STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MINI-WAREHOUSES AT KENDALL, LTD., )

)

Petitioner, )

)

vs. ) CASE NO. 94-2967RU

) DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

)

FINAL ORDER

Pursuant to written notice, a formal hearing was held in this case on July 12-13, 1994, at Miami, Florida, before Errol H. Powell, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Timonthy G. Schoenwalder, Esquire

Blank, Rigsby & Meenan, P.A. Post Office Box 11068 Tallahassee, Florida 32302-3068

For Respondent: Charles G. Gardner, Esquire

Florida Department of Transportation Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399-0458 STATEMENT OF THE ISSUE

The issue for determination at formal hearing was whether Respondent's surplus property appraisal policy, stated in a letter dated October 9, 1991, violates Section 120.535, Florida Statutes.

PRELIMINARY STATEMENT

This proceeding is a rule challenge brought under the provisions of Section 120.535, Florida Statutes, seeking an administrative determination that the Florida Department of Transportation (DOT) violated the provisions of Section 120.535(1), Florida Statutes, by adopting a surplus property appraisal policy, which meets the definition of a rule, without complying with the rulemaking procedures established by Section 120.54, Florida Statutes. DOT's alleged surplus property appraisal policy is enunciated in a letter dated October 9, 1991, and purports to be as follows:

SUBJECT: A STATEMENT OF DISTRICT APPRAISAL POLICY SURPLUS PROPERTY APPRAISALS - THE VALUATION PROCEDURE

It is inequitable to examine surplus properties without some evaluation of the abutting property. To be consistent in the appraisals for acquisition and those for sale by the Florida Department of Transportation, subjects should be estimated at their "ATF" or "Across The Fence" value.

The surplus property appraisals should be addressed in the same way a "before and after" appraisal is conducted. The current Right of Way Appraisal Standards would be applicable in this assignment.

The recommended appraisal procedure for surplus properties will be:

1. Estimate the market value of the surplus

   property and the abutting property, as assembled.

2. Estimate the market value of the abutting property, as it exists (without the surplus property added).

3. Subtract the estimated market value of the abutting property, as it exists, from the estimated market value of the assembled abutting and surplus properties.

4. The difference between the two value estimates should yield a supportable indication of market value for the surplus property.

The parties agreed, and it was so ordered, that this case would be consolidated for hearing purposes with DOAH Case No. 93- 6643, bearing the same style. A separate order by this Hearing Officer is being issued on each case, since one case requires a final order and the other case a recommended order.

A proposed prehearing stipulation was filed by Mini-Warehouses at Kendall, Ltd. d/b/a A+ Mini-Storage (KENDALL) on July 11, 1994, to which DOT orally responded at the hearing on July 12, 1994. At the hearing, KENDALL presented the testimony of six witnesses and entered 17 exhibits 1/ into evidence. DOT presented the testimony of three witnesses and entered seven exhibits 2/ into evidence.

A transcript of the formal hearing was ordered. At the request of the parties, the time for filing post-hearing submissions was set for more than ten days following the filing of the transcript. The parties submitted proposed findings of fact and conclusions of law. All proposed findings of fact have been addressed in the appendix to this final order.

FINDINGS OF FACT

1. Mini-Warehouses at Kendall, Ltd., d/b/a A+ Mini-Storage (KENDALL) is a Florida partnership maintaining its principal place of business at 12345 S.W. 117th Court, Miami, Florida.

   
   

2. At all times material hereto, KENDALL held title to all privately owned real property, hereinafter abutting parcel, located adjacent to real property owned by the Florida Department of Transportation (DOT), hereinafter surplus property, situated in Dade County, Florida.

   
   

3. KENDALL's abutting parcel is zoned IU-C, Industrial/Conditional - Manufacturing.

4. DOT is a decentralized state agency. It has established several districts of which District 6, Dade County, is one. DOT's central office is located in Tallahassee, Florida.

   
   

5. The surplus property and the abutting property are located in DOT's District 6.

   
   

6. DOT identifies the surplus property as parcel no. 0739 which is a long, narrow right-of-way, consisting of .927 acres. It is 29 to 67 feet wide and approximately 950 feet long. The surplus property is zoned EU-M, Residential.

   
   

7. On June 28, 1985, DOT and KENDALL entered into a written surplus property lease (original lease) for the subject surplus property. The original lease was automatically renewable and could be cancelled by either party with 30 days prior notice.

   
   

8. Leasing the surplus property allowed KENDALL to reduce the amount of damage that the state's storm water runoff would otherwise cause to its abutting property.

   
   

9. KENDALL was required by the original lease to pay DOT $2,400 annually, plus sales tax, for the use of the surplus property. KENDALL made the payments from 1985 to 1991.

   
   

10. By letter dated May 3, 1991, DOT's District 6 office informed KENDALL that: (a) the original lease was unilaterally terminated; (b) KENDALL would be required to execute a renewal lease for 5 years with an option to renew for 5 more years, at an annual rate to be determined; (c) KENDALL might want to hire an independent appraiser from DOT's approved list of independent fee appraisers; and (d) KENDALL would have to negotiate a fee with the appraiser.

    
    

11. Wanting to continue to lease the surplus property, KENDALL chose an appraiser from DOT's approved list of independent fee appraisers and hired him to appraise the surplus property.

    
    

12. Per DOT's instructions, the independent appraiser contacted District 6's chief review appraiser for further instructions regarding the appraisal.

    
    

13. The appraiser hired by KENDALL had a long working relationship with DOT. Throughout the 1980's to 1991, DOT and District 6 had accepted surplus property appraisals, without exception, from the appraiser that: (a) used only the contributory value method as a starting point in the appraisal process for fair market rent; (b) determined the fair market value that the surplus property would bring in a sale open to the public; and (c) made necessary market-based adjustments to arrive at a final figure, which was somewhere between the figure obtained in (a) and the figure obtained in (b), which represented the fair market rent for the surplus property.

    
    

14. However, involving the surplus property at KENDALL, District 6's chief review appraiser informed the independent appraiser that only the unmodified across the fence or contributory value method would be acceptable when estimating rent that DOT should seek for the surplus property. Moreover, the chief review appraiser informed him that any other method would result in his appraisal being rejected.

15. The chief review appraiser informed the independent appraiser that the factors to be used and considered were: (a) the surplus property's contributing value to KENDALL, as if the abutting property was vacant; and (b) a market rate of return based on the contributing value to KENDALL for fee simple ownership in perpetuity even though the renewal lease only conveyed surface rights, subject to a 30-day cancellation clause.

    
    

16. In other words, District 6's chief review appraiser was instructing KENDALL's appraiser to use the across the fence appraisal method. This appraisal technique involves the following actions:

    
    

    1. Estimate the market value of the surplus

       property and the abutting property, as assembled.

    2. Estimate the market value of the abutting property, as it exists (without the surplus property added).

    3. Subtract the estimated market value of the abutting property, as it exists, from the estimated market value of the assembled abutting and surplus properties.

    4. The difference between the two value estimates should yield a supportable indication of market value for the surplus property.

       
       

17. KENDALL's independent appraiser followed the instructions of the chief review appraiser for DOT's District 6. In his appraisal, he relied upon market data of the sales of commercial land, exclusively, and determined that the surplus property's highest and best use is to serve as a storage yard for parking trailers and boats, assuming the surplus property could be rezoned or a variance obtained to permit that use.

    
    

18. Based upon the assumption of vacant or undeveloped commercial property and rezoned or variance surplus property for commercial use as a storage yard, the independent appraiser determined that the market value of the surplus property in fee simple was $128,000. He further ascertained that an investor would be satisfied with a 10 percent yield and determined that the across the fence value is an annual rent of $12,800 for a 50 to 100 year lease term, which is the prevailing market rent for the surplus property. The appraisal was accepted by DOT.

    
    

19. Based on the accepted appraisal, DOT determined that the prevailing market rent for the surplus property was $12,800, plus tax, annually and assessed KENDALL accordingly. Wanting to continue to use the surplus property, KENDALL paid DOT $2,544 as partial payment of the annual rent, plus tax, for the initial year of renewal beginning June 28, 1991, and paid $24,617 for outstanding rent, plus tax, for the period June 28, 1991, through June 27, 1993. KENDALL has continuously paid the annual rent required by DOT.

    
    

20. Not agreeing with the across the fence method, KENDALL obtained the approval from DOT for the submission of a second appraisal for the surplus property. DOT agreed but on the condition that the second appraisal had to be submitted by December 31, 1991.

    
    

21. For the second appraisal, the independent appraiser used the method which he used previously and which was historically accepted by DOT. Contrary to the first appraisal, the appraiser determined in the second appraisal that the fair market rent for the surplus property was $3,000 a year if the entire

    parcel could be used as a storage yard and that the surplus property would only produce a nominal rent of $100 a year if leased to the general public. The second appraisal was submitted by DOT's imposed deadline.

    
    

22. By letter dated October 9, 1991, the chief review appraiser for DOT's District 6 notified all approved appraisers on its list, including KENDALL's independent appraiser, of the surplus property appraisal policy that would be used. It states in pertinent part:

    
    

    SUBJECT: A STATEMENT OF DISTRICT APPRAISAL POLICY SURPLUS PROPERTY APPRAISALS - THE VALUATION PROCEDURE

    
    

    [I]t is inequitable to examine surplus properties without some evaluation of the abutting property. To be consistent in the appraisals for acquisition and those for sale by the Florida Department of Transportation, subjects should be estimated at their "ATF" or "Across The Fence" value.

    
    

    The surplus property appraisals should be addressed in the same way a "before and after" appraisal is conducted. The current Right of Way Appraisal Standards would be applicable in this assignment.

    The recommended appraisal procedure for surplus properties will be:

    1. Estimate the market value of the surplus

       property and the abutting property, as assembled.

    2. Estimate the market value of the abutting property, as it exists (without the surplus property added).

    3. Subtract the estimated market value of the abutting property, as it exists, from the estimated market value of the assembled abutting and surplus properties.

    4. The difference between the two value estimates should yield a supportable indication of market value for the surplus property.

    
    

    This process is logical and it appears to be reflective of the market. The appraisal problem is complicated by this procedure, but the result should be a more accurate and consistent estimate of market value of surplus property.

    
    

23. In late 1991 or early 1992, KENDALL started the process to obtain a variance from Dade County. In accordance with DOT's requirement, KENDALL absorbed the costs associated with obtaining the variance. As of the date of hearing, KENDALL had expended between $10,000 and $15,000.

    
    

24. Generally, the landowner is responsible for obtaining the variance or rezoning necessary for a lessee to use a leased parcel for its highest and best use. However, if the landowner is not obtaining the variance or rezoning, generally, the lessee receives a reduced rental rate.

25. In July 1992, the chief review appraiser for DOT's District 6 notified KENDALL that the second appraisal was rejected. He rejected the appraisal without reviewing it.

    
    

26. In May 1994, Dade County issued KENDALL a conditional variance. Assuming KENDALL satisfies numerous local concurrency and planning requirements, the final variance will permit it to use no more than 60 percent of the surplus property for storage purposes.

    
    

    CONCLUSIONS OF LAW

    
    

27. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and the parties thereto, pursuant to Sections

    120.535 and 120.56, Florida Statutes.

    
    

28. Section 120.535, Florida Statutes, provides in pertinent part:

(1) Rulemaking is not a matter of agency discretion. Each agency statement defined

as a rule under s. 120.52(16) shall be adopted by the rulemaking procedure provided by s.

120.54 as soon as feasible and practicable

. . .

(2)(a) Any person substantially affected

by an agency statement may seek an administra- tive determination that the statement violates subsection (1). A petition for an administra- tive determination of an agency statement shall be in writing and shall state with particularity facts sufficient to show:

1. That the person is substantially affected by the statement.

2. That the statement constitutes a rule under

   s. 120.52(16), in which case the petition shall include the text of the statement or a description of the statement.

3. That the agency has not adopted the statement by the rulemaking procedure provided in s. 120.54.

1. Section 120.52(16), Florida Statutes, defines rule in pertinent part to mean:

   
   

   [E]ach agency statement of general applicability that implements, interprets, or prescribes law

   or policy or describes the organization, procedure, or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule . . .

   
   

2. KENDALL is seeking an administrative determination that the following statement, contained in a letter from the chief review appraiser of DOT's District 6, is an "agency statement" that violates Section 120.535(1):

   
   

   SUBJECT: A STATEMENT OF DISTRICT APPRAISAL POLICY SURPLUS PROPERTY APPRAISALS - THE VALUATION PROCEDURE

   
   

   [I]t is inequitable to examine surplus properties without some evaluation of the abutting property. To be consistent in the appraisals for acquisition and those for sale by the Florida Department of Transportation, subjects should be estimated at their "ATF" or "Across The Fence" value.

   
   

   The surplus property appraisals should be addressed in the same way a "before and after" appraisal is conducted. The current Right of Way Appraisal Standards would be applicable in this assignment.

   The recommended appraisal procedure for surplus properties will be:

   1. Estimate the market value of the surplus

      property and the abutting property, as assembled.

   2. Estimate the market value of the abutting property, as it exists (without the surplus property added).

   3. Subtract the estimated market value of the abutting property, as it exists, from the estimated market value of the assembled abutting and surplus properties.

   4. The difference between the two value estimates should yield a supportable indication of market value for the surplus property.

      
      

      This process is logical and it appears to be reflective of the market. The appraisal problem is complicated by this procedure, but the result should be a more accurate and consistent estimate of market value of surplus property.

      
      

3. As the challenger, the burden is upon KENDALL to demonstrate by a preponderance of the evidence that such policy exists and that such policy constitutes a rule as defined by Section 120.52(16). Humana, Inc. v. Department of Health and Rehabilitative Services, 469 So.2d 889 (Fla. 1st DCA 1985); Agrico Chemical Co. v. Department of Environmental Regulation, 365 So.2d 759 (Fla. 1st DCA 1978), cert. denied, 376 So.2d 74 (1979).

   
   

4. The challenged statement is applicable only to DOT's District 6 and to appraisals of surplus property in District 6. The evidence is clear that DOT's chief review appraiser for District 6 would accept only appraisals which (a) were prepared by appraisers from DOT's approved list of appraisers and (b) used the "across the fence" method to obtain the market value of the property. It is of no consequence that KENDALL was allowed to submit a second appraisal, using a different method of appraisal, because the chief review appraiser rejected the second appraisal without reviewing it.

   
   

5. KENDALL has met its burden. DOT's policy of using the "across the fence" appraisal method for its surplus property in District 6 is a rule as defined by Section 120.52(16), Florida Statutes. Moreover, DOT did not engage in rulemaking as it relates to the policy and did not demonstrate the rulemaking was not feasible or practicable. Hence, DOT's policy is in violation of Section 120.535, Florida Statutes.

6. Standing is not at issue in this proceeding.

CONCLUSION

Based on the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the petition to declare the surplus property appraisal policy

of District 6, Florida Department of Transportation of using only the "across the fence" method a rule and in violation of Section 120.535, Florida Statutes, is granted.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 2nd day of March 1995.

ERROL H. POWELL

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of March 1995.

ENDNOTES

1/ Some exhibits had multiple parts, e.g., A., B, C. 2/ Ibid.

APPENDIX

The following ruling are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact

Stipulated Facts:

1. Partially accepted in finding of fact 1.

2. Partially accepted in finding of fact 4.

3. Partially accepted in findings of fact 2 and 6.

4. Partially accepted in finding of fact 3.

5. Partially accepted in finding of fact 6.

6. Partially accepted in finding of fact 7.

7. Partially accepted in finding of fact 9.

8. Partially accepted in finding of fact 11.

9 and 10. Partially accepted in finding of fact 19.

11. Rejected as being argument, or conclusion of law.

Findings of Fact:

1,2, 28 and 29. Rejected as irrelevant, unnecessary or subordinate.

1. Partially accepted in finding of fact 7.

2. Partially accepted in finding of fact 9.

5 and 7. Partially accepted in finding of fact 8.

6. Partially accepted in finding of fact 10.

1. Partially accepted in findings of fact 18 and 20.

2. Partially accepted in finding of fact 11.

3. Partially accepted in finding of fact 12.

4. Partially accepted in finding of fact 13.

5. Partially accepted in finding of fact 14.

6. Partially accepted in findings of fact 14 and 15.

7. Partially accepted in finding of fact 22.

8. Partially accepted in findings of fact 16 and 22.

9. Partially accepted in finding of fact 17.

17 and 18. Partially accepted in finding of fact 18.

19. Partially accepted in finding of fact 20.

20, 21 and 22. Partially accepted in finding of fact 21.

23 and 24. Partially accepted in finding of fact 23.

1. Partially accepted in finding of fact 24.

2. Partially accepted in finding of fact 25.

3. Partially accepted in finding of fact 26.

Respondent's Proposed Findings of Fact (Respondent's proposed findings begin with paragraph numbered 20.)

1. Partially accepted in finding of fact 1.

2. Partially accepted in finding of fact 2. 22-30 and 33. Rejected as subordinate.

31 and 32. Partially accepted in finding of fact 4.

34, 36, 100 and 108. Rejected as contrary to the greater weight of the evidence.

35. Rejected as irrelevant, unnecessary, or subordinate. 101-107. Rejected as subordinate, or irrelevant.

NOTE--Where a proposed finding has been partially accepted, the remainder has been rejected as being irrelevant, unnecessary, cumulative, subordinate, contrary to the greater weight of the evidence, argument, or a conclusion of law.

COPIES FURNISHED:

Timonthy G. Schoenwalder, Esquire Blank, Rigsby & Meenan, P.A.

Post Office Box 11068 Tallahassee, Florida 32302-3068

Charles G. Gardner, Esquire

Florida Department of Transportation Haydon Burns Building, M.S. 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

Ben G. Watts Secretary

Department of Transportation Haydon Burns Building, M.S. 58 605 Suwannee Street

Tallahassee, Florida 32399-0458

Thornton J. Williams General Counsel

Florida Department of Transportation Haydon Burns Building, M.S. 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

Carroll Webb, Executive Director Administrative Procedures Committee

120 Holland Building Tallahassee, Florida 32399-1300

Liz Cloud, Chief

Bureau of Administrative Code Department of State

The Elliott Building Tallahassee, Florida 32399-0250

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this final order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules Of Appellate Procedure. Such proceedings are commenced by filing one copy of a notice of appeal with the Agency Clerk Of The Division Of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court Of Appeal, First District, or with the District Court Of Appeal in the appellate district where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 94-002967RU

Orders for Case No: 94-002967RU