STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

)

FINAL ORDER IN CASE NO. 95-5089RU

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Richard Hixson, held a formal hearing in the above- styled case on January 11, 1996, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Mirella Murphy James

Assistant City Attorney Post Office Box 2842

St. Petersburg, Florida 33731

For Respondent: Robert B. Button, Esquire

Assistant Division Attorney Division of Retirement

Cedars Executive Center, Building D 2639 North Monroe Street Tallahassee, Florida 32399-1560

For Intervenors Robert D. Klausner, Esquire Moore, et al.: and Ronald Jay Cohen, Esquire

6565 Taft Street, Suite 200

Hollywood, Florida 33024

For Intervenor David E. Ramba

Florida League Assistant General Counsel and of Cities: Jane Hayman

Deputy General Counsel Florida League of Cities Post Office Box 1757

Tallahassee, Florida 32302-1757

For Intervenor Frederick M. Rothenberg, Esquire City of Largo: HOLLAND and KNIGHT

Post Office Box 1288 Tampa, Florida 33601-1288

and

Lawrence P. Stevenson, Esquire HOLLAND and KNIGHT

Post Office Box 810 Tallahassee, Florida 32302

For Intervenor Scott R. Christiansen, Esquire Sgt. Russell CHRISTIANSEN and DEHNER, P.A.

Rizzo: 2975 Bee Ridge Road, Suite C Sarasota, Florida 34239

STATEMENT OF THE ISSUES

The ultimate issues in this case are: 1) whether certain agency statements made by the Respondent, DIVISION OF RETIREMENT, regarding the application of the provisions of Chapters 175 and 185, Florida Statutes, to pension plans for municipal fire fighters and police officers are "rules" as defined by Section 120.52(16), Florida Statutes; 2) if so, whether the agency is required to promulgate such "rules" in accordance with Section 120. 535, Florida Statutes; and 3) whether such "rules" constitute an invalid exercise of delegated legislative authority in violation of Section 120.56, Florida Statutes

Specifically, the issues in this case relate to the criteria required of municipal pension plans to qualify for state funds. Chapters 175 and 185, Florida Statutes, provide for pension plans for fire fighters and police officers, and authorize two types of pension plans. "Chapter plans" are created by state law, and "local law plans" are created either by special act of the Legislature or by municipal ordinance.

The gist of the CITY OF ST. PETERSBURG's Section 120.535 Petition is that the DIVISION is attempting by non-rule policy to impose the same requirements relating to terms, conditions, and benefits on local law plans that the DIVISION requires of chapter plans. Specifically, the alleged non-rule policies of the DIVISION of which the CITY complains are: 1) the definition of "credited service"; 2) the definition of "average final compensation"; 3) the disallowance of a Social Security offset; 4) the interpretation of "disability retirement";

5) the requirement that all of the CITY's pension plans be in compliance in order to receive state funds; 6) the release of funds to other municipalities not found in compliance; 7) the failure to enforce Rule 60Z-1.004, Florida Administrative Code, which defines "credited service;" and, 8) the application of a declaratory statement issued to the City of Boca Raton to other municipalities.

As set forth below, the requirements for local law plans have been the subject of extensive prior litigation. In rejecting a challenge to the

constitutionality of these statutes, the Court in City of Orlando v. State Department of Insurance, 528 So.2d 468 (Fla. 1st DCA 1988) stated:

Chapters 175 and 185 create a purely voluntary program whereby municipalities may receive state-collected taxes, imposed

on property and casualty insurance premiums, with which to fund retirement programs for local police and fire fighters. In exchange for receipt of these funds, the legislature has established certain criteria under which the funds must be operated and managed.

Id. at 469.

The dispute in this case again focuses on determining what criteria the legislature has established for the operation and management of such local pension plans in order to establish whether a local plan complies with the statute for purposes of receiving state-collected tax funds.

Petitioner, CITY OF ST. PETERSBURG, and Intervenors, FLORIDA LEAGUE OF CITIES and CITY OF LARGO, take the position that Respondent, DIVISION OF RETIREMENT, has made non-rule policy statements, and required compliance therewith, which go beyond the criteria established by the legislature for participation in the program. Petitioner contends that such statements violate Section 120.535, Florida Statutes, because the statements constitute unpromulgated rules, and further that such statements violate Section 120.56, Florida Statutes, because the statements constitute invalid exercises of delegated legislative authority.

Respondent, DIVISION OF RETIREMENT, takes the position that the statements are not "rules" as defined in Section 120.56(12), Florida Statutes, that even if the statements are "rules" it is not practicable or feasible for the agency to promulgate the statements as rules, and that the statements merely apply the provisions of Chapters 175 and 185, Florida Statutes, as intended by the legislature, and therefore do not violate Section 120.56, Florida Statutes.

PRELIMINARY STATEMENT

On April 6, 1995, the DIVISION notified the CITY that premium insurance excise tax funds for its police officers pension under Chapter 185, Florida Statutes, were being withheld for calendar year 1994. The CITY filed a Petition for Administrative Hearing pursuant to Section 120.57(1), Florida Statutes, which is pending in DOAH Case No. 95-2637.

On July 21, 1995, the DIVISION notified the CITY that premium insurance tax funds for its fire fighters pension under Chapter 175, Florida Statutes, were being withheld for calendar year 1994. The CITY filed a Petition for Administrative Hearing, pursuant to Section 120.57(1), Florida Statutes which is pending in DOAH Case No. 95-4110. Cases Nos. 95-2637 and 95-4110, were thereafter consolidated for hearing.

On October 19, 1995, the CITY in DOAH Case No. 95-5089 filed a Petition pursuant to Sections 120.535 and 120.56, Florida Statutes, challenging the DIVISION's alleged non-rule policy statements which formed the basis for the withholding of the CITY's 1994 premium tax funds. On November 30, 1995, all three cases were consolidated for hearing. In accordance with the agreement of

the parties at hearing, and for purposes of proceeding on the Section 120.535 petition, the cases are hereby bifurcated.

The FLORIDA LEAGUE OF CITIES and the CITY OF LARGO intervened on behalf of the Petitioner in the 120.535 proceeding, Case No. 95-5089. Additionally, municipal fire fighters Michael Moore and Richard Feinberg intervened on behalf of the Respondent in Case No. 95-5089.

At hearing on January 11, 1996, the parties stipulated to the evidentiary record. The CITY also presented the testimony of two witnesses , Trela White and Irene Bankhardt.

The CITY and the LEAGUE objected to the introduction of legislative records and transcripts relating to the legislative history of Chapters 86-41 and 86-42, Laws of Florida. It has been held that such records may be reviewed in the determination of legislative intent. Magaw v. State, 537 So.2d 564, 566 (Fla.

1989); Asphalt Pavers v. Department of Revenue, 584 So.2d 55, 57 (Fla. 1st DCA 1991). Accordingly, the objection is DENIED.

The DIVISION has made objection to the introduction of records relating to representations of counsel for the Department of Insurance. The materials do not constitute privileged matter, and the objection is DENIED.

Pursuant to the stipulation of the parties, the Section 120.57 actions, Cases Nos. 95-2637 and 95-4110, which are now bifurcated from the Section

120.535 case, were placed in abeyance pending resolution of Case No. 95-5089. A transcript of the proceedings was filed on February 13, 1996.

The DIVISION filed its Proposed Final Order on March 8, 1996. Intervenors Moore and Feinberg filed their Proposed Final Order on March 12, 1996. The CITY, along with Intervenors, the CITY OF LARGO and the FLORIDA LEAGUE OF CITIES, filed their Proposed Recommended Order on March 12, 1996. The DIVISION's Proposed Final Order includes numbered proposed findings of fact, and accordingly, specific rulings on the DIVISION's proposed findings are set forth in the Appendix attached hereto. The remaining parties' Proposed Final Orders do not contain numbered findings, and also combine proposed findings of fact and conclusions of law. While these proposals have been carefully considered, the proposals have not been submitted in a form that allows for the findings to be individually addressed in the attached Appendix.

Subsequent to the filing of the Proposed Orders, the DIVISION filed a Request for Official Recognition of legislation filed in the 1996 Session of the Legislature which addresses these issues. By order entered March 26, 1996, the parties were directed to show cause why this proceeding should not be held in abeyance pending the Legislature's consideration of such legislation. The DIVISION and Intervenors concurred in abeyance pending the 1996 Legislature's consideration of the bills. The CITY, however, objected to abeyance and for the reasons set forth below, abeyance of this case is denied.

FINDINGS OF FACT

Parties

1. Petitioner, the CITY OF ST. PETERSBURG (CITY), is a municipality of the State of Florida which participates in the voluntary program to receive state- collected taxes imposed on property and casualty insurance with which to fund

   retirement programs for its municipal fire fighters and police under Chapters

   175 and 185, Florida Statutes, respectively.

   
   

2. Intervenor, CITY OF LARGO (LARGO), also is a State of Florida municipality participating in such local plans for fire fighters and police. LARGO has standing to intervene in this proceeding.

   
   

3. Intervenor, FLORIDA LEAGUE OF CITIES (LEAGUE), represents municipalities participating in such local plans for fire fighters and police. The LEAGUE has standing to intervene in this proceeding.

   
   

4. Respondent, DIVISION OF RETIREMENT (DIVISION), is the agency of the State of Florida charged with the statutory duty to administer the voluntary program by which municipalities receive state-collected taxes imposed on property and casualty insurance with which to fund local plans under Chapters

   175 and 185, Florida Statutes. Prior to 1993, the Florida Department of Insurance was the responsible state agency to administer Chapters 175 and 185, Florida Statutes.

   
   

5. Intervenors, MICHAEL MOORE and RICHARD FEINBERG are municipal fire fighters with the CITY and have standing to intervene in this proceeding. (Russell M. Rizzo, a municipal police officer and an intervenor in case No. 95- 2637, did not request to intervene in the Section 120.535 action, case No. 95- 5089.)

   
   

   History

   
   

6. Chapters 175 and 185, Florida Statutes, relating to pension plans for fire fighters and police, authorize two types of retirement or pension plans. One type is called "chapter plans" and the other is known as "local law plans." Chapter plans are created under state law, and the provisions of Chapters 175 and 185, Florida Statutes, control the plans' terms, conditions and benefits. Local law plans are purely voluntary and are created either by special act of the Legislature, or by municipal ordinance. The special act or municipal ordinance contain the provisions relating to the terms, conditions, and benefits of the local law retirement plan. Both chapter plans and local law plans receive funds from the state-collected premium tax on property and casualty insurance.

   
   

7. The CITY has operated local law retirement plans for fire fighters and police since 1951. The CITY's police and fire fighter plans were first chartered by special act of the Legislature. The fire fighter charter plan has been closed to new members since approximately 1970. The CITY in 1970 established a supplemental retirement plan for fire fighters which was enacted by CITY ordinance. The CITY's police and fire fighter pension plans are subject to union negotiation, and cannot be unilaterally amended. City of Tallahassee v. Public Employee Relations Commission, 393 So.2d 1147 (Fla. 1st DCA 1981). In this respect, the CITY may not have the authority to make unilateral changes to its local law plans in order to comply with directives of the DIVISION.

   
   

8. The CITY has voluntarily participated on a continuing basis in the program created under Chapters 175 and 185, Florida Statutes, whereby the CITY has received state-collected taxes imposed on property and casualty insurance premiums with which to fund its local plans for fire fighters and police. The CITY has received such funds until calendar year 1994.

9. In 1986 the Legislature significantly amended Chapters 175 and 185, Florida Statutes. See Chapters 86-41 and 86-42, Laws of Florida. Chapter 86-41 pertained to municipal fire fighters; Chapter 86-42 pertained to municipal police officers. As indicated above, the constitutionality of these statutes was upheld in City of Orlando v. State Department of Insurance, supra. In section 1. of each act, the Legislature added substantially the same legislative intent language:

   
   

   Therefore, the Legislature declares that it is a proper and legitimate state purpose to provide a uniform retirement system for the

   benefit of fire fighters as hereinafter defined, and intends, in implementing the provisions

   of s. 14, Art. X of the State Constitution as they relate to municipal fire fighters' pension trust fund systems and plans, that such retire-

   ment systems or plans to be managed, administered, operated, and funded in such manner as to maximize the protection of the fire fighters' pension trust funds. This chapter hereby establishes minimum standards for the operation and funding of municipal fire fighters' pension trust fund systems and plans.

   
   

10. After the enactment of Chapters 86-41 and 86-42, Laws of Florida, the Department of Insurance undertook rulemaking to implement the provisions of the acts. The CITY and the LEAGUE challenged the proposed rules under Section 120.54, Florida Statutes. The Department's proposed rules were upheld by a DOAH Hearing Officer. On appeal, the First District Court of Appeal reversed the order of the Hearing Officer, and held that the majority of the department's proposed rules were invalid because statutory provisions governing chapter pension plans, which were not made expressly applicable by the Legislature to local fire fighter and police plans, did not preempt municipal power with respect to pension plans. Florida League of Cities, Inc. v. Department of Insurance, 540 So.2d 850 (Fla. 1st DCA 1989) review denied 545 So.2d 1367 (Fla. 1989), [hereinafter referred to as the "Rules Case"].

    
    

11. In 1988 the CITY and the Department of Insurance engaged in litigation regarding the compliance of the CITY's local law plans with the Department's construction of the statute. This litigation was ultimately settled by the Department's agreement not to withhold the CITY's premium tax funds. During 1990 and 1991, the Department of Insurance also engaged in litigation with numerous other municipalities regarding compliance of local law plans with the provisions of Chapters 175 and 185, Florida Statutes. The Department settled these cases and continued to distribute premium tax funds to these local law plans with the understanding that the disputed issues would be better resolved through rulemaking. The Department of Insurance conducted staff workshops to discuss rulemaking; however, the Department did not thereafter initiate formal rulemaking under Chapter 120, Florida Statutes, with regard to promulgation by rule of compliance requirements for local law plans under Chapters 175 and 185, Florida Statutes.

    
    

12. In 1993 the Legislature transferred statutory responsibility for the administration of Chapters 175 and 185, Florida Statutes, from the Department of Insurance to the DIVISION. The legislative transfer effected a transfer of all programs as well as personnel. Since the legislative transfer in 1993, the DIVISION has made a continuous and good faith effort to present these issues to

    the Legislature for resolution. During the 1996 Session, HB 1951 and SB 2484 have been introduced. These bills specifically address the issues presented in this case.

    
    

    Stipulated Facts

    
    

    The following facts verbatim were set forth by the parties in the Prehearing Stipulation:

    
    

13. The DIVISION admits to the authenticity of all documents contained within its files, including, but not limited to, interoffice memoranda, correspondence to and from the DIVISION and/or the Department of Insurance which are contained in the files of the Division, and any correspondence copied to the DIVISION and/or the Department of Insurance which are contained in the files of the DIVISION.

    
    

14. The DIVISION takes the position that Sections 175.032 and 185.02, Florida Statutes, (Definitions), apply to local law plans.

    
    

15. (The) Position of (the agency in) Declaratory Statement DMS-DR-94-18 was issued to the City of Boca Raton pursuant to Section 120.565, Florida Statutes.

    
    

16. It is the position of the DIVISION that a plan containing a mandatory retirement age violates the Older Worker Benefits Protection Act; and that pension plans which violate this federal law are not eligible for distribution of premium tax funds under Sections 175.351 and 185.35, Florida Statutes.

    
    

17. It is the position of the DIVISION that fire fighters disabled from duties of a fireman as defined in Section 175.032, Florida Statutes, are eligible for disability benefits.

    
    

18. The CITY admits that the Social Security offset contained in its supplemental fire pension plans could possibly reduce a fire fighter's pension below two (2) percent for each year of credited service; however, the CITY specifically has no knowledge that this has or will occur.

    
    

19. The CITY admits that Sergeant Rizzo has accrued in excess of thirty- two (32) years of service. The CITY admits that the police pension plan contains a maximum pension plan benefit of 60 percent of the highest pay step of the lowest rank held during the previous three years, which benefit Sgt. Rizzo became eligible for after twenty-five (25) years of active service. The CITY admits after thirty (30) years of service Sgt. Rizzo will retire with a pension benefit equal to less than two (2) percent for each year of active service. The CITY admits that Sgt. Rizzo was permitted to cease all employee contributions to his pension plan after twenty-five (25) years of service.

    
    

20. The 1994 premium taxes are withheld from the CITY by the DIVISION.

    
    

21. Prior to 1994 the DIVISION, or its predecessor agency, the Department of Insurance, have never withheld Chapter 175 or 185 insurance tax premium moneys from the CITY.

    
    

22. The DIVISION has not initiated the rulemaking process with regard to definition of the term "average final compensation" in Section 175.351, Florida Statutes, and there are currently no existing promulgated rules that apply to local law plan definitions for "average final compensation" for the DIVISION.

23. The DIVISION has not initiated the rulemaking process with regard to definition of the term "average final compensation" in Section 185.35, Florida Statutes, and there are currently no existing promulgated rules that apply to local law plan definitions for "average final compensation" for the DIVISION.

    
    

24. It is the position of the DIVISION that Rule 60Z-1.004, Florida Administrative Code, defining "credited service" contradicts Chapter 185, Florida Statutes, and is not enforced.

    
    

25. It is the position of the DIVISION that all municipal pension plans submitted for review must comply with the non-rule policy at issue in the present case in order to receive Chapter moneys pursuant to Sections 175.351 and 185.35, Florida Statutes.

    
    

26. It is the position of the DIVISION that the pension plans of the City of St. Petersburg do not fulfill the requirements of Section 175.351, Florida Statutes, to qualify for release of state premium tax moneys.

    
    

27. It is the position of the DIVISION that the pension plans of the City of St. Petersburg do not fulfill the requirements of Section 185.35, Florida Statutes, to qualify for release of state premium tax moneys.

    
    

28. It is the position of the DIVISION that the term "credited years of service" as used in Section 175.351(4) and 185.35(1)(d), Florida Statutes, is to be defined in accordance with the term "aggregate number of years of service" and "aggregate number of years of service with the municipality" under Sections 175.032(1)(a) and 185(1)(b), Florida Statutes, respectively.

    
    

29. It is the position of the DIVISION that it has the authority under Chapters 175 and 185, Florida Statutes, and Chapter 60Z, Florida Administrative Code, to withhold Chapter 175 and 185 premium tax money to plans not in compliance with Sections 175.351 and 185.35.

    
    

30. It is the position of the DIVISION that it has the authority to release payment of Chapter 175 and 185 premium tax moneys to plans not in compliance with Sections 175.351 and 185.35, Florida Statutes, provided the municipality is making good faith efforts to bring the violations into compliance.

    
    

    CONCLUSIONS OF LAW

    
    

31. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties to this proceeding pursuant to Sections 120.535 and 120.56, Florida Statutes.

    
    

32. Section 120.535(1), Florida Statutes, provides:

    
    

    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. Rulemaking shall be presumed feasible and practicable to the extent provided by this subsection unless one of the factors provided by this subsection is applicable.

       
       

       as:

       1. Rulemaking shall be presumed feasible unless the agency proves that:

          1. The agency has not had sufficient time to acquire the knowledge and experience reasonably necessary to address a statement by rulemaking; or

          2. Related matters are not sufficiently resolved to enable the agency to address a statement by rulemaking; or

          3. The agency is currently using the rule- making procedure expeditiously and in good

          faith to adopt rules which address the statement.

       2. Rulemaking shall be presumed practicable to the extent necessary to provide fair notice

       to affected persons of relevant agency procedures and applicable principles, criteria, or standards for agency decisions unless the agency proves that:

       1. Detail or precision in the establishment of principles, criteria, or standards for agency decisions is not reasonable under the circum- stances; or

       2. The particular questions addressed are of such a narrow scope that more specific resolution of the matter is impractical outside of an adjudication to determine the substantial interests of a party based on individual circumstances.

       
       

33. Section 120.52(16), Florida Statutes, in pertinent part defines "rule"

    
    

    (16) "Rule" means each 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.

    
    

34. Whether an agency statement is a rule depends on the effect of the

    statement. State Department of Administration v. Harvey, 356 So.2d 323 (Fla. 1st DCA 1977). An agency statement is a rule if the statement "...purports in and of itself to create certain rights and adversely affect others," State Department of Administration v. Stevens, 344 So.2d 290, 296 (Fla. 1st DCA 1977), or if the statement serves "...by its own effect to create rights or require compliance or otherwise to have the direct and consistent effect of law." McDonald v. Department of Banking and Finance, 346 So.2d 569, 581 (Fla. 1st DCA 1977).

    
    

35. The DIVISION's statements at issue in this case clearly require compliance with the DIVISION's interpretation of Chapters 175 and 185, Florida Statutes and have the direct and consistent effect of law. Specifically, the DIVISION requires that in order to receive funds, the CITY must adhere to the DIVISION's definition of "credited service" as that term is used in Sections 175.351(4) and 185.35(1)(d), Florida Statutes, to mean "aggregate years of service" or "aggregate years of service with the municipality" as set forth in

    the definitions sections of Chapters 175 and 185, Florida Statutes. The DIVISION requires the compliance with its definition of "salary" and also requires that the CITY desist from applying a Social Security offset because of the DIVISION's construction of the two (2) percent per year provision of Sections 175.351(4), and 185.35(1)(d), Florida Statutes. The DIVISION further requires compliance with its construction of disability benefits. In this respect, however, the DIVISION and Intervenors Moore and Feinberg contend that these non-rule policy statements, which admittedly require compliance, need not be promulgated as specific rules because the DIVISION has already promulgated Rule 60Z-2.004, Florida Administrative Code, which provides:

    
    

    The Division of Retirement shall withhold distribution of Chapter 175 tax revenues allocated to a fund which is not in compliance with the applicable requirements of Chapter 175 or Section 175.351, or these Rules.

    
    

36. The DIVISION and Intervenors Moore and Feinberg contend that the application of this rule is not subject to statutory rulemaking requirements, citing Lucas v. Department of Administration, 466 So.2d 386 (Fla. 1st DCA 1985). The decision in Lucas, however, sheds no light on the circumstances in this case. Unlike the circumstances in Lucas, Rule 60Z-2.004, Florida Administrative Code, is simply a general statement of the obvious intent of the statute, and does not specify or interpret the compliance requirements for the CITY. Moreover, the rule is so general that any application of what criteria constitute compliance under the rule is subject to the unbridled discretion of the DIVISION. This is clearly demonstrated by the fact that the DIVISION has allowed the distribution of premium insurance tax funds to municipalities which even the DIVISION considers out of compliance with Chapters 175 and 185, Florida Statutes. The DIVISION has distributed such funds despite the provisions of Rule 60Z-2.004, Florida Administrative Code.

    
    

37. It is also apparent that the non-rule statements of the DIVISION which determine the criteria for compliance are not simply a reiteration of the provisions of Chapters 175 and 185, Florida Statutes. As Judge Zehmer recognized in the Rules Case, Chapter 175 and Chapter 185 each provide specific statutory minimum requirements applicable to local law plans. See Sections 175.351, and 185.35, Florida Statutes. These sections provide specific statutory criteria of compliance required for local law plans to receive state- collected premium tax funds. Section 175.351(4) provides in pertinent part:

    
    

    In order for municipalities and special

    fire control districts with their own pension plans for fire fighters or for fire fighters and other employees to participate in the distribution of the tax fund established in ss. 175.101-175.121 and 175.131-175.151,

    their pension funds must meet each of the following standards:

    1. The plan must be for the purpose of providing retirement and disability income for fire fighters or their beneficiaries.

    2. The normal retirement age, if any, must not be more than age 60.

    3. If the plan provides for a stated period of service as a requirement to receive a retirement income, that period must not be

       more than 30 years.

    4. The benefit formula to determine the amount of monthly pension must be equal to at least 2 percent for each year of the fire fighter's credited service, multiplied by

       his or her average final compensation. However, if current state contributions pursuant to this chapter are not adequate to fund the additional benefits to meet the minimum requirements in this chapter, only increment increases shall be required as state moneys are adequate to provide. Such increments shall be provided as state moneys become available.

       
       

       Section 185.35(1)(d) provides in pertinent part:

       
       

       1. In order for municipalities with their own pension plans for police officers or for

          police officers and other employees to participate in the distribution of the tax fund established

          in ss. 185.07, 185.08, and 185.09, their retire-

          ment funds must meet each of the following standards:

          1. The plan must be for the purpose of providing retirement and disability income for police officers.

          2. The normal retirement age, if any, must not be higher than age 60.

          3. If the plan provides for a stated period of service as a requirement to receive a retirement income, that period must not be higher than 30 years.

          4. The benefit formula to determine the amount of monthly pension must be equal to at least 2 percent for each year of the police officer's credited service, multiplied by his or her average final compensation. However, if current state contributions pursuant to this chapter are not adequate to fund the additional benefits to meet the minimum requirements in this chapter, only increment increases shall be required as state moneys are adequate to provide. Such increments shall be provided as state moneys become available.

       
       

38. Under the court's holding in the Rules Case, the DIVISION's non-rule statements which would extend the application of other statutory sections not made specifically applicable by the Legislature to local law plans would create additional rights and impose additional requirements which would have the direct and consistent effect of law. Accordingly, under the authority cited above, such agency statements are rules under the definition of Section 120.52(16), Florida Statutes.

    
    

39. The DIVISION takes the position that these non-rule statements which interpret the criteria set forth in Chapters 175 and 185, Florida Statutes, merely implement the specific legislative intent language. As set forth above, the Legislature in enacting Chapters 86-41 and 86-42, Laws of Florida, stated, "(t)his chapter hereby establishes minimum standards for the operation and funding of municipal fire fighters' pension trust fund systems and plans." See Section 175.021, Florida Statutes. (Section 185.01, Florida Statutes, contains identical legislative intent language for municipal police officers' pension

    plans.) The problem with the DIVISION's position in this regard is that the First District Court of Appeal in the Rules Case has already rejected the extension of general provisions of Chapters 175 and 185, Florida Statutes, to local law plans absent specific legislative authority.

    
    

40. As noted above, the Legislature is currently considering legislation (HB 1951 and SB 2484) in the 1996 Session which addresses these issues and provides specific legislative authority for the application of the provisions of Chapters 175 and 185, Florida Statutes, to local law plans. (As presently drafted it does not appear that the pending legislation is specifically remedial nor retroactive. The proposed effective date is October 1, 1996.)

    
    

41. The DIVISION's position that these non-rule statements do not violate Section 120.535(1), Florida Statutes, faces further difficulties. The DIVISION's non-rule statement that "credited service" as used in Sections

    175.351 and 185.35, Florida Statutes, is defined as "aggregate years of service" or "aggregate years of service with the municipality" applies the definitions sections of Chapters 175 and 185, Florida Statutes, to local law plans. In this respect, however, the DIVISION has already promulgated Rule 60Z-1.004, Florida Administrative Code, which defines "credited service" as follows:

    
    

    Credited years of service as defined in Section 185.02(6) shall mean years and fractional parts of years of service as a full-time police officer employed by the municipality prior to his normal retirement date.

    
    

42. The DIVISION does not enforce Rule 60Z-1.004, Florida Administrative Code, because the DIVISION takes the position that the rule does not comply with legislative intent. The DIVISION's position in this regard has resulted in the untenable posture of an agency failing to follow a promulgated rule, and instead requiring substantially affected persons to comply with an unpromulgated rule. Under the provisions of Section 120.535(1), Florida Statutes, the agency has no discretion in this regard, and must address these conflicting policies by appropriate rulemaking.

    
    

43. Having determined that the above statements meet the definition of rules, the next inquiry is whether rulemaking is feasible and practicable under the five specific defenses to rulemaking set forth in Section 120.535(1)(a) and (b), Florida Statutes. The three specific defenses to the feasibility of rulemaking are not applicable in this case.

    
    

44. As to Section 120.535(1)(a)1., Florida Statutes, the DIVISION and its predecessor the Department of Insurance, have had since at least 1989 when the Rules Case was decided to develop the knowledge and experience necessary to promulgate rules. Accordingly, the DIVISION has had sufficient time and experience reasonably necessary to address these non-rule statements by rulemaking.

    
    

45. As to Section 120.535(1)(a)2., Florida Statutes, the DIVISION contends that rulemaking is not feasible because legislation (HB 1951 and SB 2484) is currently pending before the 1996 Session of the Florida Legislature which significantly addresses these issues, and accordingly under the statute, related matters are not sufficiently resolved to enable the DIVISION to address these statements by rules. The CITY takes the position that pending legislation is irrelevant to this case, that the DIVISION has attempted to have the Legislature

    address these issues during several prior sessions without success, and that legislative history is inadmissible. The DIVISION's position in this regard is understandable; however, the CITY correctly points out that the controversy surrounding the interpretation of Chapters 175 and 185, Florida Statutes, has been unresolved since the decision in the Rules Case. The evidence reflects that the DIVISION has consistently, and in good faith, presented these issues to the Legislature for resolution. Indeed, the DIVISION is currently presenting these issues to the Legislature; however, adopting the DIVISION's position would in effect allow an agency to avoid the mandate of Section 120.535, Florida Statutes, ad infinitum. Additionally, the pending legislation as presently framed is not specifically remedial nor retroactive, and the proposed effective date is October 1, 1996, and may not ultimately resolve all issues raised by the CITY in this proceeding. Accordingly, under these circumstances, the pendency of this legislation does not provide a defense to the feasibility of addressing these issues by rulemaking.

    
    

46. As to Section 120.535(1)(a)3., Florida Statutes, there is no contention that the agency is currently using the rulemaking procedure.

    
    

47. Similarly, neither of the two practicability defenses to rulemaking as set forth in Section 120.535(1)(b), Florida Statutes, are applicable to this case. There is no basis upon which it can be concluded that detail or precision in formulating the criteria for compliance is not reasonable in these circumstances, and it is clear that the DIVISION's non-rule statements have a broad scope of application beyond the individual circumstances of one municipality.

    
    

48. The DIVISION also asserts that rulemaking is not feasible or practicable because of the inevitable challenges which would be instituted to any proposed rules. A review of the extensive litigation history of these issues supports the DIVISION's concerns; however, Section 120.535, Florida Statutes, does not provide such a defense to rulemaking.

    
    

49. Having determined that the non-rule policy statements met the definition of rules and that none of the five defenses to rulemaking is applicable, the question arises as to the validity of the non-rule statements under Section 120.56, Florida Statutes. It has been held that "...section

    120.535 provides the exclusive mechanism for challenging an agency's failure to adopt agency policy as a rule..." Christo v. State Department of Banking and Finance, 649 So.2d 318, 320 (Fla. 1st DCA 1995). The court in Christo, also stated that "...the exception to this arrangement is where the unpromulgated rule enlarges, modifies or contravenes the specific provisions of the law implemented." Id. at 319. The court in Christo, however, did not go on to hold that the challenged agency non-rule policies violated the provisions of Section 120.56, Florida Statutes.

    
    

50. While it is clear that under the holding in the Rules Case, the DIVISION must have specific legislative authority in order to apply the provisions of Chapters 175 and 185, Florida Statutes, to local law plans, there is currently pending legislation which may explicate or clarify the specific authority of the DIVISION in this regard to rulemaking and therefore resolve some of the issues pertaining to the validity of the DIVISION's non-rule policies. Under the circumstances of this case, proceeding to determine that the non-rule policies of the DIVISION are invalid pursuant to Section 120.56, Florida Statutes, is not appropriate. The appropriate remedy in these circumstances is set forth in Section 120.57(1)(b)15., Florida Statutes, which requires the DIVISION to demonstrate in the Section 120.57(1) actions that its

    non-rule policies are supported by specific legislative authority. To the extent the DIVISION cannot cite specific legislative authority for such compliance criteria which is embodied in the non-rule policy, such criteria would enlarge, modify and contravene the specific provisions of Chapters 175 and 185, Florida Statutes.

    
    

51. In summary, it is clear that the DIVISION's non-rule policy which applies the definition of "salary" and "aggregate number of years of service" or "aggregate number of years of service with the municipality" as contained in Chapters 175 and 185, Florida Statutes, to local law plans meet the definition of rules and violate the provisions of Section 120.535(1), Florida Statutes.

    
    

52. The DIVISION's policy of disallowing all Social Security offsets is also a rule and violates the provisions of Section 120.535(1), Florida Statutes. (Because the invalidity of this non-rule policy is not determined at this time, the DIVISION's reliance on the decision in Miami v. Carter, 105 So.2d 5 (Fla. 1958) is not addressed.)

    
    

53. Finally, the DIVISION's non-rule policy regarding applying the DIVISION's construction of disability benefits is a rule and violates Section 120.535, Florida Statutes.

    
    

54. While the DIVISION's apparent selective enforcement of these non-rule policies reflects an unbridled discretion exercised by the DIVISION, selective enforcement does not of itself constitute a rule for purposes of Section 120.52(16), Florida Statutes, and is not appropriately raised in this proceeding.

    
    

55. Similarly, the remaining issues relating to the enforcement of the Boca Raton declaratory statement and the enforcement of federal statutes regarding age discrimination are not rules and therefore not appropriately raised in this proceeding.

ORDER

Based on the foregoing findings of fact and conclusions of law, it is hereby,

ORDERED:

The DIVISION's non-rule policies as cited above constitute rules and violate the provisions of Section 120.535(1), Florida Statutes. Pursuant to Section 120.535(4), Florida Statutes, the DIVISION shall discontinue all reliance upon such statements as a basis for further agency action, except as otherwise provided by Section 120.535(5),Florida Statutes.

DONE and ORDERED this 11th day of April, 1996, in Tallahassee, Leon County, Florida.

RICHARD HIXSON, 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 11 day of April, 1996.

APPENDIX

To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact:

Respondent's Proposed Findings of Fact

1.-19. Accepted and incorporated, pursuant to the prehearing stipulation.

20. Rejected as not necessary.

21.-22. Accepted to the extent that Division has made continued good faith efforts to present these issues to the Legislature for resolution.

23.-27. Accepted for legislative history purposes.

28.-31. Accepted as to the Division's expression of its non- rule policy

As set forth in the Preliminary Statement, above, the remaining parties' proposals are not addressed individually

COPIES FURNISHED:

Mirella Murphy James Assistant City Attorney Post Office Box 2842

St. Petersburg, Florida 33731

Robert B. Button, Esquire Assistant Division Attorney Division of Retirement

Building D, Cedars Executive Center 2639 North Monroe Street Tallahassee, Florida 32399-1560

Robert D. Klausner, Esquire and Ronald Jay Cohen, Esquire 6565 Taft Street, Suite 200

Hollywood, Florida 33024

David E. Ramba

Assistant General Counsel and Jane Hayman

Deputy General Counsel Florida League of Cities Post Office Box 1757

Tallahassee, Florida 32302-1757

Frederick M. Rothenberg, Esquire HOLLAND and KNIGHT

Post Office Box 1288 Tampa, Florida 33601-1288 and

Lawrence P. Stevenson, Esquire HOLLAND and KNIGHT

Post Office Box 810 Tallahassee, Florida 32302

Scott R. Christiansen, Esquire CHRISTIANSEN and DEHNER, P.A.

2975 Bee Ridge Road, Suite C Sarasota, Florida 34239

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.

================================================================= FIRST DCA ORDER DISMISSING APPEAL

=================================================================

DISTRICT COURT OF APPEAL, FIRST DISTRICT

Tallahassee, Florida 32399

Telephone No. (904) 488-6151

September 30, 1996

CASE NO: 96-01817

L.T. CASE NO. 95-5089RU

City of St. Petersburg & v. Division of Retirement City of Largo

Appellant(s), Appellee(s).

BY ORDER OF THE COURT:

Appeal dismissed pursuant to Rule 9.350(b), Fla.R.App.P.

I HEREBY CERTIFY that the foregoing is (a true copy of) the original court order.

JON S. WHEELER, CLERK

By: Deputy Clerk

Copies:

Michael S. Davis Mirelle M. James

Robert B. Button Robert D. Klausner

David Ramba Jane C. Hayman

Fredrick M. Rothenberg Lawrence P. Stevenson

Scott R. Christiansen Ronald J. Cohen

Thomas J. Jones Susan L. Turner Ann Cole, Agency Clerk

Docket for Case No: 95-005089RU

Orders for Case No: 95-005089RU