Findings Of Fact Floralino Properties, Inc. is a small utility providing water and sewer service in Pasco County. During the period May 30, 1978 until March 12, 1979, it purchased a substantial portion of its water from the Pasco Water Authority, Inc. (PWA) for resale to its customers. In order to recoup the costs of those purchases, the Public Service Commission authorized the utility to assess a surcharge upon each customer's bill. (See Order No. 7494). However, because the surcharge exceeded the actual charges for water purchased, the utility was required to escrow all excess revenues. Respondent failed to do so thereby precipitating the issuance of Order No. 9320. A subsequent Commission audit reflected the excess revenues to be $2,228.05. Prior to the hearing, but after the issuance of Order No. 9320, the respondent escrowed the funds in a Pinellas County bank. The utility now agrees to make an appropriate refund with interest within 30 days to all customers who received service during the period in question.
Recommendation Based upon the foregoing findings of fact and conclusions of law, the Hearing Officer recommends that respondent be found guilty of violating Order No. 7494, dated November 2, 1976; that a fine of $250 be imposed upon respondent; that respondent make an appropriate refund of $2,228.05 with 6 percent interest to those customers entitled to such refund within 30 days; and that a final report setting forth the disposition of such monies be submitted to the Public Service Commission within 90 days. DONE AND ENTERED this 22nd day of August, 1980, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: M. Robert Christ, Esquire 101 East Gaines Street Tallahassee, Florida 33542 Floralino Properties, Inc. 2320 East Bay Drive Clearwater, Florida 33516 Steve Tribble Commission Clerk 101 East Gaines Street Tallahassee, Florida 32301 Herman B. Blumenthal, III, Esquire 10401 Seminole Boulevard (Alt. 19) Seminole, Florida 33542
Findings Of Fact The Utility's water plants are operating satisfactorily and are under no citations or corrective orders promulgated by the Department of Environmental Regulation. One customer service problem exists with regard to frequency of service outages and low pressure. The Utility had not previously been informed of the particular customer's problem and gave assurances that it would be corrected immediately. As demonstrated by a report of the Department of Environmental Regulation incorporated in Exhibit 1, the Utility provides good quality water that meets all pertinent standards of the Florida Safe Drinking Water Act of 1977, and in every way the quality of water service provided by the Utility was shown to be satisfactory. Rate Base In order to present a truer picture of the Utility's average rate base, and taking into account the factor of recent growth of the system, Commission expert engineering and accounting witnesses recalculated the Utility's figures for plant in service based upon a thirteen-month average as opposed to the twelve-month test year employed by the Utility. Thus equipment accounts and equipment retirement accounts were recalculated on a thirteen-month average in arriving at a total plant in service figure, based upon which the actual rate base was calculated. These calculations as well as adjustments to reclassify certain expenses which should have been capitalized in the plant accounts and then based on a thirteen-month average, demonstrated a total plant in service adjustment figure of $7,770. These, together with an adjustment for additional total accumulated depreciation of $2,807 and other relatively minor adjustments to the Utility's capital accounts, none of which were contested by the Utility, result in a rate base, or net investment figure, of $90,173. The adjustments and calculations supportive of this figure, all of which were uncontroverted by the Petitioner, appear attached hereto and are incorporated by reference herein as Schedule 1, Attachments 1 and 2. Operating Statement The Utility seeks to increase its revenues to the above- stated amount. Determination of an appropriate revenue figure necessitate re-allocations and adjustments to operation and maintenance expenses to add in necessary employee salaries and to reclassify and delete certain operation and maintenance expenses properly attributable to water systems not involved in this rate case. Additional, depreciation expense on contributed property must be disallowed and an adjustment for increased revenues necessary to result in an agreed upon 12.45 percent rate of return on rate base with concomitant adjustments to allow for increased gross receipts tax and income tax, established an appropriate revenue requirement of $35,922 per year. The Respondent's accounting witness established that the 12.45 percent rate of return on the Utility's rate base is the minimum necessary to insure a reasonable, compensatory rate of return to the Utility and to assure the company's financial viability in order that the quality of service to customers does not deteriorate. These adjustments to the initial operating statement accounts depicted in Exhibit 2, were not refuted by the Utility. The adjustments and calculations supportive of this revenue figure are set forth in greater detail in Schedule 2 of Exhibits 2 and 2A attached hereto and incorporated by reference herein. There was no dispute regarding the appropriate cost of capital for the company. The weighted cost of capital was shown to be 12.45 percent, based upon the Utility's undisputed cost of equity at 14 percent, as well as its imbedded debt cost of 9.47 percent. The rate structure should be predicated upon a base facility charge rate design. The base facility charge type of rate structure will insure that each customer, even seasonal residents who do not use a minimum amount of water per month sufficient to defray their portions of the cost of service, actually pay the minimum necessary for the Utility to meet its fixed costs which are attributable to their connections. In the case of the systems involved in this proceeding, a base facility charge of $3.35 for a 5/8" x 3/4" meter and a gallonage charge of 88 cents per 1,000 gallons will produce the revenue requirement of $35,922. Both the Petitioner and the Respondent agree to the feasibility and appropriateness of this base facility charge rate design and these amounts.
Recommendation Having considered the competent, substantial evidence of record, the foregoing findings of fact and conclusions of law, it is RECOMMENDED that John V. Smith Water Company should be authorized to receive gross annual revenues for its water service to customers in Walton County, Florida of $35,922 and that the Utility be authorized to file revised tariff pages containing rates designed to produce annual water revenues in that amount. It is further RECOMMENDED that the $4,000 letter of credit previously required to be filed by the Public Service Commission be returned to the Utility for cancellation. DONE and ENTERED this 20th day of November, 1980, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of November, 1980. COPIES FURNISHED: John V. Smith 234 Deer Avenue Niceville, Florida William H. Harrold, Esquire 101 E. Gaines Street Tallahassee, Florida 32301 Robert T. Mann Chairman Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301 Steven C. Tribble Commission Clerk Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301
Findings Of Fact The City has brought this action pursuant to Section 120.56, Florida Statutes, challenging Rules 17-50.015(2)(f) and 17-50.016(2)(f), Florida Administrative Code. Section 120.56(1), Florida Statutes, authorizes any person substantially affected by a rule to seek an administrative determination of the invalidity of the rule on the ground that the rule is an invalid exercise of delegated legislative authority. The Department has stipulated to the City's standing to maintain this action. 4. Rules 17-50.015(2)(f) and 17-50.016(2)(f) were adopted by the Department pursuant to Sections 403.061, 403.101, 403.1823, 403.1832, 403.1838 and 403.804, Florida Statutes. No disputed issues of material fact exist between the parties.
Findings Of Fact The Hospital Cost Containment Board has adopted a policy known as the "outlier" policy. Generally speaking, the policy is a credit available to a hospital as a result of the hospital's having experienced a higher level of outlier experience compared to total admissions in one period as compared to another period. The policy has an exception in which a hospital can receive credit in an amendment for a change in outlier experience in a previous year if it files an amendment to its budget within the first ninety days of its current fiscal year. For such amendments, the comparison is between changes in outlier experience which have occurred between two specific timeframes. The first is the change between outlier experience during all the fiscal year two years prior to the current year and the first half of the year prior to the current year. The second is the change between outlier experience in all the fiscal year two years prior to the current year and all of the year prior to the current year. If the second change is greater than the first change, the difference is the outlier credit that is allowed. For an amendment filed after the first ninety days of a hospital's current fiscal year, no credit is allowed for changes in outlier experience from the prior year because in such cases the comparison is between outlier experience which has actually occurred in the current year-to- date compared to the hospital's prior year actual outlier experience. The "outlier" policy described above has been adopted by the Hospital Cost Containment Board as a policy that it generally applies to all hospitals subject to its regulation. The "outlier" policy described above has not been promulgated as a rule in accordance with the procedures established by Section 120.54, Fla. Stat. (1987).
The Issue Whether the proposed Florida Administrative Code Rules 28-20.110, 28-20.120, and 28-18.210 are invalid exercises of delegated legislative authority.
Findings Of Fact Parties Petitioner, Florida Keys Citizens Coalition, Inc. ("FKCC"), is a non-profit Florida corporation whose address is 10800 Overseas Highway, Marathon, Florida 33050. The primary purpose of FKCC is to "protect the quality of life of the citizens of the Florida Keys." The primary emphasis of the organization involves issues related to the carrying capacity, the limits of the infrastructure, and the environmental qualities of the Florida Keys. Consistent with its purpose, FKCC opposes regulations which it believes will diminish the quality of the natural habitat in Monroe County and the City of Marathon and hinder safe and efficient emergency evacuation. FKCC has been involved in previous Monroe County litigation, including participating as a party to at least two formal administrative challenges to the 2010 Monroe County Comprehensive Plan (Monroe County Comprehensive Plan). Petitioner, Last Stand, Inc., is a non-profit Florida corporation whose address is Post Office Box 146, Key West, Florida 33041-0146. The primary purpose of Last Stand is to preserve and protect the quality of life in the City of Key West, the Florida Keys, and their environs, with particular emphasis on the natural environment. To that end, Last Stand opposes regulations that it believes diminishes the quality of the natural habitat in the Florida Keys and regulations that hinder safe and efficient emergency evacuation in the Florida Keys. Last Stand is an organizational member of FKCC. Moreover, many individual members of Last Stand are also members of FKCC. A substantial number of members of both FKCC and Last Stand live, work, and/or engage in various recreational activities in the City of Marathon or in nearby areas. For example, a substantial number of members of both of those organizations regularly use and enjoy the nearshore waters of Monroe County for recreational water activities, such as boating, diving, snorkeling, and/or swimming.3 A substantial number of members of both organizations also regularly use and enjoy terrestrial habitats in Monroe County, including the City of Marathon, for recreational activities such as hiking and bird-watching. A substantial number of the members of both FKCC and Last Stand may be adversely affected or impacted by the issues which are in dispute in this proceeding. Moreover, the issues in this proceeding are germane to the purposes of both FKCC and Last Stand. Also, both FKCC and Last Stand regularly represent their members' interests in formal administrative hearings and local commission meetings relative to environmental and growth management issues. Respondent, Administration Commission, consists of the Governor and Cabinet and is empowered to adopt, by rule, any enactment, amendment, or rescission of a land development regulation or element of a local comprehensive plan in the Florida Keys area. Respondent, Monroe County, is a local county government within the Florida Keys Area of Critical State Concern ("ACSC"). Respondent, City of Marathon, is a municipality within the Florida Keys ACSC. Intervenor, the DCA, is the state land planning agency responsible for the general supervision of the administration and enforcement of the ACSC program. As the state planning agency, the DCA is authorized to propose changes to local comprehensive plans and land development regulations within an ACSC for adoption by the Administration Commission. Economic Base of Florida Keys Tourism is the economic base of the Florida Keys. Moreover, the basis for the Florida Keys' tourism is a healthy natural environment that supports fishing, diving, water sports, boating, bird-watching habitat, visiting endangered species habitat, and other related activities. History of the Florida Keys ACSC The Florida Keys area is designated as an ACSC and consists of, unincorporated, Monroe County, the City of Layton, the City of Key Colony Beach, the Village of Islamorada, and the City of Marathon. See § 380.0552(3), Fla. Stat. (2004).4 The City of Key West has been separately designated as an ACSC pursuant to Florida Administrative Code Rule Chapter 28-36. The Florida Keys were originally designated by the Administration Commission in 1975 and re-designated by the Legislature in 1986. The legislative intent section and the Principles for Guiding Development, as set forth in Subsections 380.0552(2) and (7), Florida Statutes, together require an effective land use management system that protects the natural environment and character of the Florida Keys, maintains acceptable water quality conditions, ensures adequate public facility capacity and services, provides adequate affordable housing, supports a sound economic base, protects constitutional property rights, and requires adequate emergency and post- disaster planning to ensure public safety. During the past 20 years, the growth management process has been implemented in essentially two phases. The first phase involved developing, adopting, and implementing the first comprehensive plans and regulations under the new designation. These plans and regulations were adopted by the county and cities in the mid-1980s. The 1986 plan established a growth management system that substantially increased protection of natural resources and began to reduce the over-allocation of density in the Florida Keys. It also achieved the long-term protection of North Key Largo. However, several major problems were not adequately addressed by the 1986 plan, including maintaining evacuation capability, water quality protection, sewage treatment, stormwater treatment, and community character. In addition, although the plan required a focal point plan for Big Pine Key, this planning process did not result in a viable plan that adequately protected the Florida Keys deer. The required open space ratios proved difficult to maintain within habitats once development occurred, resulting in fragmentation of habitat. The second phase involved the planning process undertaken in the early 1990s to meet the requirements of the Growth Management Act and to update the plan based on lessons learned in implementing the 1986 plan. In developing, reviewing, and litigating the Monroe County Comprehensive Plan, the following critical issues emerged involving how to: maintain acceptable hurricane evacuation capability; retrofit existing development and provide new development with adequate wastewater and storm water facilities, including, where appropriate, upgrading of on-site systems; determine the carrying capacity of the Keys to withstand the impacts of additional land development and modify state and local plans, regulations and programs so that the carrying capacity is not exceeded; provide an adequate supply of affordable housing while maintaining acceptable hurricane evacuation and protecting the environment. In 1996, the Administration Commission adopted a rule which included a cap of 255 residential units per year for Monroe County. The rule also adopted a five-year Work Program into the Monroe County Comprehensive Plan with the local governments to construct sewage treatment facilities, replace cesspits, and purchase land to protect natural habitat. Monroe County, the City of Marathon, and the DCA were required to submit reports to the Administration Commission each year "documenting the degree to which the Work Program objectives for that year [had] been achieved." The rule contemplated that if the local governments did not make "substantial progress" towards accomplishing the tasks of the Work Program, the unit cap for new residential permits would be reduced by at least 20 percent for the following year. The Administration Commission found a lack of "substantial progress" in 1999 and adopted a rule which reduced the annual allocation of residential permits by 20 percent and extended the five-year Work Program to seven years. The Administration Commission found "substantial progress" had been accomplished in 2001 and began rulemaking to restore the permit allocation. However, the rule was challenged, and since the Administration Commission found a lack of "substantial progress" in 2002, the Commission adopted a revised rule which did not restore permits. The Carrying Capacity Study The 1996 Administration Commission rule amended the Monroe County Comprehensive Plan to require the completion of a carrying capacity analysis. The carrying capacity analysis shall be designed to determine the ability of the Florida Keys ecosystem, and the various segments thereof, to withstand all impacts of additional land development activities. The analysis shall be based upon the findings adopted by the Administration Commission on December 12, 1995, or more recent data that may become available in the course of the study, and shall be based upon the benchmarks of, and all adverse impacts to, the Keys land and water natural systems, in addition to the impact of nutrients on marine resources. The carrying capacity analysis shall consider aesthetic, socioeconomic (including sustainable tourism), quality of life and community character issues, including the concentration of population, the amount of open space, diversity of habitats, and species richness. The analysis shall reflect the interconnected nature of the Florida Keys' natural systems, but may consider and analyze the carrying capacity of specific islands or groups of islands and specific ecosystems or habitats, including distinct parts of the Keys' marine system. (Ref. 1991 Stip. Settlement Agreement). Agencies: County, DCA, DEP, DOH, DOT, GFC, SFWMD, NMS, SFRPC, EPA, USFWS, Army COE, and other interested parties to include representatives of environmental organizations and development interests. The Florida Keys Carrying Capacity Study ("FKCCS") was completed over a period of six years. Six million dollars was allocated by the DCA and the United States Army Corps of Engineers to produce the Monroe County Sanitary Wastewater Master Plan, the Stormwater Management Plan, and the FKCCS. The contractor, URS Corporation, completed the FKCCS and the Carrying Capacity/Impact Assessment Model ("CCIAM"), a separate component to be used in forecasting land use scenarios. A panel of external experts was used to peer review the scope of work. In September 2002, the study was completed. The National Research Council of the National Academy of Sciences ("Council") reviewed the CCIAM and FKCCS and, as a result of its review, adjustments were made to the CCIAM. The Council's review concluded that overall, due to data constraints and other issues in certain portions of the CCIAM, the model proved insufficient to develop a comprehensive carrying capacity framework that would allow for undisputable determinations of whether future development scenarios fall within the carrying capacity of the Florida Keys. The marine module, the most data- deficient, was subsequently removed from the CCIAM. The FKCCS recommended four main guidelines for future development in the Florida Keys: Prevent encroachment into native habitat. A wealth of evidence shows that terrestrial habitats and species have been severely affected by development and further impacts would only exacerbate an already untenable condition. Continue and intensify existing programs. Many initiatives to improve environmental conditions and quality of life exist in the Florida Keys. They include land acquisition programs, the wastewater and stormwater master plans, ongoing research and management activities in the Florida Keys National Marine Sanctuary, and restoration efforts throughout the Florida Keys. If further development is to occur, focus on redevelopment and infill. Opportunities for additional growth with small, potentially acceptable, additional environmental impacts may occur in areas ripe for redevelopment or already disturbed. Increase efforts to manage the resources. Habitat management efforts in the Keys could increase to effectively preserve and improve the ecological values of remaining terrestrial ecosystems. Partnership Agreement While preparing the Assessment Report for 2003, the DCA Secretary concluded that the existing policy direction, consisting of imposition of the Work Program by the Administration Commission and reduction of residential permits, due to lack of substantial progress, was not sufficient to solve the problems facing the Florida Keys. The Assessment Report described difficulties and delays in implementing the Work Program. Most of the sewage treatment facilities contemplated by the Work Program were not constructed and valuable upland habitat continued to be developed. On December 16, 2003, the Administration Commission concluded that Monroe County had not made substantial progress and directed the DCA "to determine changes that would be necessary to the comprehensive plan to fully implement the requirements of the Work Program[,] as well as habitat protection provisions." The Administration Commission also accepted the staff recommendation that it "determine substantial progress has been made for the City of Marathon, and that some permits will be provided back to the City of Marathon," the number to be determined at the Administration Commission's January 27, 2004, meeting. The DCA approached the Florida Keys local governments and community-based organizations and proposed a Partnership Agreement to "begin implementation of the Work Program associated with the Florida Keys Protection Act." The DCA Secretary addressed the governing boards of the Florida Keys' local governments concerning the proposed Partnership Agreement. Monroe County, the City of Marathon, and the Village of Islamorada adopted resolutions supporting the partnership proposal. By letter dated February 25, 2004, the DCA Secretary requested that the Governor, as a member of the Administration Commission, authorize the Administration Commission staff to initiate rulemaking to amend the Comprehensive Plans of Monroe County and the City of Marathon. According to the letter, this action was requested based upon a series of significant commitments made by each of these local governments which addressed issues related to habitat protection, affordable housing, wastewater and stormwater management projects, land acquisition, and nutrient credits. The letter also noted the following: A complete follow-through on these commitments would mean over $410 million would be spent in the coming years to address these issues in the Florida Keys. Habitat protection will be increased, environmentally-sensitive hammock and pinelands would be purchased, new wastewater and stormwater management projects would be initiated, and 230 units of affordable housing would be made available for residents of the Florida Keys. * * * In essence, we have developed proposals that allow additional units primarily for affordable housing in the Florida Keys, but also would ensure the most pressing issues will be jointly addressed by local and state government. Consistent with the February 25, 2004, letter, the Partnership Agreement consists of commitments by the Florida Keys' local governments and several state agencies to address habitat protection, wastewater and stormwater treatment, affordable housing, and hurricane evacuation. At its March 9, 2004, meeting, the Administration Commission accepted the DCA's recommendation to initiate rulemaking to implement the Partnership Agreement. The Proposed Rules 29. Proposed Rules 28-18.210, 28-20.110, and 28-20.120 were published in the Florida Administrative Weekly on July 16, 2004.5 According to the published notice, the purpose of Proposed Rule 28-18.210 is to amend Policy 101.2.14 of the Marathon Comprehensive Plan to address building permit allocations by increasing the annual residential permitting cap and specifying allocations authorized for market rate and affordable housing, restoring certain allocations authorized for market rate and affordable housing, authorizing certain unused rate of growth ordinance allocations to roll forward, and deleting the requirement for nutrient credits upon a date certain. The notice also provides that the Proposed Rule amends the Work Program set forth in Policy 101.2.14 of the Marathon Comprehensive Plan to establish Year Eight and Year Nine to address tasks not yet completed in the original Work Program. The published notice states that the purpose of Proposed Rules 28-20.110 and 28-20.120 is to amend Policy 101.2.13 of the Monroe County Comprehensive Plan to address building permit allocations by increasing the annual residential permitting cap and specifying allocations authorized for market rate and affordable housing, restoring certain allocations previously reduced to be targeted for affordable housing, authorizing certain unused rate of growth ordinance allocations to roll forward, and deleting the requirement for nutrient reduction credits upon a date certain. The notice also provides that the proposed rules amend the Work Program in Policy 101.2.13 of the Monroe County Comprehensive Plan to establish Work Program provisions for Year Eight, Year Nine, and Year Ten to address tasks not yet completed in the original Work Program. Finally, the notice states that the Proposed Rule amendments address the adoption of necessary land development regulations. The published notice cites Subsection 380.0552(9), Florida Statutes, as the specific authority for the Administration Commission's promulgating the Proposed Rules and Section 380.0552, Florida Statutes, as the law implemented. Petitioners challenge portions of Proposed Rule 28-18.210, which will amend the Marathon Comprehensive Plan and portions of Proposed Rules 28-20.110 and 28-20.120,6 which will amend the Monroe County Comprehensive Plan and the Monroe County Land Development Regulations on the basis that they constituted invalid exercises of delegated legislative authority. Petitioners contend that the proposed rules should comply with Section 380.0552 and Chapters 163 and 380, Florida Statutes, and, therefore, should be analyzed for such compliance in this proceeding. Notwithstanding Petitioners contention to the contrary, for the reason stated in paragraph 199 below, Proposed Rules 28-18.210, 28-20.110, and 28-20.120 will be analyzed based on their consistency with Section 380.0552, Florida Statutes, because that is the provision which the proposed rules explicitly purport to implement. The published notice does not specify the subsection of Section 380.0552, Florida Statutes, that the proposed rules implement. However, the parties agree that the proposed rules must be consistent with Subsection 380.0552(7), Florida Statutes, which set forth the Principles for Guiding Development. Restoration/Increase of ROGO Allocations The Comprehensive Plans for Monroe County and the City of Marathon include a Permit Allocation System, under which Monroe County was originally allocated 255 permits per year for new residential units. As noted in paragraph 18 above, in 1999, the Administration Commission determined that substantial progress on the Work Program had not been accomplished and adopted a rule reducing the annual allocation of permits by 20 percent. After the incorporation of the Village of Islamorada and Marathon, and a voluntary reduction by the Village of Islamorada, the current annual allocation of residential development permits is 158 for Monroe County, 24 for Marathon, and 14 for the Village of Islamorada. Proposed Rule 28-20.110(1) amends Policy 101.2.13 of the Monroe County Comprehensive Plan by increasing the annual unit cap of 158 to 197, thereby restoring the original level of permits issued for new residential development under the Rate of Growth Ordinance ("ROGO"). The proposed rule requires that "[e]ach year's ROGO allocation of 197 new units shall be split with a minimum of 71 units allocated for affordable housing in perpetuity and market rate allocations not to exceed 126 new units per year." Proposed Rule 28-18.210 amends Policy 101.2.14 of the Marathon Comprehensive Plan by increasing the maximum number of permits for new residential units from 24 to 30 per year, thereby, restoring the original level of permits per year for new residential development under ROGO. The proposed rule requires that "[e]ach year's ROGO allocation of 30 units shall consist of 24 market rate and 6 affordable units" and that the affordable housing "remain as affordable housing in perpetuity." In addition to restoring the number of permits for new development to the original levels, Proposed Rule 28-20.110 amends the Comprehensive Plans of Monroe County and Marathon to restore available permit allocations that were unused in previous years and to allow unused ROGO allocations to be allocated in subsequent years. Proposed Rule 28-20.110 adds a new provision to the Monroe County Comprehensive Plan, providing that "effective July 12, 2004, 140 ROGO allocations, which represent unused reductions for ROGO Years Nine through 12, and 25 units lost in Year Ten due to lack of nutrient credits, are reallocated to the County exclusively for affordable housing purposes." Proposed Rule 28-18.210 adds a provision to the Marathon Comprehensive Plan that "effective July 12, 2004, 65 ROGO allocations, which represent unused ROGO allocations for ROGO Years 9 through 12, are to be reallocated to the City exclusively for affordable housing." Advancing/Borrowing Nutrient Credits The existing Comprehensive Plans of Monroe County and the City of Marathon include a nutrient credit system. According to the Monroe County Comprehensive Plan, nutrient reduction credits are earned when existing treatment systems are upgraded. The amount of nutrient reduction credits earned correlate to the type of treatment system to which an old system is upgraded. Thus, if a treatment system is upgraded to the "best centralized system" or the "advanced wastewater treatment system," Monroe County would earn the most nutrient credits possible. For example, elimination of a cesspit by connection to a centralized advanced wastewater treatment system earns 1.5 nutrient credits, and the elimination of a substandard on-site disposal system by connection to a centralized secondary treatment system earns 0.5 nutrient credits. Under the existing Comprehensive Plans of Monroe County and the City of Marathon, development permits for new residential development can only be issued if a nutrient reduction credit has been earned. The requirement that adequate nutrient credits be earned prior to issuance of permits is to mitigate for nutrient impacts of new residential development. However, Proposed Rules 28-18.210 and 28-20.110 provide that Monroe County and the City of Marathon will be permitted to "borrow" nutrient credits from the pool of nutrient credits that are anticipated from the construction and/or completing of sewage treatment facilities. The existing Comprehensive Plans of Monroe County and the City of Marathon provide that nutrient reduction credits are earned by the construction of the Little Venice system according to the schedules prescribed in the Comprehensive Plans. The schedules in the Comprehensive Plans provide that "213 of the total credits estimated to be available from the full operation of the system shall be earned when the wastewater permit is issued, the design/build contract for the system has been fully executed and construction of the system has commenced." The Comprehensive Plans also provide that all the remaining available credits shall be earned when the construction of the Little Venice System is complete, the collection system lines have been installed, and the final total of credits available from the operation of the systems has been calculated. Proposed Rules 28-20.110 and 28-18.210 amend the Comprehensive Plans of Monroe County and Marathon by allowing 213 of the total credits estimated to be available from the full operation of the Little Venice system to be earned, effective July 13, 2003. The proposed rules also provide that when the Little Venice system is completed, "[t]he total credits available shall be reduced by the 213 [credits] advanced in the year 2003." Proposed Rule 28-20.110 amends the Monroe County Comprehensive Plan by allocating 41 nutrient credits for market rate units and 193 nutrient credits for affordable housing units to Monroe County. The Proposed Rule 28-20.110 provides that the 41 nutrient credits will be subtracted from the nutrient credits subsequently earned from hookups to the Key West Resort Utilities Wastewater Facility ("Key West Resort Utilities"). The 193 nutrient credits will be subtracted from hookups to the Key West Resort Utilities, Bay Point, and Key Largo Wastewater Facilities. Repeal of Nutrient Reduction Provision As described in paragraph 42 above, the existing Comprehensive Plans of Monroe County and the City of Marathon have mandatory nutrient provisions that require nutrient credits to be earned prior to issuance of a permit for new residential units. Proposed Rules 28-20.110 and 28-18.210 amend the Comprehensive Plans of Monroe County and the City of Marathon by repealing the mandatory nutrient credit provisions. Pursuant to the proposed rules, "effective July 13, 2005, no nutrient credits shall be required if the local government has made satisfactory progress as determined by the Administration Commission in meeting the deadlines established by the Work Program as adopted by rule after March 15, 2004." Challenges to Increase/Restoration of Permits, Advancing Nutrient Credits, and Repeal of Nutrient Reduction Provision Petitioners contend that the increase in new residential permits is arbitrary and capricious and contravenes the law implemented because it will increase development even though the identified thresholds for growth in the Florida Keys--water quality, terrestrial habitat, and evacuation times-- have been exceeded and will "worsen" the water quality. Petitioners challenge the provision which allows the borrowing or awarding of nutrient credits before wastewater projects are completed as arbitrary and capricious, because it will allow a net increase in the nutrient impacts into the nearshore waters of the Florida Keys and will "worsen" the water quality. Proposed Rules 28-20.110(1) and 28-18.210 increase the number of permits for new residential units from the preceding years. However, the number of permits to be issued under the Monroe County Comprehensive Plan has not increased. Rather, the permits will be issued in a shorter time frame and without being subject to the previous conditions. Even though increased development could result in an increase in the nutrient impacts into the nearshore waters of the Florida Keys, the adverse effect of such nutrient loading is offset by the adequate treatment of wastewater and stormwater runoff. To address the problem of nutrient loading, the Proposed Rules 28-20.110 and 28-18.210 extend the years of the Work Programs and include in those programs tasks, such as construction and completion of wastewater facilities, as well as financing for those projects. Based on the commitments of Monroe County and the City of Marathon in the Partnership Agreement, there is a reasonable expectation that the projects included in the Work Program of the Proposed Rules will be completed. When completed, the wastewater treatment facilities will provide nutrient credits. In anticipation of the completion of the wastewater treatment facilities, Proposed Rules 28-20.110 and 28-18.210 restore the annual permits for new residential units to their original levels and allow previous unused ROGO allocations to be allocated. The Proposed Rules provide that the nutrient credits for these allocations will be borrowed from the pool of nutrient credits that are anticipated from the planned construction and completion of wastewater facilities. Petitioners' contention that the repeal of the mandatory nutrient reduction credit provision is arbitrary and capricious and contravenes the law implemented because such repeal allows the water quality to worsen, is inconsistent with the "no net nutrient" provision of the Comprehensive Plans and is unjustified given that the nutrient pollution has increased since the nutrient credit provisions were adopted. Petitioners also contend that the repeal of the nutrient credit provision is arbitrary and capricious because the repeal is effective on a date certain without further action and without regard for whether it is justified. Proposed Rules 28-20.110 and 28.18-210 repeal the mandatory nutrient reduction credit provisions of the Comprehensive Plans, but the condition precedent to the repeal is the Administration Commission's making a determination that Monroe County and the City of Marathon have "made satisfactory progress . . . in meeting deadlines established by the [new] Work Program." This determination must be made prior to the repeal going into effect. Presumably, the tasks in the Work Program for which satisfactory progress must be made are those relevant and reasonably related to and which result in nutrient credits. Contrary to Petitioners' assertion, the repeal of the mandatory nutrient credit provision does not automatically become effective on the date prescribed in the proposed amendments. Instead, the repeal is contingent on Monroe County's and the City of Marathon's making "satisfactory progress." The term "satisfactory" is not vague as asserted by Petitioners. In the context of Proposed Rules 28-20.110 and 28-18.210, "satisfactory" would be given its common and ordinary meaning, which is "sufficient to meet a demand or requirement."7 Annual Reporting Requirement The existing Comprehensive Plans for Monroe County and the City of Marathon provide that "beginning September 30, 2003, and each year thereafter, [the respective local government] Monroe County and the [DCA] shall report to the Administration Commission documenting the degree to which the Work Program objectives have been achieved." Proposed Rules 28-20.110 and 28-18.210, will modify the annual reporting requirements in the Monroe County and Marathon Comprehensive Plans. The proposed amended provision, which is underlined, and the existing provision are as follows: Beginning September 30, 2003, and each year of the work program thereafter, Monroe County and the Department of Community Affairs shall report to the Administration Commission documenting the degree to which the work program objectives for that year have been achieved. The report for years seven and eight shall be combined and provided to the Administration Commission by September 30, 2005. The Commission shall consider the findings and recommendations provided in those reports and shall determine whether substantial progress has been achieved toward accomplishing the tasks of the work program. Petitioners contend that the proposed rules, which delete the requirement for Monroe County and for the City of Marathon to submit the September 2004 progress report to the Administration Commission, are arbitrary and capricious. Petitioners assert that by deleting the requirement for the 2004 annual progress report, the proposed rules fail to establish an annual safeguard that is required to ensure that the environmental conditions and infrastructure limitation that the annual Work Program is designed to resolve, do not worsen. The proposed rules delete the requirement that Monroe County and Marathon submit their respective reports in September 2004 and delay submission of that report by a year. The time spent negotiating the Partnership Agreement and the proposed changes to the Monroe County Comprehensive Plans and the Land Development Regulations left little time for Monroe County and the City of Marathon to implement the new Work Programs. Moreover, the DCA and the Administration Commission would have had too short a time period in which to judge whether Monroe County and Marathon had made substantial progress. By combining the reports for Years Seven and Eight of the Work Program, the Administration Commission can expect a meaningful report on Monroe County's and the City of Marathon's progress in implementing their respective Work Programs. Monroe County Work Program Under Proposed Rules Proposed Rule 28-20.110 amends the Work Program Policy 101.2.13 of the Monroe County Comprehensive Plan by adding Years Eight, Nine, and Ten to the existing Work Program. Many of the tasks included therein address and are related to wastewater facilities, habitat protection, affordable housing, and hurricane evacuation and implement the Partnership Agreement. Year Eight of the Work Program requires that Monroe County and other designated agencies perform the specified tasks and provide, in relevant part, the following: Year Eight (July 13, 2004 through July 12, 2005) Review and revise (as necessary) the Conservation and Natural Areas Map. Initiate acquisition strategy for lands identified outside the Conservation and Natural Areas identified as worthy of protection. Begin public hearings for Conservation and Natural Areas boundaries. Conclude public hearings for the adoption of the amended Conservation and Natural Areas Boundaries. Adopt an ordinance to implement a moratorium on ROGO/NROGO applications that involves the clearing of any portion of an upland tropical hardwood hammock or pinelands habitat contained in a tropical hardwood hammock or pinelands patch of two or more acres in size located within a Conservation and Natural Area. Adopt amendments to the comprehensive plan and land development regulations to enact overlay designations, and eliminate or revise the Habitat Evaluation Index, and modify the ROGO/NROGO system to guide development away from environmentally sensitive lands. Amend land development regulations to prohibit the designation of Conservation and Natural Areas (Tier 1) as a receiver site for ROGO exempt development from sender sites; and to further limit clearing of upland native habitat that may occur in the Natural Areas (Tier I) and the Transition and Sprawl Reduction Area (Tier II) upon designation by the County. Develop Land Acquisition and Management Master Plan and address both funding and management strategies. Provide $40 million in financing secured by infrastructure tax for wastewater facilities. Begin construction of wastewater plants or laying of collection lines for Baypoint, Conch Key and Key Largo Trailer Village/Key Largo Park. Ensure the connection for up to 1,350 EDUs [equivalent development units] at Stock Island to Key West Resort Utilities. Complete the Lower Keys and Key Largo feasibility study. Complete projects identified in the Storm Water Management Master Plan. Evaluate and implement strategies to ensure that affordable housing remains affordable in perpetuity for future generations. Establish a partnership with non-profit organizations in order to construct affordable housing using additional state funds. Identify potential acquisition sites for affordable housing proposals and include in the Land Acquisition Master Plan. Provide up to $10 million in bond financing from the Tourist Impact Tax for acquisition of land for workforce housing and affordable housing sites. Complete a comprehensive analysis of hurricane evacuation issues in the Florida Keys and develop strategies to reduce actual hurricane clearance times and, thereby, reduce potential loss of life from hurricanes. As discussed below, several of the tasks in Year Eight of the Work Program implement parts of Goal 105 of the Monroe County Comprehensive Plan. Goal 105 reads: Monroe County shall undertake a comprehensive land acquisition program and smart growth initiatives in conjunction with its Livable CommuniKeys Program in a manner that recognizes the finite capacity for new development in the Florida Keys by providing economic and housing opportunities for residents without compromising the biodiversity of the natural environment and the continued ability of the natural and man-made systems to sustain livable communities in the Florida Keys for future generations. Goal 105, also referred to as the "Smart Growth Goal," provides a framework to implement the FKCCS and a 20-year land acquisition program. The initial phase of implementing Goal 105 calls for the drafting and adoption of "Tier Maps" to be used as guidance for the Monroe County's Land Acquisition Program. Pursuant to Policy 105.2.1 of the Monroe County Comprehensive Plan, the Tier maps will designate and map properties into one of the following three general categories for purposes of Monroe County's Land Acquisition Program and the smart growth initiatives: Natural Area (Tier I); Transition and Sprawl Reduction Area (Tier II); and Infill Area (Tier III). Tier I property is property where all or a significant portion of the land is characterized as environmentally sensitive by policies of the Monroe County Comprehensive Plan and applicable habitat conservation plan. Tier I is to be designated as a Natural Area. New development is to be severely restricted in Tier I. Tier II is any geographic property where scattered groups and fragments of environmentally-sensitive lands, as defined by the Comprehensive Plan, may be found and where subdivisions are not predominantly developed. New development is to be discouraged in Tier II, which is to be designated as Transition and Sprawl Area. Tier III is property where a significant portion of land is not characterized as environmentally sensitive, as defined by the Monroe County Comprehensive Plan, where existing platted subdivisions are substantially developed, served by complete infrastructure facilities, within close proximity to established commercial areas or where a concentration of non-residential uses exist. New development and re-development are to be highly encouraged in Tier III, which is to be designated as Infill Area. Petitioners contend that Task A, which requires Monroe County to "review and revise [as necessary] the Conservation and Natural Areas ["CNA"] Map, vests unbridled discretion to the County to amend the CNA map without adequate standards or criteria." Further, Petitioners assert that Task A does not identify the purpose for which the CNA map is to be used. Based on this assertion, Petitioners contend that Task A is arbitrary and capricious and contravenes law. Task A will assist in the implementation of the Comprehensive Plan by requiring Monroe County to review and revise the CNA map. In reviewing Task A, it is clear that the county must adhere to the criteria prescribed in Goal 105 of the existing Monroe County Comprehensive Plan. When Task A is read together with Goal 105 and its related policies, it is clear that the purpose of Task A is to provide guidance for the Monroe County Land Acquisition Program. As a part of the review and revision process, the Partnership Agreement, which Task A implements, provides that the Monroe County staff should prepare the CNA map utilizing Florida Marine Source Resources Institute ADID maps, the most recent aerial photographs, site visits as necessary, and obtain input from DCA and the public. Moreover, when Task A is read with Task B, and other relevant parts of the Monroe County Comprehensive Plan, it is clear that a CNA map is to be used to implement Goal 105 of the Monroe County Comprehensive Plan, which is related to land acquisition and "smart growth initiatives." Petitioners assert that Task B, which requires Monroe County to "initiate acquisition strategy for lands identified outside the [CNA] boundaries," is arbitrary and capricious and contravenes the law implemented, because it provides no standards or criteria. Task B is consistent with Policy 105.2.1 of Goal 105 of the Monroe County Comprehensive Plan. The Partnership Agreement consistent with Goal 105 provides that Monroe County will identify lands outside the CNA boundaries for acquisition and target for purchase appropriate environmentally-sensitive lands that are contained within upland habitat of two acres or more outside the CNA. Task C requires Monroe County to "begin public hearings for [CNA]." Task D requires Monroe County to conclude the public hearings for adoption of the amended [CNA] boundaries. Petitioners contend that Tasks C and D are arbitrary and capricious and contravene the law implemented, because they do not require that an end result be achieved as a result of these public meetings. When the provisions of Task C and Task D are read together, with Goal 105 and the relevant provisions of the Partnership Agreement, it is clear that the end result sought as a result of the public hearings is to receive public comment regarding the identification of lands to be included in the CNA. Furthermore, this is a reasonable meaning of Tasks C and D in light of the well-known purpose of public hearings. Petitioners challenge Task E, which requires Monroe County to "adopt an ordinance to implement a moratorium on ROGO/NROGO applications that involves the clearing of any portion of an upland tropical hardwood hammock or pinelands habitat contained in a tropical hardwood hammock or pinelands patch of two or more acres in size located within a [CNA]." The purpose of the moratorium is to prevent impacts to native habitat until Monroe County adopts permanent regulations and amendments. Petitioners contend that Task E of Year Eight of the Work Program, which requires Monroe County to "adopt an ordinance to implement a moratorium on ROGO/NROGO applications that involve the clearing of any portion of an upland hardwood hammock or pinelands habitat contained in a tropical hardwood hammock or pinelands patch of two acres or more . . . within a [CNA]," is arbitrary and capricious and contravenes the law implemented. Petitioners assert that the criteria for the interim ordinance required fails to protect all hammock and pineland, does not protect enough hammock to ensure that the carrying capacity of the Florida Keys terrestrial habitat to sustain degradation and loss is not exceeded, does not require that the interim protections last until replaced by permanent ones, and does not apply to ROGO-exempt allocations. The criteria for the interim ordinance required by Task E is reasonable and will result in strengthening habitat protection in the areas specified in that provision. The fact that Task E authorizes the adoption of an ordinance that protects less than "all" hammock and pineland, does not make the proposed rule arbitrary and capricious, nor does the proposed rule contravene the law implemented. Petitioners contend that Task F, which requires Monroe County to "[a]dopt amendments to the comprehensive plan and land development regulations to enact overlay designations, and eliminate or revise the Habitat Evaluation Index ["HEI"], and modify the ROGO/NROGO system to guide development away from environmentally sensitive lands," is arbitrary and capricious and contravenes the law implemented. Petitioners claim that the standard set forth in Task F, "to guide development away from environmentally sensitive lands," is no more specific than is statutory language. Petitioners assert that the proposed rule should specify (1) habitat types, patch sizes and other characteristics of the areas to which regulations will apply, and (2) the exact nature of the regulation (i.e. a prohibition on direct or secondary impacts, the application of negative points or open space rations, etc.) that will be relied upon to guide development away from such areas. Task F requires Monroe County to adopt amendments to the Comprehensive Plan and Land Development Regulations to enact the overlay designations requiring Monroe County to implement Policy 105.2.2 of the Monroe County Comprehensive Plan. Task F will implement Goal 105 of the Monroe County Comprehensive Plan. This task will identify areas to which future development will be directed. Also, the overlay designations will give property owners more certainty with respect to whether they can or cannot develop their property. The requirement in Task F, that the HEI be reviewed or eliminated, is reasonable in light of Goal 105 of the Monroe County Comprehensive Plan. The HEI is currently used by Monroe County to evaluate the environmental sensitivity of land and its suitability for development and acquisition. The HEI requires lot-by-lot evaluations, which fail to take into account secondary impact of development and has resulted in the loss of valuable habitat. The Tier System in Goal 105 is designed to move Monroe County away from the existing HEI. Implementation of Goal 105 requires that the existing HEI be eliminated or revised. Task G of Year Eight of the Work Program requires Monroe County to "amend land development regulations to prohibit the designation of [CNA] (Tier 1) as a receiver site for ROGO exempt development from sender sites; and to further limit clearing of upland native habitat that may occur in the [CNA] (Tier I) and the Transition and Sprawl Reduction Area (Tier II) upon designation by the County." Petitioners contend that Task G is arbitrary and capricious and contravenes the law implemented because it fails to permanently protect even that habitat which Monroe County claims is most important to protect, allows the geographic scope of the contemplated rules to be defined in the future without stated criteria or standards, and allows an unnecessary delay in the adoption of protections which the data and legal requirements demonstrate should have been adopted two years earlier. Task G is intended to strengthen protection of habitat by adopting land development regulations to prohibit development in specified areas and to further limit clearing in designated areas. Goal 105, specifically, provides guidance as to the standards that such regulations must follow in Policy 105.2.1 of the Monroe County Comprehensive Plan. Petitioners contend that Task K of Year Eight of the Work Program requiring Monroe County to ensure the connection for up to 1,350 units at Stock Island to Key West Resort Utilities, is arbitrary and capricious and contravenes the law implemented. Petitioners charge that the requirement in the proposed rule is vague and could be met by simply connecting one home to the referenced wastewater utility to remedy a documented, serious water quality problem. When the purpose of Task K is considered, the reasonable meaning of the provision is that the task requires that Monroe County connect approximately 1,350 units to the designated facility. Petitioners contend that Task M of Year Eight of the Work Program, which requires Monroe County to "complete projects identified in the Stormwater Management Master Plan," is arbitrary and capricious and contravenes the law implemented. In support of this contention, Petitioners assert that the Proposed Rule does not identify the name or number of stormwater projects that are to be completed. Petitioners argue that by referring only to "projects," without specifying the name or number of the projects to be completed, the Proposed Rule may require that only a minimum of two projects be completed. The reasonable interpretation of Task M is that Monroe County is required to complete all the remaining projects identified in the Stormwater Management Master Plan. This meaning is supported by a review of related tasks in the previous years of the Work Program. For example, Year Six of the Work Program required Monroe County and other designated agencies to "initiate construction of selected projects as identified in the Stormwater Management Master Plan." Year Seven of the Work Program required that Monroe County and other agencies "continue implementing selected projects identified in the Stormwater Management Master Plan." Petitioners contend that Task P in Year Eight of the Work Program, which requires Monroe County to "provide up to $10 million in bond financing from the Tourist Impact Tax for acquisition of land for workforce housing and affordable housing sites," is arbitrary and capricious and contravenes the law implemented. As a basis for this contention, Petitioners claim that Task P sets a vague requirement which could be met by simply providing $1.00 in bond financing to provide a need which the State and Monroe County claim is important enough to justify the permitting increase allowed by Proposed Rules 28-18.210 and 28-20.110. Contrary to Petitioners' assertions, the requirement to provide $10 million in bond financing could not be met by providing $1.00 in bond financing. The $10 million figure represents the approximate amount of bond financing that will be provided. For the reasons stated above, it is not possible to include an exact amount in this Work Program requirement. The Work Program for Year Nine provides that the following tasks be done between July 13, 2005, through July 12, 2006: In coordination with the Florida Key Aquaduct Authority and Key Largo Sewer District, initiate the process to obtain $80 million in bond financing secured by connection fees. Secure site for lower Keys and Key Largo wastewater facilities. Petitioners contend that Task A for Year Nine for the Work Program, which requires that Monroe County, "in coordination with the Florida Keys Aqueduct Authority and the Key Largo Sewer District, initiate the process to obtain $80 million in bond financing secured by connection fees," is arbitrary and capricious and contravenes the law implemented. Petitioners contend that Task A, which requires that Monroe County only "initiate" the process necessary to obtain the required bond financing, and does not require that the funds be secured and dedicated to actual improvements, delays funding to remedy a critical water quality problem. The reasonable meaning of the provision in Task A, that Monroe County will initiate the process to obtain "80 million in bond financing secured by connection fees," is that Monroe County will take all steps legally necessary to accomplish obtaining the bond financing. Petitioners contend that Task B of Year Nine of the Work Program, which requires Monroe County to "secure a site for lower Keys and Key Largo wastewater facilities," is arbitrary and capricious and contravenes the law implemented, because it delays an important remedy to a critical water quality problem. Task B reasonably requires that one of the first steps that must be taken prior to constructing any wastewater facility is to secure a site. Irrespective of the need for the wastewater facilities specified in Task B, unless a site is secured, no construction can occur. Proposed Rule 28-20.110(1), which amends Policy of the Monroe County Comprehensive Plan by adding Year Ten to the Work Program, provides the following: Year Ten (July 13, 2006 through July 12, 2007) Award Contract for design, construction, and operation of lower Keys and Key Largo wastewater facilities. Begin construction of the lower Keys and Key Largo wastewater plants. Initiate connections to lower keys and Key Largo wastewater systems. Complete construction and hookups for Bay Point, Conch Key and Key Largo Trailer Village/Key Largo Park. Obtain $80M in bond financing secured by connection fees Petitioners contend that Task A, which requires Monroe County to award a contract for design, construction, and operation of the lower Florida Keys and Key Largo wastewater facilities, is arbitrary and capricious and contravenes the law implemented, because it delays an important remedy to a critical water quality problem. Petitioners also contend that Task D, which requires that construction and hookups for specified areas be completed, and Task E, which requires Monroe County to obtain $80 million in bond financing secured by connection fees, are arbitrary and capricious and contravene the law implemented. That Tasks A, D, and E are required to be completed in Year Ten of the Work Program, between July 13, 2006, and July 12, 2007, is reasonable in view of the steps that must be taken prior to completing the responsibilities provided in those tasks. Petitioners contend that Task B, which requires Monroe County to "begin construction of the lower Florida Keys and Key Largo Trailer Village/Key Largo Park wastewater plants" between July 13, 2006, and July 12, 2007, is arbitrary and capricious and contravenes the law implemented. Petitioners assert that this portion of Proposed Rule 28-20.110 delays an important remedy to a critical water quality problem and does not require the completion of construction or the hookup and operation of the necessary facility. Task B of the Work Program, to begin construction of the lower Florida Keys and Key Largo wastewater plants, reasonably and logically follows the task in the preceding work year that required Monroe County to secure a site for the lower Florida Keys and Key Largo wastewater facilities. Given this chronology, it is reasonable that Task B does not require that the specified wastewater facilities be completed and fully operational the same year that construction begins. Petitioners contend that Task C of Year Ten of the Work Program, which requires Monroe County and Largo Sewer District to "initiate connections to lower Keys and Key Largo wastewater systems," is arbitrary and capricious and contravenes the law implemented. As a basis for this contention, Petitioners assert that Task C does not require the completion of connections and operation of the system, but requires only the undefined "initiation" of connections. Task C, which requires Monroe County to "initiate connections" to the lower Florida Keys and Key Largo wastewater facilities, is not arbitrary and capricious. Given the purpose of this task, this provision reasonably requires Monroe County to begin connecting units to the wastewater facilities. Even without a precise number, the reviewing agencies can evaluate the Work Program for Year Ten, including Task C, and determine if Monroe County has made substantial progress. City of Marathon Work Program Under Proposed Rules Proposed Rule 28-18.210 adds Year Eight and Year Nine to the existing Work Program in Policy 101.2.14 of the Marathon Comprehensive Plan. The tasks in the Work Program, many of which implement the Partnership Agreement, include tasks related to the construction of wastewater facilities, affordable housing, and hurricane evacuation. Year Eight of the Work Program of the Marathon Comprehensive Plan include, in relevant, part the following tasks: Year Eight (July 12, 2004 through July 12, 2005) Begin construction of wastewater collection lines for Little Venice Phase II by December 2004. Work with the Florida Keys Aqueduct Authority to initiate bond financing for citywide sewer facilities and to develop a schedule of events necessary to initiate process by December 2004. Develop and advertise a Request for Proposal for the design, construction, operation of Marathon Central Wastewater System by December 2004. Obtain necessary bond financing (60% of projected sewer cost) secured by connection fees by December 2004. Award contract for design, construction and operation of Marathon Central Wastewater System by December 2004. By January 2005, identify potential acquisition sites for affordable work force housing. Establish a partnership with non- profit organizations in order to construct affordable housing using additional state funds. Evaluate strategies to increase the time that affordable housing remains affordable; establish a maximum sales price for work force housing and establish a ceiling on down payments that are not subsidized by public programs; and amend comprehensive plan and/or land development regulations. * * * Develop a map or list of real estate numbers of lots containing environmentally sensitive lands in need of acquisition and submit to the Department of Community Affairs by July 2004. Assist the state in land acquisition efforts by establishing a land acquisition advisory committee to prioritize proposed acquisitions by July 2004. Complete a comprehensive analysis of hurricane evacuation issues in the Florida Keys and develop strategies to reduce actual hurricane clearance times and thereby reduce potential loss of life from hurricanes. Year Nine of the Work Program of the Marathon Comprehensive Plan includes in relevant part the following tasks: Year Nine (July 13, 2005 through July 12, 2006) Begin construction of Phase I of Marathon Central Wastewater System by January 2006. Evaluate wastewater master plan and indicate areas, if any, that will not receive central sewer. For any area that will not be served by central sewer, develop a septic tank inspection program and begin implementation of the program by September 2005. * * * E. Develop and implement a Building Permit Allocation System that discourages and limits development in environmentally sensitive areas within the proposed Marathon comprehensive plan by July 2005. Petitioners contend that Proposed Rule 28-18.210(1), which establishes the Work Program for Years Eight and Nine, is arbitrary and capricious and contravenes the law implemented, because it fails to adopt regulation and plan changes, or requires same, to protect terrestrial habitat to the extent shown necessary in the Carrying Capacity Study. The mere fact that the proposed Work Plan for Years Eight and Nine of the Marathon Comprehensive Plan does not address habitat protection, does not make those provisions arbitrary or capricious. Neither does it mean that they contravene law. In this case, it reflects that the Work Plan emphasizes other issues relevant to the City of Marathon Comprehensive Plan. Siting Utilities and Public Facilities The siting of public facilities in Monroe County is governed by existing Policy 101.12.4 in the Monroe County Comprehensive Plan. According to that policy, Monroe County requires that an "analyses be undertaken prior to finalizing plans for the siting of any new or significant expansion (greater than 25 percent) of any existing public facility," and that the analyses include "an assessment of needs, evaluation of alternative sites and design alternatives for the selected sites and assessment of direct and secondary impacts on surrounding land uses and natural resources." With regard to the assessment impacts on surrounding land uses and natural resources, existing Policy 101.12.4 provides the following: The assessment of impacts on surrounding land uses and natural resources will evaluate the extent to which the proposed public facility involves public expenditures in the coastal high hazard area and within environmentally sensitive areas, including disturbed salt marsh and buttonwood wetlands, undisturbed beach berm areas, units of the coastal barrier resources system, undisturbed uplands (particularly high quality hammock and pinelands), habitats of species considered to be threatened or endangered by the state and/or federal governments, consistent with 105.2.1 offshore islands, and Conservation Land Protection Areas. Proposed Rule 28-20.110(2) amends existing Policy 101.12.4, which deletes the term "Conservation Land Protection Areas" from the category of areas included as environmentally sensitive areas, as quoted above, and replaces it with the term, "Natural Areas (Tier I)." Proposed Rule 28-20.110(2) also adds the following provision to existing Policy 101.12.4. Except for passive recreational facilities on publicly owned land, no new public community or utility facility other than water distribution and sewer collection lines or lift stations, and the existing Key Largo Wastewater Treatment Facility, shall be allowed within the Natural Areas (Tier I) unless it can be accomplished without clearing of hammock or pinelands. Exceptions to this requirement may be made to protect the public health, safety and welfare, if all the following criteria are met: No reasonable alternatives exist to the proposed location; and The proposed location is approved by a super-majority of the Board of County Commissioners. Petitioners contend that Proposed Rule 28-20.110(2), discussed above, is arbitrary and capricious and contravenes the law implemented. Petitioners assert that the Proposed Rule allows the siting of public facilities in terrestrial habitats (CNA or Tier I) and also allows water distribution and sewer collection lines or lift stations to be built as a matter of right in a CNA or Tier I, contrary to the findings of the Carrying Capacity Study. Petitioners also contend that the provision in the Proposed Rule, discussed above, is vague, because it refers to the term "natural areas," but is intended to mean CNAs. In the recent past, a decision to site a sewage treatment facility in an environmentally sensitive hammock elicited considerable controversy. Ultimately, Monroe County and the DCA agreed that public facilities should not be located on environmentally sensitive land. The proposed change to Policy 101.12.4 strengthens the policy by requiring approval of a super majority of the Monroe County Board of County Commissioners (County Commission) for an exemption. This also adds specificity to the policy and provides more protection for natural areas and, thus, improves protection of environmentally- sensitive habitat. Contrary to Petitioners' assertion, the term "natural area" is not vague. The Monroe County Comprehensive Plan currently includes Goal 105, which describes a detailed land classification system. "Natural Area (Tier I)" represents natural areas that can be targeted for acquisition and is an updated term. On the other hand, the term "Conservation Land Protection Areas" refers to lands targeted for acquisition by federal and state agencies. ROGO Exemption for Public Facilities Both Monroe County and Marathon have a "Rate of Growth Ordinance," also known as ROGO. A site proposed for development is ranked based on the environmental sensitivity of the property and receives negative points for greater environmental sensitivity. A site proposed for development can also receive positive points for such things as providing its own water system or elevation above the minimum flood insurance elevation. Monroe County and the City of Marathon award their annual allocation of development permits to the top-scoring sites. Proposed Rule 28-20.110 will make several modifications to the ROGO point allocation system in the Monroe County Comprehensive Plan. Existing Policy 101.3.4 of the Monroe County Comprehensive Plan provides that "public facilities shall be exempted from the requirements of the Permit Allocation System for new non-residential development." The existing policy also provides that certain development activity by enumerated federally tax-exempt, not-for-profit organizations "may be exempted from the Permit Allocation System by the County Commission after review by the Planning Commission upon a finding that such activity will predominantly serve the County's non- transient population." Proposed Rule 28-20.110(3) amends existing Policy 101.3.4 by requiring that the County Commission make an additional finding as a condition of exempting certain development activity by certain federally tax-exempt not-for- profit organizations from the Permit Allocation System. Pursuant to the proposed rule, the County Commission must also find that the "development activity is not planned within an area proposed for acquisition by governmental agencies for the purpose of resource protection." Petitioners contend that the provision of Proposed Rule 28-20.110(3), discussed above, is arbitrary and capricious and contravenes the law implemented in that the development activities of the federally tax-exempt, not-for-profit organizations covered by the proposed rule allows development activity on some environmentally-sensitive areas and is inconsistent with the Carrying Capacity Study. Existing Policy 101.3.4 allows development activity by not-for-profit organizations without a permit allocation because such development does not include overnight accommodations which might impact hurricane evacuation. Since a permit allocation was not necessary, such development was not affected by the negative points awarded for development in an area proposed for acquisition for resource protection. However, some not-for- profit organizations proposed development in environmentally- sensitive areas. The proposed change will prevent ROGO-exempt development on such lands and improve the protection of environmentally-sensitive habitat. Lot Aggregation Existing Policy 101.5.4, of the Monroe County Comprehensive Plan addresses the issue of lot aggregation and provides that "points shall be assigned to Allocation Applications for proposed dwelling units, which include a voluntary reduction of density permitted as of right within subdivisions (residential units per legally platted, buildable lots) by aggregating vacant, legally platted, buildable lots." This policy sought to reduce density within subdivisions by awarding or assigning positive points to applicants who aggregated two or more contiguous, vacant, legally buildable lots. The existing policy motivated and allowed applicants to purchase any contiguous property in order to be awarded additional points and, thus, increased their chances of receiving an allocation, even if the lots were in areas targeted for public acquisition for resource protection. Proposed Rule 28-20.110(4) amends Policy 101.5.4, Subsection 3, by prohibiting the awarding of points to Allocation Applications "for lot aggregation within those areas proposed for acquisition by public agencies for the purpose of resource protection." Petitioners assert that the proposed rule is arbitrary and capricious and contravenes the law implemented because it fails to adequately protect terrestrial habitat to the extent shown necessary in the Carrying Capacity Study. The basis of Petitioners' assertion is that under Proposed Rule 28-20.110(4), an applicant can get positive points for aggregating habitat, if the area is not proposed for acquisition by public agencies for the purpose of resource protection. Proposed Rule 28-20.110(4) will direct applicants seeking to be awarded additional points for "lot aggregation away from areas proposed for acquisition by public agencies for resource protection and, thereby, improve protection of terrestrial habitat. Clearing of Native Vegetation Existing Policy 205.2.7 of the Monroe County Comprehensive Plan provides that the "clearing of native vegetation shall be limited to the immediate development area." Under the existing policy, an applicant with aggregated lots would demand to clear a portion of both lots, so that a large portion of all of the lots would be cleared. Proposed Rule 28-20.110 amends existing Policy 205.27.7 by adding the following provision relating to the clearing of vegetation areas where Allocation Applications have received points for lot aggregation: For applications that receive points for lot aggregation under the Permit Allocation System for residential development, clearing of vegetation shall be limited to the open space ratios in Policy 205.2.6 or 5,000 square feet, whichever is less. The clearing of vegetation for ROGO applications that receive points for lot aggregation is also addressed in Proposed Rules 28-20.120(4), which adds a new provision, Regulation 9.5-347(e), to the Monroe County Land Development Regulations. That new provision is as follows: Section 9.5-347 (e) Lot Aggregation and Clearing: For ROGO applications that receive points for lot aggregation under Section 9.5-122.3 (a)(3), clearing of vegetation shall be limited to the open space ratios in paragraph (b) above or five-thousand (5,000) square feet, whichever is less. Petitioners contend that Proposed Rules 28-20.110(b) and 28-20.120(4) are arbitrary and capricious and contravene the law implemented, because they do not prohibit clearing of aggregated lots and are inconsistent with the Principles Guiding Development and with the Carrying Capacity Study. Notwithstanding Petitioners' assertions, even though the proposed rules do not prohibit all clearing of native vegetation, they will limit the amount of clearing for applicants who receive a ROGO allocation based upon lot aggregation. Under Proposed Rule 28-20.120(4), the clearing will be limited to an amount necessary to construct a reasonably-sized house. Technical Coordination Letter Proposed Rule 28-20.110(5), which will add a new policy, Policy 101.5.11, to the Monroe County Comprehensive Plan, provides the following: If not listed in the document "Parcels Not Located in Threatened and Endangered Species Habitat and Not Subject to FWS Consultation", or involving minor development activity exempted by the U.S. Fish and Wildlife Service (USFWS)", any application for a ROGO or NROGO allocation shall contain a technical coordination letter from the USFWS. The County shall consider the recommendations of the USFWS's technical coordination letter in the issuance of the subject permit, except that if a low-effect habitat conservation plan is required by USFWS, the mitigation requirements of that plan shall be incorporated in the conditions of the permit. As a result of federal litigation, the U.S. Fish and Wildlife Service ("USFWS") created a list of "Parcels Not Located in Threatened and Endangered Species Habitat and Not Subject to FWS Consultation." Monroe County and the DCA have developed the practice of requiring a technical coordination letter from the USFWS for development on parcels that are not on that list or are not otherwise exempt from USFWS review. Proposed Rule 28-20.110(5) incorporates into the Monroe County Comprehensive Plan a current practice that resulted from federal litigation. Monroe County Land Development Regulation 9.5-120 Proposed Rule 28-20.120(1) adds the phrase "species of special concern" to the following terms defined in Section 9.5-120(b) of the Monroe County Land Development Regulation as shown by the underlining: (1) "Known habitat of threatened/endangered animal species or species of special concern"; (2) "Potential habitat of threatened/endangered animal species" or species of special concern; and (3) Wide-ranging threatened/endangered animal species or species of special concern. This proposed change will conform the land development regulations to the Monroe County Comprehensive Plan by expanding the list of species that result in negative points under the Permit Allocation System to include "species of special concern." Existing Regulation 9.5-120(b) includes in the definitions of "known habitat of threatened/endangered animal species" and "potential habitat of threatened/endangered species" the sentence, "The county's threatened and endangered species maps shall constitute prima facie evidence of the species unless determined otherwise by the director of environmental resources." The definition of "wide-ranging threatened/endangered animal species" includes the sentence, "The county's threatened and endangered species maps shall constitute prima facie evidence of wide-ranging threatened or endangered species unless determined otherwise by the director of environmental resources."8 Proposed Rule 28-20.120(1) amends Section 9.5-120(b) by deleting the phrase, "unless determined otherwise by the director of environmental resources" from the sentences quoted above. Proposed Rule 28-20.120(1)(a) adds the following provision to the section of Regulation 9.5-120, which defines the term "known habitat of threatened/endangered species or species of special concern": (1) . . . The county's threatened and endangered species maps shall constitute prima facie evidence of the species. Within areas designated for public acquisition for the purposes of resource protection, any threatened, endangered or species of special concern species observed on site while conducting a habitat evaluation shall be noted on the adopted Threatened and Endangered Species Maps. Such observations noted while conducting a habitat evaluation by County Staff Biologists, consultants certified by the County, conducting habitat evaluations, or state or federal agency representatives conducting field inspections shall also constitute evidence of species. Petitioners contend that the portion of Proposed Rule 28-20.120(1)(a), quoted above, is arbitrary and capricious. Petitioners assert that the Proposed Rule fails to account for potential observations of "known habitat of threatened/endangered animal species" on parcels that are not within "areas designated for public acquisition for purposes of resource protection." Also, Petitioners assert that the Proposed Rule limits observations of species required to be noted on the adopted threatened and endangered species maps to consultants or scientists on the parcel specifically to conduct an HEI analysis and fails to require field verification of the parcel. Proposed Rule 28.20.120(1)(a) will expand the circumstances in which observations of listed species will cause modification of the adopted threatened and endangered species maps. Under the present land development regulations, Monroe County modified the maps only if a county staff biologist observed a listed species and did not take into account other professional observations. Monroe County Land Development Regulation 9.5-122.3 Regulation 9.5-122.3(a)(8) of the Monroe County Land Development Regulations establishes and assigns evaluation criteria and point assignment for applications for proposed dwelling units in Monroe County. The existing regulation requires that negative points be assigned to applications that propose a dwelling unit within a "known habitat of a documented threatened/endangered species" and a "potential habitat of threatened/endangered species." Proposed Rule 28-20.120(2) adds the following language to Section 9.5-122.3.(a)(8),9 as shown by the underlined provisions: Point Assignment: Criteria: -10 An application which proposes a dwelling unit within a known habitat of a threatened/endangered species or a species of special concern. For species of special concern, negative points shall only be applied to areas designated for public acquisition for the purpose of resource protection. -5 An application which proposes a dwelling unit within a potential habitat of a threatened/endangered species or a species of special concern. For species of special concern, negative points shall only be applied to areas designated for public acquisition purposes of resource protection. Regulation 9.5-1223.(a)(8), as amended, adds "species of special concern" to the species covered by the existing regulation. Also, the amended regulation requires that negative points be assigned to applications that propose dwelling units in a habitat of a species of special concern, if the area is designated for public acquisition for purposes of resource protection. Petitioners contend that Proposed Rule 28-20.120(2), which amends Regulation 9.5-122.3(a)(8), is arbitrary and capricious. As a basis for this contention, Petitioners assert that even though the Proposed Rule increases situations where an application is awarded negative points, it decreases protection of habitat by limiting the negative point award only to habitat of special concern that have been designated for public acquisition. Proposed Rule 28-20.120(2) increases situations in which an application will be awarded negative points by adding "species of special concern" to the species covered by Regulation 9.5-122.3(a)(8). By awarding negative points as provided in the proposed rule, there is increased protection of habitat for species of special concern. Monroe County Land Development Regulation 9.5-336 Proposed Rule 28-20.120(3) amends Section 9.5-336(b) of the Monroe County Land Development Regulations as follows: (b) Review and Amendment: The existing conditions map may be refined to reflect conditions legally in existence on February 28, 1986. Such refinements shall be made pursuant to the procedures for typographical and drafting errors in section 9.5-511(e). The existing conditions map as referenced throughout this chapter is intended only to serve as a general guide to habitat types for the purpose of preliminary determination of regulatory requirements. The county biologist shall make the final determination of habitat type based upon field verification, except that existing conditions that reflect disturbed with hammock shall be classified as a low quality hammock. Unlawful conditions shall not be recognized when determining regulatory requirements. Petitioners contend that Proposed Rule 28-20.120(3) is arbitrary and capricious and contravenes the law implemented because it does not protect all habitat. The existing conditions map was prepared in the 1980s. Many of the sites designated on the map as "disturbed with hammock" have re-vegetated since then. The proposed change will protect those sites by requiring clustering away from the hammock and by controlling the amount of allowed clearing. Hurricane Evacuation Monroe County and Marathon face a unique hurricane evacuation challenge. There is only one road out of the Florida Keys, and everyone must use that road to evacuate. For a Category 3 or greater hurricane, all areas of the Florida Keys must be evacuated because of the low elevations, the vulnerability to storm surge, and the logistics of post-disaster recovery. The Monroe County Comprehensive Plan and the Marathon Comprehensive Plan currently state that each ". . . shall reduce hurricane evacuation clearance times to 24 hours by the year 2010." The 24-hour standard was adopted by the Administration Commission at the conclusion of prior litigation over the Monroe County Comprehensive Plan. The term "hurricane evacuation clearance time" refers to the time that the emergency managers must call the evacuation before the arrival of tropical storm force winds. Hurricane evacuation clearance time includes both the time for citizens to mobilize (i.e., get their affairs in order, shelter their houses, take care of their belongings), and the time to evacuate the vehicles from the roadway. Tropical storm force winds typically arrive eight to 12 hours before the eye of the storm. In order to achieve a 24-hour hurricane evacuation clearance time, emergency managers must call the evacuation 32 to 36 hours before the arrival of the eye. The DCA contracted with Miller Consulting, Inc., to create a computer model to estimate the actual hurricane evacuation clearance time for the Florida Keys. The Miller model provides the best available data and analysis for estimating the clearance time. The latest run of the Miller model performed by the DCA using 2000 Census data, supplemented with development permit data up to August 2004, provides the best estimate of clearance time. This run of the Miller model estimates a hurricane evacuation time of 23 hours and 56 minutes to reach the beginning of the Homestead Extension of the Florida Turnpike on the mainland, and 24 hours and 48 minutes to reach the hurricane shelter at Florida International University ("FIU"). The beginning of the Florida Turnpike in Florida City is the appropriate endpoint for hurricane evacuation clearance time estimates. Florida City is a point of relative safety outside of the Category 3 vulnerability zone. Florida City is also the point of dispersal for the Florida Keys, where evacuees disperse to any number of destinations, such as South Dade, the FIU shelter, or a hotel in Orlando. The Miller model estimates that if those permit allocations are restored and the annual allocation is increased as described above, the hurricane evacuation clearance time next year will be 24 hours and four minutes. This exceeds the 24-hour standard adopted by the Administration Commission. Proposed Rule 28-20.110 adds the following requirement to Year Eight of the Work Program in Policy 101.2.13 of the Monroe County Comprehensive Plan and Policy 101.2.12 of the Marathon Comprehensive Plan: "Complete a comprehensive analysis of hurricane evacuation issues in the Florida Keys and develop strategies to reduce actual hurricane clearance times and thereby reduce potential loss of life from hurricanes." The Florida Keys' local governments have begun the comprehensive analysis of hurricane evacuation issues by convening a workgroup comprised of local government-elected officials and staffed by the DCA. The hurricane workgroup is considering alternative strategies to reduce clearance times, such as constructing an additional outbound lane, using transportation system management to create a temporary outbound lane, updating the assumptions for the Miller model, reducing transient occupancy, or calling the evacuation earlier. The working group must develop a strategy that balances or accommodates development and also addresses hurricane clearance times. The hurricane workgroup must do much more than simply squeeze a few more minutes out of the Miller model. There are currently 13,000 to 14,000 vacant platted lots in the Florida Keys, which must be allowed to develop or must be purchased by government. On average, 3,000 dwelling units generates about one hour of clearance time. As an example, if 8,000 or so lots were purchased for habitat protection, then two more hours of clearance time will be needed to accommodate the remaining 5,000 or 6,000 lots. The hurricane workgroup must develop a strategy to handle the amount of development permitting that can be expected and a program to acquire the balance of the vacant lots. Affordable and Workforce Housing There is an affordable housing crisis in the Florida Keys. The geography of the Florida Keys hinders the ability of working families in the Florida Keys to find affordable housing. Unlike other expensive areas, such as Boca Raton, working families cannot find affordable housing nearby; the nearest area where housing prices are affordable is the mainland in Dade County. From 1999 to 2003, there were 693 allocations for affordable housing units in the Florida Keys. This amount includes all the allocations for affordable housing units for that time period, even those allocations for which affordable housing units were not constructed. The number of affordable housing allocations issued from 1999 to 2003 and the number being issued under the existing Comprehensive Plans of Monroe County and the City of Marathon, are not sufficient to address the need for affordable housing. The Partnership Agreements recognize and address the affordable housing shortfall by increasing the number of annual affordable housing allocations, restoring residential allocations lost in previous years, and providing funding for the acquisition of land and the construction of workforce housing. As discussed above, Proposed Rule 28-20.110 implements the provisions of the Partnership Agreement by amending the Monroe County Comprehensive Plan as follows: increasing the number of annual affordable housing allocations from 32 to 71; (2) reallocating 140 unused allocations to affordable housing; and (3) requiring that the affordable housing remain affordable in perpetuity. Additionally, as specified in paragraph 60, the Work Program in Proposed Rule 28-20.110 requires Monroe County to complete tasks which will be an improvement of the affordable housing situation in Monroe County. As discussed above, Proposed Rule 28-18.210 implements the Partnership Agreement by amending the City of Marathon Comprehensive Plan as follows: (1) increases the overall number, though not the percentage, of allocations for affordable housing to six; (2) restoring 65 unused allocations for affordable housing; and (3) requiring that the affordable housing remain affordable in perpetuity. Also, as specified in paragraph 101, Proposed Rule 28-18.210 requires the City of Marathon to complete tasks that will result in improving the affordable housing issues in the City of Marathon. Proposed Rules 28-20.110 and 28-18.210 only partially address the affordable housing shortage in the Florida Keys. Nonetheless, the proposed amendments to the Comprehensive Plans of Monroe County and the City of Marathon will improve the current affordable housing shortage by increasing the number of affordable houses and providing the financial resources to make that more likely to occur. The Principles Guiding Development Subsection 380.0552(7), Florida Statutes (2004), provides in relevant part: PRINCIPLES FOR GUIDING DEVELOPMENT.- -State, regional, and local agencies and units of government in the Florida Keys Area shall coordinate their plans and conduct their programs and regulatory activities consistent with the principles for guiding development . . . . For the purposes of reviewing consistency of the adopted plan or any amendments to that plan with the principles for guiding development and any amendments to the principles, the principles shall be construed as a whole and no specific provision shall be construed or applied in isolation from the other provisions. . . . [T]he following shall be the principles with which any plan amendments must be consistent: To strengthen local government capabilities for managing land use and development so that local government is able to achieve these objectives without the continuation of the area of critical state concern designation. To protect shoreline and marine resources, including mangroves, coral reef formations, seagrass beds, wetlands, fish and wildlife, and their habitat. To protect upland resources, tropical biological communities, freshwater wetlands, native tropical vegetation (for example, hardwood hammocks and pinelands), dune ridges and beaches, wildlife, and their habitat. To ensure the maximum well-being of the Florida Keys and its citizens through sound economic development. To limit the adverse impacts of development on the quality of water throughout the Florida Keys. To enhance natural scenic resources, promote the aesthetic benefits of the natural environment, and ensure that development is compatible with the unique historic character of the Florida Keys. To protect the historical heritage of the Florida Keys. To protect the value, efficiency, cost-effectiveness, and amortized life of existing and proposed major public investments, including: The Florida Keys Aqueduct and water supply facilities; Sewage collection and disposal facilities; Solid waste collection and disposal facilities; Key West Naval Air Station and other military facilities; Transportation facilities; Federal parks, wildlife refuges, and marine sanctuaries; State parks, recreation facilities, aquatic preserves, and other publicly owned properties; City electric service and the Florida Keys Electric Co-op; and Other utilities, as appropriate. To limit the adverse impacts of public investments on the environmental resources of the Florida Keys. To make available adequate affordable housing for all sectors of the population of the Florida Keys. To provide adequate alternatives for the protection of public safety and welfare in the event of a natural or manmade disaster and for a post-disaster reconstruction plan. To protect the public health, safety, and welfare of the citizens of the Florida Keys and maintain the Florida Keys as a unique Florida resource. In determining whether the Proposed Rules are consistent with the principles, the principles should be considered as a whole. No specific provision should be construed or applied in isolation from other provisions. Ability to Manage Land Use and Development Principle A, set forth in Subsection 380.0552(7)(a), Florida Statutes, is "to strengthen local government capabilities for managing land use and development so that local government is able to achieve these objectives without the continuation of the area of critical state concern designation." Monroe County and the City of Marathon have evidenced a willingness and commitment to provide the funding required to meet the objectives of the Principles Guiding Development. Both local governments have included in the Proposed Rules tasks which reflect their understanding of the need to provide critical facilities, such as wastewater treatment facilities. While the need for such facilities has previously been acknowledged, the Proposed Rules provide a specific source of revenue to provide the needed facilities. Moreover, with regard to Monroe County, the proposed rules/regulations at issue in this proceeding strengthen the environmental protections measures in the Comprehensive Plans while allowing reasonable development. The proposed rules for Monroe County and the City of Marathon are consistent with Principle A. Environmental Issues Subsections 380.0552(7)(b), (c), and (e), Florida Statutes, are principles which require consideration of the impacts on the environment of the Florida Keys. Principle B is "to protect shoreline and marine resources, including mangroves, coral reef formations, seagrass beds, wetlands, fish and wildlife and their habitat." Principle C is "to protect upland resources, tropical biological communities, freshwater wetlands, native tropical vegetation (for example, hardwood hammocks and pinelands), dune ridges and beaches, wildlife and their habitat." Principle E is "to limit the adverse impacts of development on the water quality of water throughout the Florida Keys." Principle I is "to limit the adverse impacts of public investments on the environmental resources of the Florida Keys." The Proposed Rules of Monroe County and the City of Marathon include amendments to the Work Program which provide significant funding for sewage treatment systems that will enhance the protection of the shoreline and marine resources. The Proposed Rules of Monroe County and the City of Marathon are consistent with Principle B. The Proposed Rules of Monroe County improve protection of terrestrial habitat, limit clearing of native vegetation, and provide safeguards to ensure that parcels in threatened and endangered species habitat are protected. The proposed rules of Monroe County are consistent with Principle C. The portions of the Proposed Rules of the City of Marathon that are the subject of this proceeding do not specifically address Principle C. However, the Proposed Rules of the City of Marathon are not inconsistent with Principle C. Accordingly, the proposed rules of the City of Marathon are consistent with Principle C. The Proposed Rules of Monroe County and the City of Marathon limit the adverse impacts of development on the quality of water throughout the Florida Keys by the funding commitments that will hasten the construction of the sewage treatment facilities. The Proposed Rules of Monroe County and the City of Marathon are consistent with Principle E. The Proposed Rules do not encourage any public investment that would have an adverse impact on environmental resources. To the contrary, the Monroe County and the City of Marathon Proposed Rules provide for public investments in waste water improvements that are accelerated. Also, the Monroe County Proposed Rules prevent the construction of public facilities within a hammock area. The Proposed Rules of Monroe County and the City of Marathon are consistent with Principle I. Economic Development Principle D in Subsection 380.0552(7)(d), Florida Statutes, is "to ensure the maximum well-being of the Florida Keys and its citizens through sound economic development. The basis of the Florida Keys' economy is tourism, which is attracted by a clean and healthy environment. The increased protection of water quality that should be achieved by the hastened construction of sewage treatment facilities and the improved protection of habitat will strengthen the economy of the Florida Keys and provide the basis for a sound economic development. Also, the Proposed Rules balance environmental protection with property rights. The Proposed Rules of Monroe County and the City of Marathon are consistent with Principle D. Historical Character and Heritage Principle F in Subsection 380.0552(7)(f), Florida Statutes, is "to enhance natural and scenic resources, promote the aesthetic benefits of the natural environment and ensure that development is compatible with the unique historic character of the Florida Keys." Principle G in Subsection 380.0552(7)(g), Florida Statutes, is "to protect the historical heritage of the Florida Keys." The Proposed Rules of Monroe County and the City of Marathon will have little or no impact on the historic character and historical heritage of the Florida Keys. Thus, the Proposed Rules do no harm to either the historic character or historical heritage of Monroe County or the City of Marathon. Public Investments Principle H in Subsection 380.0552(7)(h), Florida Statutes, is "to protect the value, efficiency, cost- effectiveness, and amortized life of existing and proposed major life investments," including: The Florida Keys Aqueduct and water supply facilities; Sewage collection and disposal facilities; Solid waste collection and disposal facilities; Key West Naval Air Station and other military facilities; Transportation facilities; Federal parks, wildlife refuges, and marine sanctuaries; State parks, recreation facilities, aquatic preserves, and other publicly owned properties; City electric service and the Florida Keys Electric Co-op; and Other utilities, as appropriate. . . . The Proposed Rules of Monroe County and the City of Marathon do nothing to undermine the value, efficiency, cost- effectiveness or amortized life of existing major investments. Rather, the Proposed Rules will result in funding and timely construction of the major sewage and disposal facilities that are already contemplated by Monroe County and the City of Marathon's existing Comprehensive Plans. Affordable Housing Principle J in Subsection 380.0552(7)(j), Florida Statutes, is "to make available adequate affordable housing for all sectors of the population of the Florida Keys." The Proposed Rules include a one-time allocation of 165 permits for affordable housing in Monroe County and 65 permits for affordable housing in Marathon. The Proposed Rules will require all future affordable housing to remain as affordable in perpetuity, rather for a limited time frame. The Propose Rules are consistent with Principle J. Natural or Man-made Disaster and Post-Disaster Relief Principle K in Subsection 380.0552(7)(k), Florida Statutes, is "to provide adequate alternatives for the protection of public safety and welfare in the event of a natural disaster or man[-]made disaster and for a post[-]disaster reconstruction plan." The Proposed Rules require officials of Monroe County and the City of Marathon to participate with other Florida Keys' local governments in a comprehensive analysis of hurricane evacuation issues. The Proposed Rules are consistent with Principle K. Health, Safety, and Welfare of Citizens and Maintenance of Florida Keys as Unique Resource Principle L in Subsection 380.0552(7)(l), Florida Statutes, is "to protect the health, safety, and welfare of the citizens of the Florida Keys and maintain the Florida Keys as a unique Florida resource." The Proposed Rules of Monroe County include provisions that increase protection of upland habitat and require a moratorium on ROGO/NROGO applications in hammocks and pinelands, revisions to the CNA maps, and amendments to the land development regulations. The Proposed Rules for Monroe County and the City of Marathon will improve the water quality by providing funding for and hastening the construction of sewage treatment facilities. The Proposed Rules of Monroe County and the City of Marathon will provide more permit allocations for affordable housing, require Monroe County to approve bond funding for the construction of affordable housing, and provide that all future affordable housing remain affordable in perpetuity. Also, the Proposed Rules require Monroe County and the City of Marathon to participate in a Florida Keys wide analysis and solution to the hurricane evacuation problem. The Proposed Rules of Monroe County and the City of Marathon further the objective of and are consistent with Principle K. The Proposed Rules of Monroe County and the City of Marathon are consistent with Principle L.
Findings Of Fact Quality of Service During the test year Petitioner provided sewer service to an average of 533 multi-family customers, nine residential customers and two general service customers. Foxmoor Condominium Association, Inc., a customer of Petitioner, has indicated its willingness to cooperate with the utility in its attempt to obtain a copy of the water bill for the condominium from Lee County, which provides the water service. This information will enable the utility to utilize a base facility charge type of rate structure. Evidence of record indicates that Petitioner is in compliance with regulations of the Florida Department of Environmental Regulation, although the utility, through testimony, acknowledged the existence of a consent order between DER and the utility, whereby certain changes should take place regarding the utility operations. The evidence in the record, therefore, supports a finding that the utility's sewer service is presently satisfactory. Rate Base A rate base of $170,087 suggested by PSC staff was acceptable to the utility (see Tr. 84-87). In accepting the rate base figure, the utility did not abandon its request that certain overheads be capitalized and added to rate base. However, necessary information to accomplish this was not timely filed, and, rather than delay this proceeding for presentation and audit, it was agreed that this issue be left open for a future rate case proceeding (see Tr. 20, 21, 41). The complete rate base schedule is attached as Schedule No. 1. Net Operating Income After eliciting the testimony of the various witnesses and considering the various stipulations between the parties, the sole issue remaining in dispute in this proceeding was the appropriate level of compensation for the chief executive officer of the utility. The utility had requested a salary of $13,000 per year. However, based upon the fact that the chief executive officer was actually paid only $3,400 during the test year, that figure is determined to be the appropriate amount of compensation to be allowed in this proceeding. Upon reaching that conclusion the appropriate amount of gross annual revenues is $63,133 (see Schedule No. 2, attached) Cost of Capital The utility had 100 percent debt at a cost of 10.59 percent (see Exhibit R-4), a figure which the utility agreed to as the accepted cost of capital finding for the purposes of this rate case proceeding only (see Tr. 79). Revenue Requirement As indicated in Schedule No. 2, the revenue requirement for the sewer system is $63,133. The revenues produce an overall rate of return of 10.59 percent on sewer rate base. Accordingly, the utility should file revised tariff pages containing rates designed to produce the above-noted amount of gross revenues. Rate Structure The evidence in this proceeding establishes the utility has been improperly billing some customers, and that the utility should be required to make refunds (see Tr. 65). The utility has agreed to make the refunds requested (see Exhibit 3-R). Petitioner's master metered, multi-family customers should be billed on a base facility charge type rate structure. Residential customers should be billed on a flat rate basis because of the relatively small number of these customers during the test period, and because of the difficulty of obtaining information concerning the water consumption due to the fact that water service is provided by the county.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the application of Old Bridge Utilities, Inc. be granted and the utility be authorized to file revised tariff pages, containing rates designed to produce gross annual sewer revenues of $63,133; That the utility be required to utilize the rate structure described in the body of this Recommended Order; That the issue of capitalization of overhead be left open for resolution in a future proceeding; That the rate refunding-bond, filed by the utility, be returned for cancellation, and That the refunds reflected in the attached schedules discussed herein be made. DONE and ORDERED this 7th 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 7th day of April, 1981. COPIES FURNISHED: William H. Harrold, Esquire Florida Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301 William E. Sundstrom, Esquire Myers, Kaplan, Levinson, Kenin & Richards 1020 East Lafayette Street Tallahassee, Florida 32301 Karl L. Johnson, Esquire Nuckolls, Parsons, Johnson and Fernandez 2701 Cleveland Avenue Fort Myers, Florida 33902 ================================================================= AGENCY FINAL ORDER ================================================================= BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION In re: Application of OLD BRIDGE DOAH CASE NO. 80-1577 UTILITIES, INC. for a rate DOCKET NO. 790677-S increase to its sewer customers ORDER NO. 1-10152 in Lee County, Florida. ISSUED: 7-21-81 / The following Commissioners participated in the disposition of this matter: JOSEPH P. CRESSE, CHAIRMAN JOHN R. MARKS, III SUSAN W. LEISNER Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, WILLIAM E. WILLIAMS, held a public hearing on January 15, 1981, in Fort Myers, Florida, on the application of Old Bridge Utilities, Inc. for a rate increase to its sewer customers in Lee County, Florida. The Division of Administrative Hearings assigned Case No. 80-1577 to the above-noted docket. APPEARANCES: WILLIAM E. SUNDSTROM Attorney at Law Myers, Kaplan, Levinson, Kenin & Richards 1020 East Lafayette Street Tallahassee, Florida 32301 On behalf of Petitioner, Old Bridge Utilities, Inc. KARL L. JOHNSON Attorney at Law Nuckolls, Parsons, Johnson and Fernandez 2701 Cleveland Avenue Fort Myers, Florida 33902 On behalf of Intervenor, Foxmoor Condominium Association. WILLIAM H. HARROLD Attorney at Law 101 East Gaines Street Tallahassee, Florida 32301 On behalf of the staff of the Florida Public Service Commission and the public generally. The Hearing Officer's Recommended Order was entered on April 7, 1981. The time for filing exceptions thereto has expired and no exceptions have been filed. After considering all of the evidence in the record, we now enter our order.
Findings Of Fact The Petitioner is a wholly owned subsidiary of Queens Cove Properties, Inc. Mr. Alex B. Cardenas is president of the parent development company as well as the utility. The water system was constructed for the sole purpose of providing water to purchasers of lots in the Queens Cove subdivision. However, the Petitioner obtained certification as a public utility to serve the general area in the belief that it was required to do so. See Section 367.031, Florida Statutes. Lots in this subdivision have sold for $15,000 to $24,000, which includes undifferentiated amounts for availability of water service. The water service is part of a "bundle of rights" which the purchaser obtains with his lot. (e.g. bridge, roads, underground utilities). In addition, existing lot owners have purchased the "bundle of rights" separately from their land (where Queens Cove was not the original property seller) at prices ranging from $4,000 to $8,000. Again, the charge for water service availability was not differentiated from other rights. At the time of the second hearing, the utility had 45 connections--42 single family residences, one developer's office, one model home, and an irrigation outlet. Ten customers testified (five by adoption) at these hearings as to service problems. The water treatment plant is of the reverse osmosis type. This system is complex and costly to maintain, but is useful where as here the raw water contains a high level of natural impurities. The utility has not properly maintained this system and water taste, smell and clarity are generally poor. The customers also experience frequent periods of very low water pressure. Furthermore, they are unable to contact the utility when outages occur after business hours since there is no emergency phone number provided. The testimony of a Department of Environmental Regulation (DER) representative also established that chlorine residuals are not properly maintained and a high coliform reading in June, 1980, will require monitoring by DER. Thus, overall service is unsatisfactory and must be improved before the Petitioner is allowed to receive a return on its investment. See Section 367.081(2), Florida Statutes, which requires the Commission to consider service in setting rates. Profits earned by a utility with service deficiencies such as these would normally be placed in escrow until the problems were corrected. Here, however, the utility does not seek to earn a return on its investment, but only to break even. In addition, there was no competent, substantial evidence adduced by either Petitioner or Respondent to demonstrate what the utility's investment is. Therefore, rate base cannot be determined in this proceeding, and consequently no return can be established. Appendix one hereto details Petitioner's test year expenses as set out in its rate application, with adjustments to correct erroneous entries and to delete or reduce expenses which were not shown to be reasonable and prudent. No controversy exists with the exception of allowances for plant manager compensation, office rent and rate case expense. The Petitioner's request for an annual manager's salary of $20,000 was not supported by the evidence. No salary is currently paid for this function, nor is a plant manager as such required or utilized. Rather, the limited functions of a plant manager can be handled by one of the full time maintenance or administrative employees. This procedure is consistent with management practices in other small, developer-owned water utilities. Such delegation does not, however, relieve the owner from his duty to hire qualified personnel and provide adequate resources. A separate allowance for office rent is not justified. The Petitioner has no office in the immediate area but uses the owner-developer's office in Stuart. There is no need for a separate office under the present organizational structure, and therefore no expense for this item should be authorized. Evidence on rate case expense (attorney and accountant fees) was submitted by post-hearing pleadings pursuant to agreement of the parties. The Petitioner seeks $9,702 rate case expense, amortized over three years, or $3,234 annually. The Respondent proposes to allow $6,000 amortized over five years, or $1,200 annually. As with other expenses, the amount authorized will be paid by customers and any portion disallowed will be borne by the owner of the utility. The rate case expense sought here is $215 per customer, which far exceeds the average water/sewer utility rate case expense of $6.92 per customer. A substantial portion of these expenses were incurred as a result of Petitioner's failure to keep adequate records and its initial decision to proceed without counsel. Therefore, the reduction of authorized expenses to $6,000 proposed by Respondent is appropriate. However, Petitioner's proposed three-year amortization period better represents industry experience and is consistent with current Commission policy. Therefore, the rate case expense authorized is $6,000 amortized over three years, or $2,000 annually. The Petitioner currently bills its customers on a monthly basis using a minimum gallonage charge. This rate design neither encourages conservation of water nor accurately reflects the cost of providing service. Therefore, the utility should be required to adopt the base facility charge rate structure. This charge includes a fixed amount for the customer's share of the utility's fixed costs, as well as a gallonage charge to represent the variable expenses associated with water consumption. Petitioner requested authority to increase its tap-in or meter installation fee from $100 to $200. This increase was authorized on an interim (escrow) basis by Order 9140. The utility has now withdrawn its request for the increase and should return the escrowed amounts to all customers who have paid the $200. In addition, Petitioner should be required to pay interest on customer deposits at the rate of 6 percent prior to July 1, 1980, and 8 percent after that date. See Section 25-10.72, Florida Administrative Code. Since no interest on deposits has ever been paid, the credit must be retroactive to the date of each customer's deposit. Proposed findings of fact were submitted by the Petitioner and the Public Service Commission. To the extent these proposed findings have not been adopted herein or are inconsistent with the above findings, they have been specifically rejected as irrelevant or not supported by the evidence.
Recommendation Based on tide foregoing findings of fact and conclusions of law, it is RECOMMENDED that the petition of Island Services, Inc. be granted in part, and that Petitioner be authorized to file new rates structured on the base facility charge concept, designed to generate gross water revenue of $12,823 annually, based on the average number of customers served during the test year. It is further RECOMMENDED that Petitioner be required to refund $100 to all customers who have paid the interim $200 water connection charge and that its tariff be amended to show that $100 is the authorized charge for this service. It is further RECOMMENDED that Petitioner pay interest on deposits at the annual rate of 6 percent through June 30, 1980, and at 8 percent thereafter, with such payments retroactive to the dates of deposit. DONE and ORDERED this 6th day of August, 1980, in Tallahassee, Florida. R. T. CARPENTER, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: R. M. C. Rose, Esquire 1020 East Lafayette Street Tallahassee, Florida 32301 Marta M. Crowley, Esquire Florida Public Service Commission Fletcher Building, 101 E. Gaines St. Tallahassee, Florida 32301 Douglas E. Gonano, Esquire Citizens Federal Building Suite 200 1600 South Federal Highway Fort Pierce, Florida 33450
The Issue Whether Petitioner's application to increaseits water and sewer rates to its customers in Seminole County should be granted.
Findings Of Fact Based upon the evidence presented at hearing, including consideration of the demeanor and credibility of witnesses, the following facts are determined: I. Application and Retroactive Implementation of Interim Rate Increase By its application, the UTILITY, seeks to increase its water revenue to $158,890, and its sewer revenue to $83,830, by increasing service rates to its customers in Winter Springs, Seminole County, Florida. During the test year ending September 30, 1979, the UTILITY suffered combined losses from its water and sewer operation of $420,692. This is the first rate increase requested by the UTILITY since its inception in 1973. On April 24, 1980, the COMMISSION issued Order No. 9344 which suspended the UTILITY's proposed rate increases but granted it an interim increase under bond. The UTILITY was directed to file revised tariff pages containing residential and general service rates which would allow it to earn total annual gross revenue for water service of $139,277 and total annual gross revenues for sewer service of $83,830. The Order also stated: ". . .that the rate increase contained herein shall become effective for all bills on or after thirty (30) days after the date of this order. . . (Testimony of Blair, Fabelo; P.E. 1, 2, R.E. 3.) The UTILITY implemented the interim rate increase, within its normal billing cycle, on the June 2, 1980, water and sewer service bills. However, these bills were based on meter readings taken on May 10, 1980, for service provided from April 10 to May 10, 1980. Thus, the UTILITY increased its rates to its customers fourteen (14) days prior to April 24, 1980, the effective date of the COMMISSION's order authorizing such increase. The UTILITY's action was, however, taken in good faith, and based on a COMMISSION staff member's representation that the interim rates could properly be included in the June billing. The amount of revenues received from the interim rate increase and collected prior to the effective date of Order No. 9344 is approximately $8,700. (Testimony of Fabelo, Blair; P.E. 1, R.E. 3.) However innocently imposed, the UTILITY's action constitutes improper retroactive ratemaking. The UTILITY should refund to customers of record during the period in question their pro-rata share of revenues collected by the retroactive rate increase. The amount of each refund will depend on the amount of water consumed and paid for during the period of retroactive rates-- approximately April 10 through April 24, 1980. The UTILITY may minimize costs by distributing the refunds as separately itemized credits on its regular service bills. (Testimony of Fabelo; R.E. 3.) II. Factors Relevant to Ratemaking In determining whether a rate increase is justified, the COMMISSION must consider several factors, including (1) quality of service, (2) rate base, (3) a fair rate of return on the utility's investment, and (4) operation and maintenance expenses; each is separately addressed below. (Testimony of Asmus, Lowe.) III. Quality of Service During 1979, several customers of the UTILITY experienced occasional low water pressure in their homes. It is likely that these water pressure problems were caused by fluctuating amounts of electricity supplied the UTILITY by Florida Power Corporation. The UTILITY has recently installed an electronic control panel and Florida Power has installed a direct transmission line to the UTILITY in order to prevent this from reoccurring in the future. Several times during 1980, the UTILITY had its water service interrupted due to a cable-TV company cutting its water lines while laying cable; repairs, however, were quickly made. Few customer complaints have been made to regulatory agencies concerning the quality of the water and sewer service provided by the UTILITY: one complaint on water service was made to the Florida Department of Environmental Regulation in 1979, and subsequently determined to he unfounded; no complaints were made to the Department concerning sewer service. Although several customers testified that the water sometimes caused irritation, tests show that the water meets Florida and federal safe drinking water standards. The sewage treatment provided by the UTILITY also complies with state and federal requirements. The water and sewer service is, therefore, determined to he of satisfactory quality. (Testimony of Blair, Bostwick, Customers.) IV. Rate Base A regulated utility is entitled to an opportunity to earn a fair rate of return on its investment in plants and facilities which are used and useful in providing water and sewer service to the public. The utility investment is referred to as "rate base". Here, the average water and sewer rate base for the UTILITY's test year ending September 30, 1979, is calculated as follows: AVERAGE RATE BASE WATER SEWER Utility Plant in Service $847,287 2/ $1,218,363 Utility Plant held for Future Use (271,153) (608,476) Accumulated Depreciation (82,099) (97,306) Contributions in Aid of Construction (183,749) 3/ (178,456) 3/ (CIAC)--Net Allowance for Working Capital 11,983 4/ 11,851 TOTAL RATE BASE $322,627 $ 354,433 (Testimony of Blair, Asmus, Heiker, Lowe; Respondent's Proposed Findings of Fact and Conclusions of Law, Pg. 3; P.E. 4, R.E. 2.) V. Rate of Return A fair rate of return is the percentage factor that, when multiplied by the rate base, produces revenue that will pay the costs of capital--interest on debt to lenders, and return on equity to stockholders. In this case, after considering the UTILITY's capital structure and that of its parent company, Gulfstream Land and Development Corporation, the parties stipulated that a fair rate of return is determined to be 12.40 percent, and is calculated: COST OF CAPITAL Test Year Ending September 30, 1979 COMPONENT RATIO COST RATE WEIGHTED COST Common Equity 33.3 percent 15.50 percent 5.16 percent Long-Term Debt 53.0 13.67 7.24 Cost-Free Capital 13.7 -0- -0- TOTAL 100.0 percent Midpoint 12.40 percent (Testimony of Lowe, Asmus; Joint Stipulation of Parties, Joint Exhibit 2; P.E. 10.) VI. Operations and Maintenance Expenses The adjusted operation and maintenance expenses, including depreciation and taxes, of the UTILITY for the test year are set out below: CONSTRUCTED STATEMENT OF OPERATIONS Test Year Ending September 30, 1979 WATER SEWER Operating Revenues: $160,531 5/ $83,830 5/ Operating Expenses: Operation 84,275 6/ 90,480 7/ Maintenance 11,586 4,324 Depreciation 12,219 16,014 Taxes Other than Income Tax 7,330 8/ 4,581 8/ Provision for Income Taxes 9,786 9/ -0- TOTAL EXPENSES $125,196 $115,399 Operating Income (Loss): $35,334 ($31,569) (Testimony of Asmus, Lowe; COMMISSION's Proposed Findings of Fact; P.E. 10, R.E. 1.) The depreciation expense indicated above includes an adjustment of $2,015 (water) and $6,788 (sewer) proposed by the UTILITY as a result of a rate base adjustment which properly reclassified plant balances to their proper month. The UTILITY had inadvertently posted plant additions to a year-end entry, rather than to the months the additions were completed. At hearing, the COMMISSION agreed to the rate base adjustment and agreed, "in principle", to the UTILITY's proposed correlative adjustment to depreciation expense. However, in its posthearing Proposed Findings of Fact, the COMMISSION's counsel disputed the UTILITY's adjustment, and offered a substitute adjustment: ". . .However, in actual calculation, the. . . [COMMISSION] disagrees. The utility's adjustment does not consider used and useful as applied to the expense. In addition, the. . . [UTILITY's] adjustment includes expense on pro-forma plant. The. . .[COMMISSION's] calculation considers these adjustments. (Pg. 4, Paragraph D.) Because factual issues are difficult to resolve by posthearing submittal, evidence should be presented at hearing, where it is subject to cross- examination and rebuttal. At hearing, the COMMISSION did not object to the depreciation expense adjustment presented by the UTILITY; neither did it cross- examine to elicit the method used for its calculation nor move for a continuance based on surprise or inability to adequately verify the UTILITY's figures. Rather, it chose to defer examination of and rebuttal to the UTILITY's evidence until after the conclusion of hearing. Under such circumstances, the COMMISSION's posthearing submittal is insufficient to overcome the competent evidence adduced by the UTILITY. (Testimony of Asmus, Lowe; Respondent's Proposed Findings of Fact, Pg. 3, 4; P.E. 10.) VII. Tariff Modifications By its application, the UTILITY also requested COMMISSION approval of proposed water and sewer tariff modifications. By stipulation of the parties, the following modifications to the UTILITY's tariffs are warranted: The initial connection charge and reconnect charge on delinquent accounts is TEN AND NO/100 DOLLARS ($10.00) during working hours and FIFTEEN AND NO/100 DOLLARS ($15.00) after working hours. Customer deposit shall be FIFTY AND NO/100 DOLLARS ($50.00) for both water and sewer service and TWENTY-FIVE AND NO/100 DOLLARS ($25.00) for either water service alone or sewer service alone. Customer deposits may be increased to the foregoing sums on delinquent accounts after giving thirty (30) days' written notice, which notice shall be separate and apart from any bill for service. (Testimony of Fabelo; Prehearing Stipulation; P.E. 1, R.E. 3.) VIII. Rates The UTILITY seeks, and the COMMISSION recommends approval of these specific rates and charges: WATER RATES RESIDENTIAL RATES Base facility charge per month based on meter sizes for zero consumption. METER SIZE 5/8" x 3/4" $ 5.00 1" 12.50 1-1/2" 25.00 2" 40.00 Gallonage Charge-Per 1,000 gallons .75 General Service Base Facility charge per month based on meter sizes for zero consumption. METER SIZE 5/8" x 3/4" $ 5.00 1" 12.50 1-1/2" 25.00 2" 40.00 3" 80.00 4" 125.00 Gallonage Charge-Per 1,000 gallons .75 SEWER RATES RESIDENTIAL RATES Base facility charge per month $ 5.00 First 10,000 gallons-Per 1,000 gallons .75 Over 10,000 gallons-Monthly flat rate 12.50 General Service Base facility charge per month based on motor size for zero consumption. METER SIZE 5/8" x 3/4" 5.00 1" 12.50 1-1/2" 25.00 2" 40.00 3" 80.00 4" 125.00 Gallonage Charge-Per 1,000 gallons .75 These requested rates are structured using a base facility charge (BFC) rate design. This rate design requires customers to pay: (1) their pro-rata share of the UTILITY's fixed facility costs, and (2) a charge for pumping, treating, and delivering the actual water gallonage consumed, by 1,000 gallon increments; it equally distributes the costs of providing utility service and the COMMISSION encourages its use. (Testimony of Fabelo; Respondent's Proposed Findings of Fact; P.E. 1, P.E. 3.) These rates proposed by the UTILITY will generate water revenues of $158,890 and sewer revenues of $58,865, which provide a rate of return on water rate base of 10.52 percent, and a zero return on sewer rate base. Combined water and sewer operations will earn a rate of return of .35 percent, whereas a fair rate of return in this case has been stipulated to be 12.40 percent. Although the proposed rates will not provide the UTILITY with a fair return, the quality of its present water and sewer service will not suffer, or be decreased in any manner. (Testimony of Blair, Asmus; P.E. 10.)
Conclusions The water and sewer rate increases and tariff modifications requested by Petitioner are just, reasonable, not unjustly discriminatory, and should be granted. Although the rates will provide less than a fair return, it has not been shown that Petitioner's service will suffer. Petitioner's collection of interim rate increases from its customers prior to the effective date of Order No. 9344 violates Section 367.081(1), Florida Statutes (1979); all revenue so collected should be refunded to its customers. Revised tariff pages should be filed, a letter explaining the rate increases should be sent to Petitioner's customers, and the Petitioner's letter of credit, returned.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the UTILITY's application for approval of the rates specified in Paragraph 11, infra, be granted; That the UTILITY be required to submit, for COMMISSION approval, revised tariff pages containing the new rates and rate structure; That the UTILITY be required to send to its customers a letter, approved in form by the COMMISSION, explaining the rate increases and reasons therefore; That the irrevocable letter of intent drawn on the Pan American Bank, dated May 3, 1980, be returned to the UTILITY and the bank releaned thereafter; That the tariff modifications contained in Paragraph 10, infra, be approved; and That the UTILITY be required to expeditiously refund to its customers the interim rate increases collected prior to the effective date of PSC Order No. 9344. DONE AND ENTERED this 24th day of November, 1980, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
