The Issue The issues for decision in these cases, based upon the relief sought by Petitioners1 in their Petitions for Formal Administrative Hearing, are: whether Petitioners are entitled to "full credit or refunds of Medical Assistance Trust Fund assessments" paid by Petitioners to Respondent, the Agency for Health Care Administration, and if so, the amount of the refund each Petitioner is entitled to; whether Respondent denied the requested credit or refunds by an unadopted rule which constitutes an "invalid exercise of delegated legislative authority"; and whether Petitioners are entitled to reasonable costs and attorneys' fees pursuant to Section 120.595, Florida Statutes (2004).
Findings Of Fact The Parties. Each of the Petitioners is a hospital licensed in the State of Florida. Petitioners have standing to participate in this proceeding. Respondent, the Agency for Health Care Administration (hereinafter referred to as the "Agency"), is the agency of the State of Florida charged with the responsibility for, among other things, management of the Public Medical Assistance Trust Fund (hereinafter referred to as the "PMATF"). The PMATF. Establishment and Purpose of the PMATF The PMATF, which was established by the Legislature in 1984, is provided for, and its purpose described in, Section 409.918, Florida Statutes (2004): It is declared that access to adequate health care is a right which should be available to all Floridians. However, rapidly increasing health care costs threaten to make such care unaffordable for many citizens. The Legislature finds that unreimbursed health care services provided to persons who are unable to pay for such services cause the cost of services to paying patients to increase in a manner unrelated to the actual cost of services delivered. Further, the Legislature finds that inequities between hospitals in the provision of unreimbursed services prevent hospitals that provide the bulk of such services from competing on an equitable economic basis with hospitals that provide relatively little care to indigent persons. Therefore, it is the intent of the Legislature to provide a method for funding the provision of health care services to indigent persons, the cost of which shall be borne by the state and by hospitals that are granted the privilege of operating in this state. All moneys collected pursuant to s. 395.701 shall be deposited into the Public Medical Assistance Trust Fund, which is hereby created. Moneys deposited into the Public Medical Assistance Trust Fund shall be used solely for the purposes specified by law. [Emphasis added]. Funding of the PMATF Funding of the PMATF is provided for, in relevant part, by Section 395.701(2), Florida Statutes (2004). Section 395.701(2), Florida Statutes (2004), provides that all hospitals, with a few exceptions not relevant to this matter, are responsible for the partial funding of the PMATF. The following definitions pertinent to assessments of PMATF funds from Florida hospitals are provided in Section 395.701(1), Florida Statutes (2004): For the purposes of this section, the term: "Agency" means the Agency for Health Care Administration. "Gross operating revenue" or "gross revenue" means the sum of daily hospital service charges, ambulatory service charges, ancillary service charges, and other operating revenue. "Hospital" means a health care institution as defined in s. 395.002(11), but does not include any hospital operated by the agency or the Department of Corrections. "Net operating revenue" or "net revenue" means gross revenue less deductions from revenue. "Total deductions from gross revenue" or "deductions from revenue" means reductions from gross revenue resulting from inability to collect payment of charges. Such reductions include bad debts; contractual adjustments; uncompensated care; administrative, courtesy, and policy discounts and adjustments; and other such revenue deductions, but also includes the offset of restricted donations and grants for indigent care. In addition to amounts paid into the PMATF by hospitals, funds, referred to as "matching" funds, are also paid into the PMATF by the Federal government. The Rate of, and Basis for, the PMATF Assessment In providing for the imposition of a PMATF assessment against hospitals, the Legislature has established a rate of assessment and designated what that rate is to be assessed against, or the hospital's assessable basis. Prior to the 2000 legislative amendment of Section 395.701(2), Florida Statutes, which is at issue in these cases, the rate of assessment established by the Legislature was 1.5 percent. The Legislature has also provided that the assessable basis is a hospital's "net operating revenue." The Legislature has defined "net operating revenue" for purposes of the PMATF assessment as a hospital's "gross revenue less deductions from revenue." § 395,701(1)(d), Fla. Stat. (2004). "Gross revenue" is defined as "the sum of daily hospital service charges, ambulatory service charges, ancillary service charges, and other operating revenue," more commonly referred to as inpatient services revenue, outpatient services revenue, and other operating revenue. § 395.701(1)(b), Fla. Stat. (2004). Prior to the amendment of Section 395.701(2), Florida Statutes, adopted during the 2000 legislative session at issue in these cases, the PMATF assessment was imposed on a hospital's "net operating revenue" at the same rate regardless of whether the revenue was derived from inpatient services, outpatient services, or other operating services.9 Hospital PMATF Reporting Requirements Hospitals in Florida are required to provide extensive financial information to the Agency utilizing the Florida Hospital Uniform Reporting System, Florida Administrative Code Chapter 59E-5 (hereinafter referred to as "FHURS"). In particular Florida Administrative Code Rule 59E-5.201, provides that "[e]ach hospital shall submit to the Agency, not more than 120 days subsequent to the end of its fiscal year, its prior year report for the fiscal year then ended." A hospital's FHURS report (hereinafter referred to as "Prior Year Report") is received and processed by the Agency's Financial Analysis section, which is contained in the Agency's Bureau of Health Facility Regulation. Once received, Financial Analysis is required to review the report and determine if the report is "accepted" or "not accepted." Fla. Admin. Code R. 59E- 5.204(3). Financial Analysis is required by Florida Administrative Code Rule 59E-5.204(3) to notify the submitting hospital as to whether its Prior Year Report has been accepted or not within 90 days after the report is received by the Agency. Prior Year Reports contain, in addition to numerous other items of financial information, the information required by the Agency to actually calculate the amount of a hospital's PMATF assessment. The Agency's Determination of the Amount of a Hospital's PMATF Assessment; Hospital Notification Once a hospital's fiscal year has ended and it has filed its Prior Year Report, Section 395.701(2), Florida Statutes (2004), charges the Agency with the responsibility for calculating and collecting the hospital's PMATF assessment. Pursuant to Florida Administrative Rule 59E-5.605(1), it is contemplated that the Agency's Bureau of Health Facility Regulation, through its Financial Analysis section, will make the calculation of the amount of a hospital's PMATF assessment and "certify" that amount to the Agency's Bureau of Finance and Accounting (hereinafter referred to as the "Bureau of F&A"). The financial information necessary to calculate a hospital's PMATF assessment is obtained from the hospital's Prior Year Report. This information may be obtained before Financial Analysis has decided whether a Prior Year Report will be accepted or not. Once informed by Financial Analysis of the PMATF assessment, the Bureau of F&A is then responsible for notifying the hospital of the amount of the assessment and then collecting the hospital's payment thereof. Florida Administrative Code Rule 59E- 5.605(3) provides that, once a hospital is notified of its assessment the hospital "[m]ay request a hearing pursuant to Section 120.57, F.S." The request for hearing is to be made "[w]ithin 21 days of receipt of notification of the assessment amount . . . ." Fla. Admin. Code R. 59E-5.605(3). Section 395.701(2), Florida Statutes (2004), provides that the Bureau of F&A is to certify the amount of a hospital's PMATF assessment "[w]ithin 6 months after the end of each hospital fiscal year . . ." and, therefore, it is contemplated that the calculation by the Agency of the PMATF assessment will be accomplished within the same period of time. Payment and Deposit of PMATF Assessments Section 395.701(2), Florida Statutes (2004), provides that, once the Agency has calculated a hospital's PMATF assessment and notified the hospital thereof, the hospital will pay the assessment to the Agency as follows: The assessment shall be payable to and collected by the agency in equal quarterly amounts, on or before the first day of each calendar quarter, beginning with the first full calendar quarter that occurs after the agency certifies the amount of the assessment for each hospital. § 395.701(2), Fla. Stat. (2004). All PMATF assessments received by the Agency are to be deposited into the PMATF. Id. Application of Section 395.701, Florida Statutes (1999), to a Hypothetical Hospital, Using the 1999 Rate of Assessment and Assessable Basis In an effort to demonstrate how Section 395.701, Florida Statutes, is intended to operate, the following hypothetical may be helpful. Assume a hospital has a fiscal year ending December 31, 1999, and, during that fiscal year, it had net operating revenue of $10,000,000.00. Applying the PMATF assessment rate prior to the 2000 amendment of Section 395.701(2), Florida Statutes (1999), at issue in these cases, which was 1.5 percent, the hypothetical hospital's PMATF assessment would be $150,000.00 and the assessment would be payable in equal quarterly amounts of $37,500.00. The hypothetical hospital would be subject to the following time-lines relevant to the assessment and payment of its PMATF1: Fiscal year end: December 31, 1999; 1999 Prior Year Report due: April 30, 2000; Agency notification to the hospital that the Prior Year Report is accepted or not accepted: July 29, 2000; and Certification of the PMATF assessment: June 30, 2000; Time to request an administrative hearing: July 21, 2000; Quarterly payments of the PMATF assessment due: July 1, 2000, October 1, 2000, January 1, 2001, and April 1, 2001. Application of Section 395.701(2), Florida Statutes, in Reality While the hypothetical application of Section 395.701(2), Florida Statutes (1999), supra, is consistent with the statute and applicable rules, in reality the times-lines noted in paragraph 23 are inconsistent with actual practices of hospitals and the Agency. These inconsistencies are relevant to the extent that they ultimately impact the actual payment and receipt of PMATF funds from hospitals, which in turn has some bearing on the resolution of these cases. First, a Prior Year Report for a December 31, 1999, fiscal year-end hospital would not likely have been filed on or before April 30, 2000.11 Even though Prior Year Reports are generally required to be filed within 120 days after the end of a hospital's fiscal year, hospitals often request and are granted extensions of time to file the reports. Secondly, the Agency would not have been likely to determine by July 29, 1999, whether a Prior Year Report for a December 31, 1999, fiscal year-end hospital was accepted or not accepted. Even after a hospital has filed its Prior Year Report, it is often determined that additional information is necessary before the Agency can proceed. Requesting and obtaining this additional information can delay the time when a Prior Year Report is actually "accepted" or "not accepted." Thirdly, as a result of the fact that the applicable statute and rules do not require that a hospital's Prior Year Report be accepted or not accepted prior to the certification of a PMATF assessment and due to delays in the filing of Prior Year Reports and the Agency's acceptance thereof, the Agency is not able to base its calculation of a PMATF assessment on an accepted Prior Year Report in the great majority of instances. Approximately 70 percent of Petitioners had their 2000 fiscal year Prior Year Reports used to calculate the amount of their PMATF assessments before those reports had been accepted or not accepted. The fact that Prior Year Reports have not been "accepted" or "not accepted" does not in practice, however, delay the Agency's calculation of the PMATF assessment. In practice, the Agency determines that the Prior Year Report is provisionally accepted and goes forward with the calculation of the PMATF assessment without regard to whether Financial Analysis has completed its review of the Prior Year Report. Fourthly, although it is contemplated that the Agency's Financial Analysis section is to calculate and certify the amount of a PMATF assessment to the Bureau of F&A, the Bureau of F&A actually makes the calculation. Fifthly, the Agency has abandoned the practice, required by Section 395.701(2), Florida Statutes, of "certifying" the amount of a hospital's PMATF assessment. Instead, the Agency simply sends an invoice to the hospital which informs the hospital of the amount of its quarterly assessment.12 The Agency does not notify the hospital in the invoice of any point of entry or time constraint on requesting an administrative hearing to challenge the invoice. Due to some of the foregoing described practices, in reality the actual payment of the assessment by a hospital of its PMATF assessment is likely to be significantly later than contemplated by the statute. For example, Petitioners' Exhibit numbered 8 is an example of the actual experience of one of Petitioners, Brandon Hospital. Despite the fact that this hospital's fiscal year ended December 31, 1995, the invoice for its PMATF assessment for that year was dated March 2, 1998, and its first quarterly payment was not due until April 3, 1998, more than two years after the end of its fiscal year. Summary Based upon the foregoing, it is clear that the Legislature, prior to its amendment of Section 395.701, Florida Statutes, during the 2000 session, and as implemented by relevant rules of the Agency, had established the following necessary components of the PMATF assessment: Who the PMATF assessment is imposed on: hospitals; The rate of the PMATF assessment: 1.5 percent; The assessable basis for the PMATF assessment: annual net operating revenue (inpatient, outpatient, and other incomes) actually experienced during the hospital's previous fiscal year; Who provides the information necessary to compute annual net operating revenue: hospitals; Who calculates the PMATF assessment: the Agency; How a hospital learns of its PMATF assessment: the Agency is supposed to "certify" the assessment, but in reality merely invoices the hospital; and When a PMATF assessment is payable: in quarterly installments beginning with the first full calendar quarter after the Agency "certifies" (invoices, in practice) the amount of the assessment. The one necessary component of the PMATF assessment which Section 395.701, Florida Statutes, both before or after its amendment in 2000, does not specifically state is the exact point in time that the PMATF assessment is to be imposed. In other words, while the statute specifically states that the rate of assessment is "1.5 percent," it does not specifically state that the assessment will be imposed "at one second after the end of the hospital's fiscal year" or other equivalent language. This lack of a specific "statement," however, does not mean that the determination of when a PMATF assessment is intended by the Legislature to be imposed, the dispositive issue in these cases, is not clear from the language of the statute.13 That intent, which is concluded to be unambiguous, will be discussed, infra. The 2000 Legislative Change to the PMATF; Chapter 2000- 256, Laws of Florida. The Relevant Changes in Section 395.701(2), Florida Statutes During the 2000 legislative session, Chapter 2000-256, Laws of Florida, the "Patient Protection Act of 2000" (hereinafter referred to as the "Act"), was passed. Relevant to this proceeding, the Act modified Section 395.701(2), Florida Statutes (1999), as follows: (2)(a) There is imposed upon each hospital an assessment in an amount equal to 1.5 percent of the annual net operating revenue for inpatient services for each hospital, such revenue to be determined by the agency, based on the actual experience of the hospital as reported to the agency. Within 6 months after the end of the each hospital fiscal year, the agency shall certify the amount of the assessment for each hospital. The assessment shall be payable to and collected by the agency in equal quarterly amounts, on or before the first day of each calendar quarter, beginning with the first full calendar quarter that occurs after the agency certifies the amount of the assessment for each hospital. All moneys collected pursuant to this subsection shall be deposited in the Public Medical Assistance Trust Fund. (b) There is imposed upon each hospital an assessment in an amount equal to 1 percent of the annual net operating revenue for outpatient services for each hospital, such revenue to be determined by the agency, based on the actual experience of the hospital as reported to the agency. Within 6 months after the end of the each hospital fiscal year, the agency shall certify the amount of the assessment for each hospital. The assessment shall be payable to and collected by the agency in equal quarterly amounts, on or before the first day of each calendar quarter, beginning with the first full calendar quarter that occurs after the agency certifies the amount of the assessment for each hospital. All moneys collected pursuant to this subsection shall be deposited in the Public Medical Assistance Trust Fund. [Emphasis in original; words and letters underlined denote additions to Section 395.701(2), Florida Statutes.]. Of significance to the resolution of these cases, the Legislature, in passing the Act, made the following changes in the PMATF, and no others: First, the 1.5 percent PMATF assessment rate was limited to net operating revenue from inpatient services; Secondly, the rate imposed on net operating revenue from outpatient services was reduced from 1.5 percent to 1.0 percent; and Finally, the imposition of the PMATF assessment on other operating revenue was eliminated. Also of significance to the resolution of these cases, is the fact that the Legislature, in passing the Act, did not make any change to the following necessary components of the PMATF assessment: Who the PMATF assessment is imposed on; Who provides the information necessary to compute net operating revenue; Who calculates the PMATF assessment; How a hospital learns of its PMATF assessment; and When a PMATF assessment is payable. Of greatest significance to the resolution of these cases, is the fact that the Legislature, in passing the Act, did not make any change or even discuss when it intended for a PMATF assessment to be imposed. The Effective Date of the Act Generally, and the Changes to the PMATF in Particular Section 64 of the Act provides that "except as otherwise provided herein, this Act shall take effect on July 1, 2000." Section 22 of the Act provides the following concerning the effective date of the relevant changes to the PMATF: The amendments to Sections 395.701 and 395.701(5), Florida Statutes, by this Act shall take effect only upon the Agency for Health Care Administration receiving written confirmation from the Federal Health Care Financing Administration that the change outlined in such amendments will not adversely affect the use of the remaining assessments as state match for the State's Medicaid Program. The effect of Section 22 of the Act was to require that the Agency, as a condition upon the imposition of the changes to the PMATF, seek and obtain assurances from the Federal Health Care Financing Administration (hereinafter referred to as "HCFA"), that the reduction in the rate of the PMATF assessment on outpatient revenues and the other PMATF changes would not have any adverse effect on the amount of "matching funds" which the Federal government would pay to Florida's Medicaid Program. On or about June 9, 2000, the Agency sought the required assurances contemplated by the Act from HCFA. Those assurances were received prior to July 1, 2000.14 Based upon the foregoing, there is not dispute in these cases that the effective date of the reduction in the rate of the PMATF assessment on revenue from outpatient services, the elimination of the PMATF on other operating revenue, and the other PMATF changes included in the Act was July 1, 2000. The $28.3 Million Appropriation of PMATF Funds When considering the adoption of the changes to the PMATF ultimately made by the Legislature during the 2000 legislative session, the Legislature realized that the reduction of the rate of the PMATF applicable to a hospital's net operating revenue from outpatient services, from 1.5 percent to 1.0 percent (hereinafter referred to as the "Reduced Rate") and the elimination of the PMATF assessment on other operating revenue would cause a significant reduction in the total payments made to the PMATF by hospitals and, consequently, the amount of matching funds from the Federal government. The Legislature also realized that the reduction would begin to occur during the state's fiscal year beginning July 1, 2000, the effective date of the Act. It was also realized that the reduction in PMATF funds would be a recurring one. In recognition of the need to continue to fund the PMATF and to avoid the loss of Federal matching funds, the Legislature attempted to make up for the loss in PMATF funds by including the following in the Act: Section 20 - The Legislature shall appropriate each fiscal year from either the General Revenue Fund or the Agency for Health Care Administration Tobacco Settlement Trust Fund, an amount sufficient to replace the funds lost due to reduction by this Act of the assessment on other health care entities under Section 395.7015, Florida Statutes, and the reduction by this Act on the assessment on hospitals under Section 395.701, Florida Statutes, and to maintain federal approval of the reduced amount of funds deposited into the Public Medical Assistance Trust fund under Section 395.701, Florida Statutes, as state match for the state's Medicaid Program. Section 21 -There is hereby appropriated the sum of $28.3 million from the General Revenue Fund to the Agency for Health Care Administration to implement the provisions of this Act relating to the Public Medical Assistance Trust Fund, provided, however, that no portion of this appropriation shall be effective that duplicates a similar appropriation for the same purpose contained in other legislation from the 2000 Legislative Session that becomes law. Thus, the Legislature indicated its intention to replace the recurring loss of PMATF collections from hospitals caused by the Act and provided for the replacement of funds expected to be lost during the first fiscal year for which the changes were effective, the July 1, 2000 to June 30, 2001, fiscal year. The $28.3 million appropriation was arrived at by first estimating the total collections projected to be made during the state's fiscal year beginning July 1, 2000, of PMATF assessments without the modifications to the PMATF adopted in the Act, and then estimating the extent to which those collections would be reduced as a result of the modifications to the PMATF. Total PMATF collections projected for the fiscal year, without the modifications adopted in the Act, were estimated to be $84.9 million and it was estimated that approximately one-third of projected collections, or $28.3 million, would be lost as a result of the modifications to the PMATF.15 The Agency did not suggest to the Legislature that the $28.3 million appropriation was excessive and yet, when the amount of the appropriation approved by the Legislature is compared with the amount which the Agency has argued in these cases hospitals should receive in refunds, the amount of the appropriation is excessive. The Agency has made no effort to explain its apparent inconsistent positions.16 The Agency's Analysis of the Act On May 31, 2000, following the passage of the Act but before it became law, the Agency submitted a bill analysis and economic impact statement on the Act to the Office of the Governor, accompanied by a cover letter under the signature of the then Agency Secretary, Ruben King-Shaw, Jr. In the cover letter, Mr. King-Shaw recommended that the Governor sign the Act into law. In the Agency's analysis of the Act, the Agency describes the changes to the PMATF adopted in the Act, including the Reduced Rate, and suggests that the fiscal impact of the provisions of the Act related to the PMATF would be a $23.1 million17 reduction in PMATF assessment revenues during the state's fiscal year beginning July 1, 2000. Explaining the projected loss, the Agency stated the following: The reduction in the rate of assessments outlined above will mean that approximately $28.3 million in revenue will be lost to the Public Medical Assistance Trust Fund. Alternative state funding will be required. If the alternative state funding is not appropriated, the Medicaid Program will be required to reduce services by $65.2 million ($28.3 million state, and $36.9 million federal matching funds). The bill provides for an appropriation from the general revenue fund of $28.3 million to replace the funds lost due to the repeal of the assessments. Petitioners' Exhibit 2, Bate Stamp Page 2-19. The Agency's analysis of the Act also contains, beginning at Bate Stamp Page 2-32 of Petitioners' Exhibit 2, a "Fiscal Impact on State Agencies/Funds" section describing the projected financial impact of the Act. Among other things, this Fiscal Impact section notes that, during the state's fiscal year beginning on the effective date of the Act, the projected loss of just over $28.3 million in total PMATF assessment collections from hospitals expected during that fiscal year would be made up for by the $28.3 million appropriated by the Legislature in the Act. Again, the Agency's analysis is inconsistent with the position it was later to take and the position it now takes in this proceeding as to when the Reduced Rate should apply to PMATF assessments. The Agency's analysis is, however, consistent with the conclusion that the Reduced Rate was to have an immediate impact on PMATF assessment collections during the state's fiscal year beginning on the effective date of the Act. Again, the inconsistency in the Agency's position in these cases with the analysis provided to the Governor was not explained by the Agency during the hearing of these cases. The Agency's Changed Interpretation of the Act. Although the Agency's analysis of the Act's impact on the PMATF provided to the Office of the Governor suggests that it believed that the Reduced Rate would have an impact during the fiscal year beginning July 1, 2000, the Agency did not take any immediate steps to implement the Reduced Rate and ultimately changed its position on the issue before it could do so. When exactly the Agency decided to interpret the changes to the PMATF of the Act differently from the position it took during the legislative session and its analysis provided to the Office of the Governor has not been explained by the Agency. Nevertheless, at some point after its analysis was provided to the Office of the Governor, the Agency did indeed formulate an inconsistent interpretation. In an e-mail dated November 2, 2000, Lamon Lowe of the Agency's Medicaid office reported the following to Chris Augsburger, head of the Agency's Financial Analysis section: Dyke asked me to notify you about the Agency's position on the date that the reduction of assessments from 1.5% to 1.0% for the PMATF would go into effect. Dyke had a recent conversation with Secretary King-Shaw. Per Secretary King-Shaw, any revenue earned after July 1, 2000, would be assessed at the new rate of 1.0%. Petitioners' Exhibit 4, Bate Stamp Page 4-1. Based upon this e-mail, it appears that the Agency's position taken in this proceeding was formulated at some time immediately before the e-mail was sent by Mr. Lowe. Despite the fact that the position of the Agency reflected in Mr. Lowe's e-mail is inconsistent with the position taken by the Agency in its analysis of the Act, the Agency gave no explanation of the e-mail or its meaning at the hearing of these cases. Social Services Estimating Conference of November 9, 2000. On November 9, 2000, the Agency, through Tony Swinson, Senior Management Analyst Supervisor for the Agency, attended a meeting known as the Social Services Estimating Conference18 (hereinafter referred to as the "SSE Conference"). The purpose of the SSE Conference held on November 9, 2000, was to compare the state's fiscal year 2000-2001 projected expenditures to appropriations and to estimate and project Medicaid fund needs for the state's fiscal year 2001-2002. At the time of the SSE Conference held on November 9, 2000, the Agency projected a $519 million deficit in Medicaid services to individuals and a $640 million deficit in all Medicaid services for the state's fiscal year beginning July 1, 2000. These projections are contained in the report, Respondent's Exhibit 22, prepared by the SSE Conference. These findings suggest a motive for the change in the Agency's position: the need to deal with what was projected to be a significant deficit in funds available to meet Medicaid expenditures. The change in Agency position allowed the use of the $28.3 million appropriation to the PMATF, the continued collection of PMATF funds from hospitals during the fiscal year beginning July 1, 2000, and federal matching funds on both amounts. At some time after issuance of the SSE Conference's report of its November 9, 2000, meeting, the Agency, through Mr. Swinson, added the following footnote to the report on what has been marked as page 3 of Respondent's Exhibit 22: The estimated expenditures for FY 2000-2001 assume the $28.3 million in General Revenue appropriated to replace the revenue lost from reductions in assessments deposited into the Public Medical Assistance Trust Fund will be available for use even though the implementation of the reduction in assessment will be based on provider net operating revenues earned after June 30, 2000. Revenue to the PMATF will not be impacted until FY 2001-2002 if the reduced assessment rate is implemented for revenues earned after June 30, 2000. A similarly worded footnote was added to the SSE Conference's report on what has been marked as page 9 of Respondent's Exhibit 22: The Agency has implemented the reduction in the rate of the assessment on net operating revenues for hospital outpatient services and for other health care facilities authorized by HB 2339 by interpreting that the reduced rates apply to net operating revenues earned after June 30, 2000. Because of the timing of the receipt of provider financial reports by the Agency and the certification of the revenues, the projection above assumes that PMATF revenues will not be impacted until FY 2001- 2002. While the footnotes, although stated with what appears to be some doubt as to their accuracy, are consistent with the Agency's position in these cases, the Agency gave no explanation as to why they were added after the SSE Conference had ended and its report had been prepared. In light of the fact that the footnotes were added not too long after the first evidence of the formulation of the Agency's current position was reported in Mr. Lowe's November 2, 2000, e-mail to Mr. Augsburger, it is inferred that the Agency added the footnotes in an effort to bolster its changing position on the issue of how to implement the changes to the PMATF adopted in the Act. The Agency's Implementation of the Act. Despite the fact that the Agency suggested in its analysis of the Act that the loss of PMATF revenues would be experienced during the state's fiscal year beginning July 1, 2000, and did not apparently change its position until the fall of that year, the Agency continued to calculate, bill, and collect hospital PMATF assessments after July 1, 2000, at the 1.5 percent rate of assessment (hereinafter referred to as the "Old Rate"). In fact, the Agency continued to calculate, bill, and collect PMATF assessments from hospitals at the Old Rate and, imposed the Old Rate on the hospital's total net operating revenue, through December 31, 2002. The Agency did so even though the Agency now takes the position that hospitals' should have begun to benefit from the Reduced Rate beginning with April 1, 2001, invoices. In the early fall of 2002 a meeting was held between the Agency and hospital representatives to discuss the fact that the Agency had not yet implemented the Reduced Rate. The issue for resolution in these cases was not discussed in the meeting. The only matter discussed was the fact that the Agency had taken no steps to apply the Reduced Rate. Subsequent to the Agency's meeting with hospital representatives, a memorandum dated November 25, 2002, was sent to "all hospital PMATF facilities" with quarterly PMATF invoices due January 1, 2003. The memorandum evidenced the Agency's first effort to apply the Reduced Rate, but even then, only partially.19 Even though the Agency realized at the time it sent the memorandum that hospitals were entitled to the full benefit of the Reduced Rate and the other changes to the PMATF adopted in the Act, the Agency, because of the lack of available PMATF funds, simply authorized some hospitals, although not all,20 to take a partial credit against their PMATF payments beginning with the January 1, 2003, quarterly payment. Hospital Refund Requests and the Agency's Denial Thereof. Beginning in September 2002 Petitioners filed requests with the Agency seeking a refund of alleged PMATF overpayments made by them since July 1, 2000. Those refund requests were calculated consistent with the position of Petitioners taken in these cases concerning the proper implementation of the PMATF modifications of the Act. The refund requests filed by Petitioners in these cases were filed pursuant to Section 215.26, Florida Statutes, and utilized a form previously accepted by the Agency for requests for refunds of overpayments. The Agency responded21 to the refund requests of Petitioners by letter (hereinafter referred to as the "Refund Denial Letter"). The Refund Denial Letter sent to each Petitioner was substantially identical to Petitioners' Exhibit 8D. The Refund Denial Letter included the following: No refunds will be made for assessments on net operating revenues for outpatient services earned prior to July 1, 2000. All revenue earned in this period was correctly assessed at 1.5%. . . . . This constitutes AHCA’s final determination as to the impact of the effective date of Laws of Florida, Chapter 2000-256, §16, and the period subject to the reduced rate of assessment on net operating revenue for outpatient services. This is not a final determination as to the availability or amount of a refund for a particular hospital. Those whose substantial interests are affected by the Agency’s final determination may request a hearing pursuant to §120.569, Florida Statutes. Only AHCA’s final determination about the impact of the effective date of the statute is subject to administrative challenge at this time. A petition for administrative hearing must comply with the requirements of Florida Administrative Code, Rule 28-106.201. The petition must be received at the address specified below no later than twenty-one (21) days from receipt of this letter. Failure to timely file a petition shall constitute a waiver of the right to a hearing. . . . [Emphasis in original]. Petitioners filed Petitions for Formal Administrative Hearing in response to the Agency's refund denial letters. The Central Legal Issue: How to Apply the Reduced Rate. The Central Legal Issue: There is no dispute that on July 1, 2000, and thereafter, the rate of the PMATF assessment applicable to a hospital's net operating revenue from outpatient services was reduced from 1.5 percent, the Old Rate, to 1.0 percent, the Reduced Rate. The first issue for decision in these cases, which was first addressed in the Preliminary Order, is how exactly the Reduced Rate is to be implemented in practice. To the extent that other changes to the PMATF included in the Act impact the amount of the refunds sought by Petitioners, the conclusions concerning the application of the Reduced Rate reached in this Recommended Order apply equally. Petitioners' Position in These Cases It is the position of the Petitioners' that the Reduced Rate should apply to all PMATF assessment quarterly payments made by a hospital on or after July 1, 2000, regardless of when the hospital's fiscal year ended or when the hospital's net operating revenue was actually earned. Petitioners' position has been referred to throughout this proceeding as the "Invoice" method. In support of their position, Petitioners argue that the focus of the analysis required in these cases (the determination of legislative intent) should be the Act and, in particular, the Legislature's decision to appropriate $28.3 million to make up with what was believed would be the fiscal impact of the Act. In Petitioners' Additional Written Argument, Petitioners argue the following: The clearest statement regarding what the Legislature intended when it amended [Section] 395.701(2) is the language of Section 21 of Chapter 2000-256, Laws of Florida. The Legislature specifically appropriated those funds necessary to offset the anticipated reduction in PMATF collections in the fiscal year that began on the day the new law was effective, July 1, 2000. The estimate of a $28.3 [million] impact, as demonstrated at Hearing, was based upon the work of the PMATF Task Force. (Pet. Ex. 15, 16). The agency itself expected, when it recommended that the Act be signed by the Governor, that the effect of the rate reduction would be a $28.3 million reduction in PMATF collections from providers for the state fiscal year beginning July 1, 2000. (Pet. Ex. 2). Petitioners also suggest that the change in the Agency's position as evidenced in Mr. Lowe's e-mail, the footnotes to the SSE Conference report, and the Agency's implementation of the Act, all suggest that the Agency's position is incorrect. Finally, Petitioners have relied upon a number of extrinsic facts which they argue support their interpretation of how the Reduced Rate should be applied. Those extrinsic facts, which have been discussed in detail in Petitioners' Joint Proposed Findings of Fact, Conclusions of Law and Preliminary Recommended Order of Petitioners, include the following general subjects: The Agency's treatment of PMATF assessments for hospitals that closed before making all of their quarterly payments; The Agency's treatment of a hospital's legal liabilities for purposes of the PMATF; The Agency's application of the PMATF to new hospitals; and The types of Prior Year Reports accepted by the Agency in the past. The Agency's Position in These Cases It is the Agency's position that the Reduced Rate should apply to all PMATF assessments on net operating revenue from outpatient services earned on or after July 1, 2000, regardless of when a hospital's fiscal year ends or when the hospital actually makes a quarterly payment. In essence, the Agency's position assumes that the PMATF "accrues" continuously during a hospital's fiscal year and that it does so at the rate then in effect. Pursuant to this argument, which was referred to throughout this proceeding as the "Earned" method, every dollar of revenue from outpatient services earned by a hospital on or before June 30, 2000, is subject to the PMATF at the Old Rate and, every dollar of revenue from outpatient services earned by the same hospital on or after July 1, 2000, is subject to the PMATF at the Reduced Rate. In addition to arguing that the language of the statute and the Act clearly support its position, the Agency has argued that its position is supported by "agency expertise" and a general accounting principle, described as "the 'matching principle' under accrual accounting, in which the revenue and expense effects of an economic event are realized and recorded contemporaneously." To explain the "matching principle" under accrual accounting, the Agency presented the testimony of Mr. Thurston, who opined that the PMATF liability attaches as dollars are earned, although the final calculation of the assessment does not occur until the end of the hospital's fiscal year. Mr. Thurston opined, as an expert in public accounting, that when an economic event occurs in business, the financial implications of that event should be recorded both from the revenue and expense side, an idea he characterized as a basic "matching" concept, when the economic event occurs. Applying this theory to Section 395.701(2), Florida Statutes, Mr. Thurston suggested that the PMATF constitutes an expense against revenues as they are earned and, therefore, the expense should be matched contemporaneously with the revenue. Resolution of the Central Legal Issue: How the Legislature Intended the Reduced Rate to be Applied or the Proper Application of Section 395.701(2), Florida Statutes (2000). Where to Look To Determine Legislative Intent Ultimately, the resolution of in these cases depends upon a determination of legislative intent. That determination first requires a decision on where to look for the Legislature's intent: the Act; the language of Section 395.701, Florida Statutes, as amended; the history of the PMATF; the Agency's implementation of the PMATF, including the matters described in Finding of Fact 73; accounting principles; or some combination of these sources and/or others. Petitioners argue that it is the Act, or more precisely, the $28.3 million appropriation which the Legislature provided for which should be reviewed to determine legislative intent. While Petitioners' position was rejected in the Preliminary Order and is rejected in this Recommended Order, if Petitioners' are correct, that it is the Act and the history surrounding its adoption that controls the determination of legislative intent in this proceeding, then Petitioners are entitled to the refunds, calculated pursuant to the Invoice method, which they seek. The $28.3 million appropriation is essentially the same as the total amount of the reduction in PMATF assessments which hospitals should have seen during the fiscal year 2000-2001 if the Legislature intended that the Reduced Rate was to be applied consistent with the Invoice method. This fact is undisputed. This fact, coupled with the fact that the Agency did nothing to discourage the Legislature from making the appropriation, the fact that the Agency supported the notion that the reduction in assessments would be $28.3 million when it supported the Act with the Office of the Governor, and the fact that the Agency failed to explain at hearing why it took the various positions it did or why it changed those positions, further supports the position of Petitioners. As discussed more fully, infra, it has been concluded, however, that it is not the Act or the Legislature's actions while adopting it that should be the central focus of the determination of legislative intent in these cases. Instead, it has been concluded that the main focus of the determination of legislative intent should be the language of Section 395.701, Florida Statutes (2000). The fact that this focus will likely result in a significant inconsistency between the fiscal impact of the methodology recognized in this Recommended Order, the Imposition Method, and the $28.3 million appropriation may be disconcerting, but, if the correct focus for the determination of legislative intent is the language of Section 395.701, Florida Statutes (2000), that inconsistency simply cannot be avoided. Legislative Intent, Based Upon Section 395.701, Florida Statutes (2000). The ultimate resolution of these cases turns on the determination of one significant necessary component of the PMATF assessment which is not as specifically stated by the Legislature in Section 395.701(2), Florida Statutes, as the other necessary components of the PMATF such as, for example, who the assessment is imposed upon (hospitals).22 That component of the PMATF assessment is the moment when the Legislature intended that a PMATF assessment is deemed to actually be imposed. The exact point in time when the Legislature intended for the assessment to be imposed is significant, because, until the PMATF assessment is actually imposed, the rate of the PMATF assessment and the revenues or assessable basis upon which the rate is to apply, have little bearing. It simply does not matter under the law, what the rate of assessment or the assessable basis of a PMATF assessment is until it is time for the PMATF assessment to be imposed. While the Legislature has not specifically stated that the assessment is to be imposed at "X" point in time, it does not mean that legislative intent is not clear. Based upon the language of Section 395.701, Florida Statutes (2000), read as a whole, it is clear that the Legislature intended that the PMATF assessment is to be imposed, and, indeed, can only finally and accurately be imposed, when the condition or conditions established by the Legislature for the imposition of the assessment have all occurred. Although described as two conditions in the Preliminary Order, there is actually only one condition that has been established by the Legislature for the imposition of the PMATF assessment: the hospital must have an "annual net operating revenue" which in turn must be based upon the "actual experience of the hospital . . . " from its just completed fiscal year. This condition can occur only at the end of the hospital's fiscal year. The condition will not occur during the year as the hospital earns a dollar of revenue or when the hospital actually pays its PMATF assessment. The PMATF was not intended, therefore, to be "imposed" during a hospital's fiscal year as argued by the Agency. Nor did the Legislature intend that the imposition of the assessment must wait until a hospital is required to actually make its quarterly payment, as argued by Petitioners. The precise time when the condition for imposition of the PMATF assessment has been met and, thus, when the PMATF assessment is intended by the Legislature to be imposed, takes place immediately after the end of the hospital's fiscal year for which the PMATF assessment is made. It is only at that time that a hospital has an "annual net operating revenue" which can be "based on the actual experience of the hospital . . . ." Thus, if a hospital's fiscal year ends on June 30, 2000, the PMATF assessment for that hospital's 1999-2000 fiscal year may only be assessed immediately after its fiscal year ends at midnight, or as July 1 begins. The Invoice Method is Inconsistent with the Imposition Method In order to accept the Invoice Method, it would be necessary to find that the Legislature intended that a PMATF assessment is considered imposed when a hospital makes each payment. Any PMATF payment made by a hospital on or after July 1, 2000, would be subject to the Reduced Rate and any payment made by the same hospital before July 1, 2000, would be subject to the Old Rate. Accepting this position defies logic. Regardless of when a PMATF payment is made, all events contemplated by Section 395.701(2), Florida Statutes (1999 and 2000), for imposition of the assessment have occurred. When information necessary to actually compute the amount of the assessment is provided to the Agency by a hospital, when the Agency actually computes the assessment and informs the hospital of the amount of the assessment, and when the hospital actually makes the payments are not events contemplated or required by Section 395.701(2), Florida Statutes (2000), for the assessment to be considered imposed. The Earned Method is Inconsistent with the Imposition Method In order to accept the Earned Method, it would be necessary to find that the Legislature intended that a PMATF assessment is imposed at the time a hospital earns a dollar of applicable revenue in order to accept the Agency's position concerning how to apply the Reduced Rate. Any dollar of revenue for outpatient services earned by a hospital on or after July 1, 2000, would be subject to the Reduced Rate and any dollar of revenue for outpatient services earned by the same hospital before July 1, 2000, would be subject to the Old Rate. Neither of these findings is reasonable or supported by the language of Section 395.701, Florida Statutes. Mr. Thurston's testimony was also not persuasive. Mr. Thurston simply explained the accrual method of accounting, a method routinely followed by accountants and bookkeepers in reflecting the economic operations of individuals, businesses, and other entities. Mr. Thurston failed to explain, however, what the Agency relies on to support a conclusion that the Legislature intended for the PMATF to be applied consistent with that accounting method. Additional "Conditions" for Imposition Suggested by Petitioners. In Petitioners' Additional Argument, it has been argued that, if the Legislature truly intended that the Reduced Rate is to be applied when the PMATF assessment is imposed and that imposition of the assessment may only occur when all the conditions for imposition have been met, there are other conditions which must be met in order for the assessment to be imposed which the undersigned did not consider. In particular, Petitioners have suggested that two other conditions must be met before the PMATF assessment may be imposed: The hospital's actual experience based upon its completed fiscal year must be 'reported to the agency;' and Within six months after the end of the hospital fiscal year, the Agency shall certify the amount of the assessment for each hospital. [Footnote omitted]. The additional "conditions" suggested by Petitioners, while conditions for the actual payment or collection of a PMATF assessment, are not conditions which must be met in order for the assessment to be imposed on or owed by a hospital. Once a hospital realizes an “annual net operating revenue” no conditions for the imposition of the PMATF remain. The Amount of Petitioners' Refunds. Subsequent to the entry of the Preliminary Order on December 23, 2003, and the filing of the February 3, 2005, Stipulation, the parties were able to come to agreement as to the amount of refund which is due to each Petitioner based upon the three rate reduction application methodologies addressed in this Recommended Order: the Imposition Method; the Invoice Method; and the Earned Method. Those amounts are contained in the Refund Calculation Notebooks, Joint Composite Joint Exhibit 1. Contained within the Refund Calculation Notebooks is a folder for each remaining Petitioner containing supporting data and the calculation of refunds based upon all three methodologies. The folders for each hospital include all source data required to calculate refunds as Exhibits 1 through 7, a list of all PMATF payments as Exhibit 8, a summary of the foregoing data as Exhibit 9, the application of the Earned Method as Exhibit 10, a calculation of the refund due each Petitioner based upon Attachment B of each Petitioner's Refund Request as Exhibit 11, the application of the Invoice Method as Exhibit 12, and the application of the Imposition Method as Exhibits 13 and 14. The application of the Imposition Method contained on Exhibits 13 and 14 is the same except for hospitals with fiscal year-ends of May 31, June 30, and July 31. For those hospitals, the parties disagreed as to how the Imposition Method should be applied. Petitioners assert that those hospitals are entitled to refunds for their fiscal years ending in 2000 based upon the reduced rate while the Agency asserts that they are not. Exhibit 13 for those hospitals reflects the amount of refund based upon the Imposition Method with no refund due for their fiscal year ending in 2000. Exhibit 14 for those hospitals reflects the amount of refund based upon the Imposition Method if they are entitled to any refund for their fiscal year ending in 2000. Based upon the conclusions reached in this Recommended Order, the amount of refund due to Petitioners with fiscal year- ends of April 30 and May 31, 2000, is reflected in Exhibit 13. All events necessary for imposition of the PMATF assessment for these Petitioners for their fiscal year ending in 2000 occurred before the effective date of the Act. For Petitioners with June 30, 2000, September 30, 2000, and December 31, 2000, fiscal year-ends, the amount of refund due to them is reflected in Exhibit 14. The Agency's Alleged Unadopted Rule. The Agency's Refund Denial Letter provides, in part, the following statement which Petitioners have argued in their proposed order constitutes an unadopted rule: No refunds will be made for assessments on net operating revenues for outpatient services earned prior to July 1, 2000. All revenue earned in this period was correctly assessed at 1.5%. . . . . This constitutes AHCA’s final determination as to the impact of the effective date of Laws of Florida, Chapter 2000-256, §16, and the period subject to the reduced rate of assessment on net operating revenue for outpatient services. The foregoing statement, while ultimately based upon the Agency's interpretation of Section 395.701(2), Florida Statutes (2000), does not express that interpretation. That interpretation is not explained in the quoted portion of the Refund Denial Letter or any other document offered by Petitioners. The statement quoted by Petitioners merely informs the entity to which it was sent that its requested refund was being denied. The Refund Denial Letter then goes on to inform the entity that the denial is "not a final determination as to the availability or amount of a refund for a particular hospital [but rather is preliminary agency action]" and that the Agency's proposed decision could be challenged administratively. The fact that the Agency was required to develop an interpretation of the applicable law when it made its preliminary decision to deny refund requests filed by Petitioners does not make the complained of "statement" of the Agency a rule. Nor does the fact that the Agency explicated that interpretation in its defense of its preliminary decision during these proceedings make is notice that it was denying Petitioners' request for refunds a rule. Petitioners have failed to prove any actual "statement" of the Agency of the interpretation of Section 395.701(2), Florida Statutes (2000), advanced in these proceedings, was published by the Agency. The Refund Denial Letter does not contain an "agency statement" of "general applicability" which implements, interprets, and prescribes law. It merely announces proposed agency action. The Agency's Refund Denial Letter is not a "rule," as that term is defined in Section 120.52(15), Florida Statutes (2004). Leesburg Regional Medical Center. Leesburg Regional Medical Center (hereinafter referred to as "Leesburg"), Petitioner in DOAH Case No. 04-1882, uses a July 1 to June 30 fiscal year for purposes of the PMATF. Invoices sent to Leesburg by the Agency for PMATF assessments for quarterly payments due July 2000 through October 2002 were based upon a rate of 1.5% for inpatient and outpatient net operating revenue and other operating revenue. Leesburg paid these assessments. Leesburg received the November 25, 2002, Memorandum described in paragraph 62, supra, on or about December 2, 2002. That Memorandum was the Agency's first attempt to apply, at least in part, the Reduced Rate. In December 2003 Leesburg filed a refund request for what it believed were overpayments of its PMATF assessments due on and after July 1, 2000. The amount of the refund being sought by Leesburg was identified in a supplement to its refund request filed with the Agency in February 2004. Leesburg refund request for payments attributable to the first two quarters (ending September 30 and December 31) of its fiscal year 2000-2001 (hereinafter referred to as the "Disputed Quarters") totaled $31,116.00. While Leesburg Exhibit 8 of the Refund Calculation Notebooks indicates the total amount of Leesburg's PMATF assessments for the Disputed Quarters and the fact that those assessments were paid, the exhibit does not indicate when the payments were made. Nor was any other evidence presented to prove when the payments were actually made.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Agency: Concluding that the Legislature intended that the changes adopted in the Act are to be applied to Petitioners consistent with the Imposition Method described in this Recommended Order; Providing that Petitioners, other than those with a June 30, 2000, fiscal year-end, are entitled to refunds of PMATF payments calculated on Exhibit 14 of the Refund Calculation Notebooks; Providing that Petitioners with a June 30, 2000, fiscal year-end are entitled to refunds of PMATF payments calculated on Exhibit 14 of the Refund Calculation Notebooks. DONE AND ENTERED this 23rd day of May, 2005, in Tallahassee, Leon County, Florida. S LARRY J. SARTIN 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 23rd day of May, 2005.
The Issue Whether the Respondent, Michael E. Langton, violated Sections 112.313(6) and 112.3141(1)(c), Florida Statutes, and Section 8(e), Article II, Constitution of the State of Florida, by his activities and contacts with staff of the Department of Community Affairs on matters dealing with the Community Development Block Grant Program?
Findings Of Fact The Respondent. The Respondent, Michael E. Langton, took office as a member of the Florida House of Representatives, on October 22, 1985. The Respondent has continuously served as a Florida state representative since October 22, 1985. At all times relevant to this proceeding, the Respondent served as a public officer subject to Sections 112.313(6) and 112.3141(1)(c), Florida Statutes, and Section 8(e), Article II, of the Constitution of the State of Florida. Since October, 1981, the Respondent has been a grants consultant. The Respondent formed, owned and was employed by Langton Associates, Incorporated. Upon taking office as a Florida state representative in 1985, the Respondent requested an opinion of the Commission concerning his continued work for Langton Associates, Incorporated. The opinion of the Commission indicated that the Respondent could continue to work as a grants consultant but that he should not personally appear before state agencies. Langton Associates, Incorporated. The Respondent has been the sole stockholder of Langton Associates, Incorporated (hereinafter referred to as "Langton Associates"), since it was formed in October, 1981. The corporation is a for-profit-corporation. Among its functions, Langton Associates provides consulting services to governments eligible to apply for grants under the Community Development Block Grant Program and assists governments in preparing and submitting applications for grants under the program. During the period of time at issue in this proceeding, the Respondent was paid a salary from Langton Associates for his services to, and on behalf of, the corporation. The salary paid to the Respondent has been determined by the Respondent. Although the salary varies from year-to-year, it averages approximately $50,000.00 a year, including 1988, 1989 and 1990. The City of Macclenny, Florida, was among the clients of Langton Associates. Macclenny paid Langton Associates $12,000.00 a year for five to six years, including 1988. Income paid to Langton Associates by its clients was deposited in a business account from which the Respondent's salary was paid. During the five to six years prior to July, 1990, Langton Associates made approximately $350,000.00 for services to its clients. During the period of time at issue in this proceeding, the Respondent, through Langton Associates, provided services to a number of local governments. Several of these local governments paid Langton Associates an annual fee. The average fee was approximately $30,000.00 a year. Other clients of Langton Associates paid on a per grant application basis approximately $3,000.00 per grant application. The Community Development Block Grant Program. The Community Development Block Grant Program (hereinafter referred to as the "CDBGP"), is a Federal government program whereby funds are provided to States to use to improve small local communities. Funds received for the CDBGP in Florida are administered by the Florida Department of Community Affairs (hereinafter referred to as the "Department"), through the Department's Division of Housing and Community Development. Funds for the CDBGP are received and are distributed for four categories of grant projects: (1) housing; (2) neighborhood revitalization; (3) economic development; and (4) commercial revitalization. CDBGP funds are intended to be used in part to assist small local governments to revitalize homes and neighborhoods. Each year the Department adopts administrative rules governing the CDBGP and the manner in which annual funds are to be distributed in Florida. The Department's revised administrative rules provide the steps to be followed in each annual funding cycle. The procedures for determining which small governments receive CDBGP funds generally include the following steps: An applicant workshop is held at the beginning or the middle of the funding cycle; An opening date is established for when Applications are to be submitted; A closing date is established for when Applications are scored and awards of funds are made; Applications are initially ranked according to their scores; Site visits are conducted by the Department; Applications are ranked again. These rankings can be challenged; and Funds are awarded. The Secretary of the Department makes the final decision as to how CDBGP funds are awarded. All applications for CDBGP funds are "self-scored" prior to filing. Each applicant determines, based upon objective standards, the score of its application and informs the Department of the score on the application. When applications are filed they are initially ranked by the Department based upon the self-score determined by the applicant. Applications may be filed on behalf of small cities of less than 50,000 population or small counties of less than 200,000 population. Applications for CDBGP funds are technically filed by eligible applicants--a county or city. Private individuals and businesses are not eligible to apply for grants from the Department under the CDBGP. Applications are prepared 90 to 95% of the time by consultants, including Langton and Associates. The following question is included on applications from which it may be determined if an application was prepared by a consultant: "Who was the agency or firm responsible for preparing the application?" The eligible county or city for which an application is submitted is considered the "applicant." If a consultant prepared and filed an application on behalf of an applicant, however, it was common for Department staff associated with the CDBGP to refer to the consultant and/or the government entity as the "applicant." Although the number of consultants in Florida who prepared applications for CDBGP awards varied from year to year, there have been approximately six to ten consultants in Florida preparing applications for CDBGP awards. During 1988, there were a total of approximately 276 local governments which were eligible for awards under the CDBGP. Only a small number of these entities, however, actually filed applications for awards. The Department does not consider the identity of any consultant involved in filing a CDBGP application in determining which applicants should be awarded CDBGP grants. Following the filing of applications for CDBGP grants, additional information is not to be provided to the Department unless requested. Nor are arguments to be presented to the Department in support of any application. Target Area Maps and Gerrymandering. Applications filed during the 1988 (as well as prior years) annual funding cycle for CDBGP funds for the housing category were required to include a "target area map". A "target area map" was an area map of the local community of the applicant depicting the specific area that the proposed grant activities were to be conducted in. Therefore, a target area map for a housing grant would identify on the area map the specific houses for which the funds were being requested. Prior to the 1988 annual funding cycle many target area maps had been submitted which included oddly shaped target areas. These oddly shaped target areas were not square or rectangular; instead, the target area was drawn in such a way that houses that qualified for CDBGP funds were included and those that did not qualify, even if located right next door to a qualified house on the same block, were excluded. "[A]pplicants would draw their target area boundaries in such a way to exclude housing units that would adversely affect their score." Lines 24-25, page 73, and line 1, page 74, Transcript of September 30, 1991-October 1, 1991, Formal Hearing (hereinafter referred to as the "Transcript"). This practice was referred to as "gerrymandering." There had been concern and debate in and outside the Department concerning whether gerrymandering should be allowed. There were some who were not concerned about, or bothered by, gerrymandering because the use of gerrymandering to identify a target area did not cause persons who were not in need to be directly benefited from CDBGP funds. For example, in the housing grant area, only the houses of persons with low enough income levels could directly benefit from the CDBGP. Those that did not qualify for assistance could not be directly benefited even if an impacted area was gerrymandered. There were others, however, who were concerned about and bothered by gerrymandering because the use of gerrymandering allowed applicants to achieve higher scores for their applications by drawing the targeted area in such a way to insure that it included mainly or totally houses that were qualified for funding while excluding unqualified houses in the same neighborhood which would reduce their scores. Persons concerned with, and bothered by, gerrymandering, including the Respondent, believed that the CDBGP intended that only relatively box-shaped geographic neighborhoods should be allowed as the target area. At various times, the Department tried to devise a method of preventing gerrymandering, but could find no reasonable solution. The difficulty with preventing gerrymandering was explained by Lewis O. Burnside, the Director (beginning in January, 1989) of the Department's Division of Housing and Community Development: Every time I talked about target areas when we looked at it -- we tried to deal with target areas to see what shape should they be. Should they be square or circular and should they -- we couldn't find any rhyme or reason for that. Also, our program applies to urban and rural areas. And in rural areas it is quite normal to have a large property value farm across from what used to be tenant lands, where you have very low income people directly across the street from a multi-million-dollar piece of farmland. And so, we could not write anything, one that would give you a non-gerrymandered target area unless it was just arbitrary. We would just have to say it has got to be square, or it has got to be rectangular, and it can be no larger than a certain size. . . . Lines 8-20, page 141, Transcript. Most people associated with the CDBGP, other than the Respondent, did not consider the issue of gerrymandering to be a burning issue or a particularly improper practice. This lack of concern was caused by the fact that the general purpose of the CDBGP was to benefit low and moderate income people and gerrymandering did not circumvent this general purpose. Ultimately, individuals in the houses included in a target area, even in a gerrymandered target area, benefited only if they were in need of assistance as established under the CDBGP. There were members of the Florida Legislature, including the Respondent, who believed that gerrymandering in the CDBGP was inconsistent with the goals of the CDBGP. Through at least the 1988 annual funding cycle, gerrymandering of target area maps was not prohibited by federal or Florida law. The 1988 Funding Cycle. The general procedures for determining how CDBGP funds were to be awarded each funding cycle which are described in finding of fact 18, supra, were followed for the 1988 funding cycle. Legislation concerning the CDBGP was adopted during the 1988 legislative session and was codified as Chapter 88-201, Laws of Florida. As a result of the adoption of Chapter 88-201, Laws of Florida, and as was the practice of the Department prior to each funding cycle, the Department undertook to amend its administrative rules governing the CDBGP, Chapter 9B-43, Florida Administrative Code. Rule 9B-43.003(33), Florida Administrative Code, was renumbered as subparagraph (35) and was amended by the Department by adding the following underlined language: "Target area" means a distinct, locally designated slum or blighted area under Section 163.340, F.S.; or a designated Enterprise Zone under Section 290.065, F.S.; or a distinct locally designated area, totally contained and contiguous in nature, that is characterized by concentrations of low and moderate income persons, wherein low and moderate income persons comprise at least 51 percent or more of the target area population. It was believed in the Department when the Department amended the definition of "target area" in its Rules that gerrymandering had been eliminated or substantially reduced. Although no formal opinion was given, an attorney on the Department's legal staff indicated during a CDBGP application workshop conducted by the Department for the 1988 funding cycle that gerrymandering would no longer be allowed. A representative of the Department instructed potential CDBGP grant applicants during a CDBGP application workshop held sometime after October 11, 1988, the effective date of Rule 9B-43.003(35), Florida Administrative Code, that gerrymandered target area maps would not be permitted. The Respondent and Langton Associates were aware of this representation. At some time subsequent to the workshop at which it was announced that gerrymandering would not be allowed, applications for CDBGP housing grants for the 1988 funding cycle were submitted to the Department. There were a total of thirty-four applications received for CDBGP housing grants for the 1988 funding cycle. Langton Associates submitted applications for housing grants for the 1988 funding cycle for three applicants: (1) Macclenny; (2) Fellsmere, Florida; and (3) St. Johns County, Florida. The target areas proposed with the applications prepared and submitted by Langton Associates for Macclenny, Fellsmere and St. Johns County were not gerrymandered. Langton Associates did not submit gerrymandered target areas because the Respondent did not believe that gerrymandering was proper and because the Department had announced that it would not accept gerrymandered maps. Despite the Department employee's statement during the workshop that gerrymandered maps would not be allowed for the 1988 funding cycle, most of the target area maps submitted with applications for the 1988 funding cycle were gerrymandered. Only five applications received by the Department did not include gerrymandered target areas: (1) the three applications submitted by Langton Associates; (2) the application of Apalachicola, Florida; and (3) the application of Century, Florida. On December 1, 1988, a memorandum was sent from Earl H. Parmer, Jr., then Director of the Department's Division of Housing and Community Development, to the Department's General Counsel. Mr. Parmer informed the General Counsel of the target area maps which had been filed for the 1988 funding cycle and stated, in part, the following: As you know, the department has been attempting to reduce the grantsmanship in the CDBG program by substantially reducing the gerrymandering of CDBG target areas; however, we question whether our current rule language supports our position. Advocate's Exhibit 7. On December 2, 1988, the following response was given by the Department's legal staff to Mr. Parmer: "Maps appear to be in compliance with Rule." Advocate's Exhibit 7. The Department, therefore, determined that it could not, despite the previous instructions from a Department representative that gerrymandered target areas would not be accepted, prevent the use of gerrymandered target area maps for the 1988 funding cycle. On December 14, 1988, the applications for CDBGP housing grants were initially ranked by the Department based upon the scores determined by the applicants through self-scoring and reported to the Department. Applications were listed by highest score to lowest score. The total 1988 funding cycle housing grant funds available were sufficient to meet the requests for funds of only the top fifteen-ranked applications. There were not sufficient funds to fund those applicants who ranked below fifteenth. The applications filed by Langton Associates ranked as follows, based upon their self determined scores, on the initial ranking: (1) Macclenny was seventeenth; (2) St. Johns was thirtieth; and (3) Fellsmere was thirty-second. The scores for these applicants determined through self-scoring were not high enough to entitle any of the applicants to an award of a housing grant for the 1988 funding cycle. The Respondent's Contacts with Linda Frohock. During December, 1988, the Respondent was informed that most applications for CDBGP housing grants for the 1988 funding cycle included gerrymandered target area maps and that the Department intended to accept those maps. After learning of the Department's acceptance of gerrymandered target area maps, the Respondent telephoned Thomas Yeatman, an employee of the Department. The Respondent left a message requesting that his telephone call be returned. Between December 20 and 31, 1988, Linda Frohock, then Chief of the Bureau of Housing and Community Assistance, in the Department's Division of Housing and Community Development, returned the telephone call the Respondent had made to Mr. Yeatman. This telephone call probably took place on or about December 20, 1988. The Respondent's initial telephone call to Mr. Yeatman and his conversation with Ms. Frohock were the result of his frustration over the fact that the Department was going to allow gerrymandering of target areas. The Respondent had expressed concern over the Department's administration of the CDBGP prior to 1988. The Respondent described his frustration: I called Mr. [Yeatman] and Linda, and I wanted to speak to the secretary as Representative Langton. I made it very clear, I said, I don't care what this is going to cost me politically or financially; you guys have got to stop this craziness. You are disadvantaging tons of cities, cities that are doing this right, they are doing this fair. They have no shot at ever competing for these grants, if you are going to continue this abuse of a program. . . . . Lines 16-24, Page 35, September 12, 1991, Deposition of the Respondent. The Respondent admitted that when he called the Department he intended to put pressure on the Department through his position as a legislator and that he attempted to use his power as a public official to force the Department to take action. The Respondent let it be known to Ms. Frohock that he was calling in his capacity as a legislator. Ms. Frohock informed the Respondent that she was returning his telephone call at the direction of the Assistant Secretary of the Department and that she would report their conversation back to the Secretary and the Assistant Secretary of the Department. During Ms. Frohock's telephone conversation with the Respondent, she took notes of the nature of the conversation. During the telephone conversation with Ms. Frohock, the Respondent was very upset and angry. The Respondent was excited, and he talked loudly and rapidly. The Respondent was angry that his competitors were benefiting by being allowed to submit gerrymandered target area maps while the applications prepared for, and submitted on behalf of, Langton Associates' clients had not included gerrymandered target area maps. The Respondent believed that Langton Associates had lost money in the past because it had not gerrymandered target areas while the Respondent's competitor's had. During the Respondent's conversation with Ms. Frohock, the Respondent indicated the following: He had met with Mr. Parmer in the summer of 1988 and discussed gerrymandering. Mr. Parmer had promised him that gerrymandering would not be allowed. A Department employee had stated at a workshop that gerrymandering would not be allowed for the 1988 funding cycle. He wanted to be allowed to gerrymander the target area maps Langton Associates had submitted on behalf of its clients or he wanted the Department to require that those applicants that had gerrymandered their target area maps be punished. He indicated that he did not care what it cost him politically or financially to fight the Department's actions. He intended to shut down the CDBGP and see that all of the employees involved in the CDBGP were fired if the matter was not resolved to his satisfaction; "Heads would roll." He indicated that Florida Senator Carrie Meek and Florida Representative C. Fred Jones had asked him to play a major role in the Legislature in revising the CDBGP. He stated that the matter would end up in a court of law. He would get Fred Baggett and Jack Skelding, both of whom are attorneys, to assist him to fight the Department. He indicated that he would stop the 1988 funding cycle by suing the Department. He stated that he would probably only get two grants funded during the 1988 funding cycle. He stated that he would return to his office on January 2, 1989, and would have a legislative committee meeting on January 9, 1989; if he had not heard back from the Department about the problem, he wanted to talk to the Secretary of the Department after his return. If he was not satisfied after talking to the Secretary of the Department, he indicated he intended to speak to the then Lieutenant Governor and the Speaker of the House Designate. The Respondent asked Ms. Frohock to pass his concerns on to the Department's Secretary. The Respondent requested that Ms. Frohock provide him with copies of all target area maps submitted in the housing category and the neighborhood revitalization category for the 1988 funding cycle. These documents were public records. The Respondent's conversation with Ms. Frohock made her nervous, in part because he was a legislator. During the Respondent's conversation with Ms. Frohock, he did not specifically say that he was calling on behalf of himself, Langton Associates or any local government for which the Respondent or Langton Associates was working. Nor did the Respondent specifically mention being compensated for the call. Despite the foregoing finding of fact, it is obvious that the Department's actions which the Respondent complained of during his conversation with Ms. Frohock had directly affected applicants which had paid Langton Associates to prepare and file applications on their behalf during the 1988 funding cycle. It is also obvious that the alternative resolutions of the problem suggested by the Respondent had the potential to benefit those same applicants. In light of the fact that the Langton Associates' three applications were among only five applications out of thirty-four applications filed that were not gerrymandered, it was in the interest of Langton Associates and the Respondent that the Department take the actions the Respondent suggested or some other action to correct the Department's decision to accept gerrymandered target areas. It is also true that the Respondent did not specifically request any change in the scores of the applicants represented by Langton Associates; and that the specific actions recommended by the Respondent were suggested for the "entire set of eligible applicants." But the Respondent's suggestions included the applicants represented by Langton Associates and those applicants stood to gain more from the Respondent's suggestions than those applicants that had filed gerrymandered target area maps; especially if the applicants that had filed gerrymandered target area maps were penalized as suggested by the Respondent. While it is true that the concerns which the Respondent expressed to Ms. Frohock were to some degree concerns which the Respondent or any other legislator could have raised in their capacity as a legislator, the Respondent's actions also could have beneficially impacted clients of Langton Associates that had paid Langton Associates to prepare and file applications on their behalf in the funding cycle at issue. The fact that issues may have been raised by the Respondent in his capacity as a legislator does not negate the fact that the raising of those issues before the Department could also have benefitted the clients of his company, Langton Associates. The Respondent's actions in telephoning Mr. Parmer and talking to Ms. Frohock were also considered necessary by the Respondent because of the possible harm to the reputation of Langton Associates caused by the Department's actions. Langton Associates was one of the only consultants that heeded the Department's instructions concerning the use of gerrymandered target areas for the CDBGP 1988 funding cycle. When the Department reversed its position and accepted the gerrymandered target areas proposed by most of the applicants in the 1988 funding cycle for housing, the Respondent had to be concerned about those who would question why Langton Associates had not filed gerrymandered maps. In light of these concerns, the Respondent had to have felt compelled to take some action to force the Department to admit that it had been in error and not Langton Associates, even if the clients of Langton Associates were not directly benefited. Finally, some of the comments and requests made by the Respondent to Ms. Frohock may have been reasonable in light of the events which precipitated the conversation. If the Respondent had not been a member of the legislature who was prohibited from representing others for compensation before a state agency, some of his actions were actions which might be expected of, and considered reasonable if taken by, any consultant in light of some of the Department's actions. Some of the Respondent's actions were taken and some of his comments were made because he believed that the Department's actions had improperly misled Langton Associates. Some of his actions were taken and some of his comments were made, however, solely because of his position and power as a legislator. Following her telephone conversation with the Respondent, Ms. Frohock gave a copy of her notes to, and briefed, the Department's Assistant Secretary. She also gave a copy of her notes to Mr. Burnside. Ms. Frohock also subsequently wrote a memorandum memorializing her telephone conversation with the Respondent. The January 10, 1989, Meeting. Subsequent to the Respondent's telephone conversation with Ms. Frohock, the Respondent requested that a meeting be held with the Secretary of the Department in Representative C. Fred Jones' office. In January, 1989, Representative Jones was the Chairman of the House Committee on Community Affairs, the committee of the House of Representatives with jurisdiction over the Department's programs. The Respondent asked Mario Taylor, Staff Director of the House Committee on Community Affairs, to arrange the meeting with the Secretary of the Department. Mr. Taylor obtained approval for the meeting requested by the Respondent from Representative Jones, and Mr. Taylor informed Michael Richardson, the Department's legislative liaison, of the meeting. The meeting requested by the Respondent was scheduled for January 10, 1989 (hereinafter referred to as the "Meeting"). Mr. Richardson informed the then Secretary of the Department, Thomas Pelham, of the Meeting. Mr. Richardson told Mr. Pelham that the meeting was being held to discuss target area maps and gerrymandering. Mr. Pelham met with Mr. Burnside prior to the meeting to be briefed on the issue and requested that Mr. Burnside attend the Meeting with him. Prior to the Meeting, Ms. Frohock and Mr. Burnside met with Department staff to discuss the gerrymandering issues raised by the Respondent during his telephone conversation with Ms. Frohock. A "discussion paper" was drafted by Ms. Frohock as a result of this Department staff meeting and was dated January 10, 1989. It was agreed by Department staff that the Department had presented faulty instructions concerning gerrymandering during the workshop which took place before applications for the 1988 funding cycle were filed. There were some in the Department that wanted to take this incident into account in any recommended solution to the problem. There were others, including the Department's legal staff, who believed that the Department had done nothing illegal and, therefore, wanted to take no action. The following possible solutions to the gerrymandering issue were discussed and agreed upon by the Department's staff and were discussed in the discussion paper: Allow all applicants to resubmit target area maps (this would benefit the five applicants, including the three Langton Associates' applicants, that had submitted maps that had not been gerrymandered); Give the maximum score for the target area for all the proposals (this would also benefit the five applicants, including the three Langton Associates' applicants, that had submitted maps that were not gerrymandered); and Do nothing and allow any disappointed applicant to follow the Chapter 120, Florida Statutes, process to challenge the Department's actions. This is the option that was ultimately recommended in the discussion paper. The Meeting was attended by Representative Jones, the Respondent, Mr. Pelham, Mr. Burnside, Mr. Taylor and Mr. Richardson. The Meeting was held in Representative Jones' office. Representative Jones agreed to the meeting because he had a number of concerns about the manner in which the Department was administering the CDBGP. Representative Jones was not aware that the Respondent's company, Langton Associates, had filed applications on behalf of its clients which had been affected adversely by the Department's actions in accepting gerrymandered maps. Therefore, Representative Jones was not aware that the Respondent had not requested the Meeting solely in his legislative capacity. During the Meeting the Respondent was hostile, agitated, upset and "seemed about to explode". His manner was threatening. Mr. Pelham described the Respondent's actions as a "tirade". The Respondent did most of the talking during the Meeting: He expressed his displeasure with the Department's administration of the CDBGP and, in particular, the Department's actions in accepting the gerrymandered target area maps. Representative Jones also expressed concern about the Department's administration of the CDBGP. He indicated that he and others, in preparing applications on behalf of local governments for the 1988 funding cycle, had been misled by information presented at a workshop to the effect that gerrymandering would not be allowed for the 1988 funding cycle. The Respondent stated that "he and others had relied upon that misinformation, and now he feared that they were going to be penalized in the way those applications were scored." Lines 4-6, page 194, Transcript. He stated that he did not believe the Department was administering or interpreting the law correctly, especially with regard to gerrymandering. He stated that the law did not allow gerrymandering. He indicated his displeasure with staff of the Department and indicated that they should all, with one exception, be fired. He demanded that all applications be thrown out; that they should not be scored or acted upon. He suggested that the Department should do nothing until the Legislature could take a look at the problem. He threatened to take legal action to stop the Department if it did not stop the funding cycle. Later during the Meeting, he suggested that the Department accept redrawn target area maps that were not gerrymandered or at least require all the applicants to "play by the same set of rules." The Respondent wanted the Department to halt the 1988 funding cycle process so that legislation prohibiting gerrymandering could be adopted. As of the date of the Meeting, if the Department had halted the 1988 funding cycle process it would not have harmed the applicants represented by Langton Associates. All three applicants had scores at that time which were below the funding ranking cut off score. Without some action by the Department, those applicants did not appear destined to receive a grant for the 1988 funding cycle. While it is true that the suggestions made by the Respondent during the Meeting would apply in general to all applicants, it is also true that if all applicants were required to submit maps that were not gerrymandered, the applicants that had submitted gerrymandered maps would in all probability end up with reduced scores, depending on how their target areas were drawn. The applicants for which applications had been prepared by Langton Associates and two other applicants, on the other hand, would not suffer such a reduction in scores because they had already submitted target areas which were not gerrymandered. Those applicants which had the top fourteen scores for the 1988 funding cycle for housing at the time of the Meeting would have suffered disproportionately if the funding cycle were suspended: their status would have changed from prospective award winner to non-award winner. During the Meeting, although the Respondent did not specifically indicate that the Meeting had been called, or that he was voicing his displeasure, on behalf of himself, Langton Associates or its clients, the Respondent made reference to the fact that he was a consultant and that Langton Associates had prepared applications for local governments that had been filed in the 1988 funding cycle being discussed. This was apparent to the Department employees present at the Meeting. The Respondent, although expressing his concerns in terms of all applicants generally, was nonetheless also concerned about the impact on the Langton Associates' applicants and Langton Associates. The Department employees present at the Meeting were aware of this fact also. The Respondent indicated that unless the Department took the actions he had suggested, Langton Associates and the two other applicants that had not gerrymandered their target areas would be prejudiced. The Respondent, through Langton Associates, could have benefited if any of its 1988 funding cycle grants were approved for funding. For example, applicants which are approved will more often than not hire the consultant that prepared a successful application to administer the awarded funds. Fees for such services can be more profitable than the fees for preparing an application. Therefore, if the Respondent's actions during the Meeting could ultimately result in the awarding of a grant to one of the Langton Associates' clients, the Respondent would have benefited. The Respondent's actions in calling and participating in the Meeting were also considered necessary by the Respondent for the same reasons described in finding of fact 71, supra. As was true of the Respondent's conversation with Ms. Frohock, it is true that the concerns which the Respondent expressed during the Meeting were to some degree concerns which the Respondent or any other legislator could have raised in their capacity as a legislator. It is also true that the Respondent's actions also could have beneficially impacted clients of Langton Associates that had paid Langton Associates to prepare and file applications on their behalf in the funding cycle at issue. The fact that issues may have been raised by the Respondent in his capacity as a legislator does not negate the fact that the raising of those issues before Department employees could also have benefited the clients of his company, Langton Associates. It is also true that some of the comments and requests made by the Respondent during the Meeting may have been reasonable in light of the events which precipitated the conversation. If the Respondent had not been a member of the legislature who was prohibited from representing others for compensation before a state agency, some of his actions during the Meeting were actions which might be expected of, and considered reasonable if taken by, any consultant in light of some of the Department's actions. Some of the Respondent's actions were taken and some of his comments were made because he believed that the Department's actions had improperly misled Langton Associates. Some of his actions were taken and some of his comments were made, however, solely because of his position and power as a legislator. The 1988 Funding Cycle Awards in the Housing Category. Following the Meeting, Mr. Burnside met with Ms. Frohock and discussed the meeting. Following this discussion, Ms. Frohock, at Mr. Burnside's direction, prepared a revised discussion paper in the form of a memorandum from Mr. Burnside to Mr. Pelham. In the memorandum from Mr. Burnside to Mr. Pelham a fourth option was added: to cancel the funding cycle and start over. Mr. Burnside ultimately decided, after discussion with Ms. Frohock, to recommend that the Department adopt the option included in the original discussion paper described in finding of fact 83b: give the maximum score for the target area for all the proposals. This option was recommended, in part, because Mr. Burnside and Ms. Frohock had determined that awarding all applicants maximum scores for their target areas would not have any real impact on which applicants were ultimately awarded funds for the 1988 funding cycle for the housing category and the option recognized that the Department had made a mistake at the workshop. The option recommended was also chosen, in part, because the Department had taken a similar action in the past and because the Respondent was a legislator. Mr. Pelham ultimately approved Mr. Burnside's recommendation. The decision of the Department as to how to resolve the issues raised by the Respondent concerning the gerrymandered maps received during the 1988 funding cycle for housing was the direct result of the actions of the Respondent described, supra. After approval by Mr. Pelham of the recommended action, Mr. Burnside telephoned the Respondent to inform him of the Department's decision. This conversation took place sometime in February, 1989. After Mr. Burnside explained the decision to the Respondent, the Respondent went over the scores of the applicants and asked how the decision would affect those scores. Mr. Burnside, in response to the Respondent's question, indicated how the decision would impact the score for the application of Macclenny, one of Langton Associates' clients. This conversation took place after site visits had taken place and after an applicant previously ranked above Macclenny had been moved down in the rankings as a result of the site visits. Therefore, Mr. Burnside was able to inform the Respondent that Macclenny was within the fundable range of applicants. The Department's solution to the dispute was based in part on the fact that Macclenny was going to receive an award. The Respondent told Mr. Burnside that the result of the Department's solution, as explained by Mr. Burnside, might be acceptable to him. The Respondent was satisfied even though the solution did not resolve the ultimate problem of gerrymandering. , which the Respondent has suggested was the reason he was so upset about the Department's actions. The Respondent also asked Mr. Burnside whether the Department's decision could withstand a legal challenge. Mr. Burnside informed the Respondent that the Department's legal staff had opined that the decision was defendable. If the problem raised by the Respondent had been raised by any person who was not a member of the Florida Legislature, Mr. Burnside would have recommended to Mr. Pelham that the Department take no action and allow the complaining individual to take legal action. The Respondent, therefore, clearly affected the manner in which the Department administered the CDBGP. The Respondent's Contact with Department Staff Concerning the Monitoring of CDBGP Grants. During October, 1989, Terri Ganson was employed as a Community Assistant Consultant for the Department. Ms. Ganson's duties included, among other things, monitoring CDBGP grants. During late 1989, Ms. Ganson was responsible for monitoring three CDBGP grants that had been awarded to Marion County (hereinafter referred to as the "Marion Grants"). Ms. Ganson was required to write periodic monitoring reports concerning the Marion Grants. The Marion Grants were being administered on behalf of Marion County by a grant consultant and competitor of the Respondent, Fred Fox Enterprises. Prior to October 30, 1989, Marion County was awarded a fourth grant (hereinafter referred to as the "Fourth Marion Grant"), in the CDBGP. Marion County was seeking bids for the administration of the Fourth Marion Grant. Langton Associates and Fred Fox Enterprises had submitted proposals to administer the Fourth Marion Grant. As of October 30, 1989, Marion County had not yet decided who would administer the Fourth Marion Grant. On October 30, 1989, the Respondent telephoned Ms. Ganson. During this telephone call, the Respondent yelled at her and was very angry and upset. The Respondent believed that Ms. Ganson was cooperating with Fred Fox, his competitor, and he wanted her to stop. The Respondent feared that Ms. Ganson's monitoring reports for the Marion Grants would cause the administration of the Fourth Marion Grant to be awarded to Fred Fox Enterprises. The Respondent did not believe the monitoring reports were critical enough of Fred Fox Enterprises. The evidence failed to prove that Ms. Ganson in fact had favored Fred Fox Enterprises. During his telephone conversation with Ms. Ganson on October 30, 1989, the Respondent indicated the following to Ms. Ganson: He was concerned that Marion County would select Fred Fox Enterprises to administer the Fourth Marion Grant because of the monitoring reports Ms. Ganson had written concerning the Marion Grants. He accused Ms. Ganson of siding with Fred Fox. He told Ms. Ganson that she had "probably cost him a $96,000 administration grant because of the way [her] reports were written" Lines 2-4, page 181, Transcript. He demanded that a mistake in Ms. Ganson's monitoring reports for one of the Marion Grants be corrected. He requested that Ms. Ganson send him a copy of the current contracts and milestones, all of the monitoring reports and all requests for modifications pertaining to the Marion Grants. Ms. Ganson told the Respondent that she would check her reports to determine if she had made a mistake and, if so, would correct it. She ultimately determined that she had made a mistake and corrected it. She did not, however, totally modify her reports in the manner that the Respondent had demanded. Ms. Ganson reported the October 30, 1989, telephone conversation with the Respondent in a memorandum to her immediate supervisor. The Respondent's actions in telephoning Ms. Ganson on October 30, 1989, and his comments to Ms. Ganson were intended to avoid the loss by Langton Associates of the administration fees for the Fourth Marion Grant, which the Respondent believed could be $96,000.00. Although the decision as to who administered the Fourth Marion Grant was a local decision, the Respondent attempted to influence that decision by demanding that Ms. Ganson, an employee of the Department, modify her monitoring reports. The Respondent's conversation with Ms. Ganson was intended to benefit Langton Associates and, thus, benefit himself. The evidence failed to prove that the Respondent's conversation with Ms. Ganson was on behalf of any person or entity (other than Langton Associates) that he had received compensation from. Although the evidence proved that the Respondent was paid a salary by Langton Associates during the year in which his conversation with Ms. Ganson took place, the evidence failed to prove that Langton Associates had any clients at that time that were paying for Langton Associates' services. Although general testimony was elicited concerning Langton Associates' business and clients, testimony concerning clients that paid Langton Associates during any specific period of time was limited to the period of time preceding approximately July, 1989. The Respondent's Contact with Department Staff Concerning Awards of Multiple Service Grant Contracts. A copy of a letter dated September 22, 1989, was received by the Department. The letter was from Patricia Teems, the business manager of Langton Associates, to the Mayor of the City of Bunnell, Florida. The letter was on the letterhead of Langton Associates. In the September 22, 1989, letter Ms. Teems claimed that the City of Bunnell had awarded an administrative contract in violation of Florida law. In the last paragraph of the contract, Ms. Teems stated the following: Also, by this letter I am requesting DCA make a formal investigation into the procurement practices of the City of Bunnell. The complaint made by Ms. Teems in the September 22, 1989, letter, concerned the award of multi-service contracts. A "multi-service" contract includes the awarding of a contract to administer a grant to the same consultant that prepared the application for which the CDBGP grant was awarded. Under Florida law in effect during 1989, multi-service contracts were prohibited unless the local government awarding such a contract indicted in writing that the multi-service contract was in the best interest of the local government. Mr. Burnside was aware of the September 22, 1989, letter and the request of Langton Associates that the Department investigate its complaint against the City of Bunnell. The Department was investigating the complaint in October, 1989. During October, 1989, Mr. Pelham was walking through a hall in the House of Representatives' office building. The Respondent approached Secretary Pelham and indicated that he wanted to speak to him. During the Respondent's October, 1989, conversation with Mr. Pelham, the Respondent indicated the following: He indicated that the Department was not enforcing one of the laws governing the CDBGP. The Respondent indicated that the problem involved the services that could be performed by someone who contracted with a local government to administer a CDBGP grant. He indicated that he "was being hurt by . . . " the Department's failure to properly enforce the law. He threatened to sue the Department unless the Department enforced the law properly. The Respondent, who spoke in a low-key voice, was firm in expressing his position to Mr. Pelham that the law concerning multi-service contracts should be enforced as the Respondent interpreted the law. Shortly after the conversation with the Respondent concerning multi- service contracts, Mr. Pelham spoke to Mr. Burnside about the conversation. Mr. Burnside explained to Mr. Pelham that Langton Associates had filed a copy of the September 22, 1989, letter to the Mayor of the City of Bunnell and that the Department had been requested to investigate the matter. After Mr. Pelham and Mr. Burnside discussed the Secretary's encounter with the Respondent, they realized that the Respondent had been talking about the City of Bunnell incident when he spoke to Mr. Pelham. Mr. Pelham realized that the Respondent had been suggesting that the City of Bunnell had not followed the correct procedures in awarding the administration contract and the consultant that was awarded the administration contract should not have been the same consultant that had obtained the grant. Mr. Burnside responded on behalf of the Department to the request that the Department investigate the City of Bunnell incident by a letter to Ms. Teems dated January 22, 1990. Based upon information reviewed by the Department, including review by the Department's legal staff, the Department informed the Mayor of Bunnell and Ms. Teems that it had been concluded that the City had not violated the law. Although the Respondent admitted that he was aware that he should not directly request that the Department investigate the City of Bunnell, he approached Mr. Pelham to discuss the matter with him. The Respondent's conversation with Mr. Pelham was intended to benefit Langton Associates because Langton Associates was interested in obtaining the grant administration contract the City of Bunnell had awarded to another consultant and, thus, benefit himself. If the Department had agreed with Ms. Teems' and the Respondent's argument that the City of Bunnell had acted illegally, the City of Bunnell could have been forced to select a different administrator for its grant. The Respondent hoped Langton Associates would be the newly selected administrator. The evidence failed to prove that the Respondent's conversation with Mr. Pelham was on behalf of any person or entity (other than Langton Associates) that he had received compensation from. Although the evidence proved that the Respondent was paid a salary by Langton Associates during the year in which his conversation with Mr. Pelham took place, the evidence failed to prove that Langton Associates had any clients at that time that were paying for Langton Associates' services. Although general testimony was elicited concerning Langton Associates' business and clients, testimony concerning clients that paid Langton Associates during any specific period of time was limited to the period of time preceding approximately July, 1989. The Respondent's Contact with Department Staff Concerning Certain Department Policies. In January, 1990, Wanda A. Jones, worked in the Department's Bureau of Housing, Division of Housing and Community Development. On January 23, 1990, Ms. Jones attended a CDBGP workshop in Jacksonville, Florida, sponsored by the United States Department of Housing and Urban Development. The Respondent was introduced to Ms. Jones during the January 23, 1990, workshop by an employee of Langton Associates. The Respondent began questioning Ms. Jones about the Department's policy that allowed Noma, Florida, to continue to be awarded funds under the CDBGP year after year. Noma is a very small community that had received a number of grants and the Respondent was challenging the Department policy that allowed such a small community such as Noma to continue to receive grants. Ms. Jones attempted to explain the Department's policy to the Respondent. At the time of the Respondent's conversation with Ms. Jones, the Department was in the middle of a funding cycle. The weight of the evidence, however, failed to prove that any application had been filed by Langton Associates on behalf of any client during that funding cycle. The Respondent became upset with Ms. Jones' responses and raised his voice. The Respondent was aggressive, confrontational and he badgered Ms. Jones. Ms. Jones felt very uncomfortable. Her discomfort was caused in part by the fact that the Respondent was a legislator and he was holding her accountable for Department actions. The Respondent told Ms. Jones that the Department's policy was impacting on his business. By eliminating the situation that allowed governments like Noma to continue to obtain grants, other governments would become eligible to receive CDBGP funds. Some of those governments might include Langton Associates' clients or prospective clients. After Ms. Jones left the Respondent, he again approached her, apologized and then started to berate her again. During this conversation, the Respondent asked if Ms. Jones would speak to him "off the record" and express her personal opinions about Department actions. The Respondent's conversation with Ms. Jones was intended to benefit Langton Associates and, thus, benefit himself. The evidence failed to prove that the Respondent's conversation with Ms. Jones was on behalf of any person or entity (other than Langton Associates) that he had received compensation from. Although the evidence proved that the Respondent was paid a salary by Langton Associates during the year in which his conversation with Ms. Jones took place, the evidence failed to prove that Langton Associates had any clients at that time that were paying for Langton Associates' services. Although general testimony was elicited concerning Langton Associates' business and clients, testimony concerning clients that paid Langton Associates during any specific period of time was limited to the period of time preceding approximately July, 1989.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission on Ethics enter a Final Order and Public Report finding that the Respondent, Michael E. Langton, violated Sections 112.313(6) and 112.3141(1)(c), Florida Statutes, and Section 8(e), Article II, of the Constitution of the State of Florida, as alleged in Complaint No. 90-86. It is further RECOMMENDED that the Respondent be subjected to public censure and reprimand and be required to pay a civil penalty of $5,000.00 ($2,500.00 for each statutory violation). DONE and ENTERED this 27th day of November, 1991, in Tallahassee, Florida. LARRY J. SARTIN 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 27th day of November, 1991. APPENDIX TO RECOMMENDED ORDER The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Advocate's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection A. 1 1-3. 2 6-7. 3 8. 4 See 10. The weight of the evidence failed to prove what years the percentages apply. 5 11. 6 Hereby accepted. 7 5. B. 1 13-14 and 21-23. 2 See 25. 3 24. "Gerrymandering" 1 29-30, 38 and 41. 2 32-34. 3 31-33. 4 32-33 and 35. 5 35. 6 See 35. 7 37. The 1988-1989 Funding Cycle 1 18 and 38. 2 18. 3 44 and 51. 4 82 and hereby accepted. 5 46-47. 6 48-49. 7 19, 38 and 52. 8 52-53. 9 The first sentence is not relevant. 54-55. 10 55-56. 11 59. 12 56. 13 57 and 61-63. 14 58 and 61. 15 63. 16 58. 17 62-63. 18 59, 66 and 73. Hereby accepted. See 75 and 80. 21 76-77 and 80. 22 34. 23 81-83. 24 81. 83 and hereby accepted. Hereby accepted. 27 80. 28 84. 29 87. 30 86-87. 31 87. The testimony supporting these proposed findings was too speculative. 52 and hereby accepted. 34 89-90. 35 87 and 89-90. 36 90. 37 Not relevant. 38 92. 39 95, 97 and 101. 40 97. 41 101. 42 104. 43 100-101. 44-45 102. 46-47 Although these findings of fact are true, there could have been a number of reasonable explanations for why the Respondent did not proposed legislation concerning gerrymandering. 48 There proposed findings of fact are generally true. The fact that there are inconsistencies in testimony alone is not why some of the Respondent's testimony was not credible, however. The Respondent's explanation has been rejected based upon the weight of all of the evidence in this proceeding. C. 1 105. 2 Hereby accepted. 3 Not relevant. 4 106. 5 112-113. 6 114. 7 113. 8 114. 9 109-111. 10 113-114. 11 See 113. The evidence did not prove whether Ms. Ganson did or did not intend to favor Mr. Fox. 12 116. 13 118. D. 1-2 112. 3 120-121. 4 Hereby accepted. 5 124-125. 6 126. 7 127. 8 Not supported by the weight of the evidence or not relevant. 9 128. 10 129 and see 130. E. 1 131. 2 132. The meeting took place on January 23, 1990. 3 133 and 135. 4 133-134. 5 134 and 139. 6 See 136. 7 134. 8 138. 9-10 Not supported by the weight of the evidence. No weight has been given to the sworn statement of Ms. Jones. 11 Hereby accepted. 12 141. 13 Hereby accepted. 14 139. 15 Hereby accepted. 16 140. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1-2. 2 4, 6 and 8. 3 7. 4 13-14 and 16. 5 21-22. 6 22. Not supported by the weight of the evidence. The interrogatories were not offered into evidence. See 26. 9 5. 10 Not supported by the weight of the evidence. The interrogatories were not offered into evidence. 11 27. 12 28. 13 52. 14 57. 15-16 Hereby accepted. 31-32. The last sentence is not supported by the weight of the evidence. Respondent's exhibit 14 was offered and accepted into evidence only for impeachment purposes. Not relevant. 19 14. Hereby accepted. See 32 and 35. Hereby accepted. 23 39-42. 24 Although generally true, the intent of one legislator does not support a finding concerning the intent of the entire Legislature in enacting any law. 25 41. 26 40-42. 27 See 43. 28 44. 29 51. 30 56. 31 See 58. The Respondent's conversation with Ms. Frohock was not to raise "numerous complaints regarding the DCA's administration of the CDBG program." 32-36 See 67-72. 37 See 75 and 77-78. The evidence failed to prove that the Meeting was requested by the Respondent to discuss the general administration of the CDBGP. 38 76. 39 85. 40 78. 41 81. 42 79 and 84. 43 87. See 87. Not relevant. See 91. 47 See 87 and 89-90. See 91. Not relevant. Not supported by the weight of the evidence except as found in 101. See 100-104. 50-51 Not supported by the weight of the evidence. Ms. Frohock's sworn statement was hearsay. 52-54 Not relevant. 55 84. 56 Not relevant. 57 See 67-72 and 90-94. 58 124. 59 125. 60 See 120-121. The third sentence is not supported by the weight of the evidence. 61 See 130-131. 62 112-114. 63 114-115. 64 115. Not supported by the weight of the evidence. See 118. Not relevant. 67 See 118-119. 68 132. 69 133-134. 70 134. 71 137. 72 137 and 143. 73 See 142. 74 Not supported by the weight of the evidence. 51 COPIES FURNISHED: Virlindia Doss Bonnie J. Williams Craig B. Willis Executive Director Assistant Attorneys General Commission on Ethics Department of Legal Affairs The Capitol, Room 2105 The Capitol, Suite 1601 Post Office Box 6 Tallahassee, FL 32399-1050 Tallahassee, FL 32302-0006 Mark Herron, Esquire Jeffrey H. Barker, Esquire Akerman, Senterfitt, Eidson & Moffit 216 South Monroe Street Suite 300 Post Office Box 10555 Tallahassee, FL 32302-2555
The Issue Whether Petitioner, Children's Charity Fund, Inc., qualifies under Section 212.08(7)(o)2.b., Florida Statutes, for a consumer certificate of exemption as a charitable institution.
Findings Of Fact Petitioner, Children's Charity Fund, is a not-for-profit corporation and qualifies as a tax-exempt organization pursuant to Section 501(c)(3) of the United States Internal Revenue Code. Petitioner maintains an office in Sarasota, Florida. The articles of incorporation specify that the nature of the business to be transacted and the purpose to be promoted by Children's Charity Fund "shall be exclusively charitable, including raising funds in any lawful manner" for the following purposes: (1) to educate and inform the public about the needs of handicapped and disabled children; (2) to provide referral services and maintain a hot-line for handicapped children; (3) to provide services "in whatever form possible that the Board may deem necessary" for handicapped children and their parents; and (4) to buy medical equipment for handicapped and disabled children. The Children's Charity Fund claims entitlement to a consumer certificate of exemption based primarily on the fourth purpose listed in paragraph 2 above. In carrying out this purpose, the Children's Charity Fund purchases various types of medical equipment for handicapped and disabled children who reside in Florida as well as in other states. The medical equipment is provided to children who need the equipment, but whose parents have no insurance or their requests for the equipment have been turned down by Medicare, Medicaid, or their insurance companies. In determining which applications for medical equipment it will approve, the Children's Charity Fund has not established income limits for the applicant family. The circumstances of each family are considered on a case-by-case basis and factors other than income are also considered. To date, Children's Charity Fund has never denied an application for medical equipment for a handicapped or disabled child, regardless of family income, if such equipment was needed by the child. In addition to purchasing medical equipment for handicapped and disabled children, the Children's Charity Fund provides Christmas gifts and tickets to events organized and promoted by the Children's Charity Fund such as charity softball games. The Children's Charity Fund claims that these gifts and tickets are charitable services. During its most recent fiscal year, the Children's Charity Fund spent less than 50% of its operational expenditures on qualified charitable services. The evidence at hearing established that during the relevant time period, Children's Charity Fund spent less than 35% of its total operating expenditures on qualified charitable services. This percentage does not meet the requirements of Rule 12A-1.001(3)(g)3.e., Florida Administrative Code, which mandates that the organization seeking tax exempt status as a charitable institution spend "in excess of 50.0 percent of [its] operational expenditures toward qualified charitable services." During its most recent fiscal year, Children's Charity Fund spent approximately 50% of its operating expenditures to pay for fundraising activities.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying a consumer certificate of exemption to Petitioner, the Children's Charity Fund, Inc. DONE AND ENTERED this 18th day of May, 1998, in Tallahassee, Leon County, Florida. Carolyn S. Holifield 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 Filed with the Clerk of the Division of Administrative Hearings this 18th day of May, 1998. COPIES FURNISHED: Ken Bowron, Sr. Executive Director Children's Charity Fund, Inc. 2011 Bispham Road Sarasota, Florida 34236 Kevin J. O'Donnell Assistant General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Linda Lettera General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
