191
1 STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
2
SUGAR CANE GROWERS COOPERATIVE OF)
3 FLORIDA, INC., ROTH FARMS, INC., )
and WEDGWORTH FARMS, INC., )
4 )
and )
5 )
FLORIDA SUGAR CANE LEAGUE, INC., )
6 UNITED STATES SUGAR CORPORATION )
and NEW HOPE SOUTH, INC., )
7 )
and )
8 )
FLORIDA FRUIT AND VEGETABLE )
9 ASSOCIATION, LEWIS POPE FARMS )
W.E. SCHLECHTER & SONS, INC., and)
10 HUNDLEY FARMS, INC., )
)
11 Petitioners, )
)
12 v. )
)
13 SOUTH FLORIDA WATER MANAGEMENT )
DISTRICT, )
14 )
Respondent, )
15 )
and )
16 )
MICCOSUKEE TRIBE OF INDIANS OF )
17 FLORIDA, the UNITED STATES OF )
AMERICA, FLORIDA DEPARTMENT )
18 OF ENVIRONMENTAL REGULATION, and )
FLORIDA WILDLIFE FEDERATION, )
19 )
Intervenors. )
20
21 ----------------------------------------------------
ORAL DEPOSITION OF LONNIE L. JONES, Ph.D., VOLUME II
22 TAKEN ON MARCH 4, 1993
----------------------------------------------------
23
24
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1 A P P E A R A N C E S:
2 MS. DONNA H. STINSON
Hopping, Boyd, Green & Sams
3 123 South Calhoun Street
P. O. Box 6526
4 Tallahasee, Florida 32301
5 COUNSEL FOR SUGAR CANE GROWERS
COOPERATIVE OF FLORIDA, ET AL.
6
7
8 MR. RICK J. BURGESS
Peeples, Earl & Blank
9 One Biscayne Tower
Suite 3636
10 Two South Biscayne Boulevard
Miami, Florida 33131
11
COUNSEL FOR FLORIDA SUGAR CANE
12 LEAGUE, INC.
13
14
15 MR. KEITH E. SAXE
United States Department of Justice
16 Environmental & Natural Resources Division
General Litigation Section
17 601 Pennsylvania Avenue NW
Room 879
18 Washington, D.C. 20004
19 COUNSEL FOR UNITED STATES OF AMERICA
20
21 ALSO PRESENT: TEOFILO OZUNA, JR.
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1 T A B L E O F C O N T E N T S
2 PAGE
3 AGREEMENTS OF COUNSEL. . . . . . . . . . . . . 193
4 EXAMINATION OF LONNIE L. JONES, Ph.D., VOLUME II
5 BY MR. BURGESS . . . . . . . . . . . . . . 200
6 BY MR. SAXE. . . . . . . . . . . . . . . . 328
7 RE-EXAMINATION
8 BY MS. STINSON . . . . . . . . . . . . . . 318
9 WITNESS' SIGNATURE PAGE. . . . . . . . . . . . 331
10 CORRECTION SHEET . . . . . . . . . . . . . . . 332
11 REPORTER'S CERTIFICATE . . . . . . . . . . . . 334
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1 E X H I B I T S
2 NO. DESCRIPTION PAGE
3 1 Memorandum to G. Johns from R. Lacewell
dtd 5/21/92 . . . . . . . . . . . . . .
4
2 Memorandum to G. Johns from R. Lacewell,
5 L. Jones and T. Ozuna dtd 6/3/92 . . . . 51
6
3 Letter to G. Johns from Peterson Consulting
7 dtd 7/31/92 . . . . . . . . . . . . . .
8 4 Handwritten Notes - 20-Year Analysis . .
9 5 Handwritten Notes . . . . . . . . . . .
10 6 Memorandum to K. Saxe from L. Jones
dtd 10/23/92 . . . . . . . . . . . . . . 52
11
7 Memorandum to K. Saxe from L. Jones and
12 R. Lacewell dtd 8/28/92 . . . . . . . . 54
13 8 Memorandum to K. Saxe from L. Jones
dtd 8/4/92 . . . . . . . . . . . . . . . 65
14
8-A Memorandum to K. Saxe from L. Jones. . . 266
15
9 Handwritten Notes to S. Ponzoli . . . .
16
10 Fax to S. Ponzoli dtd 1/22/93 . . . . .
17
11 Florida Sugar Cane League Summary of
18 Hazen & Sawyer's Potential Economic
Impacts Analysis . . . . . . . . . . . .
19
12 Economic Effects of the SWIM Plan on
20 Sugarcane Production in the Everglades
Agricultural Area of Florida . . . . . . 98
21
13 Memorandum to K. Saxe from R. Lacewell
22 dtd 6/16/92. . . . . . . . . . . . . . .
23 14 Letter to R. Rosenberg from I. Hirschhorn
dtd 5/21/92 . . . . . . . . . . . . . . 94
24
25
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1 E X H I B I T S
2 NO. DESCRIPTION PAGE
3 15 Florida Sugar Cane League Summary of
Hazen & Sawyer's Potential . . . . . . . 104
4
16 Notes . . . . . . . . . . . . . . . . . 141
5
17 Letter to G. Johns from L. Jones . . . . 147
6
18 Agricultural Property Tax Assessment in
7 the EAA . . . . . . . . . . . . . . . . 155
8 19 Review of World Price Situation. . . . . 158
9 20 Review of World Price Situation. . . . . 203
10 21 Letter to G. Johns to Peterson Consulting
dtd 7/31/92 . . . . . . . . . . . . . . 298
11
22 Debt . . . . . . . . . . . . . . . . . . 300
12
23 The Validity of Benefits Transfers:
13 The Case of the Florida Everglades . . .
14 24 Issues Related to the Profitability of
Farming in the EAA Draft 6/15/92. . . . .
15
25 Memorandum to K. Saxe from T. Ozuna
16 dtd 7/30/92 . . . . . . . . . . . . . . .
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1 A G R E E M E N T S
2 DEPOSITION AND ANSWERS of LONNIE L. JONES,
3 Ph.D., VOLUME II, who resides in Bryan, Brazos
4 County, Texas, taken herein by Counsel for
5 PETITIONERS, before Lori A. Belvin, a Certified
6 Shorthand Reporter and Notary Public in and for the
7 State of Texas, on March 4, 1993, between the hours
8 of 8:30 A.M. to 2:00 P.M. at the Hilton Hotel,
9 Board Room, located at 801 University Drive East,
10 College Station, Brazos County, Texas, pursuant to
11 NOTICE and the following stipulations and
12 agreements:
13 IT WAS AGREED by and between counsel for the
14 Petitioners and Respondent, in the above-numbered
15 and styled cause, that all formalities are
16 specifically waived and that the oral deposition of
17 LONNIE L. JONES, Ph.D., VOLUME II, may be taken
18 herein forthwith before Lori A. Belvin, a Certified
19 Shorthand Reporter and Notary Public in and for the
20 State of Texas, said deposition being taken with the
21 same force and effect as though all the requirements
22 of the statutes and rules had been fully complied
23 with.
24 IT WAS FURTHER AGREED that no objections need be
25 made by any party at the time of taking said
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1 deposition, except objections as to the form of the
2 question or the responsiveness of the answer, which
3 if not made during the deposition are waived; but if
4 and when said deposition, or any portion thereof, is
5 offered in evidence on the trial of this cause by
6 any party hereto, it shall be subject to any and all
7 other legal objections, such objections to be made
8 at the time of the tender, the same as though the
9 witness were on the stand personally testifying.
10 IT WAS FURTHER AGREED that the witness shall
11 sign the deposition transcript before any notary
12 public or official authorized to administer oaths;
13 and, at such time, the witness has the privilege of
14 reading over said transcript and making any
15 corrections that he finds to be necessary such
16 corrections to be made in accordance with the Rules
17 of Civil Procedure.
18 IT WAS FURTHER AGREED that in the event the
19 original deposition transcript is not signed by the
20 witness within 20 days of receipt and filed at the
21 time of trial or any hearing, that the original or a
22 certified copy of said transcript may be filed in
23 court and used herein as though the witness had
24 signed said original transcript.
25 IT WAS FURTHER AGREED that after said deposition
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1 transcript has been returned to the deposition
2 officer along with changes, if any, made by the
3 witness in accordance with the Rules of Civil
4 Procedure, that the original deposition transcript,
5 together with copies of all exhibits, will be
6 delivered to MS. DONNA H. STINSON for safekeeping
7 and use in trial.
8 IT WAS FURTHER AGREED that after said deposition
9 transcript has been returned to counsel in
10 accordance with these stipulations and agreements,
11 it will be treated by the parties hereto and may be
12 used herein with the same force and effect as though
13 all statutes and rules relating to the taking and
14 returning into court of depositions had been fully
15 complied with.
16 * * * * *
17
18
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1 P R O C E E D I N G S
2 * * *
3 MR. SAXE: Before we begin, let me
4 raise something that came up last
5 night. In reviewing Professor Dan
6 Bromley's documents, I discovered a
7 copy of the paper that Professor Jones
8 testified yesterday he'd sent to Hazen
9 & Sawyer discussing the world price
10 that appears to be a more complete
11 version. It's substantially longer,
12 eight pages long instead of two.
13 I've shown it to Professor Jones
14 and we'll be producing this as part of
15 Dr. Bromley's collection of producible
16 documents, but I'm proposing to
17 present it today in case you want to
18 examine it and in case you want to ask
19 Professor Jones any questions
20 concerning it.
21 And if you do, and if you want it
22 either to come into evidence, what
23 I'll do is the same thing I'm doing
24 with Exhibit 12. I'll take it back
25 and get the Bates numbers put on it
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1 and then provide it for the court
2 reporter.
3 So here's a copy of it; and Rick
4 you may look at a copy, also.
5 MS. STINSON: What I'd like to do
6 is while Rick's asking questions, take
7 a minute to review it and see if it
8 raises any other questions. But, yes,
9 I'd like to go ahead and perhaps have
10 it to clarify the record --
11 MR. SAXE: That's fine.
12 MS. STINSON: -- and as an
13 exhibit.
14 THE WITNESS: There is -- I guess
15 it's appropriate for me to say that
16 there is one difference that I noticed
17 as I looked at this that I think I had
18 testified that we had talked -- Grace
19 Johns and I have talked about an
20 expected price settlement somewhere in
21 the range of 14 to 16 cents, and I
22 think that was our final conclusion
23 that we would use as an operating
24 range. I notice in this document that
25 I -- in reviewing all of the material,
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1 I found a range probably that's closer
2 of 10 to 15 cents.
3 But as I recall in our verbal
4 conversation back and forth after she
5 had received this, that sort of -- she
6 had said, "Well, I'm going to use
7 the" -- "I'm going to use something
8 like 14 to 16 cents." But she
9 obviously was getting information
10 elsewhere.
11 That's why yesterday when I said
12 14 to 16, I think I was going back to
13 that verbal conversation because I was
14 somewhat mystified by the shortness of
15 the document that was presented as
16 well.
17 MS. STINSON: Okay.
18 MR. SAXE: Just take one moment
19 before we proceed off the record.
20 (WHEREUPON, there was discussion
21 off the record.)
22 MR. SAXE: There is also another
23 document in Dr. Bromley's collection
24 that appears to be a draft version of
25 a document that was discussed
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1 yesterday, authored by Dr. Jones, and
2 I propose to do the same thing
3 basically with this. This is a draft
4 of the memorandum to me from Dr. Jones
5 concerning the subsidies to the
6 Florida sugarcane industry.
7 MS. STINSON: Okay. Yeah.
8 THE WITNESS: I'd like to, if I
9 could, say, also, that you asked me a
10 question, I believe, yesterday as to
11 who had seen this document.
12 MS. STINSON: Right.
13 THE WITNESS: Not this document,
14 but the one that we had before us at
15 the time which was the final draft of
16 what I sent to Mr. Saxe.
17 MS. STINSON: Right.
18 THE WITNESS: I don't remember
19 whether or not I mentioned the fact
20 that Dan Bromley had seen an earlier
21 version, an earlier draft, but --
22 MS. STINSON: I don't remember
23 either.
24 THE WITNESS: Anyway, he did and
25 commented on it; and, as I recall, I
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1 probably used some of his criticisms
2 and comments in the final draft.
3 MR. SAXE: Off the record.
4 (WHEREUPON, there was discussion
5 off the record.)
6 THE REPORTER: We're on the
7 record. And, Dr. Jones, I'd like to
8 caution you that you still remain
9 under oath.
10 * * *
11 LONNIE L. JONES, Ph.D.,
12 having been first duly cautioned and sworn upon
13 his oath to tell the truth, the whole truth
14 and nothing but the truth, testified as follows,
15 to wit:
16 * * *
17 E X A M I N A T I O N
18 * * *
19 BY MR. BURGESS:
20 Q. Good morning. In light of this document,
21 maybe I'll start with the subject matter.
22 My notes reflect -- and obviously your
23 testimony is on the record and it will stand as it
24 stands -- but my notes reflect that yesterday you
25 testified that when the price was dropped to
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1 16 cents per pound, Hazen & Sawyer had a scenario
2 where quote, unquote, "Everyone went out of
3 business."
4 And I think you added that although you
5 didn't have a firm or final opinion on that, your
6 preliminary opinion was that sugar would still be
7 grown there.
8 And my question to you is: What is the
9 basis for that statement?
10 A. As is reflected in that document, the
11 primary basis for -- that conclusion is based on
12 conversations with Dr. Ron Lord as well as reviewing
13 some of the documents that are cited there in terms
14 of the cost of production in Florida in comparison
15 with other countries.
16 The -- I would like -- I might clear up one
17 thing. I thought about this later. And that is
18 that I think there's a statement that you referred
19 to -- that was referred to several times yesterday
20 in questioning about where I had said the very
21 existence of the Florida sugar industry depended on
22 the subsidies.
23 As I recall, when I wrote that statement, I
24 was really relating that to the existence of the
25 Florida sugar industry as we know it today with the
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1 number of acres and the yields per acre, the returns
2 per acre that are observable for the industry at
3 this point in time.
4 I still will stand by that statement that
5 that existence does depend very much on the price
6 support program. I did not mean to imply that
7 without the price support program that the
8 Florida sugar industry would not exist at all. I
9 think it will exist in a different form and to a
10 different extent.
11 MR. SAXE: For the record, let me
12 just indicate that the document
13 Dr. Jones referred to at the start of
14 his testimony is this document -- is
15 the document titled, "Review of World
16 Price Situation." That hasn't come
17 into evidence yet, but that has been
18 provided to Counsel this morning.
19 MR. BURGESS: We might as well go
20 ahead and mark it right now as
21 Exhibit 20.
22 Do you have a copy for him?
23 MR. SAXE: You may mark one of
24 those copies as the exhibit copy,
25 and I'll just mark this.
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1 (WHEREUPON, Exhibit No. 20
2 was marked for identification.)
3 Q. (By Mr. Burgess) With the prices at 14 to
4 16 cents per pound then, are you saying that the
5 number of acres, the yields per acre, and returns
6 per acre would be different than they are today?
7 A. The documents that I cite in this document
8 point to the fact that the Florida sugar industry
9 compares reasonably well in terms of cost and
10 production with what the authors that I refer to
11 call "The major exporting countries," the costs of
12 major exporting countries.
13 There are some costs that have lower costs
14 than exist in Florida. I think that's what you have
15 to look to under a free trade situation, is what is
16 the underlying cost of production of sugar.
17 But the Florida sugar industry compares
18 favorably. So if you look at the entire EAA, where
19 clearly there would be their ability and cost of
20 production among different producers, I think it's
21 safe to conclude that some of those producers would
22 continue in business.
23 Q. And it would be profitable --
24 A. And there could be some acreage changes.
25 Q. But in your opinion, it would still be
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1 profitable to grow sugar at 14 to 16 cents per
2 pound?
3 A. For some growers. For some of the growers
4 in the EAA, given that we have a cost of production
5 of about 17 cents on average for the entire EAA,
6 that means that there could be some growers within
7 the EAA that have cost of production and processing
8 as low as the range at which I have talked about in
9 that document.
10 Q. How does the sugar program work to support
11 the price of sugar? Just in general, how does that
12 function?
13 A. It's my understanding that there are
14 several -- of course, there are several components
15 of it. I'll try to mention just the ones that I
16 think are most important in terms of supporting the
17 price of sugar.
18 First of all, there's the loan rate, which
19 is a construction that allows the commodity credit
20 corporation to give nonrecourse loans to sugar
21 growers up to 18 cents per pound of raw sugar, which
22 sets something as a floor. This is a nonrecourse
23 loan. Consequently the -- if the price were to drop
24 below 18 cents, or probably even near 18 cents, that
25 the farmers -- that simply means that the farmers
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1 don't have to pay that loan back. They can
2 sacrifice the collateralized sugar.
3 Now, there is also the import quota, which
4 in recent years has been converted to a tariff
5 quota; but, nevertheless, it serves to limit the
6 amount of sugar grown elsewhere in the world that
7 can enter the United States at the United States'
8 price.
9 And this quota is operated by the Secretary
10 of Agriculture, Justice Department of Agriculture,
11 to limit the amount of sugar that comes in to
12 achieve what used to be called "a market
13 stabilization price." I don't think they use that
14 term anymore. At one time it was called a market
15 stabilization price, and that price in the last few
16 years has been -- had ranged between 21 and 23 cents
17 per pound.
18 There's a clause in the law that says that
19 the sugar program shall be operated at no cost to
20 the Treasury. That means that the price -- the
21 market price -- the price at which raw sugar is
22 sold, has to be kept at a level that, to all extent
23 possible, avoids default on the nonrecourse loans;
24 but not only for Florida growers, but also for
25 growers in other states.
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1 Q. Okay. So the loan rate and the import
2 quota then would be two of the more important ways
3 that the sugar program supports the price of sugar?
4 A. Those are two of the major components that
5 are in the program that allow the market price to be
6 supported at a level higher than the world price,
7 yes.
8 Q. How would the sugar price to producers
9 change if, let's say, that import quota was
10 increased?
11 A. If it were increased so that the quantity
12 of sugar imported into the United States were
13 reduced?
14 Q. Yes.
15 A. Given that we had no major changes in
16 demand, assuming that demand is -- the domestic
17 demand for sugar remains, say, at about the same
18 level, then the economic theory would suggest that
19 the imposition of an import quota that reduced the
20 amount of sugar coming in from the outside would
21 reduce the supply; and the economic theory would
22 tell us that the price would rise.
23 Q. And would the reverse happen if the quota
24 was decreased, assuming the same assumptions?
25 A. Well, it's my understanding there's a
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1 number of things. If the quota were decreased,
2 which it has been -- as I look at the historic
3 statistics, the import quota for sugar has been
4 lowered through time over the historic period; and I
5 think that's to offset the increase in production
6 domestically.
7 So it has been lowered through time. Now,
8 that has been made up by domestic production, as we
9 have reduced the quota or vice versa. I'm not sure
10 which is the cause and effect. It may be that as
11 domestic production has grown, the USDA has lowered
12 the import quota in order to keep supply and demand
13 in balance.
14 MR. SAXE: Just for clarification,
15 Counsel, for the record, as you frame
16 the question, you're equating
17 increasing the quota with decreasing
18 the amount of imports permitted; is
19 that correct?
20 MR. BURGESS: Well, that's the
21 way he answered it the first time, and
22 then we kept --
23 MR. SAXE: Just kept that
24 polarity?
25 MR. BURGESS: Kept the
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1 consistency.
2 MR. SAXE: Okay. Thanks.
3 Q. (By Mr. Burgess) Do you have an opinion as
4 to whether or not there is a need in this country to
5 continue the current sugar program?
6 MR. SAXE: Objection to form.
7 A. Yeah. I don't know -- could you be a
8 little more -- a little clearer on what you mean by
9 "need." I mean --
10 Q. (By Mr. Burgess) Well, let me ask you: Do
11 you have an opinion as to whether or not the sugar
12 program, in its current form, should be continued or
13 should it be changed?
14 MR. SAXE: Objection to the form;
15 vague, "should be continued."
16 A. Yeah. I don't have a normative response to
17 what should and should not be U.S. policy. I may
18 have some personal opinions about the sugar policy,
19 as well as other policies, agricultural and
20 otherwise; but as far as professional normative
21 judgment, I think that's a little bit beyond my
22 reach.
23 Q. (By Mr. Burgess) Would it be beyond your
24 expertise?
25 A. My expertise.
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1 Q. Do you have any opinions as to whether the
2 farm program for U.S. sugar is going to change over,
3 let's say, the next ten years?
4 A. Well, let me consult my crystal ball here.
5 I think there's a general mood afoot for all
6 agricultural programs to re-examine those.
7 I don't have any particular information
8 that would suggest to me that there's going to be
9 major changes in the program until I hear -- get
10 some information or release from the U.S. Department
11 of Agriculture or the administration or Congress or
12 whoever the people are who make those decisions. I
13 really don't have any reason to suspect that.
14 We had the sugar program for quite sometime
15 now, and I think the sugar program in some form will
16 continue. Whether or not it's exactly the same, as
17 it has been in recent years or not, is really quite
18 hard to say.
19 Q. Do you know how Grace Johns intends to deal
20 with the farm program in her 20-year analysis?
21 A. I do not know what decision she has reached
22 in that regard. We talked about that in the
23 economists' meeting. In fact, I think the
24 economists were right in the middle of that
25 discussion when I got there. I got there a little
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1 bit late to that meeting because of airline
2 problems, but I have not talked to her about the
3 decision that she is going to use in her analysis in
4 that regard.
5 Q. How could one treat the issue of the
6 existence of the sugar program over a 10- or a
7 20-year time frame in an economic impact analysis?
8 How do you provide for change or the possibility of
9 change in that analysis?
10 MR. SAXE: Objection to form;
11 compound.
12 A. How do you provide for change?
13 Q. (By Mr. Burgess) Well, I assume in
14 conducting an economic impact analysis over the next
15 10 years or 20 years, given the fact that the U.S.
16 farm program exists in one form today, how do you,
17 in performing an economic impact analysis, provide
18 for whether that program is going to continue or not
19 continue?
20 A. Well, I think there would be obviously a
21 wide variety of assumptions that you could make in
22 that regard. We could assume that the program is
23 going to continue as it has in recent history. You
24 could then go into a series of alternative scenarios
25 that might exist. Perhaps the safest one is to --
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1 is what the economists often do, is to say that they
2 expect the future will reproduce the recent history
3 in terms of the parameters surrounding the analysis
4 and possibly one of those parameters.
5 As we go off into scenarios, we have no
6 historical data, or data otherwise, to support that,
7 other than it is simply an assumption that we're
8 going to make so that we could look at the effects
9 of a particular scenario.
10 Q. Do you plan to make any recommendations to
11 Grace, one way or the other, in your meeting with
12 her on Monday?
13 A. I have not at this time formulated any
14 recommendations related to assumptions concerning
15 farm policy.
16 Q. Do you have any opinions as to what the
17 effect of GATT will be on the U.S. sugar price if it
18 is implemented under the Dunkel proposal?
19 A. I've discussed that with some other
20 economists, and I wouldn't characterize my
21 understanding of the possible outcomes at this point
22 in time as a final decision or a final opinion.
23 But it's my understanding that the
24 United States has already, through their general Ag
25 policy and given the requirements that are included
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1 in GATT and the Dunkel proposal, that the United
2 States has probably already made the adjustments
3 that would be required in that and that there would
4 not be any significant further adjustments required
5 in foreign policy of the United States if we move
6 forward with those proposals.
7 Q. Such that you don't see any change, or at
8 least major change, with respect to the U.S. sugar
9 price if that proposal were implemented?
10 MR. SAXE: I'm sorry. What was the
11 last question, the last word in your
12 question?
13 Q. (By Mr. Burgess) Such that you don't see
14 any change or major change on the U.S. sugar price
15 if that proposal is implemented, the Dunkel
16 proposal, the GATT?
17 A. If that proposal is implemented, it's my
18 understanding that the requirements that are put on
19 all participating countries have already been
20 satisfied by the United States and that there would
21 not be -- would not be a requirement that they make
22 adjustments in the sugar price or in the policies
23 governing any of the other commodities in the
24 United States.
25 In order for me -- when I say
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1 "requirement," I mean it would not be a requirement
2 in order for them to participate in the
3 implementation of those proposals.
4 Q. Do you know how Grace Johns intends to deal
5 with GATT in her 20-year time frame?
6 A. I do not at this time know what -- if she's
7 reached a decision or what that decision might be.
8 I really don't even know what alternatives she's
9 considering.
10 Q. Are you going to recommend any alternative
11 considerations for her on Monday?
12 A. At this point in time, I haven't formulated
13 any recommendations regarding GATT.
14 Q. Do you have any opinions as to what the
15 effects of NAFTA will be on the U.S. sugar price if
16 NAFTA is implemented into present form?
17 A. Again, I wouldn't characterize my beliefs
18 or my understandings to be a final opinion. I have
19 participated in some studies of NAFTA, not related
20 specifically to sugar, the sugar industry, but more
21 to the general economic effects of NAFTA on the U.S.
22 economy and particularly on the Texas economy.
23 But I wouldn't, at this time, say I have
24 any firm or final opinions about the effect of
25 NAFTA.
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1 Q. What opinions have you expressed vis-a-vis
2 the effects of NAFTA on either the U.S. economy or
3 the Texas economy?
4 A. Well, I think NAFTA is going to have a
5 significant positive effect on the Texas economy. I
6 think it's going to have a positive effect on the
7 U.S. economy. Of course, when you fold it into the
8 magnitude of the U.S. economy, then it is not --
9 it's not a large effect percentagewise; but it will
10 be a positive effect, I believe.
11 Q. Do you have any opinion as to how it will
12 effect the U.S. sugar price?
13 A. I think the effect of NAFTA -- the effects
14 of NAFTA are going to reside primarily in Mexico.
15 The change in the Mexican economy is going to be
16 proportionately greater than the changes in the
17 United States; that is to say, that percentagewise
18 the impacts are going to be -- as a percentage of
19 the overall Mexican economy, the effects are going
20 to be quite a bit greater.
21 My second opinion is that most of the
22 impacts of NAFTA are going to be on the
23 nonagricultural sectors of the economy, both in
24 Mexico and in the United States.
25 I think the effect of NAFTA -- which is
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1 going to perhaps accelerate somewhat the already
2 existing growth in Mexico. You have to understand
3 that Mexico and the United States have already
4 largely liberalized the trade between the two
5 countries.
6 NAFTA is going to eliminate some further
7 trade restrictions, but most of the changes are
8 already in effect; and I think the economic results
9 of that are already ongoing.
10 But I think what we're going to see is that
11 Mexico has a very young population. They have
12 significant resources and with the capital
13 investment from the United States that I expect to
14 occur, I think we're going to see Mexico with a very
15 rapidly growing economy.
16 And as they do that, we're going to see the
17 demand for consumer products rise significantly in
18 Mexico; and I think that's going to affect the U.S.
19 sugar industry, as well as other industries in the
20 U.S.
21 Q. In what way is it going to effect the U.S.
22 sugar industry?
23 A. I think that we're going to see a very
24 rapid increase -- we'll see a rapid and significant
25 increase in the demand for sugar, the demand for
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1 sugar-bearing products, the soft drink industry,
2 bakery goods, pastries, and so forth in Mexico; and
3 that's going to increase their demand, their
4 domestic -- for domestic products as well as
5 imported products.
6 Q. Do you have an opinion as to how NAFTA
7 might affect the U.S. exports of high fructose corn
8 syrup to Mexico?
9 A. Well, I think it perhaps would be affected
10 in the same way as sugar is.
11 Q. Do you have any idea as to how Grace Johns
12 plans to treat NAFTA in her 20-year analysis?
13 A. At this point in time, I have no
14 information or knowledge as to how she plans to do
15 that.
16 Q. Do you have any recommendations for her in
17 that regard?
18 A. I have not formulated any recommendations
19 at this point in time.
20 Q. How does an economic impact analysis differ
21 from a farm level analysis?
22 A. Okay. I'm going to have to ask you to
23 clarify, if you would.
24 Q. Well, there's some testimony -- I think you
25 were here during the time of Dr. Lacewell's
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1 deposition when he testified that certain things
2 that Polopolus and Richardson did may have been
3 relevant for a farm level analysis or for an
4 analysis of farm firm survival, but that it wasn't
5 overall relevant to the economic impact analysis
6 that Grace Johns did?
7 A. That helps -- when you say "farm level
8 analysis," you're talking about the farm survival
9 analysis, basically, that they did. An economic
10 impact analysis, you're talking about a change in
11 the resource use within the industry that would
12 stimulate impacts not only in that industry but also
13 in other parts of the economy.
14 Q. Maybe it would be beneficial if you were --
15 I think you just defined economic impact analysis.
16 Is that how you would define conducting an economic
17 impact analysis?
18 MR. SAXE: Objection to form.
19 A. Yes. I would define an economic impact
20 analysis as one in which we look at the increase or
21 a decrease in some direct economic activity, which
22 then leads to changes in other economic activities
23 in other parts of the economy.
24 So what you're looking at -- excuse me. Go
25 ahead.
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1 MR. SAXE: Counsel, which of the two,
2 "economic impact analysis" or "farm
3 firm survival" were you asking for a
4 definition?
5 MR. BURGESS: Economic impact
6 analysis.
7 MR. SAXE: Okay.
8 Q. (By Mr. Burgess) Which I think that's what
9 you were answering, correct?
10 A. Yes. The difference was your first
11 question. "What are the differences between an
12 economic impact analysis" -- and you said, "farm
13 level analysis" -- but I assume you're talking about
14 the analysis that Richardson and Polopolus did?
15 Q. Well, I think you've defined economic
16 impact analysis. And do you also have a definition
17 for what might be called a "farm level analysis"?
18 Does that term have any meaning for you?
19 A. That term could have a lot of different
20 meanings. Farm level analysis is very broad; and it
21 could be, you know, anything from a simple partial
22 budgeting analysis to a complete modeling effort for
23 a farm to look at what happens to that farm under
24 different conditions.
25 Now, -- well, go ahead.
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1 Q. Does the term "farm firm survival" or "farm
2 firm survival analysis" have any meaning for you?
3 A. To me, that is a term that has been related
4 to and used in conjunction with the type of analysis
5 that Dr. James Richardson does and did in the case
6 of Florida.
7 Q. Which is what? I mean, how would you
8 define a "farm firm analysis"?
9 A. Well, basically the form --
10 MR. SAXE: Objection to form, "farm
11 firm survival analysis." You've moved
12 past farm level analysis. You're
13 talking about farm firm survival
14 analysis; is that correct?
15 Q. (By Mr. Burgess) Or farm firm analysis.
16 Are they two different things to you?
17 A. Well, they can be, yes. I think "farm
18 level analysis" is a broader term than "farm firm
19 survival."
20 Q. How about farm firm analysis?
21 A. What do you mean? What about it? I don't
22 understand your question. Are you asking me to
23 define it?
24 Q. Yeah. I think -- before Keith interrupted,
25 I think we were on track. I think that we were
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1 talking about -- I think I asked you whether the
2 term "farm firm analysis" had any meaning for you;
3 and you said, "Yes it did. It relates to the type of
4 analysis that Jim Richardson does and that he did in
5 Florida."
6 A. No. No, I disagree. You asked me, "Does
7 the term 'farm firm survival' have any meaning?"
8 And I said, "Yes, it does. It relates to
9 the kind of work that Dr. Richardson does."
10 And the point --
11 Q. Go ahead.
12 A. My point is farm level analysis can mean
13 any number of things.
14 Q. Including farm firm survival?
15 A. Yes. But farm firm survival -- farm level
16 analysis includes farm firm survival analysis, but
17 not necessarily the other way around.
18 Q. And, then, your understanding of what
19 Richardson did in Florida was what?
20 A. Farm firm survival.
21 Q. And what is the difference between "farm
22 firm survival" and "economic impact analysis"?
23 A. The -- specifically in the case of the
24 analyses that were done in Florida, an economic
25 impact analysis, which is similar to the one that
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1 Hazen & Sawyer did or it is one example of that kind
2 of analysis, the key factor there is what happens to
3 the use of resources in some target industry and if
4 you're looking at an increase or a decrease; and
5 with that change, what are the additional effects on
6 the rest of the economy.
7 The way Grace Johns and Hazen & Sawyer set
8 up their analysis, which is, in my opinion, a very
9 typical way that this is done, is to take a look at
10 what happens to the land resource in agriculture.
11 If you were in another industry, it might
12 be different; but in agriculture, the key factor is
13 what happens to land.
14 And so she set up her model in such a way
15 that she could, through time, run a baseline
16 analysis, which projected the production levels and
17 land use levels for the industries in the EAA in
18 agriculture for 10 years.
19 Then having established that baseline, she
20 went in and she began to impose some levels of
21 factors related to the SWIM plan; first the STA's,
22 then the BMP's, and then the different assessment
23 levels.
24 She looked at the effect of that on returns
25 to land. Her underlying assumption is that as long
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1 as the returns to land are positive, that land will
2 stay in production. But if the returns to land go
3 to zero or negative, then that land is taken out of
4 production. That is when you begin to stimulate the
5 loss of sales, jobs, income, and so forth. So that
6 is my understanding of an economic impact analysis;
7 and it's my understanding of how she used it, used
8 that methodology and applied it in the EAA.
9 Q. What is your understanding as to what
10 Polopolus and Richardson did from the aspect of a
11 farm firm survival analysis?
12 A. It's my understanding that they used
13 stochastic FLIPSIM model, which is designed to look
14 at -- take some representative farm that's defined
15 by the user. It's a hypothetical farm, in essence;
16 and it has certain characteristics. It has -- I
17 don't know that I can enumerate all of those
18 characteristics; but it has characteristics relating
19 to the assets of that farm, the equity position of
20 that farm, the debt position of that farm, allowance
21 for family living, an allowance for income taxes,
22 and a number of other factors.
23 Now, that model, as I understand it,
24 basically looks at what happens to the financial
25 position of that individual farm under varying
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1 circumstances, some of which might be policy, as in
2 the case of the SWIM plan.
3 Q. And that's your understanding as to what
4 they did?
5 A. I think that is -- those are the components
6 of the model and his analysis that I can recall
7 sitting here this morning. There may be some others
8 that don't come readily to mind, but I think those
9 are the key factors because, the farm firm analysis,
10 what you're doing is tracking the financial
11 condition of an individual firm.
12 Q. And then relating that firm to a broader
13 area or --
14 A. Well, this is where I really begin to run
15 into some problems as to how you can take an
16 individual firm and examine its financial position
17 and relate that to a broader area. I think they've
18 done that, but how they did it is -- to me is still
19 rather mystifying.
20 Q. I think I understand your testimony
21 relative to -- I think that some of this was as a
22 result of your testimony yesterday, that in your
23 opinion FLIPSIM in the stochastic mode was not the
24 best methodology to be employed to carry out the
25 objectives that Grace Johns had as those objectives
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1 were given to her by the board; is that correct?
2 A. I think FLIPSIM in the stochastic mode, as
3 I understand it, has some problems -- in the results
4 that it generates are not directly transferable to
5 secondary impacts or broad generalization for an
6 entire area.
7 Q. That's where there's a breakdown for you
8 and the ability to use FLIPSIM or an ability to use
9 FLIPSIM to model the impacts of the SWIM plan?
10 A. Right. That's one of the problems that I
11 see with it. What you're doing -- as we said in the
12 beginning, we said as we look at farm firm
13 survival. So if you look at -- a farm can go
14 bankrupt while the returns to land of the land that
15 it's farming is still positive; in which case,
16 someone else may take over the operation of that
17 land. And as far as the effects on the economy is
18 concerned, they may be negligible, zero; or it could
19 be even positive if it was taken over by a more
20 efficient and more productive operator.
21 Q. Do you have an opinion as to whether or not
22 FLIPSIM can be used in the stochastic mode to --
23 strike that.
24 In the context of an EAA examination; that
25 is, an examination of the effect of the SWIM plan
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1 program on the EAA, how, in your opinion, can
2 FLIPSIM be used in the stochastic mode and what
3 would that tell you as opposed to telling you
4 whether or not land goes out of production, which I
5 think you said it doesn't?
6 MR. SAXE: Objection. I think
7 assuming facts not in evidence. Are
8 you assuming that the witness believes
9 that FLIPSIM stochastically can be
10 used to evaluate the impacts of
11 implementing the SWIM plan on the area
12 economy?
13 Q. (By Mr. Burgess) Can it be?
14 A. On the area of economy? Now I'm confused
15 as to what the question is.
16 Q. How can FLIPSIM be used stochastically to
17 evaluate the effects of the SWIM plan on the EAA?
18 A. The EAA as a whole?
19 Q. Can it be, yes.
20 A. In a stochastic mode?
21 Q. Yes.
22 A. It's my opinion, given the construction of
23 FLIPSIM in a stochastic mode, what it looks at and
24 what it produces, that it has greatly serious
25 limitations for looking at what happens to the EAA
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1 economic impacts as a region.
2 Q. Can it be used to look at those impacts on
3 the region in the static mode?
4 A. Well, as I testified yesterday, when
5 FLIPSIM is run in a static mode, it's my opinion
6 that it's not greatly different from using another
7 accounting type model which might be constructed in
8 a spreadsheet format, in any of the ones that are
9 conveniently available. And so, in that sense, it
10 can be used. Hazen & Sawyer, in fact, used it to
11 look at the change through time so that you could
12 carry over from one year to the next the results of
13 previous years.
14 Now, I think I also testified yesterday
15 that there were some problems with it in the way
16 that it's constructed in its generic form. There
17 are some things when you try to relate to
18 agriculture, I think, that you have to go in and
19 change and change those underlying assumptions.
20 Q. To use it statically?
21 A. Even to use it statically, but those are
22 not overwhelming. I mean, they can be done. It's a
23 matter of changing the program some more.
24 Q. Can FLIPSIM be used stochastically to -- in
25 the context of the EAA -- model individual model
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1 farms within five different yield belts which
2 results can then be extrapolated to give you an
3 effect on or over the entire EAA?
4 A. I think there are serious problems there.
5 Q. And those problems are what?
6 A. Well, what I've already testified to. The
7 fact that the construction of FLIPSIM, the things
8 that it runs, and the results it produces are
9 basically changes in the financial position of an
10 individual firm. Those are affected by a very large
11 number of things other than the cost of production
12 and price and returns to land.
13 So FLIPSIM is not necessarily going to
14 remove a firm -- remove an acre of land from
15 production as it removes a firm from operating in
16 that business.
17 Q. Is that, in your opinion, the key
18 difference between what Polopolus and Richardson did
19 and what Hazen & Sawyer did, meaning that Hazen &
20 Sawyer looked at when land goes out of production,
21 and Polopolus and Richardson looked more at when the
22 firm goes out of production?
23 A. In my opinion, that is the key difference
24 in the underlying methodology. I guess methodology
25 means the logic of the method.
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1 And the logic of the method for Hazen &
2 Sawyer is to key on the returns to land, look at
3 costs, look at returns, and to take out the expenses
4 of production, the returns to the other factors of
5 production, and look at what -- is this land still
6 profitable in this enterprise. So long as it is and
7 this is the highest and best use, then it will stay
8 in that production. If it's not, it's going to go
9 out or go to another alternative and there are going
10 to have to be adjustments made.
11 FLIPSIM, on the other hand, is looking at a
12 complete and different thing.
13 Q. Have you conducted or participated in
14 studies in the past which considered whether or not
15 lands in agricultural production would be forced out
16 of production by some policy or program that was
17 being pursued?
18 A. I've been involved in studies that looked
19 at changes in regional agricultural production in
20 other areas of the country. Those are listed in my
21 list of publications provided in my resume.
22 Q. You say changes in reasonable agricultural?
23 A. Regional.
24 Q. I'm sorry. Regional agricultural
25 production. And just ballparking, how many of such
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1 studies?
2 A. I can't give you an exact number. Just
3 ballparking? Oh, let's say, more than five and less
4 than a dozen.
5 Q. And when you say "changes in regional
6 agricultural production," did some of them consider
7 whether or not -- or all of them consider whether or
8 not lands that were in production might be forced
9 out of production as a result of some policy or
10 program?
11 A. Yes, some of them did. Perhaps all of them
12 did. I'd have to review the list to be certain
13 about that. But that is probably the case.
14 Q. In any of those studies, did you or those
15 that you participated in use the FLIPSIM model?
16 A. No.
17 Q. In some or all of those studies -- well,
18 strike that.
19 What methodology did you go about in those
20 studies to determine those regional agricultural
21 impacts?
22 MR. SAXE: Objection to form,
23 Counsel, are you asking for a specific
24 aspect of methodology, like, modeling
25 FLIPSIM versus substitutes; or do you
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1 want to -- is it a very broad question
2 about it?
3 MR. BURGESS: It's a very broad
4 question.
5 A. Again, without the benefit of being able to
6 review my publication list, I can tell you that I
7 can recall studies in which we have used linear
8 programming models to look at the direct effects and
9 the direct adjustments within agriculture and then
10 link that up with an input/output model to look at
11 the secondary effects on the other sectors of the
12 economy, on personal income and employment.
13 I would say from my analysis that's been
14 the primary methodology that I've used in those
15 studies.
16 Q. (By Mr. Burgess) "Linear programming," is
17 that what you meant?
18 A. The marriage of linear programming and
19 input/output and all that.
20 Q. In some or all of those studies, did you
21 consider factors such as long-term debt or income
22 taxes?
23 A. Never income taxes. My opinion, as I
24 testified yesterday, income taxes are an
25 inappropriate consideration in economic impact
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1 analysis; and we never, to the best of my
2 recollection, ever considered long-term debt of
3 individual farms either.
4 That, again, points more to farm firm
5 survival rather than industrial or industrywide
6 production.
7 Q. How about yield risk? Did you consider
8 yield risk in any of those studies?
9 A. No, not using linear programming.
10 (WHEREUPON, there was discussion
11 off the record.)
12 Q. (By Mr. Burgess) In some or all of those
13 studies, did you consider uses for the land?
14 A. Yes.
15 Q. And how do you go about considering an
16 alternative use for the land?
17 A. Through the activities that you include in
18 the linear programming model.
19 No wonder you can't understand, I can't
20 pronounce it.
21 Q. And I'm just not familiar with that model,
22 so maybe you can elaborate.
23 A. Yeah. Activity has a specific meaning
24 there, and what you do is -- well, first of all, you
25 examine the region to see what crops are grown and
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1 if there are viable alternatives; and if there are,
2 then you'll want to represent those in the model,
3 each one being an activity.
4 You may have irrigated cotton as an
5 activity, dryland cotton as an activity, same thing
6 for grain sorghum, wheat, livestock production. And
7 basically what the linear programming model does --
8 is, until you put in the resource requirements for
9 each of those activities, the net returns per acre
10 of land, and when you run this model, it will select
11 the combination of activities that maximizes the
12 return to land and that -- and it produces for you
13 the number of acres that will be allocated to each
14 one of those crops, as well as other information.
15 Q. Did Grace Johns consider in the context of
16 her 10-year study any alternative uses for the land?
17 A. It's my understanding that she did not look
18 at alternatives. And, basically, the assumption
19 there, I guess, is that -- I do recall discussions
20 with her about alternatives; and I think it's a safe
21 conclusion that when you look at sugar and
22 vegetables and the returns to land that's achieved
23 from those crops and other crops that are suitable
24 for the Muck soil, you go through the cow/calf
25 operations in ranching, which is a large drop in net
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1 returns when you do that.
2 Q. From sugar and vegetables to cow/calf?
3 A. Yes. So I believe, as I recall from her
4 contract completion report in the final analysis,
5 she does not put in any net returns that would come
6 as sugar land goes from, let's say, sugar to
7 cow/calf. That would have an effect of modifying
8 somewhat the loss in the impacts, but I don't think
9 she did that.
10 Now, she did include, I believe, rice
11 production; but that was more in terms of a rotation
12 effect to achieve the -- as part of the BMP
13 scenarios.
14 Q. Do you know whether in the context of her
15 20-year study she's going to examine cow/calf
16 production in the EAA?
17 A. I do not know whether or not whether she is
18 or not at this point in time.
19 Q. Have you reviewed that concept at all?
20 A. What concept?
21 Q. The use of cow/calf in the EAA as an
22 alternative?
23 A. No, not in any detail, I haven't.
24 Q. You don't know whether it would' be
25 profitable endeavor or not?
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1 A. No, I don't know. It is my understanding
2 that there is some pasture land now in the EAA.
3 Whether or not it would be feasible to expand that
4 to larger acreage, I'd have to study it and look
5 into it to form any kind of an opinion.
6 Q. Just so I'm clear, do you know whether or
7 not Grace is going to consider any of these
8 alternative uses in a linear programming mode or
9 model that you've just testified to?
10 MR. SAXE: Objection to form.
11 Are you asking -- are you asking
12 whether she's going to consider these
13 factors and if she's going to consider
14 them, whether she's going to be using
15 them in linear programming; or are you
16 assuming that she's going to be --
17 Q. (By Mr. Burgess) Do you know whether Grace
18 is using a linear programming model in her 20-year
19 study?
20 A. I know that she didn't use the linear
21 program in the 10-year study. Whether or not she
22 plans to use it in the 20-year study, I do not
23 know.
24 Q. Do you have any knowledge as to whether
25 she's going to consider alternate land possibilities
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1 in her 20-year study?
2 A. No, I don't know.
3 (WHEREUPON, a recess was taken.)
4 Q. (By Mr. Burgess) Dr. Jones, do you recall
5 your testimony yesterday relative to -- I think it
6 was your Houston case where you said that concerning
7 examination of all the alternatives to reach policy
8 goals that would be a beneficial thing to do, a
9 beneficial exercise?
10 A. I believe I've testified that in that case
11 it proved to be a beneficial exercise because there
12 was no law or policy regulating individual pumping
13 of the water; and the study that we did, along with
14 other studies, assisted the legislature in
15 formulating a policy and implementing that policy to
16 bring that problem under control.
17 Q. And that, in fact, as a result of your
18 efforts, it showed that it was less expensive to use
19 available storm water in the area to reduce pumping
20 which wouldn't mine the aquifer, correct?
21 A. Storm water -- it was really -- the surface
22 water was really stored in reservoirs. I don't know
23 if that has the same meaning as storm water.
24 Q. Okay. Surface water?
25 A. There was surface water available. And
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1 when we did our study and were able to estimate and
2 quantify the cost of an economic -- well, the cost,
3 basically, of the externality, which was in terms of
4 loss of property, property damages, loss of income
5 from businesses and so forth, when we added that to
6 the cost of pumping water, that turned out to exceed
7 the cost of transporting and treating surface water
8 to meet the demand in the region.
9 Q. So when you conducted your examination, did
10 you look at not only the financial or financing
11 costs associated with the alternative, but also the
12 economic impact costs associated with the
13 alternative?
14 A. We had estimates from the City of Houston,
15 as I recall, and some of their consulting engineers
16 as to the cost per acre foot -- I believe was our
17 unit that we used -- of delivering or treating water
18 to the Houston area to get it into their
19 distribution system. So we did not have to go back
20 and look at the -- in a detailed examination of the
21 financing of the alternative system. That
22 information was available to us.
23 Q. Was available to you already. If it
24 wasn't, would you have done that?
25 A. That would have --
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1 Q. -- been a component of your study?
2 A. You would have to -- in order to make a
3 comparison between the direct pumping cost and the
4 externality, which we had estimated, you would have
5 to come to a cost per unit, a cost per acre foot or
6 cost per gallon of water from the alternatives so
7 you could make a comparison.
8 Q. What was the whole point of your effort to
9 examine the cost of these alternatives?
10 A. A bit of history: The argument -- this
11 issue had been debated for a long period of time as
12 to whether or not we should use alternative water.
13 The problem being that the damages that
14 were being incurred were not necessarily -- well,
15 let me rephrase that.
16 The property owners who were incurring
17 damages and lawsuits were not necessarily the same
18 property owners who were pumping the water. In many
19 cases they were one in the same; but in most cases,
20 they were not. It didn't necessarily follow that if
21 you were using a lot of water, it was going to be
22 your property that's damaged. Because you might be
23 inland and someone else is sitting -- a resident
24 who's sitting on the coastline, sinking into the
25 Galveston Bay may use very little water.
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1 So this debate had gone on for some time.
2 In fact, I think it's fairly safe to say it was
3 raised for some time. And with the people who were
4 being damaged saying that, "We need to go to an
5 alternative source of water." The people who were
6 pumping saying, "We can't afford to, that this is" --
7 "this source of water is much less expensive."
8 And so there was no vehicle for bringing
9 all this together. There was no way to make a
10 comparison because we didn't know what the extent or
11 the cost of the externalities were before we did the
12 study.
13 Q. And then that's what the study did; it
14 examined the externalities, examined the cost of the
15 externalities?
16 A. That's right.
17 Q. In the context of this case, assume for the
18 purposes of my question that there are alternative
19 ways provided for by law. That was one of your
20 dependencies, I think, yesterday, "provided for by
21 law" to achieve compliance with the water quality
22 goals of the SWIM plan.
23 Would you agree that in the context of
24 performing an economic impact analysis that those
25 alternatives should be considered?
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1 MR. SAXE: Objection to form; "should
2 be considered" is vague.
3 MR. BURGESS: I'm asking in the
4 context of performing an economic
5 impact analysis, should they be
6 considered in his professional
7 opinion. He's testified in the
8 context of his previous work that
9 looking at lower cost alternatives is
10 something that should be done, that it
11 was done in that case. I'm asking in
12 the context of this case, does he have
13 an opinion as to whether it should be
14 done.
15 A. Could I ask a question about your question?
16 Q. (By Mr. Burgess) Yeah.
17 A. You started out by saying "assume
18 something," and I don't remember what it was you
19 were asking me to assume.
20 Q. Yesterday, for some reason, it was
21 important to you that examination of alternatives
22 depended, you said, I think, primarily on whether
23 there exists legislation that provides for this,
24 provides for examination of the alternatives; and
25 I'm just saying assume for my purposes and my
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1 question that such legislation exists.
2 A. Well, legislation does exist, as I
3 understand it, for implementation of the SWIM plan.
4 In that case, I don't find it -- I would
5 not -- it's been my opinion, I guess, throughout my
6 profession that under those circumstances, it's not
7 imperative that economic analysis be done if the
8 legislature has considered the proposal.
9 It's been, I assume, debated in the halls
10 of Congress with input from all parties; and it's
11 been passed. It's my understanding that the SWIM
12 plan was passed unanimously. This seems to me to
13 speak rather strongly to the implementation of the
14 plan. And so I have some questions about whether or
15 not this similar kind of analysis that we did in
16 Houston would be required in this case.
17 Q. I'm not asking about requirements; and
18 assume, if you will, that there was no economic
19 impact study done for Congress or for the
20 legislature in Florida when it passed the SWIM
21 plan.
22 Are you telling me that just because it was
23 passed unanimously, if after that passage an
24 economic impact study is done which shows that the
25 area is going to be wiped out by implementation of
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1 what the legislature passed unanimously, that that's
2 not important to you as an agricultural economist or
3 a natural resource economist to consider?
4 MS. STINSON: I've got to object to
5 form. You said when the legislature
6 passed the SWIM plan. The legislature
7 did not pass the SWIM plan.
8 MR. SAXE: I'm going to also
9 object to form, but maybe I can be --
10 hopefully be constructive. Is your
11 question tending along the lines of
12 where the goal is to do an economic
13 impact analysis of implementing a
14 policy. Whether it is required to
15 analyze the economic impacts of
16 alternatives to the policy? Is that
17 effectively what you're asking?
18 MR. BURGESS: No, I'm not asking
19 that at all. I'm not asking whether
20 something is required or not
21 required. I'm trying to draw on his
22 experience that he testified to
23 yesterday with respect to the Houston
24 case, where my notes reflect that he
25 said, "Looking at the cost of
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1 alternatives and the least cost
2 alternatives is a beneficial
3 exercise."
4 I think he even said, "I assume
5 that it would always be prudent to do
6 that, to examine alternative ways to
7 alleviate, in that case, the damage,
8 the pumping practice."
9 MR. SAXE: And I think the
10 witness has testified that your
11 question today, your hypothetical, is
12 distinguishable and explained the
13 basis for distinguishing it from the
14 previous experience with the soil
15 subsidence and what kind of an impact
16 it's having.
17 Q. (By Mr. Burgess) Is that true what your
18 Counsel just said?
19 A. I do make a distinction between the two,
20 yes.
21 Q. Is the distinction the fact that the
22 Florida Legislature has spoke and passed a statute
23 unanimously which provides for a SWIM plan to be
24 implemented; and therefore, there is, in your mind,
25 no requirement that economic impacts be examined?
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1 A. I think we have -- I think there are a
2 number of situations of this type and this is a
3 democracy and we pass laws in an open forum. I
4 would assume that in any event the parties would
5 have been present in the debate for that and --
6 those potential impacts have been heard and taken
7 into consideration as the political and legal
8 process move forward.
9 Q. Is it your understanding or your testimony
10 that the Florida Legislature passed the SWIM plan?
11 A. They passed the Marjory Stoneman Douglas
12 Act. And I'll have to admit that I'm not a lawyer
13 and I don't know all of the intricate connections
14 between the Marjory Stoneman Douglas Act, the
15 settlement agreement of the SWIM plan per se.
16 Now, I have read the SWIM plan document,
17 parts of it, particularly those relating to
18 economics, which I assume was developed for purposes
19 of implementation of the Act. And that's been
20 adopted by the board. So it seems to me that as a --
21 not as a lawyer, but just as an observer, it seems
22 to me that the legal connection is pretty direct.
23 Q. Let's get away from -- and I'm not asking
24 you for legal conclusions, but you said you reviewed
25 the SWIM plan.
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1 Do you understand or is it your
2 understanding that the whole reason these various
3 assessments are being considered are to alleviate
4 some claimed water quality conditions? We'll start
5 at that broad point. Is that your understanding?
6 MR. SAXE: Objection to form.
7 A. Well --
8 Q. (By Mr. Burgess) Let me put it this way:
9 Why are we considering these assessments against the
10 farmers?
11 A. It is my understanding that there is a
12 problem, an identified problem of phosphorus
13 concentrations in water that's leaving the
14 agricultural area and going into the Everglades.
15 Q. And how does the SWIM plan purport to
16 alleviate those problems?
17 A. It's my understanding, from what I know of
18 it, that it proposes to try to clean up the water as
19 it -- between the point where it leaves the
20 agricultural area and goes into the Everglades to
21 reduce the phosphorus concentration.
22 Q. Through the construction of STA's?
23 A. That's one of the factors.
24 Q. So, then, assume then for purposes of my
25 question that there are alternatives which exist to
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1 meet those same goals enunciated in the SWIM plan,
2 i.e., cleaning up the water. I'm asking you
3 whether -- do you have an opinion with respect to
4 whether those alternatives should be evaluated or
5 considered?
6 A. You mean evaluated by the board?
7 Q. No. Evaluated -- let's talk about from a
8 financial standpoint. I mean both from a cost
9 standpoint and an economic impact standpoint to the
10 community, to the EAA. Should those alternatives be
11 considered as a policy?
12 MR. SAXE: I'm going to object to form
13 because of the vagueness of should
14 those alternatives be considered
15 economically. You mean, should -- you
16 can answer the question if you
17 understand it.
18 A. Well, I do think the word "should" asks for
19 a normative response; and I can't give that. I
20 wouldn't say necessarily that the board should
21 evaluate those because they've adopted the SWIM
22 plan. Now, if somebody else wanted to evaluate
23 those, then you could put the "should" question to
24 them and perhaps that would be appropriate.
25 Q. (By Mr. Burgess) As an economist, you have
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1 no opinion one way or the other as to whether
2 alternatives which are provided for by law and which
3 might have a lower economic impact and a lower
4 financial cost or burden, you have no opinion as to
5 whether or not those should be considered?
6 MR. SAXE: Counsel, for clarification,
7 is your question whether alternatives,
8 cheaper alternatives, equally
9 effective should always be considered
10 under every circumstance?
11 MR. BURGESS: No, it's not that
12 at all.
13 A. I think you're asking me to respond to a
14 very general question, which is a little bit beyond
15 the effort that I've put into this work so far; and
16 I'm just not sure that I'm -- I haven't -- I have
17 not been asked to look at alternatives or any of the
18 things that you've mentioned.
19 I've been asked to assist with the
20 evaluation of the SWIM plan; and so you've kind of
21 got me beyond, I guess, what I would consider to be
22 my expertise in this particular case with a very
23 general question.
24 Q. (By Mr. Burgess) Whether or not lower cost
25 alternatives provided for by law -- and by lower
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1 cost, I mean lower financial cost and lower cost in
2 terms of economic impact -- whether or not those
3 should be examined, in your opinion, is beyond your
4 area of expertise as an economist?
5 A. Well, you know, again, as I said earlier, I
6 don't have a complete understanding of the legal --
7 Q. And I don't want you to. I'm not asking
8 that as a predicate for my question. I'm saying,
9 assume that these alternatives and alternative ways
10 are provided for by law. You can take that as a
11 given.
12 A. We have to assume a little further I think,
13 do we not? Don't we, also, have to assume that the
14 South Florida Water Management District wants or
15 requires those to be considered and so forth?
16 That's what the "should" part of your
17 question, I think, is asking me to respond to, is to
18 tell you what I think they should do; and what I'm
19 trying to say to you is that takes me beyond
20 anything that I've been asked to do or that I have
21 worked on in this case so far.
22 Q. And then if it makes a difference for your
23 answer, assume that the South Florida Water
24 Management District endorses the idea of examining
25 these alternative concepts.
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1 A. Well, in that case, if we're sitting at a
2 point in time where we have a large number of
3 alternatives, those have been worked out by the
4 biologists and the soil scientists and they have
5 brought them to the table, they've come to an
6 agreement that, yes, this is Alternative A, it will
7 accomplish "X"; this is Alternative B, it will
8 accomplish "Y." We're in agreement on that. We
9 think that's a -- those are suitable alternatives.
10 Then it would be appropriate for me as an economist
11 to look at those where I would be asked to do so.
12 Q. Do you have any idea as to whether or not
13 that scenario which you just outlined, in fact,
14 occurred with respect to the STA's or not?
15 A. No, I don't. I know there is a SAGE
16 Committee and it has representatives from a wide
17 body of interests and I think they are the technical
18 committee that are looking at implementation, but
19 I've not been privy to very much of their material
20 or conversation.
21 What I have done, basically, is to examine
22 the Hazen & Sawyer analysis of the SWIM plan, as she
23 was asked to analyze it by the board and then
24 subsequently, also, attempted to look at some of the
25 material that was presented by Dr. Polopolus and
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1 Dr. Richardson.
2 Q. If, in fact, it is decided by the South
3 Florida Water Management District that STA's are not
4 the way to solve the water quality problem alleged
5 in the SWIM plan, how would that affect Grace Johns'
6 study?
7 MR. SAXE: What was the predicate
8 again? I'm sorry.
9 Q. (By Mr. Burgess) Assume that the board
10 decides STA's aren't the way to solve the water
11 problem.
12 A. They're not going to build STA's?
13 Q. Right.
14 A. Is that what you're saying? What about the
15 other parts that are included in her study? Do they
16 remain or -- I mean, not building STA's has
17 implications for other assumptions in her 10-year
18 study.
19 Q. That's kind of what I'm asking. Assume
20 that's the decision of the board. How does that
21 affect her study? What implications does it have?
22 A. Well, it's my understanding that, as she
23 went through sort of the layering of these impacts,
24 that she had information from the technical
25 scientists, physical scientists which assume sort of
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1 an interconnection between the BMP's would make a
2 certain level of reduction and STA's would -- and
3 when you combine these, that you would get the
4 desired level of reduction in phosphorus
5 concentration. If you pull the STA's out of that,
6 then you'd have to go back and re-examine all of
7 those assumptions and levels as to what each part
8 was doing to see whether or not the analysis was
9 still appropriate or whether another analysis would
10 need to be done.
11 Q. Are you saying it's dependent upon whether
12 or not there is something that replaces the STA's?
13 A. That's not what you asked me. You asked
14 me, "Let's assume that we're going to build STA's."
15 Q. Right. I'm saying, is your answer
16 dependent upon whether or not we substitute some
17 other program for the STA's?
18 A. I don't understand your question.
19 Q. I think I understood your answer.
20 Do you know what the moderating provisions
21 are under Florida's Administrative Code?
22 A. No, I have no -- I'd have to -- I've never
23 seen the Florida -- what do you call it, the
24 administrative code?
25 Q. Do you know what a mixing zone is in the
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1 context of Florida water quality standards?
2 A. I have seen that term. I will have to
3 review some notes and documents to have a clear
4 response to that.
5 Q. Do you know what "site specific alternative
6 criteria" are in the context of the Florida water
7 quality standards?
8 A. Again, I have either seen or heard that
9 term in meetings; but I couldn't give you a definite
10 definition of it.
11 Q. Have you been asked to look at the economic
12 costs associated with either mixing zones or site
13 specific alternative criteria?
14 A. Have I personally been asked to evaluate --
15 I haven't personally been asked to evaluate any
16 costs, other than the work that we did that was
17 presented to the South Florida Water Management
18 Board recently.
19 Q. Is anyone, to your knowledge, examining the
20 concepts of the economic costs of mixing zones or
21 site specific alternative criteria?
22 A. Not to my knowledge, those specific items.
23 Q. For your February 11th presentation to the
24 governing board, did you independently calculate the
25 cost of the BMP's for the sugarcane grower?
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1 A. For that -- I think you'll find, if you
2 look at our presentation, that we state in there
3 that we use the information that was available from
4 the Brown & Caldwell Consultants -- I believe is the
5 name of the firm. And it is a draft report of the
6 least cost BMP's that was submitted to the South
7 Florida Water Management District in January 1993.
8 And what they did in terms of BMP's was
9 look at the annual cost per acre for sugarcane to
10 achieve a 25 percent reduction in phosphorus
11 concentration in the sugarcane drainage water using
12 the least cost combination of the BMP's to achieve
13 that goal.
14 Q. And my question was -- then I guess your
15 answer is "no," you didn't independently calculate
16 those costs?
17 A. That's right. We used the Brown & Caldwell
18 Consultants' calculations.
19 Q. Now, for all capital purchases requirements
20 for BMP's, such as, land modification, machinery,
21 pumps, cultivators, et cetera, your testimony is you
22 relied on the Brown & Caldwell dollar cost values?
23 A. I think if you consult the Brown & Caldwell
24 document, you'll find that for this level of
25 phosphorus removal, 25 percent, I don't believe that
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1 those BMP's that you mentioned were relevant to this
2 level of reduction.
3 This level of reduction, if we go back and
4 look at that document, I think we'll find that it
5 included calibrated soil testing, banning
6 fertilizer, preventing fertilizer from escaping into
7 the canals. Water table management, I believe, may
8 have been included in that. I can't remember all of
9 them. There were four or five that were combined to
10 achieve the 25 percent, some of which, at least,
11 would not require, as I understand it, major capital
12 investment.
13 Q. So did you review the calculations then
14 resulting in that 86-cent number?
15 A. I read the text.
16 Q. Is that 86-cent cost the projected cost for
17 BMP implementation on cane lands only or on sod and
18 vegetable lands, also?
19 A. That's cane land only. That's the only
20 thing that we were looking at.
21 Q. Is that 86-cent cost projected as an
22 average cost, a median, or a mean?
23 A. Well, the median and mean are both
24 considered to be averages; but a statistic that I
25 would say, that I believe -- and, again, I'd have to
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1 go back and look at that document to be absolutely
2 sure in this response, but I think it's a mean.
3 Q. In your opinion, will the cost of that BMP
4 implementation be site specific, in other words,
5 different on Muck versus sandy soil?
6 A. I wouldn't have an opinion on that. I
7 would defer to Brown & Caldwell and need to get
8 information on that from them.
9 Q. Did that 86-cent cost include the cost of
10 compliance with the EAA rule?
11 A. What do you mean, "what's included in the
12 cost of compliance"?
13 Q. I'm sorry. Cost of implementation,
14 86 cents.
15 MR. SAXE: Object to form.
16 Q. (By Mr. Burgess) Does that include the
17 monitoring required by the EAA rule? Do you know?
18 A. I don't know what all is included in cost
19 of compliance. I think that was your original
20 question. If you could clarify it. I don't know if
21 I can answer it or not.
22 Q. Do you know what the EAA rule is? Are you
23 familiar with the rule?
24 A. Without consulting the documents -- I
25 couldn't give you a specific response to that, no.
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1 Q. Do you know whether that 86 cents includes
2 the cost of research and development of BMP's
3 previously spent or incurred by some of the farmers?
4 A. Again, I would have to go back and ask
5 Brown & Caldwell. They have a specific cost for
6 each one of the -- each BMP included in the
7 combination; and the development of that cost,
8 whether or not it includes research, I don't know.
9 Q. You were at the February 11th governing
10 board meeting, right?
11 A. I was.
12 Q. You were there for some of it, at least?
13 A. I was there for some it, yeah.
14 Q. Did you hear the U. S. sugar presentation
15 with respect to their BMP program?
16 A. Which presentation are you talking about?
17 Q. That preceded yours, a presentation by --
18 A. Mr. Buecher (phonetic)?
19 Q. Mr. Buecher.
20 A. I heard parts of it. I was not there for
21 the entire presentation.
22 Q. Do you know whether or not that 86 cents
23 included the cost for the BMP programs that were
24 referenced in that presentation?
25 A. For the parts of the presentation that I
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1 saw -- the parts of Mr. Buecher's presentation that
2 I saw, I believe there would have been some overlap;
3 but I don't think it was -- that they were totally
4 congruent.
5 MR. SAXE: Counsel, are you asking
6 about the cost of implementing those
7 BMP's or researching and developing
8 them?
9 MR. BURGESS: Implementing.
10 Well, he's already said he doesn't
11 know if R & D was included.
12 MR. SAXE: I think at that point
13 you were referring to R & D investment
14 by individual farmers?
15 MR. BURGESS: That's right.
16 Q. (By Mr. Burgess) You said that the January
17 report that you consulted was a draft, correct?
18 A. Uh-huh.
19 Q. Are you aware that some of the farmers
20 dispute the 86-cent cost figure or the accuracy of
21 that figure?
22 A. I haven't seen any specific disputes,
23 comments on it.
24 Q. Let's turn if we can to Exhibit 12, which I
25 think -- well, you may have that. That's in front
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1 of you now. Okay.
2 If I recall your February 11th
3 presentation, you stated -- I think at that time you
4 used four different data sources; one of which was,
5 "I don't believe the March '92 Sugar & Sweetner
6 Report." During Ron Lacewell's testimony, he
7 referred to that a number of times in justifying
8 some of the figures in here.
9 Do you recall whether or not the March '92
10 Sugar & Sweetner Report was used in conjunction with
11 the preparation of this presentation?
12 A. Well, I wish I had those before me. I know
13 we used the June 1992 for the cost of production,
14 and I think the March -- there's one table in the
15 March Sugar & Sweetner Report that was used to look
16 at the price, historic price of sugar. I don't
17 believe I specifically excluded the March document
18 in my presentation before the board.
19 Q. It's not a trick question in your question,
20 and I'm not asking you whether you remember saying
21 it. I just recall him saying March. I don't recall
22 you saying March. I'm wondering whether or not you
23 recall using it.
24 A. Yeah. I think the June report, I think,
25 has primarily the cost of production numbers. The
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1 March report has a series on prices. And I think
2 that's where the March report came in, was in
3 looking at the price of sugar.
4 Q. And that March information isn't reproduced
5 in the June. Is that why?
6 A. Right. As I understand it from Ron Lord,
7 one publication relates to primarily the prices, the
8 other one relates primarily to costs each year.
9 Q. You said yesterday that after your
10 presentation you called Ron Lord to discuss the
11 transportation cost issue. Since that presentation,
12 have you also spoken with Grace Johns about this?
13 A. Since the presentation?
14 Q. Yeah.
15 A. I don't recall a conversation with
16 her. I --
17 Q. Have you spoken -- I'm sorry.
18 A. As I know -- I don't recall a conversation
19 with her.
20 Q. Do you recall a conversation with her
21 before the presentation which specifically involved
22 whether or not your estimate of production and
23 processing costs per pound of sugar included or
24 didn't include transportation costs?
25 A. I didn't have that conversation.
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1 Q. Do you know whether Ron Lacewell did?
2 A. I don't know -- well, let me think about
3 this a minute now. I believe he did. I believe
4 that Ron talked to both Grace Johns to see what she
5 did about -- in her price assumptions. I believe he
6 may have also talked to Carl Woelche about what he
7 did in his price assumptions.
8 Q. That was since February 11th or before?
9 A. That was -- I'm not sure about the date.
10 It may have been both, in fact.
11 Q. Was there a difference between what you did
12 and what Grace and/or Carl did with respect to
13 transportation costs?
14 A. I think the two methods are similar, in
15 terms of using the Sugar & Sweetner Report
16 information and making it.
17 Q. If I recall Dr. Lacewell's testimony
18 correctly, he recounted a conversation with Dr. Lord
19 concerning transportation costs.
20 Were you a part of that conversation?
21 A. Not the same conversation, no.
22 Q. Again, I believe Dr. Lacewell testified
23 that Dr. Lord said, perhaps as much as 60 percent of
24 the marketing component of variable cash expenses,
25 perhaps up to eight-tenths of one penny per pound
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1 represented transportation costs.
2 Is that your understanding, as well?
3 A. Well, let me -- if I could, just -- I had a
4 conversation with Dr. Lord myself.
5 Q. After February 11th or before?
6 A. Yes. Yes. I'll be quite honest with you
7 and tell you, when I left the meeting and had heard
8 the charge that 2 cents had been left out of that --
9 I wanted to verify it with him directly.
10 So I called Ron Lord and we had a
11 conversation about transportation in the Florida
12 sugar, where it goes, and what transportation costs
13 might be. And as I recall, it was his opinion or he
14 told me that we had at most -- there was, I think,
15 20 percent of the cane -- I believe is his
16 estimate -- about 20 percent is milled in the EAA.
17 It's refined. Excuse me. Not milled, but refined
18 in the EAA. And then about two-thirds of the cane
19 goes to the terminal in Florida; and at the
20 terminal, the sellers are charged are a weighted
21 average cost. And I think that relates back to
22 where the .8 cents transportation comes from.
23 And he did remind me that these costs came
24 from the books of the sugar mill and the sugar
25 growers that, I believe, were audited for the last --
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1 were audited for 1987. So, although, I didn't --
2 was not in the same conversation with
3 Dr. Lacewell, I have a similar understanding about
4 transportation costs of sugar leaving the EAA.
5 Q. During your conversation with Ron Lord, did
6 he tell you that he had spoken to Jim Richardson
7 about this same topic, transportation costs?
8 A. To the best of my recollection,
9 Jim Richardson's name never came up.
10 Q. Did you tell him that there was an
11 allegation or an assertion that costs of
12 transportation from the mills to the refineries
13 average 2 cents a pound?
14 A. I probably did mention that as being one of
15 the reasons. As I recall in our conversation, I
16 told him, "Let me tell you why I'm calling."
17 And I told him I had made a presentation
18 before the South Florida Water Management District
19 Board and we had used their numbers in the
20 processing and production costs. We used the
21 reported price that comes, also, from their
22 publications; and that following the presentation --
23 and I told him what I did with it. And I told him
24 following the presentation that there was a
25 statement made that we were in error because we had
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1 not deducted 2 cents per pound for transportation.
2 Q. And what was his response?
3 A. He told me and -- I believe in words to
4 this effect -- and I think almost exactly -- that
5 "Yes, transportation costs are included in the
6 processing costs."
7 He mentioned a number of about 1.4 cents
8 per pound which when I looked at and I said, "That's
9 called marketing costs."
10 And he said, "That includes the
11 transportation costs."
12 Q. 1.4 cents you say?
13 A. I think that's the number that's listed as
14 marketing costs in our -- in the Sugar & Sweetner
15 Report and reproduced here in our -- it is not
16 reproduced here in our report, but it is in the June
17 Sugar & Sweetner Report for 1992.
18 Q. And the component of the marketing costs
19 for transportation, is that an average price just
20 with respect to Florida; or does it also apply to
21 Louisiana and Hawaii and anywhere else in the
22 United States that sugar's grown?
23 A. You've confused me with the question. You
24 said the component of the cost is an average price.
25 I don't know what you're getting at.
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1 Q. I think the testimony is that -- at least
2 from Dr. Lacewell that perhaps up to 60 percent of
3 the marketing costs, which you've identified as 1.4
4 cents per pound, represents transportation.
5 Is that your understanding, as well?
6 A. That's right. That's very close, yeah.
7 Q. And --
8 A. I didn't get the 60 percent number -- the
9 60 percent. Is that what you said? I don't recall
10 in my conversation with Ron Lord the exact number of
11 60 percent coming up.
12 Q. Okay.
13 A. He simply told me that the transportation
14 costs for Florida sugar was included in the
15 processing costs that are reported in the June Sugar
16 & Sweetner Report. So I can't testify to the
17 60 percent.
18 Q. I understand. Those processing costs that
19 we're talking about, are those unique to Florida or
20 are those average for sugar production in the
21 United States?
22 A. No. Those are unique to Florida, I
23 believe. Yes, they are. That was -- yeah.
24 Q. So that I understand your testimony, I
25 think I asked Dr. Lacewell this question, too.
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1 Is it your understanding that the
2 17.87-cent figure appearing in your report as total
3 production and processing costs per pound of sugar,
4 is it your understanding that that figure includes
5 transportation costs for transporting raw sugar to
6 any of the East Coast markets in the United States?
7 A. Well, I don't want to necessarily split
8 hairs with you; but when you say, "any of the
9 East Coast markets," that's a little bit -- I think
10 -- it's my understanding that what it includes is
11 the actual cost of transporting sugar from Florida
12 to the markets to which Florida sugar is
13 transported.
14 Q. Fair enough.
15 What is your understanding, if any, as to
16 who pays the costs associated with transportation of
17 the raw sugar to the East Coast markets or to the
18 markets where the sugar is shipped?
19 A. It's my understanding that it's paid by the
20 mill, and that's why it's included in the processing
21 cost.
22 Q. Do you have an understanding, one way or
23 the other, as to whether that's a general rule or an
24 all-the-time or sometime proposition?
25 A. You mean general rule that --
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1 Q. That the mill pays?
2 A. Relating to the other states or --
3 Q. No, in Florida.
4 A. Oh, in Florida?
5 MR. SAXE: For sugar?
6 MR. BURGESS: Yes, yes.
7 A. That question hasn't occurred to me. I
8 guess that -- I guess it was my assumption that
9 since it's included in this processing cost that's
10 reported to the USDA and it's on a per pound sugar
11 basis, that we're assuming that the mill would pay
12 that cost for every pound that's shipped.
13 I guess in individual sales negotiations
14 between seller and buyer, that may be a negotiable
15 point; and if a mill is in a favorable bargaining
16 position, who knows, he might be able to talk the
17 refinery into paying the cost. But I'm assuming
18 that it's the mill that generally pays the cost.
19 Q. For purposes of your study given on
20 February 11th, that was an assumption you made that
21 the mill paid the cost?
22 A. Yes.
23 MR. BURGESS: Break.
24 (WHEREUPON, a recess was taken.)
25 MR. SAXE: Before we get started,
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1 similar to the document that's now
2 been marked as Exhibit 20, another
3 document that I have identified in
4 Dr. Bromley's collection of documents,
5 which will be produced, is a --
6 appears to be a version of a document
7 that was discussed yesterday and has
8 been marked as Exhibit 8.
9 I'm going to produce this
10 document today, subject to the
11 application of sequential control
12 numbers to the document, for use
13 during the deposition.
14 MR. BURGESS: I'm sorry. Is this
15 becoming Exhibit 8?
16 MS. STINSON: Well, no. It is a
17 version of Exhibit 8. I'll tell you
18 what. Can we mark it 8-A?
19 MR. SAXE: Me?
20 (WHEREUPON, Exhibit No. 8-A
21 was marked for identification;
22 and there was discussion
23 off the record.)
24 MR. BURGESS: Just so I'm clear -- are
25 we on the record?
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1 MR. SAXE: Yes.
2 Q. (By Mr. Burgess) I asked the witness what
3 is the difference between what we've just been
4 handed by your Counsel, 8-A and Exhibit 8.
5 Do you know the difference?
6 A. Could I compare the two?
7 Q. Surely.
8 A. I think I know, but I want to --
9 Okay. To the best of my recollection,
10 Exhibit 8-A is an earlier draft of Exhibit 8, which
11 I -- 8-A was faxed to Mr. Saxe and I think was,
12 also, faxed to Dan Bromley and I asked him for his
13 criticisms and comments. So it's an earlier version
14 of 8.
15 Q. Okay. At your February 11th presentation,
16 I believe it was your conclusion that assuming an
17 $83 price for SWIM costs per harvested acre cane
18 that $245 was left as returns for land to the
19 farmer; is that correct?
20 A. The -- well, that everything in that
21 calculation --
22 Q. It's the second page, I believe, is the
23 executive summary.
24 MR. SAXE: I'm sorry, Counsel. You
25 said returns for land to the farmer?
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1 MR. BURGESS: To the grower.
2 A. Yes. We looked at the gross returns, the
3 ordinary production processing costs that were
4 included in the Sugar & Sweetner report. Then,
5 using our assumptions concerning finance in the SWIM
6 plan, we estimated about $83 per harvested acre.
7 And so we were comparing that back to a return per
8 harvested acre. And the difference between the 327,
9 which we acquired initially, and 245 is the $83.
10 Q. (By Mr. Burgess) Were you here for the
11 testimony of Ron Lacewell concerning this document
12 and preparation of this report or for portions of
13 the testimony?
14 A. I don't know. Maybe portions.
15 Q. Well, rather than take you through this
16 point by point, for those portions that you were
17 here, do you recall anything during his testimony
18 that was different with respect to preparation of
19 this report that you want to tell us about?
20 MR. SAXE: Off the record for a
21 minute.
22 (WHEREUPON, there was discussion
23 off the record.)
24 Q. (By Mr. Burgess) Again, this is not meant
25 to be a trick question; it's merely meant to ask you
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1 whether you recall any gross or glaring descriptions
2 or testimony by Dr. Lacewell that differs from your
3 understanding or recollection?
4 A. I don't recall any. I remember some of the
5 questioning of him. I don't have a perfect recall
6 of all of it, but I do not recall anything that he
7 said that I would have any major glaring or
8 glowing -- is that what he said -- differences with.
9 Q. Okay. Turning to the executive summary in
10 the $245 per acre returns to land management and the
11 risk. What do the growers do typically with their
12 returns to land management and risks?
13 A. Well, again, I'd have to say that it
14 depends. It depends upon the grower, what his
15 operating and farm firm characteristics are, how big
16 a family he has, and any number of other -- maybe
17 what his vacation preferences are. I could go on
18 and on.
19 Q. Let's assume that he has principal and
20 interest on land he has to pay. Is that what he
21 uses to pay that?
22 A. If he has debt on land, then part of this
23 245 would be used to pay principal and interest on
24 debt.
25 Q. Would part of that 245 be used to pay his
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1 income taxes, income taxes being a function of
2 income?
3 A. Well, to look at income taxes, you have to
4 do some more calculations, I think. And here I'm --
5 one of the key things -- and there may be others --
6 but one of the key things is that the IRS does not
7 allow you to deduct expenses for owned assets. Some
8 of the costs that are included in the USDA
9 calculation of this return of the land that we used
10 are opportunity costs of owned assets. In other
11 words, you may own all your machinery equipment;
12 nevertheless, USDA would allow you to expense out
13 the -- an investment cost for that machinery
14 equipment in getting to this bottom line number. So
15 if you want to compute income taxes or try to
16 estimate what that Line 40 is going to be -- I think
17 it's Line 40, Line 41, whatever -- of adjusted gross
18 income, then you're going to have to add that back
19 into this 245 because the IRS does not allow you to
20 deduct the cost for owned assets.
21 So it wouldn't be exactly this 245 that
22 income tax would be paid on. It would be some other
23 number after those calculations are made.
24 Q. Depending upon the ownership make-up of the
25 farm, could you also have self-employment taxes to
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1 be paid out of that returns to land?
2 A. Social Security and FICA would be --
3 self-employment, I believe that would be correct.
4 Social Security taxes and so forth on hired labor
5 would already be taken out, but taxes -- you know, I
6 would have to go back and check the document. I
7 think we would be correct in saying that
8 self-employment taxes would have to come out of
9 this, but I'm not absolutely sure of that. They may
10 not be included in -- there is a tax line in the
11 expenses. I'm certain that it includes property
12 taxes that have to be paid; and whether or not it
13 includes self-employment tax or not, I don't know.
14 My speculation would be that it does not
15 and it would have to be paid out of this 245.
16 Q. And with respect to property taxes, you're
17 saying that would have to come out of the 245 or
18 would have already been removed?
19 A. I think that's already removed in the tax
20 line. The other thing that you'd have to do is that
21 if you do have debt on this land, and, of course,
22 the interest on that debt would be deductible in
23 your income taxes. So it wouldn't affect the
24 Social Security tax, but it would affect the income
25 tax.
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1 Q. If the grower who is receiving these
2 returns to land leased his land, then, of course, he
3 would have payments to his lessor to deduct from the
4 245?
5 A. That's correct.
6 Q. Are there any other things that come to
7 mind that growers use their returns to land for?
8 A. You mean in the operation of the firm?
9 Q. Yes.
10 A. I can't, at this time, think of anything
11 else. I think the items expensed out by this item
12 is fairly exhaustive so that should about cover it.
13 Q. Do you know what the average of median
14 income is in the United States for a family of four?
15 A. Not exactly.
16 Q. Do you have a range?
17 A. I don't even have a range. Of the -- I'd
18 be speculating without going and finding that number
19 in the appropriate document.
20 Q. Would you need to know what the average or
21 median income is in the United States for a family,
22 or family of four, in order to determine what family
23 living or management return should be with respect
24 to your per acre returns to land management and
25 risks?
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1 MR. SAXE: Objection to form. "Should
2 be," I'm not sure I understand.
3 A. Not only that, but I'm a little bit
4 confused in when you say what should be "management
5 and family living." I think those are two different
6 things. You said them as if maybe they were all the
7 same thing.
8 Q. (By Mr. Burgess) Okay. I'm sorry.
9 Would family living expenses be subtracted
10 out of your returns to land?
11 MR. SAXE: Objection to form.
12 Family living expenses of the
13 landowner?
14 A. The owner that owns this acre of land, if
15 you take this 245 less the items that you've
16 mentioned, income taxes and so forth that have to be
17 paid, multiply that times the number of acres that
18 he owns, then you would have from that -- you, I
19 would assume, that the owner/operator would provide
20 for his family from that.
21 MR. SAXE: Counsel, does your question
22 assume some source of income, I take
23 it?
24 MR. BURGESS: I don't think it
25 did one way or the other.
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1 Q. (By Mr. Burgess) I don't know if it
2 matters to your answer.
3 A. Well, it does matter in some of the
4 calculations. For example, income taxes, it would
5 make a big difference. I would assume that if the
6 growers in the EAA are typical, they might have
7 other investments. They may have off-farm income.
8 All those things have to be considered in -- not
9 only in income taxes, but in family living expenses
10 and so forth. It might, also, even affect the
11 self-employment taxes, Social Security taxes because
12 there is an upper income limit there.
13 Q. In connection with the preparation of your
14 report given to the board on February 11th, did you
15 make any calculations as to what a reasonable salary
16 might be for a family farmer in the EAA?
17 A. No, we didn't. We were -- it was our
18 original objective to make a computation of the
19 returns to land in management, and that would be
20 included in the management part.
21 Q. That $245 per acre return to land
22 management and risk is for 1990; is that correct?
23 A. No, not exactly. That would be -- we use
24 throughout this analysis a 5-year average; and so
25 that, also, would point back to the 5-year average.
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1 Q. For what period of time?
2 A. 1986 through 1990.
3 Q. Are you aware of any estimates for
4 inflation in input costs since 1990?
5 A. There are published series on costs for
6 specific input items that -- those vary, product
7 mixes change. But there are, if you want to look at
8 specific items like fuel and so forth, and then you
9 can find published estimates of the change from year
10 to year in those costs.
11 Q. Are you aware of any studies which show
12 increasing trends in input costs for sugarcane
13 farming since 1990?
14 A. Study specifically for sugarcane?
15 Q. Yes.
16 A. That show what kind of increase in costs?
17 When we're talking about costs, that's -- again, I
18 just don't understand. That is a -- are you talking
19 about cost of a specific item?
20 Q. In your study, you have in your executive
21 summary, costs associated with sugarcane in the EAA;
22 and I'm asking whether you are aware of any studies
23 which indicate either an increase or a decrease in
24 those costs that you examined in this study since
25 1990?
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1 A. Prior to 1990, there are some reported
2 plots of costs recorded in the Sugar & Sweetner
3 Report; but the last year of data that's available
4 in that report was 1990.
5 Q. Right. And I'm asking you whether you're
6 aware of any studies, which -- since that time or
7 before that time which show cost projections, the
8 same type of costs associated with your analysis
9 here which would show those costs as input costs
10 increasing or decreasing for a period of time since
11 1990?
12 MR. SAXE: Objection to the
13 characterization of this "as cost
14 projections."
15 MS. STINSON: Well, I don't think
16 he characterized him. I think he's
17 asking if there are any.
18 MR. SAXE: Well, I believe you
19 said, "similar to your analysis here,
20 cost projections" and continued with
21 the question. If I'm mistaken --
22 Q. (By Mr. Burgess) Since 1990, Dr. Jones,
23 what has happened to the costs associated with
24 sugarcane in the EAA as you have used those words in
25 your executive summary? Do you know? Have they
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1 trended up? Have they trended down? Have they
2 stayed the same?
3 A. I have not seen any cost estimates since
4 1990 that are comparable to this figure.
5 Q. I don't know what you mean by, "that are
6 comparable to the figure." I guess I just --
7 A. Well, you read the cost associated with
8 sugarcane and EAA, and I assume that points to that
9 17.87. And what I'm telling you is that while I
10 assume the U.S. Justice Department of Agriculture is
11 continuing their efforts in calculating annual costs
12 and returns as they have for some period of time, I
13 have not seen those estimates.
14 Q. Other than from USDA, have you seen those
15 estimates?
16 A. No, not actual estimates for any given
17 year.
18 Q. Have you reviewed any price forecasts for
19 the price of raw sugar for, let's say, the next
20 10 years?
21 A. The article that the USDA included in the --
22 I believe it was the June 1992 Sugar & Sweetner
23 Report had some projections in it. I specifically
24 recall acreage projections. I'm uncertain as to
25 whether or not they have price projections in there;
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1 and I do not know of any price projections other
2 than those, of course, that we've already talked
3 about that are included in the Hazen & Sawyer
4 10-year study. Those wouldn't -- I would have to
5 include those in a set of price projections and cost
6 projections.
7 Q. Have you reviewed the FARPI, or Food And
8 Agricultural Research Policy Institute, a report
9 which projects 21.6 cents per pound from 1993 to
10 2001?
11 A. Now, that you mentioned that report by
12 name, yes, I did, I believe, look at that report. I
13 did look at a FARPI report that was attached to a
14 set of documents that was given by, as I understand
15 it, by Dr. Polopolus to Grace Johns. I do not
16 remember that specific price forecast, but I do
17 recall reading the document.
18 Q. Without regard to a specific input mix, do
19 you have any knowledge with respect to how costs of
20 production in agriculture have trended over the last
21 10 years?
22 A. The preface to your question is without
23 regard to any specific product mix?
24 Q. Yes. I think your answer is going to be,
25 if I ask you without that qualifier, it would depend
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1 upon the product mix and the input mix. So just in
2 general, are you aware of USDA or other projections
3 which talk about cost of production and agriculture
4 in general?
5 MR. SAXE: Any cost in any unit
6 of measure: cost per unit of crop
7 produced, cost per acre of land
8 harvested. You're asking the witness
9 for any kind of cost figures that he's
10 aware of?
11 MR. BURGESS: Well, I don't know
12 his business as well as he does; but I
13 assume that there is some general
14 measure or yardstick which shows that,
15 in general, costs of production in
16 agriculture have done this or that
17 over the past five or ten years; and
18 if he's not aware of it or it doesn't
19 exist, I assume he'll tell me. I'm
20 just trying to inquire as to whether
21 there is such a general measurement.
22 A. Well, I see numerous forecasts and
23 projections, historical plots, trends in a lot of
24 different ways, cost per acre, cost per pound of
25 product, to the actual price of tractors, that could
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1 be called a "cost." Is that what you're talking
2 about?
3 Q. (By Mr. Burgess) Yes.
4 A. Without being able to give you a specific
5 reference to any of those, they are published
6 periodically by the USDA for most all crops and --
7 Q. Are they published with respect to
8 sugarcane?
9 A. In the Sugar and Sweetner reports.
10 Q. And do you recall what those prices showed,
11 or those costs showed, cost of production showed,
12 with respect to sugarcane, let's say, within the
13 last five years if it was measured in that time
14 period?
15 A. The last five years? The specific chart
16 that comes to my mind is in the June 1992 Sugar &
17 Sweetner Report.
18 Q. Is that an assumption that you have
19 included in your presentation?
20 A. No. We haven't assumed any trends in
21 this. We took an average for the five-year period
22 from '86 to now.
23 MR. SAXE: I'm sorry. I don't believe
24 Dr. Jones finished his first answer
25 when you raised your second question.
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1 Could you reread the previous
2 question please and Dr. Jones answer
3 to it so he can complete his answer if
4 he wishes to.
5 If you wish to complete that
6 answer or if you're finished, that's
7 fine.
8 (WHEREUPON, the requested
9 portion of the record was read
10 by the court reporter.)
11 A. With respect to that chart that I was
12 referring to, over the period of time if they plot
13 the data, they show -- as I've said earlier in this
14 process, that both the processing and production
15 costs are going down when you measure it as in terms
16 of costs per pound of sugar produced.
17 Q. (By Mr. Burgess) Are you aware of a study
18 by WEFA, or the Wharton Economic or Econometric
19 Forecasting Associates, which shows the cost of
20 production to grow and process sugarcane increasing
21 at the rate of 3.5 to 4 percent a year?
22 A. I have not seen that study.
23 Q. Before preparation of your February 11th
24 report, did you need to determine the value of
25 agricultural land in the EAA?
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1 A. No.
2 Q. How would you go about determining the
3 value of agricultural land in the EAA?
4 A. Well, for land, they're basically, to the
5 best of my knowledge, two approaches. Probably the
6 best approach would be to contact whatever data
7 sources are available and acquire information on
8 recent sales of land and come up with an estimate
9 using what's called the market approach to value
10 and -- in which you look at those sales, examine
11 them, if there are any improvements on the property,
12 then that has to be accounted for and you can, from
13 that, estimate the selling price of land in the
14 particular area that you're looking at.
15 Another method, in the absence of market
16 sales, appraisers trying to find a market value of
17 land frequently use what is generally referred to as
18 an income approach or the capitalization approach to
19 estimated value. So that would be two -- I believe
20 you asked me how you go about it. That's two
21 methods that could be used.
22 Q. How does the capitalization or the income
23 approach work?
24 A. How does it work?
25 Q. Yes.
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1 A. In general, the appraisers would look at an
2 estimate of the typical net return to land from
3 using that property in its highest and best use, and
4 then would use a capitalization rate that they might
5 derive from some method and divide the
6 capitalization rate into the debt-to-land value to
7 come up with an estimate of value.
8 Q. Do you have an opinion as to what an
9 appropriate capitalization rate would be for
10 determining land value in the EAA?
11 A. I have not attempted to derive a
12 capitalization rate for that region of the country.
13 I would have to study that, somewhat, in order to
14 see what an appropriate rate -- what I would think
15 an appropriate rate to use would be.
16 Q. In general, would the capital -- would the
17 capitalization rate change as your returns to land
18 in a given area decline, in a given agricultural
19 area decline?
20 A. Would the capitalization rate --
21 Q. For land in that area change as returns to
22 land decline?
23 A. Generally speaking, what the appraiser
24 attempts to do is to keep the numerator and
25 denominator of that equation identified and treated
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1 separately. So a decline in the net return to land
2 should be -- or you would hope you can do the
3 analysis such that the return to land is independent
4 of the capitalization rate, so that they don't
5 necessarily decline together or increase together.
6 Q. Before, I think I asked you whether you had
7 any opinions as to what the return to a family
8 farmer might be in the EAA. And let me ask you the
9 same question with respect as to whether you have
10 any opinion as to what reasonable return to
11 management might be for sugarcane producers in the
12 EAA?
13 A. I've made no calculations or attempted to
14 calculate what a return to management would be.
15 Q. Do you have any opinion on how reliable the
16 data provided by the USDA on cost and returns for
17 Florida sugar production is?
18 A. It's my impression that it's quite
19 reliable.
20 Q. Do you know how those data are sampled?
21 A. I'm not familiar with the details of the
22 sampling process. It's my understanding that they
23 periodically audit the books to arrive at those
24 costs, and that's -- it seems to me to be a pretty
25 reliable source.
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1 Q. Is it your understanding that since 1987,
2 they have periodically audited the books of the
3 source?
4 A. No. It's my understanding that 1987 was
5 the last year in which they actually audited, did a
6 complete audited audit so that everything added up;
7 and since that time, they have used some indexing
8 technique and I'm not familiar with it.
9 Q. Do you know whether they've, in fact, used
10 the survey technique or techniques, also?
11 A. Since then? Since 1987?
12 Q. Yes.
13 A. It's my general understanding that
14 because -- and I think it's because of the limited
15 budget that the USDA, the division that does that,
16 cannot do every state every year; and subsequently
17 they're on sort of a rotating cycle; and whether or
18 not they've been back to Florida since 1987 or not,
19 I don't know.
20 Q. Do you have any opinion as to whether an
21 inflation factor should be applied to future
22 increases in the cost of factor inputs for sugarcane
23 production and processing? And let me direct my
24 question to whether Grace Johns should consider such
25 an inflation factor in a 20-year analysis.
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1 MR. SAXE: Would you reread that
2 question?
3 MR. BURGESS: I'll just say it
4 again.
5 Q. (By Mr. Burgess) Do you have any opinion
6 as to whether or not Grace Johns should include an
7 inflation factor with respect to future increases in
8 the cost of factor inputs for sugarcane production
9 and processing?
10 A. I have not formulated a final opinion on
11 that matter. I think it's a very complex as well as
12 important issue. I think -- but as far as exactly
13 what should be done, I think that's what you asked
14 me. I do not have a firm opinion on what she should
15 do at this point in time.
16 Q. Do you have a preliminary opinion that you
17 want to share with us?
18 A. I think that the best case situation would
19 be one in which we could take into account the
20 changes in costs and prices, as well as adjustments
21 in the product mix or in the input mix within the
22 EAA in response to those changing economic
23 conditions, in an attempt to get at what would
24 appear to be the most realistic outlook for what's
25 going to happen to costs and prices in the future.
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1 Q. How would you go about doing that? Would
2 you do alternate scenarios like you spoke about this
3 morning with respect to alternative land uses?
4 A. I think perhaps the best indicator of the
5 results of the trend, both in costs and in change of
6 product input mix, is what's happened in the recent
7 history. It gives you some known pattern of what is
8 going on in the EAA in terms of production costs.
9 So I would definitely want to look
10 carefully at the recent history as to how producers
11 and processors have changed product mix, perhaps in
12 response to rising costs for individual input items
13 and what that trend is.
14 Q. Do you have any -- I'm sorry.
15 A. Well, you asked me about scenarios, I
16 believe.
17 Q. Right.
18 A. I'm getting there.
19 Q. Okay.
20 A. That would not be a -- I wouldn't, for any
21 reason that I know today, rule out the option of
22 scenarios if that appeared to be an appropriate
23 thing to do.
24 Scenarios are usually done, in my opinion,
25 when you have less than complete information or you
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1 don't have information so you're trying to look at a
2 bracket. So I would say that your question's a good
3 one. It would be one of those things that you might
4 want to look at.
5 Q. Do you think you're going to talk to Grace
6 about this on Monday?
7 A. I suspect I will.
8 Q. Do you have any idea as to what she's
9 preliminarily considering in this regard?
10 A. I sure don't.
11 Q. Do you have any opinion with respect to the
12 likelihood of Florida sugarcane production either
13 expanding or contracting over her 20-year period of
14 record or period of study?
15 A. All I can do is look at the -- you know,
16 look at the data and the history of what's happened;
17 and, of course, we go back to 1960 and there's been
18 a rather steady increase in acreage in Florida.
19 Then the other thing we have that we can
20 look at is the USDA projections. They project out
21 high, medium, and low scenarios. We have these
22 types of data; and it's my opinion that if it is
23 anticipated that there will be a significant trend
24 in acreage, then that should be taken into account.
25 Q. Do you know whether, in fact, acreage
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1 exists for expansion for sugarcane in the next
2 20 years in the EAA?
3 A. In the EAA?
4 Q. Yes.
5 A. Well, up until the point that it's all --
6 that acreage is all planted in one crop, acreage
7 always exists if the economic conditions are such to
8 justify the expansion. Some acreage in the EAA is
9 not yet in sugarcane. So I guess the answer to your
10 question is, "Yes, acreage exists."
11 Will economic conditions cause that land to
12 be put into sugarcane, taken out of another crop
13 perhaps or put into sugarcane; or will technology
14 help bring that about? I don't really know. When
15 you say, "Is there land available," I think there
16 are economic overtones in that question that has to
17 be -- that have to be considered as to whether or
18 not it may or may not come about.
19 Q. Do you have any opinion as to whether or
20 not the SWIM plan might cause land to shift from one
21 existing product mix to sugarcane, specifically
22 vegetables and/or sod?
23 A. Could you ask it again? I lost you right
24 in the middle.
25 Q. Do you have an opinion as to whether or not
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1 the SWIM plan is going to cause directly or
2 indirectly lands that are in vegetables or sod to
3 shift to sugarcane?
4 A. I haven't tried to do a specific analysis
5 of that. One of the things -- one thought is that --
6 well, I'm -- I guess my opinion is so tentative that
7 I should just tell you that I haven't really looked
8 at that specifically.
9 Q. Do you know what crop, used for
10 agricultural use of the lands, were used for
11 expansion from 1960 to today, what those lands were
12 in before they were used for sugarcane?
13 A. You're asking me to go back and look at the
14 EAA as defined now and look at 1960 what was there
15 and then look at today and what was there?
16 Q. I think you said in response to one of my
17 earlier questions that all you can do is go back and
18 see what history shows, and since 1960 there's been
19 this tremendous increase in sugarcane.
20 My question is: Do you know whether the
21 land that sugarcane is now on that it wasn't in that
22 period of time, was that in an alternate product?
23 A. I think some of it ultimately was in
24 pasture and so forth, but I couldn't tell you in
25 general what the use was of all the acreage there.
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1 Q. Would you agree with me that the acreage,
2 number of acres, do not exist today that are
3 available for sugarcane to be planted in that
4 existed in the EAA in 1960?
5 MR. SAXE: Objection to form.
6 "Acreage doesn't exist," I'm not sure
7 what you're getting at.
8 MR. BURGESS: I'll withdraw the
9 question.
10 Q. (By Mr. Burgess) If you can return to
11 Exhibit 15, which is --
12 A. Okay. There it is.
13 Q. I'm just going to try and cover quickly
14 some things that, I think, were not fully addressed
15 yesterday or at least my notes reflect that; and I
16 don't in any manner intend to be repetitive with
17 respect to yesterday's inquiry.
18 On the second page of that document under
19 H & S position, all the way down, the next to last
20 block says -- I believe your handwritten note --
21 "For 20-year period, may need to look into this."
22 And I think your testimony yesterday wasn't
23 with respect to that comment, but was with respect
24 to the comment next to it, "20-year look at two to
25 three scenarios."
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1 Does that refer to the same thing? Are
2 those comments the same?
3 A. I think -- I don't recall my testimony
4 yesterday exactly; but as I recall today, the
5 meaning of this comment, when I wrote it was, that I
6 would -- and this relates to the question of price
7 policy and the constant price I would say that I --
8 I think the first one, "No change in 10 years,"
9 means that I wouldn't -- I have no recommendation
10 for change for Hazen & Sawyer in terms of their
11 10-year analysis; but then for the 20-year analysis,
12 to me that still opens the question as to whether or
13 not we need to look at any differences in the
14 assumptions concerning price policy.
15 Q. Do you have a recommendation for
16 Grace Johns in that regard?
17 A. I have no specific recommendation at this
18 time.
19 Q. Okay. On the right side of that page, you
20 were asked about your comment, "Average debt in
21 Florida, $20 an acre."
22 Was that comment with respect to long-term
23 debt?
24 A. I think -- I'm pressing my memory a little
25 bit here and that thought came to me one of the
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1 several times when I woke up last night.
2 Q. I'm asking the right questions then, huh?
3 Your answer gave me a problem, too.
4 A. I recall, I believe that is -- and, again,
5 I'd have to refer to some documents to verify this,
6 but I believe that comment relates to a conversation
7 that I overheard which stated that the average debt
8 per acre for farmland in Florida was $20 per acre.
9 So I think the $20 is the average debt per acre of
10 land in the State of Florida. I think I said that
11 correctly. That's the best I can do with my recall
12 at this point.
13 Q. And is it your testimony that no matter
14 what that number is, it is not relevant for purposes
15 of determining economic impact analysis in the EAA?
16 A. That's correct. That debt should not be
17 considered in an economic impact analysis.
18 Q. It should be considered, though --
19 A. Debt on land.
20 Q. -- debt on land?
21 A. Your objective is to look at the return to
22 land to examine whether or not that return is
23 positive or not. Then debt is not a factor that you
24 want to take out as an expense.
25 Q. It is important, though, if you were
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1 looking at farm firm survivability, though?
2 A. I would say, in the case of farm firm
3 survivability, it would be a factor that the owner
4 of that property would have to look at.
5 Q. On the bottom of that page, same column,
6 with respect to "integration of mills and growers
7 being not appropriate," in your comment of
8 "hokem-jokem, forget it." What exactly is
9 inappropriate about the comment here that
10 "integration of mills and growers is not
11 appropriate"? What's wrong with that comment?
12 A. Well, sugar production in the EAA is highly
13 integrated.
14 Q. Do you know to what percentage?
15 A. There are numbers on that. I can't
16 remember them today specifically, but I have looked
17 at that show in terms of U. S. Sugar Corporation,
18 how much is administrative cane.
19 This is discussed in the article by
20 Buzzanell and Lord on the Florida sugar industry.
21 They make the specific comment in the text that the
22 Florida sugar industry is highly integrated and they
23 go on to show some numbers about -- what they call
24 "administrative cane versus other cane," strongly
25 independent growers. It's a very high percentage.
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1 I think maybe as high as 80 percent of that cane is
2 administrative cane.
3 And this is true, I think, of the other
4 major operators and mills, that the ownership is
5 integrated from the mill through the production. So
6 to treat them as being separate, in my opinion, is
7 not appropriate because it could affect the
8 conclusion from your analysis.
9 Q. How about treating them as separate for the
10 percentage period of time that Buzzanell and Lord's
11 article showed that they're separate? In the
12 scenario you just gave 20 percent of the time, would
13 that be inappropriate?
14 A. 20 percent of the growers?
15 Q. I think Grace Johns integrates the mills
16 and growers across the board, correct, 100 percent?
17 A. I believe it's -- what Grace Johns does is
18 to look at the returns at the mill level because
19 that's where the returns are experienced by the
20 industry. She then takes out the cost of milling
21 cane so that each of the factors of production in
22 the milling process are paid their normal rate of
23 return that those factors would receive.
24 And then, beyond that, she allocates the
25 remaining returns to the land resource; and I think
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1 that in the EAA that is an appropriate way to do
2 that analysis. However -- well, I'll just say that
3 is an appropriate way to do that analysis.
4 Q. Well, let me ask you this: If the
5 percentages we're using here for purposes of
6 discussion were reversed and it was 20 percent
7 integrated and 80 percent independent, would you
8 still think it would be an appropriate way to do the
9 analysis?
10 A. Given that hypothetical case, I would want
11 to go back and look at the operation of this
12 industry and examine whether or not that would still
13 be appropriate. I don't have a solid opinion on
14 that at this point. I'd have to -- I think it might
15 change your approach, but I'd have to look at what
16 specific changes I'd want to include in the
17 analysis.
18 Q. Back to my $20 an acre debt question: Are
19 you aware of any computer scenarios that were run by
20 Grace or by others other than Polopolus or
21 Richardson that factored in a long term debt
22 component for $20 an acre or otherwise?
23 A. Other than the use of the fact that
24 Richardson and Polopolus made a debt, which I don't
25 know what they did either, I don't know of any
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1 scenarios that would run ascending any levels of
2 debt.
3 Q. You're not aware of whether Grace attempted
4 at any point to run FLIPSIM assuming some component
5 of long-term debt?
6 A. I'm not aware whether she did or not, and
7 I'm certainly not clear on how she would do it in
8 her model.
9 MR. SAXE: Off the record.
10 (WHEREUPON, there was discussion
11 off the record and a lunch recess
12 was taken.)
13 Q. (By Mr. Burgess) Let me show you what
14 might become Exhibit 21. I don't think that's it.
15 Let's look at Exhibit 3, what already exists as
16 Exhibit 3. Exhibit 3 to Ron Lacewell's deposition,
17 can you identify it?
18 A. Yes, I've seen it before. I think it's a
19 letter to Dr. Grace Johns from someone in Peterson
20 Consulting; and it's called -- well, the content as,
21 I understand it, it's a preliminary response to her
22 report, "Evaluation of the Economic Impact from
23 Implementing the Marjory Stoneman Douglas Everglades
24 Restoration Act and U.S. Versus South Florida Water
25 Management District Agreement."
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1 Q. Okay. Are any of the handwritten comments
2 on that letter yours?
3 A. No.
4 Q. There is a comment on the next to the last
5 page of the document in the margin which shows or
6 which says, quote, unquote, "analysis showed no
7 trend," and it's next to a bullet entry that has to
8 deal with "yield risk and vegetables."
9 Do you know of any analysis that was done
10 with respect to yield risks and the vegetables?
11 A. I haven't found the comment yet.
12 Q. Oh, I'm sorry. Next to the last page.
13 A. Is this page --
14 Q. Bates No. 327 --
15 A. DRL276?
16 MR. SAXE: Those are different
17 documents.
18 MS. STINSON: That may be
19 somebody else's version.
20 MR. BURGESS: They are different.
21 (WHEREUPON, Exhibit No. 21
22 was marked for identification.)
23 Q. (By Mr. Burgess) Let me show you what
24 we'll mark as Exhibit 21.
25 A. Okay. I believe the original version of
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1 this would be -- a copy of the same that we just
2 looked at.
3 Q. Are any of the handwritten comments on
4 Exhibit 21 yours?
5 A. Yes, some of them appear to be mine.
6 Q. Okay. Is the comment on the next to the
7 last page, quote, unquote, "analysis showed no
8 trend," is that your comment?
9 A. That is my handwriting.
10 Q. What analysis were you referring to there?
11 A. Let me look. That's -- I'm not absolutely
12 certain as we sit here. I don't recall exactly what
13 analysis that I was referring to.
14 Q. Do you know of any analysis that was done
15 by Grace Johns with respect to yields for vegetables
16 in the baseline?
17 A. I recall a conversation with -- I believe
18 it was with Grace Johns and Chris Moline. This was
19 sometime ago. And I seem to recall that she had
20 said that she had looked at the annual yields and
21 vegetables and while it was some variability in the
22 yields, that she didn't detect any trend in the
23 yields. And that could be the analysis that I'm
24 referring to in that statement.
25 Q. Do you know over what period of time she
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1 examined the yield?
2 A. I don't recall.
3 (WHEREUPON, Exhibit No. 22
4 was marked for identification.)
5 Q. (By Mr. Burgess) Let me show you what
6 we'll mark as Exhibit 22 and ask if you've seen that
7 document before.
8 MR. SAXE: May I see this document?
9 MR. BURGESS: (Complies with document.)
10 MR. SAXE: This document was
11 inadvertently produced. I would
12 consider this document a litigation
13 strategy work product document that
14 should have been withheld.
15 It looks to me like, perhaps,
16 it's an earlier draft of one that may
17 have very well have been withheld
18 subject to finalizing the privileged
19 list for Dr. Jones' documents.
20 The document contains
21 recommendations concerning the pursuit
22 of discovery. It doesn't address
23 primarily the expert's opinions or the
24 basis for the expert's opinions; and
25 what I would propose is -- we can
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1 either do one of two things. I can
2 either treat this as an inadvertently
3 produced document and request that it
4 be held out of evidence at this point
5 subject to a ruling on a motion to
6 secure return of the document; or if I
7 can get a stipulation that there will
8 not be deemed any waiver of litigation
9 strategy work product concerning such
10 documents, I will just basically allow
11 it to either be the subject of this
12 deposition and treat this document as
13 an entity into itself.
14 MR. BURGESS: I don't think
15 you're waiving any work product
16 privilege, and I would stipulate that
17 you're not, nor are you waiving your
18 right to secure return of the document
19 just by letting me ask him questions
20 about it.
21 MS. STINSON: I would agree.
22 MR. SAXE: If you both want to
23 take a look at the document.
24 MS. STINSON: I certainly agree
25 that you're not waiving anything by
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1 whatever you do here today.
2 MR. SAXE: Okay.
3 Q. (By Mr. Burgess) For what purpose was
4 Exhibit 22 prepared?
5 A. To the best of my recollection, this is a
6 document that I put together either by myself or in
7 cooperation with Dr. Lacewell. I don't have -- I'm
8 not absolutely certain if it was -- if I did it
9 alone or if we did it together. But this is in
10 response to a request from -- I believe, it was
11 Bob Rosenberg who had called and said that he wanted
12 to prepare for discovery and I believe deposition of
13 Peterson Consulting. I don't remember whatever.
14 But, anyway, the question he put to me
15 was: "Would I look at the letter that they had
16 written giving their comments and criticisms of the
17 Hazen & Sawyer draft of the economic impact
18 evaluation and put together some questions or
19 materials that we could ask for, questions we could
20 ask."
21 MR. SAXE: One moment. Would Counsel
22 object if I asked certain foundation
23 questions to the witness concerning
24 the purposes for which the document
25 was produced to avoid further
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1 inadvertent disclosures of attorney
2 work product?
3 MR. BURGESS: No, I don't have a
4 problem with that.
5 MR. SAXE: Professor Jones,
6 generally, was your understanding that
7 the purpose for which you were asked
8 to produce this document to assist
9 Counsel in the conduct of discovery in
10 this litigation?
11 THE WITNESS: Right.
12 MR. SAXE: Do you need any
13 further information about the purposes
14 for which this document was created?
15 MR. BURGESS: I'd like to know
16 when it was created.
17 A. I don't recall the exact date. It had to
18 be sometime after July 31, 1992, I guess.
19 Q. (By Mr. Burgess) Do you know if it was
20 this year 1993?
21 A. No. I think it was probably 1992; but
22 beyond that, I'm sorry, I can't get any closer.
23 Q. Okay. In Subparagraph A on the first page,
24 comment No. 1 says, "Their comments indicate that
25 they have knowledge of EAA farmers' debt loads that
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1 were not used in the H & S analysis."
2 What was the basis for that belief on your
3 part?
4 A. What's the basis for my --
5 Q. Belief that Peterson had knowledge of EAA's
6 farmers' debt loads?
7 A. I'll have to look back at their document
8 under "Debt." They say in their criticism of Hazen
9 & Sawyer that --
10 Q. What page are you on?
11 A. I'm on page -- what do y'all call it,
12 Bates?
13 Q. Bates.
14 A. Bates Page 323. I think that comment would
15 go to the major subheading "Debt" in which they say,
16 "The draft report is predicated on farmers in the
17 EAA having no long-term debt or any debt on the
18 machinery equipment. This assumption may greatly
19 simplify the analysis whether it is incorrect and
20 does not reflect the economic reality of growers in
21 the EAA." I could read the rest of that. "This is
22 a major assumption."
23 Q. You don't need to.
24 A. Well, I think that first sentence causes me
25 to wonder if they can say that her assumption is
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1 incorrect and does not reflect the economic reality
2 of growers in the EAA. That suggests to me that
3 they had information about the EAA farmers' debt
4 loads that were not used in her analysis, and I'm
5 suggesting that he --
6 Q. That that's the basis for your belief that
7 Peterson had knowledge on --
8 A. That, plus the rest of that paragraph.
9 Q. Are you aware of any publicly-available
10 sources of information within or without the State
11 of Florida that contains estimates of long-term debt
12 or debt on machinery and equipment held by farmers
13 in Florida?
14 A. I'm not aware of any -- I believe the USDA
15 may publish some generalized information concerning
16 debt, but it's usually at the State level. Or that
17 may be the lowest level of detail and it wouldn't be
18 necessarily applicable to the EAA. It's fairly
19 generalized information. But I am not -- I am not
20 readily familiar with that source of information.
21 Q. Over to Page 2, Paragraph No. 2 in the
22 second complete paragraph that begins with the
23 sentence, "H & S assumption is that as long as
24 economic returns to land is positive, it will remain
25 in production, period."
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1 Is it your testimony that there would be no
2 impact of long-term debt on that assumption made by
3 Hazen & Sawyer?
4 A. Impact on what?
5 MR. SAXE: I'm going to point out, I
6 think this question has been asked and
7 answered a number of times.
8 Q. (By Mr. Burgess) I want to make sure I
9 understand your testimony because -- well, I have a
10 reason for asking. But I want to make sure I
11 understand your testimony and let me just -- is it
12 your testimony that long-term debt has no effect on
13 Hazen & Sawyer's assumption that as long as economic
14 returns to land are positive it's going to remain in
15 production?
16 MR. BURGESS: And I note your asked
17 and answered objection.
18 THE WITNESS: Would you read it
19 back.
20 (WHEREUPON, the requested
21 portion of the record was read
22 by the court reporter.)
23 A. As I understand your question and -- that
24 is, that the underlying assumption or overall
25 assumption or method used by Hazen & Sawyer -- that
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1 is, as long as the returns to land stay in
2 production are positive, the land will stay in
3 production; and that, from an economic impact
4 standpoint, debt is not a part of that calculation,
5 that is my opinion, yes.
6 Q. (By Mr. Burgess) I have a question
7 concerning Paragraph 3 on that page; and rather than
8 read it in the record, it might be better if you
9 just read that to yourself.
10 A. Okay. Okay. I'm ready.
11 Q. Okay. Would you agree that Hazen & Sawyer
12 considers or did consider in their 10-year study a
13 depreciation to be, in effect, the repayment of
14 debt?
15 A. I think what Hazen & Sawyer did was to set
16 up an amortization schedule assuming that all
17 growers had new equipment or each acre had a new
18 equipment complement beginning in the 1994 period,
19 and then she amortized that over, I think, about a
20 12-year period at 8 percent.
21 That amortization process assumes that the
22 annual charge, then, for machinery and equipment is
23 sufficient to replace the equipment that you started
24 with at the beginning of the period, plus paid an
25 annual 8 percent interest on the original amount of
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1 money required to purchase the equipment.
2 Q. Is it not possible to answer -- I
3 understand your explanation. But is it possible to
4 answer my question with a "yes" or a "no"?
5 A. Well, you call it depreciation. Is the
6 principal repayment in an amortization schedule the
7 same as depreciation? It could be. There are of,
8 course, a number of different ways to compute
9 depreciation, straight-line declining balance,
10 double declining balance, on and on.
11 The amortization schedule would be
12 basically, as I understand it, a straight-line
13 annual rebuilding of the capital required to match
14 that amount that was at the beginning of the
15 period.
16 So, you know, it's a similar concept. I
17 guess I would agree to that. I don't want to agree
18 that it's depreciation because depreciation has a
19 little bit of a different connotation.
20 Q. So it's amortization, you're saying?
21 A. That's what she did. She amortized a full
22 complement of machinery and equipment from the
23 beginning of the period.
24 Q. Did she treat that depreciation and returns
25 to investment as a cash cost for balancing purposes?
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1 A. She put in a cost in her cost of production
2 in the budget that she used to look at to take out
3 all the appropriate costs to get to a bottom line
4 return to land.
5 Q. Do you know if she's going to maintain
6 similar treatment for purchase of machinery and
7 equipment for her 20-year study?
8 A. We haven't -- I haven't discussed that with
9 her, and I don't know exactly what her plans are.
10 Q. If you can turn to the next to the last
11 page of the exhibit or Bates No., I guess, 0427.
12 A. Uh-huh.
13 Q. The last sentence of the next to the last
14 paragraph reads: "It is true that H & S only
15 partially addressed this issue. There will be
16 losses in sales taxes, property taxes, et cetera.
17 H & S only estimated lost property tax on land taken
18 out of production or receiving a lower economic
19 return per acre."
20 And I understand that if you need to read
21 the rest of the paragraph to get the context, go
22 ahead. My question is: In what manner did H & S
23 only partially address the issue?
24 A. In the letter to her from Peterson, they
25 use a term that I thought was vague and is not -- I
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1 was not familiar with, "the destruction of economic
2 value." So in writing this in this particular
3 paragraph, I guess, I was grappling with what that
4 might mean; and I was trying to provide Counsel with
5 some alternatives as to what they might be talking
6 about since the term is so vague that I couldn't
7 determine what they were talking about.
8 In regard to the partial treatment of
9 impacts, that is only -- that only has relevance if
10 you're going to look at the complete scenario of
11 community economic impacts. Hazen & Sawyer was not
12 asked to do that, is my interpretation of the RFP.
13 However, Peterson seems to want to
14 introduce that here. So what I'm saying is that if
15 community economic impacts are introduced, then it
16 is true that Hazen & Sawyer should calculate
17 property taxes and the change in property taxes as
18 land goes out of production and as net returns to
19 land fall to use the capitalization procedure and
20 calculate property taxes on that.
21 She did not go further and look at sales
22 taxes or any of the other possible community
23 impacts. And it's my understanding when I read the
24 RFP -- in my reading of the RFP, that's not asked
25 for in there.
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1 Q. And it's your testimony that the phrase
2 "destruction of economic value," is not a term
3 that's used in economic impact literature, as you
4 state in that paragraph?
5 A. If it is, I'm not familiar with it.
6 Q. Have you ever used the FLIPSIM model either
7 stochastically or statically?
8 A. I have not personally ever run the FLIPSIM
9 model.
10 Q. In conjunction with others participating in
11 a study, have you used the FLIPSIM model?
12 A. No, I haven't used the FLIPSIM model. I
13 have worked -- I did work on a project, and it was
14 about two years ago, in which we were analyzing the
15 impact of some changes in tax laws in Texas as to
16 what the impacts would be on agriculture.
17 I was cooperating in this project with
18 Dr. James Richardson and Dr. Ed Schmitz and
19 Ron Knutson and some others.
20 The project had two levels of analysis
21 basically. One was the statewide aggregate impacts,
22 for which I had responsibility; and the other was
23 impacts on individual farm firms for which
24 Dr. Ed Schmitz, Ron Knutson and James Richardson
25 performed that analysis.
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1 I believe in the publication that came out
2 they were both -- both those analyses are in the
3 same publication but, in effect, the analyses were
4 done in parallel but not, in fact, related to one
5 another, except that we did look at the same changes
6 in tax policy.
7 Q. Was FLIPSIM run statically or
8 stochastically?
9 A. That would have been a stochastic run, I'm
10 almost certain, because of the variables that they --
11 the product that they produce from their run.
12 Q. You said earlier that your work efforts to
13 date have been confined to reviewing existing work
14 efforts of others. Other than the preparation for
15 the February 11th presentation to the governing
16 board, is that consistent with what you have done to
17 date?
18 A. In addition to that, I've prepared analyses
19 for Counsel, and you have the two items that I sent
20 directly to Grace Johns.
21 Q. That's right. Other than those items, as
22 you sit here today, do you have any plans to
23 undertake other affirmative work steps in connection
24 with this litigation?
25 MR. SAXE: Counsel --
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1 A. What's an affirmative work step?
2 MR. SAXE: -- I'm assuming in your
3 question you're referring to work
4 steps in Dr. Jones' capacity as a
5 potential testifying expert witness?
6 MR. BURGESS: That's right.
7 Q. (By Mr. Burgess) An affirmative work step
8 would be, to me, reviewing Grace Johns' work in the
9 context of what you've testified you have already
10 done and will continue to do and that is reviewing
11 existing work efforts. The February 11th
12 presentation, I would characterize as an affirmative
13 work step. And do you have any other type of
14 affirmative work projects that you're considering or
15 working on now?
16 A. Not at this point in time as I sit here, as
17 you say.
18 Q. Let me show you Exhibit 6, which, again, I
19 believe came in as an exhibit during the testimony
20 of Dr. Lacewell; however, it does appear to be a
21 memo from you. And I would just ask you to turn to
22 the table on the back and, if you would, just tell
23 me what that table -- strike that.
24 Did you prepare that table?
25 A. I did.
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1 Q. And what did you attempt to do or
2 demonstrate by that table?
3 A. I was trying to -- well, let me back up for
4 a minute. I listened to the presentation of
5 Dr. Polopolus the same day that Dr. Johns gave her
6 final report, and there were obviously wide
7 differences in the impact estimates. As I studied
8 those and tried to go through, I couldn't find a
9 common denominator for the two so that you could
10 make -- really make a comparison of some kind.
11 So in this table, what I was trying to do
12 was to go back and put this on some kind of a common
13 comparative basis and to see if, given
14 Dr. Polopolus' assumptions, that I could reproduce
15 these numbers. If I could, then I'd have somewhere
16 to go from there; and so that's what I was trying to
17 do.
18 Q. And you could not reproduce those numbers;
19 is that your testimony?
20 A. That's correct. Given the data at hand,
21 the multipliers that he said he used, which those
22 were, in fact, he did say were the same that
23 Hazen & Sawyer used, I can't come up with the same
24 impact estimates that he does.
25 Q. Was this chart prepared at or near the date
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1 of the document which is October 23, 1992?
2 A. Well, I don't recall exactly when I
3 prepared the table. I studied this for a period of
4 time and tried to reconcile some of the differences
5 without going to this technique, so -- but it was
6 all -- this was all prepared for the same process.
7 Q. Assuming it was prepared at or near that
8 time, I think your testimony would stand for the
9 proposition that you've met with Hazen & Sawyer at
10 least once and maybe twice since the time that they
11 met with Jim Richardson and Lee Polopolus.
12 Do you have any further information, as you
13 sit here today, with respect to how Polopolus
14 arrived at his numbers versus how Hazen & Sawyer
15 arrived at theirs?
16 A. I know how Hazen & Sawyer arrived at
17 theirs. The only thing that I have had in my
18 possession from Dr. Polopolus was the flip chart
19 overheads that he handed out at the South Florida --
20 at the funding council meeting that day; and then, I
21 think, from the meeting that he had with Grace
22 Johns, there are some -- there are some other
23 numbers here, but I haven't tried to redo this
24 analysis using those numbers and I don't know if you
25 could or not.
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1 Q. That's Exhibit 15?
2 A. Exhibit 15, yeah.
3 Q. Do you know whether Hazen & Sawyer has
4 asked Dr. Polopolus how he arrived at his numbers
5 versus how they arrived at theirs?
6 A. I have no specific knowledge of any
7 requests that have gone from them to him.
8 Q. Do you know whether Hazen & Sawyer intends
9 to continue to use the local employment multipliers
10 and statewide multipliers which appear in the four
11 footnotes on the last page of Exhibit 6? And when I
12 say continue to use them, I mean for purposes of
13 their 20-year study?
14 A. Those are the ones in the footnotes of the
15 table?
16 Q. Yes, sir.
17 A. No, I don't know at this point in time
18 whether she's going to use that or may have more
19 current information of what the situation might be.
20 Q. Have you independently confirmed or
21 verified that those multipliers are the correct ones
22 to use for the Hazen & Sawyer 10-year study?
23 A. Those are the multipliers for Palm Beach
24 County, and she decided to use those feeling that
25 they would be representative of the EAA. I agreed
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1 with that assumption. There are others available.
2 You can acquire such multipliers for counties,
3 groups of counties, states and so forth. But I
4 think, in looking at what was available and
5 comparing that with other studies, I think these are
6 appropriate. And I think they are the most current
7 available at the time.
8 Q. Are you aware of any computer simulations
9 or computer runs that Grace Johns may have made
10 using other multipliers?
11 A. No, I'm not, not for this study.
12 MR. BURGESS: I don't have anything
13 else. Thank you.
14 MS. STINSON: I have hopefully
15 just a few minutes. Do you want a
16 break?
17 THE WITNESS: No. I thought you
18 said, "This will take me just a few
19 minutes."
20 MS. STINSON: Oh, no. Hopefully
21 just a few minutes.
22 THE WITNESS: Oh, okay
23 * * *
24 R E - E X A M I N A T I O N
25 * * *
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1 BY MS. STINSON:
2 Q. This morning we were given a different
3 version of what has been marked as Exhibit 8, and we
4 marked it 8-A. I believe you indicated that 8-A was
5 the draft and you had sent the draft to Dr. Bromley
6 for his review; is that correct?
7 A. That's my recollection, yes.
8 Q. Can you tell me what comments Dr. Bromley
9 had on your paper?
10 A. Not with any great -- I'm going to work
11 just on recall, because he did not send me comments,
12 written comments. He called me, and we went through
13 the document over the phone. I made handwritten
14 notes in earlier drafts, or I may have even been
15 sitting at my computer terminal at the time making
16 those as we went through it. And then he had, as I
17 recall, some other general comments that caused me
18 to go back, rethink, and maybe redraft perhaps an
19 entire section or paragraph.
20 So it's very difficult for me to go back to
21 that. Some of it was specific editing; some of it
22 was language modification; some of it was, you know,
23 "you really ought to redo this whole section," or
24 something, those kinds of comments.
25 Q. Is the version that is in as Exhibit 8 a
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1 result of the conversation you had with Dr. Bromley
2 on 8-A?
3 A. It is a later version. It is a result, in
4 part, because of the conversation I had with
5 Dr. Bromley as well as my own analysis, continued
6 analysis in production.
7 Q. Did you send the draft 8-A to anyone
8 besides Dr. Bromley? Did anyone else comment on it?
9 A. I don't recall sending it to anyone else.
10 Dr. Lacewell and I were working on a number
11 of things at the time in sort of a team effort. I
12 probably shared it with him at the time and we may
13 have discussed some components of it and I think
14 that would have been the extent of it.
15 Q. On what's been marked as Exhibit 20 -- have
16 you got that?
17 A. No. Maybe I can find it.
18 Q. If you'd turn to Page 5.
19 A. Is this it, "Review of World Price
20 Situation"? This is not marked, the one that I
21 have.
22 Q. Yes, that's it.
23 A. What page?
24 Q. 5.
25 A. 5. Okay.
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1 Q. The language here I don't understand. I'll
2 ask you to explain. The second paragraph about
3 three-fifths of the way down, there's a sentence
4 that begins "under free trade." Do you see where I
5 am?
6 A. Yes.
7 Q. I understand that sentence, and it says,
8 "Sugar prices range from a low 7 and a half to 11
9 cents per pound." Then it goes on to say, "However,
10 comparative current trade policy prices are
11 predicted to range from about 27 and a half cents
12 per pound to 31.7 cents per pound."
13 What are comparative current trade policy
14 prices?
15 A. Okay. As I recall, without consulting
16 Mr. Greer's dissertation, the trade policy, current
17 trade policy prices that I am referring to relate to
18 his projection of what prices would be, what he
19 projected prices to be under current trade policies
20 without changing the trade policy. And those were
21 27.50 to 31.70.
22 Q. For what period of time? Do you recall?
23 A. I believe it's -- I believe the period he
24 used is stated in an earlier sentence when it says
25 that, "Greer builds a structural model to predict
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1 the impact, a move to free trade on the world
2 sweetner market for five years, 1991 to 1995."
3 Q. Then you say, "Hence, Greer's price
4 forecast must be on a white sugar basis rather than
5 raw." And then you indicate, you have, in fact,
6 confirmed that?
7 A. Yeah. I had some difficulty in first going
8 through his thesis as to figuring out whether he was
9 talking about raw sugar or white refined sugar or
10 just what level of processing we were talking about,
11 and that's what this comment here relates to.
12 Q. So the 27 and a half and 31.7 are his
13 prediction as to what white sugar prices would be
14 under current sugar policy; is that correct?
15 A. I believe that's correct, and evidently
16 that's what I believe to be correct when I wrote
17 this. And so it's been a while since I've looked at
18 his thesis, and I don't have complete recall of it.
19 Q. That, then, would mean that the 7 and a
20 half to 11 cents per pound is also for white sugar
21 on a free market, free trade basis, correct?
22 MR. SAXE: Objection to form; "also
23 under free market." I thought the
24 previous question was under current
25 federal policy.
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1 MS. STINSON: Also white sugar.
2 I may rephrase it if I didn't say it
3 right.
4 Q. (By Ms. Stinson) Let me rephrase it. The
5 7 and a half to 11 cents per pound under free trade
6 represent prices for white sugar; is that correct?
7 A. That's right. And I think you're right.
8 Like I say, to the best of my recollection, that's
9 the intent of that paragraph, is to say other
10 studies had shown in a range of 10 to 15 cents per
11 pounds. Greer, as best I can tell from studying his
12 thesis, comes up with a range in prices, free market
13 price would be less than that.
14 Q. Do you know what the relationship is
15 between raw sugar price and white sugar price?
16 A. I don't know what the specific marketing
17 margin is or the processing margin. I couldn't give
18 you a number.
19 Q. Is there somewhere to find that number?
20 A. Yeah, I think the Sugar & Sweetner Report
21 reports on it on a periodic basis of both refined
22 sugar prices and raw sugar prices for the U.S.
23 I believe that's correct. I'd have to go
24 back and make sure, but I think I recall seeing the
25 refined sugar prices report it.
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1 Q. On the next page, Page 6.
2 A. Page 6.
3 Q. You refer to Clauson, Lord & Hoff for
4 production and process in costs of 12.37 and
5 6.31 cents per pound in Florida for raw sugar,
6 correct?
7 A. Can you tell me which paragraph?
8 Q. I'm sorry. The first full paragraph.
9 A. Okay. Here we go. That's right. I think
10 all those -- that's a publication from the Sugar and
11 Sweetner Division of the ERS, USDA.
12 Q. Do you recall what year that's for or
13 whether it's an average?
14 A. I think it would have been a fairly recent
15 year, perhaps 1990. I'm not absolutely certain
16 without going back and looking at the document.
17 Q. So adding those two together, we've got
18 cost of production and processing of 18.67 cents per
19 pound, 18.68 if my arithmetic is right?
20 A. Right, 18.68.
21 Q. In the next paragraph you indicate that
22 2.1 cents is land charges; is that correct?
23 A. That's, as I recall, what I found to be
24 reported in that publication. I don't believe this
25 is a Sugar & Sweetner Report, periodical report like
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1 we've been talking about. I think this is a report
2 that I had gotten which is not a part of their
3 periodicals, but it was a publication from that same
4 group. So I don't want to confuse it with what
5 we've been talking about as Sugar and Sweetner
6 reports here.
7 But as I recall, there was a -- there was a
8 budget presented there, and they had put in a land
9 charge of 2.1 cents per pound.
10 Q. Now, when you say "land charges," that
11 would also be the same as return on land, right?
12 A. Uh-huh.
13 Q. So if we subtract that from 18.68, we've
14 got the basic cost of production and processing
15 minus the return to land?
16 A. You would have the cost of production and
17 processing charging out every -- yes. You would be
18 charging out expense for all factors except land.
19 Q. That's right. So we've got, again, if my
20 arithmetic is right, somewhere in the neighborhood
21 of 16 and a half cents?
22 A. In the neighborhood.
23 Q. Okay. On Page 7, the second full paragraph
24 that begins "if."
25 A. Okay.
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1 Q. The prices there, you are talking about raw
2 sugar; is that correct?
3 A. Where it says, "under free" -- yes. Yes,
4 that would be raw sugar prices I'm talking about
5 there.
6 Q. Okay.
7 A. When I refer to the 21.84 cents is the
8 7-year historic average, that would be raw sugar.
9 Q. Okay. And the 8.76 world price is also raw
10 sugar?
11 A. 8, the world price average for that period
12 is what I recall I computed to be the average for
13 that 7-year period, yes, 8.76 cents.
14 Q. In the last paragraph of this page, you
15 indicate that, "it is likely that Florida sugar
16 production would sustain the price reduction better
17 than other regions and continue to operate as a
18 major sugar-producing region in the U.S. at 15 cents
19 per pound. Florida supply would likely change very
20 little."
21 If the cost of production and processing is
22 16 and a half cents and the price is 15 cents, why
23 do you conclude that Florida production would not
24 change?
25 A. Well, I'd have to refer you back to an
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1 earlier paragraph, if I may, to explain that.
2 Q. Okay.
3 A. If I can find it. I'd like for you to look
4 at Page 6, the second full paragraph that says, "A
5 significant part of this cost is land charges,
6 2.1 cents per pound." That's what we talked about.
7 Q. Right. We already took that out to get to
8 the 16 and a half, right?
9 MR. SAXE: Counsel, maybe if you'd let
10 the witness finish his answer.
11 A. The latter of this is -- I'd like to --
12 Q. (By Ms. Stinson) Okay.
13 A. "Land values probably include some degree
14 of capitalization. U. S. sugar program benefits.
15 Ron Lord suggests in telephone conversations that
16 Florida sugar growers likely could compete in the
17 world market, but would experience some asset
18 devaluation in land and other fixed assets."
19 The 16 cents has in it still charges for
20 fixed assets; such as, investments in the mill,
21 investments in other owned farm capital
22 improvements, and those are fixed. And I think --
23 in the conversation with Ron Lord, he suggested that
24 the -- if we went to a 15-cent world price, then
25 there would be the loss of asset value, which, in
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1 effect, lowers the cost.
2 Now, the owner of those assets would, in
3 fact, suffer a windfall loss as you move to the
4 lower price; but we'd reach a new equilibrium
5 situation, which those fixed assets would be valued
6 at a lower level and they would be then expensed
7 out. It would cost less to own them since they are
8 at a lower level and that Florida sugar production
9 cost would adjust to this world price and that they
10 would continue to produce sugar.
11 Q. Do you know what portion of the
12 16 and a half percent is charges for fixed assets?
13 MR. SAXE: Objection to form; "16 and
14 a half cents."
15 Q. (By Ms. Stinson) Cents. I'm sorry.
16 A. No. Not offhand, I don't.
17 Q. Do you have a ballpark figure?
18 A. I would prefer to go back to the budgets
19 and try to work that out.
20 Q. Would that not be a critical piece of
21 information to know whether sugar production would
22 continue in Florida at a price -- where the price is
23 lower than the 16.5 cents per pound?
24 A. Now, the economic theory would be that, in
25 all likelihood, growers in Florida would continue to
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1 grow sugar as long as they could cover the variable
2 cost of production. So it would be important to
3 know how much of that total cost is variable cost,
4 and how much of it is fixed cost.
5 MS. STINSON: That's all my
6 questions. Thanks.
7 MR. SAXE: Okay. If we could
8 just take a brief break, I'll look
9 over my notes and see if I have any
10 questions.
11 MS. STINSON: Okay.
12 * * *
13 E X A M I N A T I O N
14 * * *
15 BY MR. SAXE:
16 Q. Professor Jones, would you refer, please,
17 to Exhibit 22. Professor Jones, the statement in
18 this document on Page 3 -- and I'm reading, in part,
19 "They may bring up community impacts in terms of
20 public service demand and fiscal impacts for taxing
21 jurisdictions of the area. It is true that
22 Hazen & Sawyer only partially addressed this issue.
23 There will be losses in sales tax, property tax,
24 et cetera. Hazen & Sawyer only estimated loss
25 property taxes on land taken out of production or
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1 receiving a lower economic return per acre."
2 I believe you testified that Hazen & Sawyer
3 was not asked to look at complete community economic
4 impacts. I'd just like to ask you: Can you
5 relate the items that you're referring to in this
6 document as having been omitted by Hazen & Sawyer to
7 economic impact analysis and what you understand to
8 be socio-economic impact analysis?
9 A. That's the problem that I was really
10 relating to here is that it's my understanding that
11 Hazen & Sawyer was asked to do an economic impact
12 analysis; and in doing so, she included those things
13 that are normally included in an economic impact
14 analysis. She did not include what might come under
15 the heading of "socio-economic impact analysis" or
16 in some cases called "community impact analysis";
17 such as, the public service demands, physical
18 impacts, and so forth. So in my judgment, she
19 excluded those things that are normally excluded
20 from an economic impact analysis, and it would
21 appear here that Peterson is suggesting that some of
22 those be addressed and is actually criticizing Hazen
23 & Sawyer for not addressing those.
24 MR. SAXE: Thank you. No further
25 questions.
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1 THE REPORTER: Who all needs a
2 copy of the transcript?
3 MR. SAXE: Yes, please.
4 MR. BURGESS: Yes, as with all the
5 others.
6 (WHEREUPON, at the hour of
7 2:00 P.M., the deposition was
8 concluded.)
9 * * *
10
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22
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25
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1 SIGNATURE OF WITNESS
2 I, LONNIE L. JONES, Ph.D., solemnly swear or
3 affirm under the pains and penalties of perjury that
4 the foregoing pages contain a true and correct
5 transcript of the testimony given by me at the time
6 and place stated with the corrections, if any, and
7 the reasons therefor noted on a separate sheet of
8 paper and attached hereto, and that I am signing
9 this before a Notary Public.
10
11 ____________________________
LONNIE L. JONES, Ph.D.
12
13 STATE OF T E X A S *
14 COUNTY OF _______________ *
15 SUBSCRIBED AND SWORN TO BEFORE ME by
16 LONNIE L. JONES, Ph.D., on this, the
17 _______________ day of ________________, A.D.,
18 1993.
19
_____________________________
20 Notary Public, State of Texas
21
22
23 My Commission Expires: __________________________
24
25 Job 1SUGA.FLOR00/0385
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1 C O R R E C T I O N S T O T H E
2 D E P O S I T I O N O F
3 LONNIE L. JONES, Ph.D.
4 PAGE/LINE ** READS ** SHOULD READ ** REASON
5 __________________________________________________
6 __________________________________________________
7 __________________________________________________
8 __________________________________________________
9 __________________________________________________
10 __________________________________________________
11 __________________________________________________
12 __________________________________________________
13 __________________________________________________
14 __________________________________________________
15 __________________________________________________
16 __________________________________________________
17 __________________________________________________
18 __________________________________________________
19 __________________________________________________
20 __________________________________________________
21 __________________________________________________
22 __________________________________________________
23 __________________________________________________
24 ___________________________________
LONNIE L. JONES, Ph.D.
25 Job 1SUGA.FLOR00/
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1 STATE OF TEXAS *
2 COUNTY OF HARRIS *
3 I, LORI A. BELVIN, a Certified Shorthand
4 Reporter in and for the State of Texas, hereby
5 certify pursuant to the Texas Rules of Civil
6 Procedure and/or agreement of the parties present to
7 the following:
8 That this deposition transcript is a true record
9 of the proceedings held and the testimony given by
10 LONNIE L. JONES, Ph.D., the witness named herein, on
11 March 4, 1993, after said witness was duly sworn by
12 me.
13 CERTIFIED TO BY me in Houston, Harris County,
14 Texas, on this, the ______ day of ____________,
15 A.D., 1993.
16
17
18 __________________________________
LORI A. BELVIN
19 Certified Shorthand Reporter
Notary Public, The State of Texas
20 Cert. No.: 2572 Exp.: 12/31/93
21 LOONEY & COMPANY
8 Greenway Plaza, Suite 920
22 Houston, Texas 77046
(713) 621-8572
23
24
25 Job 1SUGA.FLOR00/0385
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1 STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
2
SUGAR CANE GROWERS COOPERATIVE OF)
3 FLORIDA, INC., ROTH FARMS, INC., )
and WEDGWORTH FARMS, INC., )
4 )
and )
5 )
FLORIDA SUGAR CANE LEAGUE, INC., )
6 UNITED STATES SUGAR CORPORATION )
and NEW HOPE SOUTH, INC., )
7 )
and )
8 )
FLORIDA FRUIT AND VEGETABLE )
9 ASSOCIATION, LEWIS POPE FARMS )
W.E. SCHLECHTER & SONS, INC., and)
10 HUNDLEY FARMS, INC., )
)
11 Petitioners, )
)
12 v. )
)
13 SOUTH FLORIDA WATER MANAGEMENT )
DISTRICT, )
14 )
Respondent, )
15 )
and )
16 )
MICCOSUKEE TRIBE OF INDIANS OF )
17 FLORIDA, the UNITED STATES OF )
AMERICA, FLORIDA DEPARTMENT )
18 OF ENVIRONMENTAL REGULATION, and )
FLORIDA WILDLIFE FEDERATION, )
19 )
Intervenors. )
20
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21 REPORTER'S CERTIFICATE/FILING CERTIFICATE
DEPOSITION OF LONNIE L. JONES, Ph.D., VOLUME II
22 TAKEN ON MARCH 4, 1993
---------------------------------------------------
23
24 I, Lori A. Belvin, a Certified Shorthand
25 Reporter in and for the State of Texas, hereby
PARLIAMENTARY REPORTING OF FLORIDA, INC.
800-521-9125
338
1 certify pursuant to the Texas Rules of Civil
2 Procedure and/or agreement of the parties present to
3 the following:
4 That the deposition transcript is a
5 true record of the testimony given by
6 LONNIE L. JONES, Ph.D., Volume II, the witness named
7 herein, on March 4, 1993, after said witness was
8 duly sworn/affirmed by me.
9 That $______________ is the charge for
10 the preparation of the completed deposition
11 transcript, and any copies of exhibits charged
12 to MS. DONNA H. STINSON, Attorney for the
13 Petitioners;
14 That the original signature page and
15 correction sheet were sent to MR. KEITH E. SAXE,
16 along with their ordered copy of the deposition
17 transcript, for examination and signature by the
18 witness and return to Looney & Company by
19 ____________________, 19__.
20 That the original transcript
21 ______ was/ ______ was not returned to the
22 deposition officer by the witness.
23 That the original deposition transcript,
24 or a copy thereof, together with copies of all
25 exhibits, was delivered on _________________ to
PARLIAMENTARY REPORTING OF FLORIDA, INC.
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1 MS. DONNA H. STINSON, Attorney for the
2 Petitioners;
3 That pursuant to the information made a
4 part of the record at the time said testimony was
5 taken, the following includes all parties of record:
6
7 MS. DONNA H. STINSON, Attorney for SUGAR CANE
GROWERS COOPERATIVE OF FLORIDA, INC., ET AL.;
8
MR. RICK J. BURGESS, Attorney for FLORIDA SUGAR
9 CANE LEAGUE, INC., ET AL.;
10 MR. KEITH E. SAXE, Attorney for UNITED STATES OF
AMERICA.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
PARLIAMENTARY REPORTING OF FLORIDA, INC.
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1 That a copy of this certification was
2 served on all parties shown herein.
3
4
5
6 CERTIFIED TO on this _________ day of
7 ________________, A.D., 1993.
8
9
10
11 _______________________________
LORI A. BELVIN
12 Certified Shorthand Reporter
The State of Texas
13 Cert. No.: 2572 Exp. Date: 12/31/93
14 LOONEY & COMPANY
8 Greenway Plaza, Suite 920
15 Houston, Texas 77046
(713) 621-8572
16
17
18
19
20
21
22
23
24
25 Job No. 1SUGA.FLOR00/0385
DELIVERY ACKNOWLEDGMENT
PARLIAMENTARY REPORTING OF FLORIDA, INC.
800-521-9125
341
1 JOB NO. 1SUGA.FLOR00/0385
STATE OF FLORIDA
2 DIVISION OF ADMINISTRATIVE HEARINGS
3 SUGAR CANE GROWERS COOPERATIVE OF)
FLORIDA, INC., et al. )
4 Petitioners, )
)
5 v. )
)
6 SOUTH FLORIDA WATER MANAGEMENT )
DISTRICT, )
7 )
Respondent, )
8 )
and )
9 )
MICCOSUKEE TRIBE OF INDIANS OF )
10 FLORIDA, et al. )
)
11 Intervenors. )
--------------------------------------------------
12 ORAL DEPOSITION OF LONNIE L. JONES, Ph.D., VOLUME II
TAKEN ON MARCH 4, 1993
13 --------------------------------------------------
MS. DONNA H. STINSON MR. KEITH E. SAXE
14 123 South Calhoun St. 601 Pennsylvania NW
P. O. Box 6526 Avenue NW
15 Tallahasee, FLA 32301 Room 879
Washington, D.C. 20004
16
MR. RICK J. BURGESS
17 One Biscayne Tower
Suite 3636
18 Two South Biscayne Boulevard
Miami, FLA 33131
19
I hereby acknowledge the receipt of a/an ___
20 original ___ copy of the following items (s)
pertaining to the above numbered and styled cause.
21 ___ Deposition (s) ___ Sworn Statement (s)
___ Certified Questions ___ CNA (s)
22 ___ Affidavit (s) ___ Deposition Summary (s)
___ Exhibits ___ Videotape (s)
23 ___ Ascii Disk (s) ___ Minuscript (s)
___ Signature Pg (s) ___ Correction Sheet (s)
24 ___ Certification Pg (s) ___ Notice of Filing (s)
___ Invoice (s) ___ Other:________________
25 By:_____________ Date:__________ Time:_________
PARLIAMENTARY REPORTING OF FLORIDA, INC.
800-521-9125