Findings Of Fact The Petitioner is a wholly owned subsidiary of Florida Land Company which is, in turn, a wholly owned subsidiary of the Continental Group, Inc., a New York corporation. The parent developer companies are providing and will continue to provide the required financial backing. The Utility served 421 primarily residential customers at the end of 1979, the test year agreed to by the parties. This was the first rate proceeding involving the Utility since it was established in 1975. Service The Utility is providing satisfactory water and sewer service. There were no service complaints presented at the public hearing by the customers, nor were there any citations or corrective orders outstanding. Rate Base The Utility experienced rapid growth during the 1976 - 1979 period, increasing the number of customers served from 62 to 421. Therefore, year end rate base rather than average rate base should be utilized. 1/ The water and sewer rate bases are $155,920 and $179,360 respectively. These amounts are based on the computations detailed below and incorporate proposed Commission adjustments to which the utility stipulated. In addition, reductions to plant in service and construction work in progress (CWIP) were made by the Utility to reflect excess plant capacity which is of no benefit to current customers. The Utility replaced its reverse osmosis water treatment plant with a lime softening system in 1979. The new facility will be somewhat more expensive to operate but will improve water quality and fire flow (pressure). Because of the reverse osmosis water treatment plant retirement, the $3,615 in building and $34,541 in treatment plant assets remaining on the Utility books should be removed. This is a total adjustment to Utility Plant in Service of $38,156. A further reduction in both water and sewer rate base is needed to adjust the working capital allowance to the standard authorization, which is one-eighth of operation and maintenance expenses. The proper amounts to he authorized in these accounts are $5,338 water and $2,931 sewer. TEST YEAR PER UTILITY UTILITY ADJ. TEST ADJ. TO YEAR PER COMM. ADJ. & CORRECT. TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR $820376. $-551059. $269317. $-38156. $231161. 57866. -57866. 0. 0. 0. -18841. 17155. -1686. 0. -1686. -238419. 159526. -78893. 0. -78893. Water Rate Base Plant in Svc. C.W.I.P. Accum. Depr. C.I.A.C. Net of Amort. Working Capital Allowance 4755. 1421. 6176. -838. 5338. Income Tax Lag 0. 0. 0. 0. 0. Rate Base $625737. $-430823. $194914. $-38994. $155920. Sewer Rate Base UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR Plant in Svc. $591945. $-205690. $386255. $0. $386255. C.W.I.P. 77919. -77919. 0. 0. 0. Accum. Depr. -2815. 2551. -264. 0. -264. C.I.A.C. Net of Amort. -321611. 112049. -209562. 0. -209562. Working Capital Allowance 2558. 401. 2959. -28. 2931. Income Tax Lag 0. 0. 0. 0. 0. Rate Base $347996. $-168608. $179388. $-28. $179360. Operating Revenues The Utility is seeking water revenue of $41,429 and sewer revenue of $35,550. Computations and adjustments in support of these amounts along with test year expenses are detailed below. Because of the extraordinary expenses associated with replacement of the water treatment plant, it would not be appropriate to utilize test year data to determine operating costs. Therefore, a projected or pro forma operating expense of $42,789 removing replacement expenses is proper. A further adjustment to water operations is required to eliminate $1,987 of depreciation expense on contributed property as not authorized by current law. 2/ In addition, the useful life of various items of equipment should be increased to periods of 20 to 40 years. These extended depreciation periods are based on an engineering study which the Utility does not challenge. Finally, the requested revenue increase of $27,432 and the associated gross receipts tax of $686 are reversed to show test year operating results. The requested sewer revenue increase of $19,413 and gross receipts tax of $485 are also reversed on the sewer operating statement to show test year operating results. As with the water plant, depreciation on contributed sewer plant is disallowed, reducing depreciation by $5,261. Water Operating Statement UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR $ 14006. $ 27423. $ 41429. $-27423. $ 14006. 38039. 11368. 49407. -6678. 42789. 0. 0. 0. 0. 0. 6325. 3762. 10087. -5525. 4562. 0. 0. 0. 0. 0. 1979. 500. 2479. -686. 1793. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. Oper. Revenues Oper. Expenses Operation Maintenance Depreciation Amortization Taxes Other Than Income Other Expenses Income Taxes UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR Total Operating Expenses $46343. $15630. $61975. $-12889 $49084. Oper. Income -32337. 11793. -20544. -14534. -35078. Rate Base $ 825737. $ 194914. $ 155920. Rate of Return -5.17 pct. -16.54 pct. -22.50 pct. Oper. Sewer Operating Statement UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR Revenues $16137. $19413. $35550. $-19413. $16137. Oper. Expenses Operation 20462. 3208. 23670. -233. 23437. Maintenance 0. 0. 0. 0. 0. Depreciation 619. 9060. 9679. -5261. 4418. Amortization 0. 0. 0. 0. 0. Taxes Other Than Income 1747. 630. 2377. -485. 1892. Other Expenses 0. 0. 0. 0. 0. Income Taxes 0. 0. 0. 0. 0. Total Operating Expenses $22828. $12898. $35726. $-5979. $29747. Oper. Income $-6691. $6515. $-176. $-13434. $-13610. Rate Base $847996. $179388. $179360. Rate of Return -1.92 pct. -10. pct. -7.59 pct. Capitalization Debt $ 555,624. 60.96 percent Customer Deposits 6,195. .68 The capitalization of the Utility is as follows: Amount Percent to Total Common Equity 349,627. 38.36 $ 911,446. 100.00 percent Rate Design Both parties seek adoption of a base facility charge rate structure. This rate design provides a fixed charge to each customer served computed on that customer's share of fixed operating costs. The second element of the base facility charge represents the variable cost of water actually used. This rate design provides an equitable method of allocating service costs and has been adopted in virtually all recent water and sewer rate proceedings. The base facility charge should also be utilized where there is a temporary discontinuance of service. The Commission proposes a tariff revision incorporating a monthly standby charge equal to the base facility charge. Again, this method allocates the Utility's readiness to serve costs equitably among both active and temporarily inactive customers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the petition of Sugar Mill Utility Company 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 $41,429 annually, and gross sewer revenue of $35,550 annually, based on the number of customers served at the end of the test year. It is further RECOMMENDED that the Petitioner be permitted to retain interim revenues collected pursuant to Respondent's Order No. 9392, and that tie rate refunding bond requirement of said order be cancelled. DONE and ENTERED this 20th day of November, 1980, in Tallahassee, Leon County, Florida. R. T. CARPENTER, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
The Issue Whether the Department has the authority pursuant to Section 627.062(2)(g), Florida Statutes, to disapprove Petitioner's Custom Homeowners' rates currently in effect throughout the State of Florida as "inadequate" in Zones I, II and III, and as "excessive" in Zone IV. If so, are Petitioner's Custom Homeowners' rates currently in effect throughout the State of Florida "inadequate" in Zones I, II and III, and "excessive" in Zone IV.
Findings Of Fact The Parties. Petitioner, Fortune Insurance Company (hereinafter referred to as "Fortune"), possesses a certificate of authority to conduct insurance business in Florida. Fortune engages in the business of writing homeowners insurance throughout Florida. Fortune's business offices are located in Jacksonville, Florida. Respondent, the Florida Department of Insurance (hereinafter referred to as the "Department"), is an agency of the State of Florida charged with the responsibility for, among other things, regulating rates charged for homeowners insurance in Florida. Fortune's Current Rates. In 1985 Fortune sought approval of homeowners insurance rates to be charged by it in four geographic zones it has divided Florida into. See Petitioner's exhibit 7. Fortune did not make any material misrepresentation in its filing. (Stipulated Fact). Nor was there any material error in Fortune's filing. (Stipulated Fact). The Department reviewed and approved Fortune's Custom Homeowners Program, "HO-8", insurance rates in January of 1986. (Stipulated Fact). The Department approved the following rates: a. Zone I: $387.00 Zone II: $389.00 Zone III: $332.00 Zone IV: $655.00 Zone IV includes, among other counties, all of the counties in the northern portion of Florida, including the Panhandle. No modification of Fortune's HO-8 rates was requested by Fortune between January of 1986 and June of 1993. Fortune's 1993 Request for a Rate Increase. On or about June 11, 1993 Fortune filed Petitioner's exhibit 1 with the Department requesting approval on an increase in rates pursuant to Section 627.062(2)(a)1., Florida Statutes. (Stipulated Fact). Fortune sought approval from the Department for an HO-8 rate increase for Zone I (to $443.00), Zone II (to $445.00) and Zone III (to $380.00). No HO-8 rate increase was requested by Fortune for Zone IV. Fortune suggested in the June 11, 1993 rate increase request (hereinafter referred to as the "1993 Request"), that it was requesting a statewide increase of 14.5 percent. The statewide increase sought actually amounted to a 12.9 percent increase. The parties communicated about the 1993 Request through the remainder of 1993. (Stipulated Fact). On January 25, 1994, the Department provided Petitioners exhibit 2 to Fortune proposing base rates for all four zones of Fortune's Custom Homeowners Program. (Stipulated Fact). The Department proposed to accept a statewide increase of 8.9 percent. This weighted average for the four zones included increases for Zones I, II and III and a decrease of approximately 49.9 percent for Zone IV. Fortune disagreed with the Department's determination. Therefore, Fortune withdrew the 1993 Request by letter dated February 18, 1994. (Stipulated Fact). Petitioner's exhibit 3. By letter dated March 7, 1994 the Department accepted the withdrawal of the 1993 Request. (Stipulated Fact). The Department informed Fortune that the withdrawal was "equivalent to the filing never having been submitted." Petitioner's exhibit 4. The Department's Notice to Fortune that Fortune's Rates are Excessive and/or Inadequate and Fortune's Response. Based upon the Department's review of the 1993 Request, the Department concluded that Fortune's HO-8 rates for Zones I, II and III were inadequate and that Fortune's HO-8 rate for Zone IV was excessive. By letter dated March 8, 1994, the Department informed Fortune, in part, of the following: You are hereby notified that pursuant to the provision of Section [627.062(2)(g)] the Department has reviewed the current rates, rating schedule, and rating manual for your Custom Homeowners Program and finds on a preliminary basis that certain rates are excessive and certain rates are inadequate. (Stipulated Fact). Petitioner's exhibit 5. The Department also informed Fortune in the March 8, 1994 letter that it would be given the opportunity to prove to the Department that "your current rates are not excessive, inadequate or unfairly discriminatory." The Department also informed Fortune in the March 8, 1994 letter that Section 627.062, Florida Statutes, provides that Fortune "shall, within sixty days of the date of this Notice, file with the Department all information which you believe proves the reasonableness, adequacy and fairness of your current rates." The Department also informed Fortune in the March 8, 1994 letter that it had the right to request a hearing pursuant to Chapter 120, Florida Statutes. The Department closed the March 8, 1994 letter with the following: If you request a hearing but intend to submit additional information within the allotted 60-day period you may request that the transmittal of your hearing request be delayed until the Department has had an opportunity to review the additional information submitted. Fortune did not provide additional information to the Department within sixty days of the Department's March 8, 1994 letter. On or about March 21, 1994 Fortune mailed a petition to the Department requesting a formal administrative hearing pursuant to Section 120.57, Florida Statutes. Prior to the March 8, 1994 letter from the Department, Fortune had provided all relevant information it had concerning its rates to the Department. Fortune, through Mr. Scourtis, verbally informed the Department that Fortune had no further information to support its rates. The evidence failed to prove that, between March 8, 1994 and March 21, 1994 when Fortune mailed its request for formal administrative hearing, Fortune had any other information concerning its rates which it had not provided the Department. The evidence also failed to prove that after March 21, 1994, when Fortune's request for formal hearing was mailed, the Department unsuccessfully attempted to obtain any information from Fortune through discovery. The Department's Review of Fortune's Rates. In determining whether Fortune's rates were inadequate or excessive, the Department first determined that a "credibility ballast" equal to the annual trend factor, or 4 percent, was generally accepted and reasonable actuarial technique. Fortune failed to prove that the use of a "credibility ballast" of 4 percent was not reasonable. The Department next determined that a "credibility factor" of 24.94 percent, the credibility factor Fortune had used in its 1993 Request, was generally accepted and reasonable actuarial technique. Fortune failed to prove that the use of a "credibility factor" of 24.94 percent was not reasonable. Based upon the foregoing, and using a catastrophic load factor of 1.141, the Department determined that the overall statewide indication for Fortune was the need to increase it's rates by 6.7 percent. Fortune had used the 1.141 catastrophic load factor in the 1993 Request. The Department agreed, and the evidence proved, that a catastrophic load factor of 1.357 is actuarially acceptable and reasonable. Using a 1.357 catastrophic load factor results in an increase of 9.1 percent. The evidence failed to prove that this conclusion is unreasonable. The Department next determined the relativity between the rates sought for the zones by Fortune to determine how to allocate the overall statewide rate increase indicator. The base rate sought for Zone I ($443.00) was used as the base. The base rate sought for Zone III was .86 of the base rate in Zone I ($380.00/$443.00) and it was concluded that this relativity was reasonable. The evidence failed to prove that this conclusion was unreasonable. The relativity between Zone I and Zone II was determined to be unreasonable because the rate sought for Zone II ($445.00) was greater than that of Zone I ($445.00/$443.00 or 1.01). The Department concluded that the relativity of Zone II should have been between Zones I and III. Therefore, the relativity of Zone II was changed to .94 by reducing the rate sought by Fortune in its 1993 Request from $445.00 to $400.00 ($400.00/$443.00 or .94). The evidence failed to prove that this conclusion was unreasonable. The relativity between Zone I and Zone IV was also determined to be unreasonable: $655.00 rate for Zone IV divided by the rate sought for Zone I of $443.00 or a relativity of 1.48. This relativity was determined to be unreasonable and was reduced to .77, which placed it below Zones I, II and III. The evidence failed to prove that this conclusion was unreasonable. Having determined the relativity of the Zones, the Department determined the appropriate rate for Zone I based upon its determination of the overall statewide rate increase indicator. Except for the fact that the Department should have based this final calculation on a catastrophic load factor of 1.357 and not 1.141, resulting in an overall statewide rate increase indicator of 9.1 instead of the 8.9 indicator utilized by the Department, the evidence failed to prove that the Department's calculation of the rates for the four zones based upon the relativities determined by the Department was unreasonable. Fortune's Zone I, II and III Rates. The parties agreed that the rates for Zones I, II and III are inadequate. The only disagreement of the parties involved the extent of the inadequacy. Fortune argued that the inadequacy of its rates for Zones I, II and III is greater than that determined by the Department. Fortune failed to prove that the Department's determination of the extent of the inadequacy of the rates for Zones I, II and III was incorrect except to the extent that the Department used a catastrophic load factor of 1.141 instead of 1.357. The correct overall statewide rate increase indicator to be utilized in determining the extent of inadequacy of the Zones I, II and III rates should be 9.1 instead of 8.9. Fortune's Zone IV Rate. The Department determined that Fortune's Zone IV rate was excessive. Fortune failed to prove that the Department's determination that the Zone IV rate is excessive is incorrect except to the extent that the Department used a catastrophic load factor of 1.141 instead of 1.357. The correct overall statewide rate increase indicator to be utilized in determining the extent of excessiveness of the Zone IV rate should be 9.1 instead of 8.9.
The Issue Whether Petitioner is eligible to participate in the State of Florida Drycleaning Solvent Cleanup Program ("DSCP").
Findings Of Fact On December 21, 1995, Petitioner was incorporated as a Florida corporation. Prior to its incorporation, Petitioner did not conduct any business activities. Since that time it has provided pretreatment for waste water generated by Associated Uniform Rental, Inc. ("AUR"). AUR is a uniform rental facility that rents uniforms and cleans those same uniforms using a laundry process that involves the use of soaps, softeners, and neutralizers. AUR's uniform cleaning process does not currently use, and has never used, drycleaning chemicals. On April 24, 1996, Petitioner applied to Respondent for eligibility to participate in the DSCP. Petitioner's DSCP application lists the street address for the site as 35 North Parramore Avenue, Orlando, Florida. The application is signed by Dominick Cirotti. Petitioner maintains a business office in the building located at 35 North Parramore Avenue. Although the application for eligibility lists the address for the site as 35 North Parramore Avenue, Petitioner has operated and continues to operate a waste water treatment system in the northwest corner of the building located at 21 North Parramore Avenue. Petitioner began operating the waste water treatment system after it was incorporated in December 1995. In January 1996, Petitioner acquired title to the real property located at 35 North Parramore Avenue. Petitioner's predecessor-in-title with respect to the above-referenced real property was AUR, f/k/a/ Atlantic Uniform Services, Inc. AUR originally acquired the property from Associated Uniform Rental and Linen Supply, Inc. ("AURLS") on July 21, 1979. AURLS and AUR are different companies. In January 1996, Petitioner also acquired title to the real property comprising the northwest corner of the building located at 21 North Parramore Avenue. AUR was Petitioner's predecessor-in-title with respect to both of the above-referenced real property. There is one building located at 21 North Parramore Avenue. The remainder of the building is utilized by AUR in conducting its business operations as a uniform rental company. The waste water treatment plant is separated from the remainder of AUR's building by a knee-wall. Petitioner's waste water treatment system processes waste water generated by the operations of AUR. Petitioner's waste water treatment plant is an integral part of the operation of AUR's uniform rental facility. The building at 35 North Parramore Avenue is located immediately to the north of the building located at 21 North Parramore Avenue. A narrow alleyway separates the two buildings. Prior to transferring the property to Petitioner, AUR used the northwest corner of 21 North Parramore Avenue for the storage of clothing as part of its operations as a uniform rental company. Since 1979, AUR has operated a uniform rental company in the building located at 21 North Parramore Avenue. AUR is currently located in the same building. AUR does not use perchloroethylene in its cleaning process. AUR rents uniforms and cleans them in a laundry process. AUR's facilities are utilized primarily for the cleaning and distribution of work apparel. Since 1985, AUR has also maintained an office in the building located at 35 North Parramore Avenue. This office operates as part of AUR's uniform rental company. Dominick Cirotti is a corporate officer of Petitioner as well as the President of AUR. Petitioner and AUR share common employees. Petitioner and AUR also share common office space in the building located at 35 North Parramore Avenue. At some time between 1925 and 1979, various drycleaning businesses operated on the property located at 21 North Parramore Avenue. Drycleaning operations ceased on the real property sometime between 1960 and 1965. In April 1993, AUR retained Environmental Science and Engineering, Inc. ("ESE") to perform a limited site assessment with respect to suspected drycleaning solvent contamination beneath AUR's building on 21 North Parramore Avenue. ESE's assessment, completed on May 6, 1993, was to determine the presence of impacted soil and/or groundwater in the immediate vicinity of a hole in the concrete slab located in that area of the facility which was once used for drycleaning operations. This area was targeted because the hole was a suspected dump site for used perchloroethylene, a solvent used in drycleaning. The hole was located in the northwest corner of AUR's building on 21 North Parramore Avenue. ESE collected soil samples and screened the samples for the presence of organic vapors, and also installed a temporary monitor well and collected a groundwater sample. ESE's analytical results verified that "both the soil and groundwater had been affected by a release of chlorinated solvents . . ." In June 1993, ESE performed an additional site assessment with respect to the contamination beneath AUR's building at 21 North Parramore Avenue. On July 28, 1993, ESE provided AUR with a letter that described its findings concerning the suspected contamination. The July 1993 ESE site Assessment Report includes a site plan (Figure 1) which depicts the installation of a temporary well in the northwest corner of the AUR building located at 21 North Parramore Avenue. This temporary monitor well was installed in the vicinity of the hole in the concrete slab. At the time the site assessment was performed by ESE, the northwest corner of the building was still owned by AUR. This monitor well was located in the same part of the building that AUR would later transfer to Petitioner. The additional site assessment performed by ESE confirmed the presence of perchloroethylene contamination. In April 1994, HSA, Inc., was contracted to provide AUR with a Preliminary Contamination Investigation with regard to the perchloroethylene contamination at AUR's building on 21 North Parramore Avenue. At the time the investigation was performed by HSA, the northwest corner of the building was still owned by AUR. A summary of the investigation's findings provided that soil and groundwater contamination issues apparently resulted from the disposal of purgeable hydrocarbons. Disposal was likely through one of two holes in the concrete slab within the cleaning facility. These site investigations corroborate that there is perchloroethylene contamination, and that it originates under two holes in the concrete slab in the northwest corner of the building located at 21 North Parramore Avenue. The perchloroethylene contamination meets the definition of "drycleaning solvents" per Subsection 376.301(9), Florida Statutes (1995). This statute provides that the definition of "drycleaning solvents" only includes " . . . those drycleaning solvents originating from use at a drycleaning facility . . ." Id. Respondent denied the application for eligibility in the DSCP because Petitioner's predecessor-in-title, AUR, operated a uniform rental company on the real property that is the subject-matter of this proceeding. Effective October 1, 1995, the term "drycleaning facility," as defined in Subsection 376.301(8), Florida Statutes, was amended to exclude uniform rental companies from eligibility to participate in the DSCP. At the time the amendment to Subsection 376.301(8), Florida Statutes, became effective, AUR was operating a uniform rental company in the buildings located at 21 North Parramore Avenue and 35 North Parramore Avenue. AUR continues to operate a uniform rental company in the building locates at 21 North Parramore Ave and 35 North Parramore Avenue.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that the Secretary declare Petitioner not eligible to participate in the Drycleaning Solvent Cleanup Program, and its application should be denied. DONE AND ENTERED this 11th day of May, 2001, in Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of May, 2001. COPIES FURNISHED: William H. Haak, Esquire Lowndes, Drosdick, Doster, Kantor & Reed, P.A. 215 North Eola Drive Post Office Box 2809 Orlando, Florida 32802 Jason Hand, Esquire Department of Environmental Protection 3900 Commonwealth Boulevard Mail Station 35 Tallahassee, Florida 32399-3000 Kathy C. Carter, Agency Clerk Department of Environmental Protection Office of General Counsel 3900 Commonwealth Boulevard Mail Station 35 Tallahassee, Florida 32399-3000 Teri L. Donaldson, General Counsel Department of Environmental Protection 3900 Commonwealth Boulevard Mail Station 35 Tallahassee, Florida 32399-3000
The Issue The issues to be resolved in this proceeding concern whether the Petitioners should obtain an amendment to a development order which would allow multi-family residential development on the property of the Petitioners, presently designated as commercial property, on St. George Island, Franklin County, Florida. Included within that general issue are questions involving whether the proposed amendment is a "substantial deviation" from that 1977 development order, what vested rights, if any, the Petitioners have to develop their property, and whether the development, as proposed and as delineated in the testimony and evidence, is consistent with the development order and any vested rights thus acquired by the Petitioners.
Findings Of Fact A development order (DO) was approved by the County on September 10, 1977 providing for a DRI for approximately 1,200 acres of property on St. George Island in Franklin County, Florida. The 1,200 acres to which the 1977 DO relates is not contiguous. It is separated into two parcels, one of which is located on the east end of St. George Island, adjacent to the state park, which contains 33-1/3 acres designated as "commercial". It is identified as the "Sunset Beach Commercial Area" in that 1977 DO. That same area is also referred to as Three Hundred Ocean Mile, Gorrie Ocean Mile, or Sunset Beach. The remaining portion of the 1,200 acres is located between 12th Street West and the Bob Sikes Cut, and is generally referred to as the "Plantation". The Plantation DRI property is divided by the 1977 DO into both residential and commercial areas. There are two designated commercial areas in the Plantation property, one of which is adjacent to Bob Sikes Cut and is approximately 100 acres in size. The other commercial area is approximately 150 acres in area and is referred to as the "Airport Commercial Area" or the "Nick's Hole Commercial Area". These areas are collectively referred to in the 1977 DO as the "Plantation Commercial Areas". The remainder of the Plantation DRI property consists of 900 to 1,000 platted, residential lots designated as "Residential Areas". Approximately 250 of these lots are already developed with single- family residences. The Petitioners are successor-in-interest to a portion of the Plantation property, owning approximately 58 acres within the Airport or Nick's Hole Commercial Area. This property is hereinafter described as "Petitioners' Property" and is depicted in Exhibits 9, 17, 18 and 19 adduced by the Petitioners. The 1977 DO limits the total commercial area which can be developed to not more than 200 acres even though a larger portion is commercially designated. Thus, the development of the 58 acres at issue in this proceeding will not result in the limit in the 1977 DO being exceeded. The 1977 DO authorizes commercial development within the Plantation Commercial Areas, shown by page 5 of the Petitioners' Exhibit 2 in evidence. The 1977 DO thus provides that the commercial areas shall include one or more high quality resort hotels and motels, with affiliated uses such as tourist shops, restaurants, recreational amenities and similar activities. The 1977 DO provides that because specific plans for the two areas were indefinite at the time of the enactment of the 1977 DO, those areas would not be re-zoned at that time; but re-zoning of the areas would be granted upon final approval of the plans by the Respondent, "which approval shall not be unreasonably withheld". "Condominiums and multi-family residential structures shall not be allowed in any of the areas shown by Exhibit "A" without the prior consent of the Respondent. Before development is commenced in the commercial areas, plans and specifications for the site clearing and construction shall be submitted to the Respondent for review and approval. Upon such approval, the specific area in question shall be re-zoned to allow the requested land use." The 1977 DO has been amended several times. Two of the amendments enacted in 1985 and 1987 specifically authorize condominium and multi-family residential development within the Plantation Commercial Areas. The Franklin County zoning ordinance, Ordinance No. 75-7 (Zoning Ordinance), was in effect on September 20, 1977, when the 1977 DO was enacted. The Ordinance authorized condominium and multi-family residential development as part of the "commercial designation" applicable to St. George Island in the Plantation Commercial Areas. A "Tourist Commercial District" is established in Section 630 of the Zoning Ordinance, and this land use is specifically applicable to the islands within Franklin County. Section 631 of the Ordinance includes within the "Principal Permitted Uses" hotel, motel, restaurant and gift shops and all uses within R-2 multi-family districts. Section 520 of the Zoning Ordinance, "Multi-Family Residential District", sets forth principal permitted uses, which include "multiple dwellings including townhouses, apartment houses . . .". The Petitioners acquired their 58-acre parcel in 1991 after the entry of the 1977 DO and the two amendments referenced above. Exhibit "D" to the 1977 DO is depicted in Petitioners' Exhibit 3 in evidence. This exhibit, which includes the Petitioners' property, has been recorded in the Franklin County Public Records since 1977. The exhibit indicates the intensity of the contemplated development approved for the Petitioners' property. The portion south of Leisure Lane reflects the following densities: 525 to 675 hotel rooms; food and beverage outlets and other amenities associated with those hotel rooms; 65,000 to 82,000 square feet of resort shops and commercial business use; and 685 surface parking spaces (in addition to the parking spaces which would be located below the hotel). Those densities were calculated based upon the coverages depicted on "Exhibit D". The figures do not include that portion of the Petitioners' property north of Leisure Lane, which was also approved for commercial development. The Proposed Development "Resort Village", the proposed development, would consist of residential and multi-family development, hotel and inn and related commercial uses, such as retail shops and restaurants. Recreational amenities would be provided, such as a club house, swimming pool, tennis courts, racquetball courts and exercise facilities. The amenities would be available to surrounding property owners, as well. St. George Island is a resort vacation area, and the proposed development in Resort Village would be compatible with those uses. Approximately 150 of the 250 developed homes in the Plantation are in rental programs. The Franklin County Comprehensive Plan and its land use goals, objectives and policies includes a "mixed-use residential" land use category, limited to developments such as DRI's. That category includes recreational, commercial, retail, office, and hotel and motel development, as well as multi- family residential uses. That category is very similar to the description of the Plantation Commercial Areas contained in the 1977 DO. Resort Village is the only parcel remaining in the Plantation area available for this type of development. The Petitioners in the St. George Plantation Owners Association, Inc. entered into an agreement in October, 1992 providing for certain density and other restrictions on the Petitioners' property. These restrictions include density limitations of 3.9 residential units per gross acre; 19.5 hotel units per gross acre; and 12,000 square feet of miscellaneous commercial development per gross acre. The Petitioners also agreed not to exceed a 35-foot height limitation which was less than that previously approved by the County in the Plantation Commercial Areas. The development restrictions agreed to by the Petitioners are more stringent than those previously approved for development in the Plantation Commercial Areas and allowed-for by the County zoning code in effect in 1977 or currently authorized and allowed in commercial and multi-family developments in the County. The Petitioners have also agreed to limit the total impervious surface area to no more than 40 percent; to maintain a 50-foot buffer adjacent to wetlands; to maintain a large portion of the 58 acres in its naturally- vegetated state and not to seek permission to develop any of the DEP "jurisdictional wetlands" adjacent to Apalachicola Bay. Thus, all development will be on uplands without any permitting sought or development in wetlands and waters of the State. Character of Prior Development Approvals In the 1985 amendment to the 1977 DO, the County approved the mixed- use development of 352 multi-family units on 76.5 acres and a hotel conference center of 386 hotel units on 11 acres. The 1987 amendment approved by the County re-affirms a permitted development of the 352 multi-family units on 76.5 acres, and includes a resort-convention center/hotel with 250 units, a marina/motel with 40 units, and a "harbor house", consisting of 60 units, as well as the other authorized development. Additionally, the County approved, and there was constructed in the early 1980's, two projects in the commercial district in the center of the Island: The Villas of St. George, with a density of approximately 16.6 multi-family units per acre, and the Buccaneer Inn, with a density of approximately 44 hotel/motel units per acre. On September 2, 1981, the County approved a mixed-use development in the Sunset Beach Commercial Area in close proximity to the Bay, consisting of 252 multi-family residential units and 150 motel units, a density of nine multi-family units per acre, and 25 hotel/motel units per acre. Additionally, the Respondent recently authorized single-family residential units in this area. The Buccaneer Inn, the Villas of St. George, and the Sunset Beach development all have more dense development than Resort Village would have, with a higher percentage of impervious surface, leaving very little natural vegetation. The Respondent recently approved and took an active role in encouraging and facilitating residential developments served by aerobic septic systems in the commercial district in the center of the Island. It did so by granting a variance for setbacks and an easement for waste water purposes. The densities for these developments are 4.3 residential units per acre, greater than the 3.9 residential units per acre the Petitioners have voluntarily imposed as a restriction on their property. Reliance on Prior Approvals The Petitioners, prior to acquiring the property, studied and researched the public records of Franklin County and other documents and did considerable investigation to become familiar with the 1977 DO, as well as the 1985 and 1987 amendments and what was allowed pursuant to those amendments. Additionally, the Petitioners had conversations with Alan Pierce, the Franklin County Planner, concerning the development of their property both prior to and after purchasing the property. In one conversation with Mr. Pierce prior to purchase, the Petitioners were advised by Mr. Pierce that in order to develop the Resort Village concept, the Petitioners would be better advised to acquire "commercially-designated" property within the Plantation, instead of trying to get single-family lots re-zoned. There is no evidence that the Petitioners were placed on notice by any documents or communication from Franklin County officials that they would not be able to develop the Resort Village proposal on their property. After purchasing the property, the Petitioners continued communicating with Mr. Pierce and other Franklin County officials. Mr. Pierce was aware that the Petitioners were expending considerable resources in attempting to secure the necessary government permits and approvals, as well as doing market research, real estate development planning, and other activities related to the parcel in question. The Petitioners expended in excess of $500,000.00, as a result of their efforts in the preparation for development of the Resort Village, including fees to engineers, attorneys, architects, and various environmental specialists and consultants, as of December 1993. Development Review Process Under the 1977 Development Order The 1977 DO provides that it "is consistent with the local land development regulations of Franklin County, Florida." The DO contains "conceptual land plans", which are incorporated and made a part of the DO. The conceptual land plans are contained in "Exhibits A-F" to the 1977 DO. Two of the exhibits, "Exhibit A" and "Exhibit D", contain the conceptual plans for the development of the Petitioners' Property. The 1977 DO does not expressly set forth the specific densities for development of the Petitioner's Property, but the intensity of the contemplated development for a portion of the Petitioner's Property is shown on "Exhibit B" to the 1977 DO, as further described above. If the Petitioners had not sought an amendment to the 1977 DO to include multi-family use, they would have simply submitted a specific site plan to the Respondent "for review and approval". Upon approval of the site plan, the Respondent would automatically re-zone the property as applicable. The automatic re-zoning of the property was re-confirmed at the Respondent's June 8, 1981 board meeting. See, Petitioners' Exhibit 15, page 3, in evidence. If at the time the site plans are approved, state or federal approvals are still necessary, the Respondent is required to cooperate with the Petitioners in obtaining those approvals, as long as substantial, adverse data is not developed with regard to environmental damage and as long as cooperation does not require the expenditures of monies by the County. Since the Petitioner sought an amendment to the 1977 DO, pursuant to Section 380.06(19), Florida Statutes, to allow multi-family uses, the Petitioners address these issues as part of the Chapter 380, Florida Statutes, process, prior to submitting a detailed site plan. Franklin County's Development Review Process In order for commercial development to be effective in Franklin County, a site plan must be submitted for review and approval to the Planning and Zoning Commission. The Commission checks to insure compliance with setback requirements, parking requirements, impervious surface area, and other criteria set forth in Franklin County's ordinances. Information is also provided in the site plan approval process with regard to the treatment of waste water and the treatment and detention of storm water. After site plan approval, an applicant must next obtain any necessary waste water permits from either HRS or DEP, depending on the size of the project. A storm water permit from DEP must be obtained and a certificate from the utility system that potable water is available for the development. After these permits are obtained, an applicant must submit building plans and a building permit can then be issued. Franklin County has not adopted a process whereby it independently studies or evaluates the impact of the DRI. Franklin County relies upon the state permitting and regulatory process for that data. Waste Water and Storm Water The 1977 DO specifically addresses "sewage treatment and drainage control" and requires assurance that the planned development "will not cause pollution of Apalachicola Bay or other environmental damage". Under the 1977 DO, waste water treatment should be addressed at the site plan stage, which can occur before any or all of the permitting processes begin. The Petitioners presented considerable testimony regarding both the pending waste water treatment permit and the manner in which storm water would be addressed. Waste water will be treated by an advanced waste water treatment system (AWT). It will be a municipal-type facility with Class I reliability and will be of a higher quality than any similar facility in Franklin County. The AWT plant provides the highest level of treatment available for domestic waste water. It will remove approximately 93 percent of the nitrogen content, 91 percent of the phosphorus, and 97 percent of the bio-chemical oxygen demand in the waste water effluent. Contrastingly, aerobic septic systems remove typically 13 percent, 0 percent, and 50 percent of the nitrogen, phosphorus, and bio-chemical oxygen demand, respectively. The Petitioners propose to build the AWT plant in 30,000-gallon phases. They will install aerobic septic systems during the first years of development, until enough waste water is generated to efficiently operate the AWT plant. This will require a flow of approximately 5,000 gallons per day. The Petitioners have agreed to start construction on the AWT plant once 5,000 gallons of waste water is being generated and to disconnect all aerobic systems, once a permit to operate the treatment plant is issued by DEP. The Petitioners have also agreed not to exceed 10,000 gallons of flow at any time on the aerobic system. In order to dispose of treated effluent, the Petitioners propose to use three sub-surface absorption cells. These will be used on a rotating basis so as to minimize the amount of effluent which will percolate to the ground water at each location. There is considerable testimony regarding the importance of Nick's Hole to the Apalachicola Bay ecosystem. The Petitioners' property does not actually border Nick's Hole, but is in close proximity to it. The relative location of Nick's Hole and the Petitioners' property is depicted on Exhibit 9 in evidence. Unrefuted testimony by the Petitioners' expert witnesses, Gary Volenec and Steve Leitman, established, through their ground water study, that none of the waste water from the Resort Village development would migrate to Nick's Hole or to the marshes adjacent to it. Twenty percent of the ground water, at most, might eventually migrate toward the marsh and the Pelican Point Bay area, east of the airport and north of the Petitioners' property, with at least 80-90 percent of the treated waste water migrating toward the Gulf, in accordance with the ground water gradient in the area of the Petitioners' property. These studies did not require a specific site plan in order to be conducted accurately. Rather, they depend solely on the location of the absorption fields, as proposed, and the flow of the ground water, as revealed by the ground water study. It must be remembered that DEP, through its permitting process, has ultimate control over the specific location of the absorption fields, their configuration, construction, and manner of use and operation, as is true of the waste water plant itself. After the waste water plant is constructed, the underground water, as part of the operating permit of the plant, will be constantly monitored, as will the operation of the plant. If problems arise, constituting adverse effect or the potential thereof on the ground water or surrounding surface waters, which cannot be immediately remedied, the DEP has the authority to shut the plant down. The volume of water flowing from the Apalachicola River into the Bay is approximately a minimum of 16 billion gallons per day. The average daily rainfall on Pelican Point Bay and the surrounding wetlands is 296,000 gallons, if apportioned on a daily basis. The amount of water flowing in and out of the Pelican Point Bay/Nick's Hole area with each tidal exchange is approximately 72 million gallons. If it be assumed that the maximum amount of treated waste water, which would be 120,000 gallons per day if development were effected without the proposed multi-family amendment (which would reduce that maximum amount to 90,000 gallons per day) and the maximum percentage of migration to Apalachicola Bay (20 percent) occurred, the maximum amount of water eventually getting into Apalachicola Bay after treatment would be 24,000 gallons per day. However, if the multi-family amendment were adopted and the Petitioners' proposed development proceeded accordingly, the maximum volume of water generated from Resort Village would be reduced to 18,000 gallons per day (90,000 GPD x 20 percent = 18,000). The Intervenor expressed much concern that the sewage treatment plant would be located in a flood-prone area. This is not relevant concerning the addition of multi-family development to the permitted development on the property since, even if no amendment were sought and development proceeded as presently allowed under the 1977 DO, as amended, a waste water treatment plant treating as much as 120,000 gallons per day would be necessary. In any event, however, the Petitioners would be required to address such flooding concerns as part of the permitting process regarding waste water and storm water permits sought from the DEP at the appropriate time. Further, the critical components of the plant, including absorption cells, are required by the DEP to be well- elevated so that they can withstand the most severe storm events. The Petitioners' expert witness, Randall Armstrong, testified as to how Resort Village's storm water plan would be designated and permitted. Since the Petitioners' property is on Apalachicola Bay, a Class II designated water, as well as an outstanding Florida water, the DEP has specific storm water requirements which have to be met before a permit can be issued. Although the detail or design for the storm water system is dependent on formal site plans, it is represented by the Petitioners that all storm waters will be captured, allowed to percolate into the ground, and that no storm water will be accumulated and discharged into the waters of the Bay or the Gulf. Ultimate approval of the amendment by Final Order in this proceeding should be conditioned on a binding agreement between the parties concerned to that effect. However, for areas that will remain in their natural state, even after development on the property, the flow patterns for storm water will not change. The Respondent and the Intervenor are also concerned that storm water, under certain conditions, might flow from the Petitioners' property across the airport and into the marshes adjacent to Nick's Hole, even in the present, undeveloped condition. If that, in fact, occurs, the development of Resort Village will not alter that, for areas which remain in their natural state. If development occurs near or adjacent to the airport, any storm water will be captured and treated accordingly under the Petitioners' voluntary proposal, in any event. According to testimony in the record, DEP, in both its waste water and storm water permitting and regulatory processes, is keenly aware and sensitive to the location of the Petitioners' property and the importance of activity on that property to the health of Apalachicola Bay. The Petitioners' will not be able to get a building permit to develop the property until the Petitioners have both the waste water and storm water permits. The granting of either of those permits will require extensive scientific investigation and demonstration of reasonable assurances that the various environmental concerns, in terms of water quality, the public interest and cumulative impacts of such projects, as provided in the pertinent provisions of Chapter 403, Florida Statutes, and attendant rules, will not be adversely affected. In any event, the addition of multi-family-type development will have no adverse effect on the issues concerning sewage and waste water treatment and will actually result in a reduction in the conceivable, maximum daily flows versus the development, in the commercial sense, already permitted under the 1977 DO, as amended. Flooding Issues The Respondent and the Intervenor also expressed concerns about potential flooding at the St. George Island site in question. While Richard Deadman indicated in his testimony that DEP had concerns regarding development of the Petitioners' property, such as flooding on St. George Island, Mr. Deadman stated that his concerns were passed on to others in DEP and would be taken into account in the relevant permitting processes. The Respondent and the Intervenor also expressed concerns regarding the impact of the development on hurricane evacuation and traffic densities. The Respondent and the Intervenor's witness, Mike Donovan from the ARPC, testified that the counsel's study showed that Resort Village would have no significant impact on the regional road system, which includes the bridge from the mainland to St. George Island. Potable Water Issues The Respondent and the Intervenor also were concerned regarding the availability of potable water. Based upon the testimony of the Intervenor's witness, John Kintz from DEP, the capacity of potable water for the utility on St. George Island is very near, if not already at, capacity. Clearly, for any additional development to occur within the area served by the St. George Island water utility, whether multi-family, single-family, or commercial development, the capacity of the utility will have to be increased. If not, water hookups will not be available; and, therefore, building permits cannot be granted in Franklin County. The water utility does have an application pending at the NWFWMD to increase its water supply capacity. Fees paid by the Resort Village to the utility will assist it in providing for additional water capacity expansion. The Petitioners already have purchased 15,000 gallons capacity per day from the utility which is enough potable water to serve the project in the first several years of development. The Petitioners will continue purchasing potable water capacity on an as-needed basis as long as it is available and when it becomes available. In any event, if potable water is not adequately available, building permits cannot be granted and the development cannot proceed. In terms of the lower densities, projected sewage flows, restrictions on parking and impervious surfaces, and the other factors delineated in the above Findings of Fact, the Resort Village development will have less adverse impact than the development already allowed by the 1977 DO, as amended, for the site in question. Thus, the Resort Village, as proposed by the Petitioners will not constitute a substantial deviation from the types of development activities permitted by that 1977 DO, as amended. Although concerns were expressed by a number of witnesses, and by the Respondent and the Intervenor, concerning the potential pollution of Apalachicola Bay or other environmental damage to the Bay and its ecosystem, no preponderant testimony or evidence was presented which could establish that the development of Resort Village would cause such pollution or environmental damage. Such concerns will be thoroughly addressed in the permitting and regulatory processes, for the various permits referenced above, in any event. The Resort Village, however, was demonstrated to have no additional adverse impact on any waters, wetlands or ground water subject to state regulation, in addition to or different from that posed by the uses already permitted by the 1977 DO, as amended.
Recommendation Based on the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties it is RECOMMENDED that a Final Order be entered by the Florida Land and Water Adjudicatory Commission which: Supersedes the January 4, 1994 order in its entirety; Amends the 1977 Development Order to specifically allow multi-family use for the Petitioners' Property in the manner proposed by the Petitioners; Determines that the amendment to this 1977 Development Order does not constitute a substantial deviation under Chapter 380, Florida Statutes; Determines that the Petitioners have vested rights to develop their property at the densities and intensities of use proposed, subject to issuance of appropriate permits for storm water and waste water treatment construction and operation, site plan approval by Franklin County, and which incorporates the voluntary agreements and restrictions entered into by the Petitioners with the adjoining property owners; Requires Franklin County to follow the same procedures and guidelines in the site plan approval process and building permit process for development of the Petitioners' Property as it does for every commercial or multi-family developments in Franklin County, Florida. DONE AND ENTERED this 11th day of January, 1995, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11th day of January, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2043DRI Petitioners' Proposed Findings of Fact The Petitioners' proposed findings of fact are accepted to the extent they are not inconsistent with those made above by the Hearing Officer. They are rejected to the extent that they are so inconsistent, as being unnecessary, immaterial, or not supported by preponderant evidence of record. Respondent's and Intervenor's Proposed Findings of Fact The Intervenor's proposed findings of fact have been adopted by reference by the Respondent. 1-9. Accepted, but not necessarily material to resolution of the issues presented to the Hearing Officer. Accepted. Rejected, as not entirely in accord with the preponderant weight of the evidence as developed at hearing. 12-15. Accepted, but not entirely as to materiality inasmuch as this is a de novo proceeding with resolution of the issues presented dependent upon evidence adduced at a de novo hearing. These proposed findings are, in essence, illustrative of the procedural history of this case. 16-30. Accepted, to the extent that they actually constitute proposed findings of fact, and rejected to the extent that they merely constitute recitations of testimony. Although they are accepted, the concerns expressed are not material to the narrow range of issues presented in this proceeding, as opposed to the permitting proceedings to come concerning the storm water and waste water construction and operation permits which must be sought from the DEP. Moreover, the feared impacts which the concerns expressed in proposed findings of fact 16-30 relate have not been proven by preponderant evidence in view of the character of the proposed development, the decision by the developer not to seek permitting or to do any development in jurisdictional wetlands and in view of the less dense and intense type of development proposed herein versus that already permitted in terms of commercial designated use already allowed by the 1977 Development Order. Thus, these proposed findings of fact are largely irrelevant and immaterial to the issues presented in this particular proceeding. 31-35. Rejected, as constituting largely recitations of testimony, rather than proposed findings of fact, as being immaterial, in part, to the specific issues presented for resolution in this proceeding, as delineated in the above Findings of Fact and Conclusions of Law made by the Hearing Officer and as subordinate to the findings of fact in these particulars made by the Hearing Officer. They are largely irrelevant due to the discussion and conclusions of law made by the Hearing Officer, which are predicated on the Hearing Officer's findings of fact supported by the preponderant evidence of record. COPIES FURNISHED: Ms. Barbara Leighty Florida Land & Water Adjudicatory Commission Executive Office of the Governor 426 Carlton Building Tallahassee, FL 32301 Mr. Thomas H. Adams P.O. Box 791 Eastpoint, FL 32328 Al Shuler, Esq. P.O. Box 850 Apalachicola, FL 32329 L. Lee Williams, Jr., Esq. P.O. Box 1169 Tallahassee, FL 32302-1169 Mr. Tom Beck Bureau of Land and Water Management Department of Community Affairs 2740 Centerview Drive Tallahassee, FL 32399-2100 Gregory C. Smith, Esq. General Counsel Florida Land & Water Adjudicatory Commission Office of the Governor The Capitol, Room 209 Tallahassee, FL 32399-0001 J. Ben Watkins, Esq. 41 Commerce Street Apalachicola, FL 32320 William J. Peebles, Esq. 306 E. College Avenue Tallahassee, FL 32301
Conclusions THE PARTIES resolved all disputed issues and executed a Stipulation and Agreement. The parties are directed to comply with the terms of the attached Stipulation and Agreement. Based on the foregoing, this file is CLOSED. DONE AND ORDERED this Me™ aay of jth , 2013, in Tallahassee, Leon County, Florida. dll Vofoll be IZABETH DUDEK, SEGKETARY Agency for Heaith C4re Administration Page 1 of 3 Filed September 20, 2013 11:45 AM Division of Administrative Hearings C.1. No. 12-2365-000 A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: F. SCOTT BOYD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 Cynthia A. Mikos, Esquire Attorney for Respondent Allen Dell, P.A. 202 S. Rome Avenue, Suite 100 Tampa, Florida 33606-1854 Email address cmikos@allendell.com Agency for Health Care Administration Debora E. Fridie, Assistant General Counsel, MS #3 Agency for Health Care Administration Division of Health Quality Assurance Agency for Health Care Administration Home Care Unit, MS #34 Agency for Health Care Administration Bureau of Finance and Accounting, MS #14 Agency for Health Care Administration Bureau of Medicaid Program Integrity, MS#6 ATTN: Rick Zenuch, Bureau Chief Florida Department of Health Page 2 of 3 C.2r. No. 12-2365-000 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Final Order was furnished by United States Mail, interoffice mail, or email transmission to the above-referenced addressees this 2 day of Sgr te , 20438 . Ad ah ency Clerk Agency for Health Care Administration 2727 Mahan Drive, MS #3 Tallahassee, Florida 32308 Telephone No. (850)-412-3630 Fax No. (850) -921-0158 Page 3 of 3
The Issue The issue at hearing was whether Respondent Department of Health and Rehabilitative Services correctly denied Petitioner Michelle King's application for emergency assistance to needy families with dependent children under Title IV-A of the Social Security Act.
Findings Of Fact Petitioner is the single mother of a son, three and one-half years old. At all times material to this proceeding, Petitioner was a full-time employee of a state agency. Her income was approximately $1,150 per month. She received no child support for her son. Her rent at Azalea Gardens Apartments was $385 per month. Petitioner's child attended day care at the Child Development Center of Central Florida Community College (CFCC Lab School). The child's father paid the cost of day care in the amount of $245 per month. In June of 1995, the child's father suffered an injury and was unable to work. He no longer paid the day care bill. At the same time, Petitioner had to pay some medical bills for her son. As a result, Petitioner was behind on her day care payments. On July 7, 1995, Petitioner's landlord notified her that she had until July 12, 1995 to pay her rent and late fees. At that time, Petitioner owed rent in the amount of $385 together with a $22 late fee and two dollars per day until the rent was paid in full. On July 25, 1995, Petitioner's landlord notified her that she had until noon the next day to pay $443 in rent and late fees to avoid eviction proceedings. In the meantime, Petitioner contacted Respondent seeking assistance to pay her delinquent rent, utilities and day care costs. Respondent's caseworker initially referred Petitioner to the Salvation Army and other local charities. However, there were no community resources available to meet Petitioner's past due bills. On the advice of Respondent's caseworker, Petitioner applied for cheaper housing at Hilltop Manor Apartments and for a cheaper day care program. Petitioner was placed on waiting lists for federally subsidized housing and child care programs. On July 31, 1995, Petitioner applied for emergency assistance for needy families with children under Title IV-A of the Social Security Act. The application requested retroactive payment of one month's rent in the amount of $455 and prospective payment of day care cost for two months in the amount of $945. While Petitioner's application was pending, she was able to pay her landlord enough money to forestall eviction. However her total debt increased. The application was amended to include a request for three months day care cost and additional late fees for failure to pay rent in a timely manner. Petitioner's lease at Azalea Garden Apartments expired at the end of August, 1995. About that time, Petitioner learned that she would be able to move into Hilltop Manor Apartments at a significantly lower rental. She informed Respondent's caseworker about her success in securing more affordable housing. Petitioner anticipated moving into her new apartment on September 1, 1995. She withdrew her child from day care and sent him to visit with his father while she made the move. By letter dated September 1, 1995, Respondent's caseworker informed Petitioner that her application for funding had been denied because she was no longer living at Azalea Gardens Apartments and her son no longer attended day care at the CFCC Lab School. This letter did not advise Petitioner that she was entitled to a hearing if she believed Respondent improperly denied her application. Petitioner was able to move into her new home on or about September 4, 1995. She enrolled her child in a day care program near her residence. Petitioner forfeited her security deposit at Azalea Gardens Apartments when she moved out. She continues to owe an undetermined amount of money to Azalea Gardens Apartments and the CFCC Lab School. Respondent sent Petitioner a Notice of Disposition dated September 8, 1995, as a formal determination that she was not eligible for emergency assistance. This notice explains that Petitioner was not approved because she was able to make other arrangements for housing and day care. The notice also advised Petitioner of her right to a hearing.
The Issue Whether Respondent, ECO Home and Health Services Group Home, owned and operated by ECO Home and Health Services, LLC (“Respondent” or “ECO Home”), committed the violations of the applicable statutes and rules alleged in the Administrative Complaint; and, if so, what is the appropriate sanction.
Findings Of Fact Among other duties, APD is responsible for regulating the licensing and operation of group home facilities in the State of Florida. APD's clients include vulnerable individuals with developmental disabilities attributed to autism, cerebral palsy, intellectual disabilities, Phelan-McDermid syndrome, Prader-Willi syndrome, or spina bifida. APD's clients can choose to live in an institutional setting, group home, or independently. A client makes this choice with the assistance of a residential placement coordinator. A group home is a licensed facility providing a living arrangement similar to a family setting. The provider is responsible for the client’s room and board, safety, transportation, and assistance with the activities of daily living. ECO Home holds an APD-issued license to operate a group home. Sherman Carter is ECO Home’s owner and sole corporate officer. P.P. was a client of ECO Home. He lived at ECO Home from August 2016 until November 27, 2017. He is eligible for APD services due to his diagnosis of intellectual disability. He has also been diagnosed as schizophrenic. Mr. Carter testified that P.P. was mostly happy while living at ECO Home. P.P. had certain behavioral quirks. He heard voices. He liked to watch wrestling and the show “Cops” on television. While watching television, P.P. would sometimes suddenly stand up and rip off his shirt, as if someone had spoken to him insultingly, and would say that he was going to “fuck up” this person. Over time, staff at ECO Home learned how to de-escalate P.P.’s behavior by taking him for walks, for drives in the car, or by giving him a CD to listen to. The staff at ECO Home was trained in Professional Crisis Management (“PCM”) restraint techniques, but never needed to employ them with P.P. while he was physically in the ECO Home. Mr. Carter testified that de-escalation was necessary about once a week, and was almost certain to be needed on the Monday or Tuesday after P.P. had visited his mother over the weekend. Count I of the Administrative Complaint alleges that Mr. Carter sprayed pepper spray in P.P.’s face as Mr. Carter attempted to de-escalate a violent situation at an ADT center on July 20, 2017. While living at ECO Home, P.P. attended ADT classes at EduMatics, an ADT center in Ocoee. Kietta Mayweather-Gamble, the owner of EduMatics, testified that on July 20, 2017, she was driving to the center when she received a phone call from a staff person. The staff person told Ms. Mayweather-Gamble that P.P. was at the center with his mother and was acting in a way that no one at the center had seen before. Ms. Mayweather-Gamble arrived at the center and encountered P.P. and his mother. P.P. was cursing and belligerent. Ms. Mayweather-Gamble told P.P. that he was not allowed to use such language at the center and told P.P.’s mother that she would have to leave and take P.P. with her. The mother signed P.P. out of the center and left with him. However, she returned 10 minutes later with P.P., who was still enraged and cursing. The mother told Ms. Mayweather- Gamble that she had an appointment and could not take her son with her in his present state. Ms. Mayweather-Gamble told the mother that he could not stay at the center. She immediately phoned Mr. Carter and asked him to come get P.P. Mr. Carter told her he was on his way. Ms. Mayweather-Gamble testified that she tried to force the mother to stay until Mr. Carter came to the center, but she left shortly before he arrived. Ms. Mayweather-Gamble attempted to calm P.P., who was cursing and saying he was not going with Mr. Carter. P.P. picked up a chair. The scene reminded Ms. Mayweather-Gamble of the movie “Gladiator.” She stayed calm and continued to speak to P.P. Ms. Mayweather-Gamble told P.P. that a Rasta does not behave in this way, appealing to his pride in his Jamaican heritage in a way that was usually successful. However, on this day, P.P. could not be talked out of his anger. When Mr. Carter arrived, P.P. was in the EduMatics office with Ms. Mayweather-Gamble and Marcia Richardson, an EduMatics staff person. Mr. Carter entered the room and asked P.P. what was wrong. P.P. said, “Motherfucker, I’m not going nowhere with you. I want to go with my mother today.” Mr. Carter tried verbally to calm P.P. and persuade him to put down the chair. He employed the Rasta compliment, to no avail. He told P.P. they would go for a drive. P.P. continued to berate Mr. Carter and complain that his mother “left me in this fucking place.” P.P. finally said, “If I go anywhere with you today, I’m going to kill you.” P.P. then threw the chair at Mr. Carter, who ducked it. P.P. threw another chair at a wall. When P.P. bent down to pick up a third chair, Mr. Carter jumped over the desk that separated them and took P.P. down using PCM technique. During the scuffle, P.P. managed to draw blood by biting Mr. Carter’s arm. Mr. Carter also cut his face on one of the desks as they went down to the floor. Mr. Carter held P.P. on the floor until he calmed down. P.P. got up and sat in a chair. Mr. Carter sat with him. At some point during the melee, Ms. Mayweather-Gamble called the Ocoee Police Department.1/ When the police arrived, Mr. Carter and P.P. were sitting in the chairs. The police asked Mr. Carter what happened, and he told them that P.P. was a client of his group home and had been acting up in the EduMatics center. He told the police that he had held P.P. down as he had been trained to do. He told the police that P.P. is diagnosed with schizophrenia and medically non-compliant. While Mr. Carter spoke to the police, P.P. began to become agitated again, saying, “Well, I’m getting out of this fucking house today. I don’t care what I have to say to get out of it.” The police officers saw that P.P. was becoming angry and asked Mr. Carter to wait outside. Mr. Carter testified that he spoke no more to the police that day. P.P. complained that his chest hurt. He was taken to the hospital by the fire department, which was also dispatched to EduMatics. Mr. Carter picked him up a little while later and took him back to ECO Home. Officer Sara Swarthout of the Ocoee Police Department completed the “Offense Report” on this incident. No charges were filed; the face of the report states that it is “for informational purposes only.” Officer Swarthout’s report states as follows, in relevant part: On 7/20/17, I responded to edumatics at 2715 Old Winter Garden Rd. in reference a mentally ill person causing a disturbance. Upon arrival there was no longer a disturbance. I met with Sherman Carter, who stated he was able to de-escalate the situation. When Carter arrived he observed a male known to him as [P.P.], throwing chairs and yelling. Carter is the group home director where [P.P.] resides. When [P.P.] saw Carter he charged towards him and threw a chair in his direction. Carter sprayed pepper spray on [P.P.’s] face and held him down to calm him down . . . . Officer Swarthout confirmed in her testimony that she believed Mr. Carter told her that he pepper sprayed P.P. Officer Swarthout did not witness the alleged pepper spraying. P.P.’s only complaint was chest pain. He said nothing to Officer Swarthout about his eyes and she made no observation of any ocular distress. Ms. Mayweather-Gamble did not see Mr. Carter pepper spray P.P. She saw Mr. Carter take P.P. to the ground and subdue him, then she ran out to direct the police to the room. Ms. Mayweather-Gamble’s testimony means that any pepper spraying had to have occurred after Mr. Carter subdued P.P., when there would have been no reasonable need to employ pepper spray. Mr. Carter adamantly and credibly denied pepper spraying P.P. He denied telling Officer Swarthout that he had pepper sprayed P.P. Mr. Carter’s reasonable suspicion was that P.P. had told Officer Swarthout that he had been pepper sprayed. After watching “Cops,” P.P. frequently told Mr. Carter that he knew just what he would tell the police when he called them to take him away from ECO Home. Susan Carrington, a behavioral assistant who was frequently at ECO Home working with R.P., the other resident of the home, was at the EduMatics center on July 20, 2017, and witnessed the incident. She saw Mr. Carter take P.P. down to the floor. She saw Mr. Carter’s bloody face and arm. Ms. Carrington testified that Mr. Carter never used pepper spray. She said that P.P. never rubbed his eyes or indicated any form of distress consistent with having been pepper sprayed. She testified that she could hear Mr. Carter speaking with Officer Swarthout and that she heard nothing about pepper spray. Ms. Carrington testified that P.P. habitually complains that “my heart is hurting me” when he becomes upset and agitated. He gets attention by complaining of chest pain and asking to go to the hospital. Ms. Mayweather-Gamble confirmed that P.P. likes to go to the hospital. Finally, a Confidential Investigative Summary written by DCF adult protective investigator Jessica Moreira reported that P.P. himself denied to Ms. Moreira that he had been pepper sprayed on July 20, 2017. APD has failed to present evidence sufficient to establish Count I of the Administrative Complaint. No one witnessed the alleged pepper spraying. Eyewitnesses saw no pepper spray and saw P.P. display no aftereffects of having been pepper sprayed. Officer Swarthout’s report is the sole evidence supporting the charge, and it appears likely that Officer Swarthout inadvertently misattributed a statement of P.P.’s to Mr. Carter. Count II of the Administrative Complaint alleges that Mr. Carter pepper sprayed P.P. on or about September 25, 2017, at the ECO Home group home. The basis for this charge is Ms. Moreira’s Confidential Investigative Summary. On or about September 26, 2017, the Florida Abuse Hotline received a report that Mr. Carter had pepper sprayed P.P. on two occasions. The first occasion was the July 2017 incident referenced in Count I of the Administrative Complaint. The second was alleged to have occurred in January 2017, when Mr. Carter “was observed spraying pepper spray in [P.P.’s] eyes.”2/ Ms. Moreira testified that she investigated both alleged pepper spraying incidents. She spoke by phone to a man named Cole who claimed to be a neighbor of Mr. Carter’s and to have been training to work at ECO Home when he witnessed Mr. Carter pepper spray P.P. Mr. Cole told her that P.P. was cursing and approaching Mr. Carter aggressively when Mr. Carter pepper sprayed him. Mr. Cole stated that they wiped P.P.’s eyes with a wet cloth. Mr. Cole, the sole purported eyewitness, could not tell Ms. Moreira the date on which the pepper spraying occurred. Ms. Moreira conceded that she was taking Mr. Cole entirely at his word. She never met him in person and had no way of knowing if he actually trained at ECO Home. Ms. Moreira interviewed P.P., who denied having been pepper sprayed by Mr. Carter. She interviewed Mr. Carter, who denied ever using pepper spray on P.P. or anyone else. She interviewed P.P.’s mother, who had no first-hand knowledge but believed that Mr. Carter pepper sprayed her son. After conducting her interviews, Ms. Moreira reviewed Officer Swarthout’s report of the July 17, 2017, incident at EduMatics. She accepted the report’s statement that Mr. Carter admitted using pepper spray. Ms. Moreira testified that she made verified findings of physical injury to P.P. Her findings were based on the eyewitness statement of Mr. Cole and Officer Swarthout’s report, which in tandem she found to constitute a preponderance of the credible evidence. She testified that she “balanced” Mr. Carter’s statement that he did not pepper spray P.P. against the mother’s statement that Mr. Carter did use pepper spray, despite the admitted fact that P.P.’s mother had no first-hand knowledge. Ms. Moreira apparently gave no weight to P.P.’s denial that he had been pepper sprayed. On cross-examination, Ms. Moreira noted that she had attempted to interview Coy Patterson, an employee of ECO Home, but had been unable to reach him. When asked if it would have been important to interview Mr. Patterson, Ms. Moreira answered, “It’d depend on what he had to say.” She testified that it would not have been important to her if Mr. Patterson disputed her conclusions, because she had the statement of Mr. Cole. Coy Patterson, who worked at ECO Home from December 2016 through February 2018, testified at the final hearing and stated that he never saw Mr. Carter use pepper spray or any method other than redirection on P.P. Mr. Patterson testified that residents of the home were never “disciplined” by staff. He dealt with P.P. frequently and never had a problem with him. P.P. would be agitated when he came back from a visit with his mother, but was not aggressive and was readily redirected. Most significantly, Mr. Patterson denied knowing anyone named Cole and denied that anyone had been trained at ECO Home during his two years working there. Ms. Carrington, the behavioral assistant, worked 10-hour weekend shifts at ECO Home for over a year and never saw pepper spray being used. She never saw anyone in the home being disciplined by staff. Mr. Carter testified that he never pepper sprayed P.P. in the home or anywhere else. He had no clue who Mr. Cole was, though he later discovered that someone named Cole lived across the street from P.P.’s mother. Mr. Carter believed that P.P.’s mother called the Florida Abuse Hotline on the day after he told her that she could not address his employees as “these bitches.” APD has failed to present evidence sufficient to establish Count II of the Administrative Complaint. There is an absolute failure to prove that the alleged pepper spraying occurred “on or about September 25, 2017.” The Florida Abuse Hotline report that initiated the investigation of this charge alleged the pepper spraying occurred in January 2017. The sole witness to the alleged pepper spraying was someone named “Mr. Cole,” who could not provide the investigator a date on which the pepper spraying occurred. The DCF investigator did not meet Mr. Cole in person. Mr. Cole did not testify at the final hearing. Mr. Carter and Mr. Patterson denied knowing Mr. Cole and denied that anyone had been in training at ECO Home. Ms. Moreira downplayed Mr. Carter’s denial and testified that Mr. Patterson’s statement would have made no difference in light of the statement she obtained from the phantom Mr. Cole. The only other evidence offered by APD was Officer Swarthout’s report regarding the events of July 20, 2017, which is obviously insufficient to establish the charge that Mr. Carter pepper sprayed P.P. “on or about September 25, 2017.”
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Persons with Disabilities issue a final order dismissing the Administrative Complaint in this case. DONE AND ENTERED this 19th day of October, 2018, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of October, 2018.
Findings Of Fact Petitioner is a special taxing district providing fire protection and rescue services to the residents of the Estero area of Lee County. The fire station is located at 20241 Tamiami Trail, Estero, Florida. Petitioner employs 14 employees, including administrative staff and firefighters. The firefighters work 24 hours straight and then are off-duty for 48 hours. Two to four employees work each shift. Firefighting requires a fast response. Thus, Petitioner requires that on-duty firefighters remain at the station for their entire 24-hour shift, unless they are out fighting fires or performing rescue duties. The fire station contains an 8' x 13' bedroom with six mattresses located on three bunk beds. On-duty firefighters are allowed to bring pillows and sheets so they can sleep at the station while on duty. There are no dressers in the room, which contains small lockers that the firefighters may use to store a change of clothes. Petitioner provides kitchen facilities at the fire station and well water. The well water is used for washing equipment, taking showers, and flushing the toilet. The well water is not used for any other purposes, nor is it used by any other persons. Petitioner provides bottled water for drinking and cooking. All of the firefighters have residences apart from the fire station and within a reasonable commuting distance from the fire station. No firefighter has ever lived at the station. Petitioner does not charge, or reduce the pay of, the firefighters for their use of the limited sleeping facilities. Petitioner lawfully does not treat the use of the limited sleeping facilities by firefighters as gross income for the purposes of withholding federal income tax or making social security contributions. By letter dated July 18, 1995, Respondent informed Petitioner that the fire station's water system is a limited use community water system because the sleeping facilities constituted rental residences, as defined by Rule 10D- 4.024(21), Florida Administrative Code. Respondent advised Petitioner that it was therefore required to obtain a permit. As noted in the following section, the statute authorizes Respondent to regulate as limited use community public water systems those systems serving a certain number of "rental residences." The statute does not define "rental residence." In Rule 10D-4.024(21), Respondent defines a "rental residence" as follows: a dwelling unit, a structure or part of a structure that is rented for use, or furnished with or without rent as an incident of employ- ment, for use as a home, residence, sleeping place by one or more persons, a mobile home rented by a tenant. This term does not apply to facilities offering transient residency such as public lodging establishments. This term includes other facilities where residency or detention is incidental to the provision of medical, geriatric, educational, counseling, religious, or similar services. Respondent equated a "rental residence" with a "dwelling unit" when it based its definition of "rental residence" on the statutory definition of "dwelling unit" in Chapter 83, Part II, Florida Statutes, which is the Florida Residential Landlord and Tenant Act. A "dwelling unit" is a "residence." The American Heritage dictionary defines a "dwelling" as "a place to live in; residence; abode." Similarly, the same dictionary's first definition of "residence" is "the place in which one lives; a dwelling; an abode." But the statutory definition qualifies "residential" with "rental." The word "rental" requires consideration of the nature of the relationship of the occupant to the dwelling and its owner. Obviously, the Florida Residential Landlord and Tenant Act addresses rental transactions, but it does not do so in the definition of "dwelling unit." Other provisions of the Act describe the kind of activity that must take place for a person to be considered a tenant renting a dwelling unit. Most importantly, Section 83.43(6) defines "rent" as "periodic payments due the landlord from the tenant for occupancy under a rental agreement " The facts of this case present a revealing illustration of the distinction between a "residence" or "dwelling unit," on the one hand, and a "rental residence," on the other hand. There is no rental relationship between the occupants of the sleeping quarters at the fire station and the residence or dwelling itself. The firefighters do not pay, directly or indirectly, for these beds or the rooms in which the beds are located. Their employer legitimately does not include the value of the use of these sleeping quarters in the compensation paid to the firefighters. The firefighters have residences within commuting distance of the fire station and use the meager sleeping quarters and kitchen facilities only because they are required to spend long hours continuously at the fire station.
The Issue The issue is whether Petitioner has shown by a preponderance of the evidence that an indicated rate increase of percent, or, in the alternative, a requested rate increase of 47.1 percent, is not excessive, inadequate, or unfairly discriminatory within the meaning of Subsections 627.062(2)(b), paragraphs 1, 2, 5, 8, 10 through 12, and 14; 627.062(2)(e), paragraphs 1, 3, 6, and 10; 627.062(2)(j); 627.0628; 627.0629; and 627.06291, Florida Statutes (2008).1
Findings Of Fact The petitioner is State Farm Florida Insurance Company (State Farm Florida). Respondent is the state agency responsible for regulating insurance rates in the state. State Farm Florida is a wholly-owned subsidiary of State Farm Mutual Automobile Company (State Farm Mutual). State Farm Mutual is the parent company of four wholly-owned subsidiaries. The four siblings are State Farm Florida; State Farm Fire and Casualty (Fire & Casualty); State Farm Lloyds, Inc. (Lloyds); and State Farm General Insurance Company (General). The parent and siblings are an affiliated group, for purposes of federal and state income taxes, and file a consolidated tax return. State Farm Mutual writes property and casualty insurance, including homeowners insurance, through Fire & Casualty in 47 states. In Florida, Texas, and California, State Farm Mutual conducts the business of insurance through State Farm Florida, Lloyds, and General, respectively. State Farm Florida filed a request for a rate increase of 47.1 percent (the requested rate). The request is a “rate filing” defined in Subsection 627.0621(1)(a). The rate filing is intended to be effective for new business on December 1, 2008, and for renewals on March 1, 2009. The rate filing indicates that a rate increase of 67.6 percent is the actual rate indicated by the documentation in the rate filing (the indicated rate). However, State Farm Florida reduced the indicated rate during the administrative hearing to 67.0 percent to reflect approximately 7,000 policies that State Farm Florida renewed without wind coverage, so-called “ex-winded” policies. State Farm Florida reduced the indicated rate from 67.0 percent to the requested rate of 47.1 percent in an effort to obtain quick approval of the rate filing because State Farm Florida is allegedly, “Losing money every day.” The Notice of Intent states the grounds for denying the rate filing in 23 numbered paragraphs. Respondent dismissed the grounds stated in paragraph number 14. The Findings of Fact refer to the original numbers in the Notice of Intent but address only paragraphs numbered 1 through 13 and 15 through 23. This Recommended Order makes no further reference to the grounds stated in paragraph number 14 of the Notice of Intent. The Notice of Intent and the grounds stated therein constitute proposed agency action. This Recommended Order constitutes recommended agency action. Neither form of agency action may go beyond the powers, functions, and duties delegated by the Legislature in Chapter 627 without constituting an invalid exercise of delegated legislative authority defined in Subsection 120.52(8).2 To that end, the ALJ required the witness for Respondent to identify the statutory authority that Respondent relies on for each numbered ground in the Notice of Intent. The ALJ also required each witness for Petitioner to specify the paragraph number of the ground in the Notice of Intent which his or her testimony addressed. The Notice of Intent relies on Sections 627.062, 627.0628, 627.0629, and 627.06291 as statutory authority for the numbered grounds in the Notice of Intent. Each ground and the corresponding statutory authority is listed as follows: Ground Statutory Authority 1 §§ 627.062(2)(b)8., 627.0628, 627.0629, and 627.06291; 2 § 627.062(2)(b)8.; 3 § 627.062(2)(b)11. and 12.; 4-5 § 627.062(2)(b)11.; 6-8 § 627.062(2)(b)12.; 9-11 § 627.062(2)(b)2.; 12 § 627.062(2)(b)11.; 13 § 627.062(2)(b)2.; 15-16 § 627.062(2)(b)2.; 17 § 627.062(2)(b)10. and 11.; 18 § 627.062(2)(e)1.-3. and 10.; 19 § 627.062(2)(b)8.; 20 § 627.062(2)(b)5.; 21 § 627.062(2)(b)8. and 11.; 22 § 627.062(2)(b) and (2)(e)6.; and 23 § 627.062(2)(j). Respondent has not determined that the rate filing is excessive, inadequate, or unfairly discriminatory within the meaning of Subsection 627.062(1). Rather, Respondent proposes final agency action determining that the information provided by State Farm Florida is insufficient for Respondent to independently determine whether either the indicated or requested rate in the rate filing is excessive, inadequate, or unfairly discriminatory. Respondent asserts that the fact-finder’s determination of the sufficiency of the evidence submitted by State Farm Florida is limited to the information that State Farm Florida submitted with the initial filing. Respondent claims that the fact-finder may not rely on any information submitted by State Farm Florida during the final hearing if that information was not submitted with the initial filing. Respondent relies on the statutory requirement in Subsection 627.062(9)(a) for an insurer to certify, in relevant part, that the initial rate filing does not omit any material fact and fairly presents in all material respects the basis for the rate filing. The ALJ rejects the agency’s conclusion that the certification requirement in Subsection 627.062(9)(a) limits the evidence in the final hearing to the information that State Farm Florida submitted with the initial rate filing. Neither the Legislature nor Respondent has promulgated any explicit standards that prescribe the information that must be included in a rate filing. Other reasons for rejecting the agency’s proposed interpretation of Subsection 627.062(9)(a) are discussed in the Conclusions of Law. The fact-finder has weighed all of the evidence admitted during the final hearing, including information submitted after the initial filing (post-filing evidence). The Findings of Fact are based on evidence of circumstances as they existed through the conclusion of the final hearing. A brief discussion of the history preceding the current rate filing provides context for this proceeding. State Farm Mutual incorporated State Farm Florida in 1998 with an initial capitalization of $607,500,000.00. The hurricanes of 2004 wiped out the surplus of State Farm Florida. In 2004, State Farm Mutual recapitalized State Farm Florida with a loan of $750,000,000.00 so that State Farm Florida could continue doing business in Florida. State Farm Florida obtained an approval from Respondent for a prior rate filing of 52.7 percent. The rate increase became effective November 1, 2006. In November and December 2006, premiums on renewals increased significantly. Beginning sometime in the middle of 2007, average premium began to decline. The direct written premium for State Farm Florida that had been $1,889.00 in November and December 2006 declined to $1,350.00. In the first quarter of 2008 and the third quarter of 2008, direct written premium rose slightly to $1,399.00. The decline in premium revenues is the moving force behind the current rate filing. The Legislature has found in Subsection 627.062(2)(e)3. that rates are inadequate if they are insufficient, together with investment income attributable to them, to sustain projected losses and expenses in the class of business to which the rates apply. The reasons for the reduction in premium revenue are undisputed. State Farm Florida has non-renewed some policies; excluded wind from the covered risk of other policies, a process described by the parties as ex-winding; provided discounts to policyholders who improved covered property with wind-mitigation features identified in Subsection 627.0629(1), identified by the parties as wind-mitigation discounts; and allegedly incurred an increase in costs, not the least of which is the cost of reinsurance for excess losses. State Farm Florida asserts that the decline in premium revenue caused by non-renewals, ex-winding, wind-mitigation discounts, and increased costs such as the cost of reinsurance justifies a rate increase equal to the indicated rate of 67.0 percent or the requested rate of 47.1 percent. The Legislature requires, in Subsection 627.062(2)(g), Petitioner to show by a preponderance of the evidence that either the indicated or requested rate is not excessive, inadequate, or unfairly discriminatory. The fact-finder is unable to determine from a preponderance of the evidence that the indicated and requested rates are not excessive, inadequate, or unfairly discriminatory. This is not a finding that the indicated and requested rates are excessive, inadequate, or unfairly discriminatory. Rather, the evidence of circumstances as they existed through the final hearing is either variable or ambiguous, and therefore neither credible nor persuasive to the fact-finder; or the evidence is insufficient for the fact-finder to make the findings statutorily required to approve either the indicated or requested rate. A preponderance of the evidence does show that State Farm Florida determined the factors used in the rate filing in a manner that is consistent with standard actuarial techniques or practices and that those factors are based on reasonable actuarial judgment within the meaning of Subsection 627.0612(2)(a). However, a finding of actuarial reasonableness does not end the inquiry. The principal purpose of statutory review is to facilitate an independent determination of whether indicated or requested rates which are formulated in accordance with standard actuarial techniques are nevertheless excessive, inadequate, or unfairly discriminatory. Several evidential issues of credibility or insufficiency prevent the fact-finder from determining from a preponderance of the evidence that the indicated and requested rates are not excessive, inadequate, or unfairly discriminatory. The relevant evidential issues are discussed in paragraphs 23 through 65. Non-renewal of policies by State Farm Florida is one reason for a decline in premium revenue. State Farm Florida is voluntarily limiting new property insurance business in the state to in-state transfers of business to inland locations (transfer business). The fact-finder is unable to determine from a preponderance of the evidence whether the portion of the indicated or requested rate which is attributable to transfer business is excessive or reasonable. State Farm Florida has not quantified the number of policyholders that the transfer business entails. For one year, beginning in March 2008, State Farm Florida will decline to renew (non-renew) policyholders. State Farm Florida will also ex-wind renewed policies. The fact-finder is unable to determine from a preponderance of the evidence whether the portions of the indicated or requested rates which are attributable to non- renewal and ex-winding is excessive or reasonable. Evidence of the number of non-renewed and ex-winded policies is ambiguous. After Petitioner submitted the rate filing, the number of non- renewed and ex-winded policies increased from 50,000 to 85,000 through the administrative hearing. Such variability in the evidence is neither credible nor persuasive to the fact-finder. The number of non-renewals and ex-winded policies is important because much of the requested rate increase is based upon forecasts of lower direct written premium. Fewer policyholders and less coverage will naturally generate lower premium. Another “significant contributing factor to the indicated rate need” is the number of policyholders receiving wind-mitigation discounts. Petitioner asserts that wind- mitigation discounts are greater than loss outputs. The fact-finder is unable to determine from a preponderance of the evidence the amount of wind-mitigation discounts. The cross-examination of rebuttal testimony offered by State Farm Florida illustrates the evidential ambiguity. Q. Where in the filing or supplemental materials can I find that the discounts are greater than the loss output? A. Exhibit 5 develops the savings associated with the wind-mitigation discounts. They are part of our projected hurricane losses, and the premium savings are part of our projected premiums that were outlined in Exhibit 2. Q. Can I find them stated separately, or you are saying they are part of this exhibit and part of the other exhibit you mentioned? A. State separately? Q. That the discounts are greater than the losses. Can you show me a place where the discounts are greater? A. There is not a specific statement that says that. It does not say that premium – our premium decline is due to – it discusses several things with regard to wind mitigation discounts. . . . It is implied in the statement that premium is declining due to application of the mitigation discounts. If the reduction in losses were equivalent to the decline in premium, there wouldn’t be a need to increase the premiums to reflect the fact that the savings do not match those discounts. Transcript (TR) at 828-829. As with non-renewals, evidence of the number of policyholders receiving wind-mitigation discounts and the dollar amount of the discounts is variable and less than credible and persuasive to the fact-finder.3 Although State Farm Florida identified wind-mitigation discounts as the “primary cause of reduction in premium per policy,” the evidence does not credibly quantify the discounts. The fact-finder is unable to determine from a preponderance of the evidence whether the rate filing is based on a calculation of wind-mitigation for premiums that is different than the calculation of wind-mitigation discounts for losses. Wind-mitigation discounts must be equal for premiums and losses to avoid being unfairly discriminatory. State Farm Florida gives a discount of 65.0 percent for the hurricane portion of the premium but realizes only a 28.0 percent savings. State Farm Florida may be recovering what it claims to be losing on the wind-mitigation discounts by charging all policyholders equally even though a significantly larger portion of those policyholders do not qualify for the wind-mitigation discounts. To raise rates for all policyholders may negate the savings the discounts were intended to create. By Consent Order dated September 9, 2008, State Farm Florida conceded that it had failed to implement necessary procedures to comply with statutory and administrative rule requirements. State Farm Florida implemented refunds and credits to 98,000 current and former policyholders in the amount of $120 million and paid an additional $1.02 million to the Regulatory Trust Fund. The fact-finder cannot determine from a preponderance of the evidence whether the cost of reinsurance is reasonable or excessive within the meaning of Subsection 627.0612(2)(c). State Farm Florida purchased reinsurance coverage for a probable maximum loss (PML) equal to the difference between $9.25 billion and a retained risk by State Farm Florida of $175 million. Non-renewals, ex-winded policies, and loss savings from wind-mitigation improvements to covered property decreased the PML to $7.1 billion. However, State Farm Florida increased the amount of catastrophe reinsurance that it purchased to cover PML from $7.4 billion in the previous rate filing to $9.25 billion in the current rate filing. State Farm Florida is paying a significant portion of the PML premium to its parent, State Farm Mutual. State Farm Florida retained approximately $175 million of the $9.25 billion in PML. State Farm Florida purchased reinsurance coverage for the remainder of the PML from State Farm Mutual, other private re-insurers, the Florida Hurricane Catastrophe Fund (the Cat Fund), and the temporary increase in coverage limit (TICL).4 State Farm Florida also paid State Farm Mutual $12.8 million for a credit risk provision. The credit risk provision will pay losses that the Cat Fund is contracted to pay but may be unable to pay. The Cat Fund announced in October 2008 that it anticipated a bonding shortfall of $14.5 billion in the event the Cat Fund were called upon to pay all of its reinsurance obligations. State Farm Florida would receive only one-half of the reinsurance coverage it purchased from the Cat Fund in the event of a $14.5 billion bonding shortfall. State Farm Florida paid $842 million for reinsurance coverage. State Farm Florida paid $142 million for reinsurance coverage from the Cat Fund and TICL layer provided by the state and paid approximately $700 million for reinsurance coverage by private re-insurers, including State Farm Mutual.5 Of the total $700 million paid to private re-insurers, State Farm Florida paid approximately $151 million to private re-insurers other than State Farm Mutual. State Farm Florida paid $549 million to its parent company, State Farm Mutual. It is undisputed that the $151 million State Farm Florida paid to private re-insurers other than State Farm Mutual is reasonable. Payments to unrelated private re-insurers represent arms-length transactions between a willing buyer and willing seller of reinsurance coverage. However, the fact- finder is unable to determine from a preponderance of the evidence whether either the cost of reinsurance purchased from State Farm Mutual or the cost of the credit risk provision purchased from State Farm Mutual is excessive or reasonable within the meaning of Subsection 627.0612(2)(c). The economic reality is that State Farm Florida is merely the legal form in which State Farm Mutual chooses to do business in Florida. State Farm Mutual and its wholly-owned subsidiaries, including State Farm Florida, comprise a "group or combination" that the Legislature defines as a "person" in Subsection 1.01(3) or a joint underwriting association defined as a person in Section 624.04 (See 1976 Fla. Atty. Gen, Lexis 130). Transactions between State Farm Mutual and State Farm Florida for reinsurance and credit risk provisions totaling approximately $561.8 million, when viewed in the light of economic reality, Subsection 1.01(3), or Section 624.04, may be transactions which State Farm Mutual engages in with itself and which lack any independent economic significance.6 Transactions with no independent economic significance would be sham transactions which may distort the economic costs of the reinsurance and credit risk provisions purchased from State Farm Mutual. Such economic distortions may enable the group to derive a rate advantage from the legal form in which State Farm Mutual chooses to do business in Florida.7 The reinsurance and credit risk provision which State Farm Florida purchased from State Farm Mutual for approximately $561.8 million may be the economic equivalent of a retained risk amount by State Farm Mutual or the group. The fact-finder cannot determine from a preponderance of the evidence whether the economic cost attributable to a retained risk by State Farm Mutual or the group is more or less than the amount State Farm Mutual charged State Farm Florida for the reinsurance and credit risk coverages. Even if State Farm Florida and State Farm Mutual were distinct persons, State Farm Florida exists for the convenience of State Farm Mutual. State Farm Mutual conducted business in Florida, either directly or through some other member of the group, before State Farm Florida emerged from State Farm Mutual in 1998 with an initial capitalization of $607,500,000.00. State Farm Mutual re-capitalized State Farm Florida with $750,000,000.00 in loans after the 2004 hurricane season. State Farm Mutual owns all of the stock of State Farm Florida. There is no economic, or legal, impediment to State Farm Mutual liquidating State Farm Florida at the convenience of State Farm Mutual and doing business in Florida as it did before it created State Farm Florida in 1998. State Farm Mutual has sustained an annual loss from the reinsurance sold to State Farm Florida from 1998 through 2007. State Farm Mutual can easily end the losses, as well as the costs to State Farm Florida, by liquidating State Farm Florida and doing business in Florida directly. Issues of variability, ambiguity, and credibility pertaining to the reasonableness of the cost of reinsurance is illustrated in testimony during cross-examination of one of the witnesses for State Farm Florida. Q. Am I assuming correctly, then, that, I mean, it’s described on the page. But is there something in this page that indicates to you that it’s a reasonable coverage limit, other than it’s there? A. It would be other than that it’s there, and State Farm [Florida] has chosen that level as a limit that they deem to be reasonable. Q. Okay. So your opinion that it’s a reasonable coverage limit is informed by State Farm [Florida] believing it’s a reasonable coverage limit? A. I suppose that’s the way to say it, yes. Q. You don’t have any independent reason to think it’s either reasonable or unreasonable, other than State Farm [Florida] has it on the page that describes it such as it is? A. I would say that’s correct. TR at 555-556. Another issue of variability, ambiguity, and credibility emerges from the hurricane models used by State Farm Mutual to project PML. State Farm Florida used hurricane models identified in the record as WORLDCAT™, RISKLINK™ and CLASIC™/2 to project both hurricane losses and PML.8 Each model is approved by the Florida Commission on Hurricane Loss Projection Methodology (the Commission) pursuant to Section 627.0628. However, State Farm Florida projected hurricane losses using storm sets identified in the record as “cold water” or “long term” storm sets and projected PML using storm sets identified in the record as “warm water” or “short term” storm sets. It is undisputed that the use of warm water storm sets increases the estimated storm frequency and risk. For example, State Farm Florida justified the requested rate of 47.1 percent, in relevant part, by using cold water storm sets to reduce stated PML by approximately $1.65 billion. State Farm Florida utilized three hypothetical adjustments to reduce the indicated rate of 67.0 percent to the requested rate of 47.1 percent. First, State Farm Florida calculated the impact on the cost of private reinsurance, including that provided by State Farm Mutual, based on the non- renewal and ex-winding activity. That adjustment reduced PML from $9.25 billion to $7.8 billion. Wind-mitigation discounts reduced PML another $700 million to $7.1 billion. The use of cold water, or long term, storm sets to project PML reduced PML another $1.65 billion to $5.45 billion. State Farm Florida is actually purchasing $9.25 billion in re-insurance coverage, less the retained risk by State Farm Florida in the amount of $175 million. If the actual cost of private reinsurance were to justify an indicated rate of 67.0 percent, a requested rate of 47.1 percent would appear to be inadequate, and State Farm Florida would soon return with an additional rate filing. State Farm Florida argues that the use of warm water, or short term, storm sets to determine the actual PML of $9.25 billion is appropriate. The evidence is clear that the global reinsurance market demands and uses warm water models to evaluate risk and to price reinsurance. Warm water storm sets may be the gold standard for re-insurers, but it is also axiomatic that use of the gold standard increases the price of re-insurance and the resulting profit to re-insurers. A preponderance of the evidence does not enable the fact-finder to independently determine that the use of warm water storm sets to project PML is not excessive, inadequate, or unfairly discriminatory. The issue of whether Florida is in a warm water cycle or cold water cycle is not resolved by a preponderance of the evidence. Moreover, State Farm Florida did not provide Respondent with the near term frequency storm set used by State Farm Florida to project PML. Respondent could not independently evaluate the storm sets utilized by State Farm Florida. State Farm Florida argues, in relevant part, that the use of warm water models to estimate PML is justified because the Commission has previously evaluated hurricane models for the sole purpose of estimating hurricane losses, has never evaluated hurricane models for the purpose estimating PML, and legislative authority in Subsection 627.0628(3)(b) for the Commission to evaluate hurricane models used to project PML was not enacted until July 1, 2008. Respondent has a different statutory interpretation. Respondent interprets its legislative authority to mean that the absence of the Commission’s approval of a warm water model to project hurricane losses requires State Farm Florida to use cold water, or long term, storm sets to project PML. Any doubt as to an agency’s statutory authority to act in a manner that accepts warm water storm sets to project PML should be resolved in favor of refusing to exercise the questionable authority. Moreover, the use of storm sets in hurricane models is a matter within the substantive expertise of Respondent. A statutory interpretation involving a matter within an agency’s substantive expertise is entitled to great deference when, as in this proceeding, the agency explicates in the record reasons for such deference. State Farm Florida includes an overall rate of return of 12.2 percent in the rate filing. The fact-finder is unable to determine from a preponderance of the evidence whether the factor used by State Farm Florida for underwriting profit and contingency is reasonable or excessive within the meaning of Subsection 627.0612(2)(b). The Legislature gave the fact-finder authority in Subsection 627.0612(2)(b) to determine whether a factor for underwriting profit and contingencies (a profit factor) is reasonable or excessive. However, the evidence from State Farm Florida is expressed in terms of a rate of return rather than a statutorily authorized profit factor. The rate filing includes a profit of 5.0 percent, a contingency of 2.0 percent, and a retained risk factor of 9.0 percent for a total profit factor of 16.0 percent, but the rate filing uses a rate of return of 12.2 percent. Testimony elicited by counsel for State Farm Florida during the cross-examination of Respondent’s witness illustrates the variability between a 16.0 percent profit factor and 12.2 percent rate of return. Q. Whether it is called retained risk or it is included in profit and contingency, you get the same rate of return, isn’t that correct? A. The rate of return – rate of return or rate indication – Q. Rate of return. A. Rate of return, I would say yes to that. Q. And the placement in the filing has no effect whether the rates are excessive, isn’t that correct? A. That’s correct. Q. The issue of excessiveness is determined by the overall rate of return, not the particular derivation of the 9 percent retained risk, isn’t that right? A. That’s one of the items. Q. Is that a yes? A. Yes. TR at 793-794. The profit factor contemplated by the Legislature and the rate of return utilized by State Farm Florida are distinct investment concepts. Paragraph 72 of the PRO filed by State Farm Florida states that when the income on investments is taken into account the rate of return is 12.2 percent, effectively amending the statutory reference to a profit factor in Subsection 627.0612(2)(b), which is 16.0 percent in this case.9 The Legislature has found in Subsection 627.062(2)(e)2. that rates are excessive if, among other things: [T]he rate structure established by a stock insurance company provides for replenishment of surpluses from premiums, when the replenishment is attributable to investment losses. The retained risk of 9.0 percent by State Farm Florida is a “retained hurricane risk.” State Farm Florida claims the retained risk is a necessary cost of writing homeowners insurance in Florida. However, State Farm Florida applies the 9.0 percent factor to the entire premium, not just the portion of the premium attributable to a retained hurricane risk. Moreover, legislation identified in the record as Senate Bill 2860 (SB 2860) removed from former Subsection 627.062(2)(b)11., now 627.062(2)(b)12., expresses authority for a “retained risk” provision. The fact-finder is unable to determine from a preponderance of the evidence whether State Farm Florida passed along to policyholders premium savings attributable to an expansion of the Cat Fund from $16 billion to $28 billion. The Legislature intends in HB 1A that all premium savings resulting from the expansion of the Cat Fund are to be passed along to policyholders. State Farm Florida assumed a zero net-cost of reinsurance purchased from the state. The net-cost of reinsurance, including previously discussed private re- insurance, takes into account the premium paid, the amount of coverage, and the expected recoveries. State Farm Florida paid approximately $700 million for reinsurance from State Farm Mutual and private re-insurers and determined that expected recoveries would amount to slightly more than $106 million. The cost of coverage provided by the Cat Fund and the expected recoveries from the Cat Fund were not included in the determination of the net-cost of reinsurance. The fact-finder is unable to determine from a preponderance of the evidence whether the failure to include the cost of coverage minus the expected recoveries from the Cat Fund led to a cost of that reinsurance which is greater than the services rendered in violation of Section 627.062. Because the Cat Fund makes no profit, has minimal expenses, and has a very large investment income credit due to its tax exempt status, recoveries may, in certain circumstances, be significantly higher than the premiums paid to the Cat Fund. The fact-finder is unable to determine from a preponderance of the evidence whether expenses attributable to agent commissions are reasonable or excessive. State Farm Florida assumes a 13.0 percent commission based on historical commission ratios. However, historical ratios may not accurately predict future costs because State Farm Florida is reducing business through non-renewals and reducing coverage through ex-winding and wind-mitigation discounts. Agent services are rendered either to obtain new business or to service existing policyholders. The voluntary limitation of new business to transfer business may reasonably be expected to reduce agent services attributable to new business. The fact-finder is unable to determine from a preponderance of the evidence whether costs attributable to advertising and marketing are reasonable or excessive. State Farm Mutual advertises for “branding purposes” and allocates a portion of those costs to State Farm Florida. The benefit of advertising for “branding purposes” is the retention of business and the acquisition of new business. However, State Farm Florida is limiting new business to transfer business, and it is unclear what portion, if any, of the cost of branding incurred by State Farm Mutual is misallocated to new business that State Farm Florida is not creating. State Farm Florida made adjustments to hurricane models including the averaging of three models. A preponderance of evidence shows that averaging, by itself, did not materially affect the rate filing because averaging reduced variability between the models. The rate filing includes a factor identified in the record as a sinkhole presumed factor. State Farm Florida corrected a deficiency in the original filing by providing in Petitioner’s Exhibit 11 the calculation required by Respondent. The rate filing included a 10.0 percent loss adjustment factor for hurricane losses. The information included in the initial filing did not support the 10.0 percent factor, but the factor is supported by a preponderance of the post-filing evidence. Respondent’s PRO discusses several alleged violations of Florida Administrative Code Rules 69O-170.0135, 69O-170.014, and 69O-170.003. However, the ALJ concludes that Respondent has the burden of proving the affirmative allegation that State Farm Florida violated an administrative rule.10 Respondent’s insistence on confining the evidence to that submitted with the initial filing makes it unclear whether Respondent disputes the issue of whether the post-filing evidence cures any violations in the initial filing. The fact-finder cannot determine from a preponderance of the evidence as a whole whether Petitioner violated any administrative rule.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order determining that State Farm Florida did not show by a preponderance of the evidence that either the indicated rate or requested rate in the rate filing is not excessive, inadequate, or unfairly discriminatory. DONE AND ENTERED this 12th day of December, 2008, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 12th day of December, 2008.
