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 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 192 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. 22 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 193 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 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 194 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 195 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 . . . . . . . . . . . . . . . 17 18 19 20 21 22 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 196 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 197 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 198 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 19 20 21 22 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 199 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 200 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, PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 201 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 202 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 203 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 204 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 205 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 206 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 207 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 208 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 209 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 210 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 211 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 212 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 213 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 -- PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 214 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 215 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 216 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 217 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 218 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 219 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 220 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 221 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 222 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 223 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 224 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 225 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 226 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 227 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 228 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 229 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 230 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 231 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 232 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 233 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 234 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 235 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 236 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 237 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 238 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 239 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 -- PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 240 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 241 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 242 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 243 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 244 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 245 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 246 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 247 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 248 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 249 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 250 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 251 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 252 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 253 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 254 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 255 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 256 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 257 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 258 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 259 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 260 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 261 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 262 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 263 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 -- PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 264 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 265 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 266 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 267 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 -- PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 268 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, PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 269 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 270 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 271 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 272 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 273 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 274 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 275 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 276 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 277 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 278 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 279 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 280 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; PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 281 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 282 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 283 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 284 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 285 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 286 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 287 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 288 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 289 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 290 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 291 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 292 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 293 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 294 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." PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 295 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 296 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 297 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 298 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 299 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 300 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." PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 301 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 302 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 303 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 304 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 305 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 306 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 307 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 308 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." PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 309 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 310 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 311 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? PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 312 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 313 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 314 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 315 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 -- PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 316 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 317 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 318 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 319 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 320 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 * * * PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 321 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 322 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 323 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 324 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 325 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 326 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 327 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 328 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 329 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 330 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 331 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 332 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. PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 333 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 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 334 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 335 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/ PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 336 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 PARLIAMENTARY REPORTING OF FLORIDA, INC. 800-521-9125 337 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 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. 800-521-9125 339 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. 800-521-9125 340 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