STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CHARLEY TOPPINO & SONS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 80-854

)

STATE OF FLORIDA, DEPARTMENT )

OF TRANSPORTATION, and STATE )

OF FLORIDA, DEPARTMENT OF )

ENVIRONMENTAL REGULATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, conducted a public hearing in this matter on July 29, 1980, in Tallahassee, Florida, and on July 31, and August 1, 1980, in Key West, Florida. The following appearances were entered: Joseph C. Jacobs and Melissa F. Allaman, Tallahassee, Florida, on behalf of the Petitioner, Charley Toppino & Sons, Inc.; James Anderson, Tallahassee, Florida, on behalf of the Respondent, Florida Department of Transportation; and H. Ray Allen, Tallahassee, Florida, on behalf of the Respondent, Florida Department of Environmental Regulation.

On or about February 20, 1980, the Florida Department of Transportation ("DOT" hereafter) filed an application with the Department of Environmental Regulation ("DER" hereafter) for a variance under Section 403.201, Florida Statutes, from the water quality provisions of DER's rules and regulations. Additional information was requested by DER, and was submitted by DOT on March 11, 1980. DER gave notice of its intent to grant the variance subject to conditions by Notice dated April 15, 1980. Petitioner thereafter filed its request for a formal hearing under Section 120.57(1), Florida Statutes. DER forwarded the matter to the office of the Division of Administrative Hearings and requested that a Hearing Officer be assigned to conduct further proceedings on May 5, 1980. The final hearing was scheduled as set out above by Notice dated May 14, 1980.

A prehearing conference was scheduled and conducted in this matter shortly after it was forwarded to the Division of Administrative Hearings. The parties at that time agreed to a scheduling of the final hearing as set out above.

Thereafter DOT filed a request for expedition of the hearing, asserting that a delay of one month in this proceeding could result in inordinate expense to the State. The motion was denied by Order entered May 23, 1980, for the reason that the matter could not possibly be expedited in such a way as to alleviate the circumstances DER referenced in its motion, and for the further reason that a proper hearing could not be conducted under such a timetable. Other motions were resolved by Orders entered June 23, July 1, and July 21, 1980. At the Final Hearing, DOT called the following witnesses: J.W. Brown, a professional engineer who serves as DOT's Director of Road Operations; Charles J. Allen,

DOT's Environmental Permits Administrator; James Warren Cunningham, DOT's Assistant for Preliminary Roadway Plans; George Rankin, a professional engineer who was formerly in the Special Estimates Section of DOT; John C. Goodnight, DOT's District Engineer for District VI; and Foster Lee Malloy, an estimator employed by a private construction company. DER called the following witnesses: Jeremy Kraft, the Administrator of DER's Standard Permitting Section; Kevin Erwin, a marine biologist employed with DER; and Stephen Fox, DER's Director of Environmental Permitting. The Petitioner called the following witnesses: Stephen D. Hart, an environmental specialist employed with DER; Richard Diffenderfer, an area engineer employed by the Federal Highway Administration of the United States Department of Transportation; Ted Tyson, a member of Petitioner's Board of Directors; Donald Kosin, an employee of the Refuge Division of the United States Fish and Wildlife Service, who manages the Florida Key Deer Refuge; John Carbon, an environmental biologist employed by Monroe County; Vincent M. Drost, a realtor and developer; Leonard Plot, the Petitioner's Vice President; and Frank P. Toppino, the Petitioner's President.

Richard C. Mikelsen, a member of the Cudjoe Gardens Homeowners Association, testified as an interested member of the public and expressed concerns of his homeowners' association with regard to the proposed variance. Official recognition was taken of the provision of DER's rules as published in the Florida Administrative Code. Hearing Officer's Exhibit, Petitioner's Exhibits

1 through 16, DOT Exhibits 1 through 12, except for portions of Exhibit 11, and DER Exhibits 1 through 7 were all received into evidence. DOT Exhibit 13, and portions of DOT Exhibit 11 were rejected.

DOT is seeking a variance from various water quality provisions of DER's rules so that it can construct an operate a "borrow pit" in the Florida Keys. The issue in this proceeding is whether the variance sought by DOT should be granted because of the financial benefit that would accrue to the State, or denied because of adverse environmental impacts. The Petitioner and DOT have submitted post-hearing legal memoranda, including proposed findings of fact. To the extent that the findings of fact are not adopted in this Recommended Order, they have been specifically rejected as being irrelevant to the issues, or as not being supported by the evidence.

FINDINGS OF FACT

1. DOT has been engaged for some years in a program to improve U.S. Highway 1, which runs through the Florida Keys. The program has involved highway paving, and reconstruction of most of the bridges. The roadway and bridge construction projects require large amounts of fill material. DOT has experienced an increase in the cost of obtaining fill material in the Florida Keys. To lessen the cost of the fill material DOT is seeking to open a borrow pit on Dudjoe Key. The pit, and an adjoining roadway would cover approximately fourteen acres. DOT initially filed a permit application with DER, seeking approval to construct the pit. DER ultimately issued a notice of intent to deny the application on the grounds that reasonable assurances had not been given that the short-term and long-term effects of the proposed project would not violate water quality standards set out in DER's rules and regulations. DOT thereafter filed a request for variance from the water quality standards so that the pit could be permitted. This proceeding ensued.

   
   

2. Petitioner is a Florida corporation which does business in Monroe County, Florida. Petitioner has engaged in numerous public road and bridge construction projects in the Florida Keys and in the selling of fill material for road and bridge construction projects. Petitioner currently owns and operates a "borrow pit" on Cudjoe Key. Petitioner's pit is located within one-

   half mile of DOT's proposed pit. The purpose of the DOT pit would be to provide fill material which the Petitioner currently provides from its Cudjoe Key pit.

   
   

3. DOT originally asserted that operation of a state borrow pit would result in savings of nine million dollars. This assertion has been scaled down to three million dollars, and more recently to 1.5 million dollars. Basically, DOT asserts that fill from a state-owned pit would be cheaper because the operation costs would be approximately the same, but no royalty would need to be paid for the material. DOT sought to establish the amount of potential savings at the hearing through two kinds of analysis: First, DOT offered the testimony of its former cost estimator as to the costs per cubic yard of fill from a state-owned pit as opposed to fill from a private contractor pit; and second, DOT offered bid submissions that have been made by contractors in recently bid projects in the Keys, and which had alternative bids for state-owned and private contractor supplied fill material.

   
   

4. DOT's estimator calculated that the State would save approximately 1.5 million dollars through operation of a state-owned borrow pit. The testimony, however, is not of probative value, and cannot serve as the basis for a finding to that effect. In the first place, many of the estimator's figures were determined through private conversations that he had with various unnamed contractors. This hearsay evidence is not cumulative nor corroborative of other evidence, and cannot therefore serve as the basis for a finding of fact (See discussion at Paragraph 2 of the Conclusions of Law, infra.). Furthermore, the estimator underestimated the heavy equipment that would be required to operate the borrow pit; underestimated the cost of the equipment; did not include insurance, social security, and overtime in labor costs; overestimated by twice the number of swings that a dragline would be able to make; and underestimated the cost of moving equipment to the site. Methodology used by the State's estimator would appear to be the best that is available to the State in making initial estimates as to the cost of proposed road-building projects. The State does not have the detailed cost information available to it that private contractors have. While useful for the purpose of making preliminary estimates of the cost of proposed projects, the methodology is not adequate to support a finding of fact based as it is upon hearsay, and containing numerous miscalculations.

   
   

5. The second line of analysis offered by DOT to establish the amount of possible savings was a comparison of recent bids submitted by contractors. Special provisions drafted by DOT for the Park and Bow bridge projects using two alternatives for embankment or fill material. Alternate "A" in the bid called for state-furnished material. The low bidder on the project was Atlantic Foundation Company, Inc. Under Alternate "A", Atlantic bid a price of $9.35 per cubic yard for embankment material, and $12.00 under Alternate "B". This would have resulted in a total of $222,574.00 lest using the Alternate "A" bid on the Park and Bow projects. The second low bidder, MCC of Florida, Inc., bid $11.13 for material under Alternate "A", and $14.02 under Alternate "B". Alternate "A" would have been $247,752.00 cheaper under the MCC bid. Petitioner was the next low bidder, and it bid $10.05 per cubic yard under Alternate "A", and $10.25 under Alternate "B". Hardaway Constructors, Inc., was the only other bidder, and it offered $10.00 under Alternate "A", and $10.25 under Alternate "B". The potential savings in favor of Alternate "A" under all of these bids is reduced somewhat by clearing and grubbing costs which were bid separately by the contractors. Clearing and grubbing costs would actually have made Alternate "B" cheaper under the bids submitted by Petitioner and Hardaway. Clearing and grubbing costs would not, however, continue as a cost item in subsequent

   projects, because once clearing and grubbing is accomplished, it would not need to be done again.

   
   

6. DOT seeks to apply bid differentials submitted for the Park and Bow Channel jobs to determine the potential saving the State could realize by using a state-owned landfill for the remaining road and bridge projects in the Keys. Approximately 402,039 cubic yards of embankment material will be needed to complete the remaining projects. Using the high differential between Alternates "A" and "B" submitted for the Park and Bow Channels (that submitted by MCC), which was $2.89 per cubic yard, the potential saving would be $1,161,892.00. Using the low differential (twenty cents per cubic yard as submitted by Petitioner), savings would be $80,407.00.

   
   

7. Subsequent to the hearing, DOT awarded the Park and Bow Channel construction to the low bidder, Atlantic Foundation, Inc. The Alternate "B" proposal was accepted. DOT did not accept that proposal because of a preference to do that, but rather so that the otherwise advantageous bid could be accepted despite the pendance of this proceeding.

   
   

8. During the hearing, bids were opened for two new road and bridge projects in the Keys: the Kemp and Torch-Ramrod Channel Projects. The apparent low bidder on these projects was the Petitioner. Petitioner bided a price of

   $11.00 for embankment material if provided by a private contractor, and $10.80 if provided from a state-owned pit for the Kemp project, and $10.40 and $10.20 respectively for the Torch-Ramrod Project. The differences between the two reflect differences in hauling distance.

   
   

9. The price differentials for contractor versus state provided embankment material in projects that have already been let cannot be used to determine with any precision the amount of saving that would inure to the State through opening its own borrow pits. Potential savings depend upon many factors. The primary of these factors is which contractor happens to make the lowest bid for the project, and this in turn depends upon the contractor's cost figures for many items other than embankment material will receive the bid only if the total bid is lower than that submitted by other contractors. It is clear that opening a state-owned borrow pit would result in some savings. It appears that $10.00 per cubic yard is the lowest possible price that could be expected for contractor- provided fill material. It appears that state-furnished material could reach a price as low as $7.00 per cubic yard, although none of the bids submitted up to the time of the hearing reflected such a price. It appears that the highest potential saving would be less than the approximately one million dollars that would have been saved if the price differential reflected in the Atlantic Foundation bid on the Park and Bow Channel projects became the differential in all subsequent projects. It also appears that the saving would be somewhat more than the eighty thousand dollar saving that would inure if the price differential reflected in the Petitioner's bid on the Park and Bow projects remained consistent. Beyond these parameters, the evidence would not support a finding as to the amount of savings.

   
   

10. The fourteen-acre site of the proposed borrow pit is presently comprised entirely of tidally inundated wetland areas. Approximately two-thirds of the area has average water depths up to six inches. The southeastern portion of the site is dominated by buttonwood, and red, black and white mangrove. All of these species are wetland indicator species under DER's rules and regulations. A large number of mollusks inhabit the area, and it is a feeding area for birds, and for deer. The area of the proposed borrow pit is within the Key Deer Refuge, which is managed by the Refuse Division of the United States

    Fish and Wildlife Service. There is now a stable herd from 350 to 400 Key deer, an endangered species, and they feed primarily on mangrove. There are 15 to 20 deer in the Cudjoe Key area. The deer do presently feed in the area of the proposed borrow pit.

    
    

11. The proposed pit, including the access roads, would comprise approximately fourteen acres. It would be located landward of a berm so that there would not be a constant exchange of waters between the pit and surrounding areas. There would be an initial two-foot drop form the edge of the pit, and then a slope of five-to-one extending into the pit. A ten-to-one slope would be preferable because ultimately vegetation would be ore easily established in such a slope area. The term "Borrow pit" is actually a euphemism for a mining operation. Material would be extracted from the pit to be used as embankment material on the Keys road and bridge projects. The pit would ultimately reach a depth of more than thirty feet.

    
    

12. Construction of the borrow pit would result in obliteration of approximately fourteen acres of a natural wetland environment in the Keys. All the flora and fauna presently on the site would be destroyed. During the time that the pit is being constructed and actively operated, violations of DER's standards for turbidity, lead, oils and greases, and transparency would be likely. Once the mining operation terminates, these short-term impacts would lessen; however, violations of the Department's dissolved oxygen standards would be likely as long as the pit exists. A viable biologic community could be established along the fringes of the pit, but in the deeper areas, low dissolved oxygen levels would be a limiting factor. Other mining operations in the Keys and elsewhere in Florida confirm the likelihood of dissolved oxygen violations.

    
    

13. Loss of the fourteen acres of feeding ground for the Florida Key deer would be a significant loss in terms of preservation of that species.

    
    

14. The proposed borrow pit is located adjacent to U.S. Highway 1. On the other side of the highway, there is a housing development. Operation of the borrow pit, especially blasting activities would inevitably prove a nuisance to residents of that area. One witness testified that blasting would likely cause damage to the residences, but this was not confirmed by competent, scientific evidence.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and over the parties. Sections 120.57(1), 120.60, Florida Statutes.

    
    

16. A portion of DOT Exhibit 11, which includes a summary of savings calculated by DOT's estimator, was rejected from evidence. Some of the data set out in this Exhibit, and in the summary, is based upon conversations that the estimator had with various contractors. It is this hearsay evidence that was rejected. DOT refused to divulge the name of the contractors who were contacted by the estimator on the grounds that they were assured that the conversations would be kept confidential. DOT asserts that if it divulged the name of the contractors who were contacted, contractors would not be willing to give estimates in that manner in the future, and DOT would not be able to make adequate estimates in advance of bid letting. Hearsay is defined at Section 90.801, Florida Statutes, as follows:

. . . an out-of-court statement other than one made by a declarant who testifies at the

trial or hearing offered in court to prove the truth of the matter contained in the statement.

Clearly, information in DOT Exhibit 11 which was obtained by DOT's estimator through conversations with other persons is hearsay. Hearsay cannot serve as the basis for any finding of fact in an administrative proceeding unless it supplements or explains other evidence. Section 120.58(1)(a), Florida Statutes; Pasco County School Board v. Public Employees Relations Commission, 353 So.2d

108 (1 DCA Fla. 1977). The hearsay evidence rejected in this matter does not supplement or explain other evidence, but rather is the sole evidence in support of certain cost estimates contained in the estimator's testimony and DOT Exhibit

1. While it is appropriate for an expert witness to utilize hearsay in formulating his opinion, allowing the hearsay offered by the estimator into evidence would allow DOT to offer cost estimates without any possibility of cross-examination by the parties which dispute the evidence.

   
   

   1. In support of its contention that the hearsay should be received in evidence, DOT has cited Gwathmey v. United States, 215 F.2d 148 (5 Cir. 1954); and Masheter v. C. H. Hooker Trucking Co., 250 N.E.2d 621 (Ct. App. Ohio 1969). Reliance upon these decision is misplaced. In Gwathmey, the trial court in a condemnation proceeding had admitted testimony of the government's expert witness concerning the replacement cost of a pier, even though the witness had never prepared an estimate of the cost, but had obtained the information from persons who were not witnesses. Furthermore, witnesses had made assumptions as to the availability of equipment which no longer existed. The Court reversed on other grounds, but ruled that the trial court properly admitted the testimony. In doing so, however, the Court noted: (at p. 159)

      
      

      We are not prepared to state the trial judge clearly erred in allowing Angas' [the government expert witness] testimony to go to the jury; but in denying the motion [a motion to strike], he should have made it clear that only facts testified to as

      being within the knowledge of the witness could be considered, and not know those based upon assumption alone and contradicted by other proven facts.

      
      

      Thus, the jury was not to consider the hearsay evidence, or the assumptions made by the witness that were found to be false.

      
      

   2. In Masheter, the trial court had allowed into evidence the opinion of an expert as to the market value of land, though the opinion was based in part on opinions expressed to the expert by mine operators that coal and clay were on the subject property, and could be profitably minable. The mine operators were not called as witnesses. The appellate court affirmed, but not because it concluded that the hearsay testimony was definitely reliable. In connection with determinations of property value, the Court noted: (at p. 622)

      
      

      The existence of hearsay in the community is a fact of the marketplace which the expert puts into evidence by his statement that he found it. In the legal sense this

      is not a hearsay use of the statement at all because it is not received as proof of the truth of the matters contained therein but rather to show the fact of its circulation.

      
      

      The hearsay was not received as a necessarily accurate statement as to the minability of resources on the subject property, but rather to establish that evidence of that sort was being circulated, and that circulation affected the value of the property.

      
      

   3. The hearsay evidence set out in DOT Exhibit 11, and in the testimony of DOT's estimator, is not properly admissible. Furthermore, much of the admissible evidence set out in the estimator's testimony and in DOT Exhibit 11 has been found to be unreliable, and has not been credited.

      
      

   4. Florida Statutes Section 403.201 relates to the granting of variances from the provisions of the chapter, and the rules and regulations of DER, and provides in pertinent part as follows:

      
      

      1. Upon application, the Department in its discretion may grant a variance from the provisions of this act or the rules and regulations adopted pursuant hereto. Variances and renewals thereof may be granted for any of the following reasons:

         * * *

         (c) To reliever or prevent hardship of a kind other than those provided for in paragraphs (a) and (b). Variances and renewals thereof granted under authority of this paragraph shall each be limited to a period of 24 months except that variances granted pursuant to part II may extend for the life of the permit or certification.

         * * *

         1. The Department may prescribe such time limits and other conditions to the granting of a variance as it shall deem appropriate.

            
            

            Der has adopted Rule 17-1.57, Florida Administrative Code, which in addition to tracking the language of the statute provides that the following factors shall be addressed in determining whether a variance or exemption should be granted:

            
            

            1. The act, rule, or regulation and sections thereof from which a variance is sought,

            2. the facts which show that a variance should be granted because of one of the . . .reasons

               as set forth in Section 403.201, Florida Statutes

               . . .

            3. The period of time set for which the variance is sought, including the reasons and facts in support, including the reasons and facts in support thereof,

            4. The damage or harm resulting or which may result to an applicant from a compliance with such rule or regulations,

            5. The requirements which applicant can meet and the date when applicant can comply with such requirements,

            6. The steps the applicant is taking to meet the requirements from which the variance is sought and wen compliance will be achieved,

            7. Any beneficial or adverse impact to residents and the environment in the affected area resulting from the Department's requiring compliances or granting a variance.

            8. The economic or social impact through granting or denying the variances.

         
         

         The evidence clearly establishes that DOT's proposed borrow pit would, over the short and long terms, result in violations of DER's standards for dissolved oxygen as set out at Rule 17-3.11(14). Over the short term, the project would result in violations of DER's criteria for turbidity [Rules 17-3.05(1)(c), 17- 3.061(2)(q)] and oils and greases [Rule 17-3.061(2)(g)]. The proposed project would also result in a significant reduction of feeding area for the Florida Key deer, and would be likely to be to some degree a nuisance to nearby residents.

         
         

   5. The location of the proposed borrow pit is within the Key Deer Refuge managed by the United States Fish and Wildlife Service. The area is thus in "Outstanding Florida Waters" as defined in DER's rules [Rule 17-3.041(1)(a)] and has been designated for special protection. With respect to permitting of projects within such waters, DER's rules provide: [Rule 17-4.242(1)]

No Department permit or water quality certification shall be issued for any stationary installation which signifi- cantly degrades, either alone or in combination with other stationary installations, or is within Outstanding Florida waters, unless the applicant affirmatively demonstrates that:

* * *

2. The proposed activity or discharge is clearly in the public interest; and

. . .

* * *

d. The existing ambient water quality within Outstanding Florida Waters

will not be lowered as a result of the proposed activity or discharge, except on a temporary basis during construction for a period not to exceed 30 days; lowered water quality will occur only within a restricted mixing zone approved by the Department; and, water quality criteria will not be violated outside the restricted mixing zone. Provided, however, that the Department may allow an extension of the 30 day time limit

on construction-caused degradation for a tier period demonstrated by the applicant to be unavoidable and where suitable management practices and technology approved by the Deportment

are employed to minimize such degradation.

1. Balanced against the adverse consequences of the proposed borrow pit construction, which are set out above, is the benefit that would accrue to the taxpayers of Florida. Undoubtedly, operation of the state-owned borrow pit would result in a savings of some money. The parameters of the savings have been established with no more precision than as set out in the findings of fact. Given that the potential saving has not been established with precision, the fact that the project is in waters classified as outstanding, and that the precision, adverse environmental consequences have been established with precision, the variance request should be denied.

   
   

   RECOMMENDED ORDER

   
   

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

   
   

   RECOMMENDED:

   
   

   That the Department of Environmental Regulation enter a Final Order denying the request for variance submitted by the Department of Transportation.

   
   

   RECOMMENDED this 22nd day of September, 1980, in Tallahassee, Florida.

   
   

   1. STEVEN PFEIFFER Hearing Officer

      Division of Administrative Hearings Department of Administration

      Room 101, Collins Building Tallahassee, Florida 32301

      (904) 488-9675

      
      

      Filed with the Clerk of the Division of Administrative Hearings this 22nd day of September, 1980.

      
      

      COPIES FURNISHED:

      
      

      Melissa Fletcher Allaman, Esquire Joseph C. Jacobs, Esquire

      Ervin, Varn, Jacobs, Odom & Kitchen Post Office Drawer 1170 Tallahassee, Florida 32302

      
      

      James W. Anderson, Esquire Department of Transportation Haydon Burns Building MS-58 Tallahassee, Florida 32301

      
      

   2. Ray Allen, Esquire Assistant General Counsel Department of Environmental

Regulation

Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32301

Mr. Jacob D. Varn, Secretary Department of Environmental

Regulation

Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32301

Mr. Vincent D. Drost

100 Drost Drive, Cudjoe Gardens Summerland Key, Florida 33042

Docket for Case No: 80-000854

Orders for Case No: 80-000854