STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JOHN P. CARDILLO, as Receiver for ) BAYSIDE CLUB, ISLAMORADA, INC., a )

Dissolved Florida Corporation, )

)

Petitioner, )

) CASE NO. 92-6160RX

vs. )

) FLORIDA KEYS AQUEDUCT AUTHORITY, )

)

Respondent. )

)

FINAL ORDER

Pursuant to written notice, a formal hearing was held in this case before Daniel Manry, a duly designated Hearing Officer of the Division of Administrative Hearings, on February 4, 1993, in Key West, Florida.

APPEARANCES

For Petitioner: Peter J. Tincher, Esquire

Monaco, Cardillo & Keith, P.A. 3550 East Tamiami Trail Naples, Florida 33962

For Respondent: Robert T. Feldman, Esquire

Feldman & Koenig, P.A.

417 Eaton Street

Key West, Florida 33040 STATEMENT OF THE ISSUE

The issue for determination in this proceeding is whether Florida Administrative Code Rule 48-3.002 2. is an invalid exercise of delegated legislative authority.

PRELIMINARY STATEMENT

This proceeding was assigned to Hearing Officer Stuart M. Lerner on October 13, 1992, and scheduled for formal hearing on November 9, 1992. The parties waived the expedited time requirements otherwise applicable to this proceeding under Section 120.56, Florida Statutes, in several agreed continuances.

Respondent's Motion To Dismiss was denied in part and granted in part in an Order entered by Hearing Officer Lerner on November 23, 1993. Respondent's Motion To Dismiss the rule challenge as untimely was denied. That portion of the petition for formal hearing requesting an order directing Respondent to refund impact fees previously collected in the amount of $34,500 was dismissed for lack of jurisdiction. The matter was transferred to the undersigned on February 1, 1993, and a formal hearing was conducted on February 4, 1993.

At the formal hearing, Petitioner submitted the testimony of Mr. Joseph F. Popplewell, a general contractor and former president of Bayside Club, Islamorada, Inc., a dissolved Florida corporation. Respondent submitted the testimony of: Mr. Harry Bethel, Director of Policy Administration and Field Services for Respondent; Ms. LouAnn Malgrat, Director of Administration for Respondent and former Division Director of Finance for Respondent; and Mr. John

T. Dougherty, Executive Director for Respondent. The parties submitted 12 exhibits which are identified in the transcript of the formal hearing. Exhibits 1-12 were admitted in evidence without objection.

A transcript of the formal hearing was filed with the undersigned on February 24, 1993. Petitioner and Respondent timely filed proposed findings of fact and conclusions of law on March 8 and 11, 1993, respectively. The parties' proposed findings of fact failed to comply with the requirements of the order entered by the undersigned on the record at the formal hearing, including the requirement in Florida Administrative Code Rule 60Q-2.031(3) for citations to the record and the requirement of the undersigned that each paragraph be numbered. Therefore, the parties' proposed findings of fact are not addressed in this Final Order.

FINDINGS OF FACT

1. Petitioner is the receiver for Bayside Club, Islamorada, Inc., a dissolved Florida corporation ("Bayside"). Mr. Joseph Popplewell is a general contractor and former president of Bayside. Respondent is the governmental entity authorized by Chapter 76-441, Section 14(1), Laws of Florida, to adopt impact fees for the water system in the Florida Keys, to equitably adjust the financial burden of a new pipeline, and to expand it or improve appurtenant facilities between existing customers and new water users.

   
   

2. In 1986, Bayside sought to construct a 30 unit hotel on approximately one acre of land in Monroe County, Florida. The development project was formally classified as an expansion of an existing eight unit hotel. The existing hotel, however, had little, if any, useful life, and, in substance, the project involved the development of a new 30 unit hotel.

   
   

3. Bayside obtained a building permit on June 4, 1985. In the same month, the building permit was challenged by an adjacent land owner. The challenge asserted that the existing hotel constituted a grandfathered nonconforming use and that the building permit improperly treated the development site as if it were located in a zoning district which permitted hotel usage and subsequent expansion.

   
   

4. During the last half of 1985, the Monroe County Commission considered the challenge to the building permit and found that the building permit was valid. The adjacent landowner filed suit against Bayside. The circuit court upheld the validity of the building permit. The suit was finally decided on May 29, 1990, when the Third District Court of Appeal reversed the lower court's decision that the building permit was valid. Dowd v. Monroe County, 557 So.2d

   63 (Fla. 3d DCA 1990). On May 29, 1990, the circuit court entered its order declaring the building permit invalid.

   
   

5. In 1986, Bayside was advised by Respondent that unit water system development fees ("impact fees") were scheduled to increase from $1,500 to

   $2,000. Bayside chose to avoid paying impact fees at the increased unit rate and to achieve a savings in development costs.

6. On or about April 18, 1986, Bayside executed an Agreement For Water Service. On or about April 29, 1986, Bayside issued a check payable to Respondent in the amount of $36,840, which included impact fees in the aggregate amount of $33,000. As provided in Florida Administrative Code Rule 48-3.002 2., the Agreement For Water Service expressly stated in paragraph 1 that "SAID SYSTEM DEVELOPMENT CHARGE SHALL NOT BE REFUNDABLE."

   
   

7. Construction of the proposed hotel stopped sometime in 1986. A receivor was appointed for Bayside by the appropriate circuit court on June 14, 1991. Sometime in early 1992, the receiver for Bayside requested a refund of the impact fees. Respondent denied that request in a letter dated February 27, 1992, but refunded amounts paid by Respondent in excess of the impact fees.

   
   

8. Respondent's denial of Petitioner's request for a refund did not constitute an unreasonable classification and did not establish a differential rate that was either unjust or inequitable. Respondent has consistently applied Florida Administrative Code Rule 48-3.002 2. to prohibit the refund of impact fees regardless of the classification or rate charged the person who paid the impact fee. Petitioner had adequate notice in Rule 48-3.002 2. and the Agreement For Water Service that the impact fees were nonrefundable.

   
   

9. Respondent reasonably anticipated that the projected costs for expanding the water system would be incurred. The county commission and circuit court both upheld the validity of the building permit. If Bayside reasonably anticipated that projected costs for expanding the water system and appurtenant facilities would not be incurred due to a suit challenging the building permit, Bayside had the option of not paying the impact fees until the final conclusion of litigation. Bayside was on notice that the impact fees were nonrefundable and chose to forego its option not to pay the fees until the conclusion of the suit challenging the building permit. Bayside made a business decision to save money and time by paying the impact fees when it did. Viewed in the light of hindsight, that business decision was imprudent. Bayside did not notify Respondent that the costs of expanding the system were not reasonably anticipated until six years after Bayside chose to pay the impact fees.

   
   

10. The nonrefundable impact fees imposed by Respondent in 1986 were just and equitable. Expansion of the water system pipeline and appurtenant facilities was reasonably required as a result of the development proposed by Bayside at the time that the impact fees were imposed. The costs attributable to such expansion were reasonably anticipated by Respondent at the time that the impact fees were imposed. The use of the impact fees was limited to meeting such reasonably anticipated costs of expansion. The impact fees imposed by Respondent in 1986 did not exceed a pro rata share of reasonably anticipated costs.

    
    

11. Expansion of Respondent's water system was necessary irrespective of the proposed hotel. The expansion of Respondent's water system and appurtenant facilities was financed through the sale of debentures. The indebtedness incurred is made good through revenues in the form of rates, fees, and other charges. Under such circumstances, rates and fees were set with a view towards raising the money necessary to repay the loan. The impact fees did not cease to be just and equitable merely because they were set high enough to meet the water system's reasonably anticipated capital requirements.

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Section 120.56, Florida Statutes. The parties were duly noticed for the formal hearing.

    
    

13. Petitioner has the burden of proof in this proceeding. The burden of proof in an administrative proceeding is on the party asserting the affirmative of the issue unless the burden is otherwise specifically established by statute. Young v. State, Department of Community Affairs, 567 So.2d 2 (Fla. 3d DCA 1990); Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981); Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977). Petitioner must show by a preponderance of the evidence that Florida Administrative Code Rule 48-3.002 2. is an invalid exercise of delegated legislative authority.

    
    

14. Petitioner failed to satisfy his burden of proof in this proceeding. Raising capital for future outlay is a legitimate purpose for Respondent to consider in setting impact fees. Contractors and Builders Association v. City of Dunedin, 329 So.2d 314, 320 (Fla. 1976). Impact fees imposed to raise expansion capital are just and equitable if such fees do not exceed a pro rata share of reasonably anticipated costs of expansion, the expansion is reasonably required, and use of such fees is limited to meeting the reasonably anticipated costs of expansion. Id.

    
    

15. The nonrefundable impact fees imposed by Respondent in 1986 satisfied the conjunctive tests enunciated in Dunedin and, therefore, were just and equitable. Expansion of the water system pipeline and appurtenant facilities was reasonably required as a result of the development proposed by Bayside at the time that the impact fees were imposed. The costs attributable to such expansion were reasonably anticipated by Respondent at the time that the impact fees were imposed. The use of the impact fees was limited to meeting such reasonably anticipated costs of expansion. The impact fees imposed by Respondent in 1986 did not exceed a pro rata share of reasonably anticipated costs.

    
    

16. Rates and fees are fixed for the future. Cf. Citizens of Florida v. Hawkins, 356 So.2d 254, 256 (Fla. 1978). The process of fixing rates and fees is one of making a rule for the future. McCardle v. Indianapolis Water Co., 272

    U.S. 400, 47 S.Ct. 144, 71 L.Ed. 316 (1926). The process of fixing rates and fees must of necessity be related to matters which are reasonably predictable. Id. The appropriate approach in fixing rates and fees is to use existing facts and the most recently available data adjusted for known changes which will occur within a reasonable time. See H. Miller & Sons, Inc. v. Hawkins, 373 So.2d 913, 915 (Fla. 1979) (for "existing facts") and Gulf Power Company v. Bevis, 289 So.2d 401, 404 (Fla. 1974) (for "most recently available data"). The fees imposed by Respondent in 1986 reasonably represented expected future operations based on existing facts and the most recently available data. See Gulf Power,

    289 So.2d at 405 (holding that the propriety or impropriety of rates set for a test year must reasonably represent expected future revenues).

    
    

17. If Bayside reasonably anticipated that projected costs for expanding the water system and appurtenant facilities to accommodate the proposed project would not be incurred, Bayside had the option of not paying the impact fees. Bayside was on notice that the impact fees were nonrefundable and chose to forego its option not to pay the fees until the conclusion of a suit challenging the building permit. Bayside made a business decision to save money and time by

    paying the impact fees when it did. That business decision proved imprudent. Bayside did not notify Respondent that the costs of expanding the system were not reasonably anticipated until six years after Bayside chose to pay the impact fees.

    
    

18. Expansion of Respondent's water system was necessary irrespective of the proposed development. The expansion of Respondent's water system and appurtenant facilities was financed through the sale of debentures. The indebtedness incurred is made good through revenues in the form of rates, fees, and other charges. See Ch. 76-441, Sec. 14(1), Laws of Florida (defining "revenues" to include fees). Under such circumstances, rates and fees may be set with a view towards raising the money necessary to repay the loan. Dunedin,

    329 So.2d at 319. Such fees do not cease to be just and equitable merely because they are set high enough to meet the system's capital requirements as well as its operating expenses. Id.

    
    

19. It may be a simpler task to amortize a known outlay than to predict population trends and other variables necessary to arrive at an accurate forecast of future capital needs. Dunedin, 329 So.2d at 320. In either case, absolute precision is not required. Pinellas Apartment Association, Inc. v. City of St. Petersburg, 294 So.2d 676, 678 (Fla. 2d DCA 1974). However, if new facilities must be built in any event, both old and new users must provide the capital reasonably anticipated for expansion of the existing system. Dunedin,

    329 So.2d at 321.

    
    

    For purposes of allocating the cost of replacing original facilities, it is arbitrary and irrational to distinguish between old and new users, all of whom bear the expense of the

    old plant and all of whom will use the new plant. (emphasis supplied)

    
    

    Dunedin, 329 So.2d at 321.

    
    

20. Bayside was a "user" of the reasonably anticipated expanded facilities. In Dunedin, 329 So.2d at 317-318, the court held that the "cost of new facilities should be borne by new users to the extent new use requires new facilities, but only to that extent." The statement in Dunedin that the "cost of new facilities should be borne by new users" does not mean that only those persons who actually use the services must pay for them. City of Key West v.

    R.L.J.S. Corporation, 537 So.2d 641, 643 (Fla. 3d DCA 1989).

    
    

    Plainly, the statement was not intended as

    a sweeping declaration that taxpayers who own property in the impacted area but do not actually use new facilities are to be relieved from the burden of paying an impact fee established by

    an ordinance.

    
    

    City of Key West, 537 So.2d at 643.

    
    

21. A developer is a "user" for purposes of impact fees imposed for proposed facilities even though the developer does not actually use the facilities to be constructed as a result of a proposed development. City of Key West, 537 So.2d at 644. The term "user" encompasses anyone who may derive benefit from the proposed services, including a developer, such as Bayside, who seeks to develop and profit from a hotel. See City of Key West, 537 So.2d at

    643 (holding that the term "user" included a developer who did not intend to use a proposed condominium but who merely sought to sell individual condominium units to third party purchasers). Flat rates and fees unrelated to use are not arbitrary and capricious. See, e.g., City of New Smyrna Beach v. Fish, 384 So.2d 1272, 1275 (Fla. 1980); State v. City of Miami Springs, 245 So.2d 80 (Fla. 1971); Stone v. Town of Mexico Beach, 348 So.2d 40 (Fla. 1st DCA 1977); Pinellas Apartment Association, Inc. v. City of St. Petersburg, 294 So.2d 676 (Fla. 2d DCA 1974); 567 Island Corporation v. North Bay Village, 236 So.2d 467 (Fla. 3d DCA 1970).

    
    

22. The nonrefundable impact fees imposed by Respondent in 1986 were not taxes. The impact fees were not collected for purposes extraneous to the reasonably anticipated costs of expanding the water system and appurtenant facilities to accommodate the proposed development. The fees imposed by Respondent in 1986 had a reasonable connection, or rational nexus, between the required impact fee and the anticipated needs of the community caused by the proposed new development. The impact fees were collected in 1986 to pay for reasonably anticipated costs of future expansion based upon existing facts and the most recently available data. The fees were reasonably related to matters which were reasonably predictable. Such fees are not taxes. Dunedin, 329 So.2d at 318; Hollywood, Inc. v. Broward County, 431 So.2d 606, 611-612 (Fla. 4th DCA 1983).

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that Florida Administrative Code Rule 48-3.002 2. is not an invalid

exercise of delegated legislative authority.

DONE AND ENTERED this 26th day of April, 1993, at Tallahassee, Florida.

COPIES FURNISHED:

Peter J. Tincher, Esquire Monaco, Cardillo & Keith, P.A. 3550 East Tamiami Trail Naples, Florida 33962

Robert T. Feldman, Esquire Feldman & Koenig, P.A.

417 Eaton Street

Key West, Florida 33040

DANIEL S. MANRY, 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 26th day of April, 1993.

John T. Doughtry, Executive Director Florida Keys Aqueduct Authority

Post Office Box 1239

Key West, Florida 33041-1239

Carroll Webb, Executive Director Administrative Procedures Committee Holland Building, Room 120 Tallahassee, Florida 32399-1300

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. Alternatively, a party adversely affected by this Final Order may bring a civil action filed in Circuit Court under Section 230.23(4)(m)5., Florida Statutes (1990 supp.), or bring a Civil action in Federal Court.

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

DISTRICT COURT OPINION

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

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DISPOSED OF

JOHN P. CARDILLO, as Receiver IN THE DISTRICT COURT OF APPEAL for BAYSIDE CLUB, ISLAMORADA, OF FLORIDA

INC., a dissolved Florida THIRD DISTRICT corporation, JANUARY TERM, 1995

Appellant, CASE NO. 93-1219

DOAH CASE NO. 92-6160RX

vs.

FLORIDA KEYS AQUEDUCT AUTHORITY,

Appellee.

/

Opinion filed May 24, 1995.

An Appeal from the Division of Administrative Hearings Monaco, Cardillo & Keith and Peter J. Tincher (Naples), for appellant.

Feldman & Koenig and Robert T. Feldman (Key west), for appellee.

Before HUBBART, GERSTEN and GODERICH JJ.

GODERICH, Judge.

Bayside Club, Islamorada, Inc. [Bayside] purchased an eight-unit motel with the intent of expanding the motel to thirty units. Although the property was zoned for single-family homes, the Monroe County Commission granted Bayside a building permit pursuant to a zoning code provision that allowed expansion of preexisting motels.

After the building permit was issued, Bayside paid a $33,000 impact fee to the Florida Keys Aqueduct Authority [FKAA]. An adjoining property owner challenged the issuance of the building permit. The Monroe County Commission upheld the issuance of the building permit, and thereafter, the adjoining property owner filed an action seeking to enjoin the construction. Bayside prevailed at the trial court, but this court ultimately ordered a rescission of Bayside's building permit and an injunction from further construction. Dowd v. Monroe County, 557 So.2d 63 (Fla. 3d DCA), cause dismissed sub nom. Popplewell v. Dowd, 564 So.2d 488 (Fla. 1990)

After this court's decision, Bayside requested that FKAA refund the $33,000 impact fee. FKAA refused to return the impact fee based on Rule 48-3.002(2), Florida Administrative Code, which provides that all impact fees are non- refundable [hereinafter "no refund rule"]. On appeal, the Office of Administrative Hearing also ruled that the "no refund rule" was "not an invalid exercise of delegated legislative authority." This appeal follows.

We reverse based on the authority of Florida Keys Aqueduct Authority v.

Pier House Joint Venture, 601 So.2d 1270 (Fla. 3d DCA 1992). In Florida Keys, the FKAA imposed an impact fee based on she potential increased demand on its water system due o the conversion of a building from a manufacturing plant to a twenty- four-unit hotel and spa facility. In assessing the impact fee, FKAA utilized a "unit system" whereby each "unit" was assessed a fee irrespective of the actual water consumption. Therefore, under FKAA'S "unit system," the manufacturing plant was counted as one unit, whereas the proposed twenty-four- unit hotel facility was counted as twenty-four units.

In Florida Keys, this court approved the trial court's reasoning which provided, in part, that:

By electing to measure existing levels of demand on a unit basis, [FKAA] classified the former manufacturing plant as one (1) unit. That determination exceeds the bounds of the legislative and judicial requirements that a system development fee

be "bust and equitable." To say that both the former manufacturing plant, an enormous

water consumer employing up to ninety people, and a single-occupancy guest house room comprise the same one unit and therefore place equivalent potential demands on

the water system, defies logic.

Florida Keys, 601 So.2d at 1272 (emphasis added) . The court further noted that the root cause of this unjust and inequitable result "appears to be that the FKAA does not have an industrial use classification for large users" like the manufacturing plant. Florida Keys, 601 So.2d at 1272. Therefore, finding that the "unit system" led to a result that "defies logic" and was unjust and inequitable, this court affirmed that portion of the trial court's order that declared the imposition of the impact fee invalid, but reversed and remanded for the imposition of a "fair and equitable" impact fee.

Similarly, the "no refund rule," as applied in the instant case, leads to a result which "defies logic" and is clearly unfair and inequitable. Bayside paid a $33,000 impact fee to FKAA based on the granting of the building permit which allowed Bayside to expand an existing eight-unit motel to a thirty-unit motel.

Thereafter, this court determined that the building permit was wrongfully issued by the Monroe County Commission and ordered rescission of the building permit.

As a result of this court's decision, instead of the anticipated thirty-unit motel, a single family home was built on the property. Therefore, there is no nexus between the impact fee paid by Bayside and retained by FKAA, and the actual or possible increased impact on the water system. Under the circumstances, the application of the "no refund rule" is clearly unfair and inequitable and has led to a result that "defies logic." See also Contractors & Builders Ass'n of Pinellas County v. City of Dunedin, 329 So.2d 314 (Fla. 1976); City of Tarpon Springs v. Tarpon Springs Arcade Ltd., 585 So.2d 324 (Fla. 2d DCA 1991). We reverse the order under review and remand with directions for FKAA to refund the impact fee paid by Bayside.

Nothing in this opinion should be construed as holding that the "no refund rule" is invalid per se. Rather, as stated above, under the peculiar facts of this case, we find that the "no refund rule" is invalid. Finding that this issue is dispositive, we do not need to address the remaining arguments raised by the appellant.

Reversed and remanded with directions.

MANDATE

DISTRICT COURT OF APPEAL OF FLORIDA THIRD DISTRICT

DCA 93-1219

JOHN P. CARDILLO, etc.

vs.

FLORIDA KEYS AQUEDUCT AUTHORITY

This cause having been brought to this Court by appeal, and after due consideration the Court having issued its opinion;

YOU ARE HEREBY COMMANDED that such further proceedings be had in said cause in accordance with the opinion of this Court attached hereto and incorporated as part of this order, and with the rules of procedure and laws of the State of Florida.

Case No. 92-6160 RX (DEPT.)

WITNESS, The Honorable ALAN SCHWARTZ

Chief Judge of said District Court and Seal of said Court at Miami, this 9th day of June, 1995.

Clerk District Court of Appeal of Florida, Third District

Docket for Case No: 92-006160RX

Orders for Case No: 92-006160RX