Title: Memo: Department of Commerce SWUCA Economic Impact Statement (EIS) Concerns
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Title: Memo: Department of Commerce SWUCA Economic Impact Statement (EIS) Concerns
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Language: English
Spatial Coverage: North America -- United States of America -- Florida
Abstract: Memo: Department of Commerce SWUCA Economic Impact Statement (EIS) Concerns, Jan 5, 1995, To: Karen Lloyd From: Jay Yingling
General Note: Box 10, Folder 14 ( SF-Water Use Caution Areas-SWFWMD - 1993-1994 ), Item 6
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Bibliographic ID: WL00002291
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Full Text

( January 5, 1995


TO: Karen Lloyd, Senior Attorney, Office of General Counsel
James Robinson, Senior Attorney, Office of General Counsel

FROM: Jay Yingling, Senior Economist, Planning Department Nw

SUBJECT: Department of Commerce SWUCA Economic Impact Statement (EIS)

This memo has been prepared in response to concerns expressed in Ms Blakeslee's letter,
dated December 21, 1994, over the adequacy of the section of the SWUCA EIS dealing
with small business impacts. While an outdated "small business" definition was used in the
EIS, our consultants and I agree that the change in the definition would not significantly
alter our conclusions concerning impacts to small businesses. Regarding their other
concerns, we feel that the District and the EIS have met the statutory requirements of
Chapter 120, F.A.C., concerning impacts to small businesses. Each of the concerns
expressed are addressed below.

Small Business Definition
The definition for small businesses used in the EIS was "an independently owned and
operated business concern which employs 50 or fewer permanent full-time employees, and
that has a net worth of not more than $1 million." This definition was correct when first
researched by the consultant. However, the legislature revised the definition in the 1994
session to read "an independently owned and operated business concern that employs 100
or fewer permanent full-time employees and that, together with its affiliates, has a net
worth of not more than $3 million and an average net income after federal income taxes,
excluding carryover losses, for the preceding 2 years of not more than $2 million. As
applicable to sole proprietorships, the $3 million net worth requirement shall include both
personal and business investments."

The concern of the Department of Commerce is that "the District did not consider the
actual number of small businesses affected by the proposed rule change." In all of my
experience, I am not aware of an EIS prepared by the District or any other agency in which
an exact number or even an estimate of the number of small businesses affected by a rule
revision has been attempted. The reason for this is that such a determination is impractical,
if not impossible. To make such a determination would require sensitive financial data on
individual permittees that they would not likely turn over to the District. In addition, to my
knowledge there is no publicly available data


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January 5, 1995
Page 2

that is descriptive or discrete enough to make an estimate of the number of small businesses
regulated by the District under either the old or new definition. The Florida Department of
Commerce, Division of Economic Development, is the publisher of the Florida County
Comparisons. 1993 document from which the number of small businesses reported in the
EIS was taken. Table C-13 on page C-49 of this Commerce document reports small
business establishments and employment for 1992. In both this 1993 edition and the latest
1994 edition, the "50 or fewer employee" definition was used, not the current "100 or fewer
employee" definition.

In the EIS we chose to be conservative and provide information on the percentage of all
private establishments in the SWUCA that are classified as small businesses by the
Department of Commerce (Table 5-2). This better reflects the number of businesses not
regulated by the District that may be affected by utility water price increases that are
discussed in the EIS as well as the permit-related costs for those that are regulated. In
reality, the District has issued approximately 5,800 water use permits in the SWUCA for
both large and small businesses. The proposed rule, as approved by the Governing Board,
substantially affects only the SWUCA because all significant District-wide revisions had
been deleted. This number of water use permits is much smaller than the 41,000 small
businesses estimated by the Department under the old definition to be in the counties
encompassed by the SWUCA. At most, the District could only regulate approximately 15
percent of the small businesses, assuming all permittees were small businesses. If anything,
the numbers in Table 5-2 of the EIS overstate the potential number of small businesses
(under the old definition) that may be affected because it includes those that are not
supplied by utilities, or do not exceed permitting thresholds, and are therefore not affected
by the proposed rules.

The new definition would likely expand the number businesses considered small businesses.
However, since small businesses under the old definition already comprise approximately
95 to 98 percent of all private establishments, it is unlikely that the change in definition
would substantially alter any estimate that would have been made within commonly
accepted margins of error. Furthermore, the more complex new definition would make it
even more difficult to arrive at an estimate of the number of small businesses affected, even
if it was explicitly required by statute, which it is not.

Interpretation of Impact
The Department implies that we interpret "impact" to mean that a


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C January 5, 1995
Page 3

requirement has no impact on small businesses because it is applied uniformly to all
businesses. This is not the case. Costs of complying with proposed requirements are
estimated for all types of permittees, regardless of size. Then the question is posed, "Is the
cost proportional to water use/production?" In other words, a requirement with a high fixed
cost that is not related to a level of production would likely cause a disproportional impact
to a small business.

Ironically, the Department used the shifting of the responsibility for hydrologic analyses
from the District to the permitted to illustrate their point. This requirement was deleted
from the approved rule and therefore is not mentioned in the most recent version of the
EIS. However, when the requirement was in the proposed rules, the previous EIS (August
25, 1994) clearly indicated that this was the very requirement that would most likely cause
disproportionate impacts to small businesses (p. 5-4).

As stated in the EIS, we feel that we have indicated that there are financial impacts to small
businesses but feel that they will typically remain viable businesses. As will be
demonstrated, the proposed rules are also tiered to reduce impacts on smaller businesses.

Do Small Business Contribute to the Prbems in the SWUCA?
As defined under the old or new definition, the vast majority of our permittees are likely to
be small businesses if they reflect the distribution of small businesses as a percentage of
private emabliahients overall. A review of agricultural data demonstrates that small
businesses represent a very significant proportion of permitted water quantities in the
SWUCA. The 1992 Census of Agriculture indicates that the percent of farms with 10 or
less employees in the eight counties in the SWUCA ranges from 75 to 91 percent. This
would indicate the percentage with 50 or 100 employees would be much higher. On the
basis of the number of employees criteria, it is likely that at least 75 percent of agricultural
permits are associated with small business operations'. Data further indicate that
approximately 88 percent of all permits in the SWUCA are for agricultural operations.
Based on this agricultural permit data alone, a likely minimum of two-thirds (.88 x .75) of
all permits in the SWUCA may be associated with small businesses. Finally, agricultural

xData to determine whether permittees would qualify as small
businesses under the definition's financial criteria are not
publicly available.

1 A 1.

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January 5, 1995
Page 4

constitute approximately 82 percent of the large permits (100,000 gpd or more) that
represent 88 percent of permitted quantities in the SWUCA. Although they may typically
be small businesses, agricultural permittees tend to have large permits. Without even
considering quantities permitted to other small businesses in non-agricultural permit use
type classifications, it should be clear that to exempt all small businesses from the proposed
rule amendments would severely limit the District's ability to address the water supply
problems in the SWUCA.

Concern That the Rules Are Not Tiered
The District does not regulate small businesses that are utilityosupplied and not all self-
supplied small businesses are regulated by the District. Many self-supplied small
businesses would likely have a four inch or less well for potable and/or irrigation purposes.
Such businesses would fall below permitting thresholds. Of the approximately 5,800
operations required to obtain permits in the SWUCA, 72 percent of those operations are for
less than 100,000 gpd and are exempt from most substantive requirements, including
metering and reporting water use. Permits for less than 100,000 gpd represent only 12
percent of permitted quantities in the SWUCA. While the thresholds may not exempt all
businesses that qualify as small businesses from-eitherriing r substpermitting or substantive perm
conditions, it is clear that the rules are tiered to exempt smaller businesses that do not
contribute significantly to the problem from all or most permitting requirements.

As previously mentioned, the hydrologic analysis requirement has been deleted from the
proposed amendments. After it was noted in the August 1994 version of the EIS that the
provision could have disproportionate impacts on small businesses, the District negotiated
with permittees to develop language that would exempt smaller permittees from the
requirement. The requirement that permittees perform the hydrologic analyses was deleted
in its entirety from the proposed rules before the negotiated language exempting small
permittees could be incorporated into, a formal rule draft

Other Considerations
Section 120.54 (2)(a), F.S., requires the District to consider five methods for reducing the
impacts to small businesses. Of those, the only one that is not discussed explicitly in the
EIS or in this document is the establishment of performance standards in lieu of design or
operational standards for small business. Most of the significant requirements in the
proposed rules, such as irrigation quantities and per capital requirements, are performance
standards and not design or operational standards. Although the statute requires that the
District consider the five


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( January 5, 1995
Page 5

methods, it does not require that they be explicitly addressed in the EIS. Upon reviewing
the proposed rule language, it should be clear that the District did consider and employ the
methods listed.

The consultant and I are of the opinion that the use of the old definition for small
businesses has no significant impact on the results of the analysis of the impact on small
businesses and does not impair the fairness of the rulemaking proceedings. We also feel
that section 5 of the EIS fulfills the letter and intent of the statutory requirements and that
the District showed due consideration to the five factors that must be considered to reduce
impacts on small businesses.

cc: Richard Owen

I. l11

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