STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ALACHUA COUNTY, )

)

Petitioner, )

)

vs. ) CASE NO. 80-811

)

FLORIDA DEPARTMENT OF )

TRANSPORTATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William E. Williams, held a public hearing in this cause on November 13, 1980, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Peter Skoro, Esquire

Deputy County Attorney Post Office Drawer "CC"

Gainesville, Florida 32602

For Respondent: Philip S. Bennett, Esquire

Haydon Burns Building Tallahassee, Florida 32301

Petitioner, Alachua County, Florida (hereinafter "Petitioner" or "Alachua County") seeks to recoup from Respondent, Florida Department of Transportation (hereinafter "Respondent" or "DOT") monies consisting of proceeds from the sale of road bonds secured by revenues from the so-called "Second Gas Tax", which Petitioner alleges that DOT wrongfully expended to acquire rights-of-way for the State Highway System. DOT denied Petitioner's claim, and this matter was referred to the Division of Administrative Hearings to conduct a formal hearing pursuant to Section 120.57(1), Florida Statutes. The hearing was origina11y scheduled for August 7 and 8, 1980 by Notice of Hearing dated May 19, 1980.

Thereafter, the parties stipulated to many of the facts at issue in this proceeding, and final hearing was rescheduled for November 13, 1980 by Notice of Hearing dated October 29, 1980.

At the final hearing, Petitioner called Jean Cogburn, Carmen Hiers and Ed Culpepper as its witnesses. Respondent called Walter Howard Skinner, III, as its only witness. The parties stipulated to the entry into the record of Hearing Officer's Exhibit No. 1, with attached Exhibits 1 through 21, and Hearing Officer's Exhibit No. 2.

FINDINGS OF FACT

1. The parties entered into a Stipulation resolving many of the factual disputes involved in this proceeding. This Stipulation included attached Exhibits 1-21, which were referred to by number in the Stipulation. The Stipulation, in its entirety, provided as follows:

   
   

   1. On August 1, 1973, and February 1, 1976, the State of Florida issued full faith and credit road bonds on behalf of Alachua County, Florida, said bonds having a face value of $3.8 million and $4.0 million,

      respectively (see Exhibits 1 and 2). The 1976 bonds were issued in parity with the 1973 bonds. The Alachua County portion of the fifth and sixth cent gas tax (Second Gas Tax) were pledged for the payment of "the principal of and interest on the bonds."

   2. The 1973 and 1976 bonds were issued

      to pay for certain specified road construction projects and unspecified "rights-of-way acquisition for Primary and Secondary roads throughout Alachua County" (see Exhibits 1 and 2, pp. 6) .

   3. Prior to July 1, 1977, the Florida Department of Transportation (DOT) controlled the expenditure of the counties' portion of the Second Gas Tax fund pursuant to statute.

   4. Prior to July 1, 1977, upon priorities established jointly by the counties and

      the DOT, the counties through their respective boards of county commissioners adopted resolutions and signed agreements authorizing the

      DOT to expend county Second Gas Tax funds and road bonds (such as the Alachua County road

      bond funds) on road construction and right- of-way acquisition projects within the counties. Upon receiving such authorization, the Florida DOT administered and supervised all aspects of the road projects.

   5. Exhibits 3, 4, and 5 (attached hereto) consist of the requisite county resolutions (requesting initiation of road

      projects and specifying the- source of funds) and right of way acquisition agreements for Alachua County road projects initiated by the Florida Department of Transportation, prior

      to July 1, 1977, said projects being identified as numbers 26070-2532, 26070-2533 and

      26250-2501, respectively.

   6. Exhibits 6, 7, and 8 (attached hereto) consist of right-of-way agreements,

      right-of-way appraisal agreements, and orders of taking in condemnation suits, executed prior to July 1, 1977, which pertain to the road projects identified in Paragraph 5 above.

   7. Exhibits 9 and 10 (attached hereto)

      are of the same character as Exhibits 6, 7, and 8, but were executed after July 1, 1977.

   8. Exhibit 11 (attached hereto) represents a summary of expenditures, by year, for

      each of the above-enumerated right-of-way acquisition projects.

   9. The Florida Department of Transportation committed and expended approximately

      $500,000 to $600,000 of Alachua County road bond funds after July 1, 1977, for acquisition of Primary rights-of-way. These expenditures

      included acquisition of real property, surveying costs, appraisals, general personnel and

      office operation costs of the Florida Department of Transportation.

   10. Prior to July 1, 1977, the three

       above-enumerated road projects were designated

       as part of the state Primary Road System, pursuant to statute. After July 1, 1977, pursuant

       to Chapter 77-165, Laws of Florida, the three above-enumerated road projects were designated as part of the State Road System. Chapter

       77-165, Laws of Florida, establish [sic] three road classification systems including State roads,

       County roads, and Municipal roads, Pursuant to

       law, each jurisdiction was to assume administrative, operational, and financial responsibility

       for its respective road system.

   11. Pursuant to Chapter 77-165, Laws of Florida, Florida DOT assumed the administrative, operational, and financial responsibility for State roads, and adopted Chapters 14-11 and

       14-12, Florida Administrative Code, to effect this assumption and transfer of responsibility.

   12. Pursuant to Chapter 77-165, Laws of Florida, and Chapters 14-11 and 12, Florida Administrative Code, the Florida DOT requested that the various counties identify those road projects (jurisdiction over which had been transferred to the counties pursuant to the new law) for which the counties desired the

       Florida Department of Transportation to continue administrative responsibility. Attached

       as Composite Exhibit 12 are documents consisting of the Florida DOT's above-noted request

       to Alachua County and Alachua County's response thereto.

   13. After July 1, 1977, Alachua County never requested, through resolution or signed agreement, that the Florida Department of Transportation acquire rights-of-way on the

       three above-identified rights-of-way acquisition projects. Alachua County did not adopt

       resolution [sic] in the same form used to initiate the road projects (see Exhibits 3, 4, and 5) requesting the Florida Department of Transportation to discontinue acquisition of said

       rights-of-way; however, there was an exchange of correspondence between representatives of both Alachua County and the Florida Department of Transportation subsequent to July 1,

       1977, relative to the issue of bond monies, copies of which letter [sic] are attached hereto as Composite Exhibit Number 13.

   14. Exhibit 14 consists of a DOT Office of Management and Budget circular which was distributed throughout the various offices,

       including District Offices, of the Department of Transportation. Exhibit 15 (which is a July 22, 1977, letter) was distributed to the various boards of county commissioners for the counties within the State of Florida.

   15. For fiscal year 1977-1978, the

       Florida Legislature appropriated to the Florida Department of Transportation at Chapter 77-464, Laws of Florida, the amount of $20 million for the specific purpose of acquiring Primary rights-of-way for the new State Road System.

       Similar appropriations have been awarded to the Department of Transportation in subsequent fiscal years.

   16. On or about October 18, 1977, the Florida Department of Transportation pursuant to Chapter 77-165, Laws of Florida, for the purpose of affecting said law, promulgated rules as set forth at Chapters 14-11 and 14-12, Florida Administrative Code.

   17. In connection with the February 1,

       1976, bond issue, the road construction project denominated as Southeast 40th Avenue (see page 6 of Exhibit 2) remains uncompleted as of this

       date and there are insufficient monies remaining in the Alachua County road bond fund to

       complete said project. As of July 21, 1980,

       $28,317.01 remains in the February 1, 1976, bond issue fund.

   18. Attached as Composite Exhibit 16 is an August 23, 1977, letter from the Palm Beach County Engineer to Board of County Commissioners, an August 26, 1977, letter

       from Palm Beach County Director of Engineering Coordination to the Florida Department of Transportation, and a copy of resolution number R-77-859, said resolution dated August 23, 1977.

   19. Attached as Exhibit Number 17 are documents showing that the Florida Department of Transportation, with the concurrence of the Alachua County Board of County Commissioners, transferred $1.2 million from the Alachua County road bond account to the Second Gas Tax account of Alachua County.

   20. Attached as Exhibits 18 and 19, respectively, are the January 30, 1973, and August 5, 1975, resolution of the Alachua

       County Commission issued in connection with the August 1, 1973, and February 1, 1976, bond issues.

   21. Attached as Exhibits 20 and 21, respectively, are the August 1, 1973, Lease Purchase Agreement and the February 1, 1976, Supplemental Lease Purchase Agreement prepared in connection with their respective bond issues.

   22. The parties to this stipulation agree to submit into evidence the depositions taken

       by Petitioner of Leon Cassels, Florida Department of Transportation, Comptroller; Tom Webb,

       Florida Department of Transportation, Deputy Director of Operations; Gene Mynard, Florida Department of Transportation, Fiscal Division Accountant; Fred Renault, Florida Department of Transportation, Chief, Bureau of Right-of-Way; Chuck Butterworth, Florida Department of Transportation, Fiscal and Securities Analyst; Robert (Bob) Taff, Florida Department of Transportation, Contracts Supervisor.

       
       

2. Subsequently, the parties by Supplemental Stipulation further agreed as follows:

   
   

   The Florida Department of Transportation expended $590,018 of Alachua

   County road bond funds after July 1, 1977, in connection with road projects

   number 26070-2532, 26070-2533, and 26250-2501;

   and this sum represents the amount of money Alachua County claims should be reimbursed by the Florida Department of Transportation.

   
   

3. Testimony adduced at the final hearing on November 13, 1980, established that upon sale of the bond issues in dispute in this proceeding, the State Board of Administration set up a separate two-part account for each bond issue. The first portion of the account consists of a "sinking fund" containing the necessary reserve requirement together with a portion of the Second Gas Tax sufficient to make maturity payments falling due within any given year. The remaining portion of the bond proceeds were placed in a "construction account", whose contents were invested by the State Board of Administration until drawn down by DOT to fund specific projects. Any amounts of the Second Gas Tax not required to be deposited in the "sinking fund" to meet maturity requirements were available, prior to July 1, 1977, for distribution to Alachua County through DOT. After July 1, 1977, of course, the Second Gas Tax proceeds, if not otherwise encumbered, were distributed directly to Alachua County.

   
   

4. By Resolution dated January 30, 1973, Petitioner requested the Division of Bond Finance and the Department of Transportation to finance and construct highway improvement projects by means of a bond issue in the amount of

   $3,800,000, and by additional resolution dated August 5, 1975, Petiti- requested the issuance of additional bonds in the amount of $4,000,000 for the

   same purpose. In identical wording in both resolutions Petitioner indicated its ". opinion that adequate highways are necessary and desirable to the progress and development of the State and County . . ., and that ". . neither the

   Department of Transportation . nor the County has sufficient funds to finance such construction . . "

   
   

5. As previously indicated, the dispute between the parties in this proceeding concerns some $590,018 of Alachua County road bond funds expended after July 1, 1977, on DOT project Numbers 26070-2532, 26070-2533 and 26350- 2501. Each of these projects was the subject of a separate resolution adopted by the Board of County Commissioners of Alachua County, Florida. Project Numbers 26070-2532 and 26070-2533 involved right-of-way acquisition for construction and improvements to State Road 26 in Alachua County. Project Number 26250-2501 involved right-of-way acquisition for construction and improvements to State Road 121 (34th Street) in Alachua County. In identical language in each of these resolutions, the Board of County Commissioners of Alachua County, Florida authorized the ". . . use by the Florida Department of Transportation of such portions of bond proceeds as are needed to acquire right- of-way for construction and improvements to State Roads 26 and 121. As previously indicated, these resolutions were never rescinded by Petitioner.

   
   

   CONCLUSIONS OF LAW

   
   

6. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes.

   
   

7. Article XII, Section 9(c) of the Florida Constitution provides, in part, as follows:

   
   

   1. A state tax, designated "second gas tax," of two cents per gallon upon gasoline and other like products of petroleum and an equivalent tax upon other sources of energy used to propel motor vehicles as levied by Article IX, Section 16, of the Constitution of

      1885, as amended, is hereby continued for a period of forty consecutive years. The proceeds of said

      tax shall be placed monthly in the state roads distribution fund in the state treasury.

   2. Article IX, Section 16, of the Constitution of 1885, as amended is adopted by this

   reference as a part of this revision as completely as though incorporated herein verbatim

   for the purpose of providing

   that after the effective date of this revision the proceeds of the "second

   gas tax" as referred to therein shall be allocated among the several counties in accordance with the formula stated therein to the extent necessary to comply with all obligations to or for the benefit of holders of bonds,

   revenue certificates and tax anticipation certificates or any refundings

   thereof secured by any portion of the

   "second gas tax."

   (5) Funds allocated under paragraphs

   (2) and (4) of this subsection

   shall be administered by the state board of administration created under said

   Article IX, Section 16, of the Constitution of 1885, as amended, and which is

   continued as a body corporate for the life of this subsection 9(c). The board shall remit the proceeds of the "second gas tax" in each county account for use in said county as follows: eighty per cent to the state agency supervising the state road system and twenty per cent to the governing body of the county. The percentage allocated to the county may

   be increased by general law. The proceeds of the "second gas tax" subject to allocation to the several counties under this paragraph (5) shall be used first, for the payment of obligations pledging revenues allocated pursuant to Article IX, Section 16, of the Constitution of 1885, as amended, and any refundings thereof; second, for the payment of debt service

   on bonds issued as provided by this paragraph

   (5) to finance the acquisition and construction of roads as defined by law;

   and third, for the acquisition and construction of roads. When authorized by law, state

   bonds pledging the full faith

   and credit of the state may be issued without any election: (i) to refund obligations secured by any portion of the second gas tax" allocated to a county

   under Article IX, Section 16, of the Constitution of 1885, as amended; (ii) to

   finance the acquisition and construction of roads in a county when approved by the governing body of the county and the state agency supervising the state road system; and (iii) to refund obligations secured by

   any portion of the "second gas tax" allocated under paragraph 9(c)(4). No such

   bonds shall be issued unless a state fiscal agency created by law has made a determination that in no state fiscal year will the

   debt service requirements of the bonds and all other bonds secured by the pledged portion of the "second gas tax" allocated to the county exceed seventy-five per

   cent of the pledged portion of the "second gas tax" allocated to that county for

   the preceding state fiscal year, of the pledged net tolls from existing facilities collected in the preceding state fiscal year; and of the annual

   average net tolls anticipated during the first five years of operation of new projects to be financed. Bonds issued pursuant to this subsection shall be payable primarily from the

   pledged . . . portions- of the "second gas tax" allocated to that county. (Emphasis added).

   
   

8. Section 206.47, Florida Statutes, which governs the distribution of second gas tax proceeds pursuant to Article XII, Section 9 of the Florida Constitution, quoted above, provides, in pertinent part, as follows:

   
   

   1. The second gas tax shall be allocated among the several counties in accordance with the formula stated in section 16 of Article IX of the

      state constitution of 1885, as amended, to the extent necessary to comply with all obligations to or for the benefit of

      holders of bonds, revenue certificates, and tax anticipation certificates or any refundings thereof secured by any portion of the second gas tax allocated

      under the provisions of section 16, Article IX of the state constitution of 1885, as

      amended.

   2. The department of revenue will transmit the second gas tax as collected monthly to the state board of administration allocated and distributed to the

      credit of the several counties of the state based on the formula of distribution contained in section 16, Article IX of the constitution of 1885, as amended.

   3. The state board of administration will calculate a distribution of

      the second gas tax received from the department of revenue under subsection (2)

      based on the formula contained in section 9 (c)(4),

      Article XII of the revised state constitution of 1968.

   4. The state board of administration shall allocate the second gas tax

   beginning with the tax collected January

   1969 on the formula contained in section 9(c)(4)

   Article XII of the revised state constitution of 1968, subject only to the debt service requirements of bonds pledging all or part

   of the second gas tax allocated under the provisions of section 16, Article IX of the state constitution of 1885, as amended

   (7) The gas tax funds credited to each county will be first distributed to meet the debt service requirements, if any, of the section 16, Article IX debt assumed or refunded by the state

   board of administration payable from the second gas tax. The remaining gas tax funds credited

   to each county are surplus gas tax and shall be divided 80 percent to the

   department of transportation and 20 percent to the board of county commissioners of the county for the acquisition and construction

   of roads.

   (9) The state board of administration will, in each fiscal year, distribute the

   80 percent surplus gas tax allocated to

   each county to the debt service requirements of each bond issue pledging the

   80 percent surplus accruing to that county

   under the provisions of section 16, Article IX of the state constitution of 1885, as amended.

   The remaining 80 percent surplus gas tax funds will be advanced monthly, to the extent practicable, to the department of transportation for use in the county. (Emphasis added).

   
   

9. The 1977 Florida Legislature, by enacting Chapters 77-165 and 77-416, Laws of Florida, substantially restructured the State road system by transferring administrative responsibility over what had been the "primary" road system to DOT, and what had been the "secondary" road system to the individual counties. Thus, Section 335.02(3), Florida Statutes, was amended to require DOT to utilize its own appropriated funds to ". . . purchase all rights of way .

   . . for any roads designated as state roads in the state highway system or the interstate system

   
   

10. Further, Section 339.089, Florida Statutes, was amended by the 1977 Legislature to read, in pertinent part, as follows:

    
    

    1. Any county which has agreed prior to July 1, 1977, by resolution, to use the surplus of the second gas tax to provide a connecting road to

       a planned interchange on the interstate system shall provide such

       connecting road.

    2. Any surplus which is not otherwise used to provide connecting roads pursuant to subsection (1) shall be used for a connected system of county roads within the county . . . .

    
    

11. Section 339.08(3), Florida Statutes, was amended by the 1977 Legislature to read as follows:

    
    

    1. Beginning July 1, 1977, the department shall develop and implement a phased transfer of the administrative responsibility for construction programs financed by the 80 percent portion of the second gas tax to the respective

       counties. In counties of over 100,000 population, this transfer of

       responsibility shall be made at the rate of not less than 20 percent per year and shall

       be completed by July 1, 1980 . . .

    2. All projects let to construction contract on or before June 30, 1977, shall be completed by the department. If requested by a county, the department may undertake or complete all stages of a project if it can be completed through the construction stage by July 1, 1980. Adequate arrangements shall be agreed to between the counties and the department to ensure that the department has

    sufficient funds to complete its projects as previously indicated. (Emphasis added).

    
    

12. As indicated in the Findings of Fact, it is undisputed that DOT expended $590,018 of Alachua County road bond funds to acquire rights-of-way for the state road system after July 1, 1977, the effective date of legislative amendments transferring administrative responsibility for the 80 percent portion of the second gas tax funds to the counties. Accordingly, Petitioner contends that funds thus expended should be reimbursed to the county by DOT for use in accordance with the County's priorities for its own road system. The gist of Petitioner's argument is that effective July 1, 1977, DOT was precluded from using the County's second gas tax funds to acquire rights-of-way for the state highway system by virtue of the aforementioned 1977 legislative amendments. It is, however, concluded as a matter of law that Petitioner's contentions in this regard are without merit.

    
    

13. At Petitioner's behest proceedings were initiated culminating in the issuance of road bonds, proceeds from which were to be used, in part, for ". . . [r]ight-of-way acquisition for Primary and Secondary roads throughout Alachua County." At all times material to this proceeding Petitioner knew, or should have known, that all parts of the project financed by the road bonds would become part of the state road system. After the bonds were issued, Petitioner by resolution specifically requested that DOT ". . . use . . . such portion of bond proceeds as are needed to acquire right-of-way . . ." for improvements to the very roads which are here in dispute. Acquisition of these rights-of-way was undertaken prior to July 1, 1977, and was completed prior to July 1, 1980. There is no showing in this record that DOT would have had any interest in acquiring these rights-of-way for the state road system in the absence of the request to do so by Alachua County. This record clearly reflects that DOT acted in accordance with the bond documents and accompanying resolutions in expending the disputed $590,018 in Alachua County road bond funds. Under these circumstances, Petitioner is estopped to dispute the propriety of those expenditures. State ex rel. Barnett National Bank of Deland v. Thursby, 150 So.252 (Fla. 1933); Metropolitan Dade County Water and Sewer Board v. City of North Miami, 213 So.2d 482 (Fla. 3d DCA 1968)

    
    

14. n addition, throughout the constitutional and statutory framework creating the Second Gas Tax and authorizing the issuance of bonds secured by revenues generated by that tax, outstanding bonds are accorded preferential treatment and are dealt with specifically in establishing priorities for payment. The 1977 amendments, though restructuring administrative responsibilities for Second Gas Tax funds, make no mention of projects funded by

outstanding bonds secured by those funds. It is, therefore, further concluded that by failing to specifically address outstanding bond issues in the 1977 amendments, the Legislature intended that those amendments should not apply to projects funded by bonds. See, e.g. Wanda Marine Corp. v. Department of Revenue, 305 So,2d 65 (Fla. 1st DCA 1975).

RECOMMENDED ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:

That a final order be entered by the State of Florida, Department of Transportation, denying the relief requested by Petitioner.

DONE AND ENTERED this 2nd day of April, 1981, in Tallahassee, Florida.

WILLIAM E. WILLIAMS

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301 904/488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2dd day of April, 1981.

COPIES FURNISHED:

Peter Skoro, Esquire Deputy County Attorney Post Office Drawer "CC"

Gainesville, Florida 32602

Philip S. Bennett, Esquire Haydon Burns Building Tallahassee, Florida 32301

Docket for Case No: 80-000811

Orders for Case No: 80-000811