The Issue Whether Respondent, Hillsborough County School Board (School Board), erred in denying the Petitioner's request to consolidate its two charter contracts into one charter agreement.
Findings Of Fact Trinity School is a Florida corporation that owns and operates two charter schools in Hillsborough County, Florida. The two charter schools are known as Trinity Lower School for Children and Trinity Upper School. Trinity Lower School for Children provides education for 425 students in kindergarten through fitth grade. Trinity Upper School serves 225 students in sixth through eighth grades. The School Board is constitutionally and statutorily charged with the operation and supervision of all K through 12 public schools in Hillsborough County, Florida. Art. IX, § 4(b), Fla. Const.; §§ 1001.32(2) and 1003.02. The two Trinity charter schools are part of the public school system and are sponsored by the School Board. § 1002.33. Trinity School was formed by a group of educators and parents of children who had attended a private Roman Catholic School that was closing. In 1999, Trinity School submitted its application to form a K through eighth grade charter school. Its application was approved by the School Board, and Trinity began operation in 1999. Trinity School's population grew steadily from its inception and in 2003, Trinity School sought to purchase a building across the street from its campus. Ms. O'Dea, the founder, principal, chief executive, and educational officer for Trinity School, explained that Trinity School learned that it would be eligible for additional federal start-up money, if Trinity School divided its charter into two separate charters. By dividing the original charter and creating a new charter school for the middle school, Trinity School was able to obtain at least $450,000.00, in federal start-up funds which was used to help purchase a building across the street from the original school, grow the number of classes, as well as increase the number of programs and teachers. In 2003, Trinity School applied for a charter for the Trinity Upper School, which would serve sixth through eighth grades. The School Board approved the charter for the Upper School, and Trinity School was able to receive the federal start-up money. The Trinity Upper School began operating under its own charter in 2004. Although two separate charters, both Trinity Schools are operated by the same parent corporation, follow the same Bank Street School principles of educational development, and are located in the same location. Further, the record showed through the testimony of Ms. Difranco, Trinity School's director of finance, that the two charter schools "actually function as one school[,] [w]e share buildings; we share a media center; we share staff; we use one accounting system." On April 3, 2008, Trinity School wrote the School Board's representative to request a change in Trinity School's financial reporting to the school district. Trinity School's letter recognized that both schools operated "under the fiscal umbrella of The Tampa School Development Cooperation [sic], but the schools' finances are reported to the district separately." Trinity School advised the School Board representative that combining the schools' financial reports would benefit "both our accounting practices and the school district." On May 15, 2008, Ms. Hodgens, the School Board's supervisor of charter schools, wrote Ms. O'Dea: After consulting with the Department of Education regarding your request to combine Trinity School for Children and Trinity Upper School, the district has been advised that you are able to combine the two schools. I will present your request to the Hillsborough County School Board regarding the combination of the two schools during your schools' contract renewal process. On March 15, 2010, the School Board wrote Ms. O'Dea concerning the renewal of the charters. The School Board informed Ms. O'Dea that "Trinity School for Children/Trinity Upper is scheduled for Contract Renewal Review[,]" and requested that a list of materials be provided for the review. On June 28, 2010, Ms. Hodgens, referencing her earlier letter dated May 15, 2008, wrote Ms. O'Dea concerning Trinity School's request to combine the charters during the contract renewal period. Specifically, Ms. Hodgens wrote: After several conversations with district staff, there is no educational benefit for students by combining the two schools. Due to this fact, the Superintendent will not be making this recommendation to the School Board at the time of your contract renewal. Trinity School and the School Board brought their consolidation dispute before the Department of Education under section 1002.33(6)(h). On March 30, 2011, Dr. Eric Smith, the Florida Commissioner of Education, entered a Mediation Report of Impasse, stating that the parties had reached an impasse and that the matter could not be settled through mediation, pursuant to section 1002.33(6)(h). Ms. Difranco, who has been Trinity Schools' director of finance for the past two years, credibly testified that both schools functioned administratively as one school, but were required to file separate fiscal reports. Furthermore, she credibly testified that creating the two separate fiscal reports for each school, results in Trinity School's accountants and personnel having to perform additional duties of separating the relevant data by school. Ms. Difranco credibly testified that she had conducted a cost analysis comparing the costs of treating the two schools as separate charters with an estimated cost of operating under one charter. According to Ms. Difranco, the savings to Trinity School would be approximately $123,000.00, a year. The largest bulk of the savings would come from a reduction in the administrative fee Trinity School pays to the School Board to administer the charter schools. Ms. Difranco estimated that the administrative fee paid to the School Board would reduce by approximately $65,000.00, a year. The reason for the reduction in administrative fees received by the School Board is the legislature's enactment of section 1002.33(20)(a), Florida Statutes (2011). Section 1002.33(20)(a), in part, changed the formula used to calculate the administrative fee charged to charter schools by district school boards. This change in the formula for funding results in a reduction of the amount of money that the School Board will receive as administrative fees from Trinity School if the two charters are combined into one charter. The School Board, in making its decision about whether or not to grant the request to combine the two charters into one charter, considered the fact that it would receive less money from the administrative fees, if the two charters were combined. Both Trinity Schools have received from the State of Florida "A" ratings and are respected charter schools. Trinity Schools, however, have not been designated as "high-performing" charter schools by the Commissioner of Education, as defined by section 1002.331, Florida Statutes (2011). The reason that Trinity Schools’ two charters do not meet the statutory definition of "high-performing" charter school under section 1002.331 is due to past negative fund balances. The record, however, showed that Trinity Schools are on the verge of eliminating the financial difficulties. Specifically, the testimony showed that in 2009-2010 school year, Trinity Schools had a negative fund balance. However, the testimony showed through Ms. Difranco that for school years 2010-2011, and the current school year 2011-2012, that Trinity Schools have met the fiscal requirements.
The Issue Whether Petitioner owes sales and use tax (plus penalties and interest) to the Department of Revenue (Department), as alleged in the Department's November 1, 1999, Notice of Decision.
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the Stipulations of Fact set forth in the parties' Joint Pre-Hearing Stipulation: 1/ Mr. Wiviott is a very successful, "hands-on" entrepreneur who presently owns approximately five or six businesses. Since 1958, when he and his brother opened a carpet store in Milwaukee, Mr. Wiviott has owned approximately 30 different businesses (including nine restaurants and a yacht service business), many of which he has sold "for literally millions of dollars of profit." Approximately two-thirds of the businesses that he has owned he has "started from scratch." There have been instances where Mr. Wiviott has invested in businesses that were in industries in which, at the time of his investment, he had no prior experience. In these instances, he overcame his lack of experience by being "extremely industrious" and doing "research." When Mr. Wiviott has needed to consider a "feminine viewpoint" in making a business decision, he has used Mrs. Wiviott, his wife of 43 years, as a "sounding board." For the past 35 years, William Becker has been Mr. Wiviott's accountant. In 1991 or 1992, Mr. Wiviott purchased two "brand new" boats as business investments. The boats were sold to Mr. Wiviott together as a package. Mr. Wiviott paid a total of $1.1 million for the two boats. The larger of the boats was a 63-foot sport fisherman. Although unfinished, it was seaworthy. Mr. Wiviott named this boat the "Choice One." Mr. Wiviott named the other boat, a 56-foot sport fisherman, the "Choice Too." Mr. Wiviott accepted delivery of the Choice One and Choice Too in the Bahamas. He did not pay any sales tax on his purchase of the boats. After accepting delivery, Mr. Wiviott brought the boats to Fort Lauderdale. In 1993, Mr. Wiviott explored the possibility of entering (for the first time) the yacht charter business. He spoke to various people involved in the industry, including two charter brokers (Bob Offer and Bob Saxon) and a charter yacht owner (Bernie Little). He also had discussions with Mr. Becker. Together, he and Mr. Becker made cost and revenue projections. He ultimately made a "value judgment" to go into the business. Mr. Wiviott retained the services of Mr. Offer to help him find a suitable yacht for the business. One of the yachts that Mr. Offer showed Mr. Wiviott was the Fifty-One, a Washington State-built, Fort Lauderdale- based "mega" yacht owned by an Italian national, Dr. Moretti. The Fifty-One's interior design made it particularly well suited for chartering. It had four levels, including a sky deck/lounge equipped with a complete kitchen (to complement the galley located on the bottom level). There were five staterooms that could comfortably accommodate ten charter guests. Each of the regular staterooms had its own head. The master stateroom had "his and her" heads. There was also a stateroom for the captain, as well as quarters for six other crew members (the number needed to properly service a charter party). The Fifty-One had not been well maintained during the time it had been owned by Dr. Moretti. Although Dr. Moretti had made the Fifty-One available for charter, the yacht had a poor reputation among charter brokers and, as a result, it just "sat at the dock," unchartered, while under Dr. Moretti's ownership. In October of 1993, Mr. Wiviott offered to purchase the Fifty-One from Dr. Moretti for $5.1 million, subject to a satisfactory marine survey and sea trial. Dr. Moretti initially rejected the offer, but subsequently agreed to sell the Fifty- One at Mr. Wiviott's offering price (which was considerably less than the $9 million that Dr. Moretti had paid for the Fifty-One a year and a half earlier). Before the deal was consummated, Mr. Wiviott contracted with a marine survey company, Patton Marine, Inc. (Patton), to perform a thorough inspection of the Fifty-One. Patton performed an extensive pre-purchase survey of the Fifty-One, which included various sea trials and other tests (conducted in Fort Lauderdale and off the Fort Lauderdale coast). The survey revealed that the Fifty-One had various "deficiencies." Most of these "deficiencies" were "small items" and were remedied before the sale was finalized. The most serious of the remaining "deficiencies" was the excessive amount of interior vibration. Notwithstanding the known "deficiencies" that remained, Mr. Wiviott thought that, at $5.1 million, the Fifty- One was a good buy. At worst, he believed, he "could make a pretty good profit" by reselling the Fifty-One. Mr. Wiviott retained Robb Maass, whom Mr. Wiviott was told was the "top marine attorney in the [Fort Lauderdale] area," to assist him in forming a Florida corporation which would purchase the Fifty-One and operate a yacht charter business. With Mr. Maass' assistance, B. W. Marine, Inc. (Petitioner) was organized under the laws of the State of Florida, effective January 20, 1994, with Mr. Wiviott as its sole officer, director, and shareholder. Petitioner's principal corporate address was, at the time of incorporation, and has remained, 757 Southeast 17th Street, #389, Fort Lauderdale, Florida 33316. On January 28, 1994, shortly after Petitioner's incorporation, Petitioner closed on the purchase of the Fifty- One. No Florida or other state sales tax was paid on the purchase. The newly purchased yacht (which had been registered in the Cayman Islands by the previous owner, Dr. Moretti) was immediately registered with the United States Coast Guard, and it thereafter began to fly an American flag. Based upon on Mr. Maass’ advice, Petitioner also took steps to obtain a "certificate of documentation with appropriate endorsement for employment in the coastwise trade" for the Fifty-One. It was not until the following year, however, that the United States Congress (passing a bill introduced by Florida Congressman E. Clay Shaw, Jr.) authorized the Secretary of Transportation to issue such a "certificate of documentation." 2/ After taking delivery of the yacht in the Bahamas, Petitioner imported the Fifty-One into Florida. It did so because Mr. Wiviott wanted the Fifty-One to be marketed in the south Florida area and to have access to the exceptional yacht repair and maintenance facilities that were available there. The South Florida area is where the "mega" yacht charter brokers (who, in most instances, effectively "make[] the decision [as to] which boat a charter client is going to use") are concentrated and where the reputation (or, as Mr. Wiviott put it in his hearing testimony, the "aura" or illusion") of a "mega" yacht is established (in part, by the owner, captain, and crew "pander[ing]" to the broker community during showings of the yacht). It is therefore important for a "mega" yacht available for charter to have a presence in the south Florida area so that it can seen by, and shown to, the "mega" charter brokers who are concentrated there. Although most "mega" yachts are marketed in Florida, "the chartering experience [generally occurs] elsewhere," in such places as New England (in the summer) and the Caribbean and Mediterranean (in the winter). Aware of this, Mr. Wiviott, at the time that the Fifty-One was imported into Florida, had no expectation that that the Fifty-One would be used exclusively for charters in Florida waters. Mr. Wiviott wanted the Fifty-One to be imported into Florida without Petitioner having to pay any use tax. Mr. Maass advised Mr. Wiviott that Petitioner would not have to pay Florida use tax if it registered with the Department as a "dealer" and used the Fifty-One "only . . . for bare boat charter[s]." Mr. Maass cautioned Mr. Wiviott that "[t]here could be no personal recreational use, no personal use aboard the boat whatsoever." Before importing the Fifty-One into Florida, Petitioner registered with the Department as a "dealer" that would be engaging in "bare boat" charter operations in Florida. Mark Newcomer was the first captain of the Fifty-One under Petitioner's ownership. Mr. Wiviott considered Captain Newcomer to be, not a "charter captain," but a "yard captain," that is, a captain "who specializes in repairs, maintenance and upgrades of yachts." Captain Newcomer was hired by Petitioner "to take delivery [of the Fifty-One] and to oversee the renovation and retrofit[ting] of the yacht." He was responsible for ensuring that the Fifty-One was brought up to American Bureau of Shipping (ABS) standards. Obtaining certification that the Fifty-One met ABS standards was an "essential part" of any campaign to effectively "market[] the boat" for charter. Mr. Wiviott did not have any intention of continuing Captain Newcomer's employment with Petitioner following completion of "the renovation and retrofit[ting] of the yacht." Captain Newcomer brought the Fifty-One into Florida on or about February 1 or 2, 1994, and docked it at a Fort Lauderdale marina (either Pier 66 Marina or the Bahia Mar Marina). On February 3, 1994, Captain Newcomer moved the Fifty- One to the Bradford Marine Shipyard (Bradford Marine), a Department-registered Fort Lauderdale repair facility able to service boats up to 150 feet in length. The Fifty-One underwent repairs and improvements at Bradford Marine until February 12, 1994, by which time the work that had to be done with it out of the water had been completed. At Bradford Marine, Petitioner had to pay a 20 to 30 percent "surcharge on all outside vendors that c[a]me in." On February 13, 1994, Captain Newcomer moved the Fifty-One to the Bahia Mar Marina (Bahia Mar), a more cost- effective location, to do (with the help of others) the remaining repair and improvement work on the yacht (which could be done with the yacht in the water). Because Captain Newcomer was "very good friends" with the dockmaster at the Bahia Mar, he and those he supervised were allowed to perform work on the Fifty-One (involving the use of noise-generating power tools) that would have otherwise been prohibited. The Fifty-One remained at the Bahia Mar until March 14, 1994, undergoing repairs and improvements. On March 15, 1994, Captain Newcomer, accompanied by Mr. and Mrs. Wiviott (and with less than a full crew), took the Fifty-One on a cruise to the Jockey Club, a "private club" that was part of a "condominium complex resort" located in Miami. He did so pursuant to the instructions of Mr. Wiviott, with whom he spoke to on a daily basis regarding the repair and improvement work that was being done on the Fifty-One under his (Captain Newcomer's) supervision. Mr. Wiviott wanted "to take the boat out to stretch it out [and to] see the progress that Captain Newcomer was making." Furthermore, Mr. Wiviott thought that it was important for Petitioner's charter business for the Fifty- One "to be seen." Near the Jockey Club, the Fifty-One ran aground "in the mud," where it "sat . . . for about eight hours until the tide came back in." After the Fifty-One arrived at the Jockey Club, divers "g[o]t under the boat and clean[ed] the prop[eller]s [and] clean[ed] the drivetrain." The Fifty-One remained docked at the Jockey Club for three days. On March 17, 1994, the Fifty-One returned to the Bahia Mar to undergo further repairs and improvements. By mid-April of 1994, the work necessary to bring the Fifty-One up to ABS standards had been completed. Petitioner therefore applied for, and on April 19, 1994, was issued, an ABS "Class Certificate." The Fort Lauderdale Charter Broker's Boat Show (1994 Boat Show) was held at Pier 66 Marina (Pier 66) from April 14, 1994 to April 20, 1994. The Fifty-One was one of the boats entered in the 1994 Boat Show, and it remained at Pier 66 for the entire show. Mr. Wiviott was aboard throughout the event to show the boat to charter brokers and others. Captain Newcomer helped Mr. Wiviott show the boat. Food and drinks were served. Fresh flowers adorned the boat. The crew wore their dress uniforms. After the end of each day's session, Mr. Wiviott stayed aboard the Fifty-One overnight in lieu of spending company money to rent a hotel room. Following the 1994 Boat Show, from April 20, 1994 until April 28, 1994, the Fifty-one was taken on a "shakedown" cruise to Key West and back to Fort Lauderdale, during which it was run at various speeds and systems were "overloaded" to determine whether they worked properly. At the time of the cruise, the Fifty-One was not equipped with all of the staff and other accoutrements necessary to provide the "five star service" that those who charter "mega" yachts pay to receive. During the cruise, the boat docked at the Ocean Reef Club, an exclusive private resort community in Key Largo; the Galleon Marina, a public facility in Key West; Fisher Island; and the Jockey Club. There were a "few breakdowns" during the cruise, including a "crane breakdown" at the Ocean Reef Club. With the help of vendors, the necessary repairs were made. Aboard during the cruise, in addition to Captain Newcomer and a partial crew, was Mr. and Mrs. Wiviott; Mr. Wiviott's brother, Howard Wiviott; Howard's wife; Mr. Becker, whose firm provided Petitioner with accounting services (primarily through the efforts of Stacey Torchon, one of its accountants); and Mr. Becker's wife. There was no marine surveyor, no representative of a registered repair facility, and no "mega" yacht charter broker aboard during the cruise. 3/ Mr. Becker and his wife did not remain aboard for the entire cruise. They disembarked in Key Largo on April 23, 1994. During the time that he was aboard, Mr. Becker spoke to Captain Newcomer and the crew about the financial and accounting procedures that needed to be followed in conducting Petitioner's charter operations, information that Mr. Becker could have provided by telephone from his California office. (Stacey Torchon, who was "more involved [than Mr. Becker] in the day-to-day operations" of Petitioner, never met personally with any Fifty-One crew member; rather, she communicated with the crew by telephone.) While they were aboard, Mr. Becker and the other guests Mr. Wiviott had invited to take part in the cruise (referred to, collectively, hereinafter as the "Invited Guests") ate, relaxed, and enjoyed the hospitality and ambiance. The Invited Guests' presence on the Fifty-One during the "shakedown" cruise was not solely for the purpose of furthering Petitioner's charter business. Mr. Wiviott was motivated by personal reasons in inviting them aboard. The assertion (made by Petitioner in its Proposed Recommended Order) that one of the purposes of the "shakedown" cruise was to determine, through the feedback given by the Invited Guests, "whether the Petitioner was delivering the chartering experience in terms of comfort, ambiance and service that people willing to spen[d] $50,000 per week would expect" simply does not ring true. Mr. Wiviott knew full well that the Fifty-One, with a "yard captain" at the helm and less than a full crew, was not equipped to provide such service. He did not need to take the "Fifty-One" on a lengthy cruise with family and friends to find this out. Had Mr. Wiviott really wanted to learn if the Fifty-One offered a "chartering experience" for which someone would be willing to pay $50,000.00, he would have asked "mega" yacht charter brokers, not family and friends, to come aboard the Fifty-One for a cruise and give him their feedback. On April 28, 1994, following the "shakedown" cruise, the Fifty-One returned to the Bahia Mar, where, in the ensuing days, defects discovered during the "shakedown" cruise were remedied. By May 7, 1994, the Fifty-One was ready for charter. The Fifty-One, at that time, was not the only vessel in Petitioner's fleet. Shortly after acquiring the Fifty-One, Petitioner had purchased (in Florida) the Choice One and Choice Too 4/ from Mr. Wiviott. Petitioner paid Mr. Wiviott $1,138,804.28 for the Choice One. Inasmuch as the purchase was made under Petitioner's sales tax exemption certificate (that Petitioner had obtained from the Department based upon its representation that it intended to use the Fifty-One exclusively for "bare boat" charter operations in Florida), no Florida sales tax was paid. At the time of the purchase, Mr. Wiviott envisioned that Petitioner would use the Choice One as a "chase boat" for the Fifty-One (from which charterers and guests could fish). The Choice One, however, was never used by Petitioner for this purpose because it turned out that it was not feasible to do so. The Choice One wound up sitting at the dock in Fort Lauderdale, leaving only "to be stretched" or moved to another docking facility by its captain (initially Steven Ernst and then later Carl Roberts). Before its sale by Petitioner in 1995, the Choice One was chartered on only one occasion, during which time it remained at the dock in Fort Lauderdale (positioned so that those aboard could view a passing "boat parade"). The Fifty-One was chartered on a more frequent basis. Of the 15 charters of the Fifty-One during the Audit Period, however, only two (the Gerardo Cabrera and Jean Foss charters) were in Florida waters. The Gerardo Cabrera charter was the first charter of the Fifty-One following the completion of the "renovation and retrofit[ting] of the yacht." It started in Fort Lauderdale on May 18, 1994, and ended in Fort Lauderdale on May 21, 1994. The captain of the Fifty-One for the Gerardo Cabrera charter was Jon Cheney, who had replaced Captain Newcomer on May 7, 1994. The charter agreement between Petitioner (as the "Owner") and Mr. Cabrera (as the "Charterer") was dated May 13, 1994, and read, in pertinent part, as follows: In consideration of the covenants hereinafter contained, the Owner agrees to let and the Charter[er] agrees to hire the Yacht from noon on the 18th of May 1994 to noon on the 21st of May 1994 for the total sum of $18,000.00 + expenses + 6% FSST ($1,080 Dollars) of which amount $18,000 + $1,080 + $5,000 (ADVANCE toward expenses) for a total of $24,080 shall be paid on the signing of this Agreement . . . . The Owner agrees to deliver the Yacht at Bahia Mar Yachting Centre, Ft. Laud. on the 18th day of May 1994 in full commission and working order, outfitted as a yacht of her size, type and accommodations, with full equipment, inclusive of that required by law, and fully furnished, including galley and dining utensils and blankets; staunch, clean and in good condition throughout and ready for service; and agrees to allow demurrage pro rata to the Charterer for any delay in delivery. . . . The owner's insurance policy does not cover Charterer's protection and indemnity during the term of the Charter. . . . * * * The Charterer agrees to accept the yacht delivered as hereinbefore provided and to pay all running expenses during the term of the charter. The Charterer, his agents and employees have no right or power to permit or suffer the creation of any maritime liens against the yacht, except the crew's wages and salvage. The Charterer agrees to indemnify the Owner for any charges or losses in connection therewith, including reasonable attorney's fees. * * * The Charter[er] agrees to redeliver the yacht . . . to the Owner at Bahia Mar Yachting Centre, Ft. Lauderdale, FL . . . . The Charter[er] agrees that the yacht shall be employed exclusively as a pleasure vessel for the sole and proper use of himself, his family, guests and servants during the term of this charter and shall not transport merchandise or carry passengers for pay, or engage in any trade nor in any way violate the Revenue Laws of the United States, or any other Government within the jurisdiction of which the yacht may be at any time, and shall comply with law in all other respects. * * * 11. It is mutually agreed that full authority regarding the operation and management of the yacht is hereby transferred to the Charter[er] for the term thereof. In the event, however, that the Charterer wishes to utilize the services of a Captain and/or crew members in connection with the operation and management of the yacht, whether said Captain and/or crew members are furnished by the Owner or by the Charterer, it is agreed that said Captain and/or Crew members are agents and employees of the Charterer and not of the Owner. In the further event that local United States Coast Guard or other regulations require the Owner exclusively to provide a Captain and/or crew, or the Owner wishes to provide his own Captain and/or crew, the Owner agrees to provide a Captain who is competent not only in coastwise piloting but in deep sea navigation, and to provide a proper crew. The Captain shall in no way be the agent of the Owner, except that he shall handle clearance and the normal running of the yacht subject to the limitations of this charter party. The Captain shall receive orders from the Charterer as to ports to be called at and the general course of the voyage, but the Captain shall be responsible for the safe navigation of the yacht, and the Charterer shall abide by his judgment as to sailing, weather, anchorages, and pertinent matters. The Charterer assumes total control and liability as if the Charterer were the owner of the yacht during the term of the charter. . . . This agreement, by "industry standard," is "considered a 'bare boat' charter agreement." On May 13, 1994, Mr. Cabrera (as "Employer") also entered into a separate "Yacht Employment Agreement" with Captain Cheney (as "Yacht Captain"). It provided as follows: WHEREAS, Charterer has under charter the yacht FIFTY ONE pursuant to his bare boat charter party agreement wherein it is Employer's obligation to furnish the said yacht with a competent master and crew; and WHEREAS, Yacht Captain is a competent master, having over two years' experience in the coastal and inland waters of FLORIDA and THE BAHAMAS and is able to furnish a crew for the management and navigation of the said yacht; and WHEREAS, the parties desire to reduce their agreement to written term; NOW THEREFORE in consideration of the premises and of the agreements hereinafter contained, it is agreed as follows: Employer hereby hires yacht Captain as the Master of the said yacht to act as such Master as long as the yacht is under charter to Employer. Yacht Captain agrees to furnish 6 crew men to assist in operating and navigating the said yacht. The Captain and crew, if any, shall be properly uniformed. The crew to comprise the following: [left blank] Yacht Captain shall be paid for his services and the services of his crew a total sum of TEN DOLLARS AND OTHER GOOD AND VALUABLE CONSIDERATION and Employer shall furnish the Yacht Captain and his crew, quarters and food, during the term of this Agreement. The term of this Agreement shall commence on the 18th day of MAY 1994, or at such time that the yacht shall be ready to sail pursuant to the bare boat charter party agreement with the Owner and shall terminate on the 21st day of MAY, 1994, unless sooner terminated by the termination of the yacht party agreement for any reason whatsoever. In the event that the yacht charter party agreement is sooner terminated, the Master and crew will receive a pro-rated share of the agreed compensation for their services. After collecting from Mr. Cabrera all the monies Mr. Cabrera owed under both the charter agreement and the "Yacht Employment Agreement," Rikki Davis (the broker representing Mr. Cabrera) handed these monies over to Mr. Offer (the broker representing Petitioner). (It is commonplace in the "mega" yacht chartering industry "to have the amount paid for the use of the vessel under [a] bare boat charter agreement and amount for the captain and crew paid together by the charterer as a lump sum."). Mr. Offer, in turn, forwarded the monies he was given by Ms. Davis to Petitioner. The Gerardo Cabrera charter was the only charter that took place before the captain and crew of the Fifty-One became employees of Papa's Yacht Services, Inc. (Papa's), Petitioner's sister corporation, which, like Petitioner, was incorporated in Florida and has maintained a Florida corporate address from its inception. Papa's was formed solely for the purpose of enabling Petitioner to be in "compliance [with] the bare boat charter concept." Papa's dealings with Petitioner was Papa's sole source of revenue. Petitioner paid Papa's a "management fee" for providing a captain and crew for the Fifty-One. Although the Fifty-One's captain and crew had become Papa's employees, Petitioner continued to pay for their health insurance and provide them with free room and board on the Fifty-One at all times during the Audit Period, except when the Fifty-One was under charter and the charterers provided the captain and crew with room and board. Having a full-time captain and crew aboard a "mega" yacht available for charter, even when the yacht is not under charter, is essential to conduct successful charter operations. The captain and crew must be available, on the vessel, to host the "mega" yacht charter brokers who come aboard between charters (sometimes with little or no advance notice) and to perform those everyday tasks necessary to maintain the vessel. To attract and keep qualified onboard personnel, it is necessary to provide them with, as part of their compensation package, free room and board on the "mega" yacht. Doing so is the "standard in the industry." The Fifty-One was chartered by Jean Foss from December 27, 1995 to January 3, 1996, approximately a year and a half after Papa's had become the employer of the Fifty-One's captain and crew. Ms. Foss cruised to the Bahamas during the charter. The charter originated and concluded in Fort Lauderdale. "[T]he only reason [the Fifty-One] was in Florida [for the charter was] because [Ms. Foss] wouldn't fly to the Bahamas." The charter agreement between Petitioner (as the "Owner") and Mr. Foss (as the "Charterer") was similar to the charter agreement into which Mr. Cabrera and Petitioner had entered. It was dated August 15, 1995, and read, in pertinent part, as follows: TERM, HIRE & PAYMENTS: In consideration of the covenants hereinafter contained, the OWNER agrees to let and the CHARTERER agrees to hire the Yacht for the term from 12 noon . . . on the 27th day of December, 1995 to 12 noon . . . on the 3rd day January, 1996 for the total sum of $44,800 + All Expenses of which amount $22,400.00 shall be paid on the signing of this AGREEMENT and the balance thereof as follows: remaining 50% deposit (US$22,400.00) and Florida State Sales Tax of 6% US$2,668 for a total sum of $25,088.00 due by 24 November, 1995. DELIVERY. The OWNER agrees to deliver the yacht to CHARTERER at Fort Lauderdale, Florida at 12 noon . . . on the 27th day of December, 1995, in full commission and in proper working order, outfitted as a yacht of her size, type, and accommodations, with safety equipment required by law, and fully furnished, including gallery and dining utensils and blankets; staunch, clean and in good condition throughout and ready for service, and agrees to allow demurrage pro rata to the CHARTERER for any delay in delivery. . . . * * * 5. RUNNING EXPENSES. The Charterer agrees to accept the yacht as delivered as hereinbefore provided and to pay all shipboard expenses during the term of the charter period. * * * 8. RE-DELIVERY and INDEMNIFICATION. The CHARTERER agrees to redeliver the yacht, her equipment, and furnishings, free and clear and of any indebtedness for CHARTERER's account at the expiration of this charter, to the OWNER at Fort Lauderdale, Florida at 12:00 noon on the 3rd day of January, 1996 in as good condition as when delivery was taken, ordinary wear and tear and any loss or damage for which the OWNER is covered by his own insurance, and CHARTERER's insurance (if any) set forth in Paragraph 3 of this AGREEMENT, excepted. . . . * * * 10. RESTRICTED USE. The CHARTERER agrees that the yacht shall be employed exclusively as a pleasure vessel for the sole and proper use of himself, his family, passengers and servants, during the term of this charter, and shall not transport merchandise, or carry passengers for hire, or engage in any trade, nor any way violate the Revenue Laws of the United States, or any other Government within the jurisdiction of which the yacht may be at any time, and shall comply with the laws in all other respects. * * * 12. CHARTERER'S AUTHORITY OVER CREW. It is mutually agreed that full authority regarding the operation and management of the yacht is hereby transferred to the CHARTERER for the term thereof. In the event, however, that the CHARTERER wished to utilize the services of a captain and/or crew members in connection with the operation and management of the yacht, whether said captain and/or crew members are furnished by the OWNER or by the CHARTERER, it is agreed that said captain and/or crew members are agents and employees of the CHARTERER and not of the OWNER. In the further event that local United States Coast Guard or other regulations require the OWNER exclusively to provide a captain and/or crew, or the OWNER agrees to provide a proper captain who is competent not only to coastwise piloting, but in deep sea navigation, and to provide crew, the captain shall in no way be the agent of the OWNER, except that he shall handle clearance and the normal running of the yacht subject to ports to be called at, and the general course of the voyage. The captain shall be responsible for the safe navigation of the yacht, and the CHARTERER shall abide by his judgment as to sailing, weather, anchorages, and pertinent matters. The captain and crew shall be selected by the CHARTERER with the approval of the OWNER or the OWNER's Agent. CHARTERER is aware that he has a choice of captains. CHARTERER has full right to terminate the captain and/or crew; however, replacements shall be hired as under Paragraph 12 of this AGREEMENT. . . . Ms. Foss also entered into a "Yacht Services Agreement." The agreement, dated August 16, 1995, was with Papa's, which agreed to provide a seven person crew for the Fifty-One for the charter period (December 27, 1995, through January 3, 1996). Ms. Foss, in turn, agreed to pay Papa's $11,200.00 for such crew services and, in addition, to provide the captain (Arthur "Butch" Vogelsang) and crew with food and quarters aboard the Fifty-One during the charter period. Petitioner collected and remitted to the Department the sales tax owed by Mr. Cabrera and Ms. Foss on their rentals of the Fifty-One. No Florida sales tax was due on any of the other 13 charters of the Fifty-One during the Audit Period because they all took place outside Florida. In the case of 11 of these 13 other charters, like in the Jean Foss charter, the charterer entered into a charter agreement with Petitioner for the rental of the Fifty-One, as well as a separate agreement with Papa's for employment of a captain and crew for a fee (that "represent[ed] the actual cost [to Papa's] of the crew"). Typically, the total amount due under both agreements was sent to Petitioner, and Mr. Becker's firm (which also provided accounting services to Papa's) "moved the [portion of the] funds" due Papa's to Papa's bank account. Two charterers during the Audit Period (Mutual of Omaha Marketing Company and Prince Faisal Aziz of Saudi Arabia) refused Mr. Wiviott's request that they enter into two separate agreements, one (with Petitioner) for the rental of the Fifty- One and another (with Papa's) for employment of a captain and crew. Instead, they insisted on signing a single document, a Mediterranean Yacht Brokers Agreement (or MYBA Agreement), wherein Petitioner agreed to provide both the Fifty-One and a captain and crew. Not wanting to lose the business, Mr. Wiviott, on behalf of Petitioner, entered into these MYBA Agreements, notwithstanding that he had been instructed by Mr. Maass "not [to] take MYBA contracts." The MYBA Agreement between Petitioner (as "Owner") and Mutual of Omaha Marketing Company (as "Charterer") was dated December 16, 1995, and provided that: the "charter period" would begin 12:00 noon on March 3, 1996, and end 12:00 noon on March 17, 1996; the "cruising area" would be the Caribbean; the "port of delivery" would be Guadeloupe; the "port of re- delivery" would be Grenada; the crew would consist of a captain and six other crew members; the charter fee would be $48,000.00 per week for a total (for 2 weeks) of $96,000.00; the "Advance Provisioning Allowance" would be $48,000.00; and the "delivery/re-delivery fee" would be $6,857.00. In addition, it contained the following "clauses," among others: CLAUSE 1 AGREEMENT TO LET AND HIRE The OWNER agrees to let the Yacht to the Charterer and not to enter into any other Agreement . . . for the Charter of the Yacht for the [s]ame period. The CHARTERER agrees to hire the Yacht and shall pay the Charter Fee, the Security Deposit, the Advance Provisioning Allowance and any other agreed charges in cleared funds, on or before the dates and to the Account specified in this Agreement. * * * CLAUSE 6 CREW The OWNER shall provide a suitably qualified Captain acceptable to the insurers of the Yacht and a suitably experienced Crew, properly uniformed, fed and insured. The OWNER shall ensure that no member of the Crew shall carry or use any illegal drugs on board the Yacht or keep any firearms on board (other than those declared on the manifest) and shall ensure that the Captain and Crew comply with the laws and regulations of any country into whose waters the yacht shall enter during the course of this Agreement. The MYBA Agreement between Petitioner (as "Owner") and Prince Aziz (as "Charterer") was dated March 19, 1996, and provided that: the "charter period" would begin 12:00 noon on April 2, 1996, and end 12:00 noon on April 9, 1996; the "cruising area" would be the Caribbean; St. Maarten would be the "port of delivery" and "the port of re-delivery"; the crew would consist of a captain and six other crew members; the charter fee would be $50,000.00; and the "Advance Provisioning Allowance" would be $10,000.00. It contained the following additional provisions, among others: 30. AGREEMENT TO LET The OWNER shall let the yacht for the charter period and agrees not to enter into any other agreement for the charter of the yacht for the same period, and agrees not to sell the yacht before completion of the charter period, unless otherwise agreed by the Charterer. * * * 32. CREW The Owner shall provide a properly qualified Captain approved by the insurers of the yacht and a properly qualified crew, uniformed and insured. . . . Upon the advice of Mr. Maass, Petitioner assigned to Papa's its MYBA Agreements with Mutual of Omaha Marketing Company and Prince Aziz. It also entered into "Bareboat Charter Agreements" with Papa's for the rental of the Fifty-One for the same periods covered by the MYBA Agreements (notwithstanding that the MYBA Agreements expressly prohibited Petitioner from doing so). According to what Mr. Maass told Mr. Wiviott, by Petitioner taking such action, "the MYBA contract[s] could be accepted without violating the requirement that [Petitioner] engage only in bare boat chartering." The written assignment of the MYBA Agreement with Mutual of Omaha Marketing Company was dated December 16, 1995, the same date as the MYBA Agreement, and read, in pertinent part, as follows: BW Marine owns the vessel "Fifty-One," a 125 foot motoryacht, bearing official number 1020419 (the "Vessel"); BW Marine entered into a Yacht Charter Party Agreement dated December 16, 199[5] (the "Charter") between BW Marine and Mutual of Omaha Marketing Company (Charterer"); BW Marine desires to assign to Papa's Yacht Services, and Papa's Yacht Services agrees to accept, all BW Marine's right, title, and interest in and to the Charter; NOW THEREFORE, in consideration of the premises, the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: Assignment BW Marine assigns to Papa's Yacht Services all its right, title, and interest in and to the Charter. Papa's Yacht Services accepts the assignment and assumes all obligations of BW Marine under the Charter. Payment For administrative convenience, Charterer shall pay BW Marine the charter hire under the Charter. BW Marine, in turn, shall remit the surplus of these funds over the lease amount due from Papa's Yacht Services to BW Marine under that certain Bare Boat Charter Agreement between the parties of even date herewith. . . . Mutual of Omaha Marketing Company was not a signatory to this written assignment (and no other document offered into evidence reflects that Mutual of Omaha Marketing Company consented to the assignment). 5/ The written assignment of the MYBA Agreement with Prince Aziz was dated March 19, 1996, the same date as the MYBA Agreement. It was identical to the December 16, 1995, written assignment of the MYBA Agreement with Mutual of Omaha Marketing Company (with the exception of the dates contained therein). Prince Aziz was not a signatory to this written assignment (and no other document offered into evidence reflects that Prince Aziz consented to the assignment). The first "Bareboat Charter Agreement" between Petitioner (as "Owner") and Papa's (as "Charterer") was dated December 16, 1995, and provided, in pertinent part, as follows: Owner owns the vessel "Fifty-One," a 125 foot motorcoach bearing official number 1020419 (the "Vessel"); and Charterer desires to charter the Vessel from Owner and Owner is willing to make the Vessel available to Charterer for such purpose, subject to the terms and conditions contained herein. NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: Term Owner agrees to let and Charterer to hire, the Vessel for a term commencing March 3, 1996, and ending March 17, 1996. Payment Charterer shall pay Owner charter hire of One Hundred Two Thousand Eight Hundred Fifty Seven Dollars ($102,857.00), plus state sales tax, if applicable. Control The Vessel is chartered on a bare boat or demise basis. Owner hereby transfers to Charterer full authority regarding the operation and management of the Vessel for the charter term. Charterer is solely responsible for retaining a master and crew. Guest Limitation When the Vessel is underway, the number of persons on board the Vessel, other than the master and crew, shall be limited to the Charterer (or the Charterer's representative, if Charterer is a corporation) and twelve (12) guests. * * * Delivery Owner agrees to deliver the Vessel at Guadeloupe. Redelivery Charterer shall redeliver the Vessel to Owner at Granada at the end of the charter term, in as good condition as when delivery was taken, ordinary wear and tear excepted. . . . * * * 9. Expenses Charterer shall pay all running expenses during the term of the charter. Charterer shall pay for routine maintenance and repair of the Vessel during the charter term. * * * 12. Non-Assignment Charterer agrees not to assign this Agreement or subcharter the Vessel without the consent of the Owner in writing, which Owner may withhold in Owner's sole discretion. . . . The second "Bareboat Charter Agreement" between Petitioner and Papa's was dated March 19, 1996, and was identical to the first "Bareboat Charter Agreement" between them (with the exception of the charter period, charter cost, and delivery/redelivery locations). The evidence is insufficient to support a finding that Papa's ever entered into a sub-charter agreement with either Mutual of Omaha Marketing Company or Prince Aziz. Both Mutual of Omaha Marketing Company and Prince Aziz paid Petitioner the entire charter fee prescribed under their respective MYBA Agreements. They did not make any payments to Papa's. Petitioner paid Papa’s a “management fee” for providing the captain and crew during these charters. On one of the 15 charters during the Audit Period, Mr. Wiviott was aboard the Fifty-One as a guest of the charterer, the Choice Meat Co., Inc., a company that he and his son, Greg Wiviott, owned. Choice Meat Co., Inc., paid the "going charter rate" for the rental, but no broker's commission because "there was no broker to pay." There were occasions during the Audit Period, when the Fifty-One was not under charter, that Mr. Wiviott, members of his family (including his wife; children; grandchildren; his bother, Howard; and Howard's wife), and his friends used the Fifty-One outside Florida for non-business-related, personal purposes, sometimes for "one or two weeks at a time." For instance, in June of 1994 (after the Gerardo Cabrera charter and before the next charter, which began on July 21, 1994), when the Fifty-One was in New England, the Wiviott family was aboard for approximately "a couple of weeks." At the end of that summer, just before the Fifty-One returned from New England to Fort Lauderdale, the family again used the Fifty-One, this time "for a week or so." In November of 1994, around the Thanksgiving holiday, the Fifty-One traveled to the Caribbean so that the family could use it there for recreational purposes. The Fifty-One remained in the Caribbean for ten to 14 days with the family aboard. After the Wiviott children and grandchildren got off, the Fifty- One went on to the Virgin Islands, where Mr. and Mrs. Wiviott's friends came aboard and were entertained by the Wiviotts. In January of 1995, some time "shortly after the 1st," when the Fifty-One was in St. Maarten (where it was based for the winter), the Wiviott family once again spent time aboard the Fifty-One. The foregoing instances of out-of-state, non-charter, non-business-related use of the Fifty-One by the Wiviott family occurred when Captain Cheney was in command of the vessel. The Wiviott family continued to make such use of the Fifty-One during the time Captain Elario was captain. When Captain Elario took over the Fifty-One in St. Lucia (from Paul Canvaghn, who had been captain for only a day or two), Mr. and Mrs. Wiviott were aboard the vessel. They remained on board for approximately a week as the Fifty-One cruised the Caribbean. During that week, Mrs. Wiviott swam, laid in the sun, relaxed, and ate meals prepared by the Fifty- One's chef. She did not perform any tasks designed to further Petitioner's charter business. Subsequently, while Captain Elario was still captain, Mr. and Mrs. Wiviott took a non-charter, non-business-related trip on the Fifty-One to the Bahamas. Also during the time Captain Elario was captain, when the Fifty-One was in Hilton Head, South Carolina, Mr. Wiviott's brother, Howard, and Howard's wife, came aboard, and they remained on the yacht as it traveled to Norfolk, Virginia. Howard and his wife did not perform any tasks designed to further Petitioner's charter business while aboard the Fifty- One. Mr. and Mrs. Wiviott's daughter, along with her two young children, stayed overnight on the Fifty-One when, while under Captain Elario's supervision, it was docked at the Capital Marina in Washington, D.C. During the daughter's and children's stay, there was a party celebrating the youngest child's birthday. Indicative of the amount of time that Mr. and Mrs. Wiviott spent aboard the Fifty-One were the clothing and other personal items that (as a convenience) they stored (in a locker) on the Fifty-One (so that they would not have to bring these items with them each time they boarded the vessel). (These items were moved from the locker to another area on the Fifty- One, when necessary, to accommodate charterers using the stateroom in which the locker was located). Whenever the Fifty-One returned to Florida, it underwent needed repairs and maintenance. It also cruised the waters of the south Florida area, docking at various facilities. It did so not only "to be stretched," but to gain additional exposure among "mega" yacht charter brokers. In addition, while in Florida, the Fifty-One was stocked with supplies and provisions (including rack of lamb, veal, lobster tails, baked goods, gourmet foods, specialty items, wines, bath and beauty products, and party supplies) to be available for use by those on board when the Fifty-One was outside Florida, including not only charterers (such as Mutual of Omaha Marketing Company and Prince Aziz) and their guests, but also Mr. Wiviott, his family, and friends (when they were on board the Fifty-One for non-business-related, personal purposes). The Fifty-One, while in Florida, was also provided with fuel for charter, as well as non-charter, non-business related, trips outside Florida. Petitioner's charter business proved to be unprofitable. Expenses far exceeded revenues. (Petitioner, however, was able to sell the Fifty-One for more than the purchase price it had paid, receiving approximately $5.7 million, excluding commissions, for the Fifty-One in February of 2000.) By letter dated October 11, 1996, the Department informed Petitioner that it was going to audit Petitioner's "books and records" for the Audit Period. Petitioner was selected for audit because it had reported only a relatively small amount of taxable charter revenue on the Florida sales and use tax returns it filed during the Audit Period. The Department's "audit findings" were that the Fifty-One "was purchased for [a] dual purpose, for leasing and to be used by the shareholder" and therefore "the vessel and other purchases [made by Petitioner during the Audit Period under its sales tax exemption certificate, including its purchase of the Choice One] are taxable at the cost price." Based upon these audit findings, the Department issued a Notice of Intent to Make Audit Changes, in which it advised Petitioner that Petitioner owed $430,047.95 in sales and use taxes, $215,023.97 in penalties, and $169,672.70 in interest through July 18, 1997, for a total of $814,744.62, "plus additional interest of $141.39 per day . . . from 07/18/97 through the date [of] payment." By letter dated April 22, 1998, Petitioner protested the Department's proposed assessment. On November 1, 1999, the Department issued its Notice of Decision sustaining the proposed assessment and announcing that, as of October 6, 1999, Petitioner owed the Department $929,270.52, with "interest continu[ing] to accrue at $141.39 per day until the postmarked date of payment." Petitioner subsequently filed a Petition for Chapter 120 Administrative Hearing on the Department's proposed action.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order sustaining its assessment against Petitioner in its entirety. DONE AND ENTERED this 26th day of October, 2001, in Tallahassee, Leon County, Florida. STUART M. LERNER 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 26th day of October, 2001.
Findings Of Fact Background And Overview Respondent was first employed by Petitioner, School Board Of Palm Beach County, Florida (the "School Board"), in 1964 as a teacher. Respondent was promoted to principal in 1971, Assistant Superintendent for the School Board in 1978, and Associate Superintendent of Schools for Planning and Operations on July 1, 1984. Respondent was one of three Associate Superintendents in the Palm Beach County school district. There was also an Associate Superintendent of Instruction and an Associate Superintendent of Administration. Each Associate Superintendent reported to the Deputy Director who reported to the Superintendent. Respondent served as Associate Superintendent of Planning and Operations until he was demoted to principal on November 5, 1991. Respondent served under an annual contract as an Associate Superintendent and maintains a continuing contract as a teacher. While employed as an Associate Superintendent, Respondent never received notice of an allegation of incompetent conduct, was never disciplined, and never received a negative performance evaluation prior to this proceeding. In the Summer of 1991, Respondent was a finalist for the position of Superintendent. The position of Associate Superintendent of Planning and Operations was subsequently abolished effective July 1, 1992. Planning And Operations: Organization And Regular Duties The organization of Planning and Operations has changed in specific regards during the years Respondent was its Associate Superintendent. 1/ For the purposes of this proceeding, however, Planning and Operations employed approximately 1,500 people and was organized and operated in three subdivisions: Growth Management; Facilities Planning and Management; and Personnel Relations. Personnel Relations is not at issue in this proceeding. 2/ Growth Management responsibilities included: identifying school district demographics; determining racial balance; and site acquisition for development of schools and other facilities. Facilities Planning and Management responsibilities included: building new schools; renovations; improvements; and maintenance. Each of the three subdivisions of Planning and Operations was supervised directly by an Assistant Superintendent. The Assistant Superintendents supervised one comptroller and nine directors. Directors had direct responsibility for assistant directors. Assistant directors supervised first-line managers. First-line managers supervised numerous employees who regularly worked on: major school center projects; new school construction; facility design and contract services; facility operations; maintenance and renovations; personnel administration; information management; recruitment and selection; and human resources. Additional Duties In addition to their regular duties, Respondent and other senior administrative supervisors were required by Mr. Thomas Mills, the former Superintendent, to promote and solicit the involvement of members of the local business community in the Palm Beach County school system. The school system faced student overcrowding, a lack of materials, a lack of adequate funding, and a rising drop out rate. Members of the business community were recruited to help raise money for operating expenses and to support a bond issue for which the School Board sought voter approval in 1986. Many members of the local business community were also vendors to the School Board. Respondent was directed by former Superintendent Mills and Dr. James Daniels, the Deputy Superintendent, to contact and network with as many members of the business community as possible. Such activities were considered by former Superintendent Mills to be a high priority. Respondent complied with the directives of the former Superintendent and Deputy Superintendent. The efforts of Respondent and other senior managers proved successful. The business community in Palm Beach County raised funds to supplement the operating expenses of the school system and supported a bond issue for construction of new facilities and capital improvements to existing facilities. In 1986, the majority of registered voters in Palm Beach County approved a Special Referendum authorizing a $678 million bond issue for the construction of educational facilities in the Palm Beach County School District. The School Board established a five year plan for the construction of educational and ancillary facilities (the "five year construction plan"). A portion of the bond money was allocated to capital improvement projects to renovate or remodel existing facilities. Planning and Operations supervised all bond issue projects, including capital improvement projects. In the 1986- 1987 school year, such projects, including capital improvement projects, were supervised by the division of New School Construction. In the Fall of 1987, supervision of capital improvements was transferred to Maintenance and Renovations. Maintenance and Renovations was also organized within Planning and Operations. Approximately 39 new schools were constructed in Palm Beach County while Respondent was Associate Superintendent of Planning and Operations. The total budget for construction of new schools was approximately $550 million. Thousands of construction projects, renovations, and improvement or maintenance projects were performed by Planning and Operations. Approximately $317 million of the authorized bond issue was issued from 1987 through 1989. In addition to the construction of new schools, the School Board approved a plan in 1985 to acquire land and construct four ancillary facilities. The ancillary facilities included a new administrative complex, a central warehouse, and a maintenance and operations facility. Planning and Operations supervised the site acquisition and construction of all four ancillary facilities. Deficiencies In Planning And Operations Deficiencies in the organization and operation of Planning and Operations were well known to both the School Board and Planning and Operations personnel. They were pandemic deficiencies that Respondent could not correct without the approval and financial support of the School Board and the technical assistance of experts. 3/ The School Board retained an outside consultant, Price Waterhouse, to study deficiencies in Planning and Operations and to formulate an improvement program. The improvement program was to be developed in three phases. The first phase identified deficiencies within Planning and Operations on the basis of discussions with department personnel and outside specialists. The second phase would have focused on verifying and prioritizing problems and their impacts. The third phase would have formulated a program for improvement of Planning and Operations. Deficiencies in Facilities Planning and Management were identified in interviews conducted by the accounting firm of Price Waterhouse with directors, assistant directors, and first- line managers. In 1987, Price Waterhouse issued a draft report to the School Board describing the deficiencies found in Facilities Planning and Management (the "Price Waterhouse Report"). 4/ The School Board determined that the Price Waterhouse Report merely told the School Board what was already common knowledge and that further expenditures on a program for improvement with Price Waterhouse would be a waste of money. The School Board knew of the deficiencies in Planning and Operations. The School Board knew that those deficiencies created impediments to the supervision of Planning and Operations. Known deficiencies within Facilities Planning and Management involved: financial procedures and controls; staff performance, including personnel and control; planning of operations and projects; contract administration; construction administration; and organization structure. Deficiencies in financial procedures resulted in budgeting without adequate preparation, historical data, timing, and coordination between departments. Poor cost and schedule accounting for capital improvements, maintenance, and operations made it difficult to capture and report cost information in sufficient detail and in a timely manner. Poor cost controls directly affected the control of operations, decisions to perform work by in-house staff or contractors, and the value received for money spent. Adequate project management tools and policies were not in place to contain costs and adhere to schedules for maintenance, capital improvements, and new construction. Payment of suppliers, contractors, architects, and other vendors was slow, frustrated vendors, and made them reluctant to do work for the School Board. There were deficiencies in staff performance, personnel, and control. Productivity appeared to be low. There was a lack of performance measurement and reporting mechanisms in place to accurately assess productivity. Productivity was significantly affected by: inadequate work planning and coordination; the condition and availability of equipment and materials; logistics; and geographic constraints. Many employees were uncertain as to their responsibilities and corresponding authority, particularly at the first-line manager level. Uncertainty over responsibility and authority undermined the effectiveness of first-line managers dealing with vendors, contractors, and architects. Staffing levels and management span were not adequate to maintain existing facilities and operations, control personnel growth, and prevent duplication of field personnel skills between maintenance and capital improvements. Support resources were weak in technical expertise, administrative staff, reference materials, and computer aided design equipment. Capital improvement, new construction, and maintenance tasks were frequently not scheduled in sufficient accuracy and detail to foresee and anticipate potential problems. Frequent schedule slippage allowed contractors less time to complete construction and meet schedules; adversely affecting productivity, project costs, and the ability to plan for and manage project issues and achieve targeted completion dates. Shortages of materials and supplies often caused project delays. Coordination of work between and within departments failed to determine the optimal sequence in which work was to be performed to maximize the utilization of trade employees and avoid conflicts and rework. Deficiencies in contract administration led to lack of clarification in the responsibilities, requirements, and expectations of parties to contracts. Contract documents and conditions were too vague and resulted in frequent disputes, delays, and occasional change orders. To avoid delays caused by change orders, contractors sometime proceeded without proper authorization at their own risk. The definition of authority and responsibility and the guidelines for quality control and inspection for in-house employees and contractors needed to be improved. Such deficiencies in construction administration resulted in project delays, poor construction, and higher facility life cycle costs. A lack of consistency in procedures and policies for project management exacerbated the deficiencies in construction administration. Deficiencies in organization structure directly affected problems in other areas of Planning and Operations. Continuity of work was lacking on new construction. Project managers changed when responsibility passed from one division to the next; resulting in a start-stop effect on the project and a loss of specific project knowledge. Improvement was needed in communications between and within departments and in upper management support of lower management authority. There was a need for a long range organization structure and staffing strategy which addressed alternatives such as internal staffing and contracted services. The presence of deficiencies described in the Price Waterhouse Report in 1987 was confirmed in 1993 in a Report On Audit Of The Palm Beach County District School Board For The Fiscal Year Ended June 30, 1992 Dated: June 24, 1993 issued by the State of Florida, Office Of The Auditor General (the "Auditor General's Report"). The Auditor General's Report found that deficiencies similar to those described in the Price Waterhouse Report for Facilities Planning and Management also existed in Growth Management. Problems reported in the Price Waterhouse Report and in the Auditor General's Report described a deficient organizational and operational system in which the School Board required Respondent to supervise unprecedented growth and activity. Respondent was required to: supervise a $550 million construction plan involving thousands of projects and four ancillary facilities; 5/ promote involvement of the business community in the school system; and perform the duties he was otherwise required to perform in the absence of the five year construction plan established by the School Board and associated promotional responsibilities. In 1987, the Price Waterhouse Report stated that supervisors and assistant directors were stretched very thin, and their roles needed to be more clearly defined. Communication between and within departments and from directors and similar supervisors was poor. 6/ Many of the deficiencies described in the Price Waterhouse Report and the Auditor General's Report created impediments to Respondent's supervision of Planning and Operations irrespective of his additional duties associated with the five year construction plan. Petitioners' Allegations Petitioners' allegations against Respondent are based on two separate investigations conducted by Petitioners. 7/ Petitioners' allegations involve: acquisition of a site for a central warehouse for $3.161 million (the "District Warehouse Site"); acquisition of a site for a west bus compound for $750,000 (the "West Bus Compound"); construction of an addition to a new maintenance and operations building on Summit Boulevard in West Palm Beach for Maintenance and Renovations and Facility Operations and construction of an addition to a north maintenance building (the "Summit Facility"); requests for additional services on form G-604 (the "G-604" issue); acceptance of gratuities from members of the business community who were also vendors of the School Board; and evaluation of two employees. Petitioners' allegations of incompetency primarily involve the five year construction plan and ancillary facilities. Few of the alleged acts of incompetence involve other aspects of Respondent's job performance from July 1, 1984, through November 5, 1991. The District Warehouse Site The School Board determined in 1985 that a need existed for a centralized warehouse site in Palm Beach County. 8/ The School Board determined that approximately 10 acres would be adequate. Since the value of land in Palm Beach County was appreciating, the School Board also approved the policy of former Superintendent Mills that encouraged the acquisition of land for future expansion if the land could be acquired at a desirable price, i.e., "warehousing" land for future use. Respondent had advocated a decentralized warehouse system in which separate warehouse functions would be carried out in various regions of Palm Beach County. Others in Planning and Operations supported the concept of a centralized warehouse site. The centralized warehouse concept was accepted and approved by former Superintendent Mills and the School Board. On October 11, 1989, the School Board purchased approximately 16 acres of real property as a site for a centralized district warehouse. The property was purchased for $3.161 million from KEI Palm Beach Center, Ltd. ("KEI"), a limited partnership in which Mr. William Knight was a limited partner and Knight Enterprises, Inc., a corporation controlled by Mr. William Knight, was the general partner (the "Knight property"). Respondent did not act incompetently and did not violate any statute, rule, policy, instruction, or directive, or circumvent normal acquisition procedures (collectively referred to hereinafter as "applicable standards") with regard to the evaluation and purchase of the Knight property. Respondent neither proposed nor advocated the purchase of a particular warehouse site. Respondent did not propose or advocate the identification, evaluation, selection, and purchase of the Knight property. Respondent showed no favoritism to Mr. William Knight, to his son, Mr. Jim Knight, or to any entity owned by the Knights. Respondent committed no act or omission which impaired his business judgment, compromised his independence, or which was otherwise improper in connection with the acquisition of the District Warehouse Site. Initial Site Selection And Evaluation Prior to the acquisition of the Knight property, the School Board attempted to acquire property owned by Palm Beach County and known as Section 6. Negotiations for the acquisition of Section 6 terminated when Section 6 became unavailable. A site search for the District Warehouse property was conducted by Growth Management. Ten separate sites, including the Knight property, were initially identified and reviewed by a site acquisition team within Growth Management. The site acquisition team was headed by Mr. William Hukill, Assistant Superintendent for Growth Management. The site acquisition team also included Mr. Robert Skakandy, a real estate acquisition coordinator in Growth Management, and Mr. David Williams, Assistant Director of Growth Management. Respondent was not significantly involved in identifying the 10 properties considered by the site acquisition team, including the Knight property. Each property was placed on the list by the site acquisition team because it was within or proximate to the geographical area preferred by the site acquisition team or possessed other targeted location characteristics. 9/ Site selection procedures typically did not involve Respondent. Site selection procedures were described in detail in the Auditor General's Report: . . . upon identification of potential sites, the sites were evaluated by the District's Growth Management Center. A description of each site was presented to the Assistant Superintendent, Growth Management and to the Assistant Director, Growth Management for their review, after which the descriptions were . . . presented to the Superintendent. Following the Superintendent's review, the preliminary site investigations and site descriptions with the Superintendent's recommendation were to be presented to the School Board for their review and approval. (emphasis supplied) Auditor General's Report at 63. Growth Management first considered the Knight property in August, 1988. Mr. Jim Knight communicated the availability of the Knight property to Ms. Linda Howell, a real estate coordinator in Growth Management. Ms. Howell and Mr. Jim Knight conducted further discussions. Ms. Howell identified the Knight property as a potential site and relayed the site information to Mr. Skakandy. The site acquisition team reduced the list of ten sites to a list of three final sites. The Knight property was not one of the three final sites selected. The three final sites were all less expensive than the Knight property. The three final sites were the Riviera Beach site, the Boyton Beach site, and the Farmer's Market site. Feasibility problems developed with each of the three final sites. The Riviera Beach site was sold to another party. The Boyton Beach site was objected to by other staff not on the site acquisition team. It was 15-20 miles south of the center of the county and failed the express criteria for a "central" warehouse. Environmental problems and costs associated with the disposal of building materials caused Maintenance and Renovations to recommend against purchase of the Farmer's Market site. 10/ Reconsideration Of Knight Property On or about January 11, 1989, former Superintendent Mills sent a memorandum to Mr. Hukill indicating that Mr. William Knight had called the Superintendent to express his interest in having the Knight property reconsidered for the District Warehouse Site. Respondent received a copy of that memorandum but was not otherwise involved significantly in the reconsideration of the Knight property. On or about January 20, 1989, Mr. Hukill sent a letter to the former Superintendent indicating that the Knight property was still under consideration and that the Knight property location was quite good under the circumstances. Mr. Hukill indicated that appraisals had been ordered and that a site recommendation would be forthcoming. 11/ The Knight property was reconsidered in accordance with procedures customarily followed in Growth Management. There was no formalized procedure followed in Growth Management for the evaluation of property for site acquisition. Sites were discussed in a free form fashion. Except for a recommendation of the final site selected, written records for recommendations on specific properties were not customarily prepared by staff in Growth Management. 12/ Mr. Hukill made the ultimate decision to add or drop sites from consideration. Acquisition sites were added or deleted from site acquisition lists without notifying Respondent. The Knight property was evaluated by the entire staff in Growth Management. The evaluation of the Knight property included a review of environmental issues, utilities, zoning, and road use. Mr. Jim Knight had more than 20 meetings with Growth Management staff including Mr. Hukill, Mr. Skakandy, and Mr. Williams. Respondent was not significantly involved in those discussions. 13/ The Knight property was recommended by staff because of its suitability for the District Warehouse and because of the unavailability or unsuitability of the first three sites originally selected by the site acquisition team. The Knight property was located in almost the exact center of the county. It was also located on Southern Boulevard, a roadway that runs directly to western communities in Palm Beach County where many new schools were scheduled for construction. Respondent properly relied on staff recommendations for the Knight property in accordance with his customary practice. At no time prior to the time the property was acquired did any employee within Growth Management state to Respondent that the Knight property was not a suitable site or that the purchase of the Knight property would be detrimental to the School Board. Mr. Hukill did not sign the written recommendation for the Knight property. The reason for his refusal, however, had nothing to do with the suitability of the Knight property for the District Warehouse. Mr. Hukill believed, as a philosophical matter, that the School Board should spend its money on schools rather than on additional warehouse sites. Mr. Hukill, in effect, objected to a determination made by the School Board in 1985. Mr. Hukill agreed with the recommendation that the Knight property was suitable based on the marketplace, location, and ease of distribution for servicing schools. Respondent neither identified nor advocated the Knight property. Respondent had no conversations with either Mr. William Knight or Mr. Jim Knight concerning the evaluation of the Knight property as a site for the District Warehouse except as previously described. Except for the price paid for the Knight property, Respondent's involvement in the acquisition of the Knight property was limited to a review of staff recommendations and the acceptance of those recommendations. Additional Acreage The initial search for a District Warehouse site focused on the acquisition of 10 acres of property. However, the Knight property included 16 acres. The additional acreage was purchased to overcome access problems that would have occurred if only 10 acres had been purchased. Unanticipated problems in site selection was one of the deficiencies known to the School Board and discussed in the Price Waterhouse Report in 1987. Engineering involvement frequently did not occur early enough in site acquisition. As a result, sites selected by the site acquisition team required unanticipated expenses, and the full cost of the project was not properly assessed. 14/ The decision to purchase additional acreage was not made by Respondent. Former Superintendent Mills wanted the additional acreage to accommodate future expansion for office space on the warehouse site. The former Superintendent believed that a larger site was desirable to properly accommodate future expansion needs and directed the purchase of the additional acreage. The issue of whether to increase the site for the District Warehouse from 10 acres to 16 acres was discussed at a Superintendent's staff meeting. The former Superintendent, the School Board attorney, Respondent, and a dozen other members of the former Superintendent's staff attended the meeting and participated in the discussion. The decision and recommendation to purchase the additional acreage was made by the former Superintendent. Purchase Price The final purchase price for the Knight property was reasonable and beneficial for the School Board. Respondent was responsible for the final purchase price. Two separate appraisals for the Knight property were obtained by Growth Management in accordance with its customary practice and applicable law. 15/ Respondent did not select the appraisers. They were selected by Mr. Skakandy with the approval of Mr. Williams. The appraisers were qualified and had been used many times in the past by Planning and Operations. The two appraisals for the Knight property differed by $1.00 a square foot. The higher appraisal was for $5.50 a square foot. The lower appraisal was for $4.50 a square foot. 16/ Respondent refused to accept Mr. William Knight's offer to split the difference between the two appraisals and insisted on a sales price of $4.42 a square foot. The price paid for the Knight property was reasonable and less than the lowest appraised value. Contract Negotiations Respondent was not involved in contract negotiations for the Knight property and did not dictate any of the terms of the contract for the purchase of the Knight property; except the final purchase price discussed in the preceding paragraph. Site acquisition personnel typically negotiated site acquisition contracts in concert with the School Board attorney. Site acquisition personnel did not customarily report the status of contract negotiations to Respondent. No established procedure required such reports. Contract negotiations for the acquisition of the Knight property were carried out entirely by site acquisition personnel within Growth Management and Mr. Robert Rosillo, the School Board attorney. Negotiations by staff and the School Board attorney for the Knight property were within the scope of normal functions for site acquisition. The School Board attorney did not confer with Respondent during the three months in which contract negotiations for the Knight property were conducted. Respondent never gave the School Board any direction or other information concerning the acquisition of the Knight property. It is the responsibility of the School Board attorney and technical staff in Growth Management to draw acquisition contracts, address zoning requirements, and determine contingencies for closing. Any problems associated with the final contract for purchase of the Knight property were the responsibility of the School Board attorney and staff negotiators. Road Improvements: Allocation Of Costs Between The Parties The contract for the Knight property addressed road improvements, right-of-way, and relocation measures necessary for the use of the property. Engineering drawings reflected the right-of-way issues, the need to relocate water and sewer lines and a lift station, and the need for road improvements. The parties to the contract agreed to share the cost of road improvements proportionally. The contract required the seller to place $70,000 in a separate escrow account to be used to fund the necessary road improvements. While Petitioners now complain that the amount escrowed by the seller was inadequate, the terms of the contract were prepared by the School Board attorney and recommended by Growth Management staff in accordance with long standing practice. In 1987, The Price Waterhouse Report stated that contract documents did not delineate specific responsibilities. The result was confusion, disagreements, and additional costs to the School Board or outside parties. 17/ Adverse impacts from the purchase of the Knight property on October 11, 1989, reflected deficiencies reported in the Price Waterhouse Report in 1987. Those deficiencies were well known to the School Board at least two years before the acquisition of the Knight Property. The School Board chose not to expend additional funds on a program of improvement suggested by Price Waterhouse. Financial Ability Of Seller To Comply With Repurchase Option The contract for the Knight property contained a provision which gives the School Board the right to require the seller to repurchase the property if conditions pertaining to zoning are not satisfied (the "repurchase option"). The repurchase option was drafted by the School Board attorney. A decision not to enforce the repurchase option was made by the School Board, the School Board attorney, and the former Superintendent. If the School Board had elected not to proceed with closing, the contract afforded the seller to right to sue for specific performance. A foreclosure suit was filed against the Knight property a few days prior to the closing on October 11, 1989. Mr. Rosillo discussed the impact of the foreclosure suit on the purchase with former Superintendent Mills. The issue was not discussed with Respondent. The contract did not require the seller to evidence its financial ability to perform the terms of the contract. Nor did the contract require Mr. William Knight to personally guarantee the obligation of the seller under the repurchase option. Temporal Considerations The time required for the evaluation and purchase of the Knight property was reasonable and adequate. The transaction was not "rushed." The evaluation and purchase of the Knight property required approximately 14 months to complete. Once the decision to purchase the property was made, approximately three months were required to finalize the terms of the contract and close the transaction. Even if the evaluation and purchase of the Knight property was rushed, Respondent did not act as an impetus to rush the transaction. Respondent was not significantly involved in the identification, evaluation, and purchase of the Knight property except for the final purchase price. Mr. Jim Knight actively negotiated the transaction with Mr. Rosillo, Mr. Hukill, Mr. Williams, and Mr. Skakandy. The entire transaction was discussed fairly and adequately by Growth Management staff and the School Board attorney. Respondent did not propose or advocate the Knight property. Respondent did not negotiate the terms of the contract to purchase the Knight property except for the final purchase price. Respondent did not decide whether to close the transaction or whether to enforce the repurchase option. Bifurcated Funding For Land Acquisition And Construction The fact that the Knight property was acquired prior to the time that money was available to construct the District Warehouse does not make Respondent incompetent. Property was customarily purchased first and a building constructed out of budget appropriations in subsequent years. In 1987, The Price Waterhouse Report included such practices in its list of deficiencies. The capital budgeting process lacked sufficient coordination, timing, and input. Adequate cost accounting tools were not available. Existing reports lacked sufficient detail, accuracy, and timeliness. Capital improvement funding sources were not clearly identified. The fact that priorities for capital improvements were not easily or accurately tracked was a source of frustration for administrators including Respondent. 18/ Those deficiencies were known to the School Board prior to 1987. In 1987, the School Board chose not to pursue a program of improvement with Price Waterhouse. In 1993, the Auditor General's Report found that originally designated capital outlay moneys had been expended on projects, land purchases, and other purposes which were not contemplated in the 1986 school construction plan. Expenditures not contemplated in the five year construction plan included the District Warehouse Site. 19/ The notice of tax levy for capital improvements had not been prioritized within categories as required by Section 200.065(9)(a), Florida Statutes. Failure to prioritize the projects contributed to delays in undertaking some of the projects at issue. Furthermore, the School Board did not segregate and account for the proceeds and related expenditures of each respective year's levy. 20/ The decision to purchase the Knight property and rely on budget appropriations in subsequent years for construction was made by former Superintendent Mills. The former Superintendent's policy was to purchase land at a reasonable price if there was a future need for the property. Land values in Palm Beach County were appreciating rapidly. The money to construct the buildings on such properties typically came from budget appropriations in subsequent years. The Knight property was purchased for less than its lowest appraised value. 2.10 Gratuities And The Knight Property Respondent went fishing in 1986 and 1987 on Mr. William Knight's fishing boat in St. Thomas, U.S. Virgin Islands, and in Bimini, Bahama Islands. Respondent reported both fishing trips on his annual financial disclosure forms. The two fishing trips did not adversely affect Respondent's business judgment or create the appearance of impropriety. Respondent was not significantly involved in the acquisition of the Knight property in October, 1989. In 1986, Respondent accepted an invitation from Mr. Robert Howell, a member of the School Board at the time, to go fishing in St. Thomas. The invitation was made to Respondent through former Superintendent Mills. The former Superintendent joined Respondent on the fishing trip. Respondent had never met Mr. William Knight before that time. The fishing trip lasted two days. Respondent paid for his own transportation to St. Thomas. In 1987, Respondent and former Superintendent Mills accepted an invitation from Mr. William Knight to fish with their children in Bimini. The fishing trip lasted one day. The West Bus Compound On or about April 24, 1990, the School Board purchased property in Royal Palm Beach for $750,000 (the "West Bus Compound"). The property was purchased from Mr. John Bills. Site selection procedures typically did not involve Respondent. 21/ Respondent did not act incompetently or violate applicable standards with regard to the identification, evaluation, and purchase of the West Bus Compound. Respondent did not propose or advocate the West Bus Compound or the evaluation, selection, and purchase of the West Bus Compound. Respondent showed no favoritism to Mr. Bills, or any entity owned by Mr. Bills. Respondent committed no act or omission which impaired his judgment, compromised his independence, or which was otherwise improper in connection with the evaluation and acquisition of the West Bus Compound. The need for a site to service the western portion of Palm Beach County was identified by Mr. George Baker, the Director of Transportation. Transportation was a division of the Department of Administration. The Associate Superintendent of Administration was Dr. Henry Boekhoff. Respondent had no authority or responsibility over Transportation. The need for a site to service the western portion of Palm Beach County was uncontroverted. Due to westward population migration, several new schools were built in the western regions of the County. Mr. Baker determined that it was not cost effective to transport buses back and forth from compounds in the eastern portion of the County for maintenance and storage. Mr. Baker and Dr. Boekhoff determined that a West Bus Compound would result in significant savings in the operating budget. The need for a West Bus Compound was well known within the school district administration, including Growth Management. Mr. Baker had repeatedly stated to everyone "within earshot" that the need for a West Bus Compound was urgent. Mr. Baker identified a site location in Royal Palm Beach owned by Mr. Bills. Mr. Baker told Mr. Williams, who worked in Growth Management, that Transportation wanted the site owned by Mr. Bills for the West Bus Compound. Mr. Bills was trying to sell his property. Mr. Bills submitted a brochure on the property to Mr. Hukill and other staff in Growth Management. Mr. Hukill recommended the property owned by Mr. Bills to Respondent. Respondent discussed the site with former Superintendent Mills. At Mr. Hukill's request, the former Superintendent authorized Mr. Hukill to proceed with negotiations for the property owned by Mr. Bills. Respondent advised Mr. Williams of the availability of the property owned by Mr. Bills. Respondent instructed Mr. Skakandy to follow normal procedures regarding the West Bus Compound site. The West Bus Compound site was evaluated by Mr. Skakandy and Mr. Williams. They also negotiated the contract for acquisition. Such action on the part of Mr. Skakandy and Mr. Williams was consistent with customary practice within Growth Management and was within the scope of their regular duties and responsibilities. Two appraisals were obtained for the West Bus Compound. The higher appraisal was for $810,000. The lower appraisal was for $703,000. The property was purchased for $750,000. Respondent properly relied on the recommendations and advice of technical staff in Growth Management with respect to the acquisition of the West Bus Compound site. Respondent was never informed by anyone within Growth Management that there were any limitations on the use of the site. Certain zoning and easement requirements reduced the usable area for the site below that originally projected by Growth Management. Mr. Baker recommended the site even though the usable area was less than originally projected. Respondent was not acquainted with Mr. Bills at the time that the West Bus Compound was evaluated and acquired. Subsequently, however, Respondent developed a friendship with Mr. Bills. Respondent never showed any favoritism to Mr. Bills in connection with the West Bus Compound. The Summit Facility On July 1, 1989, employees of Maintenance and Renovations and employees of Facility Operations were housed in a leased facility at 3323 Belvedere Road, West Palm Beach, Florida (the "Belvedere" site). A new ancillary facility was nearing completion in the Fall of 1989. The new facility was located at 3300 Summit Boulevard in West Palm Beach (the "Summit Facility"). The Summit Facility included a second building known as the north building. The landlord for the Belvedere site exercised its rights under the lease to obtain use of the Belvedere site sooner than originally anticipated by the School Board. Electronics employees housed at the Belvedere site were moved to Northshore High School ("Northshore") on a temporary basis until the Summit Facility was completed. Residents of the neighborhood adjacent to Northshore complained to some members of the School Board about increased traffic. The School Board took the matter up at a public meeting during the Fall of 1989. Approval Of Day Laborers In Trades Sections At the public meeting conducted in the Fall of 1989, the School Board specifically authorized Mr. David Lord, Director of Maintenance, and former Superintendent Mills to use day- laborers in the trades sections 22/ to construct additions to buildings at the Summit Facility and to relocate electronics employees from Northshore to the Summit Facility by January 1, 1990. Mr. Lord and the former Superintendent discussed the matter with the School Board in detail. 23/ At the public meeting, the School Board instructed Mr. Lord to use whatever resources were available to him to make needed capital improvements to the Summit Facility by January 1, 1990. Confusion over when to use contractors or in-house personnel was one of the deficiencies discussed in the Price Waterhouse Report in 1987. Criteria for determining when to perform work on a contract basis and when to perform work in- house were not clearly established. This made planning difficult and increased project costs. 24/ Lack of communication and agreement between project managers and construction personnel concerning time and cost of in-house projects resulted in incorrect decisions concerning the desirability of building in-house or by contract, caused delays, cost overruns. 25/ Comparative cost analyses of in- house and contract maintenance construction were not available. 26/ In 1993, the Auditor General's Report found that established procedures did not provide reasonable safeguards to monitor day-labor projects to ensure that goods and labor were used only for authorized projects. The Auditor General's Report recommended that such procedures be established. 27/ Mr. Lord used day-laborers from his trades sections to make the capital improvements mandated by the School Board in accordance with the School Board's instructions. The work was begun in December, 1989, and completed in March, 1990. Code Violations In 1991, after considerable time for discussion and analysis among attorneys and technical staff within the Department of Education and Planning and Operations, it was determined that some additions to the Summit Facility were not in compliance with applicable safety code regulations. Respondent properly relied on Mr. Lord and Mr. Lord's immediate supervisor for technical compliance with applicable code provisions. Florida Administrative Code Chapter 6A-2 contains the State Uniform Building Code. Part A of Chapter 6A-2 ("Part A") applies in some circumstances, and Part B of Chapter 6A-2 ("Part B") applies in other circumstances. In July, 1990, officials of the Department of Education, Educational Facilities Department, in Fort Lauderdale, Florida, were invited to a demonstration of fire alarms at the Summit Facility. Mr. Russell Smith, Director of Facilities Design, determined that life/safety code violations existed in the two buildings at issue in the Summit Facility. Mr. Smith's determination of code violations was based on the assumption that Part A applied to the capital improvements at the Summit Facility. Mr. Lord had determined that Part B applied to the capital improvements. The capital improvements at the Summit Facility complied with the requirements of Part B but not Part A. Mr. Smith did not report the alleged code violations to Respondent until December, 1990. Respondent directed Mr. Smith to obtain a determination from the Department of Education. Mr. Smith pursued the matter with representatives of the Department of Education as well as Mr. Lord in Growth Management. Ms. Abbey Hairston, General Counsel for the School Board, concluded that there was a strong likelihood that Part B applied. Mr. Lord suggested that an outside consulting firm be retained to determine the applicability of Part A or Part B to the capital improvements at the Summit Facility. Respondent could not have detected the existence of the alleged code violations in the capital improvements to the Summit Facility. Respondent did not have the expertise to make such a determination. Respondent's regular duties and responsibilities did not require that Respondent maintain such expertise, conduct inspections for the purpose of detecting code violations, or correct code violations. Respondent did not act incompetently and did not violate applicable standards with regard to the capital improvements to the Summit Facility. Respondent did not propose or advocate that capital improvements be made to the Summit Facility in compliance with Part B. Respondent properly relied on his staff for technical compliance with applicable code requirements. When Respondent received notice of alleged code violations, Respondent acted in a competent and timely manner. In 1987, The Price Waterhouse Report discussed several deficiencies in staff performance, personnel, and control. The Price Waterhouse Report stated: Internal expertise is limited. Knowledge of specialized areas is limited, project quality suffers, life cycle costs are higher. . . . Training programs and budgets are insufficient, especially with respect to technical and safety training. Employees are not as efficient or effective as they could be. Knowledge of project managers is less than they feel is necessary Project managers are resistant to new management techniques. . . . Inadequate technical library. . . . Price Waterhouse Report, Staff Performance, Personnel And Control, Issues 5, 7, and 9, and corresponding Impacts. In 1993, the Auditor General's Report recommended that: . . . District personnel strengthen procedures to provide that, prior to occupancy in the future, the required approvals for occupancy are obtained to ensure that the facilities meet the prescribed safety standards. Auditor General's Report at 64. Tracking And Reporting Costs The computer codes and accounting approach used to track and report the cost of capital improvements to the Summit Facility complied with applicable standards. The computer codes and accounting approach recorded each transaction and were subject to separate retrieval in accordance with established procedures. Required object, fund, and function codes were used to document the expenditure of funds for the capital improvements to the Summit Facility. In 1987, the Price Waterhouse Report stated: Adequate cost accounting tools are not available. Existing reports lack sufficient detail, accuracy and timeliness. [There is] . . . [n]o ability to manage and control project cost. This results in true project cost being unknown and lack of problem identification on a timely basis. . . . Capital Improvement Requests are not easily or accurately tracked. Priorities are difficult to track and coordinate. This is a source of school administration frustration. . . . Project management tools are not available. Project cost containment suffers. Control and reporting is lacking. . . . Accountability is difficult to enforce. Price Waterhouse Report, Financial Procedures And Controls, Issues 4, 8, and 17, and corresponding Impacts. The day-labor hours billed for additions to the Summit Facility totaled approximately 6,373. In the three fiscal years from 1989 through 1992, approximately 566,853.75 day-labor hours were paid and approximately 454,701.75 were billed. Day-labor hours paid exceeded day-labor hours billed by approximately 112,152 hours. 28/ As the Price Waterhouse Report indicated in 1987, adequate cost accounting tools were not available. The cost accounting and reporting procedures that were in fact utilized for the additions to the Summit Facility complied with available cost accounting procedures. Respondent did not act incompetently and did not violate applicable standards in connection with the method used to track and report the cost of capital improvements to the Summit Facility. Respondent did not propose or advocate any particular accounting procedure. Respondent properly relied on technical staff to track and record the cost of capital improvements to the Summit Facility, and staff properly utilized the accounting tools available to them. Purchase Orders Purchase orders for mezzanine and modular offices were originated by staff in lower levels of Maintenance and Operations. The purchase orders were processed in accordance with normal procedure and approved by Ms. Betty Helser, Director of Purchasing. Ms. Helser was under the supervision of the Associate Superintendent of Administration and was not subject to the authority of Planning and Operations. Planning and Operations had no authority over Purchasing. Respondent did not participate in the purchase order approval process. Respondent was not responsible for that process. Several names were listed on the purchase orders as resource or contact persons in connection with the purchase order. Respondent was not one of those named. Funding Source For Capital Improvements Respondent did not act incompetently and did not violate applicable standards in connection with the funding source for capital projects, including acquisition of the District Warehouse site, the West Bus Compound, and additions to the Summit Facility. Funding sources for such projects were approved by the School Board. The funds used to pay for the District Warehouse, the West Bus Compound, and the Summit Facility were not misappropriated or misapplied. The School Board approved those capital projects and their corresponding budgets. The budget for each capital project provided for the transfer of capital outlay moneys to the general fund. 29/ Taxes had been levied for capital improvements pursuant to Section 236.25(2), Florida Statutes. Funds were transferred from this special millage money and not from general obligation bond money. Such transfers occurred in prior years and were consistent with customary procedure. Moreover, no funds were used for capital projects without the prior knowledge and consent of the School Board. Deficiencies in the budget reporting and control process impeded full consideration by the School Board of the impact of capital projects and budget transfers on the 1986 school construction plan. As a result, originally designated capital outlay moneys were expended on capital projects not contemplated in the 1986 school construction plan. Accordingly, some originally contemplated projects were not undertaken in the five year plan due to lack of funds. 30/ Deficiencies in financial processes and controls reported by Price Water House in 1987 and known to the School Board prior to that time created impediments to proper budgeting and resulted in poor budget quality. In 1987, the Price Waterhouse Report stated: Performance measurement (feedback) needed to assess and improve budget accuracy is lacking. Poor budget accuracy, control, and forecasting [results]. . . . The capital budgeting process lacks sufficient coordination, timing and department input. Budget priorities may not be sufficiently addressed and quality of actual budgets may suffer. Priorities for improvements are defined by construction and remodeling, but they may not be consistent with the school's needs. High priority projects may not be addressed on a timely basis. Price Waterhouse Report, Financial Procedures And Controls, Issues 2, 16, and corresponding Impacts; Price Waterhouse Report, Planning Of Operations And Projects, Issue 9 and corresponding Impact. Projects funded by the capital outlay millage derived under Section 236.25(2), Florida Statutes, were not prioritized within categories in the notice of tax levy as required by Section 200.065(9)(a). Failure to prioritize the projects to be funded by the capital outlay millage contributed to delays in undertaking some of the projects contemplated in the 1986 construction plan. In addition, the proceeds and related expenditures of each year's levy was not segregated and accounted for. 31/ Reports reviewed by the School Board consisted of monthly financial statements containing analyses of revenues by source of funds and analyses of expenditures by function. Status reports showed comparisons of projected revenues designated for the 1986 school construction plan with actual revenues received. Comparisons of projected construction costs anticipated in the five year construction plan with actual construction costs were not available. Like the notice of tax levy, available status reports did not prioritize projects within categories. The failure to prioritize projects and reporting inadequacies constituted some of the pandemic deficiencies known to the School Board prior to 1987 and did not result from Respondent's alleged incompetence. In 1993, the Auditor General's Report recommended several procedures for rectifying deficiencies in the budgeting process. First, quarterly status reports on capital projects should be revised to show the projected costs of projects, current expenditures, and the variances over or under projected costs. Second, proposed budget amendments should include an explanation of the possible effects on capital construction plans and operating budgets. Third, the ". . . Board and the Superintendent. . ." 32/ should develop written management reporting guidelines. Finally, the School Board should re- examine the remaining bond plan projects to ensure that they reflect current needs. G-604s: Requests For Additional Services Respondent did not act incompetently and did not violate applicable standards with regard to the use of requests for additional services or change orders on form G-604. Requests for additional professional services or for change orders are made on form G-604. Palm Beach County requires that such requests be reviewed by the School Board. Respondent never attempted to hide requests for architectural services from the School Board or to prevent their review by the School Board. In August of 1986, Mr. Hukill wrote a memorandum to Respondent requesting that directors be allowed to review and approve appropriate requests for additional services in an amount no greater than $20,000 per request and then submit the G-604 to the School Board for subsequent review. Respondent approved the procedure requested by Mr. Hukill. Two weeks later, Mr. Larry Mione, Contract Administrator, erroneously wrote a memorandum to four assistant directors authorizing requests for additional services of up to $20,000 per request without the need to have such requests subsequently reviewed by the School Board. As a result of the erroneous memorandum from Mr. Mione, some G-604s were approved by directors and were not subsequently reviewed by the School Board. This practice was in derogation of the memorandum issued by Respondent. When the discrepancy was discovered, several investigations were ordered by former Superintendent Mills and Deputy Superintendent Daniels. There were approximately 30 people at staff meetings two times a month. All of them review School Board reports. None of them discovered the discrepancy in the conflicting memoranda until after the violations had occurred. Respondent was not charged with wrongdoing or incompetence and was not found incompetent. An independent outside consultant confirmed the need for the G-604s and the procedure authorized by Respondent. Gratuities Former Superintendent Mills established a policy that required all senior administrative personnel, including Respondent, to promote the involvement of members of the business community in the school system. The policy was designed to obtain the aid of business in solving problems such as overcrowding, lack of materials and text books, a lack of funding, and an increasing drop out rate. The policy was a high priority for former Superintendent Mills. Respondent performed the duties required under the policy established by former Superintendent Mills. Respondent entertained members of the business community and was entertained by them. The gratuities accepted by Respondent generally involved free lunches, dinners, and golf outings. Policy Directive Respondent's activities did not violate the policy directive of former Superintendent Mills. Former Superintendent Mills knew of Respondent's activities and approved of those activities. Upper management was encouraged to socialize with members of the business community, including contractors and architects, in an effort to get them involved in solving problems facing the school system. Business Judgment And Impropriety Respondent's business judgment was not adversely affected by his association with vendors of the school system. Respondent's association with such members of the business community did not create the appearance of impropriety. The award of contracts to vendors was the responsibility of Purchasing. Purchasing was under the control of Dr. Boekhoff, the Associate Superintendent of Administration. Ms. Helser was the Director of Purchasing. Respondent did not have the authority to influence decisions made in Purchasing. Incompetence Respondent carried out the policy directive of former Superintendent Mills competently with no adverse affect on his business judgement and without the appearance of impropriety. The business community became actively engaged in solving problems of the school district. Companies such as Motorola, Pratt Whitney, and IBM provided opportunities for speakers to address employees to promote the bond issue. The bond issue was approved by the voters. A program known as "Cities in Schools" was developed as a business partnership to prevent drop out. Funds were raised for programs and materials. Respondent did not improperly promote a particular vendor or product in connection with the business of the School Board. Respondent never violated any administrative directive or established standard of conduct of the Department of Education. Evaluations 128. The Amended Petition For Demotion alleges that Respondent was incompetent in evaluating two employees. Those employees were Mr. Goode and Mr. Hukill. No credible and persuasive evidence was submitted by Petitioners to support their allegations in this regard. Attorney Fees And Costs The parties' request for attorney fees and costs are addressed in the Conclusions of Law.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Palm Beach County School Board enter a Final Order finding Respondent not guilty of any of the allegations in the Amended Petition For Demotion, award Respondent back salary with applicable interest for the entire period of his demotion, immediately reinstate Respondent to a salary level comparable to that received as Associate Superintendent of Planning and Operations in accordance with Section 231.36(6)(b), Florida Statutes, dismiss the request to return Respondent to annual contract status under Section 231.35(4)(c), and maintain Respondent on continuing contract. RECOMMENDED this 23rd day of July, 1993, in Tallahassee, Florida. DANIEL MANRY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of July, 1993.
The Issue Whether the proposed amendment to Florida Administrative Code Rule 6A-2.0020(4) is an invalid exercise of delegated legislative authority because of conflict with section 1008.34(1)(a), Florida Statutes (2016), or because the rule will be arbitrary and capricious in its application and administration.
Findings Of Fact Petitioner Florida Association of Independent Charter Schools is a Florida non-profit corporation. The association is substantially affected by the proposed amended rule. Petitioner Aspira Raul Arnaldo Martinez Charter School is a charter school in Miami-Dade County and is currently serving 573 students. Its school grades over the past two consecutive years are: “D” for 2014-2015 and “D” for 2015-2016. If the proposed amended rule becomes effective and the school receives a school grade lower than “C” for 2016-2017, the school will not be eligible for the 2017-2018 Capital Outlay Appropriation. The school is substantially affected by the proposed amended rule. Petitioner Miami Community Charter Middle School is a charter middle school in Miami-Dade County currently serving 283 students. It is a Title I school serving 99 percent Free and Reduced Lunch. Its school grades over the past two consecutive years are: “D” for 2014-2015 and “D” for 2015-2016. If the proposed amended rule becomes effective and the school receives a school grade lower than “C” for 2016-2017, the school will not be eligible for the 2017-2018 Capital Outlay Appropriation. The school is substantially affected by the proposed amended rule. Respondent State of Florida Board of Education is “the chief implementing and coordinating body of public education in Florida . . . [with] the authority to adopt rules pursuant to ss. 120.536(1) and 120.54 to implement the provisions of law conferring duties upon it for the improvement of the state system of K-20 public education . . . .” § 1001.02(1), Fla. Stat. Respondent Florida Department of Education “act[s] as an administrative and supervisory agency under the implementation direction of the State Board of Education.” § 1001.20(1), Fla. Stat. “The Commissioner of Education is the chief educational officer of the state . . . , and is responsible for giving full assistance to the State Board of Education in enforcing compliance with the mission and goals of the K-20 education system except for the State University System.” § 1001.10(1), Fla. Stat. Charter school capital outlay funding is the state’s contribution to capital funding for charter schools. A charter school’s governing body may use such funds for the following purposes: purchase of real property, construction of school facilities, purchase or lease of permanent or relocatable school facilities, purchase of vehicles, renovation, repair, maintenance of school facilities, and insurance for school facilities. § 1013.62(3), Fla. Stat. The charter school statute, section 1002.33, Florida Statutes, specifically authorizes the State Board of Education to adopt rules which address charter school eligibility for capital outlay funds. “The Department of Education, after consultation with school districts and charter school directors, shall recommend that the State Board of Education adopt rules to implement specific subsections of this section.” § 1002.33(28), Fla. Stat. One of the specific subsections of section 1002.33 is subsection (19), entitled “CAPITAL OULAY FUNDING.” Subsection (19) provides, in pertinent part: “Charter schools are eligible for capital outlay funds pursuant to s. 1013.62.” Each year, the Commissioner of Education is required to allocate charter school capital outlay funds, if any are appropriated by the Legislature, to eligible charter schools.1/ One of the eligibility criteria, which is at the center of the parties’ dispute, is set forth in section 1013.62(1)(a)3., Florida Statutes: “Have satisfactory student achievement based on state accountability standards applicable to the charter school.” The 2016 Florida Legislature amended section 1013.62, but it did not amend the statute regarding satisfactory student achievement. With regard to satisfactory student achievement, presently effective rule 6A-2.0020 provides: (2) The eligibility requirement for satisfactory student achievement under Section 1013.62, F.S., shall be determined in accordance with the language in the charter contract and the charter school’s current school improvement plan if the school has a current school improvement plan. A charter school receiving an “F” grade designation through the state accountability system, as defined in Section 1008.34, F.S., shall not be eligible for capital outlay funding for the school year immediately following the designation. On February 28, 2017, Respondents published a Notice of Proposed Rule, which proposed to amend rule 6A-2.0020. On March 22, 2017, the State Board of Education approved the proposed amendments to rule 6A-2.0020. As approved, the portion of the proposed rule which addresses satisfactory student achievement provides: (4) Satisfactory student achievement under Section 1013.62(1)(a)3., F.S., shall be determined by the school’s most recent grade designation or school improvement rating from the state accountability system as defined in Sections 1008.34 and 1008.341, F.S. Satisfactory student achievement for a school that does not receive a school grade or a school improvement rating, including a school that has not been in operation for at least one school year, shall be based on the student performance metrics in the charter school’s charter agreement. Allocations shall not be distributed until such time as school grade designations are known. For the 2016-2017 school year, a charter school that receives a grade designation of “F” shall not be eligible for capital outlay funding. Beginning in the 2017-2018 school year, a charter school that receives a grade designation of “F” or two (2) consecutive grades lower than a “C” shall not be eligible for capital outlay funding. Beginning in the 2017-2018 school year, a charter school that receives a school improvement rating of “Unsatisfactory” shall not be eligible for capital outlay funding. Proposed amended rule 6A-2.0020(4), if adopted, will provide the standard for what constitutes failure to meet satisfactory student achievement for purposes of receiving capital outlay funding. A school with a grade of “F” or two (2) consecutive grades lower than a “C” will be ineligible for funding. Proposed amended rule 6A-2.0020(4), if adopted, will allow a charter school with a single “D” grade to continue receiving capital outlay funds for the next fiscal year. On April 5, 2017, Respondents published a Notice of Change for a technical change for rule 6A-2.0020, referencing the following rulemaking authority for the rule: sections 1001.02(1), (2)(n); 1002.33(19), (28); 1013.02(2)(a); and 1013.62(5).
The Issue The issues are whether the Department of Education’s (Department) decision to deny Petitioner’s application for capital outlay funding for the 2017-2018 school year is in conflict with Florida Administrative Code Rule 6A-2.0020(4)(b), as amended effective August 13, 2017, and is, therefore, based on an unadopted rule; and whether the Department’s decision to deny the application should be determined under the prior version of the rule.
Findings Of Fact Petitioner is a not-for-profit public charter school located in Ocoee, Florida, serving approximately 260 students in kindergarten through grade five. The school opened in the 2012-2013 school year, but did not receive a school grade until 2014-2015. That year, it received a grade of “B.” It received a grade of “D” in 2015-2016 and a “D” in 2016-2017. Since school year 2015-2016, Petitioner has been operating under a School Improvement Plan, approved and reviewed by its sponsoring school district, the Orange County School District. A School Improvement Plan is a plan designed to improve academic performance and is required when a charter school receives a grade of “D” or “F.” See § 1002.33(9)(n)1., Fla. Stat. (2016). The Department is the agency charged with the responsibility of administering capital outlay funds for charter schools pursuant to section 1013.62, Florida Statutes.1/ Charter school capital outlay funding is a source of funds for charter schools, which must meet eligibility criteria set forth in section 1013.62. The funds can be used only for specific purposes set forth in the statute, such as the purchase of real property, construction of school facilities, purchase of vehicles, computer equipment and software, insurance for school facilities, and renovation and repair of school facilities. See § 1011.71(2), Fla. Stat. Petitioner has used the funding “for subsidizing or supplementing [its] rent.” If funds are appropriated by the Legislature, each year the Department is required to allocate capital outlay funds to eligible charter schools. The allocation is based on the number of students in the school. In school year 2017-2018, charter school capital outlay consisted of a combination of state and local funds, which included both a state appropriation and revenue resulting from the discretionary millage level levied by local school districts under section 1011.71(2). The state appropriation for charter school capital outlay for that year was $50 million. In order to receive capital outlay funds, a charter school must satisfy a number of criteria, one of which is that the school must have “satisfactory student achievement based on state accountability standards applicable to the charter school.” § 1013.62(1)(a)3., Fla. Stat. A school’s budgetary concerns are not a consideration in the approval process. Rule 6A-2.0020 governs eligibility for charter school capital outlay funds and implements the statutory requirement for satisfactory student achievement. The previous version of the rule, effective December 15, 2009, stated, in part: (2) The eligibility requirement for satisfactory student achievement under Section 1013.62, F.S., shall be determined in accordance with the language in the charter contract and the charter school’s current school improvement plan if the school has a current school improvement plan. A charter school receiving an “F” grade designation through the state accountability system, as defined in Section 1008.34, F.S., shall not be eligible for capital outlay funding for the school year immediately following the designation. Under this version of the rule, a charter school that received an “F” grade was automatically ineligible for capital outlay funding. A school that received any grade other than an “F” was evaluated based upon satisfaction of performance metrics in the charter school contract and the School Improvement Plan, if there was one. Therefore, capital outlay funding was not guaranteed to any charter school under the former version of the rule. The 2016 Legislature amended section 1013.62 to change eligibility criteria for charter school capital outlay funding, although the section of the statute relating to satisfactory student achievement was not amended. The goal of the Legislature was to raise academic standards required of charter schools in order to qualify for capital outlay funding. In order to comply with these statutory changes, the Department proposed revisions to rule 6A-2.0020. These proposed revisions also included changes to the criteria for determining satisfactory student achievement that would be required in order to be eligible for capital outlay funds. Rule development began in May 2016, and the Department anticipated that the amended rule would go into effect before school year 2016-2017. The Department determined that revisions to the satisfactory student achievement portion of the rule were necessary in order to be consistent with the Department’s overall approach to school quality and accountability, which included the adoption of new standards and assessments. Based on a review of the school grading statute, and the definition of a “D” school as one that is making less than satisfactory progress, the Department determined that a school earning an “F” or two consecutive grades below a “C” was not consistent with the requirement for satisfactory student achievement. The proposed rule was approved by the State Board of Education at the September 2016 board meeting, but was later withdrawn for further revision. On February 28, 2017, the Department published a Notice of Proposed Rule, proposing that, beginning in school year 2017- 2018, a charter school with two consecutive grades below a “C,” as well as a single “F” grade, would be ineligible for capital outlay funds. The amended portion of the rule that addresses satisfactory student achievement and which is at the heart of this dispute, states as follows: Satisfactory student achievement under Section 1013.62(1)(a)3., F.S., shall be determined by the school’s most recent grade designation or school improvement rating from the state accountability system as defined in Sections 1008.34 and 1008.341, F.S. Satisfactory student achievement for a school that does not receive a school grade or a school improvement rating, including a school that has not been in operation for at least one school year, shall be based on the student performance metrics in the charter school’s charter agreement. Allocations shall not be distributed until such time as school grade designations are known. For the school year 2016-17, a charter school that receives a grade designation of “F” shall not be eligible for capital outlay funding. Beginning in the school year 2017-18, a charter school that receives a grade designation of “F” or two (2) consecutive grades lower than a “C” shall not be eligible for capital outlay funding. Beginning in the school year 2017-18, a charter school that receives a school improvement rating of “Unsatisfactory” shall not be eligible for capital outlay funding. The words, “Beginning in the school year 2017-18,” were included in the rule to make it clear that the new criteria for satisfactory student achievement would not apply to schools in school year 2016-2017, but instead would apply to schools applying for funding for the school year 2017-2018. These changes were approved by the State Board of Education on March 22, 2017, or before charter schools began submitting applications for funding for the following school year. Due to a third-party challenge of the new rule, however, it did not become effective until August 13, 2017. Fla. Ass’n of Indep. Charter Sch. v. Fla. Dep’t of Educ., Case No. 17-1986RP (Fla. DOAH July 21, 2017), aff’d, 2018 Fla. App. LEXIS 8802 (Fla. 1st DCA June 21, 2018)(per curiam). The Department requires charter schools to submit an application for capital outlay funding each year and requires the sponsoring school district to review the application and make a recommendation regarding eligibility. The applications are filed with the Department using a web-based system known as the Charter School Portal. The Commissioner of Education then makes the final decision as to whether the school has satisfied all eligibility requirements. For the school year 2017-2018, applications for charter school capital outlay funding were due by July 7, 2017, and each sponsoring school district was required to review and recommend its charter schools’ capital outlay plans by July 28, 2017. For school year 2017-2018, 582 applications were submitted for review by the Department. Petitioner began receiving capital outlay funding in school year 2015-2016. It also received funding for school year 2016-2017. Funding in those two years was based on the old rule. Because Petitioner expected, but was not guaranteed, to get capital outlay funding again in 2017-2018, it planned its budget for the upcoming school year with those funds included. Had its application been approved, Petitioner would have received approximately $68,000.00 in capital outlay funding. On June 27, 2017, or three months after the rule was adopted by the State Board of Education, Petitioner submitted its application for charter school capital outlay funding. The Department did not inform Petitioner by separate written notice that the new rule would apply to all capital outlay applications for school year 2017-2018.2/ On July 13, 2017, the Orange County School District recommended that Petitioner be eligible for capital funding. Based on the amended rule, which became effective on August 13, 2017, Petitioner was determined ineligible for capital outlay funding for the 2017-2018 school year, as its two most recent school grades from 2015-2016 and 2016-2017 were lower than a “C.” This determination was consistent with the language in the revised rule, which stated clearly that the rule would apply “Beginning in the school year 2017-18.” In making this determination, the Department applied the rule in a prospective manner, beginning with the 2017-2018 school year, but it used the two most recent school grades (2015-2016 and 2016-2017) to determine eligibility for capital outlay funds. Petitioner was one of approximately a dozen schools that were impacted adversely by the change in the rule. On August 29, 2017, the Department sent an automated email to Petitioner stating that the school was ineligible for capital outlay funds. The email informed Petitioner that the basis for the denial could be accessed on the web-based system that the school used for filing its application. Petitioner also was notified of the denial of capital outlay funds by letter dated October 30, 2017, and yet a third time in an amended letter dated February 2, 2018. The last paragraph in the amended letter reads as follows: After review of your Charter School Capital Outlay Plan, submitted for 2017-18 school year, it has been determined that your school is ineligible to receive charter school capital outlay fund. According to Rule 6A- 2.0020(4), Florida Administrative Code, beginning in the 2017-18 school year, a charter school that receives a grade designation of “F” or two (2) consecutive grades lower than a “C” shall not be eligible for capital outlay funding. Therefore, Kids Community College Charter does not meet the requirements for charter capital outlay funding for the 2017-18 school year, as the school received two consecutive grades lower than a “C” [in school years 2015-2016 and 2016-2017]. Petitioner contends that because the letter conflicts with the terms of the amended rule, it constitutes an unadopted rule and cannot be used as the basis for denying its application. In the same vein, Petitioner argues that the most reasonable interpretation of the rule is that only school grades earned beginning in 2017-2018 and beyond can be used to satisfy eligibility for capital outlay funds. This interpretation of the rule, however, would mean that charter schools with any grade designation, including “Fs,” could receive funding in school years 2017-2018 and 2018-2019. Also, it would effectively delay implementation of the new academic standards for two years. In short, if Petitioner’s interpretation is accepted, the new eligibility criteria could not take effect until school year 2019-2020. This is contrary to the Department’s interpretation of the rule, which determines eligibility for capital outlay funds based on the new criteria beginning in school year 2017- 2018. The Department’s interpretation of the rule is as or more reasonable than the interpretation offered by Petitioner. On February 23, 2018, Petitioner filed its request for an administrative hearing to contest the Department’s decision.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Education enter a final order denying Petitioner’s application for capital outlay funding for the school year 2017-2018. DONE AND ENTERED this 9th day of August, 2018, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of August, 2018.
The Issue Whether Petitioners, Renaissance Charter School, Inc., and Renaissance Charter School at Tradition, can be required by the St. Lucie County School Board ("School Board") to offer regular school busing to all eligible charter school students residing more than two miles from the charter school. Whether Petitioner, Renaissance Charter School at Tradition, breached its contract with the School Board by not providing transportation to students in accord with the parties' charter school contract and Florida Statutes. Whether School Board Policies 3.90 and 8.31 constitute an invalid exercise of delegated legislative authority. Whether the School Board has charter busing policies which amount to illegal, unadopted rules under chapter 120, Florida Statutes (2014).
Findings Of Fact The Parties Renaissance Charter School, Inc., is a not-for-profit Florida corporation. Renaissance Charter School, Inc., currently owns and operates two charter schools in St. Lucie County: Renaissance Charter School at Tradition and Renaissance Charter School at St. Lucie. The School Board is the "sponsor" of Renaissance Charter School at Tradition within the meaning of the charter school statute, section 1002.33. The School Board's Approval of Renaissance Charter School at Tradition's Charter Application and Charter Contract On August 1, 2012, a charter school application was submitted to the School Board by Renaissance Charter School, Inc., on behalf of Renaissance Charter School at Tradition. During the charter application and approval process, the School Board consistently contended that charter schools in St. Lucie County are required by law to offer regular school busing to all eligible students residing more than two miles from their charter school.1/ On September 17, 2012, the School Board's Charter School Evaluation Team recommended approval of the Renaissance Charter School at Tradition charter school application, subject to the charter school providing "a viable transportation plan that meets statutory requirements once a school site has been finalized." On May 14, 2013, the School Board, at a regular board meeting, unanimously approved its charter contract with Renaissance Charter School, Inc., for Renaissance Charter School at Tradition. The Renaissance Charter School at Tradition charter contract became effective upon approval by the School Board at its May 14, 2013, meeting. The term of the charter contract is five years, commencing on the first day of the 2013-2014 school year, and ending on June 30, 2018. The School Board and Renaissance Charter School at Tradition have a valid and binding charter school contract that is still in full force and effect. Applicable Transportation Provisions of Renaissance Charter School at Tradition's Charter Contract Section 6 of the charter contract between the School Board and Renaissance Charter School at Tradition, which governs student transportation, provides as follows: SECTION 6: TRANSPORTATION Cooperation Between Sponsor and School: The School shall provide transportation to the School's students consistent with the requirements of Part I.E. of Chapter 1006, and Section 1012.45, F.S. The School may contract with the Sponsor to provide transportation service. Reasonable Distance: Transportation will not be a barrier to equal access for all students residing within the District, and the School shall provide transportation to all students residing in the District subject to the limitations in this Section 6.B. Students residing within two miles of the school will be expected to furnish their own transportation, except that certain students, as specified in Section 1006.21, F.S., for example students with disabilities and elementary grade students who are subject to specified hazardous walking conditions, must be provided transportation, regardless of the distance from the school. For students who are geographically isolated, or who are unable to be transported on a school bus due to disabilities, the School will offer reimbursement to eligible parents residing within the District. This parental reimbursement shall be equivalent to the monies provided by the Sponsor to the School for transportation of the student. At the time of student application for enrollment, the School shall be responsible for informing parents of the transportation options available, including the reimbursement amount available in lieu of provided transportation to qualifying students. Compliance with Safety Requirements: The School shall demonstrate compliance with all applicable transportation safety requirements. Unless it contracts with the Sponsor for the provision of student transportation, the School is required to ensure that each school bus transporting the School's students meets applicable federal motor vehicle safety standards and other specifications. The School agrees to monitor the status of the commercial drivers' licenses of each school bus driver employed or hired by the School (hereafter "School Bus Drivers") unless it contracts with Sponsor to provide such services. The School will provide the Sponsor, via the Charter Schools Support Department, an updated list each quarter of all School Bus Drivers providing commercial driver's license numbers, current license status and license expiration dates. Fees: The School may not charge a fee for transportation to which the student is entitled pursuant to state law. The School shall reimburse parents for parent-provided transportation costs if the student is legally entitled to transportation. Private Transportation Agreement: In the event the School will be contracting with a third party to provide transportation to its students, the School shall provide a copy of the transportation contract to the Sponsor at least sixty (60) days prior to the initial day of classes. Reimbursement for School Funded Transportation: The rate of reimbursement to the School by the Sponsor for transportation will be equivalent to the reimbursement rate provided by the State of Florida for all eligible transported students. Section 1 B) 4) of the charter contract further provides: 4) Statutory Requirements: The Parties will comply with Section 1002.33, F.S., and any regulations adopted by the State Board of Education or other state agency, or amendments thereto, pertaining to charter schools, and all applicable federal, state and local laws pertaining to civil rights and student health, safety and welfare. If any conflict exists between the provisions of the approved application or this Charter and any specific provision of law, then the provisions of the law shall prevail. The School shall be bound by amendments to applicable statutes, rules, and regulation, as any such amendments take effect. Unless specifically incorporated herein, the policies of the Sponsor do not apply to the School. However, if the School is statutorily required to have a policy and does not, the Sponsor's policy shall be deemed to apply. Students of Renaissance Charter School at Tradition and the School's Transportation Policy For a student to attend Renaissance Charter School at Tradition, their parents must apply during an open enrollment period, and a lottery system is used to determine who may attend. Parents whose child is selected through the lottery to attend Renaissance Charter School at Tradition are given a certain number of days to accept or decline the seat. Then the process starts over again until all seats are filled or there are no other students on the list. Renaissance Charter School at Tradition opened for the 2013-2014 school year as a K-6 school with 695 enrolled students. Projected enrollment for the 2013-2014 school year was 661 students. However, before the 2013-2014 school year began, projected enrollment had increased to 745 students. Renaissance Charter School at Tradition opened for the 2014-2015 school year as a K-7 school with 890 enrolled students and an enrollment cap of 945 students. For the 2015-2016 school year, Renaissance Charter School at Tradition plans to open as a K-8 school with projected enrollment of 1,075 students. For the 2016-2017 school year, Renaissance Charter School at Tradition plans to open as a K-8 school at maximum capacity of 1,145 enrolled students. The only "A" graded schools in St. Lucie County, Florida, for the 2013-2014 school year were Renaissance Charter School at Tradition and Renaissance Charter School at St. Lucie. There is a waiting list for grades K-3 at Renaissance Charter School at Tradition. Parents of students enrolled at Renaissance Charter School at Tradition recognize that Renaissance Charter School at Tradition provides their children with a unique educational opportunity. Parents of students enrolled at Renaissance Charter School at Tradition recognize that the decision to enroll their children at Renaissance Charter School at Tradition is a personal choice and not a privilege. Parents of students enrolled at Renaissance Charter School at Tradition are active partners in the education of their children. Renaissance Charter School at Tradition does not provide regular school busing to its students who reside more than two miles from the charter school. Renaissance Charter School at Tradition re-evaluates its transportation policies on a yearly basis. Parents of students are informed that Renaissance Charter School at Tradition does not offer regular school busing in informational meetings before they apply for their child to attend the school. Parents of students enrolled at Renaissance Charter School at Tradition sign a "Parent Obligation Form," contractually obligating themselves "[t]o provide transportation to and from the school for my child." Parents are required to sign the "Parent Obligation Form" every year as part of the enrollment process. The transportation policy of Renaissance Charter School at Tradition, which is given to all parents upon enrollment, apprises parents that the school does not offer regular school busing to students, but that the school agrees to provide "transportation or an equivalent reimbursement" to students in certain legally-defined circumstances. The transportation policy of Renaissance Charter School at Tradition provides as follows: Student Transportation Policy Renaissance Charter School at Tradition's [sic], is and always has been, fully committed to ensuring that transportation will not be a barrier to equal access for all students residing within the District. To date, there are more students attending our newly-opened charter school than was projected for our first year. Although our school does not presently offer busing as a means of school transportation, we are in the process of helping put together parent carpools for those parents who want their children to share rides to and from school. Moreover, transportation, or an equivalent reimbursement, will be provided to any student who falls under any of the following categories [taken from Florida State Statute 1006.21]: Any student in grades K-8 who does not otherwise have access to an adequate educational facility or opportunity. Any student in grades K-6 who are subjected to a hazardous walking condition as defined in s. 1006.23 while en route to or from school. Any student in grades K-8 who have a documented transportation need in their IEP. Any student in grades K-8 who are pregnant, student parents, and/or the children of these students if a teenage parent program is presented at the school. If you feel your child falls within one of the categories listed above, please notify the front office and we will work with you on a case-by-case basis. The School Board rejected the transportation policy of Renaissance Charter School at Tradition because it does not provide for the regular school busing of all students residing more than two miles from the charter school. Renaissance Charter School at Tradition's failure to provide regular bus transportation to all students residing more than two miles from the charter school does not constitute a barrier to equal access to all students. At the hearing, no credible and persuasive evidence was presented that any students lack equal access to an adequate educational facility or opportunity. No evidence was presented that any students are subject to hazardous walking conditions while en route to or from the charter school. There is one student who enrolled on January 20, 2015, who has a transportation need documented in their individual education plan, but the child's parent has chosen to provide transportation. No evidence was presented of any students who are pregnant or who have given birth to any children. Renaissance Charter School at Tradition opens at 6:00 a.m. and closes at 6:00 p.m. There are before-and-after- care private buses that take students off-site to other organizations, such as to karate and the Boys and Girls Clubs. Renaissance Charter School at Tradition also encourages parents' use of carpooling their children to and from school. The School Board's position is that carpooling is not a viable transportation option for the charter school. At Renaissance Charter School at Tradition, one parent has decided to run a private busing service, but no other parents have chosen to use the services of that private bus.2/ The Charter Contract and Transportation Policy Do Not Require Petitioners to Transport by Regular School Bus All Students Residing More Than Two Miles From the Charter School The parties' dispute centers on whether the School Board can require Renaissance Charter School at Tradition to offer regular school bus transportation, to and from the school, for all students residing more than two miles from the school. The interests of Petitioners are directly and substantially affected by the School Board's attempt to require that Petitioners transport by regular school bus all students residing more than two miles from the charter school. The parties unsuccessfully mediated their dispute before the Florida Department of Education. The persuasive and credible evidence adduced at hearing demonstrates that Renaissance Charter School at Tradition has not breached its charter contract with the School Board by not providing regular school busing to all students residing more than two miles from the charter school. The charter school contract between the School Board and Renaissance Charter School at Tradition does not require Renaissance Charter School at Tradition to provide regular school busing to all students residing more than two miles from the charter school.3/ Renaissance Charter School at Tradition's transportation policy is consistent with its charter contract with the School Board. The School Board's Inequitable Treatment of Charter Schools The persuasive and credible evidence adduced at hearing demonstrates that the School Board's treatment of Petitioners is inequitable. The School Board has a "no transportation zone," which geographically encompasses approximately one-third of the county. Students of traditional public schools residing in the "no transportation zone" are not provided regular school bus transportation to and from school. The School Board also has a "limited transportation zone." Students of traditional public schools residing in the "limited transportation zone" are provided regular school bus transportation, but only if they attend a school located within the "limited transportation zone." The "no transportation zone" and "limited transportation zone" encompass approximately one-half of St. Lucie County. At the hearing, the School Board conceded that it has different policies for the transportation of traditional public school students and students at magnet schools and attractor schools. The School Board encourages the use of carpools for students of traditional public schools. The School Board's Alleged Unadopted Policy The School Board, in paragraph 20 of its counter- petition filed in Case No. 14-3267, specifically states: "The School District's adopted policy is that students who live more than two miles from their assigned school shall be provided school bus transportation." (emphasis added). The persuasive and credible evidence adduced at hearing demonstrates that the School Board interprets Florida law and its adopted School Board Policies 3.90 and 8.31 to require that all existing and future charter schools within the county provide regular school bus transportation for all students residing more than two miles from the charter school. The persuasive and credible evidence adduced at hearing demonstrates that the School Board does not have an unadopted policy that all charter schools within the county must provide regular school busing to all students residing more than two miles from their charter school. The School Board's Adopted Policies The School Board has two adopted policies, School Board Policy 3.90 (dealing with charter schools) and School Board Policy 8.31 (dealing with student transportation). The interests of Petitioner are directly and substantially affected by these policies.4/ Both School Board Policies 3.90 and 8.31 were properly noticed pursuant to chapter 120, Florida Statutes. Neither School Board Policy 3.90 nor 8.31 is specifically incorporated into the charter agreement between the School Board and Renaissance Charter School at Tradition. Moreover, according to the School Board, School Board Policy 8.31 applies only in the absence of a viable charter school transportation policy. The persuasive and credible evidence adduced at hearing fails to demonstrate that the School Board and Renaissance Charter School at Tradition mutually agreed that School Board Policy 3.90, or 8.31, apply to the charter school.
The Issue Whether Broward County School Board has good cause to non- renew Automotive Technical Charter High School of South Florida, Inc.'s Charter School Agreement.
Findings Of Fact On June 19, 2001, the School Board approved the initial Charter School Agreement that allowed Parkway Academy to open. The original contract was effective for a ten-year period, which ended on June 30, 2011. Parkway Academy was assigned school location number 5181. Parkway Academy serves students from both Broward and Miami-Dade counties. Parkway Academy is located on Broward College Campus and the 2011-2012 school year enrollment was approximately 517 students. Eighty-five students were in Parkway Academy's most recent graduating class and 84 were accepted into college. Charter schools are part of the public school system and are required to follow the same precepts as a public school. During the 2010-2011 school year, the school district conducted a program review of Parkway Academy's Charter to determine if the charter should be renewed. After the first program review conducted during the 2010-2011 school year, the School Board determined that Parkway Academy had academic performance and programmatic deficiencies. As a result of the deficiencies, the School Board only granted Parkway Academy a one-year renewal Charter. Parkway Academy's Charter was renewed for the 2011-2012 school year, permitting the school to operate through June 30, 2012. The Charter Agreement mandated that Parkway Academy "provide educational services in accordance with the terms of [the] charter school agreement." The Charter School Agreement provided the following contractual performance obligations in Section 2.D: "Any non- renewal cancellation or termination of the Charter shall be subject to Section 1002.33(8), Florida Statutes, and the terms of this Charter." Section 2.D.1. of the Charter prohibited Parkway Academy from being designated a "school in need of improvement" for more than two years and provided the following non-renewal provisions: a failure by the School to participate in the state's education accountability system created in section 1008.31 or failure to meet requirements for student performance stated in this Charter. * * * (f) receipt by the School of a state- designated grade of "F" in any Two (2) of Four(4) years or the School is designated as "a school in need of improvement" for more than Two (2) years [more than Five (5) years of failure to make Adequate Yearly Progress(AYP)], in accordance with the provisions of the No Child Left Behind Act of 2001. A "school in need of improvement" is one that has failed to make Adequate Yearly Progress (AYP) for more than Five (5) years in accordance with the provisions of the No Child Left Behind Act of 2001. The equivalent of an "F" grade is defined as the School receiving less than 395 points for elementary and middle schools and less than 790 for high schools on the Florida Grades issued by the Florida Department of Education. Schools that receive a school improvement designation of "Declining" will also be considered the equivalent to an "F" grade. The foregoing point designations or school improvement ratings shall be amended during the term of this Charter to conform to current state law or rules; Section 2.D.1.a of the Charter delineated what constitutes "good cause" for charter termination or non-renewal and read in pertinent part: "Good cause" for termination or non-renewal shall include, but not be limited to, the following: * * * (2) receipt by the School of a state- designated grade of "F" in any Two (2) of Four (4) years or the School is designated as "a school in need of improvement" for more than "Two (2) years [more than Five (5) years of failure to make Adequate Yearly Progress (AYP)], in accordance with the provisions of the No Child Left Behind Act of 2001. A "school in need of improvement" is one that has failed to make Adequate Yearly Progress (AYP) for more than Five (5) years in accordance with the provisions of the No Child Left Behind Act of 2001. The equivalent of an "F" grade is defined as the School receiving less than 395 points for elementary and middle schools and less than 790 for high schools on the Florida Grades issued by the Florida Department of Education. Schools that receive a school improvement designation of "Declining" will also be considered the equivalent to an "F" grade. The foregoing point designations or school improvement ratings shall be amended during the term of this Charter to conform with the current state or rules. * * * (22) any other good cause shown, which shall include without limitation, any material breach or violation by the School of the standards, requirements or procedures of this Charter such as: * * * (c) the School's failure to fulfill all the requirements for highly qualified instructional personnel as defined by the No Child Left Behind Act (NCLB) * * * (t) a failure by the School to fulfill all of the requirements for highly qualified instructional personnel as defined by NCLB Section 11.D of the Charter provided the requirements for teacher certification and highly qualified teachers and read in pertinent part: All teachers employed by or under contract to the School shall be certified and highly qualified as required by Chapter 1012, Florida Statutes and any other applicable state of federal law. Criteria developed by the School for hiring all other staff (administrative and support staff) shall be in accordance with their educational and/or experiential backgrounds that correspond to the job responsibilities they will be expected to perform. If the School receives Title I funds, it will employ highly qualified staff. In compliance with those requirements, the School's teachers shall be certified and teaching in-field and the School's support staff shall have attained at least Two (2) years of college education or have passed an equivalent exam. The School may employ or contract with skilled selected non-certified personnel to provide instructional services or to assist instructional staff members as education paraprofessionals in the same manner as defined in Chapter 1012 and as provided by State Board of Education rule for charter school Governing Boards; however, in order to comply with NCLB requirements, all teachers in core academic areas must be certified/qualified based on Florida Statutes and highly qualified as required by NCLB. The School agrees to disclose to the parents of its students the qualifications of instructional personnel hired by the School. Parkway Academy's Charter Agreement for the 2011-2012 school year was signed by the parties on or about March 3, 2011, and went into effect July 1, 2011. The School District conducted its next renewal review of Parkway Academy during the last week of October and first week of November of 2011 to determine if the charter school renewal should go beyond the 2011-2012 school year. Diane Rogers ("Rogers"), Personnel Administrator for the Certification Department, audited and reviewed Parkway Academy's instructors and the courses each instructor was teaching. On or about October 26, 2011, Rogers retrieved teacher assignment information from the Data Warehouse1 and reviewed the instruction assignments and qualifications for the 2011-2012 school year to make a determination if each of Parkway Academy's teachers were certified, teaching in field, out of field, highly qualified, or not highly qualified for the teaching assignments he/she had been given. After completing the teacher review audit, Rogers identified the following five faculty members who lacked appropriate teacher certification: John Ahrens ("Ahrens"), Valerie Cedant ("Cedant"), Jerry Goodbolt ("Goodbolt"), Talondra Ingram ("Ingram"), and Uriel Williams ("Williams"). Rogers found Ahrens was teaching auto mechanics and auto tech but did not have the required Broward certificate. Rogers notified Parkway Academy in November 2011 that Ahrens needed a Broward teaching certificate. Rogers also found that Cedant previously had a temporary certificate, which expired June 30, 2011, and Ingram's temporary certificate had also expired before the 2011-2012 school year. Additionally, Goodbolt was working at the school without ever applying for a teaching certificate. While assessing the Parkway Academy, Rogers also discovered Williams had applied for a certificate from the Florida Department of Education ("FDOE"). FDOE determined his status was ineligible for a Florida educator's certificate in any area. Therefore, Rogers properly categorized Williams as not highly qualified to teach his assignments, Physical Education, Personal Fitness and Health Education, for the school because Williams did not have the basic requirement, a Florida educator's certificate. Rogers also identified the following eight teachers who did not have the required highly qualified2 status when she did her review: Floyd Barber ("Barber"), Cedant, Ingram, Gleandeal Johnson ("Johnson"), Lee Kornhauser ("Kornhauser"), Hyaptia Mata ("Mata"), Roxanna Smilovich ("Smilovich"), and Manage Vincent ("Vincent"). Rogers determined that Cedant was not highly qualified in that Cedant was precluded from the status because she did not have a valid educator's certificate and was also teaching improperly out of field without a valid educator's certificate. Rogers determined that Barber was not highly qualified to teach his assignment, Literature and Arts, since his FDOE certification was in Business Education. Therefore, he was improperly teaching out of field at Parkway Academy. Rogers also found in her review that Johnson had a FDOE certificate in Business Education 6 through 12 but she was assigned to teach Journalism, which requires FDOE certification either in English 6 through 12, Journalism, or English 5 through Therefore, Johnson was not highly qualified to teach Journalism because she was teaching out of field improperly, and she had not met the requirements. Rogers also discovered during her audit that Kornhauser was FDOE certified in Math 5 through 9, which allows him to teach middle school grade level math but he was assigned to teach Business Math and Math for College Readiness, which requires a Mathematics 6 through 12 certification. Therefore, Rogers determined that Kornhauser was not highly qualified to teach his assigned courses and was improperly teaching out of field. Rogers' review of Mata found that she was FDOE certified in Biology 6 through 12, but she was assigned to teach Earth Space Science, Chemistry, and Physics, all three of which required certifications other than Biology. Rogers determined Mata was not highly qualified to teach the three courses and was improperly teaching out of field. Upon review, Rogers found that Smilovich's FDOE certification was in Biology 6 through 12, but she was assigned to teach Earth Space Science, which requires certification in Chemistry, Physics, Earth Space Science, or General Science 5 through 9. Rogers' audit also determined that Smilovich was not highly qualified for her assigned class, and she was improperly teaching Earth Space Science out of field. Rogers' review also found Vincent was FDOE certified in Biology 6 through 12, but Vincent was teaching Chemistry, which requires a certification in Chemistry 6 through 12. Rogers determined that Vincent was not highly qualified for the teaching assignment and was improperly teaching Chemistry out of field. Parkway Academy employed and had the following instructors teaching out of field for the 2011-2012 school year without the proper credential for the core course of instruction they were assigned: Cedant, Ingram, Johnson, Kornhauser, Mata, Smilovich, Vincent, and Williams. Seventeen out of the 52 classes at Parkway Academy were being taught out of field. After discovering the teachers who were teaching out of their fields during her audit, Rogers also checked to determine if Parkway Academy had complied with the requirement to notify the parents that their children had teachers providing instruction out of field. Rogers found that Parkway Academy had only notified parents partially regarding Vincent and Mata. She concluded that the newsletter notification was incomplete for Mata because it listed only one of her areas being out of field, and it failed to notify the parents about the other instructors teaching out of field. Rogers concluded her audit by determining that Parkway Academy did not comply with the Charter School Agreement and laws because the school failed to employ teachers who all had valid teaching certificates, failed to have all of its teachers teaching in the appropriate field, failed to correctly designate teachers who were highly qualified to teach core curriculum subject areas, and failed to correctly notify parents that their children were being taught by teachers who were out of field. Rogers emailed Parkway Academy on or about December 1, 2011, and requested updated information on the status of each deficiency regarding the instructors that lacked the proper certification and/or qualifications that she had discovered during her review. Parkway Academy provided Rogers an email update the next day on each teacher Rogers had listed in the email of December 1, 2011, that was not in compliance, but Parkway Academy never provided Rogers any replacement teachers' names or certifications to verify compliance as she requested. During December 2011, Parkway Academy took the following measures to correct some of the teacher certification and qualification deficiencies. Parkway Academy replaced Cedant, Ingram, and Smilovich with certified, highly qualified teachers. Also, Parkway Academy changed Barber, Johnson, and Kornhauser's core course codes to courses they were certified to teach. Parkway also obtained out of field agreements with Mata and Vincent to teach courses they were not certified to teach while each worked on certification in the area they were teaching. The School Board's Testing and Assessment Department also reviewed Parkway Academy's Charter. Among other things, the Department looked at Parkway Academy's Adequate Yearly Progress ("AYP"), the measure of school performance used to comply with the No Child Left Behind Act of 2001 ("NCLB"). The Testing and Assessment Department found that Parkway Academy did not meet AYP for the latest school year 2010-2011, which was reported after the signing of the renewal Charter School Agreement in March 2011. Additionally, the Department determined that the failure to meet the requirements for student performance for the 2010-2011 school year meant Parkway Academy had failed to make AYP for the following eight consecutive years: 2003-2004, 2004- 2005, 2005-2006, 2006-2007, 2007-2008, 2008-2009, 2009-2010, and 2010-2011. Parkway Academy's failure to meet the AYP for eight consecutive years earned the school the status of a "school in need of improvement" for more than two years. Parkway Academy failed to operate in compliance with the Charter School Agreement. The Certification Department's audit review report which showed a failure to use instructors that had the proper certification and/or qualifications for a substantial part of the year, combined with the Testing and Assessment Department's review results that concluded the Respondent was a "school in need of improvement" for more than two years due to failing to make AYP for eight consecutive years, caused a recommendation to be made to the School Board to non-renew Parkway Academy's Charter. On March 20, 2012, the School Board voted not to renew Parkway Academy's Charter. A Proposed Non-Renewal of its Charter notice was sent to Parkway Academy. On April 4, 2012, the School Board received Parkway's letter dated April 2, 2012, requesting a hearing upon the proposed Charter non-renewal, which was forwarded to the DOAH. The day of the formal hearing, Ahrens obtained a vocational certificate, which qualified him to teach auto mechanics and auto tech. Kornhauser neither had applied for nor obtained mathematics certification for grades 6 though 12.3
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Broward County School Board, enter a final order declining to renew the Charter School Agreement for Automotive Technical Charter High School of South Florida Inc., upon both the statutory and contractual grounds of (1) failure to meet the requirements for student performance stated in Parkway Academy's Charter including the school's status as a "school in need of improvement" for more than two years; (2) failure to use instructors having proper certification and/or qualifications; (3) failure to have teachers teaching in their fields; and (4) failure for Parkway Academy to disclose the out of field qualifications to the students' parents. DONE AND ENTERED this 10th day of August, 2012, in Tallahassee, Leon County, Florida. S JUNE C. McKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of August, 2012.
