1

2 STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SUGAR CANE GROWERS COOPERATIVE

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

Cooperative Marketing Association; 92-3039

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

FARMS, INC.,

6 and

FLORIDA SUGAR CANE LEAGUE, INC.;

7 UNITED STATES SUGAR CORPORATION;

and NEW HOPE SOUTH, INC.,

8 and

FLORIDA FRUIT AND VEGETABLE

9 ASSOCIATION; LEWIS POPE FARMS;

W.E. SCHLECHTER & SONS, INC.;

10 and HUNDLEY FARMS, INC.,

11 Petitioners,

12 vs.

13 SOUTH FLORIDA WATER MANAGEMENT

DISTRICT, an Agency of the State

14 of Florida,

15 Respondent,

16 and

17 MICCOSUKEE TRIBE OF INDIANS OF

FLORIDA; the UNITED STATES OF

18 AMERICA; and FLORIDA DEPARTMENT VOLUME 1

OF ENVIRONMENTAL REGULATION, and PAGES 1 - 211

19 the FLORIDA WILDLIFE FEDERATION,

20 Intervenors.

__________________________________/

22 DEPOSITION OF RONALD T. LUKE, PhD

24 ACCURATE STENOTYPE REPORTERS, INC.

100 Salem Court

25 Tallahassee, Florida 32301

904/878-2221

6 ___________________________________________________________

7 DEPOSITION OF: RONALD T. LUKE, PhD

TAKEN AT THE INSTANCE OF: Intervenor USA

10 DATE: Thursday, March 11, 1993

TIME: Commenced at 9:00 a.m.

12 Concluded at 6:00 p.m.

LOCATION: Accurate Stenotype Reporters

14 100 Salem Court

Tallahassee, Florida

16 REPORTED BY: TERRY WILHELMI, CSR

Notary Public in and for the

17 State of Florida at Large

___________________________________________________________

2 APPEARANCES:

REPRESENTING THE FLORIDA SUGAR CANE GROWERS

4 COOPERATIVE OF FLORIDA:

5 DONNA H. STINSON, ESQUIRE

Hopping, Boyd, Green & Sams

6 123 South Calhoun

Tallahassee, Florida 32301

8 REPRESENTING THE SOUTH FLORIDA WATER

MANAGEMENT DISTRICT:

PATRICK S. COUSINS, ESQUIRE

10 Popham, Haik, Schnobrich & Kaufman, Ltd.

4100 One Centrust Financial Center

11 100 S.E. Second Street

P.O. Box 019101

12 Miami, Florida 33l3l

REPRESENTING THE UNITED STATES OF AMERICA:

KEITH E. SAXE, ESQUIRE

15 U.S. Department of Justice

60l Pennsylvania Avenue N.W.

16 Room 879

Washington, D.C. 20004

18 ALSO APPEARING: Professor Lonnie Jones

20 * * * * *

2 I N D E X

3 WITNESS PAGE

4 RONALD T. LUKE, PhD

5 Direct Examination by Mr. Saxe 5

10 E X H I B I T S

NUMBER DESCRIPTION PAGE

Luke l Curriculum Vitae 22

13 Luke 2 Comments of Dr. Luke on Draft Final Report 110

Luke 3 Memo to Mr. Green from Dr. Luke 10/2/92 117

20 CERTIFICATE OF REPORTER 211

1 STIPULATIONS

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

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

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

5 other uses and purposes as may be permitted by the

6 applicable and governing rules. All objections, except as

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

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

9 waived.

10 * * *

11 Thereupon,

12 RONALD T. LUKE, PhD

13 was called as a witness, having been first duly sworn, was

14 examined and testified as follows:

15 DIRECT EXAMINATION

16 BY MR. SAXE:

17 Q Dr. Luke, I'm Keith Saxe, I am an attorney with

18 the U.S. Justice Department and I am here representing the

19 United States in Sugar Cane Growers Cooperative of Florida

20 versus South Florida Water Management District. I will be

21 taking your deposition today in this case for today and

22 tomorrow and, if necessary, some third day to be scheduled

23 for the future. During this deposition, I'll be asking you

24 a series of questions, you are required to give me your

25 complete and honest answer to each question, unless the

1 attorney for the Cooperative, Ms. Stinson, instructs you

2 not to answer a question. If for any reason you don't

3 understand a question, please tell me and I'll try to

4 clarify it for you.

5 Dr. Luke, would you please state your full name

6 and address for the record.

7 A Yes. My name is Ronald Thomas Luke and my

8 business address is 7600 Chevy Chase Drive, Suite 500,

9 Austin, Texas 78752.

10 Q Dr. Luke, you have been designated by the

11 Cooperative to give expert testimony in this case on

12 socioeconomic impacts of the SWIM plan and alternatives to

13 the SWIM plan, federally accepted principles and standards

14 for water resources projects, and state law requirements

15 for analysis of socioeconomic impacts of major

16 developments.

17 Is that consistent with your understanding of

18 the scope of your expert testimony in this case?

19 A Taking those broadly, yes, it is.

20 Q I'm going to hand you, just to make it a little

21 bit easier, a copy of the expert witness designation

22 excerpted from the Cooperative's witness list, so you have

23 those items to refer to. I would like you to just give me

24 some explanation, in your own words, of what each of those

25 three elements encompasses. Starting if you would, please,

1 with the socioeconomic impacts of the SWIM plan and

2 alternatives to the SWIM plan.

3 A I think that -- again, I didn't draft this, but

4 what I would interpret it to mean is that we have a

5 proposed project by the District which has the potential,

6 if implemented, to have an impact on the primary industry,

7 the primary economic activity in the Everglades

8 Agricultural Area, which is of course its agriculture. It

9 also has the potential to provide some new economic

10 activity, which is to say the construction and operation of

11 the storm water treatment areas.

12 Both of those effects have potential to have

13 ripples, if you will, in the sense that they can both

14 create and destroy jobs, not only in the agricultural or

15 the construction sector, but in those sectors that supply

16 the primary sectors and those households that derive their

17 incomes from all the economic activity. Those economic

18 ripples in turn can have an effect on population. If there

19 is not work to do, at least some subset of the population

20 either will want to or will have to leave the area. It

21 will have an impact upon both demands for certain public

22 services and the ability to pay for them. It will have

23 impacts on the ability of some folks to educate their kids.

24 It will potentially have other social impacts that come

25 from either better times or worse times economically and

1 can come from economic dislocations.

2 The alternatives that are referred to, I'm aware

3 from having read some of the literature associated with

4 this case and attended some hearings, viewed some hearings,

5 that their set of best management practices and noticed

6 that a list of those that particularly has to be adopted,

7 there is uncertainty over both the cost and the

8 effectiveness of each of those BMP's and therefore what

9 combination may be necessary to achieve certain results.

10 There is uncertainty over the effectiveness, I

11 guess I would say, of the proposed storm water treatment

12 areas on their phosphorus uptake and whether or not the

13 preliminarily specked acreage would or would not be

14 sufficient to achieve any particular desired biological

15 result. There is also uncertainty about the interaction

16 between the nutrient loadings and the impacts of

17 hydroperiod management. And if you take those things, put

18 them together, there are a lot of different ways that one

19 could fashion a management plan, if you will, for the

20 WCA's, that would each have potentially different costs and

21 different impacts.

22 There is also the question of how any of this is

23 to be paid for. The method of financing in certain

24 projects can be a very important factor in determining its

25 impacts and the distribution of those impacts, which is

1 also important, who is impacted, what groups, so that part

2 of what I have been trying to get a handle on is what is

3 the range of alternatives that might, vis-a-vis the

4 District's response to legislation, settlement agreements,

5 that might be called for. I understand recently there is a

6 new one having to do with a treatment plant that might be

7 used in lieu of or in conjunction with storm water

8 treatment areas.

9 Let's see, it was kind of a general question, so

10 I'm not sure whether I have answered it or not, but that

11 would kind of be my thoughts at the moment.

12 Q That's fine. The next one is federally accepted

13 principles and standards for water resources projects;

14 would you explain that for me in your own words?

15 A Yes. The question of analysis of the impacts of

16 water resources projects is not anything new. In fact, the

17 literature goes back at least into the '50's, I mean, this

18 was one of the first areas that people focused on in terms

19 of systematic policy analysis. The federal government

20 developed a body of procedure that's actually called

21 Principles and Standards for Water Resources Projects. I

22 believe it originally emerged as a document back in the

23 '70's.

24 Each of the agencies that undertakes water

25 resources projects, such as Bureau of Reclamation, Corps of

1 Engineers, has a set of procedures that it follows in

2 assessing a project, not only assessing its impacts, but in

3 measuring its cost benefits and whether or not it appears

4 to be on net, a project that ought to go forward.

5 Q How about the last one, state law requirements

6 for analysis of socioeconomic impacts of major

7 developments; again give me some explanation in your own

8 words?

9 A I have had the opportunity to review a

10 memorandum of law that I believe Bill Green is the

11 principal author of, concerning the interpretation of the

12 Florida water quality regulations that I believe are one of

13 the main bodies of law that underlie this particular

14 proceeding and underlie some of the events leading up to

15 this proceeding. It is my understanding that the Florida

16 water quality laws include a number of balancing

17 provisions, that is they do not require that every instance

18 of pollution be totally eliminated, regardless of the cost

19 of that elimination and regardless of the benefit of that

20 elimination. It provides for agencies to use, and I'm not

21 able to give you the entire list, but examples of that list

22 would be mixing zones, certain variances, and other, in

23 effect, approaches to enforcement that in my view

24 inherently and implicitly require a weighing of costs and

25 benefits of some sort of strict enforcement of a

1 qualitative or quantitative standard. And what I see

2 getting into there is a question of, in order to make a

3 decision which has a reason basis, particularly when such

4 large expenditures are being contemplated, what kinds of

5 analysis are necessary as part of the reasonable adoption

6 of a plan or regulatory scheme.

7 Q Are there any additional areas, additional to

8 the ones that are listed in that designation, in which you

9 might give expert testimony in this case?

10 A I think that there are existing ongoing or

11 planned a number of studies that touch on some of the

12 topics I have just told you about and I think that as part

13 of my work that I may be called upon to analyze those

14 studies and to form opinions about them and I may also be

15 asked to either do sensitivity analysis or independent

16 studies for the purpose of providing opinions and testimony

17 on the socioeconomic cost/benefit areas relevant to the

18 SWIM plan.

19 Q When you say you refer to studies that are

20 planned, can you be more specific?

21 A I can try, I'm not sure I know what they all

22 are.

23 Q To the extent you know.

24 A For instance, there is an ongoing study of

25 economic impacts which Hazen and Sawyer is conducting, I

1 understand we're supposed to get a look at sometime in the

2 next few weeks. At a meeting of economists in West Palm

3 Beach a few weeks ago, I was told by Ms. Johns that their

4 economic benefit study was, I believe her term was on the

5 back burner right now, but once they finish the impact

6 study, that that -- and I don't remember whether she said

7 it would kind of come to the front burner or it might come

8 to the front burner, but in effect I have the impression

9 that there may be additional work done on the economic

10 benefit issue.

11 I understand that there is an engineering

12 alternative that has been advanced by the District's

13 consultant regarding an alternative to STA's for phosphorus

14 removal and if that is considered an alternative by any

15 parties, then that's a whole matter that really either

16 requires additions to studies that have been done or would,

17 you know, you could call it a new study, your choice.

18 As far as the work that the League is doing or

19 the League's consultants, as I have understood their

20 testimony, they are in a role of responding and whether

21 they will do independent studies on either impacts or

22 costs, direct impacts, indirect impacts, I really don't

23 know, but if they did, then I would need to take a look at

24 those.

25 I understand that as to the water supply issue,

1 which is wrapped up with the hydroperiod issue, that there

2 is a planning process that is ongoing, vis-a-vis the lower

3 east coast of Florida, and that is directly intertwined

4 with the issues of hydroperiod management in the WCA's and

5 in the park and that that process really has not produced

6 final planning documents or the kinds of economic or

7 socioeconomic analysis that accompany them, and as those

8 come out, there may be something there that needs to be

9 looked at.

10 Q The water supply and hydroperiod related

11 planning that you are referring to, who is undertaking that

12 planning, as you understand?

13 A My understanding is the District is. I mean,

14 it's a public involvement process and all but, I mean, it's

15 my understanding that they are the responsible state

16 agency.

17 Q And the engineering alternative advanced by a

18 District contractor concerning STA's for phosphorous

19 removal, do you have anymore specific information on which

20 contractor, what alternatives?

21 A There are two that sound kind of similar, I want

22 to say Burns and Macullop.

23 Q There are two, as I understand it, that maybe

24 sound similar.

25 A This is something where they reported to the

1 District that there is a phosphorous removal technology,

2 which if I read it correctly, there are operational plants

3 in Germany and that could be considerably less expensive

4 and consume less land than the current four STA proposal. I

5 read, and I don't recall whether it was a memo or a letter,

6 but I read the communication to the District as suggesting

7 that this was worthy of further investigation.

8 Q Does this involve some kind of structural

9 facility or did you glean anymore?

10 A Yes. I mean, there were no pictures, but the

11 impression that I got from reading this was that it was a

12 waste treatment facility as opposed to another design for a

13 filtration marsh.

14 Q Earlier when you were describing the state law

15 requirements for analysis of socioeconomic impacts of major

16 developments, you indicated that you might be testifying

17 about what kind of analysis are required, you also referred

18 to Florida regulations. Is it your testimony that state

19 law requirements would govern the type of analysis that

20 would have to be done by an agency such as the District in

21 undertaking the SWIM implementation?

22 A I'm not trying to give you a legal opinion, it

23 is -- I think I need to limit what I'm saying to based upon

24 my reading of Mr. Green's memorandum of law, it appears

25 that there are certain mechanisms in the Florida water

1 quality statutes which appear to require weighing and

2 balancing and in effect what I'm saying is in order to do a

3 reasoned weighing and balancing, there will be certain

4 types of analysis on a major project and a major resource

5 management area like this, that would be required.

6 Now, it's my understanding that in effect the

7 Marjory Stoneman Douglas Act is an amplification or an

8 expansion rather than a basic replacement of those water

9 quality statutes. That's based on my reading of Mr.

10 Green's memo, I have not done any independent study of

11 that. But that there may be also federal laws that could

12 certainly apply.

13 Q So when you say that you understand various

14 statutes, state and possibly federal, and regulations,

15 state and federal, require certain analysis, will you be

16 testifying as to what the legal requirements are?

17 A I don't think that's the way it would work. I

18 think basically I would be looking at it from the

19 standpoint of my counsel posing to me the hypothetical or

20 the assumption, assuming that the statutes require certain

21 tests, certain criteria, certain weighing and balancing,

22 what do you believe would be the types of economic and

23 other analysis required in order to provide a reason basis

24 for advancing a plan in satisfaction of those. I think it

25 would be more that I do not think that I am being called to

1 opine as to what the law is, but simply what kinds of fact,

2 what kind of studies would be needed in order to support

3 certain findings or to support the reasonableness of the

4 plan.

5 Q The legal interpretation or position that you

6 would be assuming, as you put it, a basis for a

7 hypothetical or something to that effect, was such a

8 position laid out in the memorandum you referred to that

9 you reviewed authored primarily by the attorney Bill Green,

10 concerning interpretation of Florida regulations?

11 A Let me say yes, I believe it was in the sense

12 that he -- the title of that memorandum, paraphrasing, is

13 something about the relevance of economic analysis to

14 determinations under the Florida water quality statute, and

15 I'm thinking that was submitted to the hearing examiner in

16 this case.

17 MR. SAXE: Counsel, do you know if that would be

18 among the documents that were produced, is that in

19 fact the same document that may have been filed in the

20 case or does it refer to another memorandum?

21 MS. STINSON: I believe it's the memo that was

22 filed, I don't know of any other. In that it was a

23 pleading, I may not have -- he may not have even had a

24 copy, but I think that was included in what was filed.

1 BY MR. SAXE:

2 Q Dr. Luke, when we were talking a moment ago

3 about the studies that might be planned or forthcoming and

4 that you might analyze, you mentioned Hazen and Sawyer, I

5 guess it was the 20 year study on economic impact, I'm not

6 sure if you used that terminology, but is that one and the

7 same, the 10 year extension of the existing 10 year study?

8 A If you want to use that as a shorthand, that's

9 fine, but in listening to Ms. Johns, Dr. Johns' lay out

10 what she was doing, there were quite a bit -- quite a few

11 other extensions, changes, elements, other than just taking

12 and extending the previous work by 10 years, so it sounded

13 like a fairly significant revision of the previous study,

14 to me.

15 Q For purposes of these proceedings today, we can

16 assume that -- we'll use 20 year study just to refer to the

17 time frame of the study, not its relationship to the 10

18 year study.

19 A If you want to use that as just a working title,

20 I have no problem. I just couldn't agree with your

21 statement that that was the only thing she was doing was

22 extending it by 10 years.

23 Q Okay, I didn't mean to imply that.

24 You also referred to the alternative advanced by

25 the District contractor, possible water supply or

1 hydroperiod planning studies that might be done by the

2 District, you indicated that you knew of no studies that

3 were specifically planned at this point by the League. Are

4 there any other planned studies or possible studies that

5 you are aware of that you might be doing sensitivity

6 analysis on or independent analysis or any other kind of

7 analysis?

8 A Not that are specifically like the Hazen and

9 Sawyer study in the sense of an economic study and then you

10 have another economist come in and look at it. There is,

11 as I understand it, and I don't really know the names of

12 all the people doing this, but that there are various,

13 let's call it natural science studies going on, vis-a-vis

14 the effectiveness of the STA's or the BMP's in terms of the

15 issue of are the cattail spreading or is the cattail area

16 stable, in terms of what would be the impacts of the SWIM

17 plan on water flows and hydroperiod and things like that in

18 and of itself, and all of those have the potential to

19 provide information that would affect one's calculation of

20 costs or benefits, so as those become public or whatever,

21 then I could envision looking at those trying to see if

22 they did make a difference and then going back and trying

23 to factor that in to whatever work we had done.

24 Q The second of the three listed areas of

25 potential testimony, federally accepted principles and

1 standards for water resources projects, you referred to the

2 Principles and Standards for Water Resources Projects

3 manual that you said Bureau of Reclamation and Army Corps

4 of Engineers adhere to?

5 A I think what I said was that there is a set of

6 regulations that is called Principles and Standards for

7 Water Resources Projects and, I'm sorry, I don't remember

8 exactly what agency it is formally adopted under, and then

9 what I am suggesting to you is that each of the various

10 federal agencies have developed their own procedures that

11 are consistent with those principles and standards. It's

12 kind of like each agency developed its own procedures to be

13 consistent with NEPA, they all differed a little, but they

14 had to kind of come back to the Corps document.

15 Q Is it the case with these regulations as it was,

16 according to your testimony, with the Florida regulations

17 and statutes governing the analysis necessary for water

18 resources projects, that you will not be giving opinion

19 testimony about what the regulations require, but you will

20 be assuming those legal positions as background for

21 hypothetical testimony?

22 A I think they are a little bit different and here

23 is what I'm talking about there. The requirements for

24 federal agencies to justify water resources projects are

25 probably much more explicit in the various funding acts and

1 everything else than is the requirement in the state,

2 Florida State laws. I guess what I'm suggesting to you is

3 that the federal principles and standards and the

4 procedures that have been developed in response to them,

5 are a reference point as to what type and scope of analysis

6 federal government has required of itself in making recent

7 decisions on which water resources projects could go

8 forward with.

9 Q When you say that the federal regulations are

10 more explicit than the state, does that mean that you will

11 be providing testimony about what's required under law by

12 those federal regulations?

13 A I think for the most part, those documents in

14 terms of the categories of analysis and everything they set

15 up, don't totally, but to a large extent, speak for

16 themselves. I mean, I think that like a lot of those

17 things, they use terms that you might want to explain to a

18 hearing examiner. I think that my testimony would go in

19 some sense to looking at the final studies that the

20 District produces in the planning documents and holding

21 that up as a checklist and saying to what extent has the

22 state agency or the South Florida Water Management District

23 done the kind of analysis that would be expected of a

24 federal agency advancing major water resources projects.

25 Q So then it's fair to say that you would be

1 interpreting what's required under these statutes and

2 regulations?

3 A I think an interpretation is inherent there, but

4 I think that they are fairly explicit in what their

5 requirements and categories are and, again, I think the

6 metaphor I would use is more the checklist concurring what

7 the District has done with the types of analysis that are

8 contemplated in federal.

9 Q It's your opinion that the checklist is fairly

10 clear, as you have put it, self explanatory, but

11 nevertheless, you might be presenting that checklist, if

12 you will, and interpreting it?

13 A Right. Interpreting in the sense of trying to

14 explain what pragmatically is required or what has been

15 required in various federal studies and maybe if there are

16 terms in there that might be technical economic terms

17 given, trying to make those clear to the hearing examiner.

18 Q Would you be making any reference to any

19 judicial decisions interpreting these requirements,

20 regulations, statutes?

21 A In the sense of those as annotations to the

22 rule, I suppose that's possible. I don't have any in mind.

23 Q We'll move to your curriculum vitae in a moment,

24 but before we do, while we're on this topic, I notice that

25 you hold a law degree, a Doctor of Jurisprudence, is that

1 correct?

2 A Yes.

3 Q Are you a practicing attorney?

4 A I'm a licensed attorney and in my conducting my

5 business I suppose I practice upon myself, but I don't hang

6 out a shingle and explicitly sell legal services.

7 Q Okay, thanks very much.

8 Dr. Luke, did you bring a curriculum vitae or

9 resume with you today?

10 A I did.

11 Q May I see it, please.

12 A (Witness complies.)

13 (Luke Exhibit 1 marked for identification.)

14 BY MR. SAXE:

15 Q Dr. Luke, is this curriculum vitae complete?

16 A I think it's reasonably complete. I haven't

17 continuously updated it with every assignment and project

18 that we have done, but I think it gives a fair

19 representation of the type of activities I have been

20 involved in from a consulting standpoint. It does not

21 include on here, I notice, my role in another company which

22 is called Health Benefit Management, and I'll be happy to

23 supplement it, if you wish, on that score.

24 Q Dr. Luke, on page 2 under Professional

25 Experience, the fourth paragraph down, it says, "In 1986

1 Dr. Luke organized Health Benefit Management. " Is that the

2 company that you're referring to?

3 A That's correct.

4 Q Would you describe your educational background

5 for me briefly, starting with high school?

6 A Okay. I went to high school in Dallas, Texas at

7 Sunset High School. I left after my junior year and went

8 to Harvard. I graduated from Harvard with an A.B. degree

9 in social studies. In 1970 I entered the Kennedy School of

10 Government, in the fall of 1970; completed a master's of

11 public policy there in 1972. Took my general examinations

12 and was approved to proceed with a doctoral dissertation.

13 I began law school at the University of Texas at Austin in

14 June of 1972 and went to law school while I was writing my

15 dissertation. I completed law school in August of 1974. I

16 completed my dissertation in the fall of 1974 and was

17 awarded a PhD in public policy in January of 1975.

18 Along in, I guess the second year of graduate

19 school, I was enrolled for limited purposes at Boston

20 College and I don't know whether I was technically enrolled

21 at MIT or not, for purposes of participation in their

22 Reserve Officers Training Program.

23 Q The graduate or advanced degrees that you have

24 in public policy, a master's from JFK School of Government

25 at Harvard and a PhD from that school also, and the J.D.

1 from University of Texas, are there any other advanced,

2 graduate or professional degrees that you hold?

3 A No.

4 Q Would you describe for me what is entailed in

5 the discipline of public policy that you have a master's

6 and PhD in?

7 A Sure. This is a program that was set up, I

8 believe the first class was the fall of 1971. Harvard,

9 since the 30's has had a master's in public administration

10 program through what was then known as the Littower Center,

11 and they decided in the late '60's to organize a -- that

12 was a mid career program -- to organize a regular graduate

13 program that would be devoted to training people for policy

14 analysis and to give them an interdisciplinary basis that

15 would be appropriate to analyzing public policy questions.

16 They developed a core curriculum -- I'm telling you kind of

17 what the program was at the time I was in it, I'm not

18 telling you exactly what it is today, because I don't

19 know. They developed a core curriculum that consisted of

20 graduate level economics, it was taught when I was there by

21 Tom Shelling; graduate level statistics that was taught by

22 Fred Mostelick; analysis of political institutions that was

23 taught by Richard Newstat and Grant Mallison; operations

24 research and decision theory that was taught by Howard

25 Rayfa and Richard Sechauser; and then policy analysis

1 project that was overseen by a number of other faculty

2 members, one that had been an associate director of office

3 of management and budget and was intended to integrate all

4 of this into applied projects. In the second year, they

5 developed a number of electives that carried those things

6 forward. They also allowed cross registration with, for

7 instance, the Harvard Business School, graduate programs at

8 MIT and other Harvard graduate schools, law school and

9 school of design, so forth and I took a mixture of those

10 programs. Did in effect a thesis in the second year, one

11 could then sort of stop with a master's and that was a

12 perfectly good end point, an MPP being thought of as

13 similar to an MBA as an ongoing professional degree, or one

14 could decide to go on and get a doctorate by taking the

15 formal examinations and completing a dissertation, which is

16 what I decided to do.

17 Q What was your dissertation on?

18 A My dissertation was on analysis of the shifts in

19 mental health policy that were occurring in the early '70's

20 in Texas and in three other states.

21 Q Which states were those?

22 A California, Colorado and Wisconsin.

23 Q Did you specialize in any particular aspect of

24 public policy in your education?

25 A I would say basically that I have specialized in

1 the ability to conduct interdisciplinary, multi-

2 disciplinary analyses of fairly complex public policy

3 matters. I have, over the years, done studies and analysis

4 that have covered a wide range of industries, but most of

5 those, if you look at what was done, would involve an

6 application of many of the same types of tools to those

7 different industries, analytical tools, so I think that the

8 specialization, if you will, is more in the tools and in

9 the implementation in multi-disciplinary studies than it is

10 in say a specific industry or a specific policy topic.

11 Q What are those analytical tools?

12 A Well, I think they are pretty much the ones that

13 I laid out, economics, statistics, certain decision theory

14 and analysis of organizations and political institutions. I

15 mean, under each one of those obviously there are whole

16 fields. I have done a lot of work in the area of impact

17 analysis of looking at both very local and regional

18 economies, looking at economic growth issues and

19 alternative sources of growth. I have looked at, in

20 effect, cost/benefit analysis in a variety of settings. I

21 have also looked at how you incorporate natural science

22 type analysis into policy analysis in environmental and

23 other areas.

24 Q With reference to the areas in which you have

25 been listed as an expert witness in this case, which

1 courses did you take that -- or what courses did you take

2 that relate directly to the work you're doing in this case?

3 A That relate directly, well, I would say all of

4 the public policy core curriculum relates quite directly.

5 Going back into undergraduate courses, I have graduate

6 courses in agricultural economics, in analysis of

7 infrastructure projects through transportation, various

8 micro and macro economic courses, public finance.

9 Q In any of those courses, did you deal

10 specifically with the methodologies for performing economic

11 impact analyses?

12 A Yes.

13 Q Which courses would those have been?

14 A The ones that I have just listed, I mean, all of

15 them involve some of those techniques.

16 Q So for instance in your operations research and

17 decision theory course work, you studied about the

18 methodologies for performing economic impact analyses?

19 A Right. One of the specific areas that that

20 dealt with was the whole question of decision making under

21 uncertainty and things like use of decision trees, that's a

22 formal aid to this kind of thinking, but here you have the

23 situation where you have various opinions about what will

24 and won't work in terms of accomplishing whatever water

25 quality goals we have and you have clearly here a situation

1 that is decision making under uncertainty and under

2 substantial uncertainty, so part of the cost/benefit

3 analysis here gets into, should get into looking at the

4 different scenarios about what could happen if various

5 measures were taken and trying to come up with some

6 probability that attaches to those that let's us come away

7 with an expected value, if you will, in terms of either

8 what some of this is going to cost or what the benefits may

9 be.

10 Q Have you received any other training, other than

11 your academic course work, that relates directly to the

12 work you're doing in this case, seminars, clinics?

13 A Well, I feel like I have learned quite a bit in

14 the last 20 years of doing this on a routine basis. I have

15 been involved in a number of studies with a lot of folks

16 working with and for and having them work for me, that may

17 have had more depth in a certain area than I did, were more

18 specialized, and so the work that I have done has allowed

19 me to kind of continue my education on a pretty routine

20 basis in terms of deepening my understanding of the

21 techniques, limitations and where they can be employed.

22 Q Other than work experience, has there been any

23 more formal training?

24 A You know, I have been to professional seminars,

25 but if you are asking me have I taken courses, not that I

1 recall.

2 Q No, I'm not asking about courses exclusively,

3 courses would certainly be responsive, but also any such

4 professional seminars, clinics, colloquiums?

5 A Yes. I mean, over the years I have gone to

6 some.

7 Q Can you describe them for me?

8 A Other than generally, probably not very well. I

9 mean, there have been a number of seminars particularly in

10 the '80's on impact assessment. There have been seminars

11 that I have produced, looking at energy impacts, impacts of

12 energy projects, I mean to say, looking at impacts at

13 various coastal development projects.

14 Q The seminars that you have attended, have they

15 been affiliated with any particular association, has there

16 been any regular meetings or periodic gatherings that come

17 to mind?

18 A Not in particular. I mean, some of them were

19 like the American Economics Association or one I think had

20 to do with -- it was an engineering society, but it was at

21 a time when there was a whole section on analysis of

22 impacts on water scale projects.

23 Q Can you estimate for me the approximate number

24 of seminars on impact assessments that you have attended?

25 A My estimate, and that's all it would be, you

1 know, would be half a dozen over the years.

2 Q How many, again, estimate how many seminars you

3 have produced on economic impacts, you mentioned energy

4 development, coastal development, any others that would

5 fit?

6 A Right. There were two major conferences and

7 then there were, as part of the Texas Coastal Management

8 Program, literally dozens of public meetings and advisory

9 committee meetings and technical work sessions that I was

10 involved in producing.

11 Q What is your occupation, Dr. Luke?

12 A Well, I suppose I have several. I am a business

13 owner and I am certainly responsible on a day to day basis

14 for overseeing the operation of that business. I am a

15 practicing economist and policy analyst and, as I say, I am

16 a licensed attorney, but I certainly don't hold myself out

17 as a practicing attorney. Legal training, though, is in

18 many cases very helpful in understanding how a certain

19 analysis fits into a situation.

20 Q When you say you are a business owner, could you

21 tell me something more about the business or businesses you

22 own?

23 A Sure. I have been employed with Research &

24 Planning Consultants initially while I was in school and

25 then beginning in 1976 on a full-time basis. I purchased

1 that business in 1979 and have owned it since then. It is

2 a consulting firm that has provided economic policy

3 analysis services over the years, based in Austin, Texas.

4 We have done studies and I have been responsible in

5 participating in studies probably about over 20 states.

6 Those studies have been concerning a variety of industries

7 and policy situations, from health care, environmental

8 protection, solid waste management, general business

9 evaluations in a whole number of industries, market

10 research. The work has been from public and private

11 clients. The size of the firm has expanded and contracted

12 over the years, depending upon the type of work that we

13 were doing and whether we were doing it with folks as

14 contractors or whether we were bringing them on as

15 employees.

16 The other business that we referenced earlier is

17 Health Benefit Management. Because of the work in health

18 care consulting, it appeared that there was an opportunity

19 and a need for companies to do medical cost management, by

20 which I mean utilization review, medical case management,

21 medical bill review. In 1986, I hired some folks and using

22 the consulting firm as a base, started a company to do

23 that. It specializes in medical cost management, workers'

24 compensation area. It has grown from one employee to now

25 about 100 that work specifically for that company. That

1 includes quite a few nurses, a full-time medical director.

2 It is run on a day to day basis by a president and has a

3 management structure. My role is CEO and that is one of

4 general direction and goal setting and planning.

5 There is a parent company over those two called

6 Ronald Luke & Associates and it houses the accounting and

7 data processing and so forth for that and there are a

8 couple of people there that report to me.

9 Q Presently how many employees are there at RPC?

10 A If you take RPC by itself, let me count, not

11 counting me, there are about, I guess, about 14.

12 Q I got the impression that Ronald Luke &

13 Associates has approximately four employees?

14 A No. I guess we have 10 people in data

15 processing, we have nine or 10 in accounting, we have three

16 or four more in office services. The total employment is

17 about 150, maybe a little more than that now.

18 Q For clarification, when I say Ronald Luke &

19 Associates, as the parent company, you say there are 150

20 employees?

21 A The total for a consolidated basis is 150.

22 Q Would that include the RPC and HBM employees or

23 exclusive of those?

24 A Yes.

25 Q Excluding RPC and HBM employees, are there any

1 employees that are uniquely associated with Ronald Luke &

2 Associates?

3 A I would say there are between 25 and 30.

4 Q Have you opened any offices in Florida in

5 connection with this case?

6 A For this case, no.

7 Q Have you opened any offices in Florida within

8 the last two years?

9 A I have an employee here who is a chiropractor. I

10 don't have a separate office, he works out of his practice

11 office.

12 Q Would that be an employee of HBM?

13 A Yes.

14 Q Dr. Luke, would you describe for me briefly your

15 employment history in chronological order, starting with

16 your undergraduate years; you have given me, I think, some

17 pieces of it, but maybe if you want to go through it

18 systematically.

19 A You kind of lost me, starting with my

20 undergraduate years?

21 Q Yes, employment during your undergraduate years

22 and subsequent.

23 A Okay. Let's see, while I was an undergraduate,

24 I worked in the dining halls, worked for a student run

25 company doing market research, was a director of something

1 called Harvard Student Agencies, which is relatively large

2 student run corporation at Harvard. I, during the summers,

3 worked for Austin Bridge one summer, worked for Lean,

4 Tempco, Vaughan one summer doing cost analysis.

5 Q What was the name of that company, I'm sorry?

6 A Lean, Tempco, Vaughan.

7 The summer after my junior year, I guess I was

8 technically employed by the social studies department. I

9 did work with the United Nations Development Program and

10 Agency for International Development in Kenya.

11 The summer after my senior year, I was employed

12 by the U.S. Army for some basic training and was also

13 involved with some other students in an enterprise that

14 published a guide book to Boston.

15 Let's see, I was employed after my first year in

16 graduate school by a group called the Alagash Group, which

17 was a, I guess you could say a think tank, in the state of

18 Maine, that was being funded to do policy analysis of

19 alternative futures for the coast of Maine. And I had

20 another opportunity to work for the United States that

21 summer.

22 Q Who for?

23 A The Department of Defense.

24 Q Is that another Army job?

25 A Yes, it was. Let's see --

1 Q Would you describe that for me a little bit

2 more?

3 A Sure.

4 Q Are you being euphemistic?

5 A Not euphemistic at all. I spent six weeks at

6 Fort Knox doing a training stint related to the Reserve

7 Officers Training Corps.

8 Q Thank you.

9 A Let's see, once I finished -- once I moved back

10 to Texas, I did some work for the LBJ School of Public

11 Affairs, helping teach a course. I also began working for

12 Research & Planning Consultants on a part-time basis. I

13 did work for the Regional Mental Health Mental Retardation

14 Center for the Galveston area, which was in conjunction

15 with my dissertation. Then on completion of school, went

16 to work for them as a director of administrative services

17 and had another interval of active military duty.

18 I left the Regional Mental Health Center in 19

19 -- the fall of 1976 and moved back to Austin and went to

20 work for Research & Planning Consultants as vice president

21 of operations and have been there ever since.

22 I guess somewhere in there I also taught a

23 course at University of Houston at Clear Lake City, having

24 to do with public budget analysis. I taught a course for

25 the U.T. School of Accounting, having to do with public

1 finance and budgeting.

2 Q Would those be the courses that are referred or

3 referenced in this resume on page 2, the third paragraph,

4 "He has taught courses on public finance and policy

5 analysis at the University of Texas at Austin and the

6 University of Houston at Clear Lake City?"

7 A That's correct.

8 Q I also see here there is a reference to your

9 employment as a publisher for various periodicals from 1979

10 to the present?

11 A Right. That's one thing that Research &

12 Planning Consultants has done since 1977 is we publish a

13 collection of rules of Texas environmental and natural

14 resource agencies and subsequently we have added a service

15 that covers the public utility agencies and subsequently we

16 added a publication that covers the workers' compensation

17 commission. In addition to just rules, we also provide a

18 newsletter that covered the commission meetings and the

19 activities of those agencies.

20 Q In the course of your employment or education,

21 have you worked on any projects that relate directly to the

22 work you are doing in this case? And I think for purposes

23 of clarity, it might be easiest if you would take these

24 three elements of your expertise described in the witness

25 designation in series. Maybe first address the

1 socioeconomic impacts of the SWIM plan and alternatives, et

2 cetera, then we can move on to the federally accepted

3 standards and the state law requirements.

4 A Okay. I guess you will have to tell me if these

5 are not as specifically related as you had in mind. The

6 undergraduate work that I did, my undergraduate honors

7 thesis is on agricultural economics and impacts of changing

8 patterns of agriculture as they relate to transiamatic

9 pastoral groups in east Africa.

10 Q Would you explain roughly who that group or what

11 that group or characterization refers to?

12 A Transiamatic means basically following the

13 water. What you have is a situation where you're dealing

14 with the interaction of the technology, the natural system,

15 which in that case is a semi-arid area to arid, the social

16 institutions in the way that those three interact.

17 In effect, what you have is a whole series of

18 people, ranging from the Somali, the Masai, Turkana, and

19 other groups who are basically pastoral people in semi-arid

20 areas. They have not historically had an institution of

21 exclusionary land ownership. In effect, what people own

22 were cattle and rights to water sources and as they move,

23 in effect, you can wander where you need to go in order to

24 get to the water source.

25 The problems that occur are that as you produce

1 more long lasting water sources by drilling relatively

2 basic wells, you produce zones of devastation and

3 desertification, I mean, you can see these on aerial photos

4 that in effect concentrate the cattle to get to the water

5 in the period of the year when the natural springs and

6 other what we would call lakes, dry up, and you produce, in

7 effect, a totally devastated zone. I mean, it is not

8 overgrazing, it is denuding the land. You also produce

9 increased disease and disease vector among the livestock

10 herd because instead of being spread out, you have got them

11 altogether, so any sickness is more likely to spread.

12 The conditions are very similar to west Texas

13 and New Mexico, I mean, the semi-arid areas of the United

14 States.

15 Q The natural conditions are similar?

16 A Right. In fact, most of their district range

17 officers in this kind of thing either went to Texas A & M

18 or New Mexico State, some went to U.T., but mainly went to

19 the agricultural, the southwestern agricultural colleges.

20 There is a system for managing livestock on

21 semi-arid areas that is called rest-rotation grazing and it

22 is a way to manage areas of land to in effect favor certain

23 desirable species and to prevent both just total

24 desertification and prevent or at least retard brush

25 encroaches and this kind of thing. We have mesquite, they

1 have something called akasha.

2 The problem is that to do rest-rotation grazing,

3 you have to have exclusionary land use institutions,

4 because part of rest-rotation grazing is the rest part, you

5 have to be able to leave an area of land alone, to keep

6 your cattle off of it and know that nobody else is going to

7 put their cattle on it. It doesn't necessarily require

8 fencing, because these are all herded cattle as opposed to

9 sort of the American west vision of the dogies running

10 around on the prairie, but it does require the ability to

11 reliably exclude people from areas for parts of the year.

12 So what you have is a question about in order to support

13 this population and I mean we're talking about a relatively

14 low standard of material living here, one might say, well,

15 we need to -- the scarce resource is water, so we need to

16 drill more wells.

17 The problem with that approach is that while

18 that will in the short run sustain more cattle and you can

19 drill wells relatively easy in this area, it will produce

20 more of an uncontrolled increase, which leads to

21 desertification, which leads to a cycle, as you get the

22 over-population, so forth, the land doesn't come back. At

23 the same time you are dealing with very basic social

24 institutions of, I mean, of their legal system, but also of

25 their whole social value system as regards this

1 institutions of land ownership.

2 So that the thing I was looking at there was how

3 do you go about doing change in a situation where you have

4 a relatively fragile environment, you have technology in

5 the form of water wells, in the form of vaccinations for

6 cattle, in the form of rest-rotation grazing knowledge that

7 could be applied. You have marketing issues. If you get

8 more cattle, can you move the market and sell them.

9 You had in that case substantial distrust

10 between the governing tribe, which is Kikuyu, and all of

11 the pastoral tribes and that went back hundreds of years.

12 There was some equating of trying to install land ownership

13 as a way to get the land away from them or to tie them down

14 with sort of the image of concentration camps in the

15 background. There had been a recent civil war where the

16 Somalies and Kikuyu wanted to succeed and be part of the

17 Somalies and Somalia. Many trips that I took up in that

18 area were with armed escorts.

19 So it presents some of the same issues that one

20 finds anywhere, of this interaction of natural systems,

21 technology, both technology for protection and technology

22 for development, and various social institutions and those

23 dynamics. Certainly those major elements are present in

24 virtually all of the kinds of environmental policy issues

25 that I have been involved in since.

1 As a graduate student --

2 Q Before you move on, are you moving on past the

3 undergraduate honors thesis?

4 A Yeah.

5 Q Before we do that, let me ask you a few

6 questions, if you don't mind, about this.

7 A Sure.

8 Q Did economic impact analysis or socioeconomic

9 impact analysis or any flavor thereof, play any role in

10 your work in this honors thesis?

11 A Sure.

12 Q What would that have been?

13 A Well, in effect, what I was looking at was the

14 question of the proposed action -- let me just set a stage

15 for you a little bit. In terms of looking at socioeconomic

16 impact analysis, typically you are looking at some proposed

17 change in the status quo that is significant enough that

18 one wants to think real hard about what its future impacts

19 will be. So you have an existing situation, not only at

20 that point in time, but your forecast of what the situation

21 will be in the future if you do not take this action. You

22 have the nature of the proposed action and then you have

23 your forecast of what may occur if you take the action and

24 then you have the comparison of the two and the difference

25 is your impact and you can forecast and calculate

1 differences on a number of different variables.

2 That's in essence what this was about. We had

3 proposals to come, there were proposals to come in and

4 drill lots of wells and the question was what happens if we

5 do that, what happens if we alter the water supply, as

6 opposed to what happens now. So what I did, drawing on a

7 number of range management specialists and husbandry people

8 that were over there with AID and UNDP, was to understand,

9 as best I could, what the natural science dynamics were, to

10 understand the region, and then to basically look at what

11 happens if you put in those wells without reforming --

12 well, reforming has a connotation I don't want to imply --

13 without altering the underlying social institutions that

14 are necessary to do the rest-rotation grazing piece of the

15 change.

16 I looked at that and did some basic modeling,

17 this is 1969, '70 now, 10 years before, 11 years before

18 P.C.'s, so we're talking about FORTRAN programs on main

19 frame computers, so it's basic compared to what we -- and

20 difficult compared to what we could do now, but did some

21 basic modeling and came to the conclusion that if you did

22 put in the additional water, while you would spread out the

23 impact somewhat, that you would produce additional

24 desertification, because one piece of technology without

25 the other was likely to have short term benefits, but long

1 term detriments to that area. I haven't looked at this in

2 awhile, so I'm -- I may be remembering what I would

3 conclude now rather than exactly what I concluded in 1969,

4 but that one ought to condition the additional water

5 resources development on getting agreement from the local

6 structure, try balance structure, to institute these

7 grazing patterns.

8 Q So when you say the question is what happens if

9 we drill wells as opposed to what we do now, what was the

10 what we do now?

11 A That we not drill anymore wells. What that

12 meant was that you, if you just looked at the current

13 cattle stock, that you would continue to concentrate that

14 stock during seasons of the year and you would produce

15 these circles of devastation. I mean, sort of the dynamic

16 here was that if you did increase the number of wells, that

17 you would raise the herd population that could be

18 maintained during the wetter years, but you would then have

19 an even greater problem when you got back into a dry cycle

20 and you are concentrating much larger herds, you end up

21 with an average of more per permanent water source.

22 Q As I understand it, the proposed action in the

23 situation that was the subject of this thesis, was the

24 developmental action, it was to increase the level of water

25 development by drilling more wells and making whatever

1 adjustments might be made through rest-rotation?

2 A No. That was that nobody could -- you can go

3 out and drill the well next week, as I say, there is no --

4 I mean, it's a rig on the back of a truck and you put in a

5 simple casing, I mean, we are not talking about a high tech

6 well here. The action was in the absence of the change in

7 the land ownership and land management institution, should

8 you go out and drill those wells.

9 Q So the proposed action was --

10 A Drilling wells alone.

11 Q That was my question.

12 Are there any projects that you have worked on

13 where the proposed action was not a resource developmental

14 proposal, but rather a resource management action that was

15 proposed to remedy environmental problems?

16 A Well, this was an action that was proposed to

17 remedy environmental problems.

18 Q As I understood it, the proposed action was to

19 drill wells, which would entail environmental problems for

20 which --

21 A No, no, that's what you don't understand. One

22 of the reasons that the central government was looking at

23 drilling these wells, was the idea that by spreading out

24 the herds, that it would reduce the perceived environmental

25 problem of a desertification and so that it was perceived

1 -- and certainly there might be some economic benefit, but

2 part of the reason they are wanting to do this was they

3 were concerned about some of the environmental impacts.

4 There may have been lots of other unstated, or unstated to

5 me, reasons why they wanted to get into this but, I mean,

6 that was part of it and that was one reason that the UNDP

7 and the AID folks were looking at this as possible -- for

8 possible grant funds.

9 Q So then the proposed action was effectively to

10 undertake resource development, i.e. drilling wells for the

11 purpose of securing environmental benefits?

12 A For the purpose of securing that, plus one would

13 assume that it would have some positive economic benefit,

14 if it produced a more stable kind of livestock supply

15 there.

16 Q At that point, was the mission of AID and its

17 involvement in this project, would you characterize

18 primarily as an environmental protective mission or was it

19 a sound resource developmental mission?

20 A Agricultural people, particularly range

21 management people, my experience they have a concept they

22 call sustainable yield, okay, and I don't know that it

23 would be appropriate to characterize sustainable yield as

24 either being a resource development or an environmental

25 position. In effect, what it says is you're interested in

1 long term yield and you only get that if you protect the

2 resource from harm and I think that the people that I

3 interfaced with were people that were from semi-arid areas

4 in the United States and that they understood and took as

5 very important this notion of promoting sustainable yield

6 agriculture in the semi-arid area.

7 Q So then it's your position that the concept of

8 sustainable yield is not a resource development concept or

9 not a resource developmental concept?

10 A No, I didn't say that.

11 Q You said, I believe, it was neither resource

12 development nor environmental protection?

13 A I think I said, and if I didn't, I meant to say

14 that it cannot be characterized as solely one or the other

15 because by the notion that you are interested in the yield,

16 you are interested in, I suppose what you could consider

17 resource development, by the fact that you are interested

18 in that yield being sustainable, you have to be interested

19 in both the continuability to get a yield from the

20 resource, but you also have to be concerned with the long

21 term viability of the resource, so I don't see those as an

22 either/or dichotomy, I mean, you really have to have both.

23 Q Are the environmental values that propel the

24 sustainable yield approach, strictly relating to continuing

25 production with the resource or are there values that don't

1 have some underlying economic element?

2 A Well, now you are asking me to get into the mind

3 of a whole bunch of farmers and ranchers, I don't know that

4 I can do that. I would say it this way, sustainable yield

5 is a management philosophy, you are managing the land in

6 this case to produce and to favor production of certain

7 types of plant and in some cases animal species. I mean,

8 it is a concept of managing the resource to get to achieve

9 certain outcomes and, presumably, those outcomes, if you

10 are willing to devote management enterprise efforts to it,

11 have some benefit.

12 Now, when you say economic benefit, certainly in

13 most cases that means cash, but it can also mean other

14 non-market benefits.

15 Q Do you believe that aesthetics is an element of

16 the values in a sustainable yield management philosophy?

17 A Well, you can -- you have multi-use management

18 and this is one of the things that comes up for instance in

19 principles of standards, I mean, it comes up in the

20 original central and south Florida project, okay, and if

21 you wanted to, there is no conceptual reason why you could

22 not define something as being more or less aesthetic in

23 deciding to manage your resource to produce that picture.

24 Q Are multi-use management and sustainable yield

25 synonymous?

1 A Not necessarily.

2 Q So my question was about the sustainable yield

3 management philosophy and whether it included aesthetic

4 elements?

5 A And I'm saying that it's, in my mind, they are

6 on different dimensions. Sustainable yield means I'm going

7 to produce some yield and I'm going to manage my resource

8 in a way that I can do that on a long term basis. Now,

9 long term can be defined differently, depending upon the

10 context, okay.

11 Now, aesthetics can be a yield of resource,

12 let's say that we agree that looking at an uncut forest is

13 more aesthetic than looking at cut forests, we just agree

14 to that, there is nothing written that says that's true,

15 but we take a vote and we agree with that. We can manage a

16 forestry source so that what we get a constant view of

17 uncut trees and our yield from that is our visual enjoyment

18 of looking at those uncut trees, okay. We could also

19 decide we wanted to manage that resource for maximum output

20 of lumber and we would -- they could both be sustainable

21 yield management, but they would be managing for different

22 yield and therefore the actions we would take would be

23 quite different.

24 Q To your knowledge, are there implementations of

25 sustainable yield management philosophy that involve non-

1 consumptive yield as you're theoretically describing it in

2 your hypothetical?

3 A I'm sorry, are there what?

4 Q Are there instances --

5 A Yeah.

6 Q -- of implementing sustainable yield management

7 philosophies, that involve non-consumptive uses as part of

8 the yield that is sought to be sustained?

9 A Could you define what you mean by non-

10 consumptive use?

11 Q What does it mean to you?

12 A You're asking the questions, sir, I'm trying to

13 get a definition of your terms.

14 Q What does non-consumptive use mean to you?

15 A I don't use the term normally so that's why I'm

16 asking for your definition.

17 Q Is non-consumptive use a term you have heard

18 before?

19 A Gosh, I may have, I mean, you asked the question

20 and I said I don't understand the term. That was our deal,

21 that if I didn't understand, I would tell you. I have told

22 you.

23 Q That's fine. I'm asking you if you are familiar

24 with the term non-consumptive use? I'm not interested in

25 my opinion, I'm interested in your opinions.

1 A Well, I would be happy to give you my opinion if

2 you will define the term for me. There may be a term that

3 I sort of on a day to day basis use that may be synonyms

4 that would mean the same thing, but that's not a term that

5 I have used a great deal.

6 Q What term would you use for what you understand

7 to be the use of that term?

8 A I do not understand, I would like you to define

9 it.

10 Q So you are not familiar with the term non-

11 consumptive use?

12 A I may have seen it, I mean, I'm simply asking

13 you for a definition. I don't know that that's an

14 unreasonable request. You asked a question, I would like a

15 definition of the term you used in the question.

16 Q I'm not interested in my definition of the term,

17 Dr. Luke.

18 A Well, it's your question.

19 Q We will avoid the use of the term.

20 You are familiar with the concepts of non-market

21 valuation, is that correct?

22 A Yes.

23 Q What are the types of use values in non-market

24 valuation?

25 A What resource are we talking about?

1 Q Generically, in the abstract.

2 A I can't answer the question. Different

3 resources have different non-use -- non-market valuations.

4 Q You use the term non-use value, can you define

5 that for me?

6 A I misspoke, non-market valuations.

7 Q Okay, maybe we can return to this question.

8 MS. STINSON: Meanwhile could we take a break?

9 MR. SAXE: Sounds good.

10 (Brief recess taken.)

11 BY MR. SAXE:

12 Q Dr. Luke, before the break we were talking about

13 the problem in Africa that was the subject of your

14 undergraduate honors thesis, was that a problem that's

15 known generally as a common property resource problem?

16 A Sometimes called a commons problem, yeah.

17 Q Have, in your list of projects and studies, are

18 there any that you have done that relate to an externality

19 problem?

20 A Oh, in the most generic sense, a goodly number

21 of those projects would have externalities. Now, whether

22 the externality was the focus of the study or not, I'm not

23 saying that it was but, I mean, any of those major projects

24 have externalities.

25 Q In the interest of time, rather than going

1 through the list of projects, it is a substantial list, if

2 you could for me focus in on those projects that have

3 involved economic or socioeconomic impact assessment of

4 resource management actions that are proposed to remedy

5 environmental problems, where the proposed action was a

6 remedial one undertaken for the purpose of remedying an

7 environmental problem?

8 A On page 3, the studies that we have done on

9 solid and hazardous waste disposal facilities.

10 Do you want me to go all the way through or do

11 you want to talk about these as we come to them? I don't

12 understand.

13 Q For right now why don't you go ahead at least

14 through the next page, exhaust this category before you get

15 to Other Economic and Statistical Studies.

16 A Sure.

17 Development of an economic assessment of the

18 impacts of a proposed high level nuclear waste repository.

19 The Louisiana natural gas study.

20 The economic and environmental studies on marine

21 terminals, on page 4.

22 Q I'm sorry, is that the "major Texas ports for

23 the U.S. Maritime Administration" or am I in the wrong

24 place? Oh, I'm sorry, "major marine terminal at Freeport,

25 Texas"?

1 A Right.

2 There are a number of studies that were part of

3 the Texas Coastal Management Program that I believe would

4 fit your category.

5 Q Where is that?

6 A Page 6.

7 Q Under Public Policy Studies?

8 A Right.

9 There would be something of that in the

10 development of land use policies and land use management

11 mechanisms, a 1972 study.

12 Q That is where?

13 A Still on page 6, I'm just going down

14 sequentially.

15 Part of the cost/benefit analysis on the

16 refinery development was a -- there is an environmental

17 issue there.

18 There is another study that was done of the

19 impact of a Superfund site designation on adjacent property

20 values.

21 Q Would that be the one on page 5, "Preparation of

22 an economic studies on the impact of designation of a

23 Superfund site on property values in an adjacent

24 subdivision in Houston, Texas for Ryland Homes?"

25 A Right.

1 Q In each of these projects or studies, you did

2 some either economic impact assessment or socioeconomic

3 impact assessment?

4 A I would say so, yes.

5 Q Did any of these involve surface water

6 management?

7 MS. STINSON: For clarification, do you mean any

8 of the ones he has already --

9 MR. SAXE: That we have presently selected that

10 Dr. Luke has just specified.

11 A Well, several of them involve -- I mean, there

12 is a -- I'm sorry, there's another one that's not on here

13 and that has to do with an analysis of impacts of

14 regulating withdrawals from the Edwards aquifer, it's not

15 in there, which is a recent study.

16 Yeah, I mean, several of them have surface water

17 issues in them.

18 BY MR. SAXE:

19 Q How about ground water management?

20 A Yes, some of them have ground water management.

21 Q Why don't you, going back through the list,

22 identify those for me which have surface water or ground

23 water management issues? Let me strike that question.

24 If you would identify which of these involve a

25 remedy proposed to address an environmental problem with

1 either surface water or ground water, not just some

2 tangential connection to surface water or ground water

3 management.

4 A Well, the solid and hazardous waste facilities

5 are that.

6 Q So that would be the Browning-Ferris solid and

7 hazardous waste facilities on page 3?

8 A Right.

9 Q Was that surface or ground water or both?

10 A It's really both.

11 The kind of a waste nuclear repository addresses

12 both.

13 The Louisiana studies are concerned primarily

14 with surface water issues.

15 The marine terminal is concerned primarily with

16 surface water issues.

17 Q That's the Freeport, Texas marine terminal?

18 A Right. The --

19 Q I'm sorry, that was primarily surface water?

20 A Um-hum.

21 The Coastal Management Program was concerned

22 with both surface water and some subsurface issues.

23 Q I'm sorry, where --

24 A We're on page 6.

25 The state of Maine work is concerned primarily

1 with surface water issues.

2 The Edwards is concerned primarily with

3 underground water issues, although -- well, the two are

4 related, I mean, the actual problem occurs where the

5 underground water becomes surface water again.

6 Q Tell me a little something, you don't have to go

7 into great detail, but tell me a little bit about the DOE

8 nuclear waste repository proposal?

9 A Well, as you know, there are high level

10 radioactive wastes sitting around nuclear power plants all

11 around the country in little concrete swimming pools for

12 the most part and this is not considered to be a stable,

13 reliable long term disposal technique for that, because

14 there's, I mean, it's subject to all sorts of possible

15 problems, human and environmental, and you are talking

16 about very long life materials. So that the high level

17 radioactive waste repository was proposed as an end. Part

18 of that is there would be a release of those materials, it

19 gets into surface water, it gets into ground water and the

20 fun starts. The repository was proposed as a long term

21 solution to the safe storage of those radioactive

22 materials.

23 The one that I did work on is the one that was

24 proposed in the Texas panhandle and we looked at the

25 socioeconomic impacts of the repository.

1 Q Did that project relate in any way or did the

2 proposed project relate in any way to the Ogawala aquifer?

3 A One of the concerns that some people expressed

4 was if indeed this was not a safe storage formation and if

5 waste were to escape from the repository, that it might

6 make its way into the Ogawala.

7 Q So the facility -- strike that.

8 Was the proposed facility to be constructed

9 within the aquifer?

10 A No, I mean, when you say within, it was not to

11 be constructed, as I understand it, within the water

12 bearing strata of the Ogawala aquifer.

13 Q Were there any concerns about -- were there any

14 concerns implicating the aquifer, the water bearing strata

15 of the aquifer --

16 A Yes. That's what I just said.

17 Q Excuse me, let me finish the question.

18 -- in the construction phase of the project?

19 A I'm not aware that there were concerns that the

20 construction of the repository, which is basically a

21 tunneling exercise, was going to do damage to the aquifer.

22 I think the concerns that I recall, and this has been a few

23 years ago, were that if waste were released somehow, that

24 they would migrate to and pollute the aquifer.

25 Q Was construction proposed above or below the

1 aquifer?

2 A Well, the aquifer underlay the area in which the

3 repository would be constructed is my understanding, I

4 don't know how deep, but it was in that same area, yes.

5 Q In the Browning-Ferris waste disposal project,

6 what was the proposed action?

7 A The proposed action was to -- there were several

8 over the years that we have worked with and the proposed

9 action was either to create or expand a municipal landfill

10 or in one case a hazardous waste injection well.

11 Q In the Louisiana natural gas development

12 project, what was the proposed action there?

13 A The proposed action was an action by the state

14 of Louisiana to assess a tax on gas coming ashore from the

15 federal outer continental shelf, upon the justification

16 that a burden was being imposed upon the state by that as

17 interstate commerce, both through the environmental impacts

18 upon their marshes and the impacts upon their

19 infrastructure.

20 Q How would it be a proposal to assess a tax

21 impelled by an interest in remedying an environmental

22 problem?

23 A Well, there logical rationale for the tax was

24 that they were going to use at least part of the money to

25 remedy the adverse impacts that, environmental impacts on

1 their marshes that had been occasioned by the OCS

2 development and production activities.

3 Q In the Freeport, Texas marine terminal project,

4 what was the proposed action there?

5 A The proposed action was to develop a state-of-

6 the-art chemical barge terminal that would be used in both

7 loading and unloading chemicals for the complex that's

8 located in the Freeport and Jackson area on Kretana Island.

9 Q So the purpose there was to permit the loading

10 and unloading of chemicals?

11 A Right, and it's a -- what it is is that right

12 now you have loading and unloading that occurs in

13 relatively unsheltered tie-ups in that harbor and the

14 lower, the mouth of the brasses, and this is a terminal

15 project by Distribution Systems, Inc., which is a chemical

16 transport company, which in effect is a sheltered anchorage

17 with boom controls and the whole bit, that we helped

18 prepare 404 permit applications on, that we prepared the

19 404 permit applications on, including the impacts, and part

20 of the justification for the project was that it would

21 reduce water pollution in the harbor and near shore areas,

22 because of not only the natural design, but also the

23 environmental safeguards that were to be present and we

24 were able to get them their permit.

25 Q The Superfund designation economic study, what

1 was the proposed action in that?

2 A Well, it was not a proposed action, it was an

3 action that occurred and that is that the -- I don't recall

4 whether it was a state designation pursuant to a federal

5 law or whether it was a federal designation, but in any

6 event, there is a solvent recycling plant which a

7 subdivision had been built adjacent to. The solvent

8 recycling plant was there first and it had shut down, but

9 there was a pit that was felt there were hazardous

10 materials in and it was designated as a Superfund site and

11 I -- we believe that the concern with the site was either

12 that there was going to be some release of materials into

13 surface water or ground water from this pit and that action

14 was believed to have precipitated a decline in both

15 property values and decline in the marketability in the

16 homes in the adjacent suburb or subdivision, and I was

17 asked to take a look at that and see whether after

18 controlling for the other factors that in the Houston

19 housing market at that time would have affected value, we

20 could quantify what the impact of the Superfund designation

21 had been.

22 Q So it had been designated as a Superfund site?

23 A Yes.

24 Q So there was no proposed action, there was an

25 action?

1 A Yeah. The action of designation had occurred

2 and that seems to have been what was being complained about

3 by some plaintiffs in a lawsuit. It was not the clean up

4 activity itself, which as I recall at that time had not

5 really commenced.

6 Q In the Texas Coastal Management Program project,

7 what was the proposed action there?

8 A Well, speaking broadly, the proposed action was

9 to adopt a state coastal management plan under the Federal

10 Coastal Zone Management Act.

11 Q The Texas land use policy project, development

12 of Texas land use policies, what was the proposed action

13 there?

14 A The purpose of the study was to examine -- first

15 of all, let me start by saying Texas, this was in 1972, but

16 still largely true today, Texas does not have land use

17 controls of the zoning and subdivision sense, outside its

18 incorporated areas or the extra-territorial jurisdiction of

19 those incorporated areas. In other words, there is no

20 county ordinance power to regulate development and that

21 has, as you can imagine, all sorts of implications in terms

22 of siting of activities and potential control or potential

23 runoff into surface streams or elsewhere.

24 There was interest at that point, under the

25 fellow that was then governor, in looking at whether or not

1 there was a rationale for establishing what I'll just refer

2 to globally as county zoning authority and, if so, what

3 kinds of mechanisms for both planning and regulation might

4 be used and what process might be used for moving to a

5 decision on those. I was involved in studying a number of

6 different states mechanisms and in looking at what some of

7 the problems and issues were that were being raised that

8 various people thought might be solved by a more extensive

9 planning and zoning and then looking toward recommendations

10 on a process for getting to a decision on whether we should

11 have a broad land use planning and management authority in

12 the state.

13 Q So the proposed action was to establish county

14 zoning authority and that encompasses land use management

15 authority?

16 A Well, I mean, I wouldn't want to tell that you

17 it was -- that anybody was proposing at that time a

18 specific action. It was -- I would consider this to have

19 been a piece of consulting work that was both background in

20 nature and was looking at establishment of a process for

21 moving to those policy decisions. It's kind of one step

22 back from the proposed action. The proposed action, if you

23 will, was to try to move to legislation on the matter,

24 there was not a specific legislative proposal that was on

25 the table.

1 Q So what proposed action did you study the

2 economic or socioeconomic impacts of?

3 A Of various alternative forms of land use

4 planning and regulation.

5 Q The Maine oil refinery development project?

6 A Um-hum.

7 Q How about there, what was the proposed action at

8 issue?

9 A The proposed action there was to establish a

10 deep water port and an associated refinery complex on Sears

11 Island in Penobscot Bay on the coast of Maine. One of the

12 issues that was leading to the development of that was the

13 concern with oil pollution at various ports now that oil

14 was coming in to be refined, rather than being piped there

15 from west Texas, and with the oil pollution from open ocean

16 transfer from super tankers to smaller vessels, because the

17 ports where a lot of the refineries were located were not

18 deep water, I mean, they were only 45, 50 foot where this

19 was 70 or 80 feet.

20 Q So again the proposed facility was what kind of

21 a facility?

22 A In effect, a super tanker terminal and there was

23 an associated refinery.

24 Q In the Edwards aquifer withdrawal project, what

25 was the proposed action there?

1 A Well, there are a couple. The proposed action

2 is to restrict pumping of the Edwards aquifer, which is a

3 large aquifer that runs from approximately San Marcos,

4 Texas, which is 30 miles south of Austin, down through San

5 Antonio and then west and south into several farming and

6 ranching counties. It is the sole water supply for the

7 city of San Antonio, as well as for other cities and is

8 used for irrigation.

9 The problem is, is that if we go to the concept

10 of firm yield, that is how much can be withdrawn

11 sustainably, even in the drought record, without

12 overdrafting the aquifer, that the withdrawals presently

13 are about twice that number. The drought record was in the

14 mid '50's. There are two springs which are in effect the

15 downstream outlets of the aquifer, that flow into the

16 Guadalupe and Blanco rivers and form about a third of the

17 water that comes in the Guadalupe and the Blanco rivers.

18 There are some critters that live in and about those

19 springs and in the aquifer which either had been or likely

20 to be classified as endangered species, and if the spring

21 -- in another drought of record there is testimony to the

22 effect that it would dry up the springs and it would

23 threaten the continued existence of those critters, so

24 there have been a series of state agency and federal court

25 actions that are addressing -- attempting to address this

1 question.

2 I was asked by the Guadalupe-Blanco River

3 Authority to look at the economic impact on San Antonio of

4 not seeking alternative water supplies on what I would

5 consider to be, at this stage anyway, more of a qualitative

6 basis, and I did that and provided that testimony to the

7 Texas Water Commission.

8 Q You testified?

9 A Um-hum, yes, I did.

10 Q When you say look at the economic impact on San

11 Antonio of not seeking an alternative water supply, am I to

12 understand that that assumed that pumping into the Edwards

13 aquifer would be restricted and the issue there is whether

14 or not to seek alternative water supplies?

15 A Correct. And the issue is are you better off

16 with a less expensive, but unreliable water supply, or with

17 a more expensive, but very reliable water supply. If you

18 are worried about the economic development of San Antonio

19 and its associated communities.

20 Q Did you do this work on this project for the

21 Texas Water Commission or who for?

22 A No. I did it for the Guadalupe-Blanco River

23 Authority.

24 Q Was there anything -- any of the results of your

25 work published?

1 A Well, I mean, it's in the record of the hearing.

2 Q Did you do any formal -- produce any formal

3 documents, impact assessments or other reports?

4 A I provided some materials to the River

5 Authority's council in that case and I frankly don't

6 remember whether it was submitted as a separate document or

7 whether it was just resource material that they used in

8 preparation of the briefs.

9 Q Did you reach a conclusion based on your

10 analysis?

11 A Yes.

12 Q What was that?

13 A The conclusion was that if one accepted the

14 hydrologic analysis that had been done, that the city of

15 San Antonio would be far better off economically developing

16 surface water supplies now while we're in a fairly wet

17 period and where the aquifer has not been -- is not in

18 danger of being shut off, rather than waiting until federal

19 court tells them to stop pumping, given the time it takes

20 to develop surface water supplies and given the kinds of

21 considerations that industries have in locating or

22 expanding facilities in places like San Antonio.

23 San Antonio is, other than military, is a home

24 for what are primarily footloose industries, meaning that

25 they are concerned about factors like ability to add

1 housing, ability to have a relatively low cost of living

2 for their workers and availability of workers, that kind of

3 thing.

4 Q Just briefly going back to your discussion of

5 the Louisiana natural gas development project, I believe

6 you testified that the tax was proposed to be assessed in

7 part to do what I understood as marsh impact mitigation?

8 A Right.

9 Q Would you say that the environmental remedial

10 purpose was the primary purpose of the proposed action or

11 would you say it was an incidental purpose?

12 A I don't know that I could say either. It

13 certainly was not incidental, there are some very real

14 impacts that have occurred in those marshes and that I

15 understand are subject to remediation, but it's not cheap.

16 We are talking about now delving into the mind of the

17 legislature of the state of Louisiana as to motive and

18 intent and I am not able to do that for you.

19 Q How about the Freeport, Texas marine terminal

20 project, you testified there that part of the justification

21 for the proposed action was to, I take it, to reduce the

22 likelihood of oil spills at that facility?

23 A Not at that facility, but in the port generally.

24 This facility had existed previously.

25 Q In the port generally?

1 A Yes.

2 Q Would you say that that purpose was the primary

3 purpose of the proposed action?

4 A The proponent was a private profit making

5 company and I assume that their primary motive was to make

6 a return on their investment. The issue here was the

7 approval of a Section 404 permit by the Corps and in terms

8 of their motivation, that was the action, in effect, one of

9 the actions, and I would assume that environmental

10 protection would have been one of their considerations in

11 approving this permit. I don't remember in detail if there

12 were any negative environmental impacts of the proposal in

13 terms of maybe some small loss of wetlands at the mouth of

14 the facility, because it was going to be dredged out, but

15 on balance it was viewed as an environmentally positive

16 action and I'm sure that there was a consideration to the

17 Corps in issuing the permit.

18 Q Besides being one of the considerations, though,

19 was it the primary purpose of the proposed action?

20 A From whose standpoint?

21 Q The acting entity.

22 A Well, do you mean the developer or the permit

23 issuer?

24 Q The developer.

25 A From the developer, as I have already said, I am

1 assuming that their objective was to earn return on their

2 investment.

3 Q So did you do an economic impact analysis where

4 the proposed action was the issuance of the permit?

5 A The issuance of the permit was viewed as a part

6 of the development process. As I recall, we did do an

7 economic analysis of the construction and operation of the

8 terminal, yes, as part of the permit application.

9 Q Dr. Luke, it appears that you have served as a

10 litigation expert before, based on what I glean from your

11 curriculum vitae, is that correct?

12 A Yes.

13 Q Do you know approximately how many times?

14 A When you say litigation, are you distinguishing

15 that from administrative type cases or are you including

16 that?

17 Q Any cases in which you were working with or

18 under the direction of counsel, either during the course of

19 court litigation, quasi judicial proceedings before an

20 administrative agency, or in anticipation of either of

21 those, where you were characterized as a litigation expert.

22 A I don't know that I have ever been characterized

23 as a litigation expert. I mean, I have been disclosed as a

24 potential expert witness, if that's saying the same thing.

25 Q That would be a subcategory, either disclosed as

1 a potential expert witness or retained for purposes of

2 providing expert consultation in such proceedings?

3 A Okay, I couldn't give you a precise number, but

4 I would say over the course of now doing this for about 20

5 years, it's certainly been several dozen times.

6 Q What was the most recent such involvement?

7 A It's a little difficult to answer, I mean, there

8 are several cases ongoing where I'm involved in one way or

9 another in the analysis and it may lead to testimony.

10 Q What are those cases?

11 A Well, of course there's this one. There is a

12 case where the client is a company called Atochem,

13 A-t-o-c-h-e-m. There is a case for Good Samaritan Hospital

14 in West Palm Beach. There is a case for Riverside Hospital

15 in New Port Richey. There is a case for Florida Medical

16 Center in -- I can't remember exactly which of the towns

17 it's in, but Broward County. There is a case for an

18 individual in Austin concerning health insurance, possible

19 health insurance fraud. There is a case for the Texas

20 attorney general's office concerning possible health

21 insurance fraud. There are other cases that are active in

22 my firm but, I mean, my involvement with them is more of a

23 supervisory or managerial nature.

24 Q Of the cases that you have just mentioned, other

25 than this case, are there any in which you have been

1 designated as an expert witness?

2 A Well, I have in the Atochem case. I have in the

3 Carson case.

4 Q I'm sorry, what was the last one?

5 A Carson, which is one of the insurance cases.

6 Q Would that be the individual?

7 A Right.

8 On the others, I don't know that there has been

9 a designation yet. One of them is a -- well, probably in

10 the Florida Medical Center case there is a designation.

11 Also the Edwards aquifer case is sort of an ongoing matter,

12 but it's not in a posture right now where there would be a

13 standing designation.

14 Q In your involvements with the projects we

15 discussed earlier involving impact assessment of actions

16 proposed to remedy environmental problems, were you listed

17 as a litigation expert -- excuse me, strike that.

18 In any of the previously discussed projects

19 involving economic impact assessment of actions proposed to

20 remedy environmental problems, did you participate as a

21 litigation expert?

22 A Again, the term I'm more familiar with is expert

23 witness and I think in all of those I did, yes.

24 Q Of those cases that we were just discussing, did

25 you testify in any of them?

1 A Yes.

2 Q Did you testify in the Browning-Ferris industry

3 waste disposal matter?

4 A There are several matters there and I think in

5 pretty much all of those I did, yes.

6 Q How about in the Department of Energy nuclear

7 waste project?

8 A No.

9 Q The Louisiana natural gas development project?

10 A I was deposed, but I didn't testify because the

11 case went down on summary judgment.

12 Q In the Freeport, Texas marine terminal case?

13 A There was not a hearing on that so, I mean, I

14 submitted a permit application, but I didn't testify.

15 Q In the Superfund designation matter?

16 A I was deposed, but the case settled.

17 Q In the Texas Coastal Management Program matter?

18 A I testified before the legislature on that,

19 there was not a -- there was no litigation really to that.

20 Q The Texas land use policies project?

21 A No, there was no testimony related to that.

22 Q So you were a litigation expert in that case?

23 A No, I mean, there was no litigation, it was a

24 study.

25 Q Oh, I'm sorry, okay. Backing up is that also

1 the case with the Texas Coastal Management Program, was

2 that not a matter in or anticipating litigation?

3 A Right, that was a legislative policy development

4 project.

5 Q How about the Maine oil refinery development

6 project?

7 A There was eventually some -- there were some

8 permit proceedings relating to that, but the study that I

9 did was not connected to any party to those proceedings.

10 Q Were you a litigation expert in that proceeding?

11 A No.

12 Q And the Edwards aquifer withdrawals project, I

13 believe you mentioned that you don't believe you are

14 presently designated as an expert witness, but that that's

15 a matter in litigation and has been for some time?

16 A Right. I testified there in a public hearing

17 format in front of the Water Commission, but not in an

18 administrative hearing.

19 Q Moving to your involvement in this case, Dr.

20 Luke, when were you retained as an expert in this case?

21 A I believe I was first contacted in the summer of

22 1992.

23 Q By whom?

24 A I can see him, but I have gone blank on the

25 name. Who is the attorney that represents the vegetable

1 people?

2 MR. SAXE: Donna --

3 MS. STINSON: I'll be happy to --

4 MR. SAXE: Ken Oertel?

5 MS. STINSON: Ken Hoffman.

6 BY MR. SAXE:

7 Q Ken Hoffman?

8 A Yes, Ken Hoffman.

9 Q Were you retained by the fruit and vegetable

10 league at some point?

11 A No.

12 Q And that contact took place, as you remember it,

13 in December of 1992?

14 A No, I said it took place in the summer of '92.

15 Q Oh, I'm sorry, thank you. When were you first

16 contacted by the Sugar Cane Growers Cooperative or its

17 agents or attorneys?

18 A Well, as I recall, Ken asked me to attend a

19 meeting in West Palm Beach at which he was present, as were

20 representatives of the Cooperative and its counsel, and

21 other counsel, and that was the first contact I had with

22 the Cooperative.

23 Q What was the nature of that meeting?

24 A Well, I suppose you would say it was a get

25 acquainted meeting.

1 Q Was anybody else from RPC in attendance at that

2 meeting?

3 A I don't think so.

4 Q Do you recall who was at the meeting, other than

5 yourself and Mr. Hoffman?

6 A I don't know that I recall everyone. I do

7 recall Bill Green being there and George Wedgworth and Jeff

8 Ward.

9 Q Where in West Palm Beach was the meeting held?

10 A I believe it was at the Cooperative's offices.

11 Q And you were subsequently retained by the Co-op?

12 A Yes.

13 Q Approximately when?

14 A It was relatively shortly after that meeting.

15 Q Still the summer of '92?

16 A Right.

17 Q Were you retained to provide services other than

18 the giving of expert testimony in this case?

19 A You have kind of lost me on that question.

20 Q Were there any other services you were retained

21 to provide, besides expert testimony?

22 A I think the answer to that question is that what

23 was asked for at that time was to do some review and

24 analysis of documents and to prepare some comments, and the

25 issue at that time, I mean, I'm sure that the issue was

1 raised about if there was a need to present the results of

2 this analysis in a hearing, would I be willing to do that,

3 but I think that the engagement was not sort of we want you

4 to be an expert witness, it was more we want you to do some

5 analysis and to help us think about some questions and that

6 may lead to the occasion where you would need to present

7 that in the administrative hearing.

8 Q So would it be fair to say that you were

9 retained to provide consultation and potentially testimony?

10 A Probably that's a more accurate statement.

11 Q What is RPC's role in the work you were retained

12 to do, the services you were retained to provide to the

13 Cooperative?

14 A I don't understand the question, what was RPC's

15 role in the work I was retained to do?

16 Q What is it, yes, what is RPC's role in the work

17 you were retained -- the services you were retained to

18 render to the Cooperative?

19 A Well, it's to provide the services, I mean.

20 Q I would like you to go through the work you or

21 RPC have done so far to provide expert consultation and

22 potential testimony to the Cooperative, in chronological

23 order.

24 MS. STINSON: Let me stop you for a moment and

25 ask you what your intentions are for lunch, if we

1 should stop now, let's go off the record.

2 MR. SAXE: Sure.

3 (Discussion off the record.)

4 (Luncheon recess taken.)

5 BY MR. SAXE:

6 Q Dr. Luke, before the break I had started to ask

7 you about the work that you or RPC have done so far to

8 prepare in this case and I would like you to go through it

9 for me step by step in chronological sequence, one step at

10 a time, starting with meetings and projects and reports and

11 analyses and any related activities that were undertaken

12 after you were retained.

13 MS. STINSON: Object to form.

14 MR. SAXE: I haven't asked a question yet.

15 MS. STINSON: I'm sorry, okay.

16 BY MR. SAXE:

17 Q What was the first step in your case

18 preparation?

19 A Well, I suppose the first step was meeting with

20 the client and finding out what they might like me to do.

21 Q Can you be more specific?

22 A You mean can I tell you what they asked me to

23 do?

24 Q That's a good start.

25 A I was asked to review the SWIM plan and the

1 Hazen and Sawyer reports when they became available.

2 Q What did you do next?

3 A I obtained copies of those documents and I

4 reviewed them.

5 Q Did you work alone or did you have assistance?

6 A I involved Larry Leistritz in that review and I

7 probably used some of the RPC staff members in pulling

8 certain background documents that had been cited either in

9 the SWIM plan or in Hazen and Sawyer, some of which turned

10 out to be relevant to review and I believe I looked at them

11 in some detail, others I just glanced at.

12 Q Did you use any RPC members at that point to do

13 anything other than pull documents?

14 A Not that I recall.

15 Q Do you recall what documents you did review at

16 that point?

17 A Other than the SWIM plan itself and the Hazen

18 and Sawyer studies, there were some documents relating to

19 the sugar cane industry in Florida which were cited in the

20 Hazen and Sawyer study and most of those I think were

21 either USDA or IFAS documents, and I believe I reviewed

22 some of those.

23 Q Approximately when did this work take place?

24 A It would have been in July and August.

25 Q Of 1992, I take it?

1 A Yes.

2 Q Do you recall whether the Hazen and Sawyer

3 studies you are referring to were any particular draft or

4 date?

5 A I recall both of them were styled as being draft

6 final.

7 Q When you say both of them, was that an economic

8 impacts report and an economic benefits report?

9 A Yes.

10 Q After you reviewed these documents, did you

11 prepare an analysis?

12 A I prepared, along with Larry Leistritz, a set of

13 comments which were submitted to Mr. Green and which it's

14 my understanding he put into the record or whatever would

15 be the right term, at a hearing or a public work session

16 that was held on the Hazen and Sawyer report in August.

17 Q Did anybody else review those comments before

18 they went to Mr. Green?

19 A Anybody besides who?

20 Q Beside yourself and Dr. Leistritz.

21 A Other than perhaps for proofreading type of

22 review, no.

23 Q What did you do next?

24 A I was not able to attend the August session and

25 I believe Mr. Ward forwarded to me a videotape of that

1 session and the comments by Dr. Johns and I believe the

2 comments the following day by Dr. Richardson and I don't

3 recall if Dr. Polopolus is on that tape or not.

4 Q The August session you are referring to, do you

5 know whether that was a governing board meeting of the

6 South Florida Water Management District?

7 A Not really recognizing the people who were on

8 the dais, I'm not sure. I mean, I believe they were board

9 members, but whether it was the full board or a committee

10 of some sort, I don't know.

11 Q What did you do after reviewing the videotape?

12 A The next thing that I recall specifically was

13 going to College Station and visiting with Dr. Richardson.

14 Q Approximately when was that?

15 A Well, it would have been either -- I seem to

16 recall it was right after the fall term had started at A &

17 M and that could have been either late August or early

18 September.

19 Q What was the purpose of the visit?

20 A I had talked to him on the phone and I believe

21 he had sent me one of the manuals, maybe the 1986 manual on

22 FLIPSIM and I went over there to learn some more about it

23 and to talk to him about it and to talk about some of the

24 analysis that he had done.

25 Q What analysis was it that you went to talk with

1 him about?

2 A The analysis that he and I guess Dr. Polopolus

3 had done of the Hazen and Sawyer report that was the basis

4 for the comments that were made at the hearing or meeting

5 that I referred to earlier.

6 Q Did you have any other material describing that

7 analysis that you reviewed at that point, other than the

8 videotape of the presentation?

9 A I don't know whether it was that meeting or a

10 later meeting, they produced a handout that was composed of

11 some flip charts -- excuse me, some view graphs that they

12 had prepared, so I would have had that. That would have

13 been sent along with the videotape by the folks at the

14 Cooperative.

15 Q What did you discuss with Dr. Richardson at the

16 meeting in late August or early September?

17 A I would characterize it as just an elaboration

18 of the comments that he had made and giving me some more

19 background on the FLIPSIM model and how that tied into the

20 work at FAPRI.

21 Q At this point, were you still working under the

22 original request from the Cooperative to review the SWIM

23 plan and the Hazen and Sawyer reports?

24 A In general, because I mean, this was -- I had

25 not, to my knowledge, met Richardson or Polopolus or had

1 not been really aware that they were going to be at that

2 meeting to present anything. I don't recall if anybody had

3 told me that they were working on anything, so this was a

4 new piece. Some of their comments were very similar to the

5 ones Dr. Leistritz and I had made, but some of them,

6 because of their greater knowledge of the FLIPSIM model and

7 their more specific knowledge of the Florida sugar cane

8 industry, were different, were in addition, so part of what

9 I was trying to do was to see if there was anything in our

10 comments that I might need to modify in light of what they

11 had found.

12 Q Did you draw any conclusions about that

13 question?

14 A Yes. My conclusion at that point was that there

15 was no need to modify the general thrust of the comments,

16 that they seemed to be saying that the job losses, the

17 lands out of production would be greater than Grace Johns

18 had projected, but it was a matter of degree more than a

19 change in direction, and given the nature of the comments

20 were more methodological than aiming at coming up with an

21 alternative number, I didn't see a need to alter my

22 comments.

23 Q Had you been asked by the Cooperative to prepare

24 any particular report or analysis after the comments you

25 had transmitted to Mr. Green back in July or August?

1 A There was a further request that once we saw

2 that the District was actually projecting that land out of

3 production and primary job losses, we discussed with them

4 the possibility of doing what I will phrase as a community

5 impact analysis, that might either accept as scenarios the

6 Hazen and Sawyer direct impact analysis and Polopolus and

7 Richardson analysis and, if necessary, run additional

8 scenarios ourselves, and then to follow that on through in

9 terms of the impacts on the EAA.

10 Q Approximately when did this discussion take

11 place?

12 A Oh, I think there were probably an ongoing

13 discussion over several telephone conversations and then a

14 meeting that was held at the Cooperative in, I want to say

15 late September.

16 Q Who was at the meeting at the Cooperative?

17 A Well, let's see, Mr. Green was there, Mr.

18 Wedgworth was there, Mr. Ward was there. There may have

19 been a couple of other board members of the Cooperative,

20 but I don't put a name with them. Dr. Leistritz was there

21 and a gentleman from Peterson, I don't know whether it's

22 Peterson & Associates or Peterson & Company, joined us.

23 Q Do you remember that individual's name?

24 A I really don't. It's the only time I have ever

25 seen him.

1 Q What was your understanding of Peterson's role?

2 A My understanding was that they had been

3 providing some technical support to the League and to the

4 League's consultants.

5 Q Who from the League was at the meeting, do you

6 recall?

7 A No one other than, I mean, Peterson I guess was

8 the closest you could say to there being someone there from

9 the League and he was not there, as I recall, representing

10 the League.

11 Q Besides your purpose for attending the meeting,

12 did the meeting have a purpose?

13 A I suppose the general purpose could be

14 considered a question of what we want to do next on these

15 issues of socioeconomic impact of the SWIM plan and other

16 related economic issues.

17 Q When you say what do we want to do next, who

18 would the we be?

19 A Sorry, the Cooperative.

20 Q Did you have any impression about why a

21 representative from the League or an assistant to the

22 League was at that meeting?

23 A Yes.

24 Q What was that?

25 A We're getting real close to legal case strategy

1 and I don't know that I can answer that question without

2 sort of divulging kind of discussions of counsel with their

3 client.

4 Q Well, unless the Cooperative's attorney

5 instructs you not to answer a question, you are required to

6 answer it honestly and completely. I'm not seeking any

7 privileged communications, but I don't think the last

8 question did implicate any necessarily.

9 MS. STINSON: For the record, I will instruct

10 the witness not to answer if it involves attorney

11 thought processes and trial strategy, as I'm sure he

12 is aware, but he may answer, if he can, without

13 divulging such information.

14 A I think about as far as I can go and not stray

15 over that line is to say that there was a discussion of

16 possible cooperation or division of labor, if you will,

17 between consultants retained by the League and the

18 Cooperative in preparing economic studies.

19 BY MR. SAXE:

20 Q Under that tentative division of labor, what did

21 you understand that you might be expected to do?

22 MS. STINSON: Again, I instruct the witness not

23 to answer insofar as it may involve trial strategy,

24 but if the question is what has he been asked to do

25 with respect to this case, I think that's a relevant

1 question.

2 A The work of RPC was to focus on what I will call

3 the community impacts as opposed to the farm -- direct farm

4 impacts, vis-a-vis the total socioeconomic picture on the

5 impact side. There was not really any discussion of any

6 division of labor concerning analysis of the economic

7 benefits or cost benefits or anything of that sort.

8 BY MR. SAXE:

9 Q So then what did you understand that the

10 League's consultants would be undertaking?

11 A It was unclear what they would be undertaking.

12 Q So if I understand your testimony, your

13 impression was that you would be focusing on community

14 impacts and not on direct farm impacts of the SWIM plan?

15 A That's correct.

16 Q As a result of the meeting, were you asked to

17 produce any additional work product besides the comments

18 you had already submitted?

19 A Yes.

20 Q What was that or what were those?

21 A That was a -- it was my understanding at that

22 point that there was some requirement that there be some at

23 least general and preliminary formulation of opinions to

24 which experts might testify by the October 26th deadline

25 and it was understood, by me anyway, that the opinions that

1 could be advanced at that point in time would necessarily

2 be tentative, subject to revision, almost more in the

3 nature of hypotheses at that point, but it was my

4 understanding that it was necessary to make some

5 declaration of those in some filing. I'm not sure what the

6 nature of the filing was on that date, but I was asked by

7 the client to do what we could do in that period of time in

8 order to be able to at least identify what we might

9 ultimately testify to.

10 Q So at that point am I correct in understanding

11 that you had been requested not to undertake any of this

12 community impact analysis or further analysis of economic

13 impacts by October 26th, but rather simply to define what

14 your proposed testimonial expert opinions might be?

15 A No, I don't think that accurately states what we

16 were doing. We were starting to do a community impact

17 analysis and to look at certain other policy issues. We

18 were starting to gather and, I guess at that point had

19 started to gather, some of the underlying baseline

20 information and literature and interviews and so forth,

21 that would be necessary to do a community impact study, but

22 it was clear to all concerned that the farm level impact,

23 regardless of which entities ultimately did that, and many

24 other matters that would be required to do a complete

25 community impact analysis, wouldn't be known, couldn't be

1 processed by that October 26th deadline, so we were

2 underway on a community impact analysis, but we had this

3 immediate deadline to at least identify what would

4 potentially be opinions.

5 Q Was there any decision made at that point about

6 how to address the direct farm impacts?

7 A No.

8 Q You said that we were starting to analyze

9 community impact and certain other policy issues, what

10 other policy issues were you analyzing?

11 A Well, for instance, the issue of what would

12 constitute a reasonable cost/benefit analysis, trying to

13 begin to understand the areas of uncertainty in the natural

14 science underlying the plan and some of the alternatives

15 that had been proposed in the past, to begin to look at

16 some of the benefit issues and some of the parallel

17 planning efforts that were ongoing.

18 Q When you say parallel planning efforts that were

19 ongoing, could you be more specific?

20 A The water supply planning and the planning for

21 funding the SWIM plan.

22 Q At that point was anybody engaged with you in

23 analyzing community impacts and these other policy issues,

24 besides Dr. Leistritz?

25 A Yes. There would have been several people at

1 RPC who would have had some role in that.

2 Q Who would those people be?

3 A Well, the names that come to mind would be Ann

4 Orzik, Kim Manley, Jean Werner. In this period there would

5 have been a lady named Melissa Cox involved. Some other

6 people may have had some very incidental involvement, but

7 none that I recall specifically.

8 Q What was Ann Orzik's role at that point?

9 A Ann was looking at the areas involved with

10 fiscal and public facilities and services analysis and the

11 data necessary to assemble baseline in that regard, and

12 looking at issues of methodology of how to make forecasts.

13 Q Is Ann employed in the same office that you do

14 most of your work from?

15 A No. She lives in New Hampshire and works out of

16 the office there, works out of a home office, to be

17 precise.

18 Q How long has Ann been affiliated with RPC?

19 A About 1976.

20 Q So about 23 years?

21 A No.

22 Q About 17 years?

23 A Sounds closer.

24 Q This is a subtraction test. How about Kim

25 Manley?

1 A How about her?

2 Q How about her, what was her role at that point,

3 or his role?

4 A It's a lady and she is a research assistant and

5 her role would have been gathering documents and putting

6 them in a bibliography and library and some cases preparing

7 summary statements.

8 Q Where is Kim's office?

9 A It's in Austin.

10 Q How long has she been with RPC?

11 A She joined us sometime early 1992, I don't

12 remember the exact date.

13 Q Jean Werner what was his or her role?

14 A It's a lady. Jean is a consultant on vocational

15 matters. She has a doctorate in education and has been

16 involved with vocational analysis, a number of different

17 applications, and she was looking at the structure of

18 employment and of the labor force, particularly the

19 agricultural workers in the EAA.

20 Q Where is Jean's office located?

21 A In Austin.

22 Q How long has she been with RPC?

23 A I want to say 1989, thereabouts.

24 Q Melissa Cox, what was her role?

25 A Her role was to provide some project

1 coordination and data analysis. She is a master's level

2 economist and does statistical analysis. She is not with

3 us any longer.

4 Q Where was her office?

5 A In Austin.

6 Q How long had she been with you?

7 A She was only with us for two or three months.

8 She worked for a company in Austin called Pharmaco and was

9 doing data analysis for them and we were advertising for an

10 economist and brought her on board. They came back to her

11 a couple of months later and made her an offer and she

12 decided to accept it, so I don't remember whether she was

13 there two or three months, but it was a very brief time.

14 Q Again, what was the name of that company?

15 A Pharmaco, with a P-h. They are a

16 pharmaceuticals testing company.

17 Q So that I understand it, at that point you were

18 working to produce a community impact analysis, but no

19 decision had yet been made about what data or analysis

20 would be relied upon for the direct farm component of such

21 an analysis?

22 A That's correct.

23 Q Was the decision subsequently made about that?

24 A No, it still needs to be made.

25 Q What did you produce or -- strike that.

1 Did you provide any written input to the

2 Cooperative by the October 26th deadline?

3 A Yes.

4 Q What was that?

5 A It's a document that I know Mr. Rosenberg

6 reviewed with Dr. Leistritz in his deposition. I believe

7 it's dated October 23rd, I don't recall a title on the

8 document.

9 Q What is the nature of the document?

10 A It's a series of statements relating to

11 preliminary opinions.

12 Q Those would represent the opinions of yourself

13 and Dr. Leistritz?

14 A At that point, given the information that we had

15 and given the requirement to bring forth any opinions that

16 we might later express.

17 Q Have your opinions changed in any respect from

18 those described in that document?

19 MS. STINSON: Object to the question without the

20 document to review.

21 BY MR. SAXE:

22 Q Can you answer it from your recollection or do

23 you need to review the document?

24 A I think to be fair in an answer, I would have to

25 review it for you.

1 Q So based on memory, you are not aware that any

2 of your opinions have changed from that document?

3 A I don't think that comes close to what I just

4 told you. I said that before I could tell you if any had,

5 I would need to review the document.

6 Q That brings us up to October 26th, what did you

7 do next?

8 A Somewhere in this time frame there are one or

9 more administrative hearings in Tallahassee, which had to

10 do with the issue of requiring production of financial

11 records of individual growers in the EAA. The question

12 that I was asked -- one of the questions that was posed to

13 me by Mr. Green, was would it be possible to do a

14 reasonable impact study at regional level, not asking about

15 the impact on Farmer Smith, but at regional level, without

16 that data. I told him that I believed it was and he asked

17 me to come to one of those hearings and provide some

18 testimony to that effect, which I did. I'm sorry, I can't

19 give you a date, but I know that's a matter of record.

20 There was another hearing at which Mr. Green

21 thought that economic issues in the case were going to be

22 discussed and he asked me to come and I just basically sat

23 and listened. I don't recall whether they did -- those

24 issues just didn't come up or what the situation was.

25 Q What was the data that Mr. Green referred to

1 when he asked you whether it was possible to do a regional

2 impact study without it?

3 MS. STINSON: Object to form, you have asked for

4 what counsel was thinking. Perhaps it can be

5 rephrased with regard to what Mr. Luke's opinion is

6 based on, but with regard to what counsel was thinking

7 in asking the question, I think it calls for

8 privileged information, if in fact it could be

9 answered.

10 MR. SAXE: Let me reframe the question.

11 BY MR. SAXE:

12 Q As you understood it, what data were you being

13 asked whether you could do a reasonable regional impact

14 study without?

15 A One of the -- it would be balance sheet data.

16 Q Anything else?

17 A I think that was pretty much it. Perhaps --

18 yes, I think that would really be it, balance sheet data.

19 Q Could you define balance sheet data for me?

20 A Data on assets and liabilities and equity of an

21 enterprise.

22 Q Assets and liabilities?

23 A And equity.

24 Q And equity, not costs and revenues?

25 A Right.

1 Q Of an enterprise, by that you mean of a

2 particular business?

3 A Correct.

4 Q Do you recall the substance of your testimony on

5 that issue at the hearing?

6 A Yes.

7 Q Can you describe that for me?

8 A Yes. Basically that that type of information

9 would be sufficient to allow one to formulate reasonable

10 opinions on that should be available from USDA.

11 Q The regional impact study that was at issue in

12 this particular question, what kind of an impact study

13 would that be?

14 A Well, this would be a piece of the farm level

15 impacts and, you know, I mean, that could be used in a

16 number of different kinds of studies.

17 Q In the context of the analysis you are

18 conducting or were at that point conducting, excuse me, how

19 would this piece of the direct farm analysis have fit in?

20 A One of the critiques of the Hazen and Sawyer

21 report that was made by Richardson and Polopolus, was that

22 Hazen and Sawyer had failed to consider the debt structure

23 of the agricultural enterprises in the EAA and that that

24 needed to be plugged into the FLIPSIM model and run in

25 order to get a fuller understanding of the farm level

1 impacts of the proposed BMP's and STA's.

2 Q What did you do next?

3 A I'm not sure where in the chronology in all this

4 we are, some of these things occurred parallel, but there

5 is a series of discussions that took place with Annette

6 Clauson at USDA regarding this information.

7 Q Do you recall approximately when those

8 discussions took place?

9 A They were in the fall and I guess the last ones

10 occurred maybe in January of '93.

11 Q Can you explain to me what these discussions

12 concerned?

13 A Concerned requests -- discussions of what data

14 USDA had from their last survey of the Florida sugar cane

15 industry, particularly as regards balance sheet data and

16 their willingness to produce that data in a form that would

17 not violate the confidentiality restrictions under which

18 the data was collected.

19 Q The period of time you have just described spans

20 from sometime in the fall through January '93, at that time

21 or subsequent, what other work were you undertaking?

22 A There was ongoing collection of data about the

23 communities in the EAA.

24 Q Can you be more specific, what types of data?

25 A There is a series of tables that I know we

1 submitted and it would be some of the data in those

2 tables. I also made a trip of several days to the EAA,

3 interviewed a number of people, tried to familiarize myself

4 personally with the lay of the land, so to speak, and there

5 were some telephone interviews conducted, I know Jean

6 Werner conducted with people with the employment service

7 here in Florida and other folks. We ordered census data,

8 obtained some published data or public data from the Palm

9 Beach County Planning Office, continued to obtain some of

10 the documents that had been cited in the bibliographies of

11 various publications, ordered RIMS tables for certain

12 counties, ordered appraisal district tapes from the

13 counties. These are typical, I'm not saying that that's an

14 exhaustive list, but I think it would give you a flavor for

15 just the kind of ongoing research that was being done.

16 Q Any others that you recall?

17 A Other what?

18 Q Other types of data.

19 A Not really.

20 Q During your trip, do you remember who you

21 interviewed?

22 A Yes. Not necessarily by name exactly, but I

23 interviewed the assistant superintendent for the Palm Beach

24 County schools that has his offices in Belle Glade. I

25 interviewed an accountant who does the books for some of

1 the farmers. I interviewed a banker. I interviewed some

2 people with the Palm Beach County Planning Office. I

3 interviewed someone with the -- a couple of people with the

4 city of Belle Glade. I interviewed someone with the Belle

5 Glade Chamber of Commerce. I talked to Jeff Ward. I

6 talked to the marketing person at the Cooperative, whose

7 name I'm not recalling right now. I spoke with Tom

8 Schunamen at IFAS.

9 Q Do you recall the name of the assistant

10 superintendent for Palm Beach County schools?

11 A No.

12 Q The accountant for the farmers?

13 A No.

14 Q The banker?

15 A No, but it was an independent bank on the main

16 street in Belle Glade.

17 Q How about in the county planning office?

18 A There were two or three people there and, I

19 mean, we sort of talked together and I'm sorry I don't

20 remember their names.

21 Q It's okay. How about at the city of Belle

22 Glade?

23 A There is a city manager, I believe is his title,

24 and he is the person I spoke with, or he may be a city

25 finance officer, but it's one of those two positions.

1 Q You also indicated that -- strike that.

2 Can you tell me approximately when that trip

3 was?

4 A It was in the fall of '92. I would guess that

5 it was in October.

6 Q You also indicated that you conducted some

7 telephone interviews, do you recall with whom?

8 A No. I think I said Jean Werner conducted some

9 telephone interviews.

10 Q Excuse me. Do you know who she spoke with?

11 A She spoke with -- I'm sorry, I also spoke with

12 someone at the Employment Security Office in Belle Glade.

13 She spoke with several people in Employment

14 Security, both in Belle Glade and I think in Tallahassee or

15 Jacksonville, where they have some regional or offices

16 where they have the research, in order to get some data on

17 seasonal workers and on unemployment claims for that area.

18 I would guess that -- I would know that Ann

19 Orzik also spoke with people in various governmental

20 jurisdictions in the area in obtaining -- and with the

21 Department of Revenue in Tallahassee, in obtaining revenue

22 and expenditure data for certain of the jurisdictions in

23 the EAA.

24 Q This seems to take us up chronologically through

25 the early part of this year, what did you do next?

100

1 A Well, somewhere in there we obtained a copy of

2 the FLIPSIM model from the University of Florida and we

3 have looked at that and made an analysis of what it does

4 and what role we think that it would play in a study if we

5 were called upon to do the direct farm impact analysis.

6 Q About when did you acquire this copy and make

7 this analysis?

8 A I'm thinking late December on actually obtaining

9 one, I'm pretty fuzzy on that but, I mean, it was -- we

10 obtained it and we made sure we could load it and run it if

11 we needed to and then we sort of set it aside and the

12 analysis of what role it might play if we were to do a

13 direct farm impact study, I had somebody look at it, a

14 gentleman named Eric Schubert, in the late February or

15 early March time frame.

16 Q Is Eric Schubert an RPC employee?

17 A Yes.

18 Q Where is his office?

19 A Austin.

20 Q How long has he been with RPC?

21 A He joined us right about the first of the year.

22 Q Between early fall and now, have there been any

23 additional personnel who have been added to the project?

24 A Added to the project is probably not a very good

25 description. Who have worked on the project, I would say

101

1 yes, a gentleman named Jeff Tomlinson who also joined us

2 right at the first of the year, and I believe that Nell

3 Simpson, who is an analyst in our Austin office, has had a

4 very small involvement.

5 Q What's Jeff Tomlinson's role?

6 A He is really acting as the project coordinator

7 or project manager under my direction. I suppose in

8 classic consulting terms, I'm the principal in charge and

9 he is more in the project manager role.

10 Q How about Mel Simpson, what's his role in the

11 project?

12 A No, Nell.

13 Q Nell, thank you. What's her role?

14 A I believe she helped with producing some spread

15 sheets, some tables. She is an MBA and an MSW and normally

16 works on our health care related projects, but is a little

17 broader gauged than that, so we had something we wanted to

18 get out one day and asked her to help us on it.

19 Q When Melissa left the project, was she replaced?

20 A In effect, Jeff was her replacement. There was

21 a hiatus there where that position was essentially vacant.

22 Q So besides yourself, presently you would say

23 that there are approximately seven RPC employees who have

24 worked on this project?

25 A That's probably right. Again, I mean, you know,

102

1 we have got runners and secretaries, so I'm not trying to

2 mention them.

3 Q After the beginning of the year, what was done

4 next?

5 A As I recall, there was, on the baseline

6 information, there were some loose ends and we were trying

7 to fill those in, but not with any particular deadline. We

8 met to prepare for the document production for Dr.

9 Leistritz' deposition and assembled those documents. We

10 discussed if we were to go forward and complete either

11 community impact analysis or to also do direct farm impact

12 analysis, what would be required, how much time, how much

13 staff effort, and we monitored, I guess, what was going on

14 with regard to activities on this project in Florida.

15 Various documents were sent from counsel or from Jeff Ward

16 and as these came, we would look at them.

17 Q Did I understand you correctly, that you

18 discussed what would be involved or required in terms of

19 resources, manpower undertakings, tasks and the like, if

20 you were required to do a community impact analysis or

21 direct farm analysis?

22 A That's correct.

23 Q So approximately what time, at what point on the

24 calendar was this discussion?

25 A Dr. Leistritz came to Austin and this was before

103

1 his deposition and I guess there were some ongoing

2 telephone discussions and then the discussion is continued

3 after the point in time of his deposition.

4 Q I believe that that deposition was approximately

5 February 8th and 9th, does that sound like about the time

6 that these discussions took place?

7 A Right, and thereafter, as I said.

8 Q Have you been requested to do a community impact

9 analysis at this point?

10 A Not at this time.

11 Q Have you been requested to do a direct farm

12 analysis?

13 A No.

14 Q When you met or conversed with the other people

15 working on the project about some loose ends on the

16 baseline information, what were those loose ends, can you

17 elaborate for me?

18 A Yes. One of the problems, curiously enough, has

19 been getting 1980 census tapes. We ordered these from the

20 Bureau of the Census and I guess because they have shifted

21 their focus to 1990, it has been a strange process. The

22 latest status was they sent us one of two 1980 tapes and

23 the 1990 documentation, so we're trying to get the two good

24 tapes and the right documentation. Once we do, it's

25 relatively simple to do this, but we're dealing at tract

104

1 level and on a pretty wide variety of items, so we felt

2 like that it was important to kind of get it off the tape.

3 Q When you say at tract level?

4 A Census tract.

5 Q Census tract?

6 A That's correct.

7 Q What is a census tract, if you can explain it?

8 A Well, it's a geographic area that is defined by

9 the Census Bureau and there are a set of criteria for how

10 it is defined relating to areas and so forth, and it is a

11 geographic area, not the smallest, but a geographic area on

12 which statistics are reported by the Census Bureau.

13 Q You also referred to a variety, I believe, of

14 information, I'm not sure if that was the word you used,

15 that would be associated with each of these tract data

16 sets, if you will?

17 A Right.

18 Q Can you tell me what some of that information

19 is?

20 A Well, I mean, I think everybody has gotten

21 either a long or short census form in the mail every 10

22 years and it is that data.

23 Q Were there any other loose ends on the baseline

24 information that you discussed?

25 A I think we were getting, I believe it was the

105

1 Hendry County appraisal tape we have only recently gotten.

2 There may have been some other things, but none of them

3 appear to be problems. It was just kind of a matter of

4 continuing to ask.

5 Q Any other loose ends?

6 A Not on that baseline data, no.

7 Q Were there any other steps or tasks that were

8 undertaken after the February time frame, we are obviously

9 getting fairly close to the present?

10 A Well, of course, I was invited to attend and did

11 attend a meeting of an economists that Hazen and Sawyer

12 sponsored at the District, I don't remember the exact date,

13 but it was late February or early March, at which the

14 status and plans for the Hazen and Sawyer impact study were

15 discussed. I think that followed pretty closely on the

16 heels of -- well, now that I think of it, pretty closely

17 after Dr. Leistritz' deposition, several days perhaps, and

18 then of course I attended some of Dr. Leistritz' deposition

19 and I attended some of Dr. Jones' deposition.

20 Q The Hazen and Sawyer study that you are

21 referring to, would that be what I called earlier the 20

22 year study?

23 A I believe it is, yes.

24 Q Were there any other tasks that you can recall

25 that you or RPC have done so far to prepare in this case up

106

1 to the present time, other than those that you have

2 described for me?

3 A We have reviewed, I guess we have reviewed a

4 number of documents that have either been cited in studies

5 or whatever, have reviewed various pleadings that have been

6 filed in the case, have reviewed some depositions, had

7 someone review Bruce Gardner's deposition comes to mind. I

8 have made a presentation to a funding council meeting that

9 was held in Belle Glade, that was either in January or very

10 early February.

11 Q Can you tell me what the presentation was about?

12 A I assume it's on tape and one could get it, I

13 have not. It was not done off of a written document, but

14 the general thrust of it was that the District seemed to be

15 putting the cart well ahead of the horse and rushing to get

16 this plan on the books and rushing to spend several hundred

17 million dollars worth of somebody else's money on a problem

18 that was not completely understood and a solution that was

19 largely untested and for which they did not appear to have

20 any plans as to how to fund it and as to which the other

21 major piece of the equation, the hydroperiod piece, was

22 really unknown and that, in my opinion, this did not sound

23 like a very good way to make policy where so many folks'

24 lives and livelihood were affected.

25 Q Were these the opinions you presented to the

107

1 funding council?

2 A That's what I just described to you, I think

3 that's basically the thrust of the presentation.

4 Q Is there anything else that you can recall that

5 has been done so far in preparing in this case?

6 A I have omitted various conversations with

7 counsel that were largely by telephone and discussed

8 various aspects of the case.

9 Q Anything else?

10 A Well, again, I mean, that's --

11 Q To the best of your recollection.

12 A I mean, I'm sure there's something else, but

13 nothing that I'm thinking of now that I believe is not

14 covered by something I have already said.

15 Q Is there any additional work or analysis that

16 you or RPC at this point expect or intend to do before

17 trial to prepare?

18 A Well, I would consider that where we are right

19 now is that we are pretty much on hold, awaiting what you

20 have called the 20 year study and awaiting some decisions

21 by the League on what, if any, consultant studies they

22 intend to do, which I think are in turn waiting on the

23 Hazen and Sawyer 20 year study.

24 Q When you say we are on hold awaiting the 20 year

25 study, am I to understand that the work that had been

108

1 ongoing in the community impact analysis is presently

2 discontinued?

3 A I would not say the engine has been shut off, I

4 would say it's kind of in park and idling. We're

5 continuing, as I say, to clean up some loose ends, to look

6 at some documents, but we are not out there building spread

7 sheets and doing forecasts and that sort of thing.

8 Q Have you submitted any proposals to do a

9 community impact analysis?

10 A We were asked to give some idea about what,

11 given what we knew now, it would probably cost to do either

12 of the two analyses that we have been discussing, direct

13 farm or community, and I have provided that estimate.

14 Q Are you presently working on any other proposals

15 to do either a socioeconomic analysis or economic impact

16 analysis in this case?

17 MS. STINSON: Object to form, I just don't

18 understand what you're asking, I'm sorry.

19 MR. SAXE: I asked Dr. Luke whether he had

20 submitted any proposals and he indicated that we were

21 asked to estimate the cost of doing the various

22 different types of analyses. I'm asking now are there

23 any other proposals other than that one which he is

24 presently working on, proposals to do economic or

25 socioeconomic impact analyses in this case.

109

1 A There are no proposals.

2 BY MR. SAXE:

3 Q Are there any other discussions or other

4 documents which you are presently preparing to submit

5 concerning work you might do in the future?

6 A Yes.

7 Q What would that or those be?

8 A The whole issue of the economic benefits report

9 is kind of hanging out there and I would expect that at

10 some point we would follow up on discussions to either do

11 that or to work with someone else in doing some further

12 work on the economic benefits area.

13 Another area is that there has been at least one

14 study done that purports to show that the agriculture is

15 being subsidized by the South Florida Water Management

16 District. I believe this was cited in a memo that came up

17 in Dr. Jones' deposition and I believe that's based on a

18 report done by Mr. Diamond and there has been some

19 discussion that we might review that document and offer

20 some comments on it.

21 Q Have you submitted any proposals to undertake a

22 benefit/cost analysis?

23 A At this point, no. I'm sorry if I thought it

24 was implicit, but there is certainly -- if we had done an

25 impact analysis and done a benefits analysis, most probably

110

1 we would put those two together into a benefit/cost

2 analysis.

3 Q Is a benefit/cost analysis basically a

4 combination of an impact analysis and a benefits analysis?

5 A I could quarrel with that statement, but

6 generally speaking, those would be the major elements.

7 Q Maybe we will quarrel about the statement later.

8 A Yeah, I mean, I'm just saying in a general

9 casual discussion, I could agree with you. I would not

10 want to -- I would need to reserve some points if we were

11 trying to be technical and precise in answering.

12 Q Okay, fine, it may come up later in the

13 deposition. Dr. Luke, I would like to review a document

14 with you. Let's take a short break and we can get it

15 marked.

16 (Brief recess taken.)

17 (Luke Exhibit 2 marked for identification.)

18 BY MR. SAXE:

19 Q Dr. Luke, I'm handing you Exhibit Number 2, for

20 the record, could you please identify this document.

21 A Based on the cover page, it appears to be a copy

22 of the comments that Dr. Leistritz and I prepared back in

23 August.

24 Q For what purpose was this document prepared?

25 A For presentation at the meeting of either the

111

1 District or of one of its committees, that occurred in

2 August of 1992.

3 Q Is this the document, the comments you referred

4 to earlier in your testimony as presented during the August

5 session after you forwarded them to Mr. Green?

6 A Yes.

7 Q Did anyone besides counsel review this document?

8 A Not at my request.

9 Q Do you know whether there was a final record or

10 final set of comments that superseded this?

11 A I don't see any draft mark on this, so I just

12 don't know.

13 Q Would you turn please to page number 180, I'm

14 going to refer to the sequential control numbers at the

15 bottom of the right hand side of each page of the document.

16 A Okay.

17 Q The first full paragraph begins with a sentence,

18 "These reports have substantive problems which must be

19 addressed if the SFWMD is to have a complete and reliable

20 assessment of the potential economic impacts of adopting

21 the SWIM plan."

22 Did that represent your opinion at the time?

23 A Yes.

24 Q On what was that based?

25 A Well, based on my education and experience and

112

1 on a review of the draft final documents.

2 Q Could you explain for me what you meant by

3 complete and reliable assessment?

4 A Yes, one that covers the range of possible

5 conditions and one that is methodologically sound and uses

6 the best available data.

7 Q Is the District required by law to address these

8 problems, in your opinion?

9 A Well, basing my answer on the analysis Mr. Green

10 has done, I think that for a project of this magnitude

11 geared at correcting water quality problems, that it is.

12 Q So your opinion of the necessity to address

13 these is based on the legal position that's been provided

14 for you by counsel, is that what I'm to understand?

15 A Yes, you are.

16 Q Would you turn please to Bates number page 182,

17 the statement at the top of the indented block material,

18 the sentence right before the words, "These are:", the

19 sentence reads, "These documents acknowledge several

20 uncertainties which may significantly alter the economic

21 impacts of adoption of the SWIM plan."

22 Would you explain to me how the factors you list

23 here as uncertainties may significantly alter the economic

24 impacts of adoption of the SWIM plan?

25 A Sure. As I understand the SWIM plan -- let's

113

1 take the first one, should I read these into the record so

2 we know what we're talking about or will the number be

3 sufficient?

4 Q You may them into the record is fine.

5 A Number one, "The nutrient discharge levels which

6 must be achieved to satisfy state water quality standards

7 have not been quantified and may be lower than the

8 concentrations and total quantities of phosphorous assumed

9 in the plan."

10 It is my understanding from reading the plan,

11 that it in fact encompasses or adopts or incorporates the

12 settlement agreement that the District entered into with

13 the federal government and that the 50 parts per billion in

14 the phosphorous is identified as an estimate of the

15 discharge level that would be required to achieve whatever

16 biological balance is being sought here, but that it may be

17 lower, and that if it is lower, that the District is in

18 effect agreeing to do what it takes in order to get it down

19 to the level of discharge that will maintain whatever

20 biological balance is being sought. So that in adopting

21 the approach that is in the SWIM plan, I see the commitment

22 as being a range of possibilities that could include either

23 larger STA's, additional BMP's, or some third category of

24 intervention that hasn't even been identified by any of the

25 parties yet.

114

1 Q Now, this set of comments pertains to draft

2 final reports of the South Florida Water Management

3 District, prepared by Hazen and Sawyer in approximately

4 July of '92, is that correct?

5 A Yes.

6 Q Do you know whether in that draft final economic

7 impacts report, did Hazen and Sawyer analyze economic

8 impacts of the specific proposed action?

9 A Some portions of their analysis are specific to

10 the acreage removals that are discussed in the SWIM plan.

11 There is, of course, no financing proposal in the SWIM

12 plan, so that they really don't discuss how the SWIM plan

13 would be financed. They just discuss some assessment

14 levels and they discuss some grouping of BMP's that is one

15 potential grouping, so they are in some ways discussing

16 specific aspects of the SWIM plan and other ways they are

17 not.

18 Q Okay, would it be fair to say then that in your

19 view, the proposed action analyzed by Hazen and Sawyer was

20 not a complete proposal for purposes of the SWIM plan?

21 A That's correct.

22 Q Was it, however, is it fair to say that it was a

23 specific set of actions?

24 A Well, in some regards, yes, in other regards,

25 no.

115

1 Q Were there specific numbers of acres of storm

2 water treatment area that were proposed to be constructed?

3 A Are you talking plan or impact study now?

4 Q I'm talking about the proposed action at issue

5 in the Hazen and Sawyer draft final report.

6 A Well, you are kind of smushing two things

7 together. The proposed action, as I understand it, is the

8 adoption of the SWIM plan, and the adoption of the SWIM

9 plan, it seems to me, can lead to a number of possible

10 actions in the future, one of which certainly is the, I

11 believe, 35,000 acres of STA's that are mentioned in the

12 SWIM plan.

13 Q So is it your view that the draft final Hazen

14 and Sawyer report purported to analyze all possible future

15 actions that might be undertaken in implementing the SWIM

16 plan?

17 A It certainly didn't purport to do that, that's

18 one -- and it didn't, and that's one of the criticisms of

19 it.

20 Q What did it purport to analyze?

21 A I would have to look at it to say specifically

22 what it said it was setting out to do. That is also in the

23 SWIM plan in terms of a listing of things and I'm sorry I

24 can't give it to you from memory.

25 Q Do you recall whether it purported to analyze

116

1 the construction of some 34,700 acres of storm water

2 treatment area?

3 A It did that but, again, when we get into what it

4 purported to do, I would have to ask you to give me a copy

5 of the document to have any chance of answering that

6 question.

7 Q Would you like to see the Hazen and Sawyer

8 report, the SWIM plan, or both?

9 A Well, let's just get both on the table because I

10 suspect your questions will cause me to go back and forth

11 between them.

12 Q I have a copy of what's called the Contract

13 Completion Report of the Economic Impacts Report.

14 A Okay, now, that's different.

15 Q It is a different, it is a final version or a

16 later version of what is at issue in this?

17 A Right.

18 Q You may have a copy of the draft final report in

19 your documents and if you need it to refresh your memory,

20 we can look for it?

21 A Why don't we see if it's there, because I do

22 know there was some editorial and other changes between the

23 draft final and the contract completion.

24 MS. STINSON: I can't remember if we produced a

25 copy.

117

1 MR. SAXE: Why don't we do this, Professor

2 Jones, if you can assist me and take a quick look

3 through those documents and see if you can find a copy

4 of the draft final report. In the meantime, I'm going

5 to ask for another document to be marked and we can

6 work on this other document and we'll come back to

7 these set of comments.

8 (Luke Exhibit 3 marked for identification.)

9 BY MR. SAXE:

10 Q Dr. Luke, I'm handing you Exhibit Number 3, if

11 you would, have you ever seen this document before?

12 A Yes, sir.

13 Q Can you identify it for me?

14 A Yes. It's a memorandum that I authored and it

15 is addressed to William Green.

16 Q Were there any coauthors with you on this

17 document?

18 A Well, I don't know what the import of your

19 question is, I mean, did I talk to other people prior to

20 writing it, almost certainly. Was it a jointly authored

21 document, no, it wasn't.

22 Q Do you consider anybody else to be a coauthor on

23 this document?

24 A Again, not in the way I'm thinking of that term.

25 Q That's fine. Is it correct that it was prepared

118

1 sometime around the date of October 2, 1992?

2 A Yes.

3 Q What was the purpose of this document?

4 A I think that Mr. Green had asked me to share

5 some thoughts with him on some of the economic dimensions

6 that were relevant to the challenge that he was doing to

7 the SWIM plan and I believe this was my response to his

8 request.

9 Q Did anybody review the document other than the

10 person to whom it was sent, Mr. Green, as far as you know?

11 A I have no idea.

12 Q The second sentence in the document says, "So

13 far, SFWMD has told us the STA's will cost $400 to 600

14 million to construct and they have not told us how they

15 intend to pay for them."

16 Can you tell me what the basis was for that $400

17 to 600 million figure, where did that come from?

18 A My recollection is that at that point in time,

19 that they had put out the number of 328 or something in

20 that range and that was like a 1991 or 1992 number and that

21 there was at that time sufficient uncertainty about the

22 efficiency of the STA's just measured in pounds of

23 phosphorous uptake per acre, that I think between

24 construction contingencies, construction costs uncertainty,

25 and the amount that you would need and perhaps range of

119

1 land costs, that this seemed to me for the purposes of this

2 memo, to be a range of capital costs.

3 Q Was that figure reported in the SWIM plan, $400

4 to 600 million?

5 A I don't recall.

6 Q You mentioned they had put out a number of $328

7 million, who was they?

8 A I don't think I say they.

9 Q I'm sorry, no, your testimony earlier, I

10 believe, was that they had put out a number of 328?

11 A I'm referring to a memo in, I believe, the South

12 Florida Water Management District documents and I would

13 include in that their technical oversight group with the

14 range of possible acreages that would be required to

15 achieve the 50 parts per billion goal.

16 Q Do you know whether the SWIM plan provided an

17 estimate of the costs to construct the STA's?

18 A I would have to look to answer your question,

19 which I'll be happy to do if you have got a copy here.

20 Q Well, I do. Let's go on and maybe we will want

21 to take some time walking through the document, but since

22 we have limited time, we may want to spend it otherwise.

23 Do you recall whether you had consulted the SWIM

24 plan to determine whether there was a reported cost of STA

25 construction at the time you made this statement?

120

1 A I read the SWIM plan. Whether I had consulted

2 it or other documents for purposes of making that

3 statement, I don't recall.

4 Q Did you calculate the $400 to 600 million

5 estimate?

6 A Calculate it? I don't know that it was a

7 calculated number or whether it was again a number drawn

8 from the documents I reviewed and the tape of the meetings

9 and so forth.

10 Q Did you generate the number?

11 A Generate? Again, I don't know whether I'm

12 picking it up from somewhere or whether it represents

13 applying a calculation to some other numbers.

14 Q So if I understand correctly, it may have been a

15 number that you read in a document you reviewed or it may

16 have been a conclusion you drew from things you read about

17 the cost of STA's and you don't recall which it was?

18 A Right, and it may have been a synthesis of

19 several different bits of information.

20 Q Move down to the third paragraph, the first

21 sentence, it says, "Second, once a financing plan is known

22 or assumed, we can assess whether the agricultural

23 enterprises in the EAA can carry the tax assessments and

24 additional operating costs."

25 Would you tell me, please, what additional

121

1 operating costs were you referring to in that statement?

2 A It would be the BMP's. There is at least some

3 body of opinion that says that the BMP's are going to

4 result in increased cost of production.

5 Q So that's the BMP costs, the cost of

6 implementing BMP's?

7 A Yes.

8 Q Further down in the document, the next

9 paragraph, second sentence, "In doing this, we do not need

10 to challenge the production cost data used by Hazen and

11 Sawyer."

12 Could you explain that?

13 A My sense was, at this point, having listened to

14 the Hazen and Sawyer presentation and having reviewed some

15 of the USDA and IFAS document and having listened to the

16 Polopolus and Richardson presentation, that the production

17 cost data was real -- there was really not a lot of

18 argument over that.

19 Q Was there an interest in avoiding challenging

20 Hazen and Sawyer's production cost data?

21 A Only the interest in not arguing about things

22 where there was no true disagreement.

23 Q The next sentence reads, "We do need to consider

24 average debt, capital expenditure requirements, federal

25 income taxes and variability of returns."

122

1 Would you define average debt for me?

2 A Average debt meaning the average debt load per

3 acre or per enterprise.

4 Q Either/or?

5 A I mean, there are a number of ways you could

6 compute something that could be called average debt.

7 Q As you used it in this sentence, what did you

8 mean by it?

9 A I don't know that I was being that specific, but

10 just some notion of the general level of debt on

11 enterprises in the EAA.

12 Q Why did you need, in your opinion, why did you

13 need to consider it?

14 A I think that it's something that would go into

15 an analysis of the health of an industry or a sector.

16 Q Why in turn would you need to consider that for

17 an industry or sector?

18 A I think that it can go to the question of

19 whether the enterprises continue, whether the land stays in

20 production or not.

21 Q So in your opinion, average debt would be a

22 factor in projecting whether land would go out of

23 production?

24 A I think it needs to be considered, yes.

25 Q The next term in the sentence, "capital

123

1 expenditure requirements", would you explain to me what you

2 meant by that in the sentence?

3 A Some of the BMP's are not just operating costs,

4 they require capital expenditures. Some of the

5 productivity increases that are mentioned by various people

6 I would believe would come about as a result of capital

7 expenditures, both on equipment, research, that kind of

8 thing, capital expenditures that would be necessary to

9 replace worn out equipment or buildings, what have you.

10 Q When you say productivity increases that had

11 been discussed, what ones are you referring to?

12 A I know there's some disagreement about this, but

13 I believe the Hazen and Sawyer report assumes an average

14 increase in sugar yield per acre that kind of subsumes

15 productivity increases both in the farming and in the

16 milling end of it and if you are improving productivity at

17 the mill end of it, then chances are at least part of that

18 improvement comes through capital investment.

19 Q That would be yield improvements?

20 A Well, yield in the sense of how much sugar do

21 you get out of a ton of cane, the processing efficiency, I

22 mean, I think it would be a reasonable assumption to think

23 that some of any improvement in mill efficiency is going to

24 be a result of capital expenditures, capital investment.

25 Q When you say variability of returns in the

124

1 sentence, what do you mean by that?

2 A The risk, perceived riskiness of the returns in

3 the business over both the short and medium term.

4 Q Do you know what capital investments were not

5 included by Hazen and Sawyer in their analysis?

6 A Well, when you say not included, my recollection

7 is that they basically assumed that at the start of their

8 forecasting period, everybody had new equipment, so they

9 allowed for some depreciation and so forth, but what they

10 didn't allow for was the ability to go out -- didn't

11 address, I should say, was the ability to go out and five

12 years into the plan, your tractor which was five years old

13 when you started, is now worn out and now you have got to

14 go to the bank or the finance company and purchase a new

15 one or purchase a used one or purchase a replacement of

16 some sort. Having observed some industries and some

17 economies, it's all well and good to say that in economic

18 theory a bank ought to lend because you can show them a

19 sound economic financial projection. I believe we could

20 probably find quite a few small business owners over the

21 last couple of years in various parts of the country who

22 would tell you it just ain't so, that once a bank decides

23 you are in kind of a distressed situation or an industry,

24 they may choose to put their money elsewhere, including in

25 treasury bonds, rather than be criticized later for having

125

1 lent into a distress situation, and I can understand that,

2 so that dynamic.

3 The same would apply to some extent to loans

4 made to a mill or to operating capital loans or that kind

5 of thing, that dynamic is really not addressed in the Hazen

6 and Sawyer report.

7 Q How should Hazen and Sawyer have handled it, in

8 your opinion?

9 A Well, I think that there is a way to approach

10 this which says over the next 10 or 20 years, I realize

11 they were on a 10 year horizon here, that in order to kind

12 of maintain production in the EAA in terms of replacement

13 of equipment and that kind of thing, that it looks like the

14 capital requirements will be some number of dollars, just

15 based on average age of equipment, costs and that kind of

16 thing, and that if returns are low, if this is perceived as

17 a declining or a dead end, there is the whole question of

18 will lenders choose to lend.

19 I don't know that there is a -- that anybody can

20 give a definitive answer to that question, but what you can

21 do through a scenario or sensitivity analysis, is to say

22 what if they don't. Does it mean because you have got old

23 and obsolete equipment that you begin to have declining

24 productivity, does it mean you have consolidation of

25 ownership, does it mean something else entirely, does it

126

1 mean you don't get the productivity increase.

2 I think that there is an issue of funding there

3 that it would be good to look at with some understanding of

4 whatever the realities of the situation are in the EAA in

5 terms of sources of funds and see if it looks like there is

6 going to be a problem.

7 Q Given Hazen and Sawyer's approach as you have

8 described it, purchasing new equipment in the first year of

9 the study period and then depreciating it over a period of

10 time, do you believe that Hazen and Sawyer's annual

11 allowance for capital expenditures was too low?

12 A Well, annual allowance is kind of things that

13 occur pretty evenly and at least some capital expenditures

14 are a little lumpier than that, so I don't really see it as

15 arguing about whether on average the number was right or

16 wrong and I really haven't assessed that. What I'm saying

17 is that it doesn't very accurately simulate the way in

18 which some of those purchases would occur, and if they

19 looked at it, it might be the conclusion would be that

20 there is no problem, for good and sufficient reasons. What

21 I'm saying is it really has -- is not looked at in their

22 draft final report.

23 Q How would you propose that that lumpiness, to

24 use your term, properly be addressed in an economic impact

25 analysis?

127

1 A I think that it's a form of sensitivity

2 analysis, of saying what if we can't replace the capital

3 equipment. In talking to some agricultural engineers or

4 others to get some feeling for what happens if you defer

5 those kind of capital replacements, you know, suggests to

6 me there's probably a curve there, the first year you defer

7 it probably it doesn't make very much difference, but as

8 you get further out, the amount of difference that it makes

9 increases.

10 Q When I asked you before why you would need to

11 consider average debt, you indicated that in your view it

12 could affect land going out of production?

13 A Um-hum.

14 Q Is that the same reason why in your opinion one

15 would need to consider each of these elements, namely

16 capital expenditure requirements, federal income taxes and

17 variability of returns?

18 A I think so.

19 I think the other thing to consider is not just

20 -- the land going out of production produces very -- could

21 produce very substantial ripples of economic and other

22 impacts, because it affects not just who owns the farm, but

23 it affects people's jobs. However, putting substantial

24 numbers of owners out of production, driving down the value

25 of their land through an assessment, I think is a separate

128

1 impact that the District ought to consider. It affects

2 fewer people, but it can effect them pretty dramatically

3 and I think that the impact on current business owners of

4 an action is something that ought to be assessed. I'm not

5 saying that it necessarily drives the public decision one

6 way or the other, but I think to ignore it is probably not

7 advisable.

8 Q Is this impact of putting extensive numbers of

9 owners out of business, does this affect overall economic

10 activity in a study area?

11 A It can. There are folks that are economic

12 mainstays of communities and that are important not only in

13 the business that they happen to own, but are important in

14 what you might call the civic fabric. There are certainly

15 others that aren't important in the civic fabric. But you

16 do find, I think, a goodly number of people who are large

17 participants in the community among those kinds of business

18 owners, that have significant stakes in the community, and

19 when you take those out, that has social ripples. But you

20 can also have economic ripples in terms of those people's

21 participation in funding of other things in the

22 communities, investments in other small businesses,

23 investments in banks in the community. It's an empirical

24 question, it has to be looked at community by community

25 but, yes, it can have an economic impact.

129

1 Q For purposes of shorthand references, is it fair

2 to call this kind of an impact or effect a question of firm

3 survival, is that accurate?

4 A You could refer to it that way if you want to as

5 a shorthand.

6 Q As I understand it -- or let me strike that.

7 Am I to understand that the significance of

8 analyzing this effect is to find out what happens to

9 certain important people in the community?

10 A I would say an important -- you can say

11 important or unimportant, but a class of people just like I

12 would be concerned about migrant workers as a class of

13 people, I would be concerned about business owners and farm

14 owners as a class of people, that would have to do with the

15 incidence of the impact of the project, not so much just

16 the size, the magnitude, but the incidence on certain

17 groups.

18 Q If the underlying economic activity of that firm

19 or set of firms continues in the case of agricultural

20 production, if the land continues in agricultural

21 production, there can be -- is it your position that there

22 can be economic consequences for the community, other than

23 a change in the class of people that are involved in that

24 particular enterprise?

25 A Would you repeat that or have her read it back?

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1 Q Maybe the best way would be for you to give me

2 some clarification on your previous answer, it was a rather

3 long one. As I understood it, you were referring to a

4 change in the type or demographic characteristics of a

5 group of people associated with a given industry or

6 economic activity, is that correct?

7 A That's correct.

8 Q My question is, if the activity, the economic

9 activity at which those people were employed continues, in

10 the case of agriculture the land continues in production,

11 is there significance for the community other than this

12 change in the demographic characteristics of the owners

13 involved in the activity?

14 A There can be. I would, I guess by way of

15 example and not saying that it necessarily applies directly

16 here. But I'm thinking about the role that, oh, let's say

17 home builders and real estate developers played in the

18 community prior to -- many communities prior to 1986 as

19 compared to the role the RTC and the FDIC played in the

20 community after 1986, which is pretty much to say none, and

21 that having a group of people who are owner operators that

22 live in the community and have some interest in the welfare

23 of the community and of other businesses and social and

24 civic activities in the community, is probably different

25 than having that land of an absentee owner who may be

131

1 equally interested in the community in which they live, but

2 is really not too interested in how things are in Belle

3 Glade.

4 Q Independent of these changes or effects on the

5 structure of ownership for the agricultural enterprises,

6 can you tell me something about how these factors you have

7 described in the sentence could cause land to go out of

8 production?

9 A You can certainly have a situation where given a

10 required capital expenditure and given variability of

11 returns and given the rest of the opportunities and

12 constraints operating on a portfolio, that it doesn't

13 appear to be worth it to keep an asset in production, even

14 though it might in economic theory still be a productive

15 asset, call it economic friction, if you will, but it's

16 just, you know, it requires a new infusion of cash in the

17 form of equipment or operating capital or something and the

18 holder of the asset chooses not to make that infusion.

19 Q How would you define productive asset as you

20 used it in your answer?

21 A I'm thinking of a situation where the asset, the

22 revenues that the asset can produce exceed the variable

23 costs of producing them.

24 Q So in a situation where the revenues exceed the

25 variable costs, it's your position that what you're calling

132

1 economic friction could nevertheless render the land such

2 that there would be no buyer in a position or inclined to

3 purchase the asset and to continue to produce with it?

4 A Could be.

5 Q Could you explain how that might take place?

6 A Sure. It's just that the perceived risks versus

7 the perceived rewards are such that, and the future of the

8 asset is such that it's just not as good an investment as

9 other things that are out there and, you know, one just

10 chooses to put their money elsewhere.

11 Q So the value of that asset would fall to zero?

12 A Or sufficiently small that just nobody wants to

13 mess around with it.

14 I mean, in any business that I'm familiar with,

15 including my own, people come in and sort of say, hey, you

16 know, we could do this new product or we could do this

17 variation or we could make this change, and there are only

18 so many hours in the day and if it appears to you that

19 well, yeah, it might make a few nickels, but it's not going

20 to make dollars, you may basically say you're right, it

21 might be a small improvement, but let's concentrate on the

22 bigger opportunities. We can only look at so many

23 opportunities at a time and there's some element of that.

24 Whether that would be the case in the EAA would depend,

25 again, on the assumptions or the empirical facts as to what

133

1 the remaining return to the land was and who the holders

2 are.

3 Q Based on what you have analyzed so far and

4 reviewed, do you have an opinion as to whether that would

5 be the case in the EAA?

6 A We have sort of asked several questions back and

7 forth and I'm not sure what opinion you're asking for now.

8 Q Concerning the perceived risks outweighing the

9 perceived benefits with sufficient degree to render the

10 land unattractive to any subsequent potential owner and

11 agricultural operator?

12 A Well, I think it's possible. You have got two

13 or three kind of major uncertainties here. One is what's

14 the bottom line in terms of the amount of costs that's

15 going to be imposed by the STA's assessments and by BMP's

16 in order to achieve some as yet unspecified standard. I

17 mean, it's one thing to come in and buy something and know

18 you're at the bottom of the market. It's another thing to

19 come in and know that you may only be on the ledge and the

20 bottom is really down there another 20 percent.

21 Q So is that the controlling factor in the EAA as

22 you see it, is the uncertainty about future costs?

23 A I think it could be. I mean, am I telling you

24 as I sit here that I know what the controlling factor is?

25 No, I am not. I am telling you that there are a number of

134

1 scenarios and sensitivity analyses that are within what

2 appears to me to be a range of reasons that I think I would

3 encourage the District to look at before flushing out their

4 plan.

5 Q So is it fair to say at this point you don't

6 have an opinion about what would happen in the EAA, but you

7 see a number of factors that in your opinion should be

8 analyzed to answer that question?

9 A Right. I mean, I don't know what the full scope

10 of the District's plan or funding is and it seems to me

11 that since that's the proposed action, until you know that

12 or until you know the boundaries on what that could be,

13 it's rather difficult to say you know what the impacts are

14 going to be.

15 Q Do you have any knowledge about what the present

16 ownership structure is in the EAA?

17 A I know there are about 139 farms that show up in

18 the numbers. I know that there's some very large holdings,

19 that some of the small holdings are actually farmed by

20 other operators, I don't know what their size is, but by

21 other operators. Relative to a lot of other areas of the

22 country or even other Florida agriculture, that these are

23 pretty large holdings.

24 Q So then is it fair to say that the most

25 significant stake, if you will, in the industry is held by

135

1 large landowners in the EAA?

2 A Try that again.

3 Q Is it fair to say that the most significant

4 stake in the industry is held by the large landowners in

5 the EAA?

6 A Significant stake in the industry is held by the

7 large landowners? Certainly they hold a very significant

8 stake. There are a bunch of other people who I perceive as

9 having very limited options, who in terms of the percentage

10 of their income comes from agriculture in the EAA, hold

11 what I'm sure to them seems to them like a very significant

12 stake also.

13 Q Do you have an opinion about whether the large

14 landowners would likely go out of production?

15 A I don't know that it isn't -- I don't know the

16 answer to that. It seems to me that it is as much, if not

17 more, a function of the productivity of the tracts that

18 they own as the total size that they own, and I think that

19 there are certainly possibilities that acreage could go out

20 of production, because it is subeconomic, without the whole

21 enterprise folding. Let's say you had somebody that owned

22 some land in the less productive yield belt, that they

23 might just drop that out of production because of the

24 increased costs.

25 Q Do you have any understanding or opinion about

136

1 the level of profitability of EAA farmers relative to

2 farmers outside of the EAA?

3 A I have seen some numbers on returns by acre,

4 some Dr. Jones have done, some Dr. Johns has done, and some

5 others, and those are sort of pre-debt service and so

6 forth. Those returns per acre seem to be relatively high,

7 how those translate, though, in terms of returns on

8 investment or returns on equity relative to other cropping

9 activities, that I don't know.

10 Q In your view, is there still some likelihood,

11 given those high levels of returns to lands relative to

12 other farming enterprises generally, that there would be

13 land going out of production because of perceived risks

14 exceeding perceived benefits?

15 A The numbers I have seen are averages for the

16 most part and I would not want to confuse averages with the

17 marginal land, so that, I mean, there is almost certainly a

18 good deal of land that under any of the scenarios that I

19 have seen, could remain in production, let's say that, but

20 there certainly appears to be some less productive land

21 independent of the size of the operation that owns it, that

22 with increased operating costs and so forth, might go out

23 of production or might shift production to something, a

24 lesser activity.

25 Q I asked you before comparing farming inside the

137

1 EAA to outside the EAA, do you know how Florida sugar

2 producing compares to sugar producing or production outside

3 the EAA in terms of returns to land profitability?

4 MS. STINSON: Objection in terms of

5 clarification, are you speaking within Florida or

6 within the country?

7 MR. SAXE: I'm speaking outside the EAA, not

8 restricted to Florida.

9 A My impression is that on a per acre basis, that

10 it is relatively high. Again, on a return on equity basis

11 or return on investment basis, I don't know that it is any

12 higher.

13 BY MR. SAXE:

14 Q Do you know anything about the equity structure,

15 asset and liability structure on average of the industry in

16 the EAA?

17 A As we sit here, I don't have any data to share

18 with you.

19 Q Dr. Polopolus, in one of his analyses, concluded

20 that at a $100 per acre assessment in addition to the costs

21 to the sugar cane farmers in implementing BMP's and the

22 economic impacts resulting from the removal of land from

23 production for construction of STA's of a specified size,

24 that everybody would go out of production. Do you agree

25 with that?

138

1 A I hear him, I neither agree nor disagree. I

2 have not done an analysis that would let me have an

3 independent opinion on that.

4 Q In the next paragraph on this document, once

5 again Bates page 175.

6 A Tell me what word it starts with.

7 Q "Third."

8 A Okay.

9 Q "Third, we can challenge the equity and

10 reasonableness of the funding plan if it assumes

11 incorrectly that all the harms are due to nutrient

12 discharges when they are due to a combination of nutrient

13 discharges and hydroperiod management."

14 Do you have an opinion whether the funding plan

15 assumes incorrectly that all harms are due to nutrient

16 discharges?

17 A I don't know what the funding plan is right now.

18 Q Do you have an opinion whether the SWIM plan

19 assumes incorrectly that all harms are due to nutrient

20 discharges?

21 A The SWIM plan, I think, really fails to address

22 or present what the harms are or what the cause and effect

23 relationship is between various activities and the harms.

24 I think it's very deficient in that regard. I think that

25 that's one of the main problems that I have is that we seem

139

1 to be focusing on nutrients in isolation from hydroperiod,

2 when everything I have seen suggests to me that it's an

3 interrelated function.

4 Q Do you have any opinion whether the harms that

5 the SWIM plan purports to address do in fact exist?

6 A Well, I'm still trying to figure out exactly

7 what they are defining as a harm. I have seen some

8 reference to some sort of a shifted balance of biological

9 community, but that's one of the things I have been looking

10 for is for somebody to put down in terms I can understand,

11 what the harm is in that shift and with regard to what

12 function of those wetlands.

13 Q The predicate in the sentence says, "when they

14 are due to a combination of nutrient discharges and

15 hydroperiod management." Do you have an opinion whether

16 the phenomenon, if not harms, that the SWIM plan purports

17 to address are due to such a combination?

18 A I have heard that theory advanced and that's

19 something where I would want to hear kind of what the

20 biologists have to say. It seems certainly plausible to me

21 that the amount, depth, flow, duration, of water would have

22 an influence on balance of biological communities, just

23 like it does lots of other communities.

24 Q So then I'm not clear on your answer, you do

25 believe that those phenomenon are due to such a

140

1 combination?

2 A I guess I would say I'm not here to tell you

3 that I can give you a biological opinion on that. I'm

4 telling you that from my viewpoint, it seems plausible to

5 me that they are and I'm kind of waiting for further

6 information from the natural science folks.

7 Q So then is it fair to say that in this

8 memorandum in the sentence we're dealing with right now,

9 you were not expressing an opinion that in fact the

10 phenomenon which the SWIM plan purports to address are

11 attributable to a combination of nutrient discharges and

12 hydroperiod management?

13 A I think the word "if" is prominently displayed

14 in that sentence.

15 Q Thank you. Just for clarification, you don't

16 view yourself as having particular expertise in what you

17 refer to as the natural science aspects of this issue?

18 A No. I would sure hope we are going to here from

19 folks that know a lot more about it than I do.

20 Q Dr. Luke, if you turn to the next page Bates

21 number 176, to the statement, "Hydroperiod is influenced by

22 weather cycles, water supply requirements, flood control

23 and agricultural practices."

24 What is the basis for that statement?

25 A The materials I have read on the Everglades and

141

1 common sense in talking with folks in the EAA.

2 Q So that represents your opinion or an assumption

3 for purposes of this?

4 A Well, I'm pretty willing to present that as more

5 fact than opinion.

6 Q The next sentence, "The competitive balance

7 between plant and animal species in the Everglades

8 Protective Area is a function of nutrient discharges,

9 hydroperiod and other factors."

10 A It seems to me that that's also pretty well

11 accepted as a fact, I mean, it's pretty self evident.

12 Q What nutrient discharges are you referring to in

13 that sentence?

14 A Any and all. You have got apparently some

15 coming in just precipitating out of the area and rain, you

16 have got some coming from the various pump structures,

17 backpumping from the urban areas, undoubtedly some coming

18 in from the agricultural areas.

19 Q Would you say that --

20 A Excuse me. And water that's being canalled or

21 chanelled through the EAA from Okeechobee that has

22 nutrients in it that did not come out of the EAA.

23 Q The next sentence, "A SWIM plan which does not

24 address hydroperiod or the interaction of hydroperiod and

25 nutrient discharges cannot reasonably conclude that

142

1 nutrient discharges alone are responsible for changes in

2 species balances, and cannot reasonably conclude that

3 changes in nutrient discharges alone will significantly

4 affect species balances."

5 Is it your opinion that the SWIM plan does not

6 address hydroperiod or the interaction of hydroperiod and

7 nutrient discharges?

8 A Yes, that's my opinion.

9 Q In your opinion, has the District addressed

10 these issues outside or beyond what is reflected in the

11 SWIM plan document itself?

12 A I am certain that that is one of the issues that

13 is being looked at in the water supply planning and there

14 may have been other isolated studies, but in terms of an

15 integrated look, be it through modeling or through other

16 types of analysis, I'm unaware of any document put out by

17 the District or a consultant to the District which takes an

18 integrated look at those factors.

19 Q The next paragraph starting with number 2,

20 Cost/Benefit Analysis, the sentence, "A rational government

21 action has to, by someone's measure, produce benefits in

22 excess of costs."

23 That concept of producing benefits in excess of

24 costs, does that have a name, a technical designation in

25 economics?

143

1 A I don't know that it has a particular term that

2 describes it.

3 Q Is this what is meant by cost justified?

4 A You know, I suppose you could use that term.

5 Q But you wouldn't use any term except produce

6 benefits in excess of costs, is that correct?

7 A No, I wouldn't say that. I mean, you were

8 asking if there was some special term in economics that

9 would be a synonym for that phrase and I told you I really

10 didn't have one.

11 Q Thank you. The next sentence, "This is clear in

12 water resources projects undertaken by federal agencies."

13 Could you explain that?

14 A Yes. In getting authorization for a Corps of

15 Engineers project, for instance, they have to have a

16 positive balance of benefits and costs, or another way to

17 say that is a benefit/cost ratio in excess of one. Now, I

18 believe that is also true for the Bureau of Reclamation.

19 Q They are required to show such a benefit/cost

20 ratio in excess of one by the principles and standards that

21 you referred to earlier, is that correct?

22 A That, and there may very well be some other

23 congressional provisions that in certain projects for

24 certain funding, would require that.

25 Q Do you know what those are offhand?

144

1 A No, I don't.

2 Q The next sentence, "While there is plenty of

3 room for disagreement about how costs and benefits are

4 computed, there still must be some showing that benefits

5 exceed costs."

6 What are the disagreements you are referring to

7 in this sentence?

8 A Well, what you get into is what's called, some

9 people call them multi-attribute problem. You have

10 measurement of different types of benefits that may have no

11 natural common unit of measure and some of the non-market

12 costs and benefits would be in there and so because they

13 are non-market, we really don't have any kind of an

14 independently objectively determined market price we can go

15 to and so we get into methods of valuation. Those methods

16 of valuation, the choice of them has some inherent degree

17 of subjectivity and there have certainly been many books

18 and journal articles written about the various methods that

19 can be used and people have argued in favor of one or the

20 other and against some. So particularly when you get into

21 that, you get into disagreement.

22 You also get into a disagreement when you start

23 trying to come up with a discounted present value over what

24 discount rate ought to be used, because that affects how

25 you value costs or benefits that occur in the future as

145

1 opposed to those that occur fairly quickly and there is

2 literature about what's the right discount rate to use for

3 various types of projects. So there are various elements

4 of professional judgment and of choice in conducting a

5 calculation of costs and benefits.

6 Q Are secondary costs included in a cost/benefit

7 analysis?

8 A They certainly can be and I guess how far out

9 you look at the ripples, if you will, can be another area

10 about which people can differ.

11 Q So this is potentially one of those areas of

12 disagreement you were referring to?

13 A Could be.

14 Q Are secondary benefits included in a cost/

15 benefit analysis?

16 A Some are, some may not be. Again, you get into

17 what are the rules, what are the standards under which the

18 analysis is being conducted.

19 Q Are there rules and standards under which these

20 analyses generally are conducted?

21 A Well, there are sets of them, and the principles

22 and standards and the procedures of the federal agencies

23 are some of those sets.

24 Q Your expert witness designation, the reference

25 was to the federally accepted principles and standards;

146

1 under those, could you tell me whether secondary benefits

2 are or are not included?

3 A Not without reviewing them.

4 Q Could you tell me some types of secondary

5 benefits that would be included?

6 A Not without reviewing them.

7 Q Could you give me some examples, hypothetical

8 examples, of some that might be included properly?

9 A No.

10 Q How about secondary costs?

11 A No. If you would like me to discuss a document

12 called Principles and Standards, I mean, I will be happy to

13 look at it if you have got it.

14 Q Well, what testimony do you intend to present

15 concerning the proper scope of secondary benefits to be

16 included under the federally accepted standards and

17 principles?

18 A My intention is to gather those principles and

19 the documentation that flows from them and to compare that

20 to whatever analysis the District has prepared.

21 Q What would be some secondary benefits of the

22 proposed action analyzed by Hazen and Sawyer?

23 A I'm sorry?

24 Q What would be some examples of secondary

25 benefits of the proposed action analyzed by Hazen and

147

1 Sawyer?

2 A You could look at indirect and induced economic

3 activity flowing from the construction and operation of the

4 STA's as a type of secondary benefit.

5 Q Would there be any others?

6 A There could be tax payments in the communities

7 where the folks that do the construction and operation

8 live, due to additional income, additional spending.

9 Q Any others?

10 A I'm sure there could be. Again, at this point

11 I'm not prepared to say that there are. Hypothetically you

12 have got all of the things that are candidates to be

13 secondary negative impacts, if you were to take all the

14 land out of production are candidates to be secondary

15 positive impacts for the folks that get the jobs doing the

16 construction and operation of the STA's.

17 Q Under the proposed action as analyzed by Hazen

18 and Sawyer, do any other secondary benefits come to mind?

19 A Not at this time.

20 Q Would the construction benefits that you

21 referred to be included in a cost/benefit analysis under

22 the federally accepted standards for doing such analyses?

23 A Without reviewing the standards, I'm not

24 prepared to say.

25 Q For clarification, when you say reviewing the

148

1 standards, do you mean referring to a recitation of the

2 standards and principles?

3 A That's correct.

4 Q I assume that's also the case with respect to

5 the tax payment benefits you described?

6 A Yes.

7 MS. STINSON: Keith, could we take a real quick

8 break?

9 MR. SAXE: Sure.

10 (Brief recess taken.)

11 BY MR. SAXE:

12 Q Dr. Luke, referring again to page 176 here, this

13 paragraph on Cost/Benefit Analysis, the sentence, "So far,

14 the District has made no such showing."

15 Would that refer to a showing that the action

16 will produce benefits in excess of costs?

17 A Correct.

18 Q In your opinion, does the SWIM plan -- strike

19 that.

20 In your opinion, is the SWIM plan required by

21 law to include such a showing?

22 A I don't know that it has to be within the four

23 corners of that document, but I believe to support its

24 decision as a reasonable and rational one, that the

25 District has to demonstrate that.

149

1 Q When you say support its decision as a

2 reasonable and rational one, does that mean to comply with

3 legal requirements?

4 A Yes.

5 Q Would that be under the state law requirements

6 governing the District's action?

7 A Yes.

8 Q Would that be under federal legal requirements

9 as well?

10 A I'm not prepared to say.

11 Q In the same vein, does the SWIM plan or the

12 District's consideration of the matters in the SWIM plan,

13 have to include a cost/benefit analysis?

14 A I think in essence it does.

15 Q Same reasons?

16 A Yes.

17 Q In a similar vein, does the SWIM plan or the

18 District's consideration of the matters addressed in the

19 SWIM plan, have to be cost justified?

20 A Well, that's your term. I think that the

21 benefits have to exceed the costs. If you want to use cost

22 justified as a synonym for that for your purposes, I won't

23 object, but it's not my term.

24 Q Let me clarify my question. I'm not asking

25 whether the benefits have to exceed the costs, I'm asking

150

1 whether the SWIM plans or the District's consideration of

2 the matters considered in the SWIM plan have to include an

3 analysis showing that the action will produce benefits in

4 excess of costs and I believe you have answered that?

5 A Yes, I have.

6 Q Now I'm asking whether it has to include such

7 analysis showing that the action is cost justified and I

8 think you indicated that that's not a term you would use,

9 you called it my term?

10 A I did.

11 Q That's fine. Is there any obligation in Florida

12 that is incumbent upon the legislature when it enacts a

13 statute requiring implementation of a water resources

14 project, that there be an analysis included showing that

15 the action will produce benefits in excess of costs?

16 A I think if the action is done in the context of

17 water quality requirements of the state, which includes

18 weighing and balancing and moderating requirements, that

19 there is, and it's my understanding that the Douglas Act

20 doesn't repeal the relevant sections of the water quality

21 act.

22 Q So is it your view that these state law

23 requirements govern the conduct of the legislature in

24 enacting statutes concerning water resources projects?

25 A Unless they specifically amend those statutes, I

151

1 think the legislature is already governed by law, yes.

2 Q Can you tell me what provision of law in Florida

3 requires the legislature to include an analysis that a

4 water resources project provided by statute produces

5 benefits in excess of costs?

6 A I don't think I'm saying that. I think what I'm

7 saying is, as I understand the Stoneman Douglas Act, that

8 what it says is that they want the District to proceed with

9 obtaining some level of water quality improvement in the

10 Everglades Protection Area and they have created a utility

11 assessment vehicle to assist it with funding, but in terms

12 of saying what water quality has to be achieved and saying

13 how you are determined what level of quality has to be

14 achieved, that flows back into the main water quality

15 statute, which requires a weighing and balancing, which

16 based upon Mr. Green's analysis, I understand to be a

17 balancing of costs and benefits.

18 Q I gather from your response that you are

19 familiar with the Marjory Stoneman Douglas Everglades

20 Protection Act?

21 A I have scanned it, I have read about it. I am

22 really relying on Mr. Green for those interpretations.

23 Q Before we jump the gun to that particular

24 statute, my question was a generic one, whether there were

25 legal requirements governing the Florida state legislature

152

1 that would require it to include an analysis showing that

2 the benefits of a statutorily provided water resources

3 project exceed the costs?

4 A And my answer to that would be I don't know.

5 Q To your knowledge, can there be any rational

6 government actions, as you use the term in this document,

7 concerning the water resources project, that do not require

8 a benefit/cost analysis?

9 A The construction of your question leaves me kind

10 of confused, maybe you could rephrase it.

11 Q Let me rephrase the question.

12 Are you familiar with the Endangered Species

13 Act --

14 A Somewhat.

15 Q -- federal law?

16 A Somewhat.

17 Q In your view, when the United States Congress

18 enacted the Endangered Species Act, was it required to

19 include in the legislative consideration of the act, an

20 analysis showing that the benefits of the act exceed the

21 costs?

22 A I'm not aware that they were.

23 Q My question was whether legislation, providing

24 for water resources projects, always necessarily is

25 required to include a cost/benefit analysis?

153

1 MS. STINSON: I think asked and answered, I

2 think he indicated he didn't know.

3 MR. SAXE: I believe I was asking at the state

4 level at that point.

5 A What are you asking now?

6 BY MR. SAXE:

7 Q Just generally.

8 A I don't know how to answer the question

9 generally, it's jurisdiction specific.

10 Q How about federal jurisdiction?

11 A Again, I'm not aware that Congress has to do a

12 cost/benefit analysis to justify its actions.

13 Q Is an economic impact study and a cost/benefit

14 analysis the same thing?

15 A They are overlapping, they would include some of

16 the same elements, but there could certainly be other

17 elements that would occur in one and not in the other.

18 Q Do they have the same purpose?

19 A At a very broad level of trying to provide the

20 basis for better decision making, yes, they do.

21 Q What is the purpose of an economic impact

22 analysis?

23 A Typically it is to acquaint people, including

24 decision makers, with the likely impacts, positive or

25 negative, of some decision that's before them.

154

1 Q Impacts broadly speaking?

2 A Could be broad, could be specific impacts that

3 they had an interest in.

4 Q Would it be other than economic impacts?

5 A Could be.

6 Q What kinds of non-economic impacts are called

7 for by definition in an economic impact analysis?

8 A Pardon me?

9 Q What kind of non-economic impacts are required

10 to be analyzed in an economic impact assessment?

11 MS. STINSON: Object to form.

12 BY MR. SAXE:

13 Q Can you give me an example of any non-economic

14 impacts that are required to be analyzed in an economic

15 impact analysis?

16 A When you say required, I don't know for an

17 economic impact analysis, necessarily where I would go to

18 find what was required. If you are asking me what might be

19 in there, then I think it is certainly possible to think of

20 economic impact studies that when they look at the

21 incidence of those impacts on groups within a community or

22 society, are inherently getting into questions about how we

23 value impacts on one group versus another and those are

24 more, if they are not non-economic, they are at least much

25 more subjective.

155

1 Q So is it your view that an economic impact --

2 the purpose of an economic impact analysis is to compare

3 the impacts on one group versus another?

4 A There are certainly economic impact analyses

5 that do that and that is one of their purposes. Not all

6 economic impact analyses necessarily address that.

7 Q What is the purpose of a cost/benefit analysis?

8 A Normally it is to determine whether the benefits

9 of a proposed action exceed the costs. In some cases it

10 may be comparitive and look at costs and benefits of

11 various alternatives and try to select the superior

12 alternative.

13 Q I would like to refer you to the Contract

14 Completion Report, Evaluation of the Economic Impact, et

15 cetera, prepared by Hazen and Sawyer, dated October 1992.

16 On page FW1 -- excuse me, on page FW2, the last sentence

17 that I have highlighted, would you read that for the

18 record?

19 A You have highlighted, "The purpose of this

20 evaluation is to assist the District in developing policies

21 that satisfy the requirements of the act and settlement

22 agreement, while minimizing their economic impacts."

23 Q Is that statement consistent with your

24 understanding of the purpose of an economic impact

25 analysis?

156

1 A It can be a purpose to assist a decision maker,

2 in this case the District, in developing policies.

3 Q Is it consistent with your understanding of the

4 purpose of a cost/benefit analysis?

5 A That can be a purpose of a cost/benefit analysis

6 is to assist a decision maker in selecting among policy

7 alternatives.

8 Q Does it appear more consistent with one than the

9 other of those two types of analyses?

10 A Does what appear?

11 Q The statement of purpose that you have just read

12 into the record.

13 A I don't follow the question, I'm sorry.

14 Q I think you have testified that it is a purpose

15 which could be shared by either an economic impact analysis

16 or a cost/benefit analysis, I'm asking you whether it falls

17 more reasonably in one category than another?

18 A I don't know that I have an answer for that

19 question.

20 Q Does that sound like a statement of purpose more

21 for an economic impact analysis or for a cost/benefit

22 analysis?

23 A It could be a statement of purpose for either.

24 Q And you would not have an opinion whether it

25 sounded more like an economic impact analysis or a

157

1 cost/benefit analysis?

2 A The only comment I could make is that there are

3 certainly matters other than economic impacts that you

4 would expect to see considered in a cost/benefit analysis

5 and so if the scope of this evaluation is limited to

6 economic impacts, then it might be a narrower study than

7 would be necessary -- would be a narrower study than would

8 be necessary for a cost/benefit study.

9 MR. SAXE: Would you read back that answer,

10 please.

11 (Requested portion read.)

12 BY MR. SAXE:

13 Q I'm sorry, Dr. Luke, I don't understand that

14 answer, could you just rephrase it for me?

15 A No.

16 Q Okay, let me ask the question a little bit

17 differently.

18 In your opinion, does that statement of purpose

19 sound more like the purpose of an economic impact

20 assessment or the purpose of a cost/benefit analysis?

21 A I believe I have asked and answered that.

22 Q Are you refusing to answer the question?

23 MS. STINSON: I believe he has.

24 MR. SAXE: Are you instructing him not to answer

25 the question?

158

1 MS. STINSON: No, but I believe it has been

2 asked and answered. I believe he said he didn't --

3 MR. SAXE: I note your objection, but unless you

4 are instructing Dr. Luke not to answer the question, I

5 would appreciate in his own words an answer to that

6 question.

7 THE WITNESS: I would appreciate you reading

8 back the question.

9 (Requested portion read.)

10 A It could be a purpose of either.

11 BY MR. SAXE:

12 Q Did Hazen and Sawyer do an economic impact

13 analysis, in your opinion?

14 A Not a complete one, no.

15 Q Did they do an incomplete economic impact

16 assessment?

17 A I suppose you could call it that, yes.

18 Q Did Hazen and Sawyer do a cost/benefit analysis,

19 in your opinion?

20 A No.

21 Q Do you know whether Hazen and Sawyer responded

22 to a request for proposals in preparing the document that

23 you are looking at now?

24 A I believe they did.

25 Q What was, in your opinion, left out of the Hazen

159

1 and Sawyer economic impact analysis that caused you to

2 characterize it as incomplete?

3 A I think if you go back to the comments I

4 prepared in August, that would be a better answer to that

5 question than my verbal answer.

6 Q In your own words right now in summary?

7 A Well, I don't choose to summarize, I choose to

8 stand by my earlier comments. I will be happy to read

9 those comments into the record if you choose to have me do

10 that.

11 Q I would like a list of the major omissions that

12 cause you now to characterize Hazen and Sawyer's economic

13 impacts report as incomplete?

14 A I believe you will find that in the comments in

15 which you marked as Deposition Exhibit Luke 2.

16 Q I asked you earlier whether Hazen and Sawyer

17 responded to a request for the preparation of that

18 document, are you familiar with the request to which Hazen

19 and Sawyer responded?

20 A I have seen the scoping statement that's in the

21 back of the SWIM plan. I have not seen, I don't believe,

22 the full text of the request for proposals.

23 Q Based on what you have reviewed, did Hazen and

24 Sawyer respond to the request in preparing that document?

25 Let me strike that.

160

1 Did Hazen and Sawyer do what they were asked to

2 do in that request?

3 A I would like to review that page of the SWIM

4 plan before answering that question.

5 Q Which page of the SWIM plan are you referring

6 to?

7 A It's in the back where it discusses the economic

8 impact study that the board intends to have done.

9 Q Okay, maybe we will come back to that.

10 In your following sentence, on Bates page 176,

11 after the sentence, "So far, the District has made no such

12 showing."

13 A I'm sorry, sir, I haven't found that yet.

14 Q It's in the paragraph Cost/Benefit Analysis.

15 A All right, I have it.

16 Q Several sentences down, there is a statement,

17 "It looks only at Palm Beach County," referring to the

18 Hazen and Sawyer report. Could you tell me what that

19 statement is based on?

20 A Yes. The report looks at impacts at the Palm

21 Beach County level, but it does not look at the impacts on

22 the communities and population in the EAA, where the

23 impacts would be most significant.

24 Q When you say impacts, do you mean direct on farm

25 impacts?

161

1 A I think any economic impacts that are going to

2 occur.

3 Q So that would include direct on farm impacts?

4 A Yes.

5 Q As well as indirect impacts?

6 A Yes.

7 Q As well as induced impacts?

8 A Yes, that's correct.

9 Q Would there be any other impacts that that would

10 include?

11 A Of an economic impact?

12 Q Yes.

13 A With the caveat of looking at impacts on

14 specific populations, I mean, that pretty well covers the

15 waterfront.

16 Q What is your basis for the opinion that the

17 Hazen and Sawyer analysis looked only at direct farm

18 impacts in Palm Beach County?

19 A I think you misunderstand my statement. My

20 statement is that they are looking at only county level

21 impacts, I understand that they did some looking at some

22 adjacent counties, and the point I'm making is that the, in

23 this case, the impacts are going to be concentrated in a

24 very small and somewhat isolated portion of Palm Beach

25 County and by looking at it at a county level, it dilutes,

162

1 in effect, the significance, severity, intensity of the

2 impacts as they will occur to those folks that live in the

3 EAA.

4 Q In terms of methodology, what does it mean to

5 look at impacts at a "county level"?

6 A It means that you are not trying to develop

7 estimates of those impacts and projections of those impacts

8 at a subcounty level, which that subcounty level may be a

9 combination of census tracts that fall in more than one

10 county.

11 Q You referred earlier to a concentration study?

12 A I don't recognize the reference, sorry.

13 Q I may have misheard.

14 The statement, "There has been no computation of

15 impacts on populations of special concern such as racial

16 and ethnic minorities, seasonal and migrant workers or

17 small businesses."

18 In your opinion, are such computations of

19 special impacts required?

20 A I think they are in a complete study, yes.

21 Q Would that be by the state law requirements?

22 A I think in looking at the weighing and balancing

23 here, that if you have vulnerable populations, that a

24 responsible unit of government would look at those things.

25 Q Vulnerable populations?

163

1 A Right.

2 Q Would you explain what you mean by vulnerable

3 populations?

4 A Sure. The EAA, as compared to Palm Beach

5 County, is poorer, worse educated, higher percentage of

6 unskilled laborers, higher percentage, much higher

7 percentage of folks for whom that is a base of where they

8 live and the kids go to school, but where many of the

9 adults in the family during part of the year are gone doing

10 agricultural work on up through the east coast and so

11 forth. Those are not people that appear to have a very

12 favorable profile with regard to retraining or re-

13 employment, that have a lot of other job opportunities and,

14 in effect, if land does go out of production and if that

15 base is destroyed, then that population which is a

16 predominantly black population is put adrift, in that they

17 are going to have to do something else and their options

18 are not that great.

19 While folks go from the EAA to West Palm Beach

20 to shop, some of the impact leaks out, virtually nobody is

21 going from West Palm Beach to the EAA to shop, and whatever

22 economic impacts there will be as a percentage of the total

23 current economy, that percentage is going to be much

24 greater in the EAA than it is in Palm Beach County as a

25 whole. These populations are concentrated in the EAA and I

164

1 would think that a responsible governmental unit would like

2 to be aware about that and not focus simply on big

3 landowners, but focus on the population whose livelihood is

4 based on that economic activity.

5 Q So by populations of special concern in this

6 sentence, you mean the vulnerable populations you have just

7 described basically?

8 A Yes.

9 Q And that's vulnerable because of their lower

10 level of education and skill as it bears on their

11 opportunity for re-employment?

12 A That's correct, or retraining.

13 Q So then you would consider small businesses to

14 be such a vulnerable population?

15 A I think that the businesses in the EAA, if you

16 have substantial withdrawal of land from production and

17 reduction of income, are vulnerable. I think when you talk

18 about fabric of a community, that that small business class

19 is pretty important to keep things running.

20 Q What I'm asking is what's the criteria by which

21 one would identify the vulnerable populations, or as you

22 put it in this sentence, populations of special concern,

23 initially you stated that it was a lack of education and

24 skill?

25 A Right.

165

1 Q I'm asking you now whether small businesses fall

2 within that category because they fit that criteria. I'm

3 not quite sure I understand your answer.

4 A Not that one. I think here what we're talking

5 about, as I was saying a moment ago, those businesses in

6 the EAA are dependent almost entirely on the local

7 population in the EAA. There are not people coming over

8 from West Palm Beach to shop in Belle Glade. So that the

9 impacts on those small businesses would be much greater

10 than on small businesses in Palm Beach County generally.

11 And since this is pretty much a one industry area, there's

12 not much they can do by way of adaptation if that one

13 industry suffers a substantial reduction in production.

14 Q What are the criteria by which the District, in

15 your opinion, could have identified vulnerable populations

16 or populations of special concern regarding which it should

17 have computed impact?

18 A I think that what one does to identify those,

19 there are a couple of ways.

20 One is you look at the profile of the immediate

21 area, compared to profile of the community at large and you

22 look for distinct differences.

23 Secondly, I have always found it helpful to hold

24 public hearings, public meetings, and ask the question and

25 see who thinks there are or that they may be one of those

166

1 populations that would be disproportionately impacted.

2 Some of those, on slight inspection, one will be able to

3 exclude, but others will be people that need to be looked

4 at. I have done that in several studies and I think it's

5 an accepted method.

6 Q In your opinion, this set of procedures you have

7 just described and special analyses that you have just

8 described, are legally required of the District in the SWIM

9 plan implementation?

10 A I think that they are part of assessing the

11 costs and benefits, because I think where you have a

12 disproportionate impact on a specific group, that one has

13 to see how that is valued. The impact of taking one

14 percent of my income or one percent of the income of all

15 the people in Palm Beach County is a heck of a lot

16 different than taking 100 percent of the income of a very

17 small group of people in Palm Beach County.

18 Q So then in your opinion, the SWIM plan or

19 District consideration of the matters in the SWIM plan that

20 did not include such procedures and analyses as you have

21 described them, would be legally insufficient?

22 A I think it could be, yes.

23 Q That's because of the Florida state law

24 requirements for cost/benefit provisions in state water

25 quality standards?

167

1 A As I understand them.

2 Q Are there particular provisions of the Florida

3 state water quality standards or laws governing the

4 District's action that you could identify which would

5 require these special procedures and this computation of

6 impacts on populations of special concern?

7 A As I have said, I am relying on Mr. Green's

8 analysis and I have not looked into it myself.

9 Q The next sentence, "There has been no

10 calculation of the costs of possible service reductions and

11 bond defaults by local governments."

12 Is it safe to say that these calculations are

13 similarly required under Florida law?

14 A I think so. They are part of an accepted type

15 of cost/benefit analysis of impacts on local jurisdictions.

16 Q The next sentence, "There has been no

17 calculation of the potential decline of property values;

18 not just of agricultural lands, but of residential and

19 commercial properties."

20 Similarly this calculation is specifically

21 required by Florida law for a SWIM plan such as the one at

22 issue here?

23 A When you say specifically required, I think I

24 have been clear that I believe the requirements of the

25 cost/benefit analysis is implicit in the weighing and

168

1 balancing that goes on in moderating provisions.

2 Q Let me restate the question. Is the SWIM plan

3 at issue in these proceedings legally deficient because it

4 does not include, in your opinion, a calculation of the

5 potential decline of property values, not just of

6 agricultural lands, but of residential and commercial

7 properties?

8 A Oh, I think that's one of many reasons it's

9 legally deficient, yes.

10 Q Dr. Luke, if you would refer to what was marked

11 earlier as Exhibit 2, turning to Bates page number 182.

12 A Okay.

13 Q If I can bring us back to where I think we left

14 off when we were looking at this document last, I had asked

15 you whether -- something to the effect of whether, to your

16 knowledge, the Hazen and Sawyer analysis pertained to a

17 proposed action, a specific proposed action, and I would

18 like to pick up again there. I'm not sure exactly where we

19 left off, but if you could indulge me and start with that

20 question?

21 A In some regards, it is trying to analyze

22 specific actions. In other regards, the action has not

23 been defined.

24 Q Dr. Luke, I would like you to review, please,

25 pages 1-1 to 1-2 of the contract completion report of Hazen

169

1 and Sawyer. Your comments in this document pertain to the

2 draft final impact report, but since we do not appear to

3 have a copy of that earlier draft of this document, what

4 I'm going to do is ask you whether your opinions expressed

5 in this document would still apply, as you have the

6 opportunity now to review the contract completion report.

7 Failing that, we may be able to get a copy of the draft

8 final report and go through it as necessary. But if you

9 would take a look at the highlighted portions of those two

10 pages for me.

11 A Okay, I have read it.

12 Q As you read that section of the contract

13 completion report, do you interpret it to mean that Hazen

14 and Sawyer, in the document you have in front of you, is

15 purporting to analyze the economic impacts of the removal

16 of 34,700 acres of land from the study area, for

17 construction, operation and maintenance of storm water

18 treatment areas, plus the costs of implementing best

19 management practices sufficient to permit permit applicants

20 for works of the District permits in the study area to

21 secure such permits, plus three potential levels of per

22 acre assessment, $10, $25, and $100 per acre?

23 A That's what they say they are analyzing. They

24 also say -- they make a statement which I believe is false,

25 which is, "The District is required to purchase 34,700

170

1 acres of land in the EAA to be used to filter phosphorous

2 from drainage water entering STA's in the Everglades,

3 causing the District to develop a method to finance the

4 purchase of that construction." I think that the

5 requirements of the settlement agreement are not that

6 limited.

7 Q Going back to my question. The removal of

8 34,700 acres from production in the EAA for construction of

9 STA's, plus the cost of implementing BMP's, plus three

10 levels of potential per acre assessment on farmland in the

11 EAA, do those proposals together constitute what could be

12 considered a proposed action for purposes of an economic

13 impact analysis?

14 A They could. They are not the proposed action in

15 this case, but they could.

16 Q When you say they are not the proposed action in

17 this case, what do you mean by that?

18 A I mean the proposed action is the adoption of

19 the SWIM plan.

20 Q My question is, could those things constitute a

21 proposed action for purposes of an economic impact

22 analysis?

23 A Sure, you could define just about any action and

24 then call that the proposed action and conduct an analysis.

25 Q In your understanding, did Hazen and Sawyer

171

1 conduct an incomplete economic impact analysis of that

2 proposed action?

3 MS. STINSON: Object to form.

4 MR. SAXE: Grounds?

5 MS. STINSON: I'm unclear as to what proposed

6 action that proposed action is.

7 MR. SAXE: The set of actions that Dr. Luke has

8 just discussed with me from this introduction to the

9 Hazen and Sawyer economic impact analysis, namely the

10 construction of 34,700 acres of STA, plus the

11 imposition of BMP's with related costs, plus three

12 varying levels of per acre assessment as a proposed

13 action.

14 A Yes, I think they did.

15 MR. COUSINS: I'm sorry, you went back and forth

16 so much, yes, I think they did what?

17 THE WITNESS: Conducted an incomplete analysis

18 even of that proposed action.

19 MR. COUSINS: Thanks.

20 BY MR. SAXE:

21 Q Going back to Exhibit 2, Bates page 182, the

22 first sentence under "Failure to Address Unknowns and

23 Uncertainties" says, "The drafts are intended to analyze

24 the impacts and benefits of a proposed action."

25 Was it your understanding at the time you wrote

172

1 this that the proposed action was the one we just

2 discussed?

3 A No. The proposed action is the adoption of the

4 SWIM plan, that's what's in front of DOAH now.

5 Q But you agree that Hazen and Sawyer did an

6 incomplete economic impact analysis of the construction of

7 34,700 acres of STA, plus the imposition of BMP's and

8 related costs, plus three varying levels of assessments?

9 A That's correct.

10 Q So then if I'm to understand your testimony,

11 they succeeded in incompletely analyzing the economic

12 impacts of that proposed action, but the drafts are not

13 intended to analyze that proposed action, they are intended

14 to analyze the implementation of the SWIM plan?

15 A I believe that the SWIM plan is looking for, in

16 its own terms, an economic impact analysis of the SWIM

17 plan.

18 Q Let me clarify the question. I'm not asking you

19 what the SWIM plan was looking for, I am asking you what

20 Hazen and Sawyer purported to analyze?

21 A I think the report speaks for itself. I assume

22 what they were trying to do is what they say on 1-1 and 1-2

23 of the contract completion report.

24 Q Returning again to Bates page 182, again, the

25 sentence a little bit further down, "These documents

173

1 acknowledge several uncertainties which may significantly

2 alter the economic impacts of adoption of the SWIM plan."

3 The uncertainties that you describe on this

4 page, would they alter the economic impact of the proposed

5 action that Hazen and Sawyer purported to analyze?

6 A Sir, I think we are being a little too clever.

7 The proposed action of the South Florida Water Management

8 District is adoption of the SWIM plan. Now, if Hazen and

9 Sawyer has chosen to analyze something other than that,

10 let's call it the Hazen and Sawyer project so we don't get

11 confused, but the proposed action in this administrative

12 law case is adoption of the SWIM plan.

13 Q So then am I to understand that these defects go

14 to the failure of Hazen and Sawyer to do what the SWIM plan

15 required them to do?

16 A I think that they go to the failure to do the

17 full analysis that is required in order to assess whether

18 there has been an appropriate weighing and balancing of

19 costs and benefits in seeking to impose certain regulatory

20 and financial requirements.

21 Q At the bottom of this page, the sentence after

22 the indented material says, "The plan and agreement

23 acknowledge that larger STA's will be necessary if nutrient

24 discharge levels must be lowered or if STA's or BMP's are

25 less effective in removing nutrients than hoped."

174

1 Do all of these criticisms relate to the

2 possibility that larger STA's might be necessary than those

3 provided in the Hazen and Sawyer specification of 34,700

4 acres?

5 A When you say all these criticisms, you mean in

6 Exhibit Luke 2?

7 Q No, I'm sorry. The immediately preceding

8 criticisms numbered points 1, 2 and 3, nutrient discharge

9 levels, effectiveness of STA's and BMP's, and the water

10 quantity management measures.

11 A I'm afraid I've lost your question in all that.

12 Q Let me see if I can restate it. As you put it,

13 I think we will all benefit by not trying to be too

14 clever.

15 The question I'm asking is, the defects in your

16 opinion that you are discussing in this page of the

17 document, did they pertain to the failure of Hazen and

18 Sawyer to do what you believe they should have done in this

19 economic impact assessment or the failure of Hazen and

20 Sawyer to do what they proposed to do as we have just read

21 in the first two pages of the introduction of the document?

22 A Okay, in this section?

23 Q In this section.

24 A Number 1, "Failure to Address Unknowns and

25 Uncertainties." As the section pertains to the impact

175

1 analysis, it pertains to the fact that the Hazen and Sawyer

2 project does not cover the range of possible actions under

3 the SWIM plan.

4 Q I'm not sure I understand whether you answered

5 my question, let me try it one more time.

6 Do these particular criticisms on Bates page 182

7 of this document, pertain to the quality of the job, if you

8 will, that Hazen and Sawyer did in satisfying what you

9 believe the District should have required them to do or the

10 SWIM plan should have or did require them to do, or do they

11 pertain to failures to do what Hazen and Sawyer set out to

12 do, as discussed in these two pages of the introduction?

13 A These criticisms go to the fact that the

14 alternatives considered in the Hazen and Sawyer report,

15 their project, if you will, that they are assessing, does

16 not cover the reasonable range of projects which may be

17 necessitated by adoption of the SWIM plan.

18 Q Is it possible to do an economic impact analysis

19 that's technically sound on one of multiple possible

20 proposed actions?

21 MS. STINSON: I'm going to object to form, I

22 think it's over-broad, but you can answer if you can.

23 A Yeah, I mean, there are a lot of caveats and

24 qualifications you might need to place on that statement,

25 but you can certainly analyze one alternative of several.

176

1 BY MR. SAXE:

2 Q You testified earlier that in the Department of

3 Energy nuclear waste project that you were affiliated with,

4 the proposed action was, loosely speaking, to build a

5 facility for storage of high level nuclear waste. Did the

6 economic impact assessment that you performed in that

7 instance evaluate the economic impacts of alternatives to

8 that proposed construction?

9 A The way that project was structured at the DOE

10 level, there was a number of different sites that were

11 being actively considered and there was a project team for

12 each site. There had been a siting process and dwindling

13 down of alternatives before we were ever involved, so our

14 role as part of a much larger project, was to do the

15 assessment for the Texas panhandle site. There is another

16 group doing a similar piece of work for the site in Nevada.

17 Q So your economic impact assessment didn't

18 evaluate impacts of the Nevada proposal, is that correct?

19 A That is correct, but DOE was evaluating those.

20 Q Would you consider the economic impact

21 assessment that you did in that instance to be defective

22 because it, within the four corners, as you put it, of the

23 document, did not consider the impacts of the Nevada site,

24 potential Nevada site?

25 A First of all, the project was scrubbed by the

177

1 federal government before we got to a complete impact

2 assessment and so we didn't do that.

3 Secondly, the overall project plan for

4 repository siting that the Department of Energy had

5 developed, included steps in which the pieces done by their

6 various contractors were brought together for a comparitive

7 analysis of alternatives, so I was fairly comfortable

8 knowing that that broader project plan was there in saying,

9 okay, I have been asked to do a limited piece of the

10 overall siting analysis.

11 Q So am I to understand that you would not

12 comfortably be able to do an economic impact assessment of

13 a proposed action unless alternative proposals were also

14 being analyzed, if not by yourself, by others?

15 A I would at least feel like I had an obligation,

16 if I am working for a public body that is charged with this

17 kind of public interest decision, to write a fairly healthy

18 disclaimer concerning the limitations on the scope of the

19 study.

20 Q The Louisiana natural gas development project, I

21 think you testified earlier that you did an economic impact

22 assessment or socioeconomic impact assessment for that

23 project and in that project's context the proposed action

24 was to develop state-of-the-art barge terminal -- excuse

25 me, to assess a tax on offshore natural gas development, I

178

1 take it?

2 A No, I didn't say that.

3 Q The proposed action -- in your own words,

4 briefly, what was the proposed action there again?

5 A Well, the action that the state of Louisiana was

6 proposing to take was to impose a tax on interstate

7 commerce and they had developed the constitutional

8 rationale for the tax that it was to offset the burdens of

9 interstate commerce that had been imposed on them

10 socioeconomically, environmentally, by that commerce. I

11 mean --

12 Q That's fine.

13 A -- what we were being asked to assess was, was

14 there in fact any such historical burden.

15 Q You did not do an economic impact assessment of

16 a proposed action in that project?

17 A No. We did an impact assessment of whether the

18 constitutional rationale existed.

19 Q An impact assessment of whether a constitutional

20 rationale existed?

21 A Right. Whether this industry, as it existed up

22 to that time and I believe we did some future projections

23 as well, had indeed imposed a negative socio -- net

24 negative socioeconomic impact on coastal Louisiana.

25 Q Could you explain to me how do you an impact

179

1 assessment of whether a constitutional rationale exists?

2 A Sure. We were looking for whether or not we

3 could find a socioeconomic burden where in effect the --

4 Q I don't think you understood my question.

5 A I guess not.

6 Q How you go about doing an impact assessment of

7 the proposition whether a constitutional rationale exists?

8 A That's sort of what I was trying to tell you.

9 The issue here is if you are imposing a tax -- if a state

10 is imposing a tax on interstate commerce, whether that tax

11 can be justified as offsetting some burden that has been

12 imposed upon the state or its citizens by the Commerce and,

13 again, we're working with a number of attorneys and I'm not

14 here to give you a discourse on all the constitutional law

15 nuances of that proposition, but that's basically the way

16 the project was presented to me.

17 With that in mind, what we did was to look at

18 the question of, in normal socioeconomic terms, had the

19 activities associated with development of OCS gas created

20 negative fiscal and economic impacts on the coastal

21 counties of Louisiana where we decided to define the study

22 area.

23 Q Did you analyze whether the assessment of the

24 tax would have economic impacts?

25 A No, weren't asked to, it wasn't the issue in the

180

1 case in court.

2 Q What was the proposed undertaking which would

3 have entailed or imposed the direct economic impacts in

4 your study?

5 A The direct economic activities associated with

6 the exploration, development and production of gas from the

7 federal outercontinental shelf.

8 Q So did you an economic impact assessment of

9 offshore gas development activities?

10 A Well, in the federal portion of the offshore

11 area.

12 Q In that portion of the project, what

13 alternatives to offshore gas development activities did you

14 analyze economic impacts of?

15 A We didn't, because we were analyzing activity

16 which had occurred from 1954 through 1980 --

17 Q So there was no proposed action, you were

18 analyzing economic impacts of existing activity?

19 A Right, and then we projected into the future

20 what could be expected from the continuation, if you will,

21 of the exploration, development and production of the

22 acreage.

23 Q In the case of the Superfund designation

24 project, I think you indicated there was also no proposed

25 action there, the Superfund designation had occurred and

181

1 you were looking at economic impacts of that designation?

2 A That's correct.

3 Q In the Freeport marine terminal project, I

4 believe you indicated that the proposed action that you

5 analyzed the economic impacts of was to develop a state-of-

6 the-art barge terminal for unloading and loading chemicals?

7 A Yes.

8 Q What alternatives to the development of that

9 facility did you analyze economic impacts of in that

10 project?

11 A In that project, the main alternative was the

12 no-action alternative, which is to say don't grant the

13 permit.

14 Q Were there any other alternatives that were

15 analyzed besides the no-action alternative?

16 A In that case, the alternatives analyzed would

17 have been the results of -- result of the scoping meetings

18 with the Corps of Engineer staff and in terms of --

19 Q I'm saying economic impact analysis.

20 A And I'm trying to answer your question.

21 Q Okay.

22 A I don't remember if any of the alternative --

23 design alternatives or operational alternatives that they

24 asked the applicant to consider, had any significant --

25 made any significant difference to what the economic impact

182

1 would be. If they did, then we would have carried it out.

2 Q Did you run multiple scenarios looking at those

3 design alternatives?

4 A Well, I'm saying if they had made a difference,

5 significant difference in construction costs, operating

6 costs, removal of land from alternative uses or anything

7 like that, then I believe we would have.

8 Q How had that determination been made that they

9 would have no significant impacts or differences in the

10 level of economic impact before an impact analysis was done

11 on each of them?

12 A Again, I'm dealing from memory here, but if the

13 engineering firm that was responsible for analyzing the

14 design alternatives basically came back and said, well, you

15 know, if we arrange it a little differently, it's not going

16 to take anymore acreage and it won't change the cost,

17 something to that effect, or it won't change it more than a

18 percent or two, then I wouldn't regard it as a

19 significantly different alternative that required a

20 distinct set of numbers to analyze its impacts.

21 Q Did you have -- strike that.

22 Was there scientific certainty in the context of

23 that project, that the proposed state-of-the-art barge

24 terminal would be effective, fully effective in securing

25 the environmental remedial purpose that you indicated,

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1 which was to prevent pollution of the port?

2 A Pretty much. What we're talking about here is

3 we're talking about a berthing area with land on three

4 sides and with booms at the mouth and with machinery for in

5 effect handling the booms so that whenever loading or

6 unloading is occurring, that the booms are in place so that

7 any chemical that would be spilled could be trapped. Then

8 they had skimming equipment that was part of their

9 installation to be able to pick it up. This is all pretty

10 well proven technology, I mean, it wasn't anything

11 experimental here where the capabilities of the skimmer or

12 the boom were unknown.

13 Q That's fine. The Maine oil refinery development

14 project?

15 A Um-hum.

16 Q If I recall, the proposed action there was to

17 establish a super tanker terminal and refinery in Penobscot

18 Bay, is that correct?

19 A Right.

20 Q I believe you have addressed this already, but

21 just refresh me, what was the environmental remedial

22 purpose of that proposed action?

23 A You really have to look on a national scale in

24 terms of the rationale offered by the developer, but in

25 effect, this was in the period where we were starting to

184

1 import significantly larger quantities of crude oil into

2 the United States and in order to do that into the Gulf

3 ports, you are basically bringing in oil in super tankers

4 and having to lidar it at sea to smaller tankers that can

5 come into the Gulf ports where the existing refinery

6 capacity is, okay. What this was proposing was in effect

7 to take advantage of a very deep natural harbor and to

8 construct a super tanker terminal and associated refinery

9 to in effect allow safer delivery of crude oil to the

10 United States.

11 Q So the remedial purpose there was to take

12 advantage of a deep water natural port, that was the

13 remedial purpose?

14 A Right. There are a lot of spills at sea that

15 are a result of this lidaring activity.

16 Q So am I to understand then the remedial purpose

17 of the proposed action was to avoid spills at sea?

18 A Right.

19 Q I see. What alternatives to the establishment

20 of that super tanker terminal in Penobscot Bay did you

21 perform an economic impact analysis of when you analyzed

22 the economic impacts of establishing that particular

23 terminal?

24 A Okay, first of all, for context, you need to

25 understand that this was a graduate school project that the

185

1 three of us worked on for approximately two months and it

2 was not presented -- it wasn't even a master's thesis, I

3 mean, it was a term project for a course. We spent time, a

4 cold January as it were, in Maine and did an analysis which

5 looked at spill probabilities given the Maritime data and

6 the alternatives in effect were different sizes and

7 probabilities of spills if the terminal was built.

8 The other alternatives that were looked at was

9 there had been, just at that same time, a major siting

10 refinery and port siting study completed by the state of

11 Maine and Maritime Administration, that had looked at the

12 relative merits of the different sites along the Maine

13 coast. If memory serves, there were four or five potential

14 terminal sites.

15 Q Did you analyze the economic impacts of those

16 various potential sites?

17 A We took that study and used pieces of it rather

18 than redoing the work because of, you know, the limited

19 time that we had for this project.

20 Q And you produced economic impact quantifications

21 for each of those alternative sites?

22 A No. There were -- those had been done already.

23 Q Well, that's my question. In the economic

24 impact assessment you did in the context of this project,

25 did you analyze the economic impacts of those alternative

186

1 sites or was this a situation as before where you feel that

2 some other responsible entity, jurisdiction, had looked at

3 alternatives and selected one, which you were then charted

4 to analyze the economic impacts of?

5 A No, I wasn't chartered by anybody, I was doing a

6 term paper.

7 Q Okay, with that correction.

8 A And nobody in the public sector had yet selected

9 this site. What had happened was that there was, I mean,

10 it's a fact there are four or five 70 foot plus anchorages

11 along the Maine coast, starting at Portland and going down

12 through Eastport.

13 Q But you were able to analyze the economic

14 impacts of one without analyzing the economic impacts of

15 alternatives in that instance, is that correct?

16 A Yes. We were not working for the developer, I

17 took the specific proposal that had been made and along

18 with the other two students that were involved, we looked

19 at the potential negative impacts of spills on the tourism

20 and fishery economy that's on Penobscot Bay, and we looked

21 at the positive impacts on jobs from the construction and

22 operation of the refinery, and we looked at the various

23 spill probabilities that were in there and put that

24 together into an analysis.

25 Q The Edwards aquifer withdrawal project, the

187

1 proposed action there, if I recall your testimony, was to

2 restrict pumping of the Edwards aquifer and you did an

3 economic impact analysis of that proposed action, is that

4 correct?

5 A Not in the sense that we're talking about here.

6 I prepared some testimony that was qualitative in nature,

7 it did not involve spread sheets and models and

8 projections, about the impacts on San Antonio of not

9 developing secure water supplies in terms of its

10 attractiveness to industry as an industrial location.

11 Q Did you qualitatively analyze the economic

12 impacts of alternatives to that proposal?

13 A Well, the alternative is status quo that they --

14 Q That would be the no-action alternative again?

15 A Pretty much.

16 Q Dr. Luke, in your opinion, is a baseline and an

17 economic impact analysis effectively an analysis of a

18 no-action with respect to the proposed action?

19 A Those two generally are about the same.

20 Q Do you know whether Hazen and Sawyer, in the

21 economic impacts report that we have been discussing today,

22 analyzed the baseline in that document?

23 A They analyzed one baseline scenario of several

24 possible baseline scenarios.

25 Q Would that be a no-action alternative, that

188

1 baseline scenario?

2 A It would be one of several no-action scenarios.

3 Q Several no-action scenarios?

4 A Right.

5 Q Can you explain to me how there could be several

6 non-actions?

7 A Sure. What you have here is an existing

8 industry that I know from the Grace Johns meeting where she

9 reviewed her forthcoming report, that there are several

10 uncertainties about its future within the time frame of the

11 analysis.

12 Q Does non-action generally, in the context of a

13 proposal --

14 A I'm not quite finished.

15 Q I'm sorry.

16 A One of those is the issue of subsidence as it

17 affects the long term production, another one is the future

18 support prices. In this case, generally speaking, none of

19 the alternatives are going to have much -- the variables

20 are outside the control of the District.

21 Q Dr. Luke, in the context of proposed regulatory

22 action by a government entity, does the non-action

23 alternative generally pertain to the omission by the agency

24 of the proposed regulatory action, the status quo, as you

25 testified earlier?

189

1 A Pretty much, and sometimes because of

2 uncertainties that are germane to the future of what the

3 status quo will be, you may see more than one no-action

4 scenario.

5 Q When you say no-action scenario, are you

6 referring to the projection of what will happen from the

7 no-action scenario, based on varying assumptions about

8 future conditions?

9 A That's right. I would --

10 Q But there is only one non-action, if you will?

11 That's all I'm trying to ask, it seems like a pretty

12 straight forward question.

13 A Not the way you're asking it. I guess what I'm

14 telling you is that you can have more -- we also refer to

15 that as a without project future, and you can have some

16 situations where there's really not a great deal of

17 volatility in what people expect to happen in an area

18 absent this action, I mean, and there you would have one

19 baseline without project future.

20 Q Is it your testimony that a without project

21 future is the same thing as a no-action alternative?

22 A It can be.

23 Q It's not apples and oranges, are they comparable

24 terms, without project future and no-action alternative?

25 A Yeah, they are comparable.

190

1 Q Would you say that in a given no-action

2 alternative, there might be multiple without project

3 futures, based on varying circumstances or varying future

4 conditions?

5 A That's correct.

6 Q Do you know whether Hazen and Sawyer look at

7 alternative base lines in the economic impacts report?

8 A They mentioned some, but then they don't really

9 follow those out quantitatively.

10 Q Do you know what those were?

11 A There was -- again, I'm dealing from the draft

12 final, they mention the issue of potential reductions in

13 prices for sugar through some freer trade or just reduction

14 of the U.S. support price. I don't think that in the first

15 there was anything other than just a passing mention of the

16 subsidence issue as something that could potentially affect

17 production before the end of the 20 period.

18 Q Have you reviewed the contract completion

19 report?

20 A I personally have not.

21 Q Dr. Luke, if you would, turn to page Bates 183

22 of Exhibit 2, I believe it is.

23 A Okay.

24 Q In the section numbered 2, the last three

25 sentences, "There is no consideration of the impacts on the

191

1 refineries or the dedicated port facility. These

2 components are lumped into the analysis of indirect and

3 induced impacts through multipliers. Given the direct

4 relationship between the components, this approach is

5 inadequate."

6 Could you explain what you mean by the direct

7 relationship between the components?

8 A Right. As I understand it, the port facility is

9 a dedicated port facility, meaning it's constructed and the

10 buildings and equipment there are strictly for the handling

11 of sugar and that there is really not any other commodity

12 that it is suited for.

13 Q Would that be only sugar from the study area?

14 A Well, it's an export facility so, yes.

15 Q It's an export facility, does it receive the

16 sugar which it exports only from the study area?

17 A That is my understanding.

18 Q How about the refineries?

19 A It's my understanding that the ones in the --

20 the two that are in the EAA receive all of their raw sugar

21 from the EAA mills.

22 Q In your opinion, is it likely that the merchants

23 in the EAA communities in the study area, receive

24 significant amounts of revenue -- let me strike that.

25 Are their merchants in the EAA study area who

192

1 likely do not receive significant amounts of revenue from

2 outside the study area?

3 A I would think there would be quite a few.

4 Q Local shop owners, for instance.

5 How does the direct relationship between the

6 refinery and the ports and the industry in the EAA differ

7 from the relationship between local agricultural suppliers

8 and the growers in the EAA?

9 A I don't know that they do, but in this type of

10 analysis you should deal with them in two different ways.

11 What I'm looking at is that on the suppliers in the EAA and

12 for that matter the shopkeepers, it is that that I think is

13 a more appropriate definition of a primary study area as

14 being just the EAA. The support facility is not in the

15 EAA, the refineries are, and there the reason I'm looking

16 at them is because they are part of a broader sector, port

17 facilities and transportation.

18 One thing about input/output analysis is that it

19 assumes, you know, it's a linear type of analysis and what

20 I'm looking at is the potential for a sufficiently drastic

21 impact on those facilities, that it's more than linear, I

22 mean, it knocks them out of operation or it makes them much

23 less competitive and that's the reason that I would look at

24 them separately.

25 I think on the suppliers within the EAA, I can

193

1 look at them through using appropriate multipliers to apply

2 it to a subcounty primary study area.

3 Q In your view, are the refinery, refineries, and

4 the port facility not included in the multiplier, the RIMS

5 multipliers, for the relevant area?

6 A No, they are in there, but they are in much

7 broader sectors and I think that they are sufficiently

8 integrated with the mills and the growers that it would be

9 appropriate to analyze them separately rather than just

10 lumping them into a sector.

11 Q Would they be included in the Florida multiplier

12 in fact, statewide?

13 A Well, sure, but again now we are talking about

14 really diluting what the impacts are. You could take out

15 the EAA tomorrow, the whole thing, I mean, whatever you

16 know, eliminate it from production, and I think the impacts

17 on the state of Florida as a whole would not be very

18 intense, because you have such a large economy that the

19 production of the EAA divided by the whole Florida economy

20 is a very small number.

21 Q So is it just a question of in a sense giving

22 them their own page as opposed to what level of impacts

23 reported they are included within?

24 A No, I would tend to analyze it separately

25 because you have got non-linearities, because you are

194

1 looking at the possibility of really them becoming

2 uneconomic and shutting down if the output that's available

3 for them to refine, the raw sugar, and the sugar that's

4 available to ship, goes down.

5 Q Would that be any less the case for those

6 merchants included in the indirect and induced effects who

7 would be employment casualties of the implementation?

8 A Again, if you do it at the Palm Beach level, I

9 don't think you are really going to capture the effects

10 very well of the merchants in the EAA. I think if you

11 define a subcounty primary study area, apply appropriate

12 multipliers just to those businesses, that that's the

13 proper way to handle that.

14 Q Do you know whether the port facility has any

15 alternative uses?

16 A At some very general level it might, you know, I

17 don't know what other commodities would move through it and

18 I suspect neither does Hazen and Sawyer.

19 Q Have you analyzed whether it might have

20 alternative uses?

21 A No, and let me just be clear, that's a very

22 valid part of the analysis of the impact on that facility.

23 I don't suggest that it's a foregone conclusion that it

24 gets wiped out.

25 Q What do you mean by non-linearities?

195

1 A What I mean is that the input/output model looks

2 at the impact on a whole sector and it sort of averages it

3 across all the enterprises in that sector. It doesn't look

4 at the fact that some businesses may lose a fraction of a

5 percent of their revenues and kind of go on along. Others

6 though may lose such a high percentage of their revenues

7 that they are no longer financially feasible to keep the

8 enterprise in operation. The input/output analysis at the

9 level of Palm Beach County, really doesn't capture that as

10 far as EAA is concerned.

11 MR. SAXE: Could you mark that answer for me.

12 BY MR. SAXE:

13 Q The next section on this page, Dr. Luke, is the

14 statement, "A major concern is the lack of

15 jurisdiction-specific projections of employment and

16 population change, public sector costs and revenues, school

17 enrollments, et cetera."

18 Do you know for which jurisdiction Hazen and

19 Sawyer projected direct employment impacts?

20 A They are operating at the county level and then

21 I believe they also have a state projection.

22 Q So in your opinion, they did not project direct

23 employment impacts on the study area itself?

24 A Well, direct or indirect or induced.

25 Q I'm asking specifically about direct?

196

1 A You know, I suppose you could say in the sense

2 that they are projecting on farms in the EAA, that you

3 could say they have done the direct projections for the

4 EAA, yes, but when they have applied the multipliers to get

5 to the total impact, total economic impact, they have done

6 that at the Palm Beach County level.

7 Q So you believe that they may have projected

8 direct on farm impacts for the EAA specifically as opposed

9 to for Palm Beach County?

10 A Well, I'm certain of that. They have attempted

11 to make that calculation.

12 Q Is there an EAA multiplier to apply to such

13 direct impacts?

14 A It is possible to develop a reasonable estimate

15 of a multiplier, yes.

16 Q Is there one that you are aware of that has been

17 developed and is available for use in such analysis at the

18 present time?

19 A No. I think it would take some professional

20 economic analysis to take the available published

21 multipliers and to come up with a reasonable set of

22 multipliers that describe the economy in the EAA. It can

23 be done, I have done it in other areas.

24 Q Would that be the process of selecting a

25 representative multiplier for the study area?

197

1 A That would be the result of selecting a

2 representative multiplier and there would be various ways

3 you might go about that.

4 Q If Hazen and Sawyer projected direct economic

5 impacts for the EAA and selected a representative

6 multiplier for the EAA, in your opinion, would the indirect

7 and induced economic impacts that they determined be

8 accurate for the EAA?

9 A I think that would be a reasonable estimate or

10 forecast, I mean, the caveat there is assuming they did it

11 correctly and with sound methodology, best available date.

12 Q In your opinion, is the Palm Beach County RIMS

13 multiplier an inappropriate representative multiplier for

14 the EAA?

15 A Yes.

16 Q What is that based on?

17 A It's based on the fact that the size of

18 multipliers goes up as the size of the economy for which

19 they are calculated increases in size and Palm Beach County

20 is a much larger economy than the EAA segment of Palm Beach

21 County, both in diversity and in self sufficiency.

22 Q Have you calculated a multiplier for the EAA?

23 A No. We have used, in the October 23rd document,

24 the multipliers for Okeechobee County, being a small rural

25 county, as a first approximation, but not as sort of our

198

1 final opinion as to what would be appropriate.

2 Q Absent having calculated a multiplier for the

3 EAA, explain to me again what is the basis for your opinion

4 that the Palm Beach multiplier is incorrect?

5 A Palm Beach County has a population of, I

6 believe, almost a million folks. The EAA has a population

7 of maybe about 60,000. Palm Beach as a county taken as a

8 whole, has a significant non-agricultural manufacturing

9 sector, has a big service sector, has a large medical

10 services sector and --

11 Q Is it safe to say --

12 A Well, let me finish.

13 Q I'm sorry.

14 A -- and it is a much more complex economy. It is

15 going to therefore have on the whole larger multipliers

16 than the EAA, which is a relatively limited simple economy.

17 Q Are you planning on developing an EAA

18 multiplier?

19 A If we proceed with community impact analysis, I

20 believe we will do that, yes.

21 Q Is it safe to say that if and when you develop

22 or calculate an appropriate multiplier for the EAA, you

23 expect it to differ significantly from the Palm Beach

24 County multiplier, based on your size multiplier theory?

25 A That's correct.

199

1 Q Have you tested this size multiplier

2 relationship for any other areas in Florida?

3 A I mean, sure, look at the size of the Florida

4 multipliers versus the size of the Palm Beach County

5 multipliers, it's the same principle.

6 MS. STINSON: Keith, can we go off the record?

7 MR. SAXE: Sure.

8 (Brief recess taken.)

9 BY MR. SAXE:

10 Q Dr. Luke, before we took the break, I believe

11 you had indicated in an earlier work product you had

12 constructed a multiplier for purposes of your analysis by

13 scaling down the Okeechobee County multiplier, is that

14 correct?

15 A No. I said we used the Okeechobee County

16 multiplier in the October 23rd document just as an initial

17 estimate of what the EAA multiplier might look like.

18 Q Do you know whether any sugar is grown in

19 Okeechobee County?

20 A No. We were just using it as a predominantly

21 rural county and we were doing this at a time when we had

22 not yet received the RIMS tables for Glades and Hendry, and

23 we had Okeechobee from the dairy studies that Mulkey had

24 done and basically used it as an expedient.

25 Q What multiplier did you use, was there a -- let

200

1 me rephrase the question.

2 Was there a sugar multiplier for Okeechobee

3 County?

4 A No, I don't think so.

5 Q What multiplier did you use?

6 A Leistritz picked it and if we spelled it out in

7 the October 23rd, I could tell you, but otherwise I would

8 have to defer to him on that.

9 Q In doing an economic impact analysis, can there

10 be secondary impacts from an action if the action has no

11 direct economic impacts?

12 A No, I wouldn't think so, certainly not in

13 traditional input/output analysis.

14 Q If there are very minor direct economic impacts,

15 are secondary impacts likely to be devastating?

16 A Not likely.

17 Q Returning to page Bates 183 in Exhibit Number 2,

18 section 3 on this page, the second sentence, "The impacts

19 identified may be only moderate when viewed in the context

20 of Palm Beach County as a whole, but could be truly

21 devastating for individual towns and school districts."

22 If there are only minor direct impacts, could

23 there be devastating secondary impacts for individual towns

24 and school districts?

25 MS. STINSON: Object to form.

201

1 MR. SAXE: Grounds?

2 MS. STINSON: If your intent is to paraphrase

3 that sentence, I believe it inaccurately reflects

4 that.

5 MR. SAXE: It's not, I'm just asking a question.

6 A Again, if there are very minor direct impacts,

7 we would expect to find slight secondary impacts.

8 BY MR. SAXE:

9 Q Turning to the next page, the third sentence

10 under section 4, Short Study Period, the sentence, "An

11 impact study should normally cover a period at least as

12 long as the economic life of the capital improvements

13 covered by the proposed action."

14 In your opinion, would selection of a 20 year

15 time frame for analysis cure this defect?

16 A I think that's reasonable. In that case that is

17 keyed more to the life of the bonds that have been assumed

18 to be some part of financing this. I think that should

19 tell us a good deal of the story.

20 Now, if there's reason to think that the funding

21 of this construction and funding of this is going to be

22 delayed out two, three, well, three, four, five years, then

23 it should really be sort of the construction period plus

24 the repayment period of the bonds, that might be a little

25 more than 20.

202

1 Q What role does the repayment period of the bonds

2 have in determining the appropriate study period?

3 A Well, because one of the things I think flows

4 out of here, and this goes back to that practicality thing

5 we were looking at awhile back, is whether or not given the

6 forecast for the agricultural economy in the EAA, it looks

7 like that bond financing is a feasible -- 20 year bonds are

8 financially feasible.

9 Q Would bond financing have to enter into the

10 direct economic impacts for it to be a relevant factor in

11 determining the appropriate study period for an economic

12 impact analysis?

13 A Say that one more time.

14 Q Would bond financing impacts have to form part

15 of the direct economic impacts in order for it to be a

16 relevant factor in determining the appropriate study period

17 for an economic impact analysis here?

18 A In this case I see the economic impact study

19 serving a secondary purpose, and that is to give us some

20 preview about whether it is financially feasible to look to

21 the agricultural economy in the EAA to repay 20 year bonds

22 and, therefore, whether that's a financing alternative, I

23 suppose strictly speaking, that may be beyond the usual

24 purpose of an economic impact study. That would be more

25 the financial feasible study than the bond issue.

203

1 Q If the District analyzed the economic impacts of

2 imposing a fixed absolute level of economic burden on the

3 EAA for purposes of retiring those bonds, would the

4 repayment period of those bonds be a relevant factor in

5 determining the appropriate study period for that economic

6 impact assessment?

7 A Yes.

8 Q Why?

9 A I think that you would want to look through the

10 end of the repayment period, particularly when you may be

11 dealing with a wasting asset, which is another way of

12 talking about the subsidence problem, and where you're

13 dealing with a revenue stream for the commodity that is

14 subject to administrative adjustment over that period.

15 Q I'm not sure I understand that answer.

16 A I'm sorry.

17 Q Could you give me an example perhaps?

18 A An example of what?

19 Q An example of how if the level of economic

20 burden on the study area was fixed as part of the proposed

21 action, the repayment period for the bonds would be a

22 relevant factor in determining the appropriate study

23 period?

24 A Well, the burden may be fixed, but the ability

25 to bear the burden may not be constant over time and

204

1 therefore you want to look at the repayment period.

2 Q Why the repayment period, that's what I'm

3 asking?

4 A Because that's the period over which the burden

5 will be imposed.

6 Q But I think we're assuming that the burden is

7 going to be fixed and that the ability to shoulder the

8 burden is what's at issue, is that correct?

9 A I'm suggesting that it may be variable and

10 therefore you want to see if while you may have a constant

11 straight line on the graph in terms of burden, you may want

12 to see whether the ability to bear that burden measured in

13 the capacity of the EAA economy to do that, drops below

14 that line some year before the bonds are repaid.

15 Q Let's take perhaps a more specific example. If

16 the District were to use a bond instrument that had a 40

17 year repayment period, but were to limit the repayment --

18 excuse me, to limit the amount of revenues it sought to

19 recoup to retire that bond from the EAA, to a fixed amount

20 for a 20 year period and chose to get the balance of the

21 funds it needed to retire that bond elsewhere, why would

22 you need to analyze the economic impacts on the study area

23 for 40 years instead of 20 years?

24 A You might not. I think you just have to look at

25 the financing proposal or proposals that you want to

205

1 analyze and that alone with other factors would help you

2 arrive at a reasonable decision about the study period.

3 Q What other factors?

4 A I would think that the life of the program would

5 be one thing, particularly if there were possibilities that

6 five years down the line you were going to decide that 50

7 parts per billion didn't get the job done and so now we are

8 going to have stage two and analyze that and that you

9 wanted to see how that would come out. I don't, you know,

10 I certainly don't think that there is any magic in the

11 number 20. I think, though, in this case, 10 was a very

12 artificial number that largely related to the way the

13 FLIPSIM model was set up and not to any rational basis to

14 what the study period of this analysis ought to be.

15 Q What's your basis for that?

16 A Richardson telling me that FLIPSIM was set up to

17 run for 10 years.

18 Q What causes you to think that that was the

19 determining factor in setting the 10 year study period?

20 A Because I know that it was originally supposed

21 to be 20 and the contract was amended down to 10 because of

22 basically the limitations on being able to run FLIPSIM.

23 Q What's your basis for saying basically the

24 limitations of running FLIPSIM?

25 A I believe there is correspondence between Grace

206

1 Johns and Mulkey to that effect.

2 Q Turning to Bates page 185, the next page under

3 section 5, the third sentence says, "However, Hazen and

4 Sawyer then assumed that none of these model farms had any

5 debt and none would require any investment to maintain

6 operations during their brief study period."

7 Do you still believe this is a true statement?

8 A Yes.

9 Q What is your basis for this position?

10 A My reading of the draft final report.

11 Q What types of debt were you referring to in this

12 statement?

13 A I believe I was referring to any and all types.

14 Q So that would be short, intermediate, long term?

15 A Right.

16 Q The bottom of this page, you say, "Hazen and

17 Sawyer should have defined scenarios for two or more debt

18 levels and for two or more equipment replacement

19 schedules."

20 What two debt levels should Hazen and Sawyer

21 have defined scenarios for?

22 A I don't know. I'm thinking in terms of one that

23 represents some notion about where the average is at the

24 present time and then one that would look at perhaps what

25 the debt might be in terms of lending limits.

207

1 Q Do you presently have any opinion about what

2 those numbers would be?

3 A No.

4 Q What two or more equipment replacement schedules

5 did you have in mind, if any?

6 A I didn't have in mind specific schedules. What

7 I'm thinking about, though, here is the notion that you

8 could go with a normal replacement schedule or you could go

9 with a slow replacement schedule, and on slow schedule you

10 ought to see less impact.

11 Q We touched briefly earlier on how Hazen and

12 Sawyer handled machinery and equipment costs during the

13 study period, I believe you testified that your

14 understanding was they effectively purchased a new

15 complement of equipment in the first year of the study

16 period and then depreciated it over a particular period of

17 years?

18 A That's correct.

19 Q Do you recall what that depreciation period was

20 and at what percent the investment was amortized?

21 A I really don't.

22 Q If Hazen and Sawyer had assumed a mix of new and

23 old equipment at the start of the study period, how would

24 that have affected the annual cost allowance, do you think

25 it would have been greater or less?

208

1 A Well, it's not a question of cost allowance,

2 it's a question of when do rather lumpy expenditures hit

3 and it's not on an equal or annual basis is my

4 understanding.

5 Q So then would it be your position that the

6 approach of purchasing all new equipment and amortizing it

7 over a 12 year period at 8 percent interest would not be

8 sufficient to cure this particular defect that you are

9 discussing here, the lumpiness problem?

10 A Whether it would or wouldn't, I think is an

11 empirical question. I think the better way to handle it is

12 to simulate kind of what the enterprises actually do.

13 Q That's with sensitivity analysis?

14 A No, I mean, if you are going to use the FLIPSIM

15 model, which is what she did, it's my understanding from

16 review of the manual and discussions with Richardson, that

17 it allows you to look at replacement schedules from the

18 standpoint of how old is the equipment when you start and

19 what's the life of it.

20 Q Do you know whether that's when one runs FLIPSIM

21 under the accounting or deterministic mode or the

22 stochastic mode?

23 A I don't know for certain. It sounds like the

24 kind of thing you can do -- you ought to be able to do

25 under either, though, because it's not a probability

209

1 distribution, it's a management assumption.

2 Q Do you know how farmers handle lumpy costs in

3 real life?

4 A Pretty much the way all of us do, I guess. They

5 may finance the purchase if they have get somebody to loan

6 them the money.

7 Q When you finance the purchase, are you achieving

8 a result that's effectively any different than purchasing

9 new equipment and amortizing it, depreciating it over a

10 period at a set interest rate?

11 A You may or may not, because one of the issues is

12 whether somebody would lend you the money to buy the

13 equipment in a given year, given your balance sheet and

14 your risk factor.

15 Q Assuming that one could finance the purchase of

16 the equipment?

17 A Assuming that, then you get back to a sort of a

18 bump in the first year, as you probably have a down

19 payment, and then you have a more level stream of payments.

20 Q Now, is that roughly equivalent to what Hazen

21 and Sawyer did, the bump in the first year and then a

22 steady stream?

23 A No, because they put the bump outside the period

24 they were studying.

25 Q Do you know when they put the bump, as you put

210

1 it?

2 A Sort of in year zero, it's before the start of

3 the study period.

4 Q On this same page then, I believe -- well, it's

5 6:00, let's go ahead and stop for the day.

6 (Deposition adjourned at 6:00 p.m.)

7 * * * * *

211

1 CERTIFICATE OF REPORTER

2 STATE OF FLORIDA:

3 COUNTY OF LEON:

4 I, TERRY WILHELMI, Certified Shorthand Reporter

5 and Notary Public in and for the State of Florida at Large:

6 DO HEREBY CERTIFY that the foregoing proceedings

7 were taken before me at the time and place therein

8 designated; that before testimony was taken, the witness

9 was duly sworn; that my shorthand notes were thereafter

10 transcribed under my supervision; and the foregoing pages

11 numbered _______through _______are a true and correct

12 record of the aforesaid proceedings.

13 I FURTHER CERTIFY that I am not a relative,

14 employee, attorney or counsel of any of the parties, nor

15 relative or employee of such attorney or counsel, or

16 financially interested in the foregoing action.

17 WITNESS MY HAND AND SEAL this, the _____day of

18 _________, 1993, IN THE CITY OF TALLAHASSEE, COUNTY OF

19 LEON, STATE OF FLORIDA.

21 ________________________

TERRY WILHELMI, CSR

22 100 Salem Court

Tallahassee, Florida 32301

23 (904) 878-2221

My Commission Expires: June 13, 1994