The Issue The issue is whether the Florida Land and Water Adjudicatory Commission should promulgate a rule establishing the Poinciana Community Development District.
Conclusions An Administrative Law Judge of the Division of Administrative Hearings has entered an Order Closing File and relinquishing jurisdiction in this proceeding. A copy of the Order is attached to this Final Order as Exhibit A.
Other Judicial Opinions REVIEW OF THIS FINAL ORDER PURSUANT TO SECTION 120.68, FLORIDA STATUTES, AND FLORIDA RULES OF APPELLATE PROCEDURE 9.030(b)(1)(C) AND 9.110. TO INITIATE AN APPEAL OF THIS ORDER, A NOTICE OF APPEAL MUST BE FILED WITH THE DEPARTMENT’S AGENCY CLERK, 2555 SHUMARD OAK. BOULEVARD, TALLAHASSEE, FLORIDA 32399-2100, WITHIN 30 DAYS OF THE DAY THIS ORDER IS FILED WITH THE AGENCY CLERK. THE NOTICE OF APPEAL MUST BE SUBSTANTIALLY IN THE FORM PRESCRIBED BY FLORIDA RULE OF APPELLATE PROCEDURE 9.900(a). A COPY OF THE NOTICE OF APPEAL MUST BE FILED WITH THE APPROPRIATE DISTRICT COURT OF APPEAL AND MUST BE ACCOMPANIED BY THE FILING FEE SPECIFIED IN SECTION 35.22(3), FLORIDA STATUTES. YOU WAIVE YOUR RIGHT TO JUDICIAL REVIEW IF THE NOTICE OF APPEAL IS NOT TIMELY FILED WITH THE AGENCY CLERK AND THE APPROPRIATE DISTRICT COURT OF APPEAL. MEDIATION UNDER SECTION 120.573, FLA. STAT., IS NOT AVAILABLE WITH RESPECT TO THE ISSUES RESOLVED BY THIS ORDER. Final Order No. DCA11-GM-008 CERTIFICATE OF FILING AND SERVICE I HEREBY CERTIFY that the original of the foregoing has been filed with the undersigned Agency Clerk of the Department of Community Affairs, and that true and correct copies have been furnished to the persons listed below jn the manner described, on this — day of January, 2011. yy A fas 4 Paula Ford, Agency Clerk DEPARTMENT OF COMMUNITY AFFAIRS 2555 Shumard Oak Boulevard Tallahassee, Florida 32399-2100 By U.S. Mail and electronic mail: Thomas A. Cloud, Esq. Clayton Bricklemeyer, Esq. City Attorney, Polk City David Smolker, Esq. GRAY ROBINSON, P.A. Bricklemeyer & Smolker, P.A. Post Office Box 3068 500 East Kennedy Boulevard, Suite 200 Orlando, Florida 32802-3068 Tampa, Florida 33602-4708 tcloud@gray-robinson.com claytonb@bsbfirm.com davids@bsbfirm.com Jack P. Brandon, Esq. Michael T. Gallaher, Esq. Peterson & Myers, P.A. Post Office Box 1079 Lake Wales, FL 33859-1079 jbrandon@petersonmyers.com mgallaher@petersonmyers.com STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS DEPARTMENT OF COMMUNITY AFFAIRS, Petitioner, Case Nos. 10-0045GM 10-2797DRI vs. CITY OF POLK CITY, Respondent, and POLK CITY ASSOCIATES, LLC, AND COLE'S PROPERTY, LLC, Intervenors. ORDER CLOSING FILES This cause having come before the undersigned on the Notice of Voluntary Dismissal, filed January 10, 2011, and the undersigned being fully advised, it is, therefore, ORDERED that the files of the Division of Administrative Hearings in the above-captioned matter are hereby closed. DONE AND ORDERED this llth day of January, 2011, in Tallahassee, Leon County, Florida. Blac aad J. LAWRENCE JOHNSTON 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 EXHIBIT Filed with the Clerk of the Division of Administrative Hearings this llth day of January, 2011. COPIES FURNISHED: David L. Jordan, Esquire Department of Community Affairs 2555 Shumard Oak Boulevard Tallahassee, Florida 32399 Jeffery Sullivan, Esquire Stidham & Stidham, P.A. 150 East Davidson Street Bartow, Florida 33831 Jack P. Brandon, Esquire Peterson & Myers Post Office Box 1079 Lake Wales, Florida 33859-1079 K. Clayton Bricklemyer, Esquire Bricklemyer, Smolker & Bolves, P.A. 500 East Kennedy Boulevard, Suite 200 Tampa, Florida 33602 Thomas A. Cloud, Esquire Gray Robinson, P.A. 301 East Pine Street, Suite 1400 Post Office Box 3068 Orlando, Florida 32802-3068
The Issue The question in this case is whether GDC should be authorized to go forward with development of some 2,000 acres, a portion of the Myakka Estates project it has planned for North Port in south Sarasota County, and, if so, on what terms. In the prehearing order dated February 8, 1980, the legal issue was stated broadly as "whether the proposed development [Phase I] comports with the standards of Chapter 380, Florida Statues (1979), as set forth in Section 380.06(8) and (11), Florida Statutes (1979) [now 380.06(11) and (13), Florida Statues (Supp. 1980)]." An important question is what legal effect the Master Development Order should be given in the present case. In the same prehearing order, factual issues were stated to include whether the "location . . . [and] approval of the proposed land sales development is consistent with the report and recommendation of the SWFRPC in light of the State, County, and North Port comprehensive plans"; whether "the proposed development will, individually and in combination with approved development, overburden the public school system . . . . overburden the public roads . . . [or] create a negative economic impact upon county and municipal governments"; and whether "GDC has provided for sufficient potable water."
Findings Of Fact GDC proposes to develop 8,135 acres in North Port in Sarasota County, just north of the Charlotte County line, as a new community, to be called Myakka Estates. Phase I, the group of three units slated for development next after the "vested portion" of the project, is designed to occupy a 2,016.56-acre tract within the larger parcel, west of and well upland from the Myakka River, and approximately four miles inland from the Gulf of Mexico. PRESENT CONDITION OF LAND The highest elevation on Phase I is 13 feet above mean sea level. About three quarters of Phase I is covered with slash pine, southern pine, and saw palmetto. Pasture lands, about seven percent of the Phase I tract, are covered with grasses, sedges, other herbaceous plants, and only occasional trees. Freshwater marsh ponds and other marshy areas are distributed more or less evenly over the property in a karstic gestalt, except that an uninterrupted stretch of marsh along the western boundary marks the eastern edge of the northern reaches of Ainger Creek, which further downstream flows across the southwest tip of the property. in the wet areas, limnophilous vegetation, including sportios bakeri, cyperus spp., cladium mariscoides, rhychospora ap., hypericum aspalathoides, xyris iridefolia, eriocaulon decangulare, eleocharis equistoides, pontederia cordota, bacopa caroliniana, and hydrocotyle umbellata, predominates. Opossums, eastern moles, raccoons, otters, and bobcats have been spotted on the Phase I property. Among other mammals whose range includes the Phase I property are shrews, bats, black bear, longtail weasel, mink, Florida panther (Burt and Grossenheider) skunks, gray fox, mountain lion, squirrels, southeastern pocket gophers, rats, mice, rabbits, whitetail deer, and armadillo. People have seen eastern rattlesnakes, pygmy rattlesnakes, water moccasins, eastern garter snakes, yellow rat snakes, anolis carolinensis (a lizard), snapping turtles, common musk turtles, box turtles, gopher tortoises, spiny softshell turtles, bull frogs, leopard frogs, cricket frogs, green tree frogs, and American toads on the Phase I property. There is reason to believe that numerous other snakes, frogs and lizards inhabit the property. On high ground in the Phase I property, people have seen turkey vultures, black vultures, red-tailed hawks, red-shouldered hawks, kestrels, bobwhites, turkeys, mourning doves, ground doves, flickers, red-billed woodpeckers, eastern kingbirds, blue jays, Carolina wrens, mockingbirds, catbirds, robins, loggerhead shrikes, meadowlarks, red-wings, boat-tailed grackles, cardinals, Florida sandhill cranes, and bank swallows. On westland portions of Phase I, people have seen pied-billed grebes, anhingas, great blue herons, American egrets, ivory egrets, Louisiana herons, little blue herons, green herons, least bitterns, wood storks, white ibis, red-winged blackbirds, purple grackles, killdeer, southern bald eagles, and limpkins. Limpkins, wood storkes, southern bald eagles, and Florida sandhill cranes are endangered species. Various fishes live in waters on the Phase I property, including lake chumbuckers, golden shiners, yellow bullheads, flagfish, golden topminnows, four different killifishes, mosquito fish, sailfin mollies, warmouths, bluegills, and three kinds of sunfish. The common prawn the Florida crayfish, and the neritina reclivata also inhabit one or more water bodies on the Phase I tract. Insect populations are relatively low because of the abundance of piscine insectivores. Before GDC acquired the property, men dug ditches which connect several ponds and cause stormwater to drain through them into Ainger Creek which empties into Lemon Bay. Drainage into the ponds and connecting ditches is by sheet flow. Cow dung in the pastures is concentrated around certain ponds, where cattle drink; and may account for some of the nonhuman fecal coliform bacteria that are to be found in Lemon Bay. Part of the Phase I property drains by sheet flow into the Myakka River. The topsoil is sandy on the Phase I tract. In the vicinity of Ainger Creek, Pompano find sand and Keri find sand predominate. These sands, Delray fine sand and Plummer fine sand, are found in most of the low-lying areas on the property. Leon fine sand covers most of the high ground. There is a strip of Immokalee fine sand along the northern border of the Phase I tract other than as pasture or for tree farming would be energy intensive. One expert proposed hydroponic cultivation. ANNEXATION GDC acquired the Myakka Estates property from a rancher in 1970 or 1971, then took steps to cause the parcel to be annexed by the City of North Port, within the municipal boundaries of which other substantial GDC development was already located. The annexation took place notwithstanding the absence of any bridge or road connecting the Myakka Estates parcel to the rest of North Port. These two parts of the City of North Port touch at a corner but are not otherwise contiguous. Some 100,000 lots have been platted in North Port east of the Myakka river; over 90,000 were still vacant at the time of the hearing. At 68 square miles, North Port, with a population of five to eight thousand, is second in land area only to the consolidated City of Jacksonville, the municipality with the largest land area in the state. LAND USE RESTRICTIONS By ordinance of the City of North Port, the entire Myakka Estate parcel is zoned agricultural and has been at all pertinent times. On September 9, 1974, however, North Port entered the Master Development Order authorizing development of all "non-vested" portions of Myakka Estates. In consideration of the Division of State Planning's forbearance from taking an appeal of the Master Development Order to the Land and Water Adjudicatory Commission, GDC agreed to submit "supplemental Applications for Development Approval as a condition to development of specific increments of the master residential plan," GDC Exhibit No. 12, a requirement also imposed by the Master Order itself. North Port has a subdivision ordinance with which, according to the uncontroverted evidence, the proposed Phase I development is in compliance. In June of 1979, North Port adopted a Comprehensive Development and Growth Management Plan, GDC Exhibit Nos. 23 and 91, in accordance with Section 163.3184, Florida Statutes (1979). Because of the pendency of the present proceedings, the SWFRPC and the DCA objected to inclusion of Phase I in the North Port plan. As a result of the objections, the plan makes little reference to Phase I although it notes that planning for Phase I "was conducted in conformance with present standards and was recently approved by the [North Port] Planning Commission and City Commission [apparently by adoption of the Development Order challenged in these proceedings]." GDC Exhibit No. 91, at 28. Stated as an objective of North Port's Comprehensive Development and Growth Management Plan, at p. 22, is To encourage growth that is relatively contiguous to the existing developed area and encompasses within the 25-year period the area bounded on the north by McCarthy Boulevard and Snover Waterway, on the east by Blue Ridge Waterway, and on the south and west by the city limits. GDC Exhibit No. 91. Other stated objectives are to "encourage consistency with and between Florida's Growth Management and Land Development Elements" and Sarasota County's Land Use Plan. It was uncontroverted that plans by General Development Utilities to furnish water and sewer service to Phase I are in conformity with provisions of the North Port plan on those subjects. Sarasota County has never adopted a comprehensive plan in accordance with Section 163.3184, Florida Statutes (1979), but the county does have the Land Use Plan, GDC Exhibit No. 93, referred to in the North Port plan. The Sarasota County Land Use Plan map designates the unincorporated area adjacent to Myakka Estates as appropriate for agriculture. The county has zoned the area along South River Road (formerly State Road 777), immediately adjacent to Myakka Estates, "QUE-1", Open Use, Estate, one dwelling unit per five acres, and the area further west "OUR", Open Use, Rural, one dwelling unit per ten acres. According to a map that is part of the Sarasota County Land Use Plan, Myakka Estates falls in the "low density residential" category, 1.1 to 4.5 units per acre. By its terms, however, this plan applies only to unincorporated areas of Sarasota County. The portion of the Phase I property lying in the easterly half of Section 33, Township 40 South, Range 20 East is within the jurisdiction of the Englewood Water District, which was created by Chapter 59-931, Laws of Florida. At the time of the final hearing, the whole area of EWD was on septic tanks and EWD's water lines did not reach Section 33. Some 166 lots are planned for the portion of Phase I over which EWD has jurisdiction. EWD has a policy of not permitting other water systems within the area served by the district. Its current regulations containing specifications for water and sewer mains and the like were adopted on June 19, 1980. The Florida State Comprehensive Plan, GDS Exhibit No. 92, is an internally inconsistent compilation of "goals", "objectives", and "policies". It was adopted by executive order and approved by the Florida Legislature in 1978. In their proposed recommended orders, the parties identified the following items as being in controversy: Ensure that the expansion of public facilities for economic development is in accordance with local government comprehensive plans and the State Comprehensive Plan. Consider the projected availability of energy when making economic development decisions. Physical, natural, economic, and human resources should be managed and developed in ways that avoid unnecessary long-term energy- intensive investments. Incorporate energy as a major consideration into the planning and decision-making processes of state, regional, and local governments. Encourage land use patterns that by design, size, and location minimize long-term energy commitments to construction, operation, maintenance, and replacement. Encourage a careful, ongoing evaluation of governmental expenditures and revenues in light of future uncertainties about energy supplies and related economic implications. To ensure the orderly long-range social, economic, and physical growth of the state. Identify the costs and benefits of growth to local and state governments and explore methods for allocating these costs to the citizens equitably. Housing should be produced in a mix of types, sizes, and prices that is based on local and regional need and that is consistent with the state's growth policy. Land use and development should proceed in an orderly manner that produces an economically efficient and personally satisfying residential environment with with minimal waste of our land resources. The provision of public facilities, utilities, open space, transportation, and other services that are required to support present and projected housing and community development needs should be ensured. Develop environmentally responsive land planning methods that reduce the stress that new develop- ments place on their communities' energy needs, water needs, sewage treatment facilities, transportation, flood control systems, and social, and educational services, and thus reduce the overall taxes and cost of the services needed to satisfy these demands. Consider energy implications in the review of applications for developments having regional impact (DRI). Land development should be managed in a manner consistent with the values and needs of the citizens of the state and with the concept of private property rights. Agricultural lands, especially those most seriously threatened, should be maintained and preserved for the production of food and fiber products. Influence the timing, distribution, type, density, scale, and design of development by coordinating land development proposals in state and local comprehensive plans and public investment programs in order to ensure the availability of adequate public facilities, services, and other resources. Allocate an equitable share of the cost of expanding public facilities to the newly served residents. Base land development decisions on quantita- tive knowledge of the short- and long-term capabilities of the hydrologic units to provide adequate supplies of water. Coordinate land use planning and water management to ensure the long-range maintenance and enhancement of water quantity and quality. Accommodate new development by using water from the local hydrologic basins rather than through surface water transfer between hydrologic basins. Protect groundwater supplies from saltwater intrusion by the regulation of withdrawals, maintenance of adequate recharge of groundwater, and prevention of saltwater movements inland through coastal canals. Maintain groundwater levels to insure that water levels are not drawn to such a degree that sustained yield is adversely affected or that natural resource degradation takes place. Protect groundwater supplies from saltwater intrusion by the maintenance of a sufficient amount of groundwater in coastal aquifers to prevent intrusion through regulation of withdrawals, maintenance of adequate recharge, and sufficient controls on coastal canals. Protect and maintain groundwater supplies and aquifer recharge areas through water- and land- management practices and, where necessary, through regulation of development activities. Allow alteration of groundwater movements within or between aquifers only where it can be shown that such alterations are not harmful to surface and groundwater resources. Develop minimum service standards for utility systems. Encourage the provision and maintenance of adequate utility systems in already developed areas. In areas where utility systems are over- burdened, manage growth while remedial measures are expedited to restore utility systems to a condition of adequacy. Encourage the effective use of utility systems, energy, land, and finite resources by evaluating and revising, if necessary, laws and regulations that may bar innovative development patterns, designs, and materials. Although authorized to do so by statute, Section 380.06(2)(a), Florida Statutes (Supp. 1980), the Administration Commission has not adopted guidelines and standards for developments of regional impact by administrative rule. PROPOSED DEVELOPMENT After development, water would cover 59.41 acres of Phase I and mostly low lying "open space/green belts" would account for another 504.69 acres. An additional 143.32 acres are planned for recreational uses. Roads and utility easements would account for 398.54 acres. GDC has agreed to construct a municipal services building in the vested portion of Myakka Estates, on a parcel across the street from Phase I. In Phase I, GDC plans to set aside 20.06 acres for an elementary school and 6.97 acres for neighborhood retail outlets. GDC has announced its intention to donate the school site to the Sarasota County School Board. Other school sites have been set aside within Myakka Estates. A large commercial area on a major arterial road is planned for the vested portion and a golf course and other recreational facilities, as well as an industrial site, are planned for later phases of development. Over a 33-year period, GDC plans to build 1,056 multifamily units on 92.61 acres and expects 2,859 single family detached houses to be built, by GDC and other contractors, on lots averaging approximately a quarter of an acre and aggregating 790.06 acres. The average envisioned for Phase I is 1.94 dwelling units per acre as compared to 2.33 dwelling units per acre for Myakka Estates as a whole. In the vested portion of Myakka estates and in the contiguous area to the south GDC is developing "multiple cores". Similarly, two distinct neighborhoods are contemplated in Phase I. GDC plans to build multifamily housing complexes in the neighborhood "cores" to be surrounded by single family detached houses, with vacant lots in between these neighborhood centers. GDC hopes to sell 1,927 unimproved lots in Phase I on an installment basis. Typically the purchaser would undertake to make installment payments over a ten-year period and GDC would agree to construct central water and sewer distribution systems and to pave access roads by the end of the period. A purchaser would be permitted to make prepayment but GDC would only be obligated to convey the lot at the end of the agreed term. GDC plans it so that installment payments will provide GDC enough money to install water and sewer systems and pave roads before GDC is obligated to convey the improved lots. All expenses of hocking up to the water or sewer system, including extending mains, where necessary, are to be borne by the purchaser. the purchaser must secure a building permit before GDC becomes obligated to furnish water. In the event GDC is unable to perform, however, the contract requires the purchaser to choose between accepting a refund of the purchase price and exchanging the lot for another lot. Under certain circumstances the lot owner is allowed a credit against purchase of a home from GDC in addition to the equity in the lot. In 1979, three quarters of the houses GDC sold were sold to lot owners who exercised their option to exchange the equity in houses in a core area, and 99 percent of the houses GDC sold in North Port were located in "core areas". At the time of the hearing, there were already hundreds of thousands of unimproved lots in Lee, Charlotte, and south Sarasota Counties and hundreds of miles of little used roads providing access to the lots. AIR POLLUTION The uncontroverted evidence was that air pollution anticipated as a result of the proposed development, chiefly from automobile exhaust, would not violate state or federal air quality standards. STORMWATER The planned stormwater drainage system has been designed to retain one inch of runoff before discharge from the Phase I property and to prevent flooding of the portions of the property slated for development during storms of up to 25 years return frequency and 24-hour duration. Stormwater in the Ainger Creek watershed will drain from roads and lawns into front- and sideyard swales, to broader, shallow, grassy collector swales, through a series of shallow ponds (with a maximum depth of six feet) equipped with control structures and into Ainger Creek in which GDC has already constructed a weir with a flap gate. Some stormwater will percolate through the sandy soils into the groundwater and, except under the most extreme conditions, groundwater will reach Ainger Creek only after most pollutants have been precipitated or filtered out biologically. Water in the Myakka River watershed will reach the river by sheet flow which, depending on conditions, will also be diminished by percolation and purified by precipitation and biological filtration. Under extremely wet conditions, water entering the Myakka River and Lemon Bay from Ainger Creek will contain pollutants normally associated with residential development, mostly high concentrations of nutrients and small concentrations of heavy metals. GDC's employee's testimony that water entering Lemon Bay will be of a higher quality after development than at present, although uncontroverted, is rejected as incredible, although it could conceivably hold true under mild meteorological conditions. Ainger Creek's flood plain extends east from the thalweg some distance into the Phase I property. See GDC Exhibit Nos. 69, 70, 71, and 72. On preliminary flood insurance rate maps, the United States Department of Housing and Urban Development (HUD) has identified special flood hazard zones along the creek which include 169 acres in proposed Unit 5 in which a minimum elevation of ten feet has been recommended for any habitable space (A-9) and 263 acres in Sections 26, 33, and 34 in which a minimum elevation of 11 feet has been recommended for any habitable space (A-10). The lowest street elevation proposed for the A-10 zone is seven feet. GDC normally adds two to two-and-a- half feet of fill to existing grade before erecting houses, but can add more. The weir across Ainger Creek and the proposed control structures where water outfalls into swales allow the retention upstream of water which otherwise might have flowed into Lemon Bay. Water retained on the Phase I property and elsewhere upstream can percolate through the topsoil and replenish the groundwaters. The weir on Ainger Creek acts as a barrier against the movement of salt water upstream. For both of these reasons, the proposed drainage system should decrease any danger of saltwater intrusion into freshwater aquifers in the area. In the event substantial amounts of salt water (or some pollutant) are introduced into Ainger Creek upstream of the weir, the weir is designed to permit the Creek to be flushed. ECONOMIC IMPACT ON PRIVATE SECTOR Except in the core areas, where GDC plans to market improved real estate, contractors other than GDC would have an opportunity to bid on construction contracts for new houses, a decade or so after installment land sales proposed for Phase I begin. Even before construction of housing, roads would have to be paved, water and sewer pipes would have to be laid, and other utilities would have to be installed. Thousands of people living on the new unpopulated Phase I property would mean additional jobs in the private and public sectors. Since there are already more than 641,000 vacant subdivision lots in the Charlotte Harbor area, however, the region is presumably in little danger of losing out on additional population for want of land developments. FISCAL IMPACT ON LOCAL GOVERNMENT Using census and other population data and reviewing GDC's sales records in other land developments, J. Thomas Campbell, a GDC employee, has projected a 47-year development or build-out schedule for Myakka Estates, forecasting, among other things, how rapidly housing units will be built in Phase I. Taking the build-out schedule as a given, Paul G. Van Buskirk, a GDC consultant, assumed an average household size increasing linearly through time and projected population growth in Phase I year by year for 33 years. Mr. Van Buskirk made assumptions about average household size, the proportion of population over age 65, and the proportion of population of school age, only after examining data of this kind from ten other communities housing mainly retired persons, which he thought would be comparable. He distributed school children among elementary, middle, and high schools on the hypothesis that the proportion would be the same as obtained in the Tampa-St. Petersburg area. In 1975, Mr. Van Buskirk projected streams of revenue and expenditure for local governments attributable to Phase I, forecasting a surplus for North port, Sarasota County, and the Sarasota County School District (School District). He assumed the value of an average house to be $40,000 in 1975 dollars, that market value would be the same as assessed value, and that then current mileages would remain constant. He also projected, in 1975, a tax base in North Port of $119,000,000 in 1979, in 1979 dollars. In fact, North Port's 1979 tax base was $122,000,000. In 1975, he projected a surplus for North Port in 1979 of $905,000 in 1979 dollars ($662,000 in 1975 dollars). In 1979, the surplus was, in fact, slightly more than $700,000. The difference between the projected surplus and the actual surplus is attributable to North Port's decision to retain the same level of services it had in 1975 while lowering the ad valorem tax rate. In his 1975 calculations, Mr. Van Buskirk made no attempt to reduce later years' dollar figures to then present values. In response to criticism by Dr. Fishkind, Sarasota County's economist, Mr. Van Buskirk reduced revenues and expenditures he had projected to present values, by assuming a discount rate of 7.5 percent. This discount rate was chosen to represent the cost of money obtainable by selling tax exempt bonds. At the same time, he posited a ten percent return compounded annually on projected surpluses. After this revision, as before, he forecast a favorable fiscal impact on North Port, Sarasota County, and the School District. CITY OF NORTH PORT The weight of the evidence showed that the fiscal impact of development of Phase I on the City of North Port would probably be favorable. Mr. Van Buskirk's model predicted fiscal developments in North Port with impressive accuracy. The large surpluses projected for the early years of development could not be counted on, however, because they would add to the already existing surplus ($8,000,000 in June of 1980) and to political pressures to lower taxes in such circumstances. North Port's recent reduction in millage, in the face of a growing surplus, evidences a predictably recurring tendency. Even though Phase I is ten miles from the center of North Port, the municipal services building GDC has agreed to build should make this distance a relatively insignificant factor in delivering some municipal services, according to Dr. Fishkind. Volume X, pp. 113-114. SARASOTA COUNTY In projecting what expenditures Sarasota County would make, if Phase I is developed according to schedule, Dr. Fishkind subtracted water and sewer costs but no others from per capita base-year figures to arrive at a per capita figure of $137.02 in 1975 dollars, to which he added special costs projected by Sheriff Hardcastle for law enforcement and Mr. Longworth for roads. Because all three of these figures are significant overstatements, Dr. Fishkind overstated expenditures significantly when he calculated Phase I's negative fiscal impact on Sarasota County over the course of the development as $8,100,000 in 1979 dollars. Dr. Fishkind also failed to include surpluses that would be furnished to county government early on in the development. Mr. Van Buskirk's base year per capital figure is a closer approximation of per capita costs that would be fairly attributable to residents of Phase I, but road and law enforcement costs are probably understated. No increase in real sots is projected and the combined effect of using a 100 percent assessment ratio and ignoring costs of sales is to overstate tax revenues. When Mr. Van Buskirk assumed a 79 percent assessment ratio and an average house value of $35,000 in 1975 dollars, he still projected a $449,000 positive fiscal impact on Sarasota County from development of Phase I. That calculation also included the ten percent interest compounded annually imputed to surpluses, however, without any showing that surpluses from Phase I would be invested rather than expended for some other county purpose, making simple discounting appropriate. Although the evidence is far from clear, it suggests, on balance, that the fiscal impact of Phase I on Sarasota County would be negative. CHARLOTTE COUNTY Charlotte County's public roads, recreation facilities, and schools would be used by the residents of Phase I, if all goes as planned, and Charlotte County would not have the offsetting benefit of ad valorem taxes from Phase I, although it would receive certain offsetting benefits on account of additional students under the current intergovernmental agreements. Phase I's development would have a negative fiscal impact on Charlotte County and the Charlotte County School District. SCHOOL DISTRICT Phase I is some five miles from Englewood Elementary School, ten miles from Venice Gardens Elementary and five to seven miles from Lemon Bay Junior- Senior High School in Charlotte County which accepts students from Sarasota County under the terms of an intergovernmental agreement. These schools are presently operating at or above capacity. Under current conditions, a major development anywhere in Sarasota County would be a burden to the school system. A survey of the school district's capital requirements for the next five years suggests some $67,445,817 will be needed for new construction. Of this, Sarasota County expects to receive $15,797,414 from State sources. Phase I is not expected to house any school children in the next five years, however. In the tenth year of development, the projection is that 489 elementary students, 245 junior high students, and 244 senior high students would live in Phase I, necessitating the construction of at least the first "phase" of an elementary school. Exclusive of site acquisition costs, an elementary school costs about $4,000,000; a junior high school costs about $19,000,000; and a senior high school costs about $18,000,000. If development of Phase I occurs at or above the rate projected by GDC, the net fiscal impact on the School District would probably be negative, but if development lags significantly behind predictions, as Dr. Fishkind testified was likely, the additional years of tax revenues before Phase I places major demands on the school system could well result in a positive fiscal impact on the School District from development of Phase I. POTABLE WATER General Development Utilities (GDU), a subsidiary of GDC, has a franchise from North Port to furnish water within the city limits, including Myakka Estates, except in the portion of Section 33 where EWD has jurisdiction. GDU is a private, not a public, utility, but its use of ground and surface waters renders the water used unavailable to another utility. At an existing water treatment facility on Myakkahatchee Creek, in North Port, about ten miles from Phase I, GDU treats 4.2 million gallons of water a day (mgd), but could treat 8 mgd. GUD also operates a water treatment complex in Fort Ogden on the Peace River, six or seven miles downstream from Arcadia. At the time of the hearing, GDU had the ability to pump 1.5 mgd from the Peace River complex to North Port and Myakka Estates. The Peace River facility includes a raw-water intake structure, a reservoir, and a treatment plant. It has a capacity of 6 mgd although some of its components have larger capacities. The intake structure and 36-inch transmission lines can handle 30 mgd and the filter units have a capacity of 15 mgd. The reservoir covers some 90 acres and has a capacity of 800,000,000 gallons. In all, GDU has reserved 1,000 acres for use as a reservoir, although the need for such a large reservoir is not anticipated even by the year 2050. GUD does not plan to expand the existing reservoir for another ten years. Southwest Florida Water Management District (SWFWMD) has permitted GDU to withdraw up to an average of 5 mgd from the Peach River not to exceed five percent of the day's flow. At Arcadia, the Peace River's daily flow varies seasonally from 32 mgd to ten billion gallons per day. Except for 36 days a year (on the average), 5 mgd is less than 5.7 percent of the low flow of the Peace River. GDU can fill its reservoir by diverting water from the Peace River at times of high flow, so as to get the best water quality, and cause the least proportional diminution of the river's flow. GDU plans to withdraw an average of 13 mgd from the Peace River when capacity of the facility at Fort Ogden reaches 30 mgd. This is approximately 1.5 percent of the Peace River's approximately 800 mgd average flow at Arcadia. Some of the diverted water will never reach Charlotte Harbor because of evaporation at various points. Other water transported to Myakka Estates from the Peace River, whether treated at Fort Ogden or at North Port, would be used for irrigation, and some of this water would drain into Lemon Bay by Ainger Creek and never reach Charlotte Harbor. Most of the water diverted into the Peace River reservoir will eventually make its way through homes in GDC developments into wastewater plants, from there into the groundwater, and ultimately into Charlotte Harbor. Even when water from the Peace River reaches Charlotte Harbor by this route, however, there will ordinarily have been an interbasin transfer. The quality of water in the Peace River is good. If it were necessary to augment river water at the Peace River plant, well water from aquifers in the vicinity would be available. Because this well water is brackish, however, it would be blended with the river water to produce a mixture low enough in chlorides to be potable. Surface water from Myakkahatchee Creek and Snover Waterway could also be transported to the Peace River reservoir, at a rate of 13.5 mgd. Myakkahatchee Creek discharges 20 billion gallons of water into Charlotte Harbor annually. Treating water at the Peace River facility requires about two kilowatts per 1,000 gallons of water. Brackish water is available from well fields in the vicinity of Myakka Estates property, but treating brackish water by reverse osmosis requires about 11 kilowatts per hour. Phase I would, of course, add to future demand for potable water. SEWERAGE By ordinance, North Port requires that new homes be equipped with 3.5- gallon flush toilets instead of the standard 5-gallon models. Since 40 percent of the water used in the average household goes through the toilet, this is an important water conservation measure. GDU plans to provide a sewer system for the whole of Myakka Estates including initially an activated sludge sewer plant with a rated capacity of 250,000 gallons a day to be located on a 40-acre parcel reserved for that purpose. Effluent from the plant would be discharged into a polishing pond then sprayed over soil planted with vegetation to take up nitrogen and phosphorus, through which it would percolate into the groundwater. Once the Myakka Estates plant reached capacity, sewerage would be transported to Gulf Cove in Port Charlotte, six miles from the Phase I property, where an existing plant with a capacity of 333,000 gallons a day now processes 100,000 gallons a day. At the Gulf Cove plant site, GDU has 163 acres available for plant expansion. SOLID WASTE Solid waste from Phase I would be taken to the existing North Port landfill some nine miles distant, as long as that could be used. A second layer of solid waste was being laid down there at the time of the hearing. Monitoring wells had been dug to detect leachates leaving the landfill. A 90-acre site for a new landfill to serve all of North Port has been chosen within the 100-year flood plan of the Myakka River. GDC has agreed to construct the new landfill and lease it to North Port for operation by the city. The use of solid waste for energy production is not feasible, unless quantities on the order of 200 tons a day are available. Part or all of Charlotte County produces about 100 tons a day of solid waste. Per capita, people produce about 5.5 pounds per day of solid waste. LAW ENFORCEMENT Because of the location proposed for Myakka Estates, traffic from Phase I to the already developed center of North port will travel outside the city limits for part of the trip. Travelers from Phase I bound for the commercial district in North Port will pass through unincorporated Sarasota County, except those taking the longer route through Charlotte County. Travel from Phase I to any other municipality in Sarasota County would require passing through unincorporated Sarasota County. At the time of the hearing, the nearest substation of the Sarasota County Sheriff's Office was approximately 30 miles from the Phase I property. At some point, as Myakka Estates becomes populated, depending upon traffic patterns, the Sheriff would create a new Sheriff's patrol zone at a cost of $180,000 (1980 dollars), if present policy on these matters holds. Not all of this amount could fairly be attributed to development of Phase I, although the costs of the proposed development (including Phase I) to the Sarasota County Sheriff's Office would be significantly greater than the costs would be if the same population moved into the area contiguous to the existing center of North Port. North Port plans to furnish primary police protection within its city limits, staffing and equipping the 2,400 square feet municipal services center GDC has agreed to build in the vested portion of Myakka Estates. City prisoners are housed in the county jail, however, and the sheriff's office serves civil process in North Port. In residential land developments in the Charlotte Harbor area, where the roads have typically been laid out rectilinearly, a problem in the interval between road building and construction of housing has been the use of roads as airstrips by smugglers and as drag strips by racing enthusiasts. TRANSPORTATION Within Phase I, streets are to be laid out curvilinearly. Minor collectors are to feed major collectors which are to feed minor arterials which are to feed major arterials, with limited access to larger roads. Three and one-half miles of bicycle paths are planned. No mass transit system is contemplated for Phase I nor would Phase I be able to accommodate a right-of-way for a mass transit facility. There is no mass transit system in Port Charlotte or North Port. The viability of Phase I depends on continued mass ownership and operation of automobiles. U.S. Highway 41, a four-lane divided arterial, runs east and west north of the Myakka Estates property, then through the southwestern corner of the main part of North Port. When I-75 is finished, development may be skewed in its direction, drastically affecting traffic patterns; I-75 is slated to pass north of the property in two or three years. intersecting U.S. Highway 41, running south then southwest to the west of the Myakka Estates property, is South River Road (State Road 777), a two-lane arterial that ends in Englewood and currently handles about 2,000 trips daily. It will require four-laning when the number of daily trips reaches 10,000. South of the property in Charlotte County, another two-lane arterial, State Road 776 runs east-west, dead ending into State Road 771 which crosses the Myakka River at El Jobean and proceeds northeast to Murdock, where it intersects U.S. Highway 41, south of the main area of North Port. GDC has agreed to pave a two-lane road from the vested portion of the Myakka Estates property through Phase I to South River Road (State Road 777). by this route, a trip from the middle of Phase I to the commercial area in North Port would involve a trip of about ten miles. The distance from the middle of Phase I to the nearest post office, which is in Englewood, is approximately 6.5 miles; to Gulf Cove, approximately six miles; to Murdock, approximately 11.5 miles; to a shopping district in Venice, approximately 14.5 miles; and to the nearest hospital, in Venice, approximately 16.5 miles. Sarasota is about 30 miles north and Ft. Myers is some 40 miles distant in the other direction. It is to Sarasota and Ft. Myers that new inhabitants of Myakka Estates would be obliged to travel for concerts, plays, art galleries, and the like. Thee are commercial airports in Ft. Myers and Sarasota. GDC's expert assumed most of the traffic leaving Myakka Estates would travel south to points in Charlotte County because of anticipated development there. Sarasota County's expert assumed most of the traffic leaving Myakka Estates would travel to points in Sarasota County based on ratios of already developed commercial acreage and on an apparently inadvertent chronological mismatching of projected retail and total employment figures: for Venice in Sarasota County year 2000 projections were used while 1990 projections were used for competing areas to the east of Myakka Estates. Development of Phase I would have a substantial and costly impact on public roads in the vicinity. Both new construction and improvement of existing roads would be required, although mainly in rural areas. At least by the time Myakka Estates is fully populated, South River Road, State Road 776, and State Road 771, including the bridge across the Myakka River would have to be four- laned. While the direction of future traffic is disputed, the prospect of thousands of automobiles operating in the area as a result of a fully populated Phase I is very clear. It is impossible to say with certainty which road would have to be widened in which year or what share of the cost should be attributed to Phase I as distinguished from the rest of Myakka Estates and other development in the area, but the eventual impact of Phase I would require expenditures of millions of dollars for public roads. Sarasota County has identified road improvements it needs to make before the year 2000, without taking Myakka Estates into account, and puts their cost at $387,000,000, which is $110,000,000 more than is projected to be available. EMPLOYMENT ACCESSIBILITY Most of the people expected to live in the Phase I development are retired persons who would not be regularly travelling to and from a place of employment. Very few employment opportunities in retail sales and professional offices are forecast for Phase I. The vested portion of Myakka Estates is projected to have significantly more opportunities of this kind. In the beginning, most persons seeking employment would have to travel at least as far as Englewood. At build-out, a later phase of Myakka Estates may afford industrial employment opportunities. SWFRPC REPORT The Master ADA was filed with the Tampa Bay Regional Planning Council, rather than with SWFRPC, because Sarasota County was part of the Tampa Bay Region at the time. The Tampa Bay Regional Planning Council recommended granting the Master ADA on conditions which were subsequently incorporated into the Master Development Order. The Phase I ADA was filed with the SWFRPC. In May of 1975, the SWFRPC issued its report recommending against approval of the Phase I ADA on various grounds, including the physical separation of the proposed development from presently developed areas and necessary services; the existing abundance of vacant platted lots and miles of deserved paved streets in the Charlotte Harbor area; creation of a need for an urban water supply, schools, police, and emergency medical facilities and services far from the areas where the affected local governments have planned to provide such facilities and services; and the adverse fiscal impact of the proposed development on local governments. The report was received in evidence to show what North Port reviewed before entering its development order but it was not offered as proof of the SWFRPC assertions in it.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That the Florida Land and Water Adjudicatory Commission enter a development order granting GDC's Phase I ADA on such conditions as the Commission shall deem appropriate, including all the conditions contained in the Development Order entered by North Port and the following additional conditions: That GDC sell no lots in the special flood hazard zones as indicated on HUD's preliminary flood insurance rate maps, GDC Exhibit Nos. 69, 70, 71 and 72. That GDC sell no lots within EWD's jurisdiction until and unless EWD shall agree to such a sale in writing. That GDC unconditionally deed to the Sarasota County School District the elementary school site planned for Phase I together with the 50 lots nearest to the site. DONE AND ENTERED this 6th day of January, 1981, in Tallahassee, Florida. ROBERT T. BENTON II Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of June, 1981. COPIES FURNISHED: Parker D. Thomson, Esquire Kenneth W. Lipman, Esquire and Douglas M. Halsey, Esquire 1300 Southeast First National Bank Building Miami, Florida 33131 C. Laurence Keesey Department of Community Affairs Room 204, Carlton Building Tallahassee, Florida 32301 David E. Bruner, Esquire 581 Springline Drive Naples, Florida 33940 Richard E. Nelson, Esquire and Richard L. Smith, Esquire 2070 Ringling Boulevard Sarasota, Florida 33577 Robert A. Dickinson, Esquire 70 South Indiana Avenue Englewood, Florida 33533 John W. Field Englewood Community Organizations 227 Bahia Vista Drive Englewood, Florida 33533 Wayne Allen, Esquire General Development Corporation 1111 South Bayshore Drive Miami, Florida 33131 Mayor Margaret Gentle City of North Port North Port, Florida 33595 Allen J. Levin 209 Conway Boulevard Northeast Port Charlotte, Florida 33952 Office of Planning and Budget Executive Office of the Governor 311 Carlton Building Tallahassee, Florida 32301 The Honorable Robert Graham Governor, State of Florida The Capitol Tallahassee, Florida 32301 The Honorable Jim Smith Attorney General The Capitol Tallahassee, Florida 32301 The Honorable Ralph Turlington Commissioner of Education The Capitol Tallahassee, Florida 32301 The Honorable Doyle Conner Commissioner of Agriculture The Capitol Tallahassee, Florida 32301 The Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32301 The Honorable Gerald Lewis State of Florida Comptroller The Capitol Tallahassee, Florida 32301 Gerald Chambers 6970 Manasota Key Road Englewood, Florida 33533
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner GDU is a wholly-owned subsidiary of General Development Corporation and has eight operating divisions. At the end of the 1979 test year, the petitioner's Port Malabar Division had 3,899 water connections and 3,760 sewer connections. At the end of July, 1981, the system was serving 4,852 water customers and 4,332 sewer customers. During the test year, petitioner's Port Malabar water system consisted of 16 shallow wells, 47 miles of distribution and transmission lines, and a three million gallon per day lime softening treatment plant with two storage facilities. The sewer system consisted of 17 lift stations, about 44 miles of collection and force mains and a treatment plant-rated at two million gallons per day. During the test year, 28 employees were assigned to the water and sewer operations. At the time of the August hearing, petitioner had 34 employees. Quality of Service The water and sewer service customers of petitioner who testified at the hearing were primarily concerned about the magnitude of the proposed rate increase and its impact upon persons with fixed incomes. Many customers testified that they were satisfied with the water and sewer service provided to them. The few complaints voiced about service included odor from a new lift station, the high mineral content of the water, water lost during construction projects, interruptions in service without notice, and, on occasion, dirty water. Petitioner maintains a customer service and local billing office in the Port Malabar area. It is the customary practice of petitioner to give its customers advance notice of any interruption in service. Water utilized for construction purposes is metered and billed to the individual contractors. The odor problem from the recently installed lift station has been resolved. Petitioner has an ongoing program for monitoring water quality and compliance with state and federal water quality standards. All drinking water requirements and standards for sewage treatment plant effluent have been complied with by petitioner. Petitioner presently has 3 sewage treatment plant operators and is attempting to secure one more operator to meet the Department of Environmental Regulation's requirement of four. Used and Useful The term "used and useful" is a ratemaking term to establish that portion of investment upon which a utility is entitled to earn a return. Facilities which are used and useful are those used to serve present customers, with a reasonable reserve added for future customers. A knowledge of engineering principles is necessary to perform a used and useful analysis. The used and useful analysis performed by petitioner resulted in a determination that the water treatment plant is 100 percent used and useful. The methodology utilized was to take the maximum day's water production during the test year and add an allowance for 18 months' growth based on an average of the prior three years growth rates. The actual growth rate of 953 water customers between the end of the test year and July, 1981, a 24.4 percent increase, closely matched the increase used in petitioner's calculations. The eighteen month period is representative of the period of time required for a utility to design, receive approval, complete construction and place the facility in usage. The utility's methodology made no allowance for fire demand and thus the results are conservative. Using a similar methodology, the PSC engineering expert also found the water plant to be 100 percent used and useful. The Office of Public Counsel's accounting expert determined that the petitioner's water plant was only 81 percent used and useful. His methodology utilized a peak day flow different than that utilized by petitioner for the reasons that he felt it was more representative of actual customer demand and did not reflect excess water loss. This witness also felt that the use of the marginal reserve or growth factor resulted in the inclusion of plant associated with future customers and allowed the utility to over-recover its depreciation expenses. Petitioner's used and useful analysis of water distribution mains resulted in the determination that $162,501 should be deemed held for future use and therefore excluded from rate base. For purposes of this calculation, petitioner utilized as-built plans and excluded those mains in sparsely settled areas unless they fronted on an occupied lot or on a fire hydrant located within 500 feet of an occupied lot. The PSC expert witness determined that the water distribution system was 100 percent used and useful. The OPC's witness determined that the used and useful portion of the water distribution system was 80.96 percent. His analysis was apparently based on the actual billings during the test year as compared to the total potential connections. By averaging the average daily flow and the average maximum flow days, and then adding an eighteen month allowance for future growth, the petitioner determined that the sewage treatment plant was 60.5 percent used and useful. Maximum flow days are more significant than average days from an engineering design perspective, and thus petitioner's calculations are quite conservative. The PSC witness determined that the sewage treatment plant was 100 percent used and useful. Based upon average daily flow and making no allowance for growth, the OPC's witness determined that the sewer plant was only 40 percent used and useful. His rationale for using the average daily flow was not adequately explained. Comparing the actual connections plus an eighteen month allowance for growth to potential connections, petitioner determined that the sewage collection and distribution mains are 100 percent used and useful. The PSC witness agreed. The witness for the OPC calculated the sewage collection line system as being only 73.4 percent used and useful, apparently giving no weight to a growth allowance. Water Loss Petitioner calculates its unaccounted for water loss at 9 percent, though a little over 1 percent is due to meter slippage because of mechanical design. Petitioner's meters are read on a monthly basis and are calibrated by a private firm once a year for the water meters and twice a year for the sewer meters. A range for water loss between 10 percent and 15 percent is considered reasonable in the industry. Pointing to the facts that many Florida water utilities have water losses at 5 percent or lower and that petitioner's own water losses were less in 1980, the OPC witness felt that the unaccounted for water should be calculated at a 5 percent rate. Construction Work in Progress A portion of the assets carried on the petitioner's books as construction work in progress (CWIP) were actually completed, paid for, in service and generating revenues during the test year. These assets--$246,9l6 of water mains and $1,053,476 of sewer mains--were reflected as CWIP because the bookkeeping process of classifying them to the proper plant accounts had not been completed. The assets were subjected to the petitioner's used and useful analysis, and they should be reclassified as utility plant in service. A utility is entitled to recover the cost of carrying its construction program. The two alternative methods of recovery are to allow the average balance of CWIP to be included in rate base or to allow the interest or other return on the construction balances to be capitalized as part of the cost of the asset and amortized over its useful life. This latter method is referred to as allowance for funds used during construction (AFUDC). If AFUDC is not added to the rate base and if the amount of construction is reasonable based upon engineering standards, CWIP should be includable in rate base. Over the long run, this method is less costly to customers than charging AFUDC. Petitioner did not charge AFUDC on the assets claimed as CWIP and the amounts claimed were less than in previous years and met the standard of reasonableness. The witness for the OPC was of the opinion that CWIP should be excluded from rate base because the assets benefited the utility rather than the current customers, and current ratepayers should not be required to finance the utility's investments. He further felt that if these funds were included in rate base, the result would be a mismatch between rate base and the utility's income statement. Contributions-in-Aid-of-Construction Petitioner has properly excluded from its rate base those moneys which represent CIAC. However, it has included in rate base accumulated depreciation on CIAC. Petitioner has done this by adding back to rate base that portion of total accumulated depreciation associated with CIAC after subtracting both total accumulated depreciation and CIAC from plant in service. The PSC method reaches the same result by subtracting from plant in service both total accumulated depreciation and net CIAC (CIAC less accumulated depreciation on CIAC). If the depreciation expense on contributed property has already been included as an above-the-line expense and re- covered through rates, accumulated depreciation corresponding to such expenses should be removed from rate base. Petitioner has never recovered depreciation on contributed property as an expense for ratemaking purposes. Working Capital An allowance for working capital should be included in rate base. Petitioner utilized the formula approach for calculating its working capital needs. This methodology is recognized by PSC rule and is a simplistic, rule-of- thumb approach. It is calculated by taking one-eighth or 12 1/2 percent of the utility's annual operation and maintenance expenses. It does not reflect some items which provide a source of working capital and it does not necessarily measure the actual working capital requirements or investment of any particular company, The result obtained from using the formula approach must be reduced by an amount for federal income tax lag. The balance sheet approach to determine working capital requirements is generally preferred by the PSC staff and its use is urged by the Office of Public Counsel in this proceeding. This method involves deducting current liabilities from current assets to determine the amount of funds the utility has currently available to meet its working capital needs. The balance sheet approach more accurately addresses the specific working capital variables of the company to which it is applied. The PSC's accounting witness recommended use of the formula approach in this case because of the absence of a staff audit of the petitioner's balance sheet, In actuality, the difference in terms of dollars between the two approaches, as calculated by the petitioner and the OPC, is an immaterial amount. On cross-examination and rebuttal, the intervenor's calculation of working capital requirements by use of the balance sheet approach was shown to be incorrect and the result obtained was therefore understated. Federal Income Tax Petitioner GDU is a wholly-owned subsidiary of General Development Corporation which is a wholly-owned subsidiary of GDV, Inc. GDU files its federal income tax returns as part of the consolidated group which contains no other public utilities. Using this subsidiary approach, each member of the group computes its tax liability as if it were a freestanding company. Petitioner computed its federal income tax liability at the full statutory rate of 46 percent. While the petitioner's actual capital structure is almost 100 percent equity, its tax was computed by recognizing its parent company's capital structure. Petitioner did not contribute any tax losses that could be used by the group on its consolidated return. A certified public accountant with the PSC staff agreed with the petitioner's use of the subsidiary approach and the 46 percent statutory rate for calculation of petitioner's federal income tax expense. During the 1979 test year, the consolidated group actually paid taxes to the Internal Revenue Service at less than the 46 percent statutory rate. This was the result of losses at the parent company level. The witness for the OPC was of the opinion that the petitioner's tax expense should be calculated so as to recognize the actual tax expense of the corporation as a whole and that only those taxes which are eventually flowed through to the Internal Revenue Service should be claimed. He would calculate petitioner's effective tax rate by use of a "payout ratio" methodology which involves adjusting the statutory rate by the ratio of taxes actually paid to the IRS to the total taxes paid by all subsidiaries. Depreciation Rate On the basis of an estimation of the average service lives for each of its primary plant accounts, petitioner has calculated an overall depreciation rate of 3.43 percent for water assets and 3.11 percent for sewer assets. This component method of depreciation has been used by petitioner for over twenty years. In estimating the service lives of its assets, petitioner relied upon its experience with its own water and sewer assets in Florida and recognized that such assets are affected by Florida's high temperatures and humidity levels and the flat topography. The composite 2.5 percent depreciation rate customarily utilized by the PSC assumes a forty year service life of assets. In actuality, petitioner has retired two of its wells in less than twenty years and most of its meters have been replaced. The service lives used by petitioner are comparable with other depreciation data from the PSC, a National Association of Regulatory Utility Commissioner's (NARUC) survey and a Texas Public Service Commission survey on average service lives. The petitioner's witnesses were of the opinion that the 2.5 percent rate or forty year composite service life is not appropriate because it does not consider the unique physical characteristics of water and sewer systems in Florida. The OPC urges the application of the 2.5 percent overall depreciation rate on the basis that petitioner did not produce sufficient evidence that a change from Commission policy was necessary. Inflation Adjustment Petitioner proposes to adjust certain operating and maintenance expenses upward by 8.3 percent as an allowance for the effect of inflation on those expenses. No adjustment is proposed for those items which were the subject of other adjustments or for those items not expected to increase directly with inflation. The figure of 8.3 percent was derived from a three- year average of percentage increases in the Consumer Price Index (CPI) from 1976 through 1979. The CPI is a "market basket" approach to measuring inflation on the average consumer, and includes such items as foodstuffs and home mortgages. Based upon its 1980 expense figures and discounting increases in expenses attributable to growth in customers, petitioner experienced a 10 percent inflationary increase for water operations and a 9 percent increase for sewer operations for 1980 over 1979. Since at least 1976, petitioner has never earned its authorized rate of return, primarily due to the effects of inflation. The PSC staff has not audited the petitioner's 1980 expense figures. Such figures have been audited by an outside CPA firm for financial purposes, but not for regulatory purposes. The 10 percent and 9 percent increases in water and in sewer operations measure only increased costs and do not account for increased revenues. Pursuant to a 1980 amendment to Chapter 367, Florida Statutes, public utilities are now entitled to automatically adjust their major categories of operating costs incurred during the previous calendar year by applying a price increase or decrease index to those costs. Section 367.081(4)(a), Florida Statutes. The PSC has established an 8.99 percent index for application by utilities in 1981. Highland Shores/Knecht Road Adjustments It is anticipated that the City of Palm Bay will purchase petitioner's water distribution system serving one commercial and 54 residential customers in the Highland Shores subdivision and 8 customers on Knecht Road. Petitioner eliminated certain amounts from its revenues, variable expenses and rate base to reflect this transaction, but did not adjust non-variable fixed costs which would not be affected by loss of these customers. Adjustments were made to chemical and electrical expenses and depreciation and property taxes associated with the plant serving those areas. No adjustments were made to payroll or other labor expenses. Petitioner presented evidence that the loss of those customers would not reduce personnel requirements or labor costs. The witness for the OPC proposed across-the-board adjustments for all operating and maintenance expenses based upon percentages of consumption and usage figures associated with these areas. Cost of Capital In actuality, the capital structure of petitioner consists almost entirely of equity invested in the utility by its parent, General Development Corporation. With adjustments for funds not available to petitioner, petitioner used its parent's capital structure in performing its cost of money analysis since the ultimate source of its equity funding consists of a mixture of debt and equity at the parent company level. All parties agreed that the proper capital structure to use in this case is that of petitioner's parent, General Development Corporation. Employing a discounted cash flow method and a risk premium analysis, petitioner has determined tat its cost of equity capital ranges from 18.06 percent to 22.32 percent, with a midpoint of 20.19 percent. Under the discounted cash flow method, the five year annual growth rates of ten water utilities were averaged and added to the average dividend yield for those utilities, to obtain an 18.06 percent return on equity. Under the risk premium analysis, petitioner analyzed utility debt costs by considering the current costs and yields of bonds, and then added a 4 percent risk premium to reflect the higher yield associated with equity as compared to debt. This analysis resulted in equity ranges between 20.59 percent and 22.32 percent. These figures are comparable to the combination of dividend yield and price appreciation of the Fortune 500 companies. The OPC witness concluded that a reasonable return on equity for petitioner would be between 14 percent and 14.5 percent. In measuring this cost of equity for petitioner, the comparable earnings method and a discounted cash flow method was employed. The former method involves an observation of the equity returns achieved by companies of comparable risks. Mr. Parcell examined the earnings of unregulated companies and large public utilities. His discounted cash flow method combined dividend yield and growth in retained earnings for nine water companies. The petitioner presented evidence that its current cost of debt is 15.3 percent instead of the 10.89 percent originally indicated in its application. Rate Case Expenses Petitioner originally estimated its rate case expenses at $25,000 based upon the assumption that there were only two issues in dispute between the utility and the PSC staff and that the proceedings could be handled by in-house personnel. Following the intervention of the Office of Public Counsel, the corresponding increase in the number of issues to be litigaged and the six additional days of actual hearing, petitioner is claiming that rate case expenses are $105,787. This figure is based upon the hourly rates of various professionals and the actual expenses incurred for the hearings. Petitioner expects the rates which will result from these proceedings to be in effect for no more than two years. This is consistent with petitioner's past history. Petitioner therefore seeks to amortize its rate case expenses over a two-year period and to divide them equally between the water and sewer operations. The OPC presented testimony expressing the opinion that the expenses claimed by petitioner in this proceeding were unreasonable and entirely out of line. It was pointed out that the expenses requested amount to about 20 percent of the total proposed revenue increase. It is contended that the hourly rates charged by petitioner's witnesses are excessive and that it was unreasonable to engage more than one witness per issue in a case of this magnitude. The hourly rates charged by the OPC's witnesses were set pursuant to an annual contract between those witnesses and the Office of Public Counsel. The OPC also believes that rate case expenses should be amortized over a three to five year period to properly take into account the newly enacted automatic pass-through provisions of Chapter 367, Florida Statutes, which should increase the time between rate cases. One witness testifying for the OPC did not feel that rate case expenses should be recovered at all through rates. The PSC staff witness did not feel that the rate case expenses claimed by petitioner were excessive when compared with other utilities of similar size.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is RECOMMENDED that the issues in dispute in this proceeding be resolved as follows: That the quality of water and sewer service provided by petitioner to its customers be found satisfactory; That 100 percent of petitioner's water treatment plant, 60.5 percent of its sewage treatment plant and 100 percent of its sewage collection and distribution system be found to be used and useful in the public service and that $162,501 attributable to petitioner's water distribution lines be excluded from rate base; That petitioner's water loss of 9 percent is not excessive; That those assets in service during the test year carried on the utility's books as construction work in progress be transferred to utility plant in service and the remaining amount of CWIP proposed by petitioner for inclusion in rate base is reasonable; That accumulated depreciation on contributions-in-aid-of-construction not be excluded from petitioner's rate base; That the formula approach utilized by petitioner in determining its working capital requirements is appropriate in this case; That the petitioner's federal tax expenses be calculated at the 46 percent statutory rate; That the composite rates of depreciation of 3.11 percent on petitioner's sewer division and 3.43 percent on its water division be adopted; That petitioner's proposed 8.3 percent inflation adjustment for certain operation and maintenance expenses be rejected; That the adjustments proposed by petitioner for loss of its Highland Shores/Knecht Road customers are appropriate; That the capital structure of General Development Corporation be utilized to determine petitioner's cost of capital; that petitioner's cost of debt is 15.3 percent and that petitioner's cost of equity is 18.06 percent; and That rate case expenses in the amount of $105,787 are reasonable. Respectfully submitted and entered this 8th day of December, 1981, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of December, 1981. COPIES FURNISHED: Gary P. Sams, Esquire and Richard D. Melson, Esquire Hopping, Boyd, Green & Sams Suite 420 Lewis State Bank Building Tallahassee, Florida 32301 Nancy H. Roen, Esquire General Development Utilities, Inc. 1111 South Bayshore Drive Miami, Florida 33131 Gregory J. Krasovsky, Esquire Florida Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301 Jack Shreve, Esquire Stephen C. Burgess, Esquire and Suzanne S. Brownless, Esquire Room 4, Holland Building Tallahassee, Florida 32301 Steve Tribble, Clerk Florida Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301
The Issue The issue in this case is whether the Petition to Establish Rule and the Amended Petition to Establish Rule (the Petition) should be granted.
Findings Of Fact The Petitioner, Centrex Homes, is a Nevada General Partnership which owns or has authority over the property proposed for establishment of the state created District. Clay County is the affected local general purpose government, a political subdivision of Florida, within whose jurisdiction in the unincorporated area of the county the proposed land is located. The Petition proposes the establishment by rule of Fleming Island CDD on certain proposed real property in the unincorporated area of Clay County. (The uniform statutory charter for all established community development districts (CDDs) is found in Sections 190.006 through 190.046, Florida Statutes (Supp. 1998), as amended by Chapter 99-378, Laws of Florida (1999). See Conclusions, infra.) The proposed land to be served by Fleming Island CDD consists of approximately 1,580 acres bounded on the north and west by vacant property; on the east by U.S. Highway 17, Fleming Island Estates and the St. Johns River; on the southwest by Black Creek; and on the south by Black Creek and the St. Johns River. A map showing the location of the land areas to be served by the CDD was attached as Petitioner's Exhibit No. 1 to the Petition. As proposed, Fleming Island CDD contains no enclaves; the land is contiguous and will be separated only by roads, streets, or other similar, small barriers. The Petition alleges that the metes and bounds legal description of the property is contained in Petition Exhibit No. 2. The Petition Exhibit Nos. 3, 4, and 5 constitute documentation that the owners of all the real property proposed to be included in Fleming Island CDD have given written consent to the establishment of the CDD on the proposed property. The Petition names the five persons (revised in the Amended Petition) to serve on the initial Board of Supervisors upon establishment of the CDD by rule. The Petition identifies and depicts in Petition Exhibit No. 6 proposed land uses within the previously-approved DRI. The Petition identifies the DRI development order in Petition Exhibit No. 7. The Petition identifies and depicts in Petition Exhibit No. 8 the main trunk waterlines, sewer interceptors, and outfalls on the property proposed to be served by the CDD. The Petition sets forth in Petition Exhibit No. 9 (revised in the Amended Petition) the proposed timetable and schedule of estimated costs for the construction of the proposed facilities. The Petition alleges and Petitioner's Exhibit No. 2 admitted at the hearing demonstrates that the Clay County Local Government Comprehensive Plan is an effective local government comprehensive plan which is in compliance with state law. The Petition also alleges that the Clay County future land use map (FLUM) designates the land to be within Fleming Island CDD. Petition Exhibit No. 11 is a Statement of Estimated Regulatory Costs. The Petitioner paid $15,000 to Clay County for the required filing and processing fees prior to filing the Petition on April 30, 1999. Based on the evidence, all statements contained within the Petition are found to be true and correct. See pre-filed and oral testimony of Gary L. Moyer; testimony of Petitioner's land use planner, Susan Fraser, AICP; and testimony of Petitioner's business expert, William J. Rizzetta. The underlying community development anticipated to be served by the CDD is described in Section 1.0 of the Statement of Estimated Regulatory Costs at Petition Exhibit No. 11 and in the testimony of Gary L. Moyer. It will be consistent with and similar to the adjacent development. Development in Fleming Island CDD is to proceed under the development order for development of regional impact (DRI). The evidence, especially the testimony of Susan Fraser (AICP), indicates that establishment of Fleming Island CDD will not be inconsistent with any applicable element or portion of the state comprehensive plan or of the Clay County Comprehensive Plan. There was no evidence to the contrary. The evidence indicates that the area of land within the proposed CDD is of sufficient size, is sufficiently compact, and sufficiently contiguous to be developable as one, functional, interrelated community. There was no evidence to the contrary. The evidence indicates that the CDD is the best alternative available for delivering community development services and facilities (including recreational facilities) to the area that will be served by the CDD. There was no evidence to the contrary. The evidence indicates that the CDD's services and facilities will not be incompatible with the capacity and uses of existing local and regional community development services and facilities. There was no evidence to the contrary. The evidence was that the area to be served by Fleming Island CDD is amenable to separate special-district government. There was no evidence to the contrary. Clay County also held a public hearing on the Petition, which resulted in the County's adoption of a Resolution 99-57 supporting the Petition and establishment of the Fleming Island CDD.
Conclusions On October 2, 1999, a local public hearing was held in this case in Green Cove Springs, Clay County, Florida, before Don W. Davis, Administrative Law Judge (ALJ), Division of Administrative Hearings, under the authority of Section 190.005(1)(d), Florida Statutes (Supp. 1998).
Conclusions Having considered the totality of the record in this cause and being mindful of the development order of Lee County referenced above and the lack of expressed opposition to the establishment of the subject community services district by Lee County or any other person or entity, it is, concluded: That all statements contained within the petition are found to be true and correct. That the creation of the district is consistent with applicable elements or portions of the Lee County Comprehensive Plan. That the area of land within the proposed district is of sufficient size, sufficiently compact, and is sufficiently contiguous to be developable as one functional, interrelated community. That the district is the best alternative available for delivering community development services and facilities to the area that will be served by the district. That the community development services and facilities of the district would be compatible with the capacity and uses of existing local and regional community development services and facilities. That the area that will be served by the district is amenable to separate, special-district government. DONE and ENTERED this 30th day of January, 1986 in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of January, 1986. COPIES FURNISHED: Ken van Assenderp, Esq. YOUNG, VAN ASSENDERP, VARNADOE & BENTON, P.A. Post Office Box 1833 Tallahassee, Florida 32302 Melvin D. Deutsch, II, Esq. Timothy Jones, Esq. Westinghouse Gateway Communities, Inc. 1625 Hendry Street, Suite 201 Fort Myers, Florida 33901 Michael J. Ciccarone, Esq. Assistant County Attorney Lee County Post Office Box 398 Fort Myers, Florida 33902 Glenn Robertson, Secretary Florida Land Water Adjudicatory Commission Office of the Governori The Captol Tallahassee, Florida 32301
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent repay Petitioner in accordance with the Final Determination issued on January 26, 1983. DONE and ORDERED this 8th day of June, 1983 in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of June, 1983. COPIES FURNISHED: Chad J. Motes, Esquire Suite 131 - Montgomery Building 2562 Executive Center Circle, East Tallahassee, Florida 32301 Mary M. McDaniel, Esquire 101 East Maud Street Tavares, Florida 32778 Honorable Wallace E. Orr Secretary, Department of Labor and Employment Security Suite 206 Berkley Building 2590 Executive Center Circle, East Tallahassee, Florida 32301
The Issue The issue before the Florida Land and Water Adjudicatory Commission (FLWAC) in this proceeding is whether the Petition to Establish the Myakka Ranch Community Development District (Petition) meets the criteria set forth in Chapter 190, Florida Statutes, and Chapter 42-1, Florida Administrative Code. The local public hearing was for the purpose of gathering information in anticipation of quasi-legislative rulemaking by FLWAC.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as a personal view of the premises by the Hearing Officer, the following relevant facts are found: In January of 1975, Central Development Company, as the owner of the Mainland Lot 20, Parkers Haven, and the owner of Parker Island, submitted to the Trustees of the Internal Improvement Fund its application for an easement across the sovereignty land between these properties in King's Bay, Crystal River. An application for a permit from the Department of Environmental Regulation to construct a concrete bridge across this land had previously been submitted. By letter dated March 16, 1977, Edward H. Cederholm with the Department of Natural Resources was notified that the Department of Environmental Regulation had determined that the bridge proposed by the applicant would have no significant adverse effect on water quality. Representatives from the Department of Natural Resources had previously concluded, after a biological and hydrographic assessment, that the bridge in itself would not significantly affect aquatic biological resources nor would it have significant adverse hydrographic effects. The Game and Fresh Water Fish Commission had no objection to the bridge itself, but did express concern over the future development of Parker Island. The request for a right-of-way easement for the bridge construction was a scheduled item for the Trustees' Agenda for April 7, 1977. The Staff of the Department of Natural Resources recommended approval of the easement request, noting that "the executed easement will be provided to the applicant upon affirmative permitting action by D.E.R." The Trustees deferred action on the request until a public hearing pursuant to Florida Statutes Section 253.115 could be conducted by the Department of Natural Resources. The Department of Natural Resources thereafter withdrew its recommendation to the Trustees pending the outcome of the public hearing. That public hearing was conducted in Crystal River on September 9, 1977, by the Department of Natural Resources. Having previously submitted an application to the Department of Environmental Regulation for the installation and maintenance of power poles and lines on and between Banana and Parker Island in Citrus County, Florida Power Corporation submitted an application to the Department of Natural Resources for an easement or other form of consent for the same. Presumably, the public hearing held on September 9, 1977, included this issue as well as the proposed bridge issue. No application has been received by the Department of Natural Resources for the construction and maintenance of a boardwalk by the Banana Island Recreation Association, Inc. The petitioners herein attempted to present evidence that it would not be in the public interest for Department of Natural Resources or the Trustees to grant easements for the bridge, power poles and lines, or boardwalk projects for the reasons that said projects would: present a hazard or serious impediment to navigation in the area; have an adverse effect upon water quality and aquatic resources; endanger an already endangered species - the manatee; and deprive waterfront property owners of their common law riparian rights to an unobstructed view. Additionally, petitioners contend that the applicants and Department of Natural Resources have failed to comply with the provisions of Chapter 253 regarding sales and conveyances of land, the title to which is vested in the Trustees. The Department of Natural Resources forwarded the requests for hearings to the Division of Administrative Hearings, and the undersigned Hearing Officer was duly designated to conduct the hearings. Upon the agreement of all parties, the hearing in this cause was consolidated with the hearings on the Department of Environmental Regulation permit applications for the bridge, the power poles and lines and the boardwalk. The separate recommended orders entered in those cases contain specific findings of fact concerning the evidence presented at the hearing relating to the effect of those projects upon navigation, water quality, aquatic resources, the manatee and riparian rights to an unobstructed view. In summary, it was concluded that the petitioners failed to present sufficient evidence that the public interest in these areas would be harmed by the granting of the Department of Environmental Regulation permits. The reader of this recommended order is specifically referred to the findings of fact and conclusions of law contained in the recommended orders entered in Case Nos. 76- 1102, 76-1103 and 77-849 and 850, all of which are attached hereto.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that the Board of Trustees of the Internal Improvement Trust Fund issue to Central Development Company and Florida Power Corporation the required easements or other forms of consent authorizing the proposed usages of sovereignty lands as set forth in their applications for the same. Respectfully submitted and entered this day of September, 1977, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida COPIES FURNISHED: Kenneth F. Hoffman, Esquire Post Office Box 1872 Tallahassee, Florida 32302 Alfred W. Clark, Esquire Assistant General Counsel Department of Environmental Regulation 2562 Executive Center Circle, E. Montgomery Building Tallahassee, Florida 32301 Baya Harrison, III, Esquire Post Office Box 391 Tallahassee, Florida 32302 David Gluckman, Esquire 3348 Mahan Drive Tallahassee, Florida 32303 Mr. H. A. Evertz, III Florida Power Corporation Post Office Box 14042 St. Petersburg, Florida 33733 Kent A. Zaiser, Esquire Assistant Department Attorney Department of Natural Resources Crown Building 202 Blount Street Tallahassee, Florida ================================================================= AGENCY FINAL ORDER ================================================================= BEFORE THE STATE OF FLORIDA DEPARTMENT OF NATURAL RESOURCES TRUSTEES OF THE INTERNAL IMPROVEMENT TRUST FUND STANLEY HARTSON et al., ) ) Petitioner, ) ) vs. ) CASE NO. 77-960 ) DEPARTMENT OF NATURAL RESOURCES, ) et al., ) ) Respondents. ) )
