Family Values - Sheridan House

         14         tag.

         15              (Pause.)

         16              The next tag is Imagine - Florida Association of Food

         17         Banks.

         18              (Pause.)

         19              Governor, the next tag is the Kids Deserve Justice

         20         sponsored by the Florida Bar Association.

         21              (Pause.)

         22              The next tag is Live the Dream - The Dream

         23         Foundation.

         24              (Pause.)

         25              Governor, the next tag is Parents Make A Difference -

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                      DEPARTMENT OF HIGHWAY SAFETY - 12/7/04

          1         the Gathering/USA, Inc.

          2              (Pause.)

          3              Governor, the last tag is the Support Soccer -

          4         Lighthouse Soccer Foundation, Inc. tag.

          5              (Pause.)

          6              Governor, that concludes.

          7              THE GOVERNOR:  Thank you, Fred.  Merry Christmas.

          8              MR. DICKINSON:  Merry Christmas to you.  Thank you.

          9              THE GOVERNOR:  Did we approve -- yeah, we approved

         10         them already.

         11              MR. DICKINSON:  I think you did.

         12              CFO GALLAGHER:  Yes, we did.














                                   ACCURATE STENOTYPE REPORTERS, INC.

                       ADMINISTRATION COMMISSION - 12/7/04

          1              THE GOVERNOR:  Administration Commission.

          2              MS. LEIGHTY:  Good morning.  I'm Barbara Leighty.

          3         Teresa Tinker was unable to attend the meeting today.

          4              THE GOVERNOR:  Barbara, how are you doing?

          5              MS. LEIGHTY:  Fine.  Thanks.  Item 1 on the

          6         Administration Commission agenda, recommend --

          7              CFO GALLAGHER:  Motion on the minutes.

          8              THE GOVERNOR:  Is there a second?

          9              GENERAL CRIST:  Second.

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

         11         Without objection, Item 1 passes.

         12              Item 2.

         13              MS. LEIGHTY:  Item 2 is the Division of

         14         Administrative Hearing's 30th Annual Report and Annual

         15         Performance Contract.  The director and chief judge,

         16         Robert Cohen, will give an overview of the report and the

         17         performance contract.

         18              THE GOVERNOR:  Good morning, Judge.

         19              MR. COHEN:  Good morning, Governor, members.

         20              THE GOVERNOR:  Welcome back.  You have to come back

         21         more often.

         22              MR. COHEN:  Thank you.  I'm available any time.

         23         Well, upon my appointment last year, I was told a part of

         24         my charge was to report annually on the state of the

         25         Division of Administrative Hearings and I'll just give you

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                       ADMINISTRATION COMMISSION - 12/7/04

          1         some of the highlights because we have certainly filed our

          2         annual report the 1st of February.  I did an updated

          3         performance contract that is an update really through our

          4         fiscal year, June 30, and our two programs at DOAH are

          5         thriving.  The Adjudication of Disputes Program is moving

          6         along well.  The Office of Judges of Compensation Claims

          7         which handles all the workers' comp cases is moving very

          8         well also.  We are --

          9              THE GOVERNOR:  How do you define "moving well"?

         10              MR. COHEN:  Well, I think you'll hear that because of

         11         some of the technological advances that we've made in

         12         terms of the electronic filing that people have better

         13         access to both the Adjudication of Disputes Program and

         14         the workers' comp program.  They can file their petitions

         15         for benefits within a matter of weeks.  They'll be able to

         16         file settlement agreements and most every other pleading

         17         in those cases to take all of this lawyer involvement,

         18         lawyers having to show up at court every time they file a

         19         basic motion or a stipulation.  So we're getting out of

         20         that and getting more into keeping those attorneys' fees

         21         down.

         22              CFO GALLAGHER:  Well, let me just tell you something,

         23         for whatever it's worth.  I've always wanted to go to a

         24         hearing and so unannounced, I've been to three offices to

         25         see one.  We have three or four judges in most of those

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                       ADMINISTRATION COMMISSION - 12/7/04

          1         offices.

          2              THE GOVERNOR:  Worker comp or ALJ?

          3              CFO GALLAGHER:  Workers' comp, haven't been to one

          4         yet because if you try to go on a Monday, which I thought

          5         would be a pretty good day to go, beginning of the week,

          6         every one of them calls in and settled.  So they don't

          7         have any.  So I'm trying to figure out, you know, now

          8         you're making it so the judges don't have to be there even

          9         more.  In fact, a couple of the offices, I couldn't even

         10         find the judges because they didn't have any cases.  So

         11         I'm sure you're working on that.

         12              MR. COHEN:  We are, Mr. Treasurer.  In fact, I don't

         13         know about the judges not being there.  Now the idea is

         14         that the lawyers don't have to be there anymore and keep

         15         running up those attorneys' fees on the cases, especially

         16         for routine matters.

         17              CFO GALLAGHER:  Well, if you don't have any lawyers

         18         there, then probably judges don't have any reason to be

         19         there either, do they?

         20              MR. COHEN:  Well, the cases are moving along.  The

         21         cases are moving better than they have in the past.

         22              THE GOVERNOR:  How do you measure that?

         23              MR. COHEN:  Well, we have performance measures that

         24         look at -- there's a statutory requirement that from the

         25         date the petition of benefits is filed until the date of

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                       ADMINISTRATION COMMISSION - 12/7/04

          1         the ultimate resolution of the case cannot exceed 240

          2         days.  That includes mediation, everything, final hearing,

          3         whatever is involved.

          4              THE GOVERNOR:  So take your three top performance

          5         measures and tell us how we're doing now compared to how

          6         we were doing a year ago.  That may give the Treasurer

          7         some comfort.

          8              MR. COHEN:  Sure.  We are -- with our top performance

          9         measures, we are doing better than we were a year ago.

         10         How much better --

         11              CFO GALLAGHER:  Boy, that's exciting.

         12              MR. COHEN:  How much better on the order of when a

         13         performance measure is 75 percent of cases must be

         14         completed within the 240 days in 2003, 2004, the standard

         15         was 50 percent.  That standard we got to 46 percent.  And

         16         the reason we don't get farther than that is that because

         17         so many cases now, fewer cases than ever before, are going

         18         to final hearing because mediation works.  Alternative

         19         dispute resolution works.  A provision is in the statute

         20         that we have state-employed mediators in each of the

         21         workers' comp districts.  If you cannot get to the

         22         mediator within the statutory time frame because they are

         23         stacked up and they are handling these cases all day long.

         24              So, Mr. Treasurer, I know if you went to the office,

         25         likely you would have seen plenty of mediations going on

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                       ADMINISTRATION COMMISSION - 12/7/04

          1         if not final hearings that day.  But if they don't get to

          2         the State-employed mediator within the statutory time

          3         frame, then they go to a private mediator to keep the

          4         system going.

          5              So any delays that are here in terms of us not

          6         getting these cases finished at 240 are virtually all

          7         because the parties need more time, there is additional

          8         medical care, there is additional time for mediation.

          9         It's not because the office is not pushing the cases.

         10         That's been a big push of mine, has been to move these

         11         cases along and to have the cases resolved to have better

         12         performance standards and have better performance under

         13         the existing standards.

         14              CFO GALLAGHER:  Well, one of the reasons you should

         15         have less workers' comp cases is because there is a major

         16         incentive for cases not to go to lawyers and that's one of

         17         the reasons we're having the cost of the system drop and

         18         the rates for employers to drop, et cetera.  So that

         19         should affect how many cases come into your offices

         20         dramatically.

         21              MR. COHEN:  Absolutely.  And the 2002 statutory

         22         changes went into effect -- actually, the most recent

         23         ones, October 1 of 2003, I guess the 2003 changes, those

         24         are the one that limited the attorneys' fees and the

         25         medical only cases.  And, yes, that is hopefully going to

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          1         create an even greater incentive to settle the matters,

          2         not take up hearing time on matters that are just medical

          3         only.  If someone needs medical care, they get their

          4         medical care, they get back to work which is the goal

          5         anyway.

          6              THE GOVERNOR:  Wouldn't you know that already since

          7         it's October 2003?  That's more than a year ago.  So it's

          8         beyond the time frame.

          9              MR. COHEN:  Well, because it's only for accidents

         10         that occurred after October 1 of 2003, there's still not

         11         that much data yet to compare.  Yes --

         12              THE GOVERNOR:  I thought you had to close the cases

         13         within less than a year time frame.

         14              MR. COHEN:  240 days, that's right.  And cases are

         15         closing.  But when you look at the volume of cases and the

         16         cases that are in the system that have been there before

         17         October 1 of 2003, it's the order of 15 to 20 percent of

         18         the cases.  I mean, we're talking -- we get about 165,000

         19         petitions filed every year and those cases are constantly

         20         moving through the process.

         21              Shall I continue, Governor?

         22              THE GOVERNOR:  Oh, yeah, please.

         23              MR. COHEN:  Some of our accomplishments this past

         24         year.  We've engaged in an improvement of the way we bill

         25         agencies for the time they use at DOAH.  In the past,

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          1         agencies paid for time they scheduled for hearings, even

          2         if the hearing was continued within 30 days of the

          3         hearing.  Even if the matter settled within 30 days of the

          4         hearing, the agencies still were billed for the time they

          5         had been scheduled for the hearing.  That was eliminated

          6         almost the first day I took over.

          7              Agencies now pay for the actual time that they use

          8         the judges, not for time that's scheduled and then the

          9         hearings are continued or settled.  Obviously no one

         10         should pay for what they are not using.  And we want to

         11         encourage settlements and not to penalize the agencies for

         12         settling matters even if it's on the eve of the final

         13         hearing.  We've eliminated a costly in-house court

         14         reporter program that was costing money instead of saving

         15         money.  It was designed to save money --

         16              THE GOVERNOR:  You outsourced the court reporting

         17         work?

         18              MR. COHEN:  Well, we outsource it.  Basically, the

         19         agencies are responsible for getting the court reporter

         20         under a state contracted rate instead of us having

         21         full-time employees there who were not busy full-time

         22         because the hearings were all over the state and they're

         23         just based in Tallahassee.

         24              THE GOVERNOR:  Well, I can speak on behalf of the

         25         Governor and cabinet that we have a very fine court

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          1         reporter here that is available for further work, I'm

          2         sure.

          3              MR. COHEN:  Great.  As I said, electronic filing,

          4         it's been launched for both the adjudication of disputes

          5         program and for the workers' comp program.  We have worked

          6         this past year on several occasions with the Starbuck

          7         Company on some of our leases, our workers' comp offices

          8         around the state.  As leases come up for renewal, we've

          9         been working with Starbuck.  We have gotten our courts

         10         moved into some better space, more cost-effective space.

         11         We're looking at the Miami office to, again, find ways to

         12         work with that program and to get us into better space and

         13         more cost-effective space.

         14              We've expanded our workload with non-state agencies.

         15         We have the statutory right to contract with non-state

         16         agencies and charge them a contract rate that's approved

         17         annually by the Legislature.  The contract rate is to

         18         allow these agencies and a lot of cases -- a lot of

         19         counties now that are experiencing amazing growth, they

         20         need help.  The commissions can't handle all the growth

         21         management issues, can't handle the challenges to the

         22         comprehensive plans, we're handling those cases on a

         23         contract basis with agencies.  We've picked up more this

         24         year.  More counties are actually in the process of

         25         drafting ordinances as we speak to allow DOAH to sit as

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          1         the adjudicatory board for their county commission so the

          2         county commissions can have meetings of reasonable length

          3         instead of sitting in hearings for several days on comp

          4         plan challenges.

          5              We are efficiently using our staff.  We have made

          6         reductions over the past year in our staff.  We have

          7         reductions proposed for the coming year to the Legislature

          8         for our staff.  And we are able to eliminate these

          9         positions without sacrificing any of our efficiency in

         10         terms of getting the work out and providing top quality

         11         servants in the adjudication of disputes.

         12              And this has been done, I personally have been

         13         handling a pretty full caseload myself as I've been doing

         14         this.  Not just been in the front office doing

         15         administration, but out there handling cases, hearing

         16         cases, writing orders like all the other ALJs on the job.

         17              THE GOVERNOR:  I'm sure that's appreciated.

         18              MR. COHEN:  We always seek consistency in our

         19         decisions.  We had some complaints, we had some questions

         20         from agencies and I have an open door and I regularly meet

         21         with agency heads, with general counsels who have

         22         questions about how things are going not whether they like

         23         the decision or didn't like a decision although that comes

         24         up from time to time.  But really on the process and

         25         whether the process is fair and whether the agencies are

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          1         being protected in terms of working with their schedules,

          2         working with their schedules in terms of times of year

          3         that are busier for them.  We had a complaint that a lot

          4         of agencies are using new attorneys.  Inexperienced

          5         attorneys are going up against the seasoned veteran

          6         attorneys who are eating their lunch in court and what can

          7         we do to help.  We recommended or suggested that we have a

          8         trial practice seminar.  The Florida Bar's administrative

          9         law section worked with us.  We hosted a seminar back in

         10         May.  Over 100 people came.  Over 30 lawyers came just

         11         from Department of Health and had some hands-on training

         12         in administrative law and really in how to try a case with

         13         really -- with real judges sitting on the cases but with

         14         real seasoned lawyers putting on the cases and injecting

         15         some humor into it but by putting on some good cases so

         16         people could see how to do a land use case and see how to

         17         do a professional licensing case and how to do them the

         18         right way.  Talked about professionalism, talked about all

         19         those aspects that lead to better trial practice in the

         20         administrative arena.

         21              CFO GALLAGHER:  Let me just say, I'm really glad to

         22         hear that because, not often, but every once in a while,

         23         some poor hearing officer gets a case in an area that they

         24         have no history, background, or anything else on.  And,

         25         you know, the orders are a little hard to figure out

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          1         because they sort of try to take care of everybody and

          2         sometimes you can't do that in these orders.

          3              MR. COHEN:  Well, and having come from the private

          4         sector and had spent 20 years handling those cases and

          5         occasionally reading orders like that directed to some of

          6         my clients, all I can tell you is that we try our best to

          7         put the case before a judge who can handle the case.  Some

          8         judges are better at environmental issues than others.

          9         Some judges have more background in tax and insurance than

         10         others.  We -- there's not a judge shopping involved here

         11         for people on the outside.  But they know they are going

         12         to get a judge, for the most part, who has handled that

         13         type of case before and who understands the issues that

         14         are coming.

         15              CFO GALLAGHER:  Well, obviously it helps an agency to

         16         have somebody that does one that they can understand what

         17         the order is.  But, you know, agencies are around, they're

         18         going to be around.  They'll live one way or the other.

         19         But in many cases our citizens -- this will be the only

         20         case they will ever have up in front of them.  It's the

         21         only time they will ever see how government works.  It's

         22         the only time that they take a look at State government

         23         and if what they get back, you know, through their

         24         attorney is something their attorney can't even figure out

         25         what it says, that's where my problem comes in.

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          1              MR. COHEN:  And I'm glad you raised that,

          2         Mr. Treasurer, because we get so many cases, especially

          3         cases from the Commission, Florida Commission on Human

          4         Relations, discrimination cases where the people are

          5         unrepresented by counsel, pro se.  We have gone to great

          6         lengths to help those people get through the process.

          7         There's only so much we're allowed to do.  We can't tell

          8         them how to try the case.  We can't tell them what

          9         questions to ask, that's trying the case for them.  But we

         10         are starting a procedure where when the pro se files a

         11         case without counsel, that we will have a telephone

         12         conference with that person and, of course, opposing

         13         counsel for the agency or if it's a private party, and go

         14         over the procedures early on with them, give them a chance

         15         to better understand what's coming because when these

         16         folks show up at the hearing and have to cross-examine

         17         witnesses and put documents into evidence, it's a pretty

         18         daunting task for someone who hasn't gone to law school.

         19         It's hard enough for people who have.

         20              CFO GALLAGHER:  Isn't there some kind of pro bono

         21         available for these people?

         22              MR. COHEN:  Well, only if they can qualify

         23         financially for legal services in an area and that's

         24         basically slightly over poverty level.  So occasionally

         25         there are legal services attorneys involved.  But for most

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          1         of these cases, it's folks who -- small business people,

          2         folks who earn enough to where they wouldn't qualify for

          3         legal aid but they still got their cases and they still

          4         need some help and they don't want to go out and spend

          5         $300 an hour or can't to have an attorney who can handle

          6         their case for them.

          7              We are, this spring, getting our first externs.  We

          8         used to call them interns.  Well, they call them externs

          9         now at FSU.  We're getting our first externs from the

         10         College of Law at FSU who will help with research and

         11         writing because all of our judges, and we don't have, not

         12         like the Article V courts, we don't have any staff

         13         attorneys or law clerks in there.  The judges hear the

         14         cases, do the research, and write their own orders.  So

         15         it's been a great year.  I mean we still have a ways to

         16         go.

         17              I think that this next year with getting the

         18         electronic filing in full swing will make a difference.

         19         We still have a ways to go in terms of the perception that

         20         has been built over the years that sometimes you get a

         21         squirrely opinion that comes out of DOAH.  And I don't

         22         like that.  I don't think anybody in the public wants to

         23         hear about an opinion they think is a little unusual or

         24         bizarre when it comes out.  We're looking at consistency.

         25         We're looking at the orders that go out, have been

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          1         reviewed by at least one of the senior judges, if not two

          2         or three, depending on the sensitivity and the nature of

          3         the opinion.  We have had a great year in our United Way,

          4         our State employees' campaign.  We have had a record

          5         giving within the agency and I just thank you for the

          6         opportunity to serve at DOAH and I'll answer any further

          7         questions you may have.

          8              THE GOVERNOR:  Any questions?  (No response.)

          9              Thank you very much.  I hope -- I would suggest maybe

         10         you come back on a quarterly or semiannual basis.  And I'm

         11         interested in real world parameters and how you're doing

         12         and suggestions if you have external factors that make it

         13         more difficult.  For example, if the Commission on Human

         14         Relations is creating all sorts of activity for you and

         15         there's not a -- you know, people are coming without

         16         lawyers, maybe come to us with these challenges.  But

         17         we're expecting to see, particularly in the workers' comp

         18         area where there was major reform, we're expecting to see

         19         a lot of the extraneous cost taken out of the system where

         20         workers get healthier and employers don't pay the second

         21         highest premium rates in the country, at least I am.  It's

         22         killing us.

         23              CFO GALLAGHER:  And I would like to talk to you a

         24         little bit about some ideas I have in regards to people

         25         coming in pro se in these human relations cases.

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          1              MR. COHEN:  Great.

          2              THE GOVERNOR:  We want to help.

          3              MR. COHEN:  Thank you.

          4              CFO GALLAGHER:  There may be a way to help.  Them

          5         having good counsel does two things.  One, it makes the

          6         system work faster and better and gives them their rights

          7         right up front.  And some people think they should have

          8         more than they should and they're very disappointed in the

          9         system because nobody has really sat down to say, Here's

         10         what your rights are and here's what you can get.  So it

         11         helps everybody if they do have somebody counsel them.

         12         And obviously you can't do it in your office.

         13              MR. COHEN:  We can do it to an extent but we can't

         14         try the case for them.

         15              THE GOVERNOR:  Is there a motion?

         16              CFO GALLAGHER:  Did we do a contract yet on the

         17         motion --

         18              THE GOVERNOR:  There's a motion to accept?  Is there?

         19              CFO GALLAGHER:  Accept the contract?  Yeah, I'll move

         20         it.

         21              THE GOVERNOR:  There's a motion to accept the report

         22         and annual performance contract.  Is there a second?

         23              COMMISSIONER BRONSON:  Second.

         24              THE GOVERNOR:  There's a second.  Without objection,

         25         Item 2 passes.  Thank you.

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          1              MR. COHEN:  Thank you, Governor and members.

          2              THE GOVERNOR:  Happy holidays.

          3              MR. COHEN:  Happy holidays to you.

          4              THE GOVERNOR:  Item 3.

          5              MS. LEIGHTY:  Item 3 is the Department of Community

          6         Affairs' 2004 Statewide Emergency Shelter Plan.  Craig

          7         Fugate with the Department will give an overview of the

          8         plan.

          9              THE GOVERNOR:  Good morning, Craig.

         10              MR. FUGATE:  Good morning, Governor.  Good morning,

         11         cabinet.  The 2004 shelter report -- I have two reports.

         12         One is a retrofit, one is the report on status of the

         13         shelter plan, are required items of the Florida

         14         Legislature passed after Hurricane Andrew to give the

         15         cabinet an update on the progress the State is making in

         16         illuminating the statewide shelter deficit.

         17              The 2004 statewide emergency shelter plan was

         18         completed prior to the hurricanes that struck this year.

         19         It is based upon criteria established in conjunction with

         20         the counties of identifying shelter capacity based upon

         21         the at-risk population within a county.  The at-risk

         22         population is those people that are in evacuation zones

         23         for a hurricane based upon storm surge or in manufactured

         24         mobile home parks that would be ordered to evacuate.  It's

         25         based upon a percentage of that population, approximately

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          1         16 percent of those that would be going to shelters, and

          2         identifies the capacity of the county to have safe shelter

          3         space which is, again, based upon the American Red Cross

          4         standard for shelter space.

          5              Those standards and that process of reviewing those

          6         shelters after Hurricane Andrew demonstrated that the

          7         State of Florida, based upon that at-risk population, had

          8         a shelter deficit of over one million shelter spaces and

          9         was growing with our population in the at-risk areas.  Up

         10         until 1999, the State had made no significant progress in

         11         reducing that deficit.  The deficit was growing as

         12         population grew.  In 1999, Florida Legislature, under

         13         budget proposed by Governor Bush, for the first time

         14         committed State funds to retrofitting existing schools

         15         which are a primary source of shelters with such items as

         16         shutters to improve the performance to meet the Red Cross

         17         standard for safe shelter space.

         18              In addition to that, the Legislature had also

         19         required that new school construction, where necessary,

         20         would have to meet an enhanced standard for hurricane

         21         protection to service shelters within the community.

         22         After Hurricane Floyd, Governor Bush had asked Walter

         23         Rebel (phonetic) to commission a report on the findings of

         24         the evacuation.  One of the concerns was not having

         25         sufficient shelter space in the populated counties along

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          1         the coast.  And the Governor and the Legislature agreed to

          2         eliminate several provisions that were in the statute

          3         prior to that which stated essentially if you were

          4         building new schools and one of those schools was built to

          5         the enhanced standard, even if you had a deficit, none of

          6         the other schools would have to meet that new standard.

          7              We eliminated that and said that if you had a

          8         deficit, new school construction should be built primarily

          9         to provide educational facilities but as a critical

         10         secondary function to the community, provide shelter space

         11         for that area.  The combination of eliminating that

         12         loophole and providing funds over that time frame has

         13         resulted in the State gaining over 630,000 spaces that

         14         meet the Red Cross standard.  Based upon the funds

         15         allocated by the Legislature, both from the Cat Fund and

         16         from hazard mitigation grant funds from FEMA from prior

         17         disasters will add approximately another 100,000 spaces

         18         for the year 2005 by August bringing our total up to over

         19         730,000 which will then have reduced the total deficit

         20         statewide to below 50 percent.

         21              Now that deficit is somewhat misleading and that is

         22         the assumption that every county being at equal risk

         23         evacuating at the same time resulting in deficits within

         24         those communities.  We have, since this process started,

         25         actually have had counties go from a negative of shelter

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          1         spaces to having a surplus of shelter spaces based upon

          2         the data used to develop this report.

          3              THE GOVERNOR:  How do you develop the denominator?

          4         If the numerator is the shelter space itself, how do you

          5         determine --

          6              MR. FUGATE:  Demand.

          7              THE GOVERNOR:  Or the demand, if you will.

          8              MR. FUGATE:  Yes, sir.  Demand had been based for

          9         this study and previous to this year at approximately

         10         16 percent of the population going to public shelter.  And

         11         all of the storms we have seen, that number has been

         12         between 3 and 5 percent and that is one of the things

         13         that --

         14              THE GOVERNOR:  Say that again.

         15              MR. FUGATE:  Between 3 and 5 percent have gone to

         16         shelter, public shelter.  Part of this, we believe, is

         17         because much of the public has heeded the advice to use

         18         alternative forms, stay with friends and family.  Also,

         19         you don't need to evacuate if you're not in one of the

         20         evacuation zones and many people are choosing to relocate

         21         to hotels, motels, and outside of the area.  This prompts

         22         very large scale evacuations, which, again, we saw in

         23         these storms approximately, I believe our numbers are

         24         about nine and a half million people in evacuation zones.

         25         And we had reports of people traveling as far away as

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          1         other states --

          2              THE GOVERNOR:  Craig, let's take the -- we have some

          3         real world examples we can remember still.  Were there

          4         shelters that even in deficit counties where these storms

          5         hit where people were turned away?

          6              MR. FUGATE:  No, sir.  We pretty much, across the

          7         board that shelter capacity it got crowded.  And, again,

          8         we tell people shelters are life posts.  They're not the

          9         accommodations you would expect.  But by and large --

         10              THE GOVERNOR:  Except in Melbourne where Treasurer

         11         Gallagher and I went which was the Ritz Carlton of all

         12         shelters.  Remember that one?

         13              MR. FUGATE:  Some counties, and, again, sheltering is

         14         the responsibility of the county governments and

         15         cooperation with the school boards and various partners

         16         such as the Red Cross.  And those accommodations do vary.

         17              CFO GALLAGHER:  For the record, it wasn't a Ritz

         18         Carlton hotel we were at.  It was an elementary school.

         19         Just want you all to know we weren't at the --

         20              THE GOVERNOR:  But this elderly couple is over like

         21         80 years old that was staying in a bed in one of the fifth

         22         grade classrooms, said that they had made their

         23         reservations for the next hurricane.

         24              CFO GALLAGHER:  And little did they know, there was

         25         one and they were back in there.

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          1              MR. FUGATE:  But I think it brings up an important

          2         point.  Our planning assumptions were based upon

          3         assumptions developed nationally of how many people would

          4         actually go to public shelter.  That number, historically

          5         in Florida, has been much lower than the planning

          6         assumption with one caveat.  When Hurricane Charley moved

          7         towards the Charlotte County area, we saw a spike in

          8         shelter population there.

          9              What we have asked the Federal Emergency Management

         10         Agency to do in cooperation with the U.S. Army Corps of

         11         Engineers is to come back and request that we do a

         12         behavioral analysis of the evacuation population and ask

         13         people who went to shelter and why.  Who did not go to

         14         shelter and why.  And did the availability or perceived

         15         lack of shelter space alter anybody's decision about how

         16         far they should travel.  We want to look at this storm by

         17         storm.  We want to look at what the fatigue rate was.

         18              We were very concerned in Jeanne that we feel that

         19         many people did not evacuate that were probably at risk.

         20         But we also want to look at Charley that when the storm

         21         changed direction and went to an area that was already

         22         under warning but had only been evacuated for essentially

         23         a bypassing storm.  We saw very large numbers on Arcadia

         24         and we want to go back and see what percentage of the

         25         population came from out of county, went to those shelters

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          1         and was that number higher than 16 percent or lower.  I

          2         think that we're going to find, sir, that over time,

          3         Governor, we may be able to adjust our numbers down as to

          4         total percentage of population that goes to shelter for

          5         general population purposes and perhaps focus on, I think,

          6         what we observed in this storm that we knew had been

          7         historically a problem.  But this storm, we saw an

          8         exasperation of that and that is our special needs

          9         population.  I think we have made tremendous progress in

         10         our general population.  I think we need to shift our

         11         emphasis and put a lot more emphasis on our special needs

         12         which goes beyond just the space.

         13              THE GOVERNOR:  I agree with that completely.  I mean,

         14         and I hope -- when is this study going to be complete?

         15              MR. FUGATE:  We have asked for this study to give us

         16         the information to go into our planning cycle for the

         17         '05 hurricane season.  We are expecting some

         18         preliminary --

         19              THE GOVERNOR:  How about the '05 legislative session?

         20              MR. FUGATE:  I'm hoping that I can have enough

         21         information to present any of those findings that would

         22         warrant legislative or rule change as we go forward as we

         23         prepare for the '05 season.  But it is in the hands of our

         24         federal partners to their commission that report --

         25              THE GOVERNOR:  What's their deadline?  Do they have a

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          1         deadline?

          2              MR. FUGATE:  They're trying to get their information.

          3         And in doing their planning I said, If I did not have the

          4         information by March it would not do me much good going

          5         forward in the legislative session.  So they know our

          6         deadlines to have information to go before committees to

          7         present findings.

          8              THE GOVERNOR:  If you need us or need me to harass

          9         anybody, I'm more than happy to do it.  They're used to

         10         that.

         11              (Laughter.)

         12              MR. FUGATE:  Yes, sir.  Part of it is the actual

         13         survey of individuals.  Dr. Jay Baker here at the Florida

         14         State University is the principal investigator for this.

         15         He's worked with us on previous storms.  We've developed a

         16         very good working relationship with the Army Corps on

         17         these surveys.  And, again, our goal is to learn those

         18         things that would affect our '05 hurricane season,

         19         determine if there are any legislative or rule changes

         20         required for that and implement that in our session.

         21              THE GOVERNOR:  How -- the other question I had

         22         related to this just based on lessons learned is the

         23         difference between Category 2 force winds which is what,

         24         as I understand it, the shelter space, general shelter

         25         space requirement is and Category 3.  And whether or not

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          1         we need to look at hardening shelters, particularly for

          2         special needs.  I mean, the shelters we saw together that

          3         were special needs shelters, apart from some of the basics

          4         inside of the shelters that needed to be looked at, I

          5         think we need to not just look at the safety but how

          6         prepared we are to provide services for frail people.

          7         These buildings, not all of them did so well.

          8              MR. FUGATE:  No, sir.  And we are dealing with

          9         several different standards.  The one that the Red Cross

         10         standard is based upon and that the Florida Building Code

         11         is based upon is the American Society of Civil Engineers

         12         which they have a Code 7 that deals with wind performance

         13         and it is based upon a three-second gust of winds at the

         14         maximum envelope you protect for with an additional factor

         15         built in for safety.  That standard, when applied, those

         16         structures perform very well.  The one significant failure

         17         is one that we're familiar with in Arcadia.  Which, based

         18         upon the design of the structure, met the standard.  Been

         19         in the actual construction, I think there have been

         20         newspaper reports that there may be concerns about whether

         21         or not it was constructed to the actual design.

         22              That is one of the caveats that when we review these

         23         structures, we cannot do a physical test of the structure.

         24         We review the plans.  But the structures that were

         25         utilized by counties that met the standard, the physical

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          1         envelope performed very well.

          2              THE GOVERNOR:  Did the Ft. Pierce, St. Lucie special

          3         needs shelter meet the --

          4              MR. FUGATE:  Danny, was that one we surveyed?

          5              MR. COLLINS:  I don't know if that specific

          6         facility -- it's not in St. Lucie County -- (inaudible)

          7              THE GOVERNOR:  Come up.

          8              MR. FUGATE:  Danny Collins from my staff.

          9              THE GOVERNOR:  Because it got damaged, I promise you.

         10              MR. COLLINS:  I'm not familiar with that specific

         11         building but --

         12              THE GOVERNOR:  This is the Convention Center in

         13         downtown Ft. Pierce that housed a ton of people.  And it

         14         wasn't to the same extent as Arcadia by any stretch of the

         15         imagination but --

         16              MR. COLLINS:  I don't believe that facility is in our

         17         plan.  That building has been discussed before but it was

         18         not retrofitted by us or by FEMA to my knowledge.

         19              THE GOVERNOR:  So here's my question.  If a special

         20         needs shelter at a county isn't able to handle, would they

         21         have to handle Category 3 force winds for special needs?

         22              MR. COLLINS:  The minimum they have to do is meet the

         23         code and the standards which is American Society of Civil

         24         Engineer standards for new construction.  That was a

         25         retrofitted -- if it was retrofitted --

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          1              THE GOVERNOR:  It's an old building.

          2              MR. COLLINS:  It's an old building.  It was not

          3         retrofitted by us to my knowledge, not by FEMA either.

          4         That was a decision made by the County to use that

          5         facility themselves.  So I'm not sure what the exact wind

          6         design was.  It was not part of our list.

          7              THE GOVERNOR:  Would it make sense to begin -- again,

          8         with the emphasis on the special needs shelters again to

          9         look at legislative changes that require stronger either

         10         hardened older buildings or new structures to deal with

         11         special needs populations?

         12              MR. COLLINS:  What we have been doing is we have been

         13         retrofitting buildings that can meet that Red Cross

         14         standard, most of the time putting just shutters on them

         15         which is pretty much the limit to the types of

         16         construction we can do to these buildings to renovate

         17         them.  That particular building you're talking about in

         18         St. Lucie had roof issues that we did not feel was a good

         19         use of retrofit dollars.  We don't spend money on that

         20         particular facility --

         21              THE GOVERNOR:  Right.  I understand that.  But I'm

         22         just saying, Craig, maybe you can answer this.

         23              MR. FUGATE:  Yes, sir.

         24              THE GOVERNOR:  The question of the -- if the counties

         25         made the determination this is the place to house, for

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          1         whatever reason, there may have been legitimate reasons to

          2         do so in anticipation of storms but afterwards it didn't

          3         look like it was the best decision.  Shouldn't we, if

          4         we're going to make a -- refocus our efforts on special

          5         needs populations, shouldn't we not give them the option

          6         but require that they -- special needs people be in

          7         significantly more secure locations?

          8              MR. FUGATE:  Yes, sir.  The shelter retrofit program

          9         is based upon we provide guidance.  Ultimately the local

         10         governments, the counties, have determined whether or not

         11         their shelters would be designated as such.  Our goal has

         12         been to increase and oftentimes at some rather violent

         13         opposition from local officials, particularly emergency

         14         managers, who as we began this process, we found, quite

         15         honestly, the emperor had no clothes.

         16              Many schools that were designated as shelter,

         17         particularly those built in the '60s and '70s, would not

         18         perform well in a hurricane.  And when we identified that,

         19         it created tremendous deficits which were then

         20         misrepresented to the press as there was absolutely

         21         nowhere to go.  And what we were actually doing was what

         22         had to be done.  We had to zero out the inventory to those

         23         schools that would perform versus older construction that

         24         did not perform.  But it was up to the counties to

         25         designate those shelters.  Over time, we have made

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          1         progress in the overall shelter population.

          2              If all special needs shelters were sheltered in

          3         structures that met ASCE 7, those structures, across the

          4         board, performed well.  We would then be focussing on

          5         habitability, generation and staffing, not building

          6         performance.  But that may be, again, where the

          7         Legislature may want to review that and make that a

          8         requirement versus the local governments making those

          9         decisions based upon available structures.

         10              THE GOVERNOR:  Commissioner?

         11              COMMISSIONER BRONSON:  Thank you, Governor.  One of

         12         the issues that I'm also concerned with and I know how the

         13         standards have worked over the period of time.  We learned

         14         something this year having four storms within just a few

         15         weeks compared to one storm or two storms in a whole

         16         season.  But also the fact that the one experience we had

         17         this year was the storm that stalled right off the coast

         18         for a short while and just beat the heck out of that

         19         coastal area and all the buildings in that coastal area

         20         for almost four times the normal length that those

         21         standards have been tested for normal storm shelters.  And

         22         that puts a whole lot more pressure on those buildings

         23         that you thought were safe because they're doing sustained

         24         12 to 18 hours instead of two to four hours of storm

         25         weather which puts a whole other category on.

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          1              The other thing that concerned me was assuming that

          2         we were to get into -- and I hope we never get into a

          3         pattern of anything close to what we had this year -- but

          4         that constant year in and year out pressure on those

          5         buildings seems to me there needs to be some ongoing

          6         upgrade assessments after every storm and before we get

          7         into a full season of which of those shelters really can

          8         withstand another hard storm before you put people in

          9         there.

         10              You know, the building in Arcadia was -- I want to

         11         say it's an anomaly, but it may not be an anomaly simply

         12         because everybody thought it was built to standard.

         13         Obviously there was a corner or two possibly cut that did

         14         not make it meet standard after all.  And we don't know

         15         that yet until I guess they do a complete background

         16         research of how it was put together.  But to have a

         17         building full of people in the black of night and no one

         18         can see what in the world is going on and have that

         19         building come down and you've got critical care people

         20         that have to be totally uprooted and moved during a storm,

         21         I think we were very lucky that we didn't have any extra

         22         damage to human life or loss of human life because of it.

         23              And so those are issues I'd like to see talked about

         24         whether we do it legislatively or do it through our normal

         25         storm review process to take a look at all those buildings

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          1         again.

          2              MR. FUGATE:  Commissioner Bronson, I share your

          3         concern.  Governor, to say with any certainty and

          4         absolute, you know, brevity here that one way or the other

          5         is absolute, with the exception of the shelter in Arcadia

          6         and with the exception of a report in Brevard -- was it

          7         Brevard County -- where we have some sheet metal lifted up

          8         on one corner roof but did not threaten the structural

          9         integrity of the shelter, all the shelters that our staff

         10         had reviewed, including those where we had made specific

         11         recommendations to the counties about what areas of a

         12         building used such as the facility in Escambia County, the

         13         Civic Center, performed well throughout the storms.

         14              THE GOVERNOR:  Go back and check Martin County as

         15         well.  I remember they had to move in the middle of the

         16         storm as well from maybe one part of the building to

         17         another.

         18              MR. FUGATE:  And essentially, those were roof

         19         failures.  And that's one of the things we want to go back

         20         and look at.  Both the FEMA mitigation team and the

         21         Department of Community Affairs went out and did building

         22         code assessments to look at how performance and some of

         23         that will also be reflected in looking at these standards.

         24              THE GOVERNOR:  So the Commissioner's questions are

         25         going to be dealt with in the study?

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          1              MR. FUGATE:  Yes, sir.  We're looking both from the

          2         Federal Emergency Management Agency and from the State

          3         Building Code Commission at the performance of code.

          4         Particularly looking at things we saw not only in shelters

          5         but also hospitals and other critical facilities that you

          6         had not expected but with multiple storms hitting, became

          7         critical issues that stressed the whole response.

          8              THE GOVERNOR:  Craig, another thing I hope would be

          9         looked at in the study, if you could gear the study

         10         towards this is, if you take -- obviously your low-lying

         11         areas, coastal areas are where people are required to

         12         evacuate, they would go to the general shelters or to

         13         special needs shelters.  And the other population are the

         14         mobile home population.  And in many of the communities

         15         that are -- many of these mobile home communities, these

         16         are large and have common areas.  Have common elements

         17         that could be conceivably hardened as well as part of our

         18         mitigation plan.

         19              MR. FUGATE:  Yes, sir.

         20              THE GOVERNOR:  And so even with a mobile home

         21         community, you could create a strategy of staying in

         22         place, in essence, by being able to stay at the community

         23         center so you're not -- where appropriate, not in a

         24         low-lying area, but if a mobile home park has a common

         25         building, some element there that they could harden up,

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          1         wouldn't that make more sense than having them get on the

          2         road?

          3              MR. FUGATE:  Governor, we actually made that

          4         recommendation after the tornados in 1998 when we lost

          5         over 42 lives in central Florida.  Majority of those in

          6         mobile home parks?

          7              I can tell you that based upon history, only

          8         providing mitigation dollars as a financial incentive was

          9         not sufficient to have the industry look at that as

         10         something that would be an ongoing practice.  That may

         11         very well be something that you will have to consider and

         12         the Legislature consider, how do we ensure that that

         13         occurs.  Voluntarily, it has not been successful with the

         14         limited experience we had.

         15              THE GOVERNOR:  I understand.  But, again, if we're

         16         going to be dealing with the mobile home issues in the

         17         regular session, my guess is, and if that way of life is

         18         to continue in our state, and I believe it's important for

         19         us to not ignore the affordable housing challenges we

         20         face, there needs to be a commitment on behalf of the

         21         folks that are making money off of these things and

         22         perhaps the State, I'm not discounting that at all, to

         23         deal with this issue.

         24              But one of the things that would be helpful, and I

         25         don't know if there is another study.  I saw a list of the

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          1         studies you-all are doing.  It's extensive.

          2              MR. FUGATE:  Yes, sir.

          3              THE GOVERNOR:  Is to do an inventory of the types of

          4         mobile home parks that have enough size and scope where

          5         you could harden their community center in order to

          6         provide that shelter.  I mean, Barefoot Bay, I don't know

          7         if that building we went to, it's a big, good size

          8         building, it could have housed a lot of people.  I'm not

          9         sure it did.  I didn't ask at the time and I'm not sure

         10         and perhaps it's possible to retrofit existing structures

         11         to the code.

         12              MR. FUGATE:  The work that we've done previously

         13         would suggest that new construction, that is very viable.

         14         Existing construction could be cost-prohibitive for the

         15         parks to take on as a program themselves but there may be

         16         some incentives that would get us there.  The bottom line

         17         in all this, sir, is our best defense against hurricanes

         18         are our new building codes and new construction, as you

         19         saw, where you do not have to evacuate.

         20              THE GOVERNOR:  Absolutely.

         21              MR. FUGATE:  The second best strategy is if you do

         22         have to evacuate, you evacuate the shortest possible

         23         distance.  And, again, in mobile home parks, having

         24         somewhere at the park to go to versus having to leave the

         25         community is a better option.

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          1              THE GOVERNOR:  Can you get an inventory for us so we

          2         can look at that?

          3              MR. FUGATE:  We'll work with Fred Dickinson, Motor

          4         Vehicle Highway Safety, putting that together and present

          5         those findings as well, sir.

          6              THE GOVERNOR:  What we clearly learned was a lot of

          7         people left and in a free country they have the right to

          8         leave and they did so and they got out of harm's way.  But

          9         because of the second storm and the delay, I see gasoline

         10         girl back there, Colleen, having to do with this.  We had

         11         significant gasoline challenges.  We didn't have -- you

         12         know, we got through it.  But it's -- not everybody can

         13         leave.  We don't have the capacity on our roads or enough

         14         supply of gasoline for everybody to do the same thing all

         15         at once.  It's a big state now.

         16              MR. FUGATE:  It also slows our recovery.  We saw in

         17         many cases where school districts were slow getting back

         18         because teachers and students who had been evacuated out

         19         of the areas were slow returning.  So, again, in the '60s,

         20         '70s and '80s, we looked at evacuation as our only

         21         strategy to deal with hurricanes.  I think our strategy

         22         needs to reflect the reality that we should not have to

         23         move millions and millions of people hundreds and hundreds

         24         of miles to safety.

         25              We saw in the building code that there is very little

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          1         reason for people that are not in storm surge areas and

          2         new homes to have to evacuate.  You saw numerous examples,

          3         sir, with the President as we walked down the street.  And

          4         the President commenting, When was this house built, it

          5         was almost unscratched next to homes with tremendous

          6         damage.  And the only difference was when it was built by

          7         code.

          8              And so I think as we continue to move towards these

          9         solutions to redirect our emphasis on special needs, to

         10         look at things such as mobile home parks and provide

         11         shelter capacity nearby or within the park, to continue to

         12         look at our building codes and performance of our shelters

         13         to make sure the ones we do select perform well and to

         14         encourage our citizens to prepare prior to every hurricane

         15         season is our answers to, I'm hoping Commissioner Bronson

         16         is correct, that Dr. Bill Bray (phonetic) has already come

         17         out and said next year could be another above average year

         18         although he doesn't expect Florida to see anywhere near

         19         the activity we saw this year.  We are probably, for the

         20         next several decades returning back to that part of our

         21         history where we did see hurricane activity of a

         22         significant level over decades versus long periods of

         23         quiet.

         24              THE GOVERNOR:  Thank you.  Any questions?  Craig,

         25         just on behalf of all of your colleagues in State

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          1         government, we appreciate your leadership.  It was

          2         spectacular.

          3              MR. FUGATE:  Thank you, Governor.

          4              THE GOVERNOR:  You're a great Floridian.

          5              MR. FUGATE:  I would like to recognize some more

          6         great Floridians because I have my staff here that works

          7         in the shelter program.  These are the team members that

          8         go out there on a day-to-day basis reviewing these

          9         shelters, working with schools, working with counties,

         10         helping with the retrofit, building to that capacity, and

         11         during the storm, they worked the infrastructure.  They

         12         worked with Secretary Castille, they worked with the

         13         Public Service Commission.  It was the fuel, the

         14         generators, the energy issues, the debris issues.  And

         15         these folks are also great Floridians, sir.

         16              THE GOVERNOR:  We appreciate you.

         17              MR. FUGATE:  But, Governor, I do have one thing I

         18         have to ask.  I do need you and the cabinet to consider

         19         approving the 2004 shelter plan.

         20              THE GOVERNOR:  Is there a motion?

         21              GENERAL CRIST:  Motion.

         22              COMMISSIONER BRONSON:  Second.

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

         24         Without objection, the shelter plan is approved.

         25              Craig, one more final thing.  The University of

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          1         Florida and University of Miami, through no fault of the

          2         University of Florida is playing at the Peach Bowl.  So

          3         the Governor's Cup is alive again this year.

          4         Unfortunately, the mighty Seminoles are disqualified since

          5         they lost to both teams.  But both Florida and Miami have

          6         a chance to win the Governor's Cup.  And I'm willing to

          7         wager something.  Something legal, something small.

          8              MR. FUGATE:  Given that Coach Zook will probably be

          9         announced today or tomorrow, the new head coach of

         10         Illinois, I reserve the right to determine who will be

         11         coaching the Florida Gators in the Peach Bowl.

         12              THE GOVERNOR:  Who's the new coach?  Zook is gone

         13         already?

         14              MR. FUGATE:  Zook has been -- they're reporting that

         15         he's being offered a position in Illinois.

         16              THE GOVERNOR:  So it will be called coachless in

         17         Atlanta?

         18              MR. FUGATE:  Thank you, sir.

         19              THE GOVERNOR:  Thank you, Craig.

         20              MS. LEIGHTY:  That concludes the Administration

         21         Commission.

         22              THE GOVERNOR:  Thank you, Barbara.




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                                 FLAWAC - 12/7/04

          1              THE GOVERNOR:  Florida Land and Water Adjudicatory

          2         Commission.

          3              MS. LEIGHTY:  Item 1 --

          4              CFO GALLAGHER:  Motion.

          5              COMMISSIONER BRONSON:  Second.

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

          7         Without objection, Item 1 passes.

          8              MS. LEIGHTY:  Item 2 recommend approval of the

          9         amended proposed final rule establishing the Tesoro

         10         Community Development District and the city of Port

         11         St. Lucie.

         12              COMMISSIONER BRONSON:  Motion on 2.

         13              GENERAL CRIST:  Second.

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

         15         Without objection, the item passes.

         16              MS. LEIGHTY:  Thank you.










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                           BOARD OF TRUSTEES - 12/7/04

          1              THE GOVERNOR:  Now, if I could -- as I understand it,

          2         there are several items on the Board of Trustees agenda

          3         that will require three votes?

          4              MS. CASTILLE:  There may be one that would be

          5         controversial.

          6              THE GOVERNOR:  Well, put aside whether they're

          7         controversial or not.

          8              MS. CASTILLE:  Three that need --

          9              THE GOVERNOR:  There are three that need three votes?

         10              MS. CASTILLE:  Yes.

         11              THE GOVERNOR:  If you-all -- if there is a concern --

         12         if someone has a concern, which please express it, what I

         13         would like to do is defer the items since Treasurer

         14         Gallagher won't be here.  Is that okay?  I don't know

         15         if there will be --

         16              MS. CASTILLE:  I think one of them might be Plum

         17         Creek.  No, the acquisitions are not --

         18              THE GOVERNOR:  Excuse me, Colleen?

         19              MS. CASTILLE:  It's No. 2, the yacht club.  The

         20         leases and easements.  So all of the acquisitions will be

         21         fine.

         22              THE GOVERNOR:  If there is a concern, rather than for

         23         the applicants' purpose, if there is a problem, I would

         24         hope they would rather defer it rather than have it be

         25         rejected.  And everybody has agreed to that.  So we'll

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                           BOARD OF TRUSTEES - 12/7/04

          1         move forward.

          2              MS. CASTILLE:  Okay, great.

          3              GENERAL CRIST:  Motion on the minutes.

          4              COMMISSIONER BRONSON:  Second.

          5              THE GOVERNOR:  Item 1, there's a motion and a second.

          6         Without objection, the motion passes.

          7              MS. CASTILLE:  Item 2 is the Naples Yacht Club

          8         recommended consolidated intent.  This is a lease, a lease

          9         modification.  This would be one of those that requires

         10         three votes.  I'm not sure that there is a controversy on

         11         this.  Do we want to defer it?

         12              THE GOVERNOR:  No, no.  Go -- I mean, I'll tell you

         13         if it needs to be deferred after you make the

         14         presentation.

         15              MS. CASTILLE:  Okay.  Great.  This is an action to

         16         modify a five-year sovereignty submerged land lease to

         17         include an additional 22,000 square feet for a total

         18         preemption of 117,699 square feet for the Naples Yacht

         19         Club in Collier County located in Naples Bay.

         20              Governor, members of the cabinet.  I have to fall on

         21         the sword on this one.  We have made a mistake over the

         22         past several years of approving the extension of the lease

         23         here.  The -- I think there is a map.

         24              There we go.  On this map, you'll see on the bottom

         25         corner with the large green parcel inadvertently as we

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                           BOARD OF TRUSTEES - 12/7/04

          1         were going through the -- as we were approving the lease

          2         extensions, it was not caught that the lease did not

          3         include that area but the applicant was utilizing that

          4         space.

          5              THE GOVERNOR:  Let's pause here for a second.  Was

          6         inadvertently not seen?  Do you-all monitor these leases

          7         on an annual basis?  Do you go see if people are

          8         complying?

          9              MS. CASTILLE:  We go see -- I don't think it's on an

         10         annual basis.  We try to see as many as we can.  In this

         11         case what we've done is we've found that we only had about

         12         a half of an FTE who were working on the extensions.

         13              THE GOVERNOR:  Which half?  The bottom or the top?

         14         That's such a government thing.  Half an FTE.  Ruining my

         15         holiday season when you tell me that.  Half an FTE.  How

         16         do you explain that to a real person in our state?  Only

         17         left arm --

         18              MS. CASTILLE:  Half of a person's -- only half of one

         19         person's time was spent on the lease extensions.  And

         20         so --

         21              THE GOVERNOR:  All throughout the whole state?

         22              MS. CASTILLE:  No, in this district.

         23              THE WITNESS:  And we have actually, throughout the

         24         whole state, evaluated the process and we had positions in

         25         the Tallahassee State Lands Department division and what

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          1         we have done is taken those positions and sent them over

          2         to the regulatory districts here.  So we have been able to

          3         increase, around the state, a person and a half.

          4              THE GOVERNOR:  So now we're two full people?

          5              MS. CASTILLE:  No, a person and a half.

          6              (Laughter.)  Sorry, sir.

          7              THE GOVERNOR:  Oh, Lord.  Help us.

          8              MS. CASTILLE:  And it's actually been a little bit

          9         difficult making that transition to People First to make

         10         sure that we can adequately assign people's time to

         11         specific payment area.

         12              THE GOVERNOR:  I'm sure it can be handled.

         13              MS. CASTILLE:  It has been -- we've been successful

         14         in handling it at DEP.

         15              THE GOVERNOR:  So that will help with the inadvertent

         16         part, you don't have to jump on the sword going forward to

         17         the same extent as you might have on this one.  But what

         18         about the other side of this which is the lessee, was that

         19         inadvertent as well?

         20              MS. CASTILLE:  I can only base the decision on what

         21         the lessee has said.  This particular proposal or this

         22         particular entity is the Naples Yacht Club.  It is run by

         23         a board and the Board has a lot of turnover.

         24              THE GOVERNOR:  We have representatives here if they

         25         want to come and speak.

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          1              MS. CASTILLE:  Yes, we do.  Tom Gardner.  Tom Gardner

          2         representing Naples Bay Yacht Club.

          3              MR. GARDNER:  Unfortunately, I was the executive

          4         director in the Department of Natural Resources when the

          5         1988 lease was approved which began the confusion.  And I

          6         didn't personally do it, but apparently in one of the --

          7              (Laughter.)

          8              Apparently in one of the cabinet meetings there were

          9         two drawings.  Or in one of the cabinet meetings there was

         10         a change that was actually made by the cabinet to

         11         eliminate some of the area in the lease.  And when that

         12         was transmitted out to them, their lease had two drawings

         13         in it.  One was the drawing without some of the activity

         14         in that green shaded area.  And the other drawing showed

         15         the activity in that green shaded area.  The Naples Yacht

         16         Club did not have a representative at the cabinet meeting

         17         and they did not receive any direct communication saying

         18         what the change was and they just assumed.

         19              THE GOVERNOR:  So this is inadvertent on both sides.

         20              MR. GARDNER:  They had a consultant working with them

         21         and the consultant didn't even pick up on it.

         22              COMMISSIONER BRONSON:  It happens.

         23              THE GOVERNOR:  It does happen, sure.

         24              GENERAL CRIST:  We're human.

         25              MS. CASTILLE:  And they have agreed and already paid

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          1         lease fees in arrears for that.

          2              THE GOVERNOR:  For which we're very grateful.  Yes,

          3         General.

          4              GENERAL CRIST:  Thank you.  I'm just curious.  The

          5         inadvertent thing, did that mean additional slips or --

          6              MS. CASTILLE:  Yes.  If you'll flip back to the next,

          7         you'll see there is a T -- it's actually an L space dock

          8         up there with the fueling station and the use of those --

          9         of the seawalled area there for the temporary mooring of

         10         boats.

         11              GENERAL CRIST:  What was that number?

         12              MS. CASTILLE:  Four.

         13              GENERAL CRIST:  Thank you.

         14              MS. CASTILLE:  Four boats.

         15              THE GOVERNOR:  Is there a motion?

         16              GENERAL CRIST:  Motion.

         17              COMMISSIONER BRONSON:  Second.

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

         19         Without objection, the modification of the lease is

         20         approved unanimously, three votes.

         21              MS. CASTILLE:  Item 3 is National Marine

         22         Manufacturers Association recommended consolidated intent

         23         to expand.  It's a lease modification to expand the boat

         24         show activity area in the Miami area in Biscayne Bay.  If

         25         you can see -- if you can see before --

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          1              THE GOVERNOR:  I think we've got -- do you have it?

          2              GENERAL CRIST:  Motion.

          3              COMMISSIONER BRONSON:  Second.

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

          5         Without objection, the item passes.

          6              MS. CASTILLE:  Okay.  Just to mention -- okay.

          7              Item 4 is Riverwalk Hotels.  Recommending

          8         consolidated intent.  This is a consideration of a

          9         three-month sovereignty submerged land lease for

         10         194,000 square feet.

         11              GENERAL CRIST:  Motion on 4.

         12              COMMISSIONER BRONSON:  Second.

         13              THE GOVERNOR:  This is downtown?

         14              MS. CASTILLE:  Downtown to support the activities

         15         with the Super Bowl.

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

         17         Without objection the motion passes.  The item passes.

         18              MS. CASTILLE:  Item 5 is Walton County Board of

         19         County Commissioners' conveyance of 9.94 acres of

         20         State-owned land in south Walton County.  The parcel will

         21         be acquired by Walton County for use as an addition to

         22         McCall Park.  It is a -- it has a conservation easement on

         23         it maintaining the public access in perpetuity which has

         24         enabled us to sell the land for 135,000 rather than the

         25         full appraised value.

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          1              GENERAL CRIST:  Motion on 5.

          2              COMMISSIONER BRONSON:  Second.

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

          4         Without objection, the item passes.

          5              MS. CASTILLE:  Item 6 is Festival Fun Parks' lease

          6         and it's a consideration of a reduction in lease fees paid

          7         by Festival Fun Parks which is the Civil River State Park

          8         and the attraction, Civil River Attraction.  When we

          9         purchased the Civil River State Park -- or the Silver

         10         River attraction in Ocala --

         11              THE GOVERNOR:  Silver Springs.

         12              MS. CASTILLE:  Silver Springs.

         13              MR. COLLINS:  Why are you calling it Silver?  Why are

         14         you calling it Silver River?

         15              MS. CASTILLE:  I'm sorry, it's at Silver Springs

         16         attraction.

         17              THE GOVERNOR:  Based on that interview, apparently

         18         that's not one of the ones you've kaiaked or canoed?

         19              MS. CASTILLE:  It isn't.  I have been in the glass

         20         bottom boat tours, however, which they're promoting.

         21              When we purchased the property and leased back to the

         22         company which was Ogdon at the time, the lease that was

         23         negotiated was a -- which had an increase of the consumer

         24         price index each year or 6 and three quarters percent of

         25         gross revenues which would be collected at the point in

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          1         time when revenues began at $17.8 million annually.

          2         What's happened is -- and since 1999, in 1999 the revenues

          3         for the company were at 16 million.

          4              Since 2001 -- since 2000, the revenues have been

          5         declining each year to the point where in 2003 revenues

          6         were at 11 million.  The company has come to us and said,

          7         and has asked for some relief and as a partner, we're

          8         trying to make sure that the entity stays in business and

          9         continues the operations of the park which we believe

         10         enhances it.

         11              What we're recommending is that the -- but in return

         12         for that, we have asked that the company pay for

         13         renovations over the next five years equating to $250,000

         14         a year.  So the lease that we are recommending to you

         15         today is a lease fee of a minimum of $600,000 or 6 percent

         16         of gross revenues whichever is greater for five years

         17         unless the revenues then increase to that 17.8 million

         18         annual figure and then the 6 3/4 percent will kick in.

         19              THE GOVERNOR:  6 3/4 is equal -- to get to that

         20         minimum lease fee, you have to get up to 17 million in

         21         sales?

         22              MS. CASTILLE:  Yes.  Before that 6 3/4 kicked in, it

         23         would remain at 6 percent which is what we are

         24         recommending today until they got to the point where they

         25         were annually receiving $17.8 million in revenues.

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          1              COMMISSIONER BRONSON:  Governor, if I might add.

          2              THE GOVERNOR:  Yes, please, Commissioner.

          3              COMMISSIONER BRONSON:  So the net here is if there

          4         remains a decline and the revenues are lower, they will

          5         still meet certain criteria that you need to have done for

          6         the lease.  If they go up, they will increase those

          7         criteria that you expect in this lease so that you meet

          8         all of the -- where you're trying to get to in the next

          9         five years as far as exotic plants and all kinds of issues

         10         that are involved with cleanup of the area.

         11              MS. CASTILLE:  Well, those requirements would remain

         12         in place, would be in place no matter which amount.

         13              COMMISSIONER BRONSON:  But they have to increase what

         14         they do based on an increase in their profit.

         15              MS. CASTILLE:  Yes.

         16              COMMISSIONER BRONSON:  Okay.  Just wanted to make

         17         sure that was it.

         18              THE GOVERNOR:  So the lessee not only do the 250,000

         19         a year but I assume they're also invested in their own --

         20         are there any assets that they also own or is this all

         21         state-owned assets?

         22              MS. CASTILLE:  No, they have assets that they own.

         23              I have Bill Hide here who represents the company.

         24              MR. HYDE:  Good morning.  My name is William Hide.

         25         I'm here today on behalf of the lessee.  The State does

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          1         own the property and it owns a good bit of the buildings

          2         on the site.  However, the rides and other attractions --

          3         and I can't break them down individually -- are owned by

          4         our company.  And at the end of the lease, we are expected

          5         to take them away.  But the moneys that we are investing,

          6         if the Sprint reduction is approved, the $250,000 per year

          7         will be plowed into the buildings and facilities that are

          8         owned by the State and will continue to be owned by the

          9         State after lease expiration.  So we're investing in your

         10         property.

         11              THE GOVERNOR:  We appreciate that.

         12              GENERAL CRIST:  Motion.

         13              THE GOVERNOR:  I'm all for it.

         14              COMMISSIONER BRONSON:  Second.

         15              THE GOVERNOR:  Colleen, there's a motion and a

         16         second.

         17              MS. CASTILLE:  I need to correct something for the

         18         record.  Apparently, I called this a conservation

         19         easement.

         20              THE GOVERNOR:  It's a lease.

         21              MS. CASTILLE:  It's a lease.  Okay.  I didn't

         22         remember saying that.

         23              THE GOVERNOR:  There is a motion and a second.

         24         Without objection, the item passes.

         25              MS. CASTILLE:  Item --

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          1              THE GOVERNOR:  Hang on a second.  Mr. Hide would like

          2         to say something.

          3              MR. HYDE:  Just on behalf of the applicant we would

          4         like to thank you very much and we have a package of

          5         goodies from our attraction which we would like to

          6         dispense to the members of the cabinet.  We hope you will

          7         enjoy them.

          8              THE GOVERNOR:  Is that within the 25-dollar gift

          9         limit?

         10              MR. HYDE:  Of course we wanted to do that after the

         11         vote had taken place, not before.

         12              MS. CASTILLE:  Okay.  Item 7 is a conservation

         13         easement process item that was requested, again, by

         14         Commissioner Bronson for us to bring back for discussion.

         15              What we did, after the discussion, before the

         16         Governor and cabinet earlier this year on conservation

         17         easements, is we went back and looked at some of our

         18         questionnaires that we have that go out to owners.  We

         19         wanted to ensure that we sort of balanced the direction

         20         that we were given from the cabinet which had multiple --

         21         sort of multiple direction from each of you.

         22              So what we did on the owners' rights questionnaire,

         23         we went back to the organic statute of the conservation

         24         easements which is 259.041(11)(a) of the Florida Statutes

         25         and in supporting conservation easements, the Legislature

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          1         found that with the increase in pressures, we could

          2         increase our land acquisition by utilizing conservation

          3         easements and thereby freeing up some money to be able to

          4         buy other properties.

          5              The direction that we were given by Commissioner

          6         Bronson at the October 26th meeting was -- had three

          7         points to it for discussion and consideration.  The goal,

          8         Point No. 1, was the goal of the state negotiating

          9         conservation easements -- and in this language is

         10         consistent with the statute -- is to obtain the rights

         11         needed to protect the sensitive resources at the lowest

         12         possible cost while ensuring that the landowner will be

         13         able to continue working the land.

         14              The second item was that the changing of the balance

         15         of the rights under the easements and the relevant

         16         statutory provisions dealing with the issue need to be

         17         brought forth.  In some cases, as we mentioned before, the

         18         landowners will agree to place more rights with the State

         19         while others will not.  The test for proposed easements is

         20         not whether the landowner signs over majority of rights to

         21         the State but whether the proposed easements contains the

         22         conditions to ensure protection of the resource.

         23              And then the third point was in negotiating easements

         24         the DEP should make further efforts to address areas of

         25         concern to the Board of Trustees in conservation

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          1         easements.  And we have found that the two issues that

          2         have been consistent are what rights are retained with the

          3         landowner and what rights are retained with the State.

          4         And then secondly, what -- essentially, oil and mineral

          5         rights is one of those issues that we've been discussing

          6         and the use of the land for row cropping have been the two

          7         issues that we continue to discuss on each easement.

          8              It is helpful to note that in the statute it

          9         specifically says it is presumed -- and this is quote:  It

         10         is presumed that a private landowner retains the full

         11         range of uses for all the rights or interest in the

         12         landowner's land which are not specifically acquired by

         13         the public agency.  So to balance our direction with the

         14         statute and our direction from the concern of the Governor

         15         and cabinet, what we did is we changed the questionnaire

         16         that we sent out in the -- to the potential conservation

         17         easement sellers.

         18              When we -- prior to this change, what we were doing

         19         was just sending them a list of questions that we asked

         20         about how they wanted to continue to maintain the land.

         21         Instead, what we're doing now is putting before them sort

         22         of a statement of intent for the particular piece of

         23         property.  On this particular one, Little River

         24         conservation area, which is one that is coming up and was

         25         put on the agenda at ARC last Friday, we state that the

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          1         purchase of a less than fee simple interest in this

          2         conservation area would provide an opportunity to protect

          3         the portion of the Little River watershed while

          4         maintaining a scenic and undeveloped rural area outside an

          5         expanding urban area.  A conservation easement would

          6         preserve habitat for wildlife and game species, protect

          7         forested land and would provide support for the owner's

          8         ongoing efforts to resource the property to a natural

          9         Longleaf Pine Community.

         10              So we state, essentially, our intent for the

         11         particular piece of property.  It is -- and then we have a

         12         note on -- also on the top of the page that says, The

         13         particular project and area that your property is in and

         14         our goals for conservation in that area may affect what

         15         rights we would consider allowing you to retain in the

         16         conservation easement.

         17              And additionally, each additional right retained

         18         by -- retained, may affect the value of the easement.  In

         19         responding to the questions below, it would be helpful to

         20         be specific as to the number of acres or locations on the

         21         property where you currently engage in the activities you

         22         list or anticipate engaging in the activities you list.

         23         And then there are a number of questions.  And I won't go

         24         through them.  There's a series of them.

         25              But essentially, we ask:  Do you wish to retain the

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          1         right to maintain commercial cattle.  Do you currently

          2         engage in silviculture or timber harvesting.  And,

          3         remember, we're asking people to identify the number of

          4         acres that they wish to do this in.

          5              Do you wish to sell or lease hunting and fishing

          6         rights.  Do you currently harvest sod.  Do you harvest row

          7         crop areas.  Do you wish to retain to harvest sod or

          8         engage in row crop activities.  So we specifically try to

          9         get from the owner what their intent is now and in the

         10         future.

         11              We have three conservation easement acquisitions

         12         before us after this item.  And what I'd like to do is I

         13         would like to sort of use them as examples to talk

         14         about on conservation easements --

         15              THE GOVERNOR:  Secretary?

         16              MS. CASTILLE:  Yes, sir.

         17              THE GOVERNOR:  Treasurer Gallagher apparently has

         18         called in from wherever he is.  He had to leave.  And he

         19         really wanted to be part of this consideration.  I know

         20         that Commissioner Bronson was looking forward to having a

         21         rematch with him.  So, you know, I think -- I apologize

         22         for people that have come to participate with us in this

         23         discussion.  But I do think out of courtesy to Treasurer

         24         Gallagher we ought to give him his chance to do that.

         25              MS. CASTILLE:  I would be happy to do that.  I

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          1         believe that there is one item on the agenda that is --

          2              THE GOVERNOR:  Two, aren't there?

          3              MS. CASTILLE:  One that specifically has told us that

          4         they wanted to close before the end of the year.

          5              THE GOVERNOR:  We can go forward on the agenda.  I'm

          6         talking about the discussion.  We're not going to stop the

          7         agenda.

          8              MS. CASTILLE:  Okay.  All right.  Then let's go ahead

          9         and move for deferral on Item 7.

         10              THE GOVERNOR:  Deferral of a discussion?

         11              MS. CASTILLE:  Of the discussion.

         12              THE GOVERNOR:  Okay.  I don't know if we need to do

         13         that.

         14              COMMISSIONER BRONSON:  It's moved.

         15              THE GOVERNOR:  Okay.  The item has been deferred

         16         without objection.

         17              MS. CASTILLE:  To the January, late January meeting.

         18         Okay.  Item 8 is the Lightsey option agreement and

         19         conservation easement for the Brahma Island Florida

         20         Forever Project within the Bombing Range Ridge Project.

         21         The considering of an option agreement to acquire the

         22         easement over 1,063 acres within Bombing Range Ride/Brahma

         23         Island in Osceola County for $3 million or price per acre

         24         is $2,821 per acre or 65 percent of fee value.  The --

         25              THE GOVERNOR:  Go ahead.

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          1              MS. CASTILLE:  The prohibitions on this specific

          2         piece of property are commercial water wells, commercial

          3         timber harvesting.  This piece of property has been in the

          4         Lightsey family and they use it for a hunting -- a hunting

          5         lease.  They have eco tourism tours out there for their

          6         guests.

          7              What they are proposing to do, this particular

          8         project is also -- it also has two easements surrounding

          9         the property.  And if you'll note from the map, we have --

         10         the beige area are -- I can't read that word -- flowage

         11         easements from when we started restoring the Kissimmee

         12         River and we knew that that would back up water in the

         13         Kissimmee chain of lakes of which this is one.  And so the

         14         flowage easements are for the water to come back on that

         15         from the South Florida Water Management District.

         16              Then there are some Board of Trustees easement lands

         17         there.  And the difference is in the negotiations, when we

         18         were restoring the Kissimmee River, there was concern on

         19         behalf of the Board of trustees that we were buying back

         20         land that we technically already owned.  That from the

         21         water levels being really low and the property owners

         22         being able to use them for cattle grazing, et cetera, when

         23         we restored the water levels to the optimum height, we had

         24         to go back and negotiate a lawsuit or negotiate a

         25         settlement with the property owners.  Some of which was to

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          1         buy lands back and then others which would be to -- which

          2         were determined to be Board of Trustees' lands.

          3              So the lands that are left, the lands in the black

          4         here, are the lands that we would have an additional

          5         conservation easement over.  This particular --

          6         Mr. Lightsey is here or he was here.  Oh, there you are.

          7         And -- over in the white shirt over here.  And he has told

          8         of this property and the incredible level of natural

          9         activity of birds and cranes and seven eagles on the

         10         property and a number of other great ecosystem indicators.

         11              So we would propose to -- let me talk a little bit

         12         about the conservation prohibitions again.  The owner's

         13         retained rights are noncommercial passive resource based

         14         recreation, the right to stock nonnative game animals.

         15         That is a practice that we engage in this state.  There

         16         are 24 such exotic animal ranches in the state that I have

         17         found through the Fish and Wildlife Conservation

         18         Commission.

         19              The two easements I already talked about.  There's a

         20         protective covenant for the eagles over the entire island,

         21         however, it doesn't affect the value of the property.  The

         22         land use designation is one unit per 10 acres and it would

         23         still -- and the development would still be allowed under

         24         this eagle covenant but would not be allowed under the

         25         easement that we are proposing.  There is an undivided

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          1         one-half interest in the oil and gas and mineral rights

          2         over approximately 1500 acres.  And the mineral rights are

          3         owned by a third party, Consolidated Tomoka Land Company.

          4         The appraiser has advised that the reservation has no

          5         impact on the value and we have Walt Schmidt here, in the

          6         office here, who is from our Florida geological survey.

          7         He is a very well-renowned geologist and has been able to

          8         give us indication as to the probability of oil and gas

          9         being in those areas --

         10              THE GOVERNOR:  Probability --

         11              MS. CASTILLE:  -- which is slim.

         12              THE GOVERNOR:  Slim to none?  Where is the

         13         1500 acres?

         14              MS. CASTILLE:  It is across the whole island.  So if

         15         you think the black area is about 10,063 (sic) acres, it

         16         would expand --

         17              THE GOVERNOR:  10,000 or 1,000?

         18              MS. CASTILLE:  I'm sorry, 1,063 acres.

         19              THE GOVERNOR:  Big island.  So it's all of the -- the

         20         only question -- are you --

         21              MS. CASTILLE:  I'm through, sir.

         22              THE GOVERNOR:  I had a question, if you don't mind.

         23         The 65 percent of appraised value is higher than kind of

         24         the -- there is no set price, but it's higher than the

         25         typical price that we pay for conservation easements.

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          1              MS. CASTILLE:  It is and I forgot why.  We're buying

          2         the timber rights off of this piece of property.

          3              THE GOVERNOR:  Haven't we bought timber rights before

          4         and paid about 50 percent of the appraised value for

          5         conservation easements?

          6              MS. CASTILLE:  Yes, but we also have one unit per 10

          7         acres of development on top of it as well.  One to five.

          8              THE GOVERNOR:  Colleen, why don't you get Eva up

          9         here.

         10              MS. CASTILLE:  Eva.

         11              MS. ARMSTRONG:  When you take into account that we're

         12         buying the timber, they're getting no subdivision.  A lot

         13         of times we'll allow people to subdivide.  They're not

         14         doing subdivision except for that one house, it comes up

         15         65 percent.  It's based on the rights that we bought.  We

         16         apply the appraisal and subtract out the rights that we

         17         bought and that's literally what it comes to based on the

         18         development rights.

         19              THE GOVERNOR:  Well, it's subjective.  It's not

         20         some -- it's not a formula that you crank out and have a

         21         result.  It's negotiated based on --

         22              MS. ARMSTRONG:  It is.  But when we do conservation

         23         easements, it's more of a formula than it is when we just

         24         buy the fee and say we're only going to pay 85 percent of

         25         value.  We negotiate the rights, we turn it over to the

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          1         appraisal staff, tell us what this comes to and negotiate

          2         it out.

          3              THE GOVERNOR:  So this has -- so the timber is not --

          4         I mean, we have bought, I was correct, wasn't I --

          5              MS. ARMSTRONG:  We have bought timber before.

          6              THE GOVERNOR:  And we've had a lower percentage of

          7         the appraised value.

          8              MS. ARMSTRONG:  Correct.  But in this case, they are

          9         counting less on -- in most of the easements you see,

         10         timber is the agricultural crop that the family is

         11         counting on keeping going.

         12              THE GOVERNOR:  Right.

         13              MS. ARMSTRONG:  You see?  And that's not the case in

         14         this easement.  They're going to hunt.  They're going to

         15         have a lodge.  They're going to bring people --

         16              THE GOVERNOR:  Well, I'm not sure timber on an island

         17         has got the same value as timber that can be accessed

         18         either.

         19              MS. CASTILLE:  We have Zack Ryan here actually if you

         20         want to talk to Zack about it.

         21              THE GOVERNOR:  Come on if you want to talk about it.

         22              MR. RYAN:  Good morning.

         23              THE GOVERNOR:  Good morning.

         24              MR. RYAN:  Yeah, still good morning.  Respond

         25         directly to what the timber issue, timber on an island not

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          1         being worth the same.  I didn't work on this particular

          2         piece of property, but the timber -- the forestry

          3         consultant should have taken into consideration when he

          4         arrived, he or she arrived at their stumpage estimate as

          5         to the accessibility of that timber.

          6              THE GOVERNOR:  Okay.  Well, I mean, but again, we

          7         bought timber rights and conservation easements and we've

          8         paid 50 percent, 52 percent of appraised value.  It can't

          9         be the timber that defines the difference between paying

         10         50 to 55 percent and 65 percent.

         11              MR. RYAN:  It very well may not be that issue alone.

         12         You may have purchased timber rights in the past and paid

         13         only 50 percent or perhaps 45 percent but that's a direct

         14         function of the starting point of the total property.  If

         15         the starting point of this total value was different than

         16         that 50 percent purchase you made, then that directly

         17         impacts the percentage that you pay.  But also, it depends

         18         on the value of that component in conjunction with perhaps

         19         the residential rights in conjunction with the ability --

         20         so that -- this total package may very easily come up more

         21         than --

         22              THE GOVERNOR:  I know that.  But you're talking in

         23         the hypothetical.  I'm trying to get a specific answer.

         24         Maybe Dean can help.

         25              MR. RYAN:  Sorry.

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          1              THE GOVERNOR:  No problem.  I'm just -- I know how

          2         appraisals work.  I'm just trying to get a little help on

          3         this specific piece of property.  Help me.  Why is it

          4         you-all have negotiated so well to get this value compared

          5         to the more traditional levels, the range that's the 45 to

          6         55 percent?

          7              MR. SAUNDERS:  Governor and cabinet, Dean Saunders,

          8         Saunders Real Estate, representing the Lightseys and they

          9         are here.  Governor, I think, I mean, you know, we

         10         negotiate off a number that the appraisers establish.

         11              THE GOVERNOR:  Sure.

         12              MR. SAUNDERS:  Bottom line is I think that the reason

         13         you find that the fair market -- that the percentage of

         14         the conservation easement value is greater than what you

         15         typically see is because this is an island.  It is

         16         surrounded by water.  Therefore, the fair market value of

         17         the property is higher than --

         18              THE GOVERNOR:  Okay.  But then the percentage --

         19         obviously the fair market value is higher.  This is a

         20         dynamite piece of property.  And, you know, you should get

         21         your fair -- get the fair value for it.  That doesn't

         22         describe why the percentage of the full appraised value is

         23         higher.

         24              MR. SAUNDERS:  Okay.  Hear me out.  You start off

         25         with the fair market value.

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          1              THE GOVERNOR:  Right.

          2              MR. SAUNDERS:  Which is X --

          3              THE GOVERNOR:  Higher because it's an island.

          4              MR. SAUNDERS:  Higher because it's an island.  And

          5         then you have Y which is the rights retained or, you know,

          6         the remainder values.  We gave up a lot of rights that

          7         typically you preserve.

          8              THE GOVERNOR:  Now we're getting there.  Tell me what

          9         those are.

         10              MR. SAUNDERS:  For example, the timber.  The right to

         11         subdivide the property.  It was important for Mr. Lightsey

         12         to not have that subdivided.  Frankly, he did that against

         13         my counsel.  I suggested, you know, I think you should --

         14         he said, No, that's not what I want.  I want that

         15         island --

         16              THE GOVERNOR:  Dean, you know, you do these deals

         17         more than all of us.  But the timber values, we do

         18         purchase them regularly and purchase through a

         19         conservation easement at lower than 65 percent.  So it has

         20         to be -- subdividing, I would recognize that's definitely

         21         one.

         22              MR. SAUNDERS:  Right.  And I would concur with you.

         23         Frankly, I'm not sure the timber is that significant of a

         24         contribution value.  But it is one right that was given

         25         up.  But when you take the fact that we gave up more

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          1         rights than typically you would have --

          2              THE GOVERNOR:  Well, you've given up one right more

          3         than typical.

          4              MR. SAUNDERS:  Well, the timber is there and the

          5         right to subdivide which normally is applicable.  But

          6         you -- but most of these, the remainder values, are fairly

          7         constant.  I mean, because you're basically to the

          8         agricultural values.  And we don't have any right to cut

          9         sod.  We don't have any right to farm.  All we've got the

         10         right to do is for ranching and for the eco tourist

         11         hunting aspects of the property.

         12              THE GOVERNOR:  Is that what we call hunting now, eco

         13         tourism?

         14              MR. SAUNDERS:  Well, they do both.  So you have given

         15         up a couple rights that typically are negotiated.  That

         16         combined with the fact that you have a fair market value

         17         of the property that is probably higher just because it's

         18         surrounded by water.  So that combination is where you

         19         get, I believe --

         20              THE GOVERNOR:  Again, I'm not talking about the total

         21         dollar value.  I'm talking about the percentage of market

         22         value.  The market value is higher because this is a prime

         23         piece of property.  We paid a lot more for those islands

         24         in Lake Toho.

         25              MR. SAUNDERS:  But when you subtract the two, higher

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          1         fair market value and then the restrictive rights, the

          2         easement is going to be a greater percentage of the total

          3         fair market value.

          4              THE GOVERNOR:  Not necessarily.

          5              COMMISSIONER BRONSON:  Governor, if I could too, and

          6         I happen to know where this is and the number of people in

          7         this, not only in this country but around the world that's

          8         been exposed to this island which is right in the middle

          9         of Lake Kissimmee, one of the best bass fishing lakes in

         10         the country, there are other exposures to this island that

         11         would make it very -- and I believe there have been, I've

         12         been told there have been individuals that wanted to buy

         13         the island itself.

         14              THE GOVERNOR:  Sure.  Again, if it's $50 a foot

         15         because it's a prime piece of property, that doesn't mean

         16         when we do a conservation easement that we would jack up

         17         the percentage of that appraised value.  That's the point

         18         I'm making.  I'm not saying it's not a good piece of

         19         property.  I'm not saying we want to do this deal.  I'm

         20         just asking a simple question and I'm getting a lot of

         21         scurrying around by the Department and Dean is not quite

         22         giving me the straight talk he normally does.  It sounds

         23         to me like you-all negotiated a pretty good deal.  Sounds

         24         to me like, these are rare occasions, that maybe the

         25         seller has done a better deal negotiating than the

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          1         Department.

          2              MS. CASTILLE:  I can show you, Governor, in relation

          3         to the other two conservation easement items that are on

          4         the agenda and the rights that are retained and the rights

          5         that are not retained in comparison, the three properties,

          6         Bombing Range Ridge, which is this one, is purchased for

          7         65 percent of full fee value.  And I'll compare the rights

          8         retained in a moment.  Panther Glades is 50 percent of

          9         full fee value.  And then Volusia Conservation Corridor,

         10         Plum Creek Tract, is 49 percent of full --

         11              THE GOVERNOR:  Okay.  And then subdividing is the

         12         main difference?

         13              MS. CASTILLE:  The subdivisions is allowing, on the

         14         Bombing Range Ridge property, it allows no subdivision.

         15         It allows that one house.  It allows no row crop

         16         activities.  It is consistent across the board with

         17         existing ranching and existing agriculture.  The timber

         18         rights, we are buying in the Bombing Range Ridge and it

         19         allows -- and the other two allow the commercial

         20         silviculture activities while this one doesn't.  So those

         21         are the two key issues that make the percentage difference

         22         between the conservation easements.

         23              THE GOVERNOR:  The principal difference is the

         24         subdivision.

         25              MS. CASTILLE:  Subdivision and silviculture.  We buy

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          1         both those rights on the Brahma Island piece of property.

          2              THE GOVERNOR:  Okay.

          3              MS. ARMSTRONG:  And if I might.  I might be able to

          4         help you a little bit.

          5              THE GOVERNOR:  No, I've been helped.  A part of my

          6         job is to give you guys a hard time so that you stay --

          7              (Laughter.)

          8              UNIDENTIFIED SPEAKER:  We appreciate that, Governor.

          9              THE GOVERNOR:  Not you.  To the contrary, my job is

         10         not to give the citizens that pay our salaries a hard

         11         time.  We try not to do that but the people, the public

         12         servants need to -- because we have a disadvantage.  We're

         13         the buyer, not the seller.  So I'm satisfied.

         14              MS. CASTILLE:  Thank you, Governor.

         15              GENERAL CRIST:  Motion.

         16              COMMISSIONER BRONSON:  Second.

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

         18         Without objection, the item passes.

         19              MS. CASTILLE:  Item 9 is the assignment of an option

         20         for a conservation easement for the Panther Glades Florida

         21         Forever Project.  The BR Bar Ranch.

         22              THE GOVERNOR:  The what?  I'm sorry?

         23              MS. CASTILLE:  Item 9, the BR Bar Ranch, known as

         24         Panther Glades, Item 9.

         25              This one is -- I'm sorry, the number is 52 percent of

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          1         fee value.  I've been given two different numbers on that.

          2         Which is right?  It is 50 percent.

          3              THE GOVERNOR:  No. 9?

          4              MS. CASTILLE:  No. 9, 50 percent of fee value.

          5              THE GOVERNOR:  We have 46 percent here.

          6              MS. CASTILLE:  50 percent is correct.  The

          7         consideration of the amount is total value of $643,540.40.

          8              THE GOVERNOR:  Here's a case, which is why -- I know

          9         we're not going to have a discussion on conservation

         10         easements, but just to refresh at least my recollection of

         11         the conversation.  We had Treasurer Gallagher saying that

         12         we should be -- that we should be explicit on the rights

         13         that are kept, that are kept by the lessee or the person

         14         who's giving us the easement.  And Commissioner Bronson

         15         had the exact opposite view, that we should be explicit on

         16         what we get.  And this is a case, this conservation

         17         easement shows that maybe we ought to continue to look at

         18         these on a case-by-case basis simply because in this case

         19         as, I understand it, mineral rights aren't part of the

         20         deal because they've already been leased to another

         21         entity.  Or the mineral rights are owned by somebody else.

         22         The property was sold, they kept the mineral rights; is

         23         that correct?

         24              MS. CASTILLE:  Correct.  That's correct.

         25              THE GOVERNOR:  So we don't -- I mean, this actually

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          1         may be a place, where -- is your geologist here?

          2              MS. CASTILLE:  Yes.  Walt.

          3              THE GOVERNOR:  Hey, Walt.

          4              MR. SCHMIDT:  My name is Walt Schmidt.  I'm chief of

          5         the geological survey in DEP.

          6              THE GOVERNOR:  How are you doing?

          7              MR. SCHMIDT:  I'm doing fine.

          8              THE GOVERNOR:  We've never had you here, have we?

          9         Brought out the big dog today.

         10              MR. SCHMIDT:  I've not been here, no, in years.

         11              THE GOVERNOR:  You think -- I hope.  I hope you'll

         12         have a good time today.  The mineral rights here, are

         13         they -- they're not in the slim and none category, are

         14         they?

         15              MR. SCHMIDT:  I would put it a little bit higher than

         16         slim to none simply because of its proximity to prior

         17         production in the sunny land trend in south Florida.  It's

         18         still off the trend and there have been wells drilled in

         19         the area that were dry.  So it's not an area that I would

         20         anticipate activity in.  And indeed, since the 1980s,

         21         we've had seismic lines run throughout the area and that

         22         has not resulted in additional drilling by industry.

         23              So other areas of the state as some of the other

         24         parcels further north than Flagler, Osceola, where I would

         25         put slim to none, in this area I would say it's very low.

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          1         Even throughout the state, the number of wells that are

          2         drilled versus the ones that hit enough to make them

          3         economic are in single digits like 7 to 9 percent.  And

          4         that includes the areas that are already developing.  So

          5         this clearly would be very low.

          6              THE GOVERNOR:  All right.  Very good.  That's good

          7         enough for me.

          8              MR. SCHMIDT:  Thank you, sir.

          9              THE GOVERNOR:  Come on back regularly, if you'd like.

         10         We try to make these meetings entertaining.

         11              MS. CASTILLE:  He is also a coauthor of a book that

         12         is not widely read but importantly read.  But it is called

         13         Strangers in Paradise and it's about exotic plants, what

         14         they are, their impact on Florida, how to address getting

         15         rid of them.

         16              THE GOVERNOR:  Excellent.

         17              COMMISSIONER BRONSON:  Things that you love to hate.

         18              THE GOVERNOR:  Sounds like a good Christmas gift.

         19         Very good.

         20              MS. CASTILLE:  It is, thank you.  So --

         21              THE GOVERNOR:  Is there a motion?

         22              GENERAL CRIST:  Motion.

         23              COMMISSIONER BRONSON:  Second.

         24              THE GOVERNOR:  There's a motion and a second.  Any

         25         discussion?  Without objection, the motion passes.

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          1              MS. CASTILLE:  Item 10 is the Plum Creek Timberlands

          2         parcel, the relay parcel in Volusia County.  This is a

          3         consideration of the acceptance of a partial assignment of

          4         an option agreement to acquire a perpetual conservation

          5         easement over 9,000 acres in Flagler County within the

          6         Volusia conservation corridor from Plum Creek Timberlands.

          7              St. Johns River Water Management District took the

          8         lead in negotiating this item on behalf of the state and

          9         the district is placing a conservation easement over the

         10         southern half of the tract, an additional 9,600 acres

         11         while the Board of Trustees will be holding the easement

         12         on the northern portion of the tract which is the Relay

         13         Ranch.  The price is $480 per acre for a total of

         14         $3,997,198 which is 49 percent of the conservation

         15         easement value.

         16              This is -- the particular issue -- there are

         17         prohibited uses and then there are retained rights by the

         18         owner.  Let me just go over the retained rights.  Hunting

         19         rights in addition to three camp areas not to exceed 6,000

         20         square feet each.  Fifty wildlife food plots.

         21         Silviculture on uplands.  The State is paying for

         22         $1 million for the wetland timber only and it includes

         23         pine, cypress and hardwoods.  Eco tourism is retained and

         24         the right to conduct a commercial program of such to

         25         include trails, boardwalks, et cetera.

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          1              On this particular issue -- there are two particular

          2         issues on this.  Let me deal with the water issue first.

          3         When we were doing -- when Florida Forever was first

          4         adopted, Governor, you may remember the contention about

          5         water development, water use development.

          6              THE GOVERNOR:  Yep.

          7              MS. CASTILLE:  And the decision at that time, the

          8         policy decision, was that for Florida Forever lands, we

          9         could purchase the land -- we could purchase future

         10         development, water -- essentially future water wells and

         11         the protection of such but we would not do any types of

         12         pipes or infrastructure with those dollars.  So this is

         13         one of those future areas for water use development and

         14         the owner is retaining the right to ask for a consumptive

         15         use permit from the water management district in the

         16         future.  And that is on the southern portion of the lands

         17         that are retained by the Water Management District.

         18              THE GOVERNOR:  What is the appraisal and percentage

         19         of value between these two properties?  I would assume

         20         that the value is equal.

         21              MS. CASTILLE:  I'm going to have to ask Robert to

         22         come up and give me -- Robert Christianson from the Water

         23         Management District.

         24              MR. CHRISTIANSON:  Thank you.  Good morning.  Robert

         25         Christianson with St. Johns River Water Management

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          1         District.  You're close, there was a very small difference

          2         just based on this water rights issue.  I think it was in

          3         the order of $75,000 difference over the whole rounding

          4         error basically.  Am I answering your question?

          5              THE GOVERNOR:  It does if the percentage is -- the

          6         value is the same both in terms of the appraised value and

          7         the percentage.  You-all have a conservation easement as

          8         well?

          9              MR. CHRISTIANSON:  That's correct.

         10              THE GOVERNOR:  So I have here 49 percent of fee value

         11         is the consideration.  Is that about the same?

         12              MR. CHRISTIANSON:  Yes.

         13              THE GOVERNOR:  So the value of the water rights is

         14         really not that much?

         15              MR. CHRISTIANSON:  It's within rounding error on a

         16         property of this size.

         17              THE GOVERNOR:  Well, we'll have to make a mental note

         18         of that next time this comes up.

         19              MS. CASTILLE:  And, Governor, just to clarify, it is

         20         not the right to the water, it's the right to request the

         21         water, specifically delineated here.

         22              THE GOVERNOR:  If it was the right to the water it

         23         would be significantly more?

         24              MS. CASTILLE:  Well, it would be a significant policy

         25         shift in the State if we did that.

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          1              THE GOVERNOR:  I would think so.  Depending on how

          2         nice the water management districts are, I guess.

          3              MS. CASTILLE:  So that's the one controversy --

          4              THE GOVERNOR:  Why -- out of curiosity why is --

          5         please come back -- because we don't do that.  At the

          6         State level, we don't do -- am I correct?

          7              MS. CASTILLE:  That's correct.

          8              THE GOVERNOR:  The water conservation easements, we

          9         don't --

         10              MS. CASTILLE:  The water management --

         11              THE GOVERNOR:  -- we don't allow for the seller of

         12         the property to maintain that value, that right.  But in

         13         this case you-all do it so regularly, I guess.

         14              MR. CHRISTIANSON:  We have done this on a couple of

         15         occasions.  We think it's an entirely compatible use of

         16         the property.  And in this instance, it's somewhat

         17         strategically located for future water supply development

         18         in the region.  We've actually used instruments --

         19         easements in the past as a well field protection measure.

         20         If you have large tracts of land, you can manage the

         21         withdrawals in a way to not impact at the surface.  So we

         22         think it's a compatible use of the property.

         23              THE GOVERNOR:  Okay.  But we don't.  Why is the

         24         difference?

         25              MS. CASTILLE:  Actually, sir, I was just told that we

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          1         do.  In 50 percent of the projects we prohibit sometimes

          2         the right to use the water.

          3              THE GOVERNOR:  Well, why are we prohibiting it now

          4         when the person who brought this property to us isn't?  I

          5         mean, what's -- how do you determine that?

          6              MS. ARMSTRONG:  Point in time.

          7              MS. CASTILLE:  Eva, can you come up and explain that?

          8              MS. ARMSTRONG:  Yes.  If you'll recall, it was when

          9         we were dealing with the Fish Eating Creek Conservation

         10         easement that the issue got -- the policy changed.  It was

         11         going to be -- we had a conservation easement pending on

         12         Fish Eating Creek and the --

         13              THE GOVERNOR:  The most recent one?

         14              MS. ARMSTRONG:  Uh-huh.

         15              THE GOVERNOR:  Okay.

         16              MS. ARMSTRONG:  And the staff recommendation and the

         17         negotiated position was to have that in there.

         18              THE GOVERNOR:  To allow --

         19              MS. ARMSTRONG:  To allow it, correct.  And everybody

         20         was very upset about that so we came to stalemate on it

         21         and backed off.  It was when Secretary Struhs was still

         22         here.  And so we went back to try to figure out, well, is

         23         it a good idea, is it not a good idea and kind of put

         24         everything there on hold.  But previous to that, you have

         25         approved a good number that had that provision in there

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          1         that did allow it.

          2              THE GOVERNOR:  Let's get to the other interesting

          3         provision.

          4              MS. CASTILLE:  Okay.  So the other interesting

          5         provision is called Provision N.  And Provision N is a

          6         section in the easement, Paragraph N of the easement which

          7         talks about government restrictions.  In our standard

          8         conservation easement document, we allow the document or

          9         the easement considerations to be modified by mutual

         10         written agreement of the grantor and the grantee, the

         11         property owner and the State.  And no modification is

         12         effective unless it's recorded in the public hearings and

         13         of course brought back to the Governor and cabinet.

         14              The property owner requested a specific section in

         15         this one and it's called government restrictions.  And it

         16         says, In the event that the government restrictions,

         17         including any actions by the State regional agencies,

         18         county, cities are enacted which apply restrictions more

         19         stringent on the use of the property for silviculture

         20         practices than those included in this easement, the

         21         grantee and the grantor agree to implement one of three

         22         remedies.

         23              One is to revise the easement, which would be to

         24         allow for the alternative use.  Number two is to purchase

         25         the remainder interest in the property at the prevailing

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          1         market at the time of conflict.  And then the other one

          2         would be to sell the property back to the property owner,

          3         sell the easement back to the property owner and again at

          4         the same price.

          5              We -- when we were --

          6              THE GOVERNOR:  This is a provision of the St. Johns

          7         Water Management District conservation easement, your

          8         standard provision?

          9              MS. CASTILLE:  No, this -- the government

         10         restrictions easement is a standard one for water

         11         management district.

         12              THE GOVERNOR:  I just said that.

         13              MS. CASTILLE:  Oh, I'm sorry.  I thought -- all

         14         right.  It's just for Plum Creek.  It's in the Plum Creek

         15         restrictions easement.  So it is not standard for the

         16         water management district.

         17              THE GOVERNOR:  Commissioner?

         18              COMMISSIONER BRONSON:  I think this is part of the

         19         point that I was trying to make at the last meeting,

         20         Governor.

         21              THE GOVERNOR:  Yes, it is.

         22              COMMISSIONER BRONSON:  And I think the individuals

         23         involved in this saw that, as we just heard a little while

         24         ago before your presentation, that within a few years, the

         25         estimation of population is around 25 million in Florida,

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          1         and everybody knows every time that goes up, new

          2         restrictions and new caveats are put into law, rules,

          3         regulations.  And having done easement agreements already

          4         with a lot of people in the state, this could put a lot of

          5         pressure on either cities, counties or the state to change

          6         those easements after the easement has already been agreed

          7         to, even if it was years past, which puts the landowner

          8         and the person that we made the deal with at great

          9         jeopardy based on them trying to make a living on the same

         10         property that they were making a living on at the time the

         11         easement was agreed to.

         12              And, therefore, one of these three ways of looking at

         13         how do we readjust based on those factors, it does give

         14         three options for those individuals to come back with the

         15         State and/or the State to go to the individual in some

         16         cases to come up with either a modified agreement, buyout

         17         process.  There at least is some room to move if the

         18         original agreement was invalidated -- or I don't know what

         19         the legal term would be, but someone tried to change it

         20         after it was legally documented.

         21              So that was my whole point of my portion of the

         22         discussion with Treasurer Gallagher on that issue, was the

         23         fact that we can't just say there will never be any

         24         movement against whatever that easement is.  Because as

         25         pressures build, there is going to be movement.  And you

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          1         got to give that leaseholder an option to deal with the

          2         State.

          3              THE GOVERNOR:  And I think that's fair in certain

          4         conditions.  I think those, again, should be negotiated on

          5         a case-by-case basis.  And whatever we do with this

          6         property, I don't believe it should create a template or a

          7         standard going forward nor should we now say conservation

          8         easements, more or less, are about 65 percent of value

          9         thing by the decision we made previously.  Those are, you

         10         know, markets don't work that way.  But the question here

         11         is:  What are the government entities that --

         12              MS. CASTILLE:  It could be any government entity.

         13              THE GOVERNOR:  What about the federal government?

         14              MS. CASTILLE:  It's not the federal.  State,

         15         regional, counties or cities.

         16              THE GOVERNOR:  So we own a property and the City

         17         decides to do what they've tried to do and we passed the

         18         law recently, you know, where we preempted their

         19         activities in certain agriculture areas.  But if they

         20         decided -- if the county decided to do something, we would

         21         have to pay?  We would have to pay?

         22              MS. CASTILLE:  It takes the -- well, we would have to

         23         pay or they would have to pay.  But the decision on price

         24         is made in this statement.  It is said that the purchase

         25         price is the prevailing market rate determined by the

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          1         average of two appraisals approved by the grantee.

          2              THE GOVERNOR:  Right.

          3              MS. CASTILLE:  So it takes away our negotiating power

          4         in the future if, in fact, any restrictions occur.

          5              THE GOVERNOR:  You have the negotiating power still

          6         because the values will -- it's an art, not a science.  I

          7         mean, you're more restricted perhaps but you have some

          8         flexibility I would think.  But I'm interested -- I mean I

          9         could see it for decisions we make at the State level.

         10         But if the water management district decides that they are

         11         going to go whacky on us, obviously not now with all the

         12         great appointees that are on those boards.

         13              But if they did, we would be forced because of their

         14         bad policy making to end up having to -- it would be a

         15         catalyst for some action.

         16              MS. CASTILLE:  Yes, it would.  And I would say that

         17         it would not necessarily be -- it would more than likely

         18         not be the State or regional, it would be the local

         19         communities because that was what gave rise to the right

         20         to farm bill (phonetic) --

         21              THE GOVERNOR:  I agree.

         22              MS. CASTILLE:  -- and all of the presumptions that it

         23         gave to agriculture under that belt.

         24              COMMISSIONER BRONSON:  Governor, to use as an

         25         example, one of the biggest heartburns of a lot of people

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          1         around the State was the issue of one of the Palm Beach

          2         County cities that is telling an agriculture production

          3         person they cannot harvest their pine trees because they

          4         have an ordinance.

          5              THE GOVERNOR:  I thought you were going to bring up

          6         the Enclave Bill on me again.

          7              COMMISSIONER BRONSON:  Well, that can always affect

          8         individuals if that happened to them in the future with 25

          9         million people.  But the point is, no matter what the

         10         regulation is, what level, if it jeopardizes the agreement

         11         made by the State, the State either has to go to that

         12         lower level through courts and hold its position or the

         13         combination of the private land owner and the state saying

         14         you're violating the conditions.  And I think the cabinet

         15         needs to stay involved in that in case that happens.  So

         16         that there is an official group which has to come back to

         17         the cabinet saying, Here was our agreement.  Now you got

         18         another group out there trying to change this so that we

         19         can stay in this situation no matter whether we're the

         20         only cabinet or future cabinets --

         21              THE GOVERNOR:  Is the seller here?

         22              MS. CASTILLE:  I just want to mention that our

         23         current agreement allows for that to happen.  It just

         24         gives broader flexibility to us as your representatives in

         25         negotiating the deal in Paragraph P under modifications.

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          1         Clay Henderson representing the seller.

          2              MR. HENDERSON:  Governor, cabinet members.  Clay

          3         Henderson on behalf of Plum Creek.  I want to clarify a

          4         few things.  One, this provision is in place in all of

          5         Plum Creek's easements that are currently in place.

          6         That's about 70,000 acres right now.

          7              THE GOVERNOR:  Who do you have easements with?

          8              MR. HENDERSON:  Those are held by St. Johns, Suwannee

          9         River Water Management District, and Volusia County.  So

         10         this is in place.  I might point out the reason why that's

         11         the case is the very first one that was done was in

         12         Alachua County where this has been a local issue.  So

         13         that's really where it developed.  I mean, when you're in

         14         silviculture and you look at a tree ordinance that doesn't

         15         want to exempt silviculture, it raises these kinds of

         16         issues.

         17              But there is a philosophical discussion I know that

         18         you're having and that is obviously your role is to

         19         protect the resource.  What is equally important is for

         20         there to be long-term economic viability for the landowner

         21         and that's the balance that we're trying to achieve.  I

         22         must say that for us what's most important is that this

         23         deal close before the end of the year.  So we do not want

         24         this to be a sticking point towards seeing the forest for

         25         the trees.  And so we've indicated to the secretary and to

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          1         cabinet aides we're in agreement to pull this provision to

          2         make this deal work.

          3              THE GOVERNOR:  How about doing this rather than

          4         pulling it.  Instead of saying, One of the following three

          5         remedies will be implemented that it says, may be

          6         implemented?  So that there is still a structure in place

          7         but it at least kind of creates a little bit of structure.

          8         Because I do think, I mean, we've not seen these before

          9         but I think there is a legitimate reason to be doing them.

         10         So I'm just suggesting maybe you don't want to throw the

         11         whole provision under the bus.

         12              MS. CASTILLE:  And we understand that as well,

         13         Governor.  What we were recommending was that the

         14         Paragraph P that's in the existing documents would address

         15         that.

         16              THE GOVERNOR:  I don't have Paragraph P.

         17              MS. CASTILLE:  Paragraph P which says, The

         18         conservation easement as herein defined may be modified by

         19         mutual written agreement by and between the grantor and

         20         the grantee and their respective successors assigned or

         21         their respective designees and that no modification shall

         22         be effective unless reported.

         23              THE GOVERNOR:  This gives a little more -- this is

         24         kind of a middle ground between Paragraph P and what was

         25         N, in the sense it gives -- it doesn't have to occur that

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          1         way, but it just gives some guidance so the State's

          2         interests are protected.  But in the event of another

          3         Alachua County or, again, I wouldn't rule out in the

          4         future the water management districts doing crazy things

          5         either.  I'm counting on the State to behave.  But, I

          6         mean, we've had some runaway water management district

          7         boards in the past that weren't particularly accountable

          8         and may have made decisions with best of intentions that

          9         could have had impacts like this.

         10              MS. CASTILLE:  So, Governor, are we -- should we

         11         change each of our easements to reflect this or should we

         12         do it just on this easement?

         13              THE GOVERNOR:  No, I'm just -- yes, General?  No, I'm

         14         not suggesting do it on every easement, just on this one.

         15              GENERAL CRIST:  Did I hear right, Clay, that you're

         16         willing to go ahead and take out N as an inhibitor?

         17              MR. HENDERSON:  We are here -- you know, you always

         18         hate having to make a deal here before the cabinet.  But

         19         my agreement with the secretary was that we would be

         20         willing to take that out to go forward.  The language that

         21         the governor is suggesting is certainly fine with us too.

         22         There may be other ways to do this in the middle ground.

         23         I am suggesting philosophically there is an issue here.

         24         And we're here to reach closure on the issue.  So whatever

         25         you-all want to do, we're in agreement.

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          1              THE GOVERNOR:  Well, I mean, Colleen, you recommended

          2         approval of this as was presented --

          3              MS. CASTILLE:  No, I did not recommend approval of

          4         Paragraph N.  It was in there --

          5              THE GOVERNOR:  You recommended approval of Item 8,

          6         didn't you?

          7              MS. CASTILLE:  I did.

          8              THE GOVERNOR:  Okay.  That included that paragraph.

          9         Look back and nod.  That's not true?

         10              MS. CASTILLE:  No, I mean, I recall having --

         11              THE GOVERNOR:  That's true, isn't it, Eva?

         12              MS. CASTILLE:  That is true.  It was in there.  The

         13         DEP recommended approval of it with it in there.

         14              THE GOVERNOR:  So, you know.  Love my prayer.

         15              MS. CASTILLE:  Clay is telling me that they would be

         16         happy with the "may" and changing the word "agreed to" to

         17         "may agree to".

         18              THE GOVERNOR:  Is there any discussion?  Any more

         19         discussion?  We need three votes?

         20              MS. CASTILLE:  Yes.

         21              GENERAL CRIST:  Motion.

         22              COMMISSIONER BRONSON:  Second.

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

         24         Without objection the item passes with one word changing

         25         from "will" to "may" in Paragraph N, is it?

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          1              GENERAL CRIST:  One other item if I might, Governor.

          2              THE GOVERNOR:  Yes, General.

          3              GENERAL CRIST:  Just staff told me in Item 5 actually

          4         that was a reverter and not a conservation easement.

          5              MS. CASTILLE:  Right.  Thank you for clarifying

          6         Item 5.

          7              Governor, members of the cabinet, I just wanted to

          8         take a moment.  Governor, you did some shameless promotion

          9         of the mansion ornament this morning which is a beautiful

         10         ornament and sales of which go to help the Mansion

         11         Foundation.  But this year, the Florida state park

         12         ornament is the official White House ornament for the

         13         White House and it's also for sale --

         14              THE GOVERNOR:  It's the official state ornament.

         15         It's on the Florida tree.

         16              MS. CASTILLE:  It is on the Florida tree, exactly.

         17         And we would encourage --

         18              THE GOVERNOR:  Can we look at it?

         19              MS. CASTILLE:  Yes, sir.

         20              THE GOVERNOR:  Is that it?  Thank you-all very much.

         21         Happy holidays.

         22              (Thereupon, the proceedings concluded at 12:10 p.m.)




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          3                        CERTIFICATE OF REPORTER


          5    STATE OF FLORIDA    )

          6    COUNTY OF LEON      )

          7              I, KRISTEN L. BENTLEY, Court Reporter,

          8    certify that the foregoing proceedings were taken before me at

          9    the time and place therein designated; that my shorthand notes

         10    were thereafter translated under my supervision; and the

         11    foregoing pages numbered 1 through 138 are a true and correct

         12    record of 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.


         20              DATED this 30th day of December, 2004.

         21                           ______________________________

         22                           KRISTEN L. BENTLEY, Court Reporter
                                      Notary Public
         23                           850-878-2221



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