1 2 STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS 3 VOLUME 4 PAGES 307 - 419 4 SUGAR CANE GROWERS COOPERATIVE CASE NOS. 92-3038 5 OF FLORIDA a Florida Agricultural 92-3039 Cooperative Marketing Association; 92-3040 6 ROTH FARMS, INC.; and WEDGWORTH FARMS, INC., 7 and FLORIDA SUGAR CANE LEAGUE, INC.; 8 UNITED STATES SUGAR CORPORATION, and 9 FLORIDA FRUIT AND VEGETABLE ASSOCIATION; LEWIS POPE FARMS; 10 W.E. SCHLECHTER & SONS, INC.; and HUNDLEY FARMS, INC., 11 Petitioners, 12 vs. 13 SOUTH FLORIDA WATER MANAGEMENT DISTRICT, an Agency of the State 14 of Florida, Respondent, 15 and 16 THE UNITED STATES OF AMERICA; 17 MICCOSUKEE TRIBE OF INDIANS; THE FLORIDA DEPARTMENT OF 18 ENVIRONMENTAL PROTECTION; THE FLORIDA WILDLIFE FEDERATION; 19 THE FLORIDA AUDUBON SOCIETY, and THE SIERRA CLUB, 20 Respondent-Intervenors. _________________________________/ 21 DEPOSITION OF RONALD T. LUKE, Ph.D. 22 23 ACCURATE STENOTYPE REPORTERS, INC. 100 Salem Court 24 Tallahassee, Florida 32301 (904) 878-2221 25 1-800-934-9090 1 __________________________________________________________ 2 DEPOSITION OF: RONALD T. LUKE, Ph.D. 3 TAKEN AT THE INSTANCE OF: Respondent-Intervenor USA 4 DATE: Friday, March 4, 1994 5 TIME: Commenced at 8:30 a.m. Adjourned at 4:15 p.m. 6 LOCATION: 315 South Calhoun 7 Tallahassee, Florida 8 REPORTED BY: MICHELLE SUBIA Notary Public in and for the 9 State of Florida at Large __________________________________________________________ 10 APPEARANCES 11 REPRESENTING THE SUGAR CANE GROWERS COOPERATIVE, 12 ROTH FARMS, and WEDGWORTH FARMS: 13 CAROLYN S. RAEPPLE, ESQUIRE Hopping, Boyd, Green & Sams 14 123 South Calhoun Tallahassee, Florida 32301 15 REPRESENTING THE UNITED STATES OF AMERICA: 16 KEITH E. SAXE, ESQUIRE 17 United States Department of Justice 601 Pennsylvania Avenue, N.W. 18 Room 879 Washington, D.C. 20004 19 REPRESENTING THE DEPARTMENT OF 20 ENVIRONMENTAL PROTECTION: 21 GARY SMALLRIDGE, ESQUIRE Florida Dept. of Environmental Protection 22 2600 Blair Stone Road Tallahassee, Florida 32399-2400 23 ALSO APPEARING: 24 Lonnie Jones 25 Ronald Lacewell 1 I N D E X 2 3 WITNESS PAGE 4 RONALD T. LUKE, Ph.D. 5 Continued Direct Examination by Mr. Saxe 310 6 7 8 9 E X H I B T S 10 11 NUMBER DESCRIPTION PAGE 12 Luke 10 Printout from Model 342 Luke 11 Plotting of Curve 342 13 Luke 12 Inputs for Model 377 14 15 16 17 18 19 20 CERTIFICATE OF OATH 419 21 CERTIFICATE OF REPORTER 419 22 23 24 25 310 1 PROCEEDINGS 2 The following deposition of RONALD T. LUKE, Ph.D. 3 was taken on oral examination, pursuant to notice, for 4 purposes of discovery, and for use as evidence, and for 5 other uses and purposes as may be permitted by the 6 applicable and governing rules. And reading and signing 7 is waived. 8 * * * 9 10 Thereupon, 11 RONALD T. LUKE, Ph.D. 12 was called as a witness, having been previously duly 13 sworn, was examined and testified as follows: 14 CONTINUED DIRECT EXAMINATION 15 BY MR. SAXE: 16 Q Dr. Luke, before the lunch break we were 17 talking about direct filtration. Would you describe for 18 me please the micro-filtration alternative that you 19 analyzed. 20 A Okay. Micro-filtration as it's been 21 explained to me is a process that utilizes hollow fibers 22 and chemical -- and I can't speak technically to you 23 exactly about what the chemical does -- but in effect it 24 in the process abstracts the -- bonds with the 25 phosphorus. And then the water actually precipitates 311 1 through the wall of the fiber. 2 And every once in a while, they blow air 3 through this bundle of fibers. And that allows the 4 process to continue. And the micro part of it -- I 5 believe it refers to the micro pours in the fiber -- but 6 this works with relatively small scale installation, 7 economically with relatively small scale installation. 8 So that the strategy in micro-filtration 9 starts from the proposition that the phosphorus content 10 of water draining off of farm land in the EAA is not 11 homogeneous, that there are what have been referred to as 12 hot spots. 13 As a simple for instance, vegetable lands or 14 land that has in the past been used for vegetable lands 15 all else equal is likely to generate more phosphorus 16 runoff than land that has been consistent in sod and 17 sugar cane. 18 And so the idea is that if we are aiming at 19 a target reduction in tons per year of phosphorus, that 20 it may be more economical to treat less water but to 21 treat that water which is at higher concentration of 22 phosphorus. 23 Q Does micro-filtration involve the 24 construction of plants for this? 25 A Right. Although they are in scale 312 1 relatively smaller. But they have about a 540 acre pond 2 associated with them. 3 Q What is the source of information for that 4 540 acre figure, is that Dr. Shannon? 5 A It is. 6 Q Was that written communication or written 7 material? 8 A I believe that you will find in the 9 documents we produced to you yesterday but in the 10 February production memoranda from Shannon to RPC that 11 are extracts from some other of his documents. But he's 12 a CH2ML engineer type, and he is our source of written 13 and oral information on this alternative. 14 Q And the data that you've used in analyzing 15 economic impacts for that alternative is contained in 16 that material that was produced? 17 A Yes. Where I was headed -- I haven't really 18 quite described the situation to you here. The numbers 19 that are shown in Exhibit 2 assume treatment of 11 hot 20 spots to remove a total of about 100 tons a year. 21 And whether those would be individual farms 22 or collections of farms, suffice it to say that it would 23 be treatment of substantially less than all of the water 24 coming out of the EAA drainage works. But it would be 25 spread over the EAA basins such that the water quality 313 1 standards would be achieved. 2 Q What would happen if the pattern of land use 3 that was tributary to those plan locations change? 4 A I guess it would depend upon how it changed 5 and how that affected your ability to route the water 6 from the new hot spot to the existing plan. 7 Q If other spots got hot and those hot spots 8 got cool, what would be required for the continued 9 efficacy of that technology? 10 A Dr. Shannon is your best source on that. I 11 don't know. 12 Q Did you factor in your economic impact 13 analysis any costs that might be associated with moving 14 hot spots in the EAA because of change in land use? 15 A No, I didn't. The general impression that I 16 get -- and again I would refer you to him if you want to 17 talk about the technology of it -- is that hot spots are 18 lands that are or have been vegetable lands and that if 19 you were really trying to maximize the efficiency of this 20 technology that what you would do is work with the 21 growers to shift the vegetable production in a way that 22 allowed you to treat the -- I won't say least amount of 23 water -- but to get an awful lot of phosphorus out of a 24 relatively small amount of water. 25 Q In your economic impact analysis, did your 314 1 analysis assume that these hot spots once identified 2 would be the locations for the micro-filtration 3 facilities and that those would not move during the study 4 period? 5 A Yes. And when you say that the hot spots 6 would be the location, again I want to be very clear, I'm 7 not telling you that I know from an engineering 8 standpoint whether you would locate it at the downstream 9 corner of that farm or whether there is a juncture of 10 drainage canals. 11 Q Sure. But you did assume that once you 12 located the plans you wouldn't move them in the study 13 period? 14 A They are not mobile. They are fixed. 15 Right. 16 Q Are the costs of land acquisition for these 17 plans also included in the materials that you received 18 from CH2ML? 19 A You know, I don't recall. But what we used 20 were the same costs of land acquisition as were used for 21 the STAs. 22 Q Are those uniform throughout the EAA to your 23 knowledge? 24 A I believe they vary somewhat. But we've 25 been consistent in our treatment of land acquisition 315 1 costs across the alternatives. 2 Q So then would it be fair to say that one of 3 the assumptions in your analysis of the micro-filtration 4 alternative is that they would be located on lands of 5 similar market value as those proposed for the locations 6 of the STAs in the SWIM Plan? 7 A It would be fair to say that I think on the 8 average. But it's not essential to the analysis that it 9 be true for each plot. 10 Q Okay. In your analysis of the 11 micro-filtration alternative, what were the assumptions 12 about the timing by which costs were incurred for 13 construction and operation? 14 A They can be done in one year. And the 15 assumption is that they would be done in 1996. 16 Q Okay. If we could turn to Exhibit 2, Page 8 17 I believe it is. 18 A The one that is numbered 8? 19 Q Well, it's actually one that has a very 20 faint handwritten 8 I think in your hand at the bottom of 21 the page. It may not even be visible on the copy. 22 A Yeah. 23 Q At the top it says, "Calculation of annual 24 total financing requirement for phosphorus reduction 25 alternatives." 316 1 A Yeah. It looks like a 7 to me, but we are 2 on the same page. 3 Q Okay. I'm sorry. Could you describe to me 4 generally how these figures were derived taking it from 5 the top. 6 A I think I already have. 7 Q You think we've already gone through this? 8 A Yes. 9 Q All right. Let me ask you some specific 10 questions. Going down the operating expenses line toward 11 the very bottom right above "total." 12 A Right. 13 Q Is the assumption in this analysis that the 14 operating expenses are incurred each year beginning in 15 the first year of the study period? 16 A I believe they are incurred in the first 17 year in which the projects are in operation. So if they 18 take multiple years to construct, the operating cost 19 would occur in the year following completion of 20 construction. 21 Q Would it then be the case that what's listed 22 on the total line doesn't reflect the actual annual costs 23 for each year in the study period but only for those 24 years in the study period when that particular 25 alternative technology is in operation? 317 1 A Right. 2 Q Can the construction costs for each of these 3 alternatives be adjusted in your model? 4 A In what way? 5 Q Are they user selectable? 6 A It depends on what you mean by user 7 selectable. There is a cost block for each one of them. 8 And if you went into the data files of the model, you 9 could certainly adjust them. 10 Q So there wouldn't be a prompt when you are 11 running the model? 12 A No. 13 Q How about the timing of the incurring of the 14 costs? 15 A Again, you would have to adjust the block 16 within the spreadsheet to do that. But, you know, there 17 is nothing particularly complicated about that. You 18 might need to make some inflation adjustments if you were 19 going to move it around. 20 Q Can the operating cost be phased in over 21 time in the RPC model or in your model? 22 A Well, those are supplied by the user for 23 each year. So that you could I guess conceivably put 24 anything in there that you wanted to. 25 Q For the micro-filtration alternative, are 318 1 the acres required for plant construction -- I think you 2 said five hundred and some odd acres per site. 3 A Yes. 4 Q Are those taken out of production in your 5 analysis? 6 A Yes. 7 Q Dr. Luke, I would like to ask you some 8 questions now about the community fiscal socioeconomic 9 impacts analysis. 10 A Okay. 11 Q And I think probably the best place to start 12 would be to get your own designation of the appropriate 13 way to refer to the other kinds of impact analysis that 14 were performed beyond the direct and indirect and induced 15 economic impact analysis that we've already discussed. 16 I think you testified earlier that the model 17 name or the module name in the model for that was the 18 municipal model. I think I've heard you refer to it as 19 community impacts. But I want to avoid mixing my 20 metaphors here. So if you could tell me what -- 21 A Okay. Do you have the memorandum we gave 22 you with instructions for running the model handy? 23 Q This might be the February -- I'm not sure. 24 Take a look at that. This might be an older version or 25 maybe not even what you are referring to. 319 1 A No. This I believe should be it. In this 2 memorandum, we have referred to several different modules 3 or models, one being the farm level model, one being the 4 land and production model, one being the economic impact 5 model for states, counties in the EAA, one being the 6 economic and fiscal impact model for cities. 7 And so I don't know that we've given you a 8 clean set of names in here. But what I would be inclined 9 to talk about is a fiscal impact model for local 10 government in the EAA. 11 Q Would that include population impacts? 12 A No. That's computed up at the economic 13 impact -- in terms of the way we have organized our 14 spreadsheets, that's completed up at the economic impact 15 model. 16 Q Would you consider that to be part of 17 economic impact analysis or more a part of something 18 else? 19 A If you are talking in terms of the 20 literature, that would probably technically be considered 21 a demographic impact analysis. 22 Q Okay. What would business impacts, loss in 23 number of businesses, migration of businesses, things 24 like that, what would that be considered a part of, also 25 demographic impact analysis? 320 1 A No. I would think if you were looking at it 2 at an aggregate level that it would be part of the 3 economic impact analysis. 4 Q But it is distinguishable from the 5 employment impacts that we talked about earlier in the 6 context of direct, indirect and induced impacts of SWIM; 7 is that correct? 8 A Well, yeah. Those are different variables 9 or indicators. But if you go to the literature on 10 economic impact analysis, you could have a list of a 11 dozen or more variables of measurements of economic 12 activity that would all be properly and usually 13 considered part of an economic impact analysis. 14 You may not address all of those indicators 15 in every economic impact analysis. 16 Q Okay. You've also indicated that impact on 17 property values should have been evaluated? 18 A Right. 19 Q By the district. Is that part of economic 20 impact or is that part of socioeconomic impact? 21 A We have computed that as part of -- we are 22 using that to go into the fiscal calculations so that we 23 have incorporated that into the fiscal impact analysis. 24 Q How about local tax impacts? 25 A That would be in fiscal. 321 1 Q And public services and facilities impacts? 2 A That would be in fiscal. 3 Q Crime impacts? 4 A That is not -- that's something that we are 5 expressing opinions on, but there is -- that's not done 6 in the spreadsheets. 7 Q Did you analyze crime impacts? 8 A Yes. 9 Q Okay. Did you quantify crime impacts in any 10 way? 11 A No. Other than directionally to say that I 12 believe that the condition of economic stress will tend 13 to raise the crime rate. 14 Q So it's more of a qualitative analysis? 15 A Right. Social impact analysis are. 16 Q I'm sorry. Social impact analysis? 17 A Right. 18 Q Okay. So then crime impacts would be social 19 impact analysis; is that correct? 20 A Yes. 21 Q And that's distinguishable from fiscal 22 impact analysis? 23 A Right. Fiscal you might be looking at the 24 number of policemen or the number of jails. But with 25 crime you are really looking more at the social aspects 322 1 of that. 2 Q And domestic violence again is social 3 impact? 4 A Yes. 5 Q Self-esteem, social impact? 6 A Yes. 7 Q Let me clarify that. Self-esteem would be 8 considered a social impact? 9 A That's right. 10 Q Self-esteem impacts would be a social 11 impact? 12 A Yes. 13 Q Family impacts would be a social impact? 14 A Yes. 15 Q Water supply impacts? 16 A Water supply as a municipal water supply, 17 that would be in the fiscal impact area. 18 Q Flood control impacts, would that be fiscal 19 impact? 20 A I'm sorry. Let's back up. I think you are 21 coming up with a list I gave you of areas that need to be 22 analyzed. And in terms of the general water supply, 23 flood control and so forth, we have not attempted in the 24 model or outside of the model to do a flood control or 25 water supply or recreational analysis for the entire area 323 1 within the SWIM Plan or the EAA. 2 Q But it is your position, is it not, that the 3 district was required to do so in order to comply with 4 the Marjory Stoneman Douglas Act and the SWIM Act 5 pursuant to guidance that is exemplified in the federal 6 principles and guidelines; is that correct? 7 A That is correct. 8 Q But it's not impact analysis, is that what I 9 understand you to be saying? 10 A You would certainly use the quantification 11 of the impacts of various project elements on those 12 factors as part of your impact analysis. They also form 13 part of the cost benefit analysis, and they also form 14 part of the description of the alternatives or evaluation 15 of the alternatives leading to selection of a strategy or 16 selection of an alternative plan. 17 Q Well, what part of the impact analysis would 18 they form a part of? You've indicated they formed a part 19 of -- and we've identified economic, social, fiscal and 20 demographic. 21 Is there another category of impact analysis 22 that the flood control effect or consequences would fit 23 in or is it categorized by itself? 24 A I guess environmental would be another one. 25 Q So this would be an environmental impact? 324 1 A Your question as I understood it was what 2 other categories of impacts could flood control cover. 3 And my answer was environmental. 4 Q Okay. Let me restate the question. The 5 kinds of impact analyses that the district was required 6 to perform in your opinion pursuant to the public 7 interest requirement of the Douglas Act, the SWIM Act as 8 you've testified to it and the guidance provided in the 9 federal principles and guidelines includes in your 10 opinion a number of different types of impact analyses; 11 is that correct? 12 A I don't know. When you say "types," 13 certainly it requires an analysis of a fairly 14 comprehensive list of impacts. 15 Q Of impacts? 16 A Yes. 17 Q Okay. And some of these impacts can be 18 grouped under the rubric of economic impact and analyzed 19 through economic impact analysis; is that correct? 20 A Well, when you say "analyze through economic 21 impact analysis," I don't know that economic impact and 22 analysis is a methodology. 23 You can analyze it through simulation 24 modeling, which is what we've done. You could analyze it 25 through other kinds of techniques. 325 1 Q My question didn't say it was a methodology. 2 I said it could be analyzed through economic impact 3 analysis. 4 A Well, unless you were trying to identify 5 something called economic impact analysis as a 6 methodology. I don't know what you mean when you say 7 "analyze through." 8 Q Okay. So there are certain types of impacts 9 then that are just best understood as nothing more than 10 types of impacts that should be analyzed? 11 A Yes. 12 Q Flood control effects or consequences would 13 fit into that category? 14 A Yes. 15 Q Health and safety? 16 A Yes. 17 Q Recreation? 18 A Yes. 19 Q Fish and wildlife? 20 A Yes. 21 Q Maybe these are miscellaneous impacts? 22 A No. These are categories of costs and 23 benefits and hence impacts that are specifically 24 recognized within multi-objective water resources 25 projects. 326 1 Q What is the scope of the relevant study area 2 or region that applies for the population impact analysis 3 that the district should have performed in your opinion? 4 A Are you speaking for the entire SWIM Plan or 5 are you speaking of an element of the SWIM Plan? 6 Q In your opinion, is the district only 7 required to do these impact analyses and cost benefit 8 analyses for an aspect of the plan? 9 A I assume that ultimately they must do an 10 impact analysis for the whole plan. 11 Q Okay. In order to comply with the federally 12 accepted standards and principles and state law 13 requirements applicable to the water resource product 14 described in the SWIM Plan in your review, what would the 15 appropriate scope of the population impact analysis be 16 for the district to have performed? 17 A For the SWIM Plan as a whole? 18 Q Yes. 19 A All right. It would be the general impact 20 on population within the area covered by the SWIM Plan 21 which is in effect Florida, south of Lake Okeechobee and 22 whatever the western boundary is over there. I don't 23 have a clean name for that. But the area within the 24 district that they are responsible for. 25 Q The entire South Florida Water Management 327 1 District? 2 A Right. Well, that goes as I understand it 3 up into Kissimmee. And there is a separate SWIM Plan for 4 that. 5 Q How about for just the BMPs and STAs 6 program? 7 A Well, if I could finish that answer first. 8 And then I think they would have to look at areas, 9 smaller areas within their general study area where there 10 were either more pronounced impacts, growth or declined. 11 And they should also look at populations of special 12 concern within that study area. 13 Q You asked me to qualify my question or asked 14 me if I would qualify it when I initially launched it 15 with respect to whether I wanted you to answer a question 16 concerning the appropriate study area for the entire SWIM 17 Plan or just some portion of the SWIM Plan. And your 18 answers I assume responded to that qualified question. 19 I'm not going to pursue the question with 20 that qualification. Instead let me ask you this: In 21 your opinion, is the SWIM Plan defective because the 22 water management district did not properly consider 23 impacts on population? 24 A Yes. I believe that's one of the defects. 25 Q Why? 328 1 A Because I believe that in doing this kind of 2 system level water resources planning, any rational plan 3 would have to consider the impacts on human needs. 4 Q Any populations in particular? 5 A I think that as part of the scoping what you 6 do is you would talk about the impacts, some very general 7 impacts on the population as a whole. For instance, are 8 the actions going to constrain or accelerate population 9 growth in the area. 10 I think then within that there are going to 11 be populations of special concern either because elements 12 of the plan will impact them disproportionately to the 13 average resident of the district or populations of 14 special concern because they are believed to be a 15 vulnerable or otherwise protected part of the population. 16 Q Dr. Luke, my question asked whether there 17 were any particular populations that the district in your 18 opinion should have studied population impacts or impacts 19 on. And I'm not looking for the methodology by which in 20 your opinion they should have determined what those 21 populations were. I'm asking you within your opinion are 22 there such populations? 23 A Yes, there are. 24 Q Okay. What are those populations in your 25 opinion? 329 1 A Okay. In tiers there is the entire 2 population and then there is some -- 3 Q Entire population of what? 4 A Of the district. And there is some level of 5 study that needs to be -- an impact analysis that needs 6 to be devoted to that. Within that then in smaller 7 populations there is the Native American population. I 8 think that another group is the migrant farm worker 9 population that should be given some particular study. 10 I think that also within the kind of 11 focussed attention that the EAA has received, that it 12 should be studied separately from the -- the population 13 should be studied separately from that of the district as 14 a whole or Palm Beach County. 15 Q Did you study population impacts on those 16 populations that you've just mentioned? 17 A I looked at the impacts of the various 18 phosphorus reduction alternatives on the population in 19 the EAA. 20 Q Only? 21 A Right. 22 Q Why did you exclude those other populations 23 from your analysis? 24 A I defined a study area of the EAA as that 25 which was likely to be most significantly affected by the 330 1 various phosphorus removal alternatives. And I would -- 2 again, I'm not trying to write a SWIM Plan. I'm trying 3 to choose an appropriate study area for evaluating a 4 series of actions that affect population on a much 5 smaller scale than the entire SWIM Plan. 6 Q But in your opinion, the district shouldn't 7 have limited its population impact analysis the way you 8 did; is that correct? 9 A Right. Because they were doing something 10 entirely different. They were supposed to be writing a 11 SWIM Plan. I wasn't supposed to be writing a SWIM Plan. 12 Q Okay. And what is the methodology you used 13 in quantifying or analyzing population impacts? 14 A Basically what I used was a functional 15 relationship between loss of jobs and out migration. I 16 did not do a complete and comprehensive population or 17 demographic model. 18 Q Is population impact out migration and in 19 migration of population from and to a study area? 20 A Well, that's one measure of population 21 impact. That's not the only measure. 22 Q Tell me how you would measure population 23 impact? 24 A For what purpose? 25 Q For purposes of doing an adequate population 331 1 impact study. 2 A Adequate for what purpose? 3 Q Tell me how the district should have done a 4 population impact study. 5 A For the SWIM Plan as a whole? 6 Q You've testified that the district should 7 have done a population impact study for the SWIM Plan; is 8 that correct? 9 A Yes. 10 Q How should they have done it? 11 A For the SWIM Plan as a whole, it's my view 12 that the district should have developed an economic 13 demographic model to assist them in projecting likely 14 future population of the area, of the various areas. And 15 in doing that, they could certainly use that which has 16 been developed by the state in its office of 17 comprehensive planning. 18 In addition to that, county level modeling 19 over the multi-county area, they should have identified 20 the characteristics of the population. And this would go 21 to age, sex, levels of education, the normal thing one 22 finds in a demographic base line, some of the things that 23 we've shown in the base line tables. 24 And where they have identified that there 25 could be populations of special concern or where there 332 1 could be sub-county impacts on population that appears 2 significant, then they need to go in and look 3 specifically at those special populations and what the 4 expected impacts on them are, both as to their 5 demographics and other factors. 6 And where necessary do a sub-county analysis 7 of the likely movements, changing composition and other 8 impacts upon those populations. There are a variety of 9 techniques that can be used to do that. 10 Q Okay. Independent of the variety of 11 techniques, is there anything else that they should have 12 done under the federally accepted principles and 13 guidelines and the state law requirements in your view 14 for the SWIM Plan? 15 A Should have done? 16 Q Yes. That's the question. 17 A That's a very broad question. Are you sure 18 that's what you mean? 19 Q In terms of the population impact piece. 20 Excuse me. Thank you. 21 A Again, depending upon what you found with 22 the initial kind of base lining and in the initial 23 analysis, there can be special issues which come to light 24 that would cause you to go back and do additional kinds 25 of supporting studies. And I of course can't list all of 333 1 those since the threshold study was really not done. 2 Q Do you have any sense of any that might be 3 likely in your opinion in this case? 4 A In this case I certainly think the impacts 5 upon the Native Americans, I think that the impacts upon 6 the seasonal and migrant farm workers and the impact upon 7 the population of the EAA would be the ones that I'm 8 aware of that merit special study. But again, I would 9 say that there may be others that I'm not aware of. 10 Q But at least those in your opinion would 11 likely have been required of the district from the 12 standpoint of analysis for the district to comply with 13 the requirements under state law and federally accepted 14 principles and guidelines, correct? 15 A Correct. 16 Q Do you have an estimate of how much -- what 17 the cost would have been to perform that analysis? 18 A It's hard to say because that analysis would 19 not have been performed in isolation from the overall 20 planning effort. And so I'm not sure that I can give you 21 any meaningful estimate of kind of what that would have 22 added to the planning. 23 Q In this context, in the context of the SWIM 24 Plan as you are now familiar with the populations through 25 your own analysis, the economies of the EAA and of the 334 1 local area and of the state through your analyses and in 2 the context of doing the full plenum of analyses that 3 you've described as required of the district for the SWIM 4 Plan, do you have any rough estimate as an expert of what 5 it would have cost to do the population piece? 6 A Not what it would have added to an overall 7 plan, no. 8 Q No ball park estimate of whether it would 9 have required a man week or two person weeks or a person 10 day? 11 A No. 12 Q So is it fair to say you have absolutely no 13 idea what it would have cost? 14 A It would depend upon what the rest of the 15 planning process looked like and how it was being 16 conducted. 17 Q Let me reexpress the question. As you 18 believe in your opinion the planning process should have 19 looked like in this instance, what would it have cost, 20 this piece? 21 Of course what I'm asking you to do is to 22 think back over the list of elements that you described 23 as required for this analysis and in your professional 24 and expert judgment put a rough quantitative tag on it 25 and then multiply it by the cost of those services and 335 1 come up with a cost. 2 A Well, the problem is is that if you are 3 doing all of the other things in terms of demographic, 4 economic, fiscal, engineering studies and so forth, I'm 5 making assumptions that other work is being done and is 6 not being sort of charged against the demographic budget, 7 if I could put it that way. 8 Q Sure. That seems appropriate. 9 A Okay. I think if you had a truly 10 comprehensive planning effort going on, I would say you 11 would be talking somewhere between perhaps two to five 12 months of professional time. 13 Q Now, that's for the population impact piece 14 or is that for other pieces as well? 15 A No. You were asking me about the 16 demographic analysis, and that's what I'm answering. 17 Q Okay. Thank you. In your analysis, how did 18 you translate employment loss into the quantification of 19 in migration and out migration? 20 A What we did was we looked at net employment 21 as a starting point and basically did a function that 22 said the maximum decline is 30 percent and used a 23 population to employment ratio and in effect an 24 exponential function to approach the 30 percent as things 25 decline. 336 1 MR. SAXE: Could you read that answer back, 2 please. 3 (Requested portion read.) 4 BY MR. SAXE: 5 Q What was the population for employment 6 ratio? 7 A I don't recall. 8 Q How was it derived? 9 A Taking the base line population and dividing 10 it by the base line of employment. 11 Q When you say "used an exponential function 12 to approach 30 percent," what does that mean? 13 A It means that we basically drew a line that 14 said that the rate of out migration due to employment 15 loss is not a constant, that you can in effect have some 16 employment loss and it will not immediately generate 17 population loss. But as the employment loss accelerates, 18 then the population does begin to move out. 19 Q I'm sorry. Is that based on an equation? 20 A Yes. We put an equation into the model to 21 translate employment loss and populations. 22 Q And where did that equation come from? 23 A It's basically one that I specified based 24 upon conversations with Dr. Leistritz and the rest of the 25 staff and past experience. 337 1 Q What about your conversations with Dr. 2 Leistritz and the rest of the staff in past experience 3 led you to design that equation or the equation in that 4 particular way? 5 A The 30 percent is -- you get in all areas to 6 a floor that unless the area is just completely 7 devastated and there is no employment around for miles 8 and miles that you are going to have some folks that 9 stick around. 10 And in this case, I guess what I'm saying is 11 that I think there would be a substantial number of EAA 12 residents that would still be there even if there were 13 substantial declines. As far as the exact shape, it's 14 really a quantitative process of what do we think. 15 Q How do you know that the equation isn't 16 linear? 17 A Well, because there has been a fair amount 18 of research on that. The other way to do this kind of a 19 model that is more complicated and we did not choose to 20 use in this is a labor market migration model that in 21 effect sets thresholds of unemployment rates for in 22 migration and out migration. 23 And because you could have some employment 24 gain before you kicked in to any in migration or 25 employment loss before you kicked into any out migration, 338 1 if you use that dynamic, which is a pretty accepted 2 dynamic if you go into larger scale modeling, it would 3 definitely be non-linear. 4 Q Would that alternative methodology that you 5 elected not to use be the one that in your opinion the 6 district should have used had it done this properly? 7 A I don't know that it would have been for 8 looking at the EAA. And the reason that I say that is 9 because of the substantial component of seasonal labor 10 there that is really not contemplated by the employment 11 or unemployment threshold methodology that I told you 12 about. 13 Q How do you know that the equation isn't 14 quadratic, a quadratic function? 15 A That was a judgment that we made. And when 16 you say "how do I know it's not," it is our judgment that 17 this was an adequate specification. We have not taken 18 time serious data or anything else to use to try to 19 estimate it. 20 Q Could it make a significant difference in 21 population impacts if you had used a quadratic equation 22 instead of an exponential equation? 23 A I don't know whether it would or not. I 24 have not tried it. 25 Another way you can do it is you can send 339 1 anyone any job losses that the people associated with 2 those jobs immediately leave the area. In other words, 3 you can take a sort of a maximum population loss number. 4 And the other extreme of course is to assume 5 that no matter how bad it gets nobody leaves the area. 6 And so that's the range of the possibilities. 7 Q And would it be correct to say that what you 8 assumed in your analysis that as a job was lost, as more 9 jobs were lost people left the area at an increasing rate 10 exponentially? 11 A Generally I think you could say it that way, 12 yeah. But I want to be clear. This is something that is 13 an estimate to reflect a past study of this phenomena. 14 But it is not empirically based. There is no 15 representation on my part that it is. 16 Q What was your assumption about the base line 17 population over the 20-year period? 18 A That it would not grow. 19 Q Was there an assumption that it would 20 shrink? 21 A No. It's just held constant. If you look 22 at the EAA population as a whole, that's pretty faithful 23 to what's actually been happening out there at least in 24 the '80 to '90 period. 25 Q And would that assumption about the 340 1 constancy of the base line population, was that also 2 applied to the Native American population? 3 A I didn't look at the Native American 4 population. I'm not aware there is substantial ones 5 within the towns of the EAA. 6 Q How about migrant workers? 7 A We assumed that the cane cutters would be 8 eliminated in favor or of mechanical harvesting. The 9 assumption was that the pattern of seasonal workers would 10 remain pretty much as it is. In other words, it's pretty 11 much a stable economy at this point. 12 A They have planted out what can be planted. 13 There are no other industries. There is no reason to 14 think there will be any others. 15 Q What is your basis on the opinion of no 16 other industries? 17 A Having looked out there, having been 18 involved over the years in looking at the kind of areas 19 that attract economic development and -- I mean I just 20 don't think that micro-soft has really got Belle Glade in 21 mind or the customer service center. 22 Q Have you looked outside the study area in 23 Hendry County? 24 A North of there. 25 Q West? 341 1 A Yeah. But I mean up North, up the lake. 2 Q Uh-huh (affirmative.) 3 A No. I was looking at the EAA. 4 Q In your opinion isn't part of the Hendry 5 County that's part of the EAA but outside the study area? 6 A I think that our definition of the study 7 area by census tracks encompasses the entire EAA. I 8 don't think there is much population on any part of it we 9 didn't pick up. 10 Q If an FTE was filled by two seasonal migrant 11 workers who simply no longer came to the area because of 12 the loss of the FTE position, how would your model work? 13 A It might understate the population. 14 Q Does the study also do employment in your 15 base line? 16 A Apart from my reductions in acreage or any 17 phosphorus removal works? 18 Q In your base line as you analyzed it. 19 A Yes. 20 Q Okay. Is that true on agricultural 21 employments? 22 A It's pretty much true across the board. We 23 did not really see anything that was changing the 24 dynamics. I mean the cane cutters are an exemption to 25 that because they could go away as employment. 342 1 MR. SAXE: Ms. Court Reporter, would you 2 please mark that as an exhibit. 3 (Exhibit 10 marked for identification.) 4 BY MR. SAXE: 5 Q Dr. Luke, I'm showing you what's been marked 6 as Exhibit Number 10. Would you just briefly identify 7 that for the record if you can. 8 A It looks like a printout of some information 9 from our model in terms of some of the inputs. 10 Q When you say "from our model," is this the 11 portion or aspect of the model that deals with this 12 population demographic impact? 13 A It looks like it, yes. 14 Q Could you tell me if that is the equation 15 you were referring to? 16 A Yes. 17 Q There is an equation I think in the middle 18 of that page? 19 A Yes. 20 Q Would you read that into the record? 21 A Yes. "'Y' equals 'a' plus 'b' times the 22 exponent of quantity minus 'c" times 'x.'" 23 MR. SAXE: Would you mark that as an 24 exhibit, please. 25 (Exhibit 11 marked for identification.) 343 1 BY MR. SAXE: 2 Q Dr. Luke, I'm showing you what has been 3 marked as Exhibit Number 11. Could you please identify 4 that briefly for the record? 5 A It looks like a plotting of the type of 6 curve that comes from the equation that we just talked 7 about. 8 Q Okay. Can you tell me where in your 9 production in the materials that you produced one would 10 find the data that equation was run on? 11 A I don't understand the question. 12 Q Well, what is the data that that equation 13 operates on in your analysis? 14 A It's used to convert change in employment 15 and to compute change in population, change in number of 16 businesses and change in property values based upon 17 changes in employment. The independent variable is 18 changes in jobs. 19 Q Right. 20 A And then the dependent variables, it is used 21 for population property value and number of businesses. 22 Q The same equation? 23 A Yes. 24 Q And what's the rationale for that? 25 A The rationale is is that those are all 344 1 interrelated and they are all ultimately driven by jobs 2 and purchasing power. 3 Q Dr. Luke, referring to Exhibit 10 again, if 4 you would. 5 A Okay. 6 Q You've got the only copy there. I would 7 like you to just go through the coefficients of the 8 equation for me and tell me what they represent. 9 A What do you mean "what they represent"? 10 Q Well, let me look at the equation and I'll 11 tell you what I mean. 12 A I mean they are defined there. I don't know 13 what you are wanting more than what is written down. 14 Q What is the significance of the coefficient 15 "a"? 16 A I don't understand the question. 17 Q Why is the coefficient "a" in the equation? 18 A What we are doing is saying that the maximum 19 decline that we are going to assume can occur for the 20 range of employment impacts that we are looking at here 21 -- it would be a 30 percent decline. "A" equals 70. "A" 22 is a constant. Therefore the way we've done this it 23 can't drop below 70 percent of the base line. 24 Q And how about "b"? 25 A "B" is the part that is subject to vary with 345 1 the loss of jobs. And it's 30 percent. 2 Q Can I see the exhibit again for a moment? 3 A Sure. 4 Q And the coefficient "c," that's multiplied 5 in the product as a negative? 6 A Yeah. That's the coefficient that 7 determines the slope of the curve along with the 8 exponential form. 9 Q What would happen if "a" was altered? 10 A I guess it depends how you alter it. 11 Q If "a" was increased? 12 A If "a" is increased, it means that the 13 potential reaction of population property values and 14 number of businesses to decreases in employment or 15 increases in employment is also decreased. 16 If you think of "a" as fixed and "b" as a 17 variable, then you are splitting 100 percent between a 18 fixed component that is insensitive to changes in jobs 19 and a variable component which is sensitive to changes in 20 jobs, if that helps you. 21 Q Thank you. And how about "b," what happens 22 if "b" is increased? 23 A I think I just answered that. 24 Q Did you? 25 A Yes. 346 1 Q Excuse me. 2 A That's okay. 3 Q What conclusions did you draw from your 4 population impact analysis? 5 A My conclusions are that the implementation 6 of the SWIM Plan as -- the implementation of the STAs as 7 proposed in the SWIM Plan would cause a substantial 8 population, net population reduction in the EAA on the 9 order of 6,000 people until the 2,500 compared to the 10 base line and then about 3,800 to 4,000 people from that 11 point to 2013 compared to the base line. 12 Other options for phosphorus removal are 13 likely to generate a smaller impact on the population. 14 Also it's my conclusion -- not based on the 15 model but based on the general analysis -- that the 16 decline in cultivated acres would have an effect on the 17 -- particularly as it related to a decline in vegetable 18 reduction would have an impact on seasonal residents that 19 could disrupt schooling patterns of their children and 20 that that is a special impact on a fairly sensitive 21 population that deserves more study to identify the exact 22 dynamics of that and what mitigation should be attempted. 23 Q Are the impacted populations primarily 24 farmer owner operators? 25 A No. They are primarily low skill, low wage 347 1 minority agricultural employees. 2 Q Do you know about what percent are migrant 3 workers? 4 A It's not something I think that can be 5 answered exactly. But I think a substantial percent of 6 them would be people that are seasonal residents of the 7 area. I guess seasonal residents in the EAA has a little 8 different meaning than on the coast. 9 Q Could you explain the different meaning that 10 seasonal residents has in the EAA? 11 A Yes. I mean these are basically black or 12 Hispanic low income migrant workers, low education 13 migrant workers with darn few options. Because I don't 14 think they would be doing this if they had other options. 15 Seasonal residents on the coast could be 16 defined basically as rather well-to-do people from the 17 North. 18 Q Thank you. Do you know whether Florida's 19 population is presently growing or shrinking? 20 A It's presently growing. 21 Q Do you know how fast? 22 A I've seen the numbers. It is one of the 23 faster growing states in the country. 24 Q Is it faster growing than the national 25 average? 348 1 A Oh, yes. 2 Q Turning to the business impact analysis that 3 you did, would you describe for me please what kinds of 4 business impact analyses in your opinion should the water 5 management district have done to comply with the 6 federally accepted standards and guidelines and state 7 requirements for the SWIM Plan? 8 A I think this goes into areas where one would 9 expect there to be fairly major economic impacts. I 10 would not suggest that there is anything that I'm aware 11 of that would indicate a need to do a detailed business 12 analysis throughout the whole water management district 13 that's covered by the SWIM Plan. 14 I think within the EAA what you have is a 15 situation where you've had for a number of years 16 declining local retail and service sector. They have 17 experienced some decline from the mechanization of sugar 18 cane harvesting. And I think that you are fairly near 19 the thresholds where certain types of businesses in 20 essence close down and are no longer available in the 21 cities of the EAA. 22 I think this in turn has some social impacts 23 on those communities. And I think that as part of the 24 impacts of the proposed actions on the human environment 25 that those would be recognized as some of the social 349 1 impacts that should be examined. 2 Q Could you estimate for me the time 3 requirements -- the cost for the district to have 4 analyzed business impacts for the SWIM Plans sufficiently 5 to comply with the federal principles and guidelines and 6 the state law requirements as you did for the population 7 impact analysis? 8 A I could give you an answer I think with 9 regard to the STAs or alternatives to the STAs. Not 10 knowing what alternatives they would have proposed for 11 hydro-period restoration, I really would have no way to 12 answer that question because I don't know exactly what 13 areas it would have affected or exactly how it might have 14 affected them. 15 If you were just going to look at the EAA 16 impacts and potential business closures and litigation 17 and that kind of thing, you know, I think you are 18 probably talking about a man month to two man months of 19 professional time. 20 Q Okay. And would it be safe to conclude that 21 if the district had performed such analysis for a broader 22 range of alternatives as would be entailed by 23 hydro-period remedial alternatives in your view that 24 those cost requirements would only go up? 25 A No. I don't think it would be safe to 350 1 speculate on that. 2 Q The person month estimates that you are 3 providing me, can you give me what in your opinion would 4 be the appropriate fee to multiply by that unit of 5 measure to get a cost for that service? 6 A Golly, if you are talking about contracting 7 it out to a consulting firm, I think you might use an 8 average for the kinds of things we are talking about, 9 assuming that there is project management of a larger 10 planning project going on, as a very round number $10,000 11 in one month is probably not a bad number. 12 Q Does the district to your knowledge have 13 staff in-house that would have been capable of performing 14 the population impact, business impact, property value 15 impact, local tax impact, public service and facility 16 impact, crime impact, domestic violence impact, 17 self-esteem impact, et cetera that in your opinion the 18 district would have had to perform to comply with the 19 legal requirements? 20 A I am not familiar with their entire roster, 21 but I do know that they have a resource economist on 22 staff. And I believe they have some other social science 23 types there, but I'm not certain of that. 24 But certainly people of the experience, 25 education and one assumes salary levels of the people 351 1 that I have seen at the district would have the 2 capability to do these kind of studies. The Corps of 3 Engineers district office tend to do a lot of this 4 internally using bachelor's and master's level social 5 science types and in some case engineers. 6 Q If the district had only four or five 7 persons on staff capable of the doing this work, I take 8 it what we would have to do to figure out the lapsed time 9 that would be required to complete the analysis would be 10 to take the total number of person months, add them up, 11 divide them by the number of five staff and that would 12 give us the number of months that the project would take? 13 A Only if you assume there are no social 14 scientists out there available to be hired. And if you 15 think that's a problem, I'm sure your assistants can 16 identify the outputs of graduates each year. I mean 17 there are plenty of people capable of doing this kind of 18 work available to be hired. 19 Q But my question is that if they had staff of 20 five, absent going out and and hiring additional 21 personnel capable of doing the work. I'm just asking you 22 about how one would estimate the lapsed time required to 23 complete the project. 24 A I'll let you do your own arithmetic. I mean 25 for this kind of a planning effort for them to try to do 352 1 this kind of a periodic planning effort for just their 2 long-term staff, not staffing but the planning effort 3 would be a real dumb way to manage a -- 4 Q Would it be smart for them to use a 5 consulting firm to do the work? 6 A I would think that it would depend on a lot 7 of considerations in terms of other planning efforts. 8 Consulting firms are one alternative. Some people 9 contract with universities. Some people go out and hire 10 people or use a hybrid of those methods. 11 The Corps of Engineers does this kind of 12 thing all the time. And they use all three methods. 13 Q When you say "does this kind of thing," you 14 mean -- 15 A Environmental assessments and environmental 16 impact statements for various water resources projects. 17 Q Including all of the elements that you have 18 described as required for the water management districts 19 working this case? 20 A That's right. 21 Q Okay. Roughly what would be the analogous 22 person month dollar figure if the district did it with 23 its own staff? 24 A Salary? 25 Q Total, not just salary, the total cost. 353 1 Assume that they had to hire staff to do that. 2 A I don't know their overhead factors. But I 3 mean I think what you are talking about in terms of the 4 staff people to do this, it would average, I don't know, 5 20 to 2,500 a month. I would think it would be 25 to 6 $30,000 a year people to augment the people they already 7 have. 8 Q What is the figure for a person month of 9 service? 10 A Well, I mean if you take 30,000 -- 11 Q Did you say 2,000 to $2,500 for a person 12 like that? 13 A Yeah, I think so. I mean 22 to 25. 14 Q As contrasted with $10,000 for a person 15 month of consulting services? 16 A That's right. 17 Q Okay. Consulting firms are usually going to 18 use somewhere between a 3 and a 4 multiple, gross salary 19 multiple. 20 Q "Gross salary," does that include non-salary 21 benefits, the costs of non-salary benefits and all those 22 things? 23 A No. That's just salary before deductions. 24 Q I see. The business impact analysis that 25 you performed and not the one that the district should 354 1 have performed, could you tell me what methodology you 2 followed in doing that? 3 A I don't think that we have performed 4 anything that I would consider a complete business 5 analysis. Let me start by saying that. Here is what we 6 have done: We have looked at the mix of businesses that 7 are located in the EAA using a variety of public and 8 private data sources. And by "private" I mean some of 9 the Dunn and Bradstreet information that Hazen and Sawyer 10 purchased for the district yellow pages type information. 11 We have reviewed the literature concerning 12 what types of businesses you are likely to find in trade 13 centers of various sizes. A lot of that Dr. Leistritz 14 has done over the years. 15 We looked at some of the trade relationships 16 between the EAA and the rest of Palm Beach County. What 17 do you have in the EAA versus what do people drive over 18 to West Palm for? I mean there are no regional malls in 19 the EAA and there aren't going to be. There are very 20 simple hospitals. And that's all you are going to see 21 out there in my opinion. 22 There are no what one person calls sit-down 23 restaurants in Belle Glade. There is just kind of fast 24 food and the Elk's Club. But there are in Clewiston. 25 One reason is Clewiston is farther from any other place 355 1 to go eat dinner in terms of the restaurant. 2 So what we've looked at is is that this is a 3 declining retail sector. It's not atypical from other 4 small towns or series of small towns located within an 5 easy drive of a metropolitan. And for the most part, the 6 retail businesses are serving a very localized population 7 and are likely to get weaker rather than stronger so that 8 if you take -- they are pretty vulnerable. And if you 9 have a big hit to the purchasing power base of the 10 community, I think you would expect to see some business 11 closures. 12 We have not tried to identify which 13 businesses. We've made a very rough quantitative 14 estimate. But you'll notice that I'm really not relying 15 upon that quantitative estimate for anything because I 16 don't assign a lot of meaning to it. 17 Q Well, what conclusions have you drawn from 18 your analysis that you'll be testifying to at trial, 19 including the one you just gave in response somewhat 20 qualitatively? 21 A It will be a qualitative conclusion. Now, 22 Dr. Leistritz has looked at this from some different 23 perspectives from his North Dakota state 24 responsibilities, and he may be willing to make some more 25 quantitative statements. I have not discussed with him 356 1 kind of what his testimony on this point would be. 2 But I would expect my testimony to be of a 3 qualitative nature. 4 Q And what will your conclusions be? 5 A My conclusions are that this is a vulnerable 6 retail and service sector, and that if to the extent that 7 unnecessary adverse impacts to it can be avoided that 8 that's very desirable because these businesses are 9 sufficiently small, that they play an important part in 10 the social fabric, the community leadership structure of 11 the community, of the various communities and that to the 12 extent that we can we should maintain that structure. 13 Q Any other conclusions? 14 A One could elaborate, but I think that's the 15 thrust of it. 16 Q Well, the elaboration undoubtedly would 17 contain -- to the extent that you will elaborate at 18 trial, could you elaborate for me now. 19 MS. RAEPPLE: Objection. At trial Dr. Luke 20 is going to be responding to questions. He can't 21 sit here today and tell you what questions he is 22 going to be asked. So I don't know on what basis 23 he could tell you precisely what elaboration he is 24 going to provide at trial. 25 MR. SAXE: Okay. I don't want a recitation 357 1 of his trial testimony. I'm asking him for the 2 facts and opinions that he'll testify to at trial. 3 I've gotten the conclusion and I've gotten it 4 framed in a qualitative way that talks about 5 generally how bad it looks. 6 If there are going to be more conclusions or 7 opinions or facts adduced and testified to at 8 trial, that's what I'm trying to find out. That's 9 what this deposition is for. 10 MS. RAEPPLE: Well, again, Dr. Luke doesn't 11 know with any precision the questions he is going 12 to be asked at trial. He could perhaps elaborate 13 on the opinions that he's drawn to date. But 14 whether or not that elaboration is going to be 15 elicited at trial, he has no way of knowing at 16 this time. 17 MR. SAXE: I'm not asking for a prediction 18 of what he'll say at trial. I'm not asking for 19 Dr. Luke's prediction of what he'll say at trial. 20 MS. RAEPPLE: Perhaps I misunderstood your 21 question. 22 MR. SAXE: Okay. I'm asking for the facts 23 and opinions to which he'll testify. If he's only 24 going to be testifying to the conclusion that he 25 just put on the record, that's fine. Then the 358 1 answer is there will be no additional facts or 2 opinions that I will testify to at trial. But if 3 there are, then I'd like to hear them. 4 BY MR. SAXE: 5 Q Dr. Luke, you indicated earlier in your 6 testimony that the equation we referred to in Exhibit 10 7 I believe it was was used by you also to estimate 8 business impacts; is that correct? 9 A Yes. 10 Q Did you draw a quantitative conclusion from 11 that analysis? 12 A As a result of applying the data to the 13 equation, yes, you can make some statement about 14 reduction in the number of businesses. I don't put a lot 15 of confidence in that, but there are numbers that have 16 been produced. 17 Q Okay. Would you tell me please what those 18 numbers are? 19 A Unless we have printed them out here, I 20 can't. They are in the model. They are not printed out 21 in a summary. They are printed out by the model. 22 Q Okay. And the inputs to the model are the 23 same as they were for the population impact, namely 24 employment loss under each of the alternatives? 25 A That's correct. 359 1 Q Do you remember how the impacts compared 2 across alternatives? 3 A It would follow generally the same 4 proportion at impact as the population loss because it's 5 being driven off the same sort of functional 6 relationship. 7 Q Okay. Is it your opinion that retail 8 employment in the EAA is a function of agricultural 9 acreage in the EAA? 10 A Yes. 11 Q And in the absence of SWIM that retail and 12 other businesses in the EAA will remain the same? 13 A Remain the same relative to what point? 14 Q Quantitatively and qualitatively. 15 A The only change that I would see there would 16 be the elimination of the remaining cane cutters. In 17 other words, mechanization of that would result in some 18 further negative effect on some of the retail businesses 19 in the area. 20 Q Did subsidence affect your base line 21 business projections? 22 A At a point in there acreage drops out of 23 production because of subsidence. In that reduction in 24 acreage does ripple through to affect sales and to affect 25 businesses, yes. 360 1 Q With respect to property value, fiscal 2 impacts, tell me if you would what should the water 3 management district have done to estimate property value 4 fiscal impacts in order to comply with the federally 5 accepted principles and guidelines in the state law 6 requirements for the SWIM project? 7 A Okay. Well, as regards to the agricultural 8 land, the way the Florida law works as I understand it is 9 that it is tied to the returns to the land so that it is 10 I think relatively straight forward to compute reductions 11 in property tax payments. 12 Now, within the urbanized areas of the EAA, 13 what you have there is a situation where as you have a 14 reduction in population and business activity income, you 15 have a reduction in the values of residential and 16 commercial properties. And I think there it's possible 17 to estimate a functional relationship that gives a fair 18 approximation of what that would be. You can get higher 19 degrees of precision if you will. 20 Looking at the declines again in some 21 agricultural communities, the notion of a 30 percent 22 decline as being a reasonable guess about the most it 23 could be it would seem to me to be conservative. I think 24 that what we've done probably is a reasonable 25 approximation on the property assessments. I think with 361 1 additional work it could be improved. But for the 2 purposes intended, it's probably an adequate approach. 3 Q The work that you have done then in your 4 opinion would have been sufficient if the district had 5 done it to comply with the federal principles and 6 guidelines? 7 A Vis-a-vis the impact of STAs or some other 8 phosphorus removal project on the EAA then. Again, I'm 9 not speaking about other property value impacts that 10 hydro-period restoration could have because at least one 11 of the major categories of alternatives having to do with 12 change of water management practices in the lower East 13 Coast could have some fairly major impacts on property 14 values and hence on property tax assessments. 15 Q Okay. Are property value impacts something 16 that are measured as an impact onto themselves so to 17 speak as opposed to an impact that's relevant because of 18 the effects it has on property tax revenues for the 19 municipality or some other reason? 20 Q You can look at the statistics both ways. 21 It is an input to a computation on property taxes. It is 22 also to some extent a measure of change in wealth of 23 residents and presumably therefore economic well-being of 24 property owners in the area. 25 Q The 30 percent maximum figure that you've 362 1 mentioned a couple of times, could you tell me more about 2 that. That specific -- let me ask specific questions. 3 Is that in your opinion the maximum 4 population out migration that would likely result from 5 the implementation of the SWIM Plan? 6 A I put that as a floor. I think as a round 7 number estimate that it's probably reasonable for these 8 purposes given the proximity to West Palm. 9 Q When you say "floor," you mean that the 10 population exodus from implementing the SWIM Plan would 11 be at least 30 percent or would be in your opinion most 12 likely approximately 30 percent? 13 A Neither. Not more than. 14 Q Not more than 30 percent? 15 A Right. 16 Q Okay. And that would be the same case with 17 respect to business loss, that the number of lost 18 businesses from implementation of the SWIM Plan would 19 likely not be more than 30 percent of those in the EAA? 20 A That's correct. Based on the kind of 21 acreage losses that we are seeing here. 22 Now, if you do more major acreage losses, 23 additional assessments or what have you, then that might 24 require us to go back and think some more about this 25 because the decision on the 30 percent floor was made 363 1 after we had looked at some runs of SWIM and STAs and had 2 seen the kind of order of magnitude of job losses that 3 appeared to be there. 4 Q Again, when you say "30 percent floor," you 5 mean 30 percent maximum? 6 A Maximum loss. 7 Q Maximum loss? 8 A Yes. 9 Q Okay. And that's also the case in your 10 opinion with respect to the likely drop in property 11 values from implementation of SWIM? 12 A That's right. 13 Q And is that based on the equation that is 14 depicted in Exhibit 10 or is -- 15 A No. The equation in 10 or 11 actually, both 16 of them implement that assumption. 17 Q I got you. The basis of your assumption is 18 -- 19 A Past experience of Dr. Leistritz looking at 20 drops in areas that are experiencing a substantial 21 economic -- 22 Q Do you use total jobs in the EAA as the 23 starting point for your projections? 24 A Measured in FTEs, yes. 25 Q Is your relationship between population and 364 1 assessed value one to one? 2 A We are using the same function. There is no 3 direct relationship between population and assessed 4 value. They are separately computed. 5 Q You derived a population to employment ratio 6 for use in measuring population impacts that was -- 7 A Excuse me. I should be clear about one 8 thing. When we talk about using this equation on 9 property values, we are talking about non-agricultural 10 property values. You might have misunderstood that. 11 Q Is the relationship in your analysis between 12 population and the number of businesses one to one? 13 A Again, we are using the same equation and we 14 are driving at the same independent variable. They are 15 starting at different points, and so I don't necessarily 16 know that there is a constant ratio there. 17 Q Does subsidence affect your base line 18 business projections? 19 A Anything that leads to a withdrawal of 20 acreage from production and hence leads to a reduction in 21 sales, jobs, et cetera will rip along through the model. 22 Q Can you show me where the subsidence effects 23 kick in on the jobs lost as depicted in Exhibit 2? 24 A It's awkward to show it because most of the 25 tables that I've produced here are comparisons between 365 1 the no action and the other runs. So it's the relative. 2 In other words, it's not an absolute statement of number 3 of jobs. 4 On subsidence under "SWIM Plan," if you look 5 at 2,006, which is a point at which even -- I'm looking 6 on the employment page which I think is numbered Number 7 5. Look at 2,006 and you see that the loss of employment 8 in comparison to the base line decreases from a minus 9 2,898 to a minus 2,267. That is showing where the 10 subsidence comes in in this base case. 11 And if you go over to the population, which 12 is numbered Number 9, you'll see in that same year a 13 reduction in the impact of the SWIM Plan from 5,988 to 14 3,813. 15 Q Does the starting point for your population 16 projections include non-agricultural population? 17 A Yes. 18 Q What conclusions did you draw from your 19 analysis of property value impacts? 20 A That the property values in the -- that one 21 could expect that implementation of the SWIM Plan as 22 proposed would result in substantial reductions in 23 agricultural and non-agricultural property values in the 24 EAA. 25 That in turn can be expected to create 366 1 fiscal imbalances in the cities of the EAA making it 2 difficult for them to maintain their levels of social 3 service even after adjusting for any population 4 reductions would either require a decrease on spending or 5 substantial increase or I would say an increase in 6 property tax rates. 7 Q Would require what kind of spending? 8 A A decrease in spending for municipal 9 services or it would require an increase in the property 10 tax rate. 11 Q So that kind of dovetails with your analysis 12 on public services and facilities I take it? 13 A Right. 14 Q You say "substantial reduction is likely," 15 substantial reductions. Can you be more specific, in 16 property values that is. 17 A Well, within the agricultural area, it would 18 be a reduction -- if you look on Page 10, this is the 19 change in property taxes paid by EAA growers. So these 20 are the changes in the agricultural property values. 21 Q So the changes in property value would be 22 proportional to this? 23 A This would be it. 24 Q The one that says "change in property taxes 25 paid by EAA growers"? 367 1 A Yes. 2 Q So each dollar of property tax corresponds 3 to a dollar loss of property value? 4 A No. It's proportionate. It's not 5 absolutely the same. The value of the -- some of this is 6 due to removing land from production. Some of it is due 7 to the reduced residual returns to the owner as a result 8 of the assessments or a result of lower assumed payments 9 from the mills. 10 So that what you have is you have -- for 11 that land which remains in production in private hands, 12 you are going to have a decline proportionate to the 13 decline in profitability because as a market value this 14 land, you know, its highest and best use at the moment is 15 agricultural from an economic standpoint. 16 So it's going to decline proportionately. 17 The property taxes on the agricultural land is levied 18 based upon its production. 19 Q Is there anywhere on Exhibit 2 where you've 20 presented the reductions in the property values per se as 21 opposed to the reductions in property taxes? 22 A No. 23 Q Does your analysis assume that expenditures 24 by cities and counties remains constant? 25 A On a per capita basis it does. 368 1 Q And what is the basis for that assumption? 2 A It seems reasonable to me. 3 MR. SAXE: Off the record. 4 (Discussion of the record.) 5 BY MR. SAXE: 6 Q Do you use total jobs in the EAA as a 7 starting point for your projections? 8 A Yes. 9 Q Measured in FTEs? 10 A Yes. 11 Q In addition to your just general 12 professional judgment, were there any other sources of 13 information that you utilized in reaching your 14 conclusions about property value impacts other than the 15 execution of your equation on job losses and -- 16 A Yes. 17 Q Okay. Could you tell me what they are? 18 A Sure. We have listed for you relatively 19 extensive literature relating to economic decline in 20 communities. And I've reviewed I think pretty much all 21 of that as has Dr. Leistritz. And that was part of our 22 basis for the equation that we came up with. 23 Q Did you do any other analysis other than the 24 running of the equation in Exhibit 10? 25 A I personally did not. In terms of the 369 1 things that he may have considered, you would need to ask 2 him. 3 Q Okay. So is it safe to say that you don't 4 have any other specific opinions about property value 5 impacts other than the ones that you've given me based on 6 the analyses that you'll be testifying to? 7 A It's a little broad. I mean my opinion is 8 that reduction in acreage and production and reductions 9 in profitability of agriculture in the EAA will lead to 10 productions in property value which will translate into 11 reductions in property tax collections and less rates are 12 raised. 13 Now, that's kind of the main opinion. I can 14 envision some questions that somebody could ask about 15 whether that's good or bad for the world, you know, I 16 would have some opinions on. 17 Q Okay. But not that kind of additional 18 elaboration. But if there is analyses that you've done 19 through which you have formulated more specific opinions 20 on particular aspects of that general conclusion, those 21 would be the kinds of things I would like you to address 22 for me. 23 A Yeah. I have nothing of that sort to add. 24 I would point out that we produced a fair amount of base 25 line type information that provides specific statistics 370 1 on municipal finances, property assessments and that kind 2 of thing. And I certainly would consider those part of 3 the bases for the opinion. 4 Q Okay. Thank you, Dr. Luke. With respect to 5 local tax fiscal impacts, what would the district have 6 done in promulgating the SWIM Plan to comply with the 7 federal principles and guidelines, federally accepted 8 standards and the state law requirements? 9 A Well, I think that complying with the 10 Douglas Act in terms of hydro-period restoration, from 11 what I can tell it would be likely to require major 12 expenditures. And it is at least likely that a 13 substantial portion of those expenditures would have to 14 come from the residents of the district, not just the 15 residents or owners in the EAA. 16 And so I think once they had framed the 17 hydro-period restoration alternatives, certainly they 18 should have prepared a funding plan and that ultimately 19 that should translate back into what's it going to do to 20 tax rates or assessments or whatever local funding 21 sources are going to be used. 22 Q And in your view, was there a particular way 23 in which they should have translated that back into local 24 tax impacts? 25 A I think they should have had a funding plan. 371 1 And how they would have translated it back into local tax 2 impacts would have depended upon what funding sources 3 they were using. 4 Q So you are not in a position to say really 5 specifically what type of analysis they should have done 6 or what methodology they should have used to analyze 7 local tax impacts without knowing what the funding plan 8 would have been; is that correct? 9 A I think generally what we are talking about 10 is some sort of a simulation model if you want to 11 category a model. But I think you would have to know the 12 funding plan before you could know with any precision 13 what kind of analysis is necessary. 14 Q Did you analyze local tax impacts in this 15 case? 16 A In this case, we used a little bit different 17 approach. We held the tax rates constant and analyzed 18 the change in fiscal balance of the local governments. 19 It's another way to approach the same issue. 20 MR. SAXE: Ms. Court Reporter, could you 21 read that answer back, please. 22 (Requested portion read.) 23 BY MR. SAXE: 24 Q In other words, instead of trying to 25 calculate what tax rate they would have had to utilize to 372 1 achieve a certain objective, you kept the tax rate 2 constant and determined what happened to the revenues? 3 A Correct. Well, what happened to the fiscal 4 balance, which is revenues minus expenses. 5 Q Did city expenditures exceed revenues when 6 STAs were implemented? 7 A The impact on fiscal balance was negative. 8 So if we assume that they were not generating large 9 surpluses in the base line, then they would either have 10 had to raise -- they would have had to raise their tax 11 rate in order to balance their budgets, yes. 12 Q For example, if revenue and costs of Belle 13 Glade were to decline at a constant rate per capita, how 14 would the fiscal balance change? 15 A Well, if the tax collections declined at a 16 faster rate than the balance would, assuming they started 17 at break even, let's say they just were balancing their 18 budget, and if you've got a small decline in population 19 but you have a substantial decline in property values, 20 then the same tax rate you are going to see your revenues 21 decline faster than your expenditures. 22 Q Are you estimating the relationship between 23 other sources of public revenue and agricultural acreage? 24 A The other sources of revenue tend to be tied 25 more to population size than to agricultural acreage. 373 1 Q Is it correct that population of property 2 values decline at the same rate based on the equation in 3 Exhibit 10? 4 A Yeah. Generally that's true. 5 Q Looking at I guess it's Page 7 -- the page 6 in Exhibit 2 that depicts change in property taxes paid 7 by EEA growers versus no action. 8 A Okay. 9 Q What is the percentage drop in property 10 taxes paid by EAA growers? 11 A I don't know. 12 Q Is it calculable from this data? 13 A Not from the data on this page. But if you 14 took the runs for the -- took the complete runs, you 15 would have a projection of property taxes paid by the 16 growers in the base line. And then you could compute a 17 percentage reduction. 18 Q And how is it that these values reflect 19 changes in property taxes only paid by EAA growers? 20 A It's just a calculation. 21 Q Does it reflect property taxes paid by the 22 population in cities? 23 A No, not in this. Now, we have a total 24 property tax, but it's not printed out. 25 Q Is it part of the analysis that you 374 1 performed that you'll be forming part of your opinions at 2 trial? 3 A Yeah. That's right. And it's produced by 4 the model that we provided to you. 5 Q Do you know how much property taxes in 6 cities decline under the various scenarios or 7 alternatives? 8 A No. What I've given you is change in fiscal 9 balances. 10 Q Where is that? 11 A That's the page that's numbered Page 8. 12 Q Is it before change in population? 13 A In my stack it's right before change in 14 total sales and right after change in employment. 15 Q I'm looking at a page that says "change in 16 fiscal balance by cities." 17 A Right. 18 Q Can you give me an estimate of what it would 19 have cost the district to perform the local tax impact 20 analysis that in your opinion they should have done for 21 the SWIM Plan to comply with the state law requirements? 22 A Not without knowing what the alternatives 23 are at the system level. 24 Q That that's been a general qualifier? 25 A Right. 375 1 Q With respect to the -- just with respect to 2 the stated purposes of the SWIM Plan. 3 A The stated purposes of the SWIM Plan include 4 hydro-period restoration. You mean the elements of the 5 SWIM Plan? 6 Q Yes. Thank you. 7 A I haven't looked at it from the standpoint 8 of all of the elements. But from the standpoint of 9 looking at it for phosphorus removal of the EAA, you are 10 probably talking a man month. 11 Q And how about for the property value of 12 impact analyses? 13 A Well, that would really be part of that 14 because the rates are half a day they get the information 15 from the taxing authorities of the state. 16 Q Okay. So cumulatively for those two 17 together it would have been about a person month? 18 A Right. 19 Q Do you have an estimate of the required 20 increase of the property tax rate to reach fiscal balance 21 in each of the cities? 22 A It could be computed, but I don't have the 23 data all printed out that would allow me to do that for 24 you here today. 25 Q Did you analyze it and form an opinion about 376 1 it? 2 A It is not really a matter of opinion. I 3 mean it is a calculation one can do from the data in the 4 model. And if you accept all the other numbers, then 5 that's just arithmetic. 6 Q I understand that. What you are basically 7 telling me is that I can figure it out myself and using 8 the model I can do that? 9 A Yeah. 10 Q What I'm asking is did you form an opinion 11 or conclusion about what would be the required increase 12 in the property tax rate to reach fiscal balance in each 13 of the cities? 14 A Given the size of the increase, which would 15 be about a half million dollars, for the five cities in 16 the SWIM Plan example once construction is completed, I 17 would see it as being a substantial increase and material 18 increase. 19 But as to being able to cite to you exactly 20 how many mills it would be, I could go to the model and 21 do that. But I don't have that information printed out 22 here today. 23 Q To the best of your recollection or 24 judgment, is it greater than 10 percent? 25 A I would really be speculating to try to 377 1 assign a percentage to it. I believe it's material and I 2 believe it's an impact that the district should have 3 considered prior to the adoption of the SWIM Plan. 4 Q Do you recall the total tax revenues for the 5 five cities in the no action case? 6 A Yes. That's in the materials I think 7 Carolyn gave you at about the lunch break. 8 MR. SAXE: Is it the one with the blue clip? 9 MS. RAEPPLE: It's right here. 10 MR. SAXE: I'm sorry. Is the blue coming 11 back to you? 12 MS. RAEPPLE: I'd like a copy. I don't care 13 which copy I have. 14 MR. SAXE: Sure. Go ahead and take that 15 one. 16 Ms. Court reporter, would you please mark 17 that as an exhibit. 18 (Exhibit 12 marked for identification.) 19 BY MR. SAXE: 20 Q Dr. Luke, I'm showing you what's been marked 21 as Exhibit Number 12. Would you take a look at that 22 document and tell me if you can please identify it for 23 the record? 24 A This is some inputs for the model. And I 25 thought that there was a summary on here of property 378 1 taxes or assessed values for the five cities, but I now 2 do not see that on here. 3 I think it's one of the other stacks. But I 4 think that information has been printed out. The tax 5 rate is on here but not the -- sorry about that. 6 Q Okay. Did you indicate that you analyzed 7 any local revenue sources other than those that you've 8 described so far? 9 A We analyzed them. I believe we elected to 10 model everything but property taxes on a per capita 11 basis. 12 Q What did that entail? 13 A Well, it entailed looking at the various 14 sources of revenues that -- all the Florida local 15 government jurisdictions report to one of the state 16 agencies on standardized financial reporting form. So it 17 is possible to look at their revenues on a consistent 18 basis. 19 And other than property taxes, none of those 20 seem to be driven by any variables that we were modeling 21 other than perhaps population. And so what we elected to 22 do for the non-property tax revenue sources was to assume 23 a constant per capita income to the local governments. 24 Q So that meant as one person out migrated 25 there was what kind of a drop in the revenue for that 379 1 particular category of revenue? 2 A I don't remember. It would be absolute. 3 But it's in the model. The idea is you've got your 4 expenses on a per capita basis. You have most of your 5 revenues on a per capita basis. And then really the only 6 thing that is being affected is the portion of the 7 revenues that comes from property taxes. 8 Q Okay. With respect to public services and 9 facilities impacts, fiscal impacts, in your opinion what 10 should the district have done in analyzing these impacts 11 for the SWIM Plan to comply with the state law 12 requirements? 13 A Okay. Well, again, I'm going to assume that 14 we are talking just about the phosphorus removal 15 alternatives in the EAA. 16 Q Okay. That's fine. 17 A And I think that a modeling of that using a 18 per capita approach is both necessary and sufficient 19 unlike a rapid growth situation. I would not anticipate 20 that anything here would require the addition of capital 21 expenditures, streets, roads, football stadiums, schools, 22 anything like that. 23 So what we are really dealing with is the 24 question of the variable costs of the services. So I 25 think the approach that we've taken is probably adequate 380 1 to address the issues in terms of a fiscal public 2 facilities and services model. 3 Q So you have analyzed this kind of fiscal 4 impact; is that correct? 5 A Yes. And what I'm saying is that we've also 6 analyzed situations of rapid growth in small communities. 7 And often one of the problems there is that the rapid 8 growth generates a need for capital investment. And the 9 small town or previously small town doesn't have the 10 wherewithal to make those capital investments. 11 And that's really one of the main public 12 facilities and services problems you run into. In this 13 case, where we are in an economic client situation, 14 capital investment is normally not required, for instance 15 if a disaster, tornado hits the sewage treatment plant or 16 something. 17 So what we are dealing with here are really 18 the non-capital expenditures, the operating expenditures. 19 None of the per capita analyses is adequate to deal with 20 it. 21 Q Can you tell me more about the methodology 22 other than just that it's a per capita analysis? 23 A I can tell you again that we have 24 expenditure reports for the local governments that are 25 consistent because of filing requirements by the state. 381 1 And so we are able to calculate per capita expenditure 2 levels for each of those local governments. 3 Q Have you produced all the models and 4 algorithms and inputs to those that one would need to 5 reproduce your results in that regard? 6 A Yes. And in the base line tables, you'll 7 find the underlying data about what the per capita 8 expenditures for each of the cities are. 9 Q In your estimation, what would it have cost 10 the district to analyze public services and facilities 11 impacts for the SWIM Plan sufficiently to comply with the 12 state law requirements? 13 A This would have been -- again, limiting it 14 to phosphorus removal in the EAA -- I think this would 15 have been part of the fiscal impact analysis that we 16 spoke of earlier. 17 Q So the one person month would have included 18 the property value impacts, the local tax impacts and the 19 public services and facilities impacts? 20 A Right. To be conservative taking all those 21 together, you might say one to two months, but not a 22 great deal more than that certainly. 23 Q Okay. What conclusions did you reach from 24 your analysis of the impacts on public services and 25 facilities from the implementation of the SWIM Plan? 382 1 A Well, it really goes back to the fiscal 2 balance question. And what I conclude is is that the 3 decline in the economy of the area is likely to create 4 fiscal stress on these five cities that will require them 5 either to tax rates at a time when their people's ability 6 to pay is going down, not up, or that it will require 7 them to curtail their public services. 8 Now, in some cases, their per capita 9 expenditures are relatively high. But that reflects in 10 part their small size, lack of economies of scale, that 11 kind of thing. My personal observat