212

2 STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SUGAR CANE GROWERS COOPERATIVE

4 OF FLORIDA, a Florida Agricultural CASE NOS. 92-3038

Cooperative Marketing Association; 92-3039

5 ROTH FARMS, INC.; and WEDGWORTH 92-3040

FARMS, INC.,

6 and

FLORIDA SUGAR CANE LEAGUE, INC.;

7 UNITED STATES SUGAR CORPORATION;

and NEW HOPE SOUTH, INC.,

8 and

FLORIDA FRUIT AND VEGETABLE

9 ASSOCIATION; LEWIS POPE FARMS;

W.E. SCHLECHTER & SONS, INC.;

10 and HUNDLEY FARMS, INC.,

11 Petitioners,

12 vs.

13 SOUTH FLORIDA WATER MANAGEMENT

DISTRICT, an Agency of the State

14 of Florida,

15 Respondent,

16 and

17 MICCOSUKEE TRIBE OF INDIANS OF

FLORIDA; the UNITED STATES OF

18 AMERICA; and FLORIDA DEPARTMENT VOLUME 2

OF ENVIRONMENTAL REGULATION, and PAGES 212 - 399

19 the FLORIDA WILDLIFE FEDERATION,

20 Intervenors.

__________________________________/

22 DEPOSITION OF RONALD T. LUKE, PhD

24 ACCURATE STENOTYPE REPORTERS, INC.

100 Salem Court

25 Tallahassee, Florida 32301

904/878-2221

213

___________________________________________________________

DEPOSITION OF: RONALD T. LUKE, PhD

9 TAKEN AT THE INSTANCE OF: Intervenor USA

DATE: Friday, March 12, 1993

12 TIME: Commenced at 8:00 a.m.

Concluded at 4:00 p.m.

14 LOCATION: Accurate Stenotype Reporters

100 Salem Court

15 Tallahassee, Florida

REPORTED BY: TERRY WILHELMI, CSR

17 Notary Public in and for the

State of Florida at Large

18 ___________________________________________________________

214

2 APPEARANCES:

REPRESENTING THE FLORIDA SUGAR CANE GROWERS

4 COOPERATIVE OF FLORIDA:

5 DONNA H. STINSON, ESQUIRE

CAROLYN S. RAEPPLE, ESQUIRE

6 Hopping, Boyd, Green & Sams

123 South Calhoun

7 Tallahassee, Florida 32301

REPRESENTING THE SOUTH FLORIDA WATER

9 MANAGEMENT DISTRICT:

10 PATRICK S. COUSINS, ESQUIRE

Popham, Haik, Schnobrich & Kaufman, Ltd.

11 4100 One Centrust Financial Center

100 S.E. Second Street

12 P.O. Box 019101

Miami, Florida 33l3l

14 REPRESENTING THE UNITED STATES OF AMERICA:

15 KEITH E. SAXE, ESQUIRE

U.S. Department of Justice

16 60l Pennsylvania Avenue N.W.

Room 879

17 Washington, D.C. 20004

ALSO APPEARING: Professor Lonnie Jones

* * * * *

215

1 I N D E X

2 WITNESS PAGE

3 RONALD T. LUKE, PhD

4 Continued Direct Examination by Mr. Saxe 216

9 E X H I B I T S

NUMBER DESCRIPTION PAGE

Luke Exhibit 4 Memo to File from Tomlinson 3/3/93 269

12 Luke Exhibit 5 Memo 274

Luke Exhibit 6 Letter from Tomlinson 2/23/93 276

13 Luke Exhibit 7 Letter from Leistritz 10/9/92 279

Luke Exhibit 8 Memo from Leistritz 10/20/92 290

14 Luke Exhibit 9 Memo from Luke 11/5/92 294

Luke Exhibit 10 Letter from Green 11/9/92 296

15 Luke Exhibit 11 Letter from Luke 11/16/92 297

Luke Exhibit 12 Letter from Wedgworth 11/18/92 300

16 Luke Exhibit 13 Memo from Luke 11/25/92 312

Luke Exhibit 14 Key for Equations by Schubert 332

17 Luke Exhibit 15 Memo to File from Schubert 2/15/93 341

Luke Exhibit 16 Call report 2/18/93 345

18 Luke Exhibit 17 Memo to File from Schubert 3/1/93 351

Luke Exhibit 18 Memo to File from Luke 2/11/93 353

19 Luke Exhibit 19 Economic Impacts 20 Year Analysis 359

Luke Exhibit 20 Effects of Prior Rice Culture 364

20 Luke Exhibit 21 Memo from Leistritz 2/16/93 367

Luke Exhibit 22 Response to Hazen and Sawyer report 374

21 Luke Exhibit 23 EEA area definitions 380

CERTIFICATE OF REPORTER 399

216

1 VOLUME 2

2 STIPULATIONS

3 The following deposition of RONALD T. LUKE, PhD,

4 was taken on oral examination, pursuant to notice, for

5 purposes of discovery, and for use as evidence, and for

6 other uses and purposes as may be permitted by the

7 applicable and governing rules. All objections, except as

8 to the form of the question, are reserved until final

9 hearing in this cause; and reading and signing is not

10 waived.

11 * * *

12 Thereupon,

13 RONALD T. LUKE, PhD

14 was called as a witness, having been previously duly sworn,

15 was examined and testified as follows:

16 CONTINUED DIRECT EXAMINATION

17 BY MR. SAXE:

18 Q Good morning, Dr. Luke. I would like to start

19 out this morning by taking a look at the Hazen and Sawyer

20 contract completion report for their economic impact

21 analysis one more time. In the forward of the document,

22 Hazen and Sawyer reported, "This evaluation focused on the

23 potential change in land use likely to occur under the

24 STA's, the BMP's, and the assessments, given the available

25 information from public and private sources." I'll show

217

1 you that statement, it's the statement that I put a number

2 1 next to.

3 In your opinion, was it a sound approach for

4 Hazen and Sawyer to focus on changes in land use?

5 A That's certainly one variable to focus on.

6 Q What would other variables be?

7 A I think we have listed a number in our

8 conversation yesterday. The impacts that flow from that. I

9 do think the change in ownership structure is something

10 that deserves to be addressed.

11 Q So change in ownership structure would be

12 relevant then in an economic impact analysis, independent

13 of any associated change in land use?

14 A That's right.

15 Q Is that the same for a socioeconomic impact

16 analysis?

17 A Yes.

18 Q Would you give me a comparitive definition of

19 economic impact analysis and socioeconomic impact analysis?

20 A I think both terms can be used in various

21 contexts.

22 An economic impact analysis, in my experience,

23 can be used to study the possible economic effects of a

24 change, such as a project, such as some other proposed

25 action. Economic impact analysis is also used to describe

218

1 a study that looks at, for lack of a better term, the

2 contribution that an industry or an activity is making to

3 an area. For instance, there is a series of reports that

4 IFAS does called the economic impact of the blank

5 agricultural industry on an area. There is no change

6 proposed there, but that they are attempting to measure

7 what the contribution -- economic contribution gives to the

8 economy, so there are at least two kinds of economic impact

9 analysis. A socioeconomic -- an economic impact analysis

10 typically focuses on output, employment, may focus on the

11 structural change in the sectors, number of establishments,

12 that kind of thing. Again, depending upon its purpose, it

13 may get into greater detail on various issues.

14 Socioeconomic analysis, in addition to looking

15 at economics, would also look at -- I say would, but could

16 look at demographic, labor market, public facilities and

17 service, land use, housing, fiscal and social variables and

18 dynamics that might flow from a proposed project. I

19 suppose it's possible one could do a full blown

20 socioeconomic impact analysis of an existing industry. I

21 don't know that I have ever really seen one, but

22 conceptually there is no reason you couldn't.

23 Q You included in your list of relevant topics for

24 socioeconomic impact analysis, land use, is that in some

25 way distinguishable from the relevance of land use to an

219

1 economic impact analysis?

2 A It is. One of the things that has been

3 sensitive in some areas is that if you have let's say

4 development of a new large factory that brings a lot of

5 people into the area, that you will have then a demand for

6 addition housing and retail and commercial studies which

7 may result in conversion of land from say an existing

8 agricultural use, and if this is an area that has prime

9 farmland, that may be a policy issue for some folks.

10 Q When you mentioned earlier that land use is one

11 variable in response to this statement in the forward of

12 the Hazen and Sawyer report, in deriving direct and

13 secondary economic impacts, are there any other variables,

14 if you will, that can cause such impacts, other than the

15 change in ownership structure that you have mentioned?

16 A Sure. If you change the production function by

17 changing the inputs, cost of inputs, and where the money

18 that the enterprise takes in is spent, you can certainly

19 change the impacts if you change the revenues of the

20 enterprise. Either through changes in its productivity or

21 changes in the price it receives for its product, you would

22 also change the economic impacts.

23 Q What is the relationship between the change in

24 production function and a change in ownership structure?

25 A Well, there might or might not be one.

220

1 Q Can you give me an example of a change in

2 production function that might be applicable in the EAA?

3 A The BMP's are a change in the production

4 function and the money that previously was -- let's just

5 assume for the sake of this example that we're talking

6 about BMP's which increase operating costs in ways that are

7 not generating additional revenue, in other words, it

8 doesn't generate an increase in productivity, then that's

9 money that otherwise would have been available to the owner

10 of the enterprise, and as to how that would affect the

11 multipliers, we would need to know where the money that was

12 spent on those BMP's was spent. Was it to buy a piece of

13 equipment from Ohio that then was installed on the farm or

14 was it spent on additional labor in the local study area,

15 for a more labor intensive production process. We would

16 need to know kind of where the -- what the feedback now is

17 of kind of the payments to the owners, to know whether on

18 net we had any significant change in the multipliers and,

19 if so, whether they went up or down.

20 Q If one is using an existing multiplier, rather

21 than generating one from raw data, if you select the

22 multiplier that's applicable to the particular industry,

23 would that multiplier still be applicable despite a

24 production -- a change in a production function like you

25 just mentioned of BMP implementation?

221

1 A It's an empirical question. It would depend

2 upon, first of all, how broad the sector definition is that

3 you're using as a multiplier for that sector. It may very

4 well be that it's already averaging a lot of fairly

5 different activities in there and even if you had very

6 precise information on the changes in the EAA, it wouldn't

7 move that multiplier very much. On the other hand, if you

8 had a fairly specific multiplier and you were dealing with

9 fairly major changes in the production function, then it

10 might become undescriptive.

11 An example would be that if you were dealing

12 with a steel manufacturing sector and you went from old

13 technologies to one of the new mini-mill technologies, you

14 may have a very different production function and hence a

15 very different multiplier.

16 Q In the example that you used earlier of BMP's in

17 the EAA, if one were using the RIMS multiplier applicable

18 to the sugar cane industry or sugar production and the

19 relevant jurisdiction, would a change in production

20 function entailed by BMP implementation, cause that

21 multiplier to be no longer applicable?

22 A Well, your phrase no longer applicable, I don't

23 think is appropriate here. Any multiplier that you would

24 use out of a RIMS model and apply it to a very specific

25 activity in the county, it does not precisely describe that

222

1 activity. I mean, because it is inherently an average

2 across a range of activities that are grouped into that

3 sector, okay. So there's nothing to say that you could not

4 continue to use it, what you would be looking at would be,

5 you know, is it a less precise estimate than it was before

6 of what the multiplier effects would be, because all you

7 can possibly get out of RIMS for a specific activity in a

8 county, a specific business, is an estimate, because the

9 multipliers are average relationships, not precise to the

10 ABC Hardware Store.

11 Q In your opinion, is the use of multipliers such

12 as the RIMS multipliers, less desirable in doing economic

13 or socioeconomic impact analysis than creating multipliers

14 from raw data?

15 A It depends. There is no universal answer to

16 that question.

17 Q In a situation where there may be changes in

18 production functions as a result of the proposed action,

19 would it be the case, in your opinion, that the study

20 should be based on a generated multiplier from raw data

21 rather than a multiplier such as RIMS?

22 A I don't think that I really have an opinion on

23 that, because I haven't studied the impact of BMP's or the

24 other proposed actions on the production function of the

25 enterprise enough to form an opinion on whether there would

223

1 be a significant enough change in the cost structure to

2 make one want to go do that.

3 I think on the multipliers, the big issue to me

4 is whether we're going to use multipliers that are

5 appropriate to the economy of the EAA versus multipliers

6 that are appropriate to the economy of Palm Beach County

7 taken as a whole.

8 Q In RPC's discussions with the Co-op thus far

9 about the work RPC might do in preparation for this case,

10 have you proposed to build a multiplier from raw data?

11 A No. That's sometimes referred to as a primary

12 data I.O. model, I have done that, but I have not proposed

13 it here. What has been proposed is to select or create an

14 appropriate multiplier for the EAA, using some combination

15 of the available published secondary data I.O. tables'

16 knowledge about the area and the professional judgment of

17 Larry Leistritz and others.

18 Q In selecting a representative multiplier, could

19 Hazen and Sawyer's use of the Palm Beach sugar multiplier

20 be better than your agricultural multiplier from Okeechobee

21 County?

22 A Could it be better, do you want to define

23 better?

24 Q More accurate in providing an estimate of

25 indirect and induced impacts from the relevant direct

224

1 economic impacts in the area.

2 A I'm not prepared to tell you that it couldn't

3 be. I would tell you that Dr. Leistritz had those both

4 available and based upon his review of the situation and

5 his knowledge of input/output analysis, he felt like of

6 those two alternatives, that he was more comfortable in

7 that October estimate using the Okeechobee County

8 multiplier and, I mean, I defer to his judgment on that.

9 Q You describe some differences between economic

10 impact assessment and socioeconomic impact assessment,

11 would it be correct to say that what Hazen and Sawyer has

12 undertaken in the 10 year study is not a socioeconomic

13 impact assessment?

14 A It would be correct to say it is not a complete

15 socioeconomic impact assessment. What it has undertaken by

16 subject matter certainly would be part of a socioeconomic

17 impact assessment.

18 Q Did Hazen and Sawyer analyze demographic

19 impacts?

20 A Not really. There may be some descriptive

21 information in there about the size of the populations, but

22 there's no demographic forecast.

23 Q As you use public service impacts in your

24 description of socioeconomic impact analysis, did Hazen and

25 Sawyer undertake a public service impact assessment as part

225

1 of this project?

2 A No, I don't think so. There is a little

3 discussion about job training programs, at least in the

4 draft final, but not any kind of comprehensive review.

5 Q As use the term social impacts in describing

6 what distinguishes a socioeconomic impact analysis from

7 economic impact analysis, did Hazen and Sawyer undertake to

8 analyze the social impacts in this project?

9 A I don't think they did, no.

10 Q As you use the term land use effects as

11 distinguishable in a socioeconomic impact analysis from its

12 use in an economic impact analysis, did Hazen and Sawyer

13 undertake to analyze those effects in this project?

14 A Apart from the direct land use effects, I don't

15 think they did. I would add that in this particular case,

16 since we are dealing with more an economic shrinkage than

17 an economic expansion, I personally would not have gone

18 into any great detail on secondary land use impacts,

19 because I wouldn't really expect to find any. That's

20 typically something we have done more in economic growth,

21 economic development scenarios.

22 Q So then would I be correct in understanding you

23 to say that of your list of types of impacts or effects

24 that are analyzed in a socioeconomic impact analysis but

25 generally not in an economic impact analysis, Hazen and

226

1 Sawyer made no significant analysis of any of those

2 elements in this project?

3 A I'm not sure I can diagram that sentence very

4 well.

5 Q I'll restate it. Would I be correct in

6 restating or summarizing your testimony this morning that

7 none of the elements that distinguishes socioeconomic

8 impact analysis from an economic impact analysis, have been

9 analyzed in any depth in the Hazen and Sawyer 10 year

10 project?

11 A I could agree to that.

12 Q You testified earlier that this Hazen and Sawyer

13 work could be called an incomplete economic impact analysis

14 and this morning you are indicating it could be called an

15 incomplete socioeconomic impact analysis as well?

16 A I don't think I'm saying that. I think it's --

17 there is a difference. I mean, when I say it's an

18 incomplete economic analysis, I'm saying there are things

19 that one should have done, even if one limits one's scope

20 to economic analysis, that they didn't do. I mean, the

21 total absence of most of the other elements of

22 socioeconomic impact analysis, it's like taking a hubcap

23 and saying it's an incomplete car, I mean, it's not a

24 useful description.

25 Q Well, to use your analogy -- strike that.

227

1 In your opinion, was the omission of analysis on

2 the elements that distinguish a socioeconomic impact

3 analysis from an economic impact analysis, a defect in

4 Hazen and Sawyer's work product?

5 A Well, that would depend upon what Hazen and

6 Sawyer was asked to do. I think that the lack of, for a

7 project of this magnitude, the lack of -- a project and

8 program of this magnitude -- the lack of a socioeconomic

9 impact analysis is a deficiency in the District's decision

10 making process.

11 Q So if I understand you correctly, the District

12 should have requested a socioeconomic impact analysis as

13 opposed to an economic impact analysis that omits analysis

14 of demographic impacts, labor impacts, public service

15 impacts, fiscal impacts, social impacts, and secondary land

16 use impacts?

17 A That's right, if they are going to have a sound

18 basis for their decision about adoption of the SWIM plan.

19 Q In your discussions with the Cooperative thus

20 far about the work RPC might do in preparing for this

21 trial, have you proposed that a socioeconomic impact

22 analysis, including the missing elements in the Hazen and

23 Sawyer work, be undertaken?

24 A We have had a discussion with them about that.

25 The time limitations that I understand exist prior to this

228

1 make me doubt that one could do a complete study in that

2 time and so I really, because of that, have not proposed to

3 them that it be as complete as I think it would be if it

4 were to be made in the proper sequence in the planning

5 process.

6 Q Have you offered to prepare an analysis for this

7 case for the Cooperative, that includes demographic, public

8 service, fiscal and social effects of the SWIM plan?

9 A That includes some of them, yes, subject to time

10 limitations.

11 Q Does RPC have a publication or document

12 describing what constitutes a complete economic or

13 socioeconomic impact statement?

14 A We have a, I guess, a series of methodology

15 papers that have been done in the course of projects for

16 clients in the past, where it was important to them to

17 prepare a written methodology and circulate it for comment,

18 and I would point to those as kind of the best statement of

19 what our methodology has been in the past. Dr. Leistritz,

20 of course has, as you have seen, a fairly extensive

21 bibliography on socioeconomic impact assessment

22 methodology.

23 One of the things that is important is what is

24 called scoping, which is kind of a recognized part of

25 impact assessment and that means that after doing some

229

1 preliminary work, that one attempts to get agreement from

2 the relevant parties on what issues, what study area, so

3 forth, are significant in the specific instance. So I

4 would tell you that those reports and the methodologies

5 recommended or proposed in those reports are specific to

6 those projects and in some cases on other projects you

7 might do more in an area, in other cases you might do less,

8 because of what you had learned in the scoping process.

9 So I would stand behind those for the projects

10 that we were being asked to assess there, but I would tell

11 you that those are not immutable, they are project

12 specific.

13 Q The guidelines that you referred to that RPC

14 has, have you produced a copy of those with your document

15 production?

16 A I'm sure we haven't, because they concern past

17 projects. They are not anything that was done for this

18 enterprise.

19 Q As I understand it, those guidelines fairly

20 accurately reflect your views on what constitutes a proper

21 or complete socioeconomic impact analysis?

22 A I must not have spoken clearly if that's what

23 you understood.

24 Q I may have misunderstood you.

25 A I said they were for the projects for which they

230

1 were developed, but that you really have to scope each

2 project separately as to what's required to address the

3 relevant issues, but not waste time on things that really

4 are not matters of concern with that specific project.

5 MR. SAXE: Counsel, it sounds to me like the

6 guidelines Dr. Luke is describing are within the

7 request for production that accompanied our notice of

8 deposition. I understand that you raised objections

9 to the request for material that pertained to previous

10 projects. I believe they were based primarily on

11 grounds of burden, because of over-breadth, and

12 without waiving any objection to that objection, I

13 would like to request that this specific set of

14 documents be produced as responsive documents.

15 MS. STINSON: Let me talk to Dr. Luke off the

16 record and see if I can get a better feel for actually

17 what we're talking about.

18 (Brief recess taken.)

19 MS. STINSON: On the record, I have discussed

20 the documents with Dr. Luke and as I understand them,

21 they are sort of -- they are project specific

22 guidelines as to what's going to be looked at in that

23 project. They are not in any particular format, it

24 varies by project, but he indicates that those are

25 available so, again, as discussed yesterday, if you

231

1 could put that request in a letter or something, we

2 will respond.

3 A Just for clarification, there have been certain

4 projects that were major enough that there are methodology

5 papers that address the various aspects of that specific

6 study and that's what I'm thinking of. I'm not

7 representing to you that a formal methodology paper has

8 been prepared every time we have been asked to do a

9 project, so my intention would be to, as I understand your

10 request now, would be to look through our library of past

11 reports for projects where we have done those types of

12 methodology papers and to provide you with copies, but that

13 you shouldn't expect that there will be one for every last

14 project that RPC has ever done, because in many cases no

15 such paper was created.

16 BY MR. SAXE:

17 Q When you say major projects, we discussed

18 yesterday about nine or so projects that you identified for

19 me from your curriculum vitae that had to do with economic

20 impacts or socioeconomic impacts of actions proposed to

21 remedy environmental problems. There was the Browning-

22 Ferris waste disposal project, the Department of Energy

23 nuclear waste project, Louisiana natural gas project, I can

24 enumerate them, but would you characterize those as major

25 projects for which there might be such methodology papers?

232

1 A It might come as no surprise to you that some

2 are, some aren't.

3 Q Well, perhaps we can -- we may be able to

4 identify sufficiently a large set from this set to make it

5 a reasonable request that you can comply with.

6 A The other thing is that you seem to be trying to

7 draw a distinction between how one would do a socioeconomic

8 impact assessment of an environmental protection project

9 versus a new mine or new power plant and there is no

10 distinction. I suppose the most complete set of

11 methodology papers concerns a surface mining project in

12 Wisconsin and also concerns a project in Texas, so those

13 were among the ones that I had in mind to produce.

14 Q Thank you, I'll correspond through counsel and

15 we can work that out.

16 You referred to the publications that Dr.

17 Leistritz provided as describing a set of criteria for

18 constructing a complete socioeconomic impact analysis?

19 A No, I didn't.

20 Q Okay, what would be the basis in publication for

21 your opinions concerning what would be a complete

22 socioeconomic impact analysis in any given instance?

23 A What I told you was that his bibliography

24 includes a number of publications that address the issue of

25 methodology in socioeconomic assessments, okay, and what I

233

1 have also told you is that the way you determine the scope

2 of a socioeconomic assessment is through a scoping process,

3 which gives both professionals, policy makers, and the

4 general public, an opportunity to raise issues with which

5 they are concerned.

6 Q When you do scoping, are there criteria that you

7 apply to determine whether or not a given element should be

8 included in a complete socioeconomic impact analysis?

9 A There is some guidance. I don't want to give

10 you the impression that there is some sort of bright line

11 yes/no test.

12 Q What is the basis of the judgments that you as

13 an economist make when you are determining in a scoping

14 analysis, whether or not an element needs to be included?

15 A Well, there are some, I think, fairly basic

16 elements that there would be a general consensus among

17 people that do this kind of work that if you were going to

18 have a complete one you would presume are going to be in

19 there and then what you are looking for are things that are

20 unique to a specific project, that may generate impacts

21 that would be special to that project.

22 For instance, in the high level radioactive

23 waste repository, the impact of transportation of the waste

24 to the site along rail or road corridors was of interest,

25 because of the possible perception that could cause that to

234

1 affect property values, could cause it to have some impact,

2 and that would not normally be something you would worry

3 about if you were transporting -- if you had an automobile

4 factory and you were transporting auto parts to and from a

5 plant.

6 Q But nevertheless, would the criteria for

7 determining that in that instance those effects would be

8 relevant for a socioeconomic impact analysis, would those

9 criteria be described anywhere in any publication or any

10 scholarly literature or textbook or paper?

11 A I'm not going to tell you they aren't, I'm going

12 to tell you that there is some literature about what

13 constitutes an adequate scoping process.

14 Q What literature would that be?

15 A I know that the Corps and the other federal

16 agencies have some guidance on that. I know there have

17 been some court cases on it. I would strongly suspect that

18 there is some scholarly literature that springs out of

19 that.

20 Q Would that be the literature upon which you

21 would be relying in formulating opinions about whether or

22 not elements had to be included in a complete socioeconomic

23 impact analysis for the Everglades?

24 A I think that literature would be helpful. I

25 think I have done enough of these that I have sort of

235

1 internalized how you carry out a scoping process.

2 Q But you would say that you have internalized it

3 from this basic set of literature?

4 A No, I wouldn't say that. I would say that I

5 guess I have been doing these since about 1976 and I have

6 sat through an awful lot of public hearings and gone

7 through review of methodology papers and --

8 Q Dr. Luke, I'm asking a pretty straightforward

9 question, I'm asking --

10 A No, you are interrupting my answer and I would

11 appreciate it if you wouldn't.

12 -- and I think in that course of time I have

13 accumulated some experience. Over those years I have

14 probably looked at a part of that literature, but I do not

15 want to tell you today that I would necessarily be relying

16 upon it.

17 Q What literature supports the judgment you would

18 exercise in determining whether elements needed to be

19 included in the complete socioeconomic impact analysis for

20 the Everglades?

21 A I can't answer your question.

22 Q There's no particular publications that contain

23 what you describe as the fairly basic elements that there

24 is consensus about in doing socioeconomic impact analysis?

25 A Again, I have done it enough that I don't know

236

1 that -- I could go find you some literature that would

2 support it, but it's not like that given this project, I

3 would sort of have to go to a book first before I would

4 know what I wanted to do.

5 Q I'm not asking you if you would have to have

6 recourse to it first, I'm asking what literature would

7 describe these fairly basic elements?

8 A I can't, sitting here, cite you to a book.

9 There are certainly some methodology documents in

10 Leistritz' literature that I would think would be

11 consistent with my judgment.

12 Q Well, since we don't all have the benefit of the

13 20 years of experience you do to have internalized, as you

14 put it, this set of criteria, do you think you could look

15 through your library and identify that literature which

16 would describe the fairly basic elements regarding which

17 there is consensus in performing scoping analyses for

18 socioeconomic impact assessments, and provide us with a

19 list of those publications so that we can request them as

20 part of the request for production?

21 A If counsel instructs me to, I'll do that.

22 Certainly in Dr. Jones you have someone with a similar

23 length of experience that would already be familiar with

24 those documents.

25 Q I'm not interested in Dr. Jones' opinions about

237

1 the fairly basic elements, at this time and in this

2 context, I'm trying to discover your opinions.

3 MR. SAXE: Yes, Counsel, we would ask that --

4 MS. STINSON: I have to object to that request.

5 I think you have asked him what he has relied upon or

6 what he is relying on and he has indicated to you that

7 there is no particular literature that he is relying

8 on. To ask him what he may have, in his educational

9 process over the last 20 years, reviewed, I don't

10 think is an appropriate discovery request.

11 MR. SAXE: I asked him what he had internalized,

12 effectively.

13 MS. STINSON: I take that to mean what have you

14 learned in educating yourself and doing work over the

15 last 20 years.

16 MR. SAXE: It's a proper request, Counsel, I am

17 entitled to an identification of publications that

18 describe the basis for the views that the expert is

19 presenting in a case.

20 MS. STINSON: You are entitled to them if he is

21 relying on them. I don't think you are entitled to

22 ask him to do research.

23 MR. SAXE: I'm not asking him to do research,

24 I'm asking him to identify those publications of which

25 he is aware that describe the fairly basic elements

238

1 regarding which there is consensus.

2 MS. STINSON: Well, you have asked him and he

3 has indicated that he can't tell you the names. I

4 don't think it's appropriate to ask him to go through

5 the library and find some that might support what he

6 has said and I would have to object, I think, to that

7 discovery request.

8 MR. SAXE: All right, we will take it up in the

9 course of discovery.

10 BY MR. SAXE:

11 Q Dr. Luke, going back for a minute to the issue

12 of the modifying multipliers, in general would you prefer a

13 multiplier from the county and for the sector for which the

14 underlying economic impacts, direct economic impacts

15 pertained, or from another county and another sector?

16 A I really think it's a case specific sort of

17 determination. You're looking for the multiplier you think

18 will best describe the impacts -- in this case I'm looking

19 for the multiplier that will best describe the impacts on

20 the other businesses and households in the EAA and it

21 wouldn't necessarily be one or the other in all cases.

22 Q The second sentence that I have highlighted in

23 the paragraph in the Hazen and Sawyer report, says, "A

24 change in land ownership does not necessarily imply a

25 change in land use or a change in sales and employment in

239

1 the EAA."

2 Would you agree with that statement?

3 A Yes, I would.

4 Q As I understand your testimony, in your opinion,

5 a change in land ownership might imply a change in land

6 use?

7 A Yes.

8 Q Dr. Luke, as I understand it, in Hazen and

9 Sawyer's methodology in the 10 year economic impact

10 assessment that we have been discussing, Hazen and Sawyer

11 followed the criteria for determining impacts such that if

12 a farm fails but land remains productive in the sense that

13 returns to lands exceed zero, the land stays in production,

14 there are no direct impacts and no secondary impacts, is

15 that correct, as you understand Hazen and Sawyer's

16 methodology?

17 A I think that's what they did.

18 Q We talked yesterday about what I believe you

19 referred to as economic friction, in that view would it be

20 correct to say that if a farm fails but the land remains

21 productive in the sense that returns to land exceed zero,

22 there might nevertheless be circumstances in which

23 perceived risk exceeds the perceived benefit of keeping the

24 land in production and that would be loosely referred to as

25 economic friction and it could cause the land to go out of

240

1 production and it could cause corresponding direct impacts

2 and consequent secondary impacts, would that be correct?

3 A I think that's a possibility.

4 Q This economic friction, would it be correct to

5 call it a theory?

6 A Theory? It would be --

7 Q How should I refer to it?

8 A It's a concept, I mean, the notion of friction

9 as a difference between what theoretically should happen in

10 a market and what does happen is, I think, a pretty common

11 economic concept.

12 Q The concept then of economic friction in the

13 context of economic or socioeconomic impact analysis, is

14 this a firm specific phenomenon?

15 A I don't understand the question.

16 Q Is this something that can be generalized,

17 averaged for an entire industry, or is it something that

18 has to be calculated on a firm specific basis?

19 A I don't know about a firm specific basis in this

20 case where you're dealing with acreage, I would more look

21 at it across a sector as to what the conditions are likely

22 to be.

23 Q Sector by sector, you mean?

24 A For the farm sector in the EAA, I would look at

25 it for this specific set of circumstances.

241

1 Q Can you elaborate what set of circumstances

2 would define an identifiable group of similarly situated

3 farms, if you will?

4 A I mean, in this case I would be looking at

5 things like would there be any -- where would the needs for

6 additional infusion of capital occur, what would be the

7 perceived risks, who would be likely to end up as the owner

8 or as -- and as possible operators, and I might find that

9 this was a significant concern, I might find on

10 investigation that it was not a significant concern.

11 Q So then would it be correct to say it's not

12 constant across firms within an industry?

13 A Right, it would. I also think it's situational

14 in terms of where things are in the banking and credit

15 system and it's who the -- it is the ownership structure of

16 the remaining firms in the industry and what their sources

17 of capital are. I mean, it's a very situation specific

18 thing and it's a concept that ought to be looked at and one

19 make a decision about whether it appears to be material in

20 the analysis of this situation or not.

21 Q Would it be the same for owner operators versus

22 corporations?

23 A I don't understand the question.

24 Q Would the ownership structure be relevant, one

25 of the relevant circumstances in determining whether or not

242

1 economic friction applied in a given instance?

2 A I think the ownership structure of the remaining

3 firms in the area and the ownership structure of whoever

4 would end up owning the land if existing operations failed,

5 would both be relevant.

6 Q So whether the land was owned or leased, would

7 that be relevant?

8 A I'm sorry?

9 Q Whether the land was owned or leased, would that

10 be relevant?

11 A Are you talking about the land where the

12 enterprise fails?

13 Q Yes.

14 A Yes, that would be relevant.

15 Q What other land would it be relevant to talk

16 about in this context?

17 A The remaining firms that stay in operation in

18 the area. I'm just trying to clarify your question.

19 Q Can you give me a list of, to the best of your

20 ability now extemporaneously to do so, of what the relevant

21 factors or elements would be, data elements if you were, in

22 analyzing the applicability of economic friction in any

23 given instance?

24 A Do you mean whether it would exist or what its

25 impacts would be if it did exist?

243

1 Q Whether it would exist and quantifying it.

2 A I would be concerned here with the difference

3 between some costs and needs for new investment. If the

4 operations can proceed and the land can be kept in

5 production over a period of time with no new capital

6 investments, operating off the costs or the capital already

7 invested, that would tell me that it was less likely to be

8 a problem. Converse, if at a point where significant

9 additional investment is required, then what we have to

10 look at is where would the funds for that investment come

11 from, what is likely to be the perceived risks, how sunk is

12 that investment versus portability or reusability somewhere

13 else in terms of the risks, and what are the sources of

14 credit or of capital that the operators might draw upon,

15 and what are the restrictions upon those capital sources

16 as, for instance, criterion for which the bank can make a

17 loan.

18 Out of that I would think we would be able to

19 reach a judgment about whether or not that was likely to be

20 an important element in explaining the likely response in

21 the EAA to specific farms going out of business.

22 Q Any others?

23 A Not that I think of right now.

24 Q Did historic events like bankruptcies, farm

25 failures, average expansion -- or rather, acreage expansion

244

1 or contraction, have any role in that determination?

2 A I would say that would be useful to look at and

3 what I think you would have to do to factor those in, would

4 be to say okay, what were the economic conditions in terms

5 of risk, profitability, availability of capital, when those

6 historical events occurred, and how does that differ either

7 because of the proposed SWIM plan or because of external

8 factors that may be changing in the future, but those could

9 be useful guides to making an analysis.

10 Q Are there any others that you can think of that

11 would be useful in making such an analysis?

12 A Not at this time.

13 Q During Dr. Leistritz' deposition, he gave some

14 testimony concerning the likely events when there's

15 succession of ownership because of a failure of the

16 previous farm owner. He referred to the farm crisis period

17 in the midwest and some others historically that he used

18 for purposes of illustration. He testified, as I

19 understood it, that a new owner usually gets a certain

20 advantage in buying the failed farm, the advantage is

21 usually in the form of reduced land prices and cheaper

22 equipment as that machinery is sold from the failed farm

23 operation. Generally, do you agree with that position?

24 A I think that's what happened in the upper

25 midwest.

245

1 Q Would you call it a general rule or rule that's

2 generally applicable when there is a succession of

3 ownership from farm failure?

4 A I'm sure not prepared to say that that would

5 occur in every case. I can certainly see that it would be

6 one scenario. You could have a farm failure because -- in

7 that case you had a situation where you had a fairly

8 substantial drop in property values that was a drop in

9 collateral that caused a whole bunch of loans to be called

10 and the value of the land had indeed declined. I can

11 envision farm failures that were not based on general

12 declines in property value and collateral value, but were

13 based upon bankruptcy of an enterprise because they made

14 some bad stock market investments --

15 Q Would the latter be relevant for purposes of

16 economic impact analysis?

17 A Again, if you wouldn't mind me finishing my

18 answer.

19 -- and in that case there wouldn't be any reason

20 to think that the land value in the next owner's hands

21 would be any less than it was before.

22 Q So the latter set of circumstances are, so to

23 speak, idiosyncratic farm failures as opposed to farm

24 failures because of generalizable conditions in an industry

25 and an area?

246

1 A I don't know about idiosyncratic, but would not

2 be related to the -- let's say are not related to the

3 economics of the farm itself, but more to the economics of

4 the owner.

5 Q When you might look at, attempt to analyze the

6 role of economic friction in the economic impacts of the

7 implementation of the SWIM plan, would you be concerned

8 with the former set of circumstances or the latter or both?

9 A I think I would be concerned primarily with the

10 former.

11 Q So in the context of the former as it would be

12 relevant to the analysis of economic friction in the EAA,

13 would it then be safe to say that as a general rule it

14 would be more likely than not that the successive owners

15 would enjoy the advantage of cheaper land and cheaper

16 equipment?

17 A I would think that the land value is definitely

18 going down as a result of the SWIM plan, so I would say

19 yes. As to the equipment, you know, less certain, but

20 probably if it's bought as used equipment and the current

21 owner bought it as new equipment, then the new owner's cost

22 basis in it is going to be less.

23 Q Do you know how the machinery and equipment of a

24 failed farm enterprise generally is disposed?

25 A Well, in the upper midwest, you basically had

247

1 the bank auctioning things off and I don't know that that's

2 universal or would apply here.

3 Q Do you have any reason to believe that's not

4 what would happen in the EAA?

5 A In this case, we're not talking about a

6 foreclosure action, we're talking about people deciding to

7 exit, so I think that you would be much more likely to have

8 privately negotiated sales than sort of courthouse square

9 auctions like in a lot of cases.

10 Q As a general phenomenon, as an industry-wide

11 phenomenon, if that were to take place, these people

12 electing to leave production, would that more likely than

13 not be associated with some diminution in the market value

14 of the used machinery and equipment that those owners were

15 putting on the market?

16 A I don't understand the question.

17 Q Would you expect that the prices of machinery

18 and equipment would drop if there were an industry-wide

19 trend in the EAA of owners wanting to get out and sell?

20 A To some extent, yes.

21 Q At this point do you have any estimate of what

22 the friction factor might be in the EAA, quantification of

23 it?

24 A No.

25 Q Roughly, ball park?

248

1 A No.

2 Q It would, if I understand it correctly, though,

3 have the effect of bumping up the value of returns to land,

4 the minimum returns to land that would be required for an

5 owner to elect to continue in production? Do you

6 understand that question or should I rephrase it?

7 A Maybe you should try again.

8 Q Okay. Hazen and Sawyer assumed that land would

9 stay in production if returns to land exceeded zero, would

10 the effect of economic friction be to raise that number, by

11 your criteria, by some fixed dollar amount, so that it

12 would be meaningful to say that the land would stay in

13 production if returns to land exceeded zero plus X, where X

14 was the friction factor?

15 A Yeah, I think that's what it would do.

16 Q At the risk of returning to a type of question

17 that we had some difficulty with before, can you point me

18 to any publications that describe the role of this economic

19 friction in an economic or socioeconomic impact analysis?

20 A No, not from memory.

21 Q Are there any economic impact analyses or

22 socioeconomic impact analyses that you have performed that

23 have analyzed economic friction?

24 A No, none of the cases have addressed this

25 particular kind of failing firm issue that I have done.

249

1 Q Are you aware of any that you haven't done that

2 have addressed the economic friction factor in an economic

3 impact analysis or socioeconomic impact analysis?

4 A No.

5 Q What kind of -- strike that.

6 Earlier you explained to me that in explaining a

7 likely response to economic friction in the context of SWIM

8 plan implementation, you would be looking at the relevance

9 of some costs versus the need for new investment;

10 specifically what kinds of data elements would be relevant

11 in such an analysis?

12 A You would want to know kind of the extent to

13 which there was existing capacity in the cultivation

14 equipment, the useful life left in structures, to where one

15 can proceed without making a new capital investment and how

16 long you could without making a new capital investment.

17 Q If we could take them one at a time, I think it

18 would be easier. What kind of data would you seek in

19 attempting to analyze that element in this context?

20 A You know, I would want to know something about

21 the average useful life of the equipment and the average

22 age of the existing equipment that's out there and also

23 whether there is excess capacity or, under-utilization is

24 probably the wrong term, but whether in effect you could

25 use other equipment. Let's say an existing operator took

250

1 over a piece of land and he has three machines and there's

2 one machine that comes with the land. Is there reserve

3 capacity, so to speak, in the three machines, such that

4 even if the one machine that's on the land goes obsolete or

5 wears out, that he can continue to cultivate that land with

6 his three machines.

7 MR. COUSINS: Could I interject, what factors

8 are we discussing now? I sort of got off track. Are

9 we discussing friction factor factors?

10 BY MR. SAXE:

11 Q Dr. Luke, which factors are we discussing right

12 now?

13 A I believe your question was what kinds of data

14 would I try to look at in order to decide if I thought that

15 land might go out of production because of economic

16 friction. That's what I think I'm talking about.

17 MR. COUSINS: Okay, thanks.

18 BY MR. SAXE:

19 Q These elements, the average useful life, the

20 average age and excess capacity or reserve capacity, these

21 are relevant to the issue of is there existing capacity in

22 equipment and structures. What I need to know is where

23 would you go to get that information, from whom would you

24 seek it?

25 A I would talk to the agricultural extension

251

1 agents, I would interview probably some of the agricultural

2 interests, I might talk to the equipment dealers, might

3 talk to the bankers, might look at some appraisal district

4 data.

5 Q What data specifically would you be looking at

6 in those sources?

7 A I paused. I might also look at USDA data.

8 The information that we just talked about,

9 whatever those sources could tell me about the factors that

10 we just discussed.

11 Q What information on average useful life of

12 equipment and structures, average age or excess capacity,

13 do you believe the agricultural extension agents would be

14 able to provide?

15 A They would be able to provide both specific and

16 general information on conditions in the EAA.

17 Q In what form?

18 A Verbal.

19 Q Based on?

20 A Their experience.

21 Q Collecting data from whom? Maybe you don't

22 understand. I'm asking for specific data sources and

23 specific data elements. I appreciate we are narrowing the

24 focus, but in the interest of saving time, since you

25 understand what it is, I think, that I'm asking, perhaps

252

1 you can just answer that question.

2 A Well, I'm doing the best I can. I would go and

3 interview them, tell them the kind of concern that I had,

4 talk to them about what they knew about the situation in

5 the field, and try to make a judgment about whether or not

6 this is a significant issue.

7 Q So you would be, if I understand it correctly,

8 you would be just relying on anecdotal reports that

9 agricultural extension agents, based on their generalized

10 feeling or experience about what the average useful life

11 and age of equipment was?

12 A I don't know that I would characterize it as

13 anecdotal.

14 Q How would you characterize it?

15 A I would characterize it as practical field

16 experience, folks that are out there talking to the farmers

17 and looking at the land on a long term, continuous basis.

18 Alvarez and Schunamen have been around here quite awhile.

19 Q So it would be based on conversations with

20 farmers by people like Alvarez and Schunamen over time, not

21 data collection in any methodological or formal sense?

22 A If they have some quantitative data, I would be

23 real interested in it, but I certainly wouldn't limit

24 myself to quantitative data in trying to assess the

25 importance of the issue.

253

1 Q Do you understand that they do have quantified

2 data?

3 A I don't have knowledge about whether they do or

4 not.

5 Q In your opinion, this information based on

6 conversations by Alvarez and Schunamen would be a

7 sufficient source of data for your analysis of the existing

8 capacity in equipment and structures?

9 A I didn't say that. I said they would be one of

10 the sources.

11 Q The other sources you mentioned were the owners,

12 equipment dealers, bankers and USDA. Go through each one

13 of those for me, if you would, and tell me specifically

14 what the sources of data would be and what the form of the

15 data would be that you would need to be able to analyze the

16 existing capacity in equipment and structures?

17 A I think that it would be very similar to the

18 answers I have given to you for the extension folks. If

19 they have quantitative data, that's very desirable; if not,

20 I would be interested in their qualitative data, in their

21 opinions and their judgments as to what would happen if

22 certain enterprises were to fail.

23 Q Would you say that the -- you don't like the

24 word anecdotal, I'm sorry, what term did you use to refer

25 to the kinds of data you would get from conversations with

254

1 Alvarez and Schunamen? I'm looking for a shorthand way of

2 referring to it just to save time, verbal, did you say

3 verbal data?

4 A Verbal sounds good, let's do that.

5 Q Okay, verbal data. Would this verbal data that

6 -- strike that.

7 In your opinion, if you were able to obtain only

8 such verbal data from the sources you have mentioned here,

9 would you be able to reliably estimate the role of existing

10 capacity in equipment and structures and the effects of

11 economic friction in implementing the SWIM plan?

12 A I think I would be able to come up with a

13 reasonable estimate that I would be comfortable in having

14 people rely upon.

15 Q Would the verbal data that you have received

16 from the sources in turn -- strike that.

17 What would you expect the verbal data that you

18 might receive from these sources to be based on by the

19 sources from whom you had received it?

20 A I think in some cases it would be their personal

21 observations and other cases it would be information that

22 they had either collected or had been allowed access to.

23 In other cases it would be their knowledge of the

24 specifications of useful life of various equipment.

25 Q When you said information that they had access

255

1 to, would that be published information?

2 A In some cases yes, in some cases no.

3 Q Would it be publicly available information?

4 A I would think in some cases yes, in some cases

5 no.

6 Q If it were published and publicly available,

7 would you seek recourse to it yourself, rather than relying

8 on the verbal data from, for instance, Alvarez and

9 Schunamen?

10 A In some cases yes and some cases no, depending

11 on how difficult it would be to access and how important it

12 was to the overall analysis.

13 Q Do you believe that Alvarez and Schunamen have

14 had access to unpublished, non-publicly available

15 information in forming the verbal data that you would seek

16 from them?

17 A Probably.

18 Q Would that be the case for the owners that you

19 would interview? I guess that's a self evident

20 proposition. Would the owners have access to unpublished,

21 non-publicly available information about their own

22 operations?

23 A Probably.

24 Q How about the equipment dealers?

25 A Yes.

256

1 Q And the bankers?

2 A Yes.

3 Q And USDA?

4 A Yes.

5 Q So then as I understand it, the verbal data that

6 you might rely upon solely if you had no access to other

7 published, publicly available information about existing

8 capacity in equipment and structure, would likely to some

9 extent be informed by the unpublished, non-publicly

10 available information that these respective sources had

11 access to?

12 A Right, because in turn, some of the information

13 would be their conversations with other knowledgeable

14 people in the area. I mean, for instance, the equipment

15 dealer trying to sell the farmer a new piece of gear and

16 the farmer saying, no, I think I can use this one three or

17 four more years, it's only X-years old. I'm not suggesting

18 that there is some spread sheet or data sheet that they are

19 accessing, I'm talking about their knowledge of the

20 business and the industry, which is typically the kind of

21 interview information that you rely upon in trying to get a

22 feel for the behavioral dynamics of the business.

23 MR. SAXE: Would you mark that section of the

24 tape?

25 THE REPORTER: Yes.

257

1 BY MR. SAXE:

2 Q Thank you, Dr. Luke.

3 Dr. Luke, returning for a moment to what I

4 believe was Exhibit 3 yesterday -- no, excuse me, it was

5 Exhibit 2. Would you look at Bates page 185?

6 A Okay.

7 Q Before I ask that brief set of questions, I do

8 have one additional question on the topic we were just on,

9 again on economic friction, I'm sorry. How would economic

10 friction be expressed in terms of units of measure, would

11 it be dollars and cents, dollars per acre, dollars per

12 pound of sugar, how?

13 A I guess there are different ways one could

14 express it. I think that your earlier question about would

15 it raise the threshold return at which people would

16 continue the enterprise above zero, might be a useful way

17 to look at what's the threshold return which you would have

18 to have before you would make new investments in the

19 operation.

20 Q So it would be returns to land and dollars per

21 acre?

22 A I would think it would be a return on --

23 expressed as return on investment, because that's the

24 issue. If you don't have to invest anything additional in

25 it, unless we're talking about just really trivial returns,

258

1 then I would think that you would wouldn't experience a

2 friction.

3 Q That would be in what units of measure?

4 A It's usually expressed as a percentage.

5 Q Okay, back to the Bates page 185, the last full

6 paragraph on that page, the second sentence says, "Recent

7 research on farms experiencing economic stress in both the

8 upper midwest region and Texas has indicated that debt

9 level was the major determining factor farm financial

10 viability."

11 Do the farmers in the upper midwest region and

12 Texas have the same debt level as farmers in the EAA, as

13 far as you know?

14 A I don't know.

15 Q In addition to the -- strike that.

16 Talking about farm financial viability and its

17 relevance in the socioeconomic impact analysis as you

18 believe it should be performed in this context, you have

19 spoken about the phenomenon -- or excuse me, the concept of

20 economic friction where although land remains productive in

21 the sense that returns to land exceed zero, the land

22 nevertheless goes out of production because of economic

23 friction. Dr. Leistritz, in his deposition, spoke about

24 what I believe was another effect where a farm fails and

25 land remains productive in the sense of returns to land

259

1 exceeding zero, I believe it was a different one that you

2 have described today and yesterday concerning economic

3 friction. As I understood Dr. Leistritz' testimony, he was

4 talking about a set of circumstances in which a farm fails,

5 land remains productive, the land stays in production and

6 there are no direct impacts, but because of production

7 organizational changes, there are nevertheless secondary

8 impacts. Would you agree with that view of possible

9 secondary impacts in implementing the SWIM plan?

10 A I would have to review the testimony you're

11 referring to before I could answer that question.

12 Q Okay, let's take a quick look at the testimony.

13 Why don't you take a look at these two pages, it shouldn't

14 take but a minute or so.

15 MS. STINSON: On the record, Dr. Luke is looking

16 at pages 66 and the next couple of pages in Dr.

17 Leistritz' deposition.

18 A Okay, I have reviewed those two pages and I

19 agree with what he says on those two pages.

20 BY MR. SAXE:

21 Q Let me see if I understand what it is that you

22 are agreeing with.

23 A I'm agreeing with every word on the page, sir.

24 Q Let me see if I can understand what that

25 imports. Do you understand that Dr. Leistritz testified

260

1 effectively that where a farm fails and land remains

2 productive in the sense that returns to land exceed zero,

3 the land might stay in production, but because of

4 production organizational changes, there might nevertheless

5 be secondary impacts from that farm failure?

6 MS. STINSON: Object to form.

7 MR. SAXE: Grounds?

8 MS. STINSON: I don't think it's appropriate to

9 ask what he understands somebody else to have said.

10 MR. SAXE: All right, I'll rephrase the

11 question.

12 BY MR. SAXE:

13 Q Dr. Luke, in your opinion, where a farm fails

14 and land stays productive in the sense that returns to land

15 exceed zero, might there nevertheless be secondary impacts

16 if there are production organizational changes entailed in

17 the succession of ownership?

18 A Certainly possible.

19 Q Are these secondary impacts the same secondary

20 impacts that we discussed earlier in the context of

21 economic friction?

22 A No.

23 Q In this case, is it correct that land would stay

24 in production, but there would nevertheless be impacts,

25 whereas in economic friction cases, the land would go out

261

1 of production and there would be secondary impacts?

2 A Well, in the hypothetical you were asking about,

3 you assumed the land would stay in production, so I don't

4 understand your question.

5 Q Isn't it true that secondary impacts result in

6 the case of economic friction where land goes out of

7 production, but in the case of production organizational

8 changes, secondary impacts result without land going out of

9 production?

10 A Well, if the land stays in production and there

11 are secondary impacts, that must be true.

12 Q To analyze -- strike that.

13 Is there a shorthand we can use that you are

14 comfortable with to refer to the phenomenon of land staying

15 in production, but there being production organizational

16 changes from a succession of ownership and the resulting

17 secondary impact, would this be called farm financial

18 viability or how could we describe this accurately?

19 A As I read Dr. Leistritz' testimony, he is saying

20 that if you had a change in the production function under

21 the new operator or if you had a change in the geographic

22 pattern of the purchases under the new operator, that that

23 would be the source of the secondary impacts attributable

24 to the change in management.

25 Q Are those both production organizational

262

1 changes?

2 A You know, I don't know that there is any label

3 that you can apply to it. It's changes in production

4 function or changes in the geographic pattern of purchases.

5 Q That's a mouthful, let me write it down so we

6 know what we are referring to whenever I ask you a

7 question. Changes in production function or changes in

8 geographical?

9 A Pattern of purchases.

10 Q What kind of data would one need to analyze to

11 evaluate the effect of changes in production function or

12 changes in geographical pattern of purchase?

13 A Well, I suppose you would need to look at the

14 way the hypothetical new operator did business versus the

15 way the hypothetical old operator did business.

16 Q And what data would one look at to make that

17 determination?

18 A You would look at where they buy certain inputs

19 from.

20 Q Where would you go to get that information?

21 A You could either go to the purchasers or the

22 sellers.

23 Q Interviews?

24 A Yes.

25 Q Is that what you would propose to do in

263

1 analyzing this in a socioeconomic impact analysis

2 concerning the implementation of the SWIM plan?

3 A If I thought it was a significant issue.

4 Q Do you think it is a significant issue?

5 A I don't know.

6 Q How would you make that determination?

7 A Probably through some initial interviews.

8 Q With?

9 A With farmers and with dealers of agricultural

10 inputs.

11 Q Are you planning on conducting such interviews?

12 A Right now I don't have any such plans.

13 Q If the Cooperative elects to go forward with

14 what you have proposed to do in preparation for this trial,

15 would you conduct such interviews?

16 A That's not an explicit part of any current

17 proposal that we have before you.

18 Q Would you expect to be analyzing the effects of

19 changes in production function or changes in geographical

20 pattern of purchase?

21 A Again, it's kind of a scoping issue. I might do

22 some -- assuming I was doing the direct farm impacts

23 analysis, I might ask about that and see if there was any

24 reason to think that it was a material factor.

25 Q Up to this point, has RPC undertaken to get

264

1 access to any data that would be relevant to analyzing

2 changes in production function or changes in geographical

3 pattern of purchase?

4 A Not to my knowledge.

5 Q I believe you testified earlier that you agreed

6 with every word on those two pages?

7 A Dr. Leistritz' words. I wasn't necessarily

8 adopting yours.

9 Q Dr. Luke, if you would review pages 86 and 87

10 from the transcript of the deposition of Dr. Larry

11 Leistritz on February 8, 1993.

12 A All right, I have read it.

13 Q May I have the transcript back?

14 A Um-hum.

15 Q Has RPC endeavored to collect data on

16 expenditure patterns or labor use or basic production

17 practices that would be relevant to analyzing the effects

18 of changes in production function or changes in

19 geographical pattern of purchase?

20 A We have collected data such as the IFAS budgets

21 and this sort of thing that generally describe current

22 production practices. We have not collected any such

23 information from individual farms or farmers.

24 Q Is the IFAS information collected from

25 individual farms or farmers?

265

1 A That's my understanding.

2 Q To analyze the differences in ways of doing

3 business, as you testified earlier, where they buy, what

4 other elements would be analyzed to determine the impacts

5 of changes in production function or changes in

6 geographical pattern of purchase?

7 A I don't understand the question.

8 Q To analyze the effects of changes in production

9 function or changes in geographical pattern of purchase,

10 you testified earlier you'd be concerned with or interested

11 in differences in the ways of doing business between

12 previous and successive owners. You indicated you would be

13 interested in where they bought, that you would interview

14 farmers and sellers to get that information, if it were

15 deemed relevant to the analysis. I'm asking what other

16 data you would seek to quantify the impacts of changes in

17 production function or changes in geographic pattern of

18 purchase?

19 A I don't know of any other that I would seek.

20 Q Could you be more specific about those that are

21 relevant to assessing the differences in ways of doing

22 business?

23 A No.

24 Q Would hiring changes be relevant?

25 A I don't understand what you're asking me.

266

1 Q What business practices besides buying practices

2 would be relevant changes in production function or changes

3 in the geographical pattern of purchase?

4 A An example would be the extent of mechanical

5 versus hand harvesting that a given operator employed.

6 Q Any others?

7 A I am not sure that I could -- I mean, that's one

8 I have heard about, there may be other alternative

9 cultivation or processing techniques that I'm not familiar

10 with, but that are recognized as sort of management,

11 reasonable management choices that some operators go one

12 way, some the other, but I couldn't enumerate or list them

13 for you.

14 Q Would local versus out of area hiring be a

15 relevant change in the way of doing business, relevant to a

16 change in production function or geographical pattern of

17 purchase?

18 A Other than that that's a component of mechanical

19 versus hand harvesting, I really am not sure why there

20 would -- what the opportunities for non-local hiring would

21 be. I don't understand that there is a management option

22 there.

23 Q In analyzing the effects of change in production

24 function or change in geographical pattern of purchase,

25 would it be relevant to analyze differences in ownership

267

1 structure?

2 A Maybe you could tell me what you mean by

3 ownership structure.

4 Q What does it mean to you?

5 A Sir, you asked me a question, I asked you to

6 define a term in the question, it's your question, what are

7 you asking me?

8 Q Dr. Luke, what does ownership structure mean to

9 you, if anything?

10 A I have heard it used to mean different degrees

11 of integration. I have heard it used to mean sole

12 proprietorship versus partnership versus corporation. I

13 suppose there are probably some other dimensions as well

14 that that could be used to refer to.

15 Q Any others that come to mind?

16 A No.

17 Q Would changes in organizational structure and

18 succession of ownership in terms of the degree of

19 integration, sole proprietorships versus corporate versus

20 other forms of ownership, have relevance in quantifying the

21 impacts of the changes in production function or changes in

22 geographical pattern of purchase?

23 A I don't know that the legal form of organization

24 would in and of itself have any relevance. The size and

25 degree of integration could.

268

1 Q How would one go about collecting data on the

2 size and degree of integration?

3 A I would think one would do it through

4 interviews, through a review of the USDA data on number of

5 operations and their relative size. Some of that

6 information is available by looking at appraisal records to

7 get a feel for size. A number of different sources could

8 be consulted.

9 Q Have you consulted, or RPC, have you or RPC

10 consulted any of those sources for data on the size and

11 degree of integration thus far?

12 A Yes, I would say so.

13 Q Which data have you consulted?

14 A Certainly there have been some interviews. I

15 believe some of the USDA data looks at size of operations.

16 Some of the appraisal district data, some of the Hazen and

17 Sawyer looks at size of operations. There may be some

18 reference as to that in some of the IFAS publications and

19 the USDA publications on the Florida sugar industry.

20 Q Is this information, other than the interviews,

21 published, publicly available information?

22 A Yes.

23 Q Who has been interviewed for information on data

24 -- excuse me, information on size and degree of

25 integration?

269

1 A I have had conversations with George Wedgworth,

2 Jeff Ward, the Cooperative's marketing person whose name

3 I'm sorry I can't recall. I have had conversations with

4 Tom Schunamen. Some of my staff may have talked to other

5 people and their conversations touched on this issue, but

6 I'm not aware of it.

7 Q With respect, though, jumping back to our

8 earlier question about purchasing, interviews with farmers

9 and sellers, there have been no such interviews?

10 A Not that I'm aware of.

11 MR. SAXE: This is a good place for a break.

12 (Brief recess taken.)

13 (Luke Exhibit 4 marked for identification.)

14 BY MR. SAXE:

15 Q Dr. Luke, do you recognize this document?

16 A Only in the sense that I glanced at it in going

17 through the supplemental production that we did.

18 Q Can you identify it for me?

19 A It appears to be a memo to file that one of my

20 staff members, Jeff Tomlinson, wrote based upon a telephone

21 conversation he had.

22 Q What does this document concern, the telephone

23 conversation, what -- strike that.

24 What did the telephone conversation pertain to?

25 A It appears he was asking about the relationship

270

1 between yield belts, yield, and assessments, and data that

2 the appraisal district had collected on that topic.

3 Q Is this data that RPC has sought from the

4 appraiser's office?

5 A We have asked them for it. It was information

6 that was referenced by Grace Johns that she had and was

7 using to analyze yields and so forth, and when I heard

8 about it at the meeting, I thought that we probably ought

9 to get a set of that data as well.

10 Q So then you were only looking for the exact same

11 data that Hazen and Sawyer had analyzed?

12 A The category of data. I hesitate to tell you I

13 know precisely what they have got or what the appraisal

14 district would supply.

15 Q If you would turn your attention to the second

16 block paragraph for me and read those first three

17 sentences. I'll read them into the record. "Approximately

18 120, forty plus acre sample blocks are evaluated each year

19 for assessment purposes. Data regarding tons of sugar or

20 sucrose is recorded for each block. The data for all

21 blocks in a yield belt is then averaged."

22 Do you know whether RPC was interested in the

23 average values or the individual data collected for the

24 120, forty plus acre sample blocks?

25 A I was interested in having the data on hand so

271

1 that when I saw what use Grace made of it, I would be able

2 to, if I chose, conduct an independent analysis of the

3 data. I don't know -- I don't really know much more about

4 it, so I'm just simply trying to shorten my response time

5 once I see her report.

6 Q Do you know whether Hazen and Sawyer used

7 average values or whether they used the individual data

8 values for the 120 sample blocks?

9 A No, I don't know.

10 Q A little bit further down under the section

11 titled Obtaining Sample Data, it says, "The survey has the

12 following information: one, Plantation I.D."

13 Do you know what that plantation I.D. would be?

14 A Some identification of the location, you know,

15 that's all I would know about it.

16 Q A little bit further down, the block after the

17 indented material, it says, "The data received by the

18 appraiser's office is considered confidential."

19 Do you understand this to be correct?

20 A I understand it to be -- it depends on who you

21 ask. For some reason the appraisal office considers it

22 confidential. I asked Rick Burgess about it and he says as

23 far as he is concerned, his opinion is that it's public, so

24 it depends who you ask.

25 Q Did you request the information from the

272

1 appraiser's office?

2 A I believe Jeff Tomlinson did, yes.

3 Q When I say you, I'm referring to you or RPC,

4 somebody in RPC in that instance.

5 A Okay.

6 Q The next sentence, "It is provided by the

7 Florida Sugar Cane League, and can only be provided to

8 other parties with the written approval of the vice

9 president and general manager, Andy Rackley, of the

10 League."

11 Based on your previous testimony, am I correct

12 that you believe this is subject to debate?

13 A The League's attorney tells me that he doesn't

14 believe that it's subject to any privilege under the,

15 whatever Florida calls an Open Records Act, and that the

16 appraisal district people are in error in treating it as

17 confidential data.

18 Q At the bottom of the document it says, "I will

19 fax a letter with specifications to Jeff Ward of the Co-op

20 to request the data and approval from the League."

21 So far as you know, was a request made to the

22 League to authorize release of the data, by Jeff Tomlinson

23 or somebody else in RPC?

24 A I know that we did send a letter to Jeff Ward.

25 Whether he forwarded it on to anybody at the League, I

273

1 don't know.

2 Q When did this letter go to Jeff Ward, do you

3 recall?

4 A Sometime on or after March 3, 1993.

5 Q Who sent that letter, when you say we?

6 A Jeff Tomlinson.

7 Q Do you know whether, if the letter has not been

8 sent or forwarded or a request based on the letter

9 forwarded to the League, do you know whether -- excuse me,

10 by the League to the appraiser's office, do you know

11 whether they intend to do so?

12 A No.

13 Q Do you know whether they intend to authorize the

14 release of the data?

15 A No.

16 Q Has anyone in RPC or on behalf of the Co-op had

17 discussions of which you are aware, after this date,

18 concerning this issue?

19 A I just told you I talked to Rick Burgess.

20 Q Other than that conversation?

21 A Not to my knowledge.

22 Q Did Rick Burgess indicate that the League would

23 take any follow up action on the request for authorization?

24 A He may have indicated that he would be talking

25 with Andy Rackley but, I mean, it was a passing

274

1 conversation and, you know, I didn't try to pin him down.

2 (Luke Exhibit 5 marked for identification.)

3 BY MR. SAXE:

4 Q Dr. Luke, this is possibly another page of this

5 same document or a loose page, do you recognize it?

6 A Not specifically.

7 Q Can you identify it?

8 A In what way?

9 Q Who wrote it, when, what context?

10 A My speculation is that it's a continuation of

11 Jeff's conversation on this issue, so that probably Jeff

12 wrote it, Jeff Tomlinson.

13 Q For the record, on this exhibit there is a

14 yellow highlighting mark on the text that is not part of

15 the original document, I added that mark.

16 Dr. Luke, the paragraph concludes, "The data

17 cannot be released because of confidentiality unless okayed

18 by the League. I will forward a list of data

19 specifications to Jeff, who will intervene on our behalf to

20 the League. We will follow up on Friday."

21 Do you know what basis there might have been for

22 the representation that Jeff will intervene on our behalf

23 to the League?

24 A I can only speculate there had been some

25 telephone conversation.

275

1 Q Have you had any conversations with Jeff

2 Tomlinson about this matter?

3 A Well, yes, but not that would add additional

4 information to what you have got in these two documents.

5 Q What did Jeff tell you about Jeff Ward's

6 willingness to intervene?

7 A I haven't -- I don't recall speaking with him

8 about that. The conversations we had were pretty much a

9 verbal communication of the information that's on the table

10 in these two exhibits.

11 Q The final sentence, "We will follow up on

12 Firday," do you know what that relates to?

13 A No.

14 Q Do you know what Friday that might refer to?

15 A No.

16 Q Were any meetings scheduled between League staff

17 and RPC staff on a Friday after March 3rd, to your

18 knowledge?

19 A Not to my knowledge.

20 Q Were any conversations scheduled, as far as you

21 are aware?

22 A No.

23 Q So it's basically your testimony that you really

24 have no idea what this sentence is in reference to when it

25 says, "We will follow up on Friday."?

276

1 A That's right, I don't.

2 (Luke Exhibit 6 marked for identification.)

3 BY MR. SAXE:

4 Q Dr. Luke, do you recognize that document that

5 has been marked for identification as Exhibit 6?

6 A Let's see, generally it would appear to be the

7 letter that Jeff Tomlinson said that he was going to write

8 to Jeff Ward.

9 Q So this is a draft of that letter, I take it?