STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ORANGE PARK BILLIARDS AND SPORTS PUB, INC.,

Petitioner,

vs.

DEPARTMENT OF TRANSPORTATION,

Respondent.

/

Case No. 13-1193

RECOMMENDED ORDER

Pursuant to notice to all parties, the final hearing was conducted in this case on August 1, 2013, by way of video teleconferencing with sites in Tallahassee and Jacksonville, Florida, before Administrative Law Judge R. Bruce McKibben of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Bruce B. Humphrey, Esquire

Birchfield & Humphrey, P.A. 1031 LaSalle Street

Jacksonville, Florida 32207

For Respondent: Susan Schwartz, Esquire

Assistant General Counsel

Florida Department of Transportation 605 Suwannee Street, Mail Station 58

Tallahassee, Florida 32399-0458 STATEMENT OF THE ISSUE

Whether Petitioner, Orange Park Billiards and Sports Pub, Inc. (the “Bar”), should be reimbursed by Respondent, Department

of Transportation (the “Department” or “DOT”), for costs associated with obtaining a new liquor license incident to its relocation as a displaced tenant pursuant to section 421.55, Florida Statutes (2012).

PRELIMINARY STATEMENT

By letter dated May 8, 2012, the Bar was notified that the Department was in the process of acquiring right of way for a new road-building project. The right of way would include the property the Bar was leasing from the Comfort Inn in Clay County, Florida. The Bar thereafter made a claim for certain costs associated with its relocation. The Department denied the claim, and the Bar timely filed an appeal of the denial.

The Bar’s appeal of the denied claim was forwarded to the Division of Administrative Hearings (DOAH) and assigned to Administrative Law Judge McKibben.

At the final hearing in this matter, the Bar called the following witnesses: Terry Harper; Steve Chelgren, owner and operator of the Bar; Beth Breeding, real estate broker;

Horace Moody; and Scott Steadman, forensic accountant. Exhibits A–I offered by the Bar were admitted into evidence. The Department called two witnesses: Katherine Maxwell, relocation administrator; and Robert Knight, relocation manager. Exhibits A–I offered by DOT were admitted into evidence.

The parties advised the undersigned that a transcript of the final hearing would be ordered. By rule, the parties have 10 days from the date the transcript is filed at DOAH to submit proposed recommended orders. The transcript was filed at DOAH on July 31, 2013. Each party timely filed a Proposed Recommended Order and each was considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Bar was a billiards and sports pub located in Clay County, Florida. It was, at all times relevant hereto, located within the Comfort Inn, a hotel situated on US Highway 17 in Clay County. US 17 is called Park Avenue in Clay County, but becomes Roosevelt Boulevard when it crosses into Duval County. The Clay

   -- Duval county line is just north of the Comfort Inn site.

   
   

2. The Bar was formerly owned by Terry Harper, who had purchased “State of Florida Quota Alcoholic Beverage License No. 20-01226, a 3PS series License for use in Clay County, Florida” in June 2009.

3. The Bar was purchased from Harper by Steve Chelgren on or about January 1, 2010. The purchase was made by way of a promissory note, and Chelgren made timely payments on the note for the first couple of years.

4. There is a dog racetrack located next door to the Bar.

   
   

   The racetrack also has a poker room. Pari-mutuel gambling is

   
   

   allowed on the dog races and the poker games. The Bar receives a lot of business from the patrons of the dog track, as much as 25 percent of the Bar’s total business. The Jacksonville Naval Air Station is located adjacent to Roosevelt Boulevard just across the Duval County line. Many Bar patrons are sailors and employees of the Naval Air Station. There are approximately 69,500 cars passing the Bar site each day. The Bar is in a good area for attracting customers.

5. In 2012, the Department acquired the Comfort Inn property as part of a state and federal road project. By way of a letter dated May 8, 2012, the Department notified Chelgren that the Comfort Inn property was being acquired. The letter gave Chelgren “at least 90 days” to relocate his business to another site. Chelgren was also advised about “advisory services and payments under the Relocation Assistance program,” which he may be eligible to receive as a result of the displacement. The program provided money for moving expenses and other services.

6. Chelgren immediately began looking for a place to relocate his business. In order to accommodate the same clientele and continue business as normal, Chelgren first considered the Roadway Inn located just across US 17/Park Avenue from his present location. The Roadway Inn site would be in close proximity to the dog track and the Naval Air Station. Unfortunately, his construction inspection experts told Chelgren

   
   

   that the Roadway Inn had too many problems and would be prohibitively expensive to renovate.

7. Chelgren then began looking elsewhere for a suitable location to relocate the Bar. He did not find a viable option in Clay County, so he began looking in Duval County. Chelgren ultimately settled on a site in Jacksonville Beach, some 30 miles from the Bar’s location in Clay County. The Jacksonville Beach site reportedly had a comparable amount of traffic and was likely to produce customers similar in number to the Comfort Inn site in Clay County.1/

8. There was one major difference between the two sites: The liquor license purchased by Chelgren in Clay County costs about $59,000; a similar license in Jacksonville Beach would cost about $400,000. The license under which the Bar operated was a 4COP license, which allows for the sale of beer, wine, and liquor and does not require the establishment to sell a certain percentage of non-alcoholic products, i.e., food, clothing, etc. There was no testimony or evidence presented at final hearing as to how a 4COP license differs from the 3PS license held by Chelgren in Clay County (except that the number at the beginning of the license type designates the county in which it is located). It is presumed for purposes of this Recommended Order that the licenses are effectively the same.

   
   

9. The City of Jacksonville Beach only allows 12 4COP (or “quota”) licenses within its city limits at any one time. While other cities may increase the number of quota licenses as the population grows, Jacksonville Beach decided to limit the number of licenses without regard to population increases. As a result, the Jacksonville Beach licenses increase in value beyond similar licenses in other locations.

10. At some point after finding the Jacksonville Beach location, Chelgren contacted the Department about obtaining reimbursement for a new liquor license at a replacement location in Jacksonville Beach. The Department, by letter dated

    November 5, 2012, notified Chelgren that his request was denied. DOT would pay for the “remaining useful life of the existing license,” but nothing more. It cost $1,820 per year to renew the liquor license, so DOT said it would pay the pro rata share of that payment for the time remaining before the next renewal.

11. The Department’s decision to deny Chelgren’s request for payment of the new 4COP license was then appealed. The appeal letter is dated January 3, 2013.

12. By letter dated January 29, 2013, DOT notified Chelgren that his appeal was denied. He was given the right to appeal further by filing a request for formal administrative hearing, which precipitated the instant action.

    
    

13. Pending resolution of the challenge to DOT’s decision, Chelgren, nonetheless, decided to make the move to the Jacksonville Beach location and to rename the business, “The Tavern on First Street.” He entered into a purchase and sale agreement dated January 16, 2013, agreeing to purchase a liquor license for the sum of $400,000 with $40,000 down and $1,500 due per month at 5 percent interest.

14. No evidence was presented as to the volume of customers at the new location, as to the automobile traffic volume, or whether the site is indeed comparable to the location of the Bar in Clay County.

15. No evidence was presented as to whether Chelgren sold his Clay County license in an effort to mitigate his damages, or whether such a sale was even possible.

16. Chelgren now operates the Tavern at First Street under a 4COP license purchased for that purpose. He continues to seek reimbursement for the cost of that license. DOT maintains its

    denial of the request.

    
    

    CONCLUSIONS OF LAW

    
    

17. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. § 120.57, Fla. Stat. (2013). Unless specifically stated otherwise herein, all references to Florida Statutes shall be to the 2012 codification.

    
    

18. The Department has statutory authority to pay certain expenses for the relocation and reestablishment of a small business displaced by the Department’s acquisition of real property for a public transportation project. §§ 339.09(2) and 421.55, Fla. Stat.

19. Florida Administrative Code Rule 14-66.007 implements sections 339.09 and 421.55, as the Relocation Assistance Program. That rule states, in paragraph (1), that the purpose of the program is to:

    [G]overn the provision of relocation services, moving costs, replacement housing costs, and other related expenses and to ensure that each person displaced as a direct result of a transportation project is treated fairly, consistently, and equitably, so that such person will not suffer disproportionate injury as a result of projects designed for the benefit of the public as a whole, and to ensure that the Department implements these regulations in a manner that is efficient and cost effective.

    
    

    The Rule goes on to say, in paragraph (7), that “any displaced person is entitled to payment of his or her actual moving and related expenses, as the Agency determines to be reasonable and necessary, as outlined in 49 C.F.R. Part 24, subject to [certain enumerated] provisions: . . .”.

20. The federal Department of Transportation implemented the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. section 4601 et seq.), as

    
    

    amended, in 49 C.F.R. section 24.1 et seq. Rule 14-66.007 incorporates the federal rule in determining whether requested expenses are to be paid.

21. Federal Regulation 49 C.F.R. section 24.304 provides for payment of reestablishment expenses for a small business. Specifically, the regulation provides, in relevant part:

    In addition to the payments available under

    §§ 24.301 and 24.303 of this subpart, a small business, as defined in § 24.2(a)(24), farm or nonprofit organization is entitled to receive a payment, not to exceed $10,000, for expenses actually incurred in relocating and reestablishing such small business, farm or nonprofit organization at a replacement site.

    
    

    Such reestablishment expenses must be “reasonable and necessary” as determined by the Department. A list of eligible and ineligible expenses is included in the regulation for guidance. For example, eligible items are such things as repairs, improvements, or modifications to real property; advertising; estimated increase of operations for lease or rental charges, taxes, and insurance. Ineligible items would include purchase of capital assets, manufacturing materials, production supplies, or inventory; and interest on money borrowed. The cost of purchasing a new license or certificate is not included as either an eligible or ineligible expense.

22. The Relocation Assistant Program is set forth in the Department’s Right of Way Manual. Section 9.3 of the manual

    
    

    addresses payments for moving and related expenses for a displaced person. Eligible moving expenses include such things as transportation, packing, storage, dismantling and reassembling equipment, and the replacement value of lost, stolen or damaged property. Section 9.3.7(g) also includes, “Other moving expenses that are not listed as ineligible as the District Relocation Administrator determines to be reasonable and necessary.”

23. Ineligible expenses are set forth in the manual at section 9.3.8. Loss of profits is specifically declared an ineligible expense. The section also disallows “Any additional operating expenses of a business . . . incurred because of operating in a new location, except those actual, reasonable expenses allowed as an eligible re-establishment expense as provided in 49 C.F.R. Part 24.304(a)(6), also described in Section 9.3.15(a)(6).” Those excepted re-establishment expenses are defined as the:

    Estimated increased costs of operation during the first 2 years at the replacement site for such items as:

    
    

    1. Lease or rental charges;

    2. Personal or real property taxes;

    3. Insurance premiums; and

    4. Utility charges, excluding impact fees.

       
       

       49 C.F.R. 24.304(a)(6).

       
       

24. A new liquor license in an adjoining county is not designated as an eligible expenses and does not fall within any of the exception.

25. Section 9.3.7(K) of the manual allows payment for “Any license, permit, fees or certification required of the person at the replacement location. However, the payment may be limited to the remaining useful life of the existing license, permit, fees or certification as issued through the applicable regulating agency.” The Department has always interpreted this section to mean that it must only pay for the remaining useful life of a license. In this case, DOT agreed to pay the pro rata amount of Chelgren’s Clay County license renewal fee.

26. The burden of proof is on the party asserting the affirmative of an issue before an administrative tribunal. Fla.

    Dep’t of Transp. v. J.W.C. Corp., 396 So. 2d 778 (Fla. 1st DCA 1981); Balino v. Dep’t of HRS, 348 So. 2d 349 (Fla. 1st DCA 1977). Accordingly, Chelgren bears the burden of proof in this proceeding by a preponderance of the evidence that he is entitled to receive reimbursement for the cost of a new liquor license in Duval County, Florida.

27. Chelgren failed to establish any basis whatsoever in the law that the cost of the new 4COP liquor license in Jacksonville Beach was a valid, reasonable or necessary replacement or reestablishment cost.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Transportation enter a final order affirming its denial of Orange Park Billiards and Sports Pub, Inc.’s application for reimbursement of its cost for a new liquor license.

DONE AND ENTERED this 9th day of September, 2013, in Tallahassee, Leon County, Florida.

S

R. BRUCE MCKIBBEN Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 9th day of September, 2013.

ENDNOTE

1/ The testimony concerning this fact was scant, however, and not convincing.

COPIES FURNISHED:

Susan Schwartz, Esquire Department of Transportation

Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399-0450

Bruce Burnett Humphrey, Esquire Birchfield and Humphrey, P.A.

1031 LaSalle Street

Jacksonville, Florida 32207

Ananth Prasad, Secretary Department of Transportation

Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399-0450

Gerald D. Curington, General Counsel Department of Transportation

Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399-0450

Trish Parsons, Clerk Department of Transportation

Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399-0450

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 13-001193

Orders for Case No: 13-001193