09-005536RP Wsg Key West Holdings, Llc vs. Department Of Community Affairs Status: Closed DOAH Final Order on Tuesday, March 30, 2010.

Summary: Petitioner didn't prove proposed amendments to Working Waterfront grant program rule were invalid.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WSG KEY WEST HOLDINGS, LLC, )

)

Petitioner, )

)

and )

MONROE COUNTY, )

)

Intervenor, )

)

)

vs. ) Case No. 09-5536RP

)

DEPARTMENT OF COMMUNITY AFFAIRS, )

)

)

Respondent. )

)

FINAL ORDER

On February 3-4, 2010, a hearing was held in this case in

Tallahassee, Florida, before J. Lawrence Johnston, Administrative

Law Judge, Division of Administrative Hearings (DOAH).

APPEARANCES

For Petitioner: Gerald E. Greenberg, Esquire

Jose M. Jimenez, Esquire

John R. Herin, Jr., Esquire

Stearns, Weaver, Miller, Weissler,

Alhadeff & Sitterson, P.A.

150 West Flagler Street, Suite 2200

Miami, Florida 33130-1536

For Intervenor: Robert B. Shillinger, Jr., Esquire Monroe County Attorney Office

Post Office Box 1026

Key West, Florida 33041-1026

For Respondent: Matthew G. Davis, Esquire Department of Community Affairs

2555 Shumard Oak Boulevard

Tallahassee, Florida 32399-2100

STATEMENT OF THE ISSUES

The issues are: whether proposed amendments to Florida

Administrative Code 1 Rules 9K-9.003(6) and 9K-9.006(2) are

invalid exercises of delegated legislative authority under

Section 120.52(8)(b), (c), and (e), Florida Statutes 2 ; and, if

so, whether costs and attorney's fees should be assessed against

Respondent and paid to Petitioner under Section 120.595(2),

Florida Statutes.

PRELIMINARY STATEMENT

Petitioner filed its proposed rule challenge at DOAH under

Section 120.56(1)-(2), Florida Statutes. The hearing on the rule

challenge was scheduled and rescheduled twice, and Monroe County

was granted leave to intervene in support of the rule challenge.

A Pre-Hearing Stipulation was filed.

At the final hearing, Joint Exhibits 1-22 were received in

evidence. Petitioner called three witnesses: Lisa Tennyson,

Grants Coordinator for Monroe County; Douglas Gregory, Sea Grant

Marine Agent and Monroe County Extension Office Director; and

(telephonically) Curtis Skomp, a commercial real estate broker.

Petitioner also had its Exhibits 1-5 admitted in evidence.

Respondent called two witnesses: Ken Reecy, Community Program

Manager for the Florida Communities Trust (FCT) in the Department

of Community Affairs (DCA); and Grant Gelhardt, Environmental

Administrator for the FCT. Respondent offered its Exhibit 3, but

Petitioner's objection was sustained. Intervenor did not present

evidence.

After the presentation of evidence, Petitioner ordered a

Transcript of the hearing, which was filed on February 23, 2010,

and the proposed final orders filed by March 22, 2010, have been

considered.

FINDINGS OF FACT

1. The FCT has the power "to undertake, coordinate, or fund

activities and projects which will . . . serve to conserve

natural resources and resolve land use conflicts, including

FCT also is specifically authorized to "award grants and make

loans to local governments and nonprofit organizations for" that

purpose. Id. at ¶ (6).

2. In 2008, the Florida Legislature enacted the Stan

Mayfield Working Waterfront grant program. Codified as Section

380.5105, Florida Statutes, paragraph (2) of the statute

authorizes the FCT to promulgate "rules specifically establishing

an application process and a process for the evaluation, scoring

and ranking of working waterfront acquisition projects. . . .

Such rules shall establish a system of weighted criteria to give

increased priority to projects:

(a) Within a municipality with a population

less than 30,000;

(b) Within a municipality or area under

intense growth and development pressures, as

evidenced by a number of factors, including a

determination that the municipality's growth

rate exceeds the average growth rate for the

state;

(c) Within the boundary of a community

redevelopment agency established pursuant to

s. 163.356;

(d) Adjacent to state-owned submerged lands

designated as an aquatic preserve identified

in s. 258.39; or

(e) That provide a demonstrable benefit to

the local economy."

3. The purpose of the grant program is to preserve working

waterfronts, which have been under pressure to convert to other

uses. Some driving forces behind the conversion of working

waterfront to other uses include: high coastal property values;

high and unpredictable property taxes; increased regulation of

commercial fishing to protect reduced fishery stocks; confusing

and time-consuming regulatory processes for expanding or creating

new working waterfronts; increased cheaper imported seafood; and

rising fuel costs.

4. The Stan Mayfield Working Waterfront grant program is

administered by the FCT. In 2008, the FCT adopted rules

governing the program, including Rule Chapter 9K-9 on Grant

Application Procedures.

5. In the first cycle of grant applications, evaluations,

and awards, Monroe County applied for a grant to purchase and

preserve Intervenor's property on Stock Island in Key West.

Monroe County's Stock Island application was not granted.

6. The FCT announced its intention to amend the rules based

on the experience of the first grant cycle under the existing

rules and input from "stakeholders" (mostly local governments and

private not-for-profit entities interested in applying for

grants) throughout the State. Workshops were conducted, and

stakeholders (including Monroe County) participated. Proposed

amendments were drafted, and stakeholders were invited to comment

on the draft proposed amendments. The draft proposed amendments

and comments were considered by the governing board of the FCT at

its meeting in May 2009. The Board made some revisions to the

draft proposed amendments and initiated rulemaking.

7. Petitioner and Intervenor challenge proposed amendments

to Rules 9K-9.003(6) and 9K-9.006(2). The proposed amendment to

Rule 9K-9.003(6) caps awards at five million dollars or the

amount appropriated by the Legislature, if less than five million

dollars (sometimes referred to as "the cap"). The proposed

amendment to Rule 9K-9.006(2) adds paragraph (d) and awards

evaluation points based on the amount of grant money requested in

an application, as follows: 8 points for a request not exceeding

$1.5 million; 4 points for a request not exceeding $2.5 million;

and 2 points for a request not exceeding $3.5 million. 3 This

proposed rule amendment is sometimes referred to as "the sliding

scale."

8. It is common for grant programs to adopt a "cap" on

awards. The FCT's proposed "cap" took into account recent and

expected future legislative appropriations, as well as the grant

amounts requested in the first grant application cycle and

expected in the immediate future, with the understanding that the

"cap" could be adjusted by rule amendment in the future if that

became necessary. The purpose of the proposed "cap" was to

ensure that at least two applicants would receive grant money in

each grant cycle.

9. The proposed "sliding scale" was suggested by a

representative of Dixie County at a noticed public FCT meeting.

It was designed promote the use of non-State matching funds and

to help local governments with less resources to compete in the

grant application process. The proposed "sliding scale" was

thoroughly discussed in-house by FCT staff and was discussed by

the FCT governing board before it was approved unanimously.

10. The challenged proposed rules cite Sections 380.507 and

380.5105(2), Florida Statutes, as their statutory authority.

They cite Sections 259.105 and 380.501-380.515, Florida Statutes,

as the specific laws they implement.

11. Section 259.105, Florida Statutes, is the Florida

Forever Act. Some of the funds in the Florida Forever Trust Fund

are designated for distribution "to the Department of Community

Affairs for the acquisition of land and capital project

expenditures necessary to implement the Stan Mayfield Working

Waterfronts Program within the Florida communities trust pursuant

to s. 380.5105." § 259.105(3)(j), Fla. Stat.

12. Sections 380.501-380.515, Florida Statutes, are the

Florida Communities Trust Act, which includes the Stan Mayfield

Working Waterfronts grant program.

13. Petitioner and Intervenor contend that the proposed

rule amendments are not authorized by statute and enlarge,

modify, or contravene the law implemented because they add to the

evaluation criteria in Section 380.5105(2), Florida Statutes.

But it is clear that, besides the two proposed rule amendments

under challenge in this case, the "system of weighted criteria"

adopted in Rule Chapter 9K-9 includes several unchallenged

criteria, in addition to the ones required by the statute to be

given "increased priority." In addition, the evidence was that

evaluation criteria in addition to those to be given "increased

priority" are essential for the "system of weighted criteria" to

function properly to differentiate and rank the most worthy grant

applications. Without additional criteria, it is likely that

many if not all grant applications would get the same score in

the evaluation process.

14. Petitioner and Intervenor also contend that the

proposed "cap" and "sliding scale" result in "increased priority"

not being given to the criteria specified in Section 380.5105(2),

Florida Statutes. Actually, "increased priority" still is given

to the criteria listed in Section 380.5105(2), Florida Statutes.

Rule 9K-9.006(1)(c) gives "increased priority" (ten points) for

the criterion listed in Section 380.5105(2)(a), Florida Statutes.

Rule 9K-9.006(2)(b) gives "increased priority" (ten points) for

the criterion listed in Section 380.5105(2)(b), Florida Statutes.

Rule 9K-9.006(1)(a) gives "increased priority" (ten points) for

the criterion listed in Section 380.5105(2)(c), Florida Statutes.

Rule 9K-9.006(1)(b) gives "increased priority" (ten points) for

the criterion listed in Section 380.5105(2)(d), Florida Statutes.

Rule 9K-9.006(2)(a) gives "increased priority" (ten points) for

15. Petitioner and Intervenor also contend that the

challenged proposed amendments discriminate against grants to

higher-priced properties. They contend that higher prices

indicate higher pressure to convert, larger size, and greater

benefit to the local economy from preservation. They contend

that all of these indicators exist in the case of Intervenor's

Stock Island property--indeed, the Stock Island property is under

relatively high pressure to convert, is relatively large in size,

and would stand to continue to greatly benefit the local economy

if preserved. They contend that discriminating against higher-

priced properties like Intervenor's Stock Island property is not

authorized by statute, contravenes the statutes, and is arbitrary

and capricious.

16. Actually, the challenged proposed rules do not

necessarily discriminate against higher-priced properties. An

applicant can use non-State matching funds to bring a more costly

proposal under the "cap" of the proposed amendment to Rule 9K-

9.003(6), and unchallenged existing Rule 9K-9.006(4)(a) provides

that grant proposals with non-State matching funds score

significant points--far more than would be lost under the

"sliding scale" of paragraph (d) of the proposed amendment to

Rule 9K-9.006(2). In addition, higher-priced projects are

favored by other criteria in parts of the rule and proposed rule

amendments that are not under challenge. For example, points are

awarded for docking facilities, seafood houses, storage areas for

traps, nets, and other gear, and boat ramps. These are more

likely to be attributes of a larger, more expensive property. A

proposed amendment to Rule 6K-9.006(3) significantly increased

the amount of points available for docking facilities, especially

existing usable docking facilities, which are more likely to

exist on larger properties. A grant proposal with these kinds of

amenities and attributes will "blow away in point-scoring" an

application for a smaller grant for a proposal without these

features.

17. In support of their contentions, Petitioner and

Intervenor hypothesize two grant proposals for projects (whether

in the same locale or in different parts of the state) with

identical attributes except for property cost. However, the

evidence was that such a scenario is unlikely. If that unlikely

scenario were to occur, it is possible that the higher-cost

proposal would exceed the "cap" of the proposed amendment to Rule

9K-9.003(6), and the lower-cost proposal would score more points

as a result of the proposed addition of paragraph (d) to Rule 9K-

9.006(2). However, the former scenario would create the desired

incentive to secure enough non-State matching funds to get under

the "cap"; and under the latter scenario, it would make sense to

favor the grant proposal requesting less State money.

18. Petitioner and Intervenor also contend that the

proposed amendments fail to include a provision suggested by

Monroe County to adopt a "sliding scale" for the "benefit to the

local economy" and add other quantifiable criteria on a "sliding

scale" (e.g. , a "sliding scale" to give credit for the capacity

of docking facilities and storage areas) that would give a

greater competitive advantage to a large project like Monroe

County's Stock Island proposal. The evidence was that these

kinds of criteria would be difficult to devise and implement to

achieve the desire result. For example, a large project might

appear to benefit the local economy greatly but actually just

consolidate several different areas of economic activity into one

location. As a result, it was logical for the FCT not to adopt

rules attempting to quantify and score these criteria on a

"sliding scale."

19. The challenged proposed amendments are supported by

logic and the necessary facts, and were adopted with thought and

reason and are rational. The contention that the FCT

thoughtlessly adopted a suggestion by a representative of Dixie

County and ignored suggestions by Monroe County is rejected.

CONCLUSIONS OF LAW

20. The validity of proposed rules can be challenged under

Section 120.56(1)-(2), Florida Statutes. The challenger has the

burden to go forward, but "the agency then has the burden to

prove by a preponderance of the evidence that the proposed rule

is not an invalid exercise of delegated legislative authority as

to the objections raised."

21. The rule challenge raises objections that the proposed

amendments are invalid exercises of delegated legislative

authority, as defined in the following parts of Section

120.52(8), Florida Statutes:

(b) The agency has exceeded its grant of

rulemaking authority, citation to which is

required by s. 120.54(3)(a)1.;

(c) The rule enlarges, modifies, or

contravenes the specific provisions of law

implemented, citation to which is required by

s. 120.54(3)(a)1.;

* * *

(e) The rule is arbitrary or capricious. A

rule is arbitrary if it is not supported by

logic or the necessary facts; a rule is

capricious if it is adopted without thought

or reason or is irrational; . . . .

A grant of rulemaking authority is necessary

but not sufficient to allow an agency to

adopt a rule; a specific law to be

implemented is also required. An agency may

adopt only rules that implement or interpret

the specific powers and duties granted by the

enabling statute. No agency shall have

authority to adopt a rule only because it is

reasonably related to the purpose of the

enabling legislation and is not arbitrary and

capricious or is within the agency's class of

powers and duties, nor shall an agency have

the authority to implement statutory

provisions setting forth general legislative

intent or policy. Statutory language

granting rulemaking authority or generally

describing the powers and functions of an

agency shall be construed to extend no

further than implementing or interpreting the

specific powers and duties conferred by the

enabling statute.

22. The language following the lettered paragraphs of

Section 120.52(8), Florida Statutes (sometimes referred to as the

"flush left" language) is reiterated in Section 120.536(1),

Florida Statutes. It is a "set of general standards to be used

in determining the validity of a rule in all cases." Sw. Fla.

Water Mgmt. Dist. v. Save the Manatee Club, Inc. , 773 So. 2d 594,

597-98 (Fla. 1st DCA 2000). This standard has been held to mean

that

Agencies have rulemaking authority only where

the Legislature has enacted a specific

statute, and authorized the agency to

implement it, and then only if the (proposed)

rule implements or interprets specific powers

or duties, as opposed to improvising in an

area that can be said to fall only generally

within some class of powers or duties the

Legislature has conferred on the agency.

Bd. of Trustees of the Internal Improvement Trust Fund v. Day

Cruise Ass'n, Inc. , 794 So. 2d 696, 700 (Fla. 1st DCA 2001),

clarified on reh. , 798 So. 2d 847 (Fla. 1st DCA 2001). See also

Sw. Fla. Water Mgmt. Dist. v. Save the Manatee Club, Inc. , 773

So. 2d at 599.

23. Petitioner and Intervenor contend that the challenged

proposed amendments to Rules 9K-9.003(6) and 9K-9.006(2) are not

authorized by Sections 380.507 and 380.5105(2), Florida Statutes,

and the specific laws they implement. Rather, they contend that

the proposed rule amendments instead enlarge, modify, or

contravene the specific laws they implement (namely, Sections

259.105 and 380.501-380.515, Florida Statutes).

24. Petitioner and Intervenor contend that the challenged

proposed amendments to Rules 9K-9.003(6) and 9K-9.006(2) enlarge,

modify, or contravene Sections 259.105 and 380.501-380.515,

Florida Statutes, because they add to the list of evaluation

criteria in Section 380.5105(2), Florida Statutes. However,

listing those criteria for "increased priority" implies that

other criteria are contemplated.

25. Section 380.515, Florida Statutes, states: "The

provisions of this part shall be liberally construed in a manner

to accomplish its purposes." It is clear from the evidence that

additional criteria are necessary for the grant program to

function properly. For this reason, Section 380.5105(2), Florida

Statutes, must be construed to allow evaluation criteria in

besides those listed for "increased priority." To interpret the

statute otherwise would lead to an absurd result, which would be

contrary to the accepted rules of statutory interpretation. See

Maddox v. State , 923 So. 2d 442, 445-46 (Fla. 2006).

26. Petitioner and Intervenor contend that, as a result of

the proposed "cap" and "sliding scale" amendments, not enough

priority is given to the criteria listed in Section 380.5105(2),

Florida Statutes. But Petitioner and Intervenor have only

challenged the proposed amendments to Rules 9K-9.003(6) and 9K-

9.006(2); they have not challenged the existing rules and other

proposed rule amendments that give "increased priority" to the

criteria listed in Section 380.5105(2), Florida Statutes; nor

have they requested the initiation of rulemaking under Section

120.54(7), Florida Statutes, for adoption of criteria suggested

by them to improve the "system of weighted criteria."

27. Section 380.5105(2), Florida Statutes, requires that

"increased priority" be given to the listed criteria. It does

not require quantification and scoring on a "sliding scale." A

rule or proposed rule is not invalid because it is not the best

possible rule. See Bd. of Trustees of Internal Improvement Trust

Fund v. Levy , 656 So. 2d 1359, 1364 (Fla. 1st DCA 1995); Dravo

Basic Materials Co., Inc. v. State, Dep't of Transportation , 602

So. 2d 632, 634 (Fla. 2nd DCA 1992).

28. The challenged proposed amendments to Rules 9K-9.003(6)

and 9K-9.006(2) do not enlarge, modify, or contravene Sections

259.105 and 380.501-380.515, Florida Statutes, as properly

construed in accordance with Section 380.515, Florida Statutes.

In addition, by creating an incentive to secure non-State

matching funds, the "cap" and "sliding scale" adopted by the

challenged proposed rule amendments serve to maximize state

resources, consistent with the intent of the Florida Forever Act.

See § 259.041(11)(a), Fla. Stat.

29. The challenged proposed amendments to Rules 9K-9.003(6)

and 9K-9.006(2) are supported by logic and the necessary facts,

and were adopted with thought and reason and are rational.

DISPOSITION

Based on the foregoing Findings of Fact and Conclusions of

Law, the challenges of Petitioner and Intervenor to the validity

of the proposed amendments to Rules 9K-9.003(6) and 9K-9.006(2)

are denied.

DONE AND ORDERED this 30th day of March, 2010, in

Tallahassee, Leon County, Florida.

S

J. LAWRENCE JOHNSTON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 30th day of March, 2010.

ENDNOTES

1/ Unless otherwise indicated, all rule references are to the

Florida Administrative Code.

2/ Unless otherwise indicated, all statutory references are to

the 2009 Florida Statutes.

3/ The proposed rule amendment also states that the "FCT will

not participate in project costs that exceed the grant award

amount." That language is not challenged.

COPIES FURNISHED :

Robert B. Shillinger, Jr., Esquire

Monroe County Attorney Office

Post Office Box 1026

Key West, Florida 33041-1026

Matthew G. Davis, Esquire

Department of Community Affairs

2555 Shumard Oak Boulevard

Tallahassee, Florida 32399-2100

John R. Herin, Jr., Esquire

Stearns, Weaver, Miller, Weissler,

Alhadeff & Sitterson, P.A.

150 West Flagler Street, Suite 2200

Miami, Florida 33130-1536

Liz Cloud, Program Administrator

Administrative Code

Department of State

R. A. Gray Building, Suite 101

Tallahassee, Florida 32399-0250

Scott Boyd, Executive Director

and General Counsel

Administrative Procedures Committee

Holland Building, Room 120

Tallahassee, Florida 32399-1300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled

to judicial review pursuant to Section 120.68, Florida Statutes.

Review proceedings are governed by the Florida Rules of Appellate

Procedure. Such proceedings are commenced by filing the original

Notice of Appeal with the agency clerk of the Division of

Administrative Hearings and a copy, accompanied by filing fees

prescribed by law, with the District Court of Appeal, First

District, or with the District Court of Appeal in the Appellate

District where the party resides. The notice of appeal must be

filed within 30 days of rendition of the order to be reviewed.