STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
RIVERSIDE VILLAGE PARTNERS, LTD.,
Petitioner,
vs.
FLORIDA HOUSING FINANCE CORPORATION,
Respondent.
)
)
)
)
)
) Case No. 03-3113
)
)
)
)
)
)
PROVINCETOWN VILLAGE PARTNERS, ) LTD., )
)
Petitioner, )
)
vs. )
)
FLORIDA HOUSING FINANCE )
CORPORATION, )
)
Respondent. )
Case No. 03-3115
)
RECOMMENDED ORDER
Pursuant to notice, a formal hearing was conducted on November 6, 2003, in Tallahassee, Florida, by Carolyn S. Holifield, a duly-designated Administrative Law Judge of the Division of Administrative Hearing.
APPEARANCES
Petitioner: M. Christopher Bryant, Esquire
Oertel, Fernandez & Cole, P.A.
301 South Bronough Street, Fifth Floor Post Office Box 1110
Tallahassee, Florida 32302-1110
Respondent: Hugh Brown, Esquire
Florida Housing Finance Corporation
227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329
STATEMENT OF THE ISSUES
The issues for determination are: (1) whether Riverside Village Partners, LTD. (Riverside or Petitioner), has, or had at the time of application, a present plan to convert its proposed development to any use other than affordable residential rental property; (2) whether Provincetown Village Partners, LTD. (Provincetown or Petitioner), has, or had at the time of application, a present plan to convert its proposed development to any use other than affordable residential rental property;
(3) whether Riverside irrevocably committed to set aside units in its proposed development for a total of 50 years; and (4) whether Provincetown irrevocably committed to set aside units in its proposed development for a total of 50 years.
PRELIMINARY STATEMENT
On August 12, 2003, Petitioners, Provincetown Village Partners, LTD., and Riverside Village Partners, LTD., filed Petitions of Formal Administrative Hearings with Respondent, Florida Housing Finance Corporation. After reviewing these petitions, Respondent forwarded them to the Division of Administrative Hearings, where they were assigned Case
Nos. 03-3113 (Riverside) and 03-3115 (Provincetown). A final
hearing in the Riverside matter was originally scheduled for October 28, 2003, in Tallahassee, Florida. A final hearing in the Provincetown matter was originally scheduled for October 29, 2003. Prior to the scheduled hearing dates, the parties filed a Joint Motion to Consolidate Cases, which was granted on September 22, 2003. Respondent subsequently filed an unopposed Motion to Continue Formal Hearing on October 13, 2003, which was granted on October 21, 2003. The formal hearing in the consolidated cases was rescheduled for November 6, 2003, in Tallahassee, Florida.
At hearing, Petitioners called three witnesses: Jay P. Brock, Kerey Carpenter, and Michael J. Sciarrino. Petitioner offered 21 exhibits, including the deposition transcript of Scott Culp, all of which were received into evidence.
Respondent called one witness, Kerey Carpenter, and offered three exhibits, all of which were received into evidence.
Prior to the evidentiary part of the hearing, the parties filed a Prehearing Stipulation, in which they stipulated to certain facts that required no proof at hearing. Also, the undersigned took official recognition of Florida Administrative Code Rule Chapters 67-21 and 67-48, as well as the 2003 Universal Cycle Application and instructions, as incorporated by reference.
A Transcript of the hearing was filed on December 10, 2003.
At the conclusion of the hearing, the parties agreed to file proposed recommended orders ten days after the transcript was filed. Respondent subsequently requested and was granted additional time to file its proposed recommended order. Both parties filed Proposed Recommended Orders which have been carefully considered in preparation of this Recommended Order.
FINDINGS OF FACT
Parties
Petitioner, Provincetown Village Partners, LTD., is a Florida limited partnership with its business address at
1551 Sandspur Road, Maitland, Florida 32751, and is in the business of providing affordable housing units.
Petitioner, Riverside Village Partners, LTD., is a Florida limited partnership with its business address at 1551 Sandspur Road, Maitland, Florida 32751, and is in the business of providing affordable housing units.
Respondent, Florida Housing Finance Corporation (Florida Housing), is a public corporation that administers governmental programs relating to the financing and refinancing of affordable housing and related facilities in Florida pursuant to Section 420.504, Florida Statutes (2003).
Florida Housing's Financing Mechanisms
To encourage the development of affordable rental housing for low-income families, Florida Housing provides low-interest mortgage loans to developers of qualified
multi-family housing projects. In exchange for an interest rate lower than conventional market rates, the developer agrees to "set-aside" a specific percentage of the rental units for
low-income tenants.
Through its Multi-Family Mortgage Revenue Bond (MMRB) program, Florida Housing funds these mortgage loans through the sale of tax-exempt and taxable bonds. Applicants then repay the loans from the revenues generated by their respective projects. Applicants who receive MMRB proceeds are required to execute a Land Use Restriction Agreement (LURA or Land Use Restriction Agreement), which is recorded in the official records of the county in which the applicant’s development is located.
Through the State Apartment Incentive Loan (SAIL) program, Florida Housing funds low-interest mortgage loans to developers from various sources of state revenue, which are generally secured by second mortgages on the property. Applicants who receive SAIL proceeds are required to execute and record a LURA in the county records as with MMRB's Land Use Restriction Agreements.
Florida Housing also distributes federal income tax credits for the development of affordable rental housing for low-income tenants; those tax credits are referred to as "housing credits." Generally, applicants who utilize tax-exempt bond financing for at least 50 percent of the cost of their development are entitled to receive an award of housing credits on a non-competitive basis. These non-competitive housing credits are received by the qualified applicant each year for ten consecutive years. Typically, applicants sell this future stream of housing credits at the initiation of the development process in order to generate a portion of the funds necessary for the construction of the development.
The Application, Scoring, and Ranking Process
Because Florida Housing’s available pool of tax-exempt bond financing and SAIL funds is limited, qualified projects must compete for this funding. To determine which proposed projects will put the available funds to best use, Florida Housing has established a competitive application process to assess the relative merits of proposed projects.
Florida Housing’s competitive application process for MMRB and SAIL financing is included with other financing programs within a single application process (the 2003 Universal Application) governed by Florida Administrative Code Rule Chapters 67-21 and 67-48. The 2003 Universal Application form
and accompanying instructions are incorporated as Form "UA1016" by reference into Florida Administrative Code Chapters 67-21 and 67-48 and by Florida Administrative Code Rules
67-21.002(97), and 67-48.002(111), respectively.
For the 2003 Universal Application cycle, each applicant who completed and submitted Form UA1016 with attachments was given a preliminary score by Florida Housing. Following the issuance of preliminary scores, applicants are provided an opportunity to challenge the scoring of any competing application through the filing of a Notice of Possible Scoring Error (NOPSE). Florida Housing considers each NOPSE filed and provides each applicant with notice of any resulting change in their preliminary scores (the NOPSE scores).
Following the issuance of NOPSE scores, Florida Housing provides an opportunity for applicants to submit additional materials to "cure" any items for which the applicant received less than the maximum score or for which the application may have been rejected for failure to achieve "threshold." There are certain portions of the application which cannot be cured; the list of noncurable items appears in Florida Administrative Code Rules 67-21.003(14) (for MMRB applicants) and 67-48.004(14) (for SAIL applicants).
Following the cure period, applicants may again contest the scoring of a competing application by filing a
Notice of Alleged Deficiencies (NOAD), identifying deficiencies arising from the submitted cure materials. After considering the submitted NOADs, Florida Housing provides notice to applicants of any resulting scoring changes. The resulting scores are known as "pre-appeal" scores.
Applicants may appeal and challenge, via formal or informal hearings, Florida Housing’s scoring of any item for which the applicant received less than the maximum score or for any item that resulted in the rejection of the application for failure to meet "threshold."
Upon the conclusion of the informal hearings, and of formal hearings where appropriate, Florida Housing issues the final scores and ranking of applicants. Applicants are then awarded tentative MMRB and/or SAIL funding in order of rank; Florida Housing issues final orders allocating the tentative funding and inviting successful applicants in the credit underwriting process.
If an applicant who requests a formal hearing ultimately obtains a final order that modifies its score and threshold determinations so that its application would have been in the funding range had the final order been entered prior to the date the final rankings were presented to the Florida Housing Board of Directors (Board), that applicant’s requested
funding will be provided from the next available funding or allocation.
The 2003 Application Process
On or about April 8, 2003, Riverside, Provincetown, and others submitted applications for MMRB and SAIL financing in the 2003 Universal Application cycle.
Riverside requested $3,205,000 in tax-exempt MMRB funding and $1.6 million in SAIL funding to help finance its proposed development, a 34-unit development in Pinellas County, Florida. In its application, Riverside committed to lease all or most of these units to house families earning 60 percent or less of the area median income (AMI). However, depending on which Florida Housing funding source(s) Riverside’s application was deemed eligible to receive, it would commit to lease at least 17 percent of the units to families earning 50 percent or less of AMI, or would commit to lease only a total of 85 percent of the units to families earning 60 percent or less of AMI.
Provincetown requested $4.5 million in tax-exempt MMRB funding and $2.0 million in SAIL funding to help finance its proposed development, a 50-unit development in Gadsden County, Florida. In its application, Provincetown committed to lease all or most of the units to families earning 60 percent or less of AMI. However, depending on which Florida Housing program(s) Provincetown’s application was deemed eligible to receive, it
would commit to lease at least 11 percent of the units to families earning 50 percent or less of AMI, or would commit to lease only a total of 85 percent of the units to families earning 60 percent or less of AMI.
Florida Housing evaluated all applications and notified applicants of their preliminary scores on or before May 12, 2003. Applicants were then given an opportunity to file NOPSEs on or before May 20, 2003.
After considering all NOPSEs, Florida Housing notified applicants by overnight mail on or about June 9, 2003, of any resulting changes in the scoring of their applications. Applicants were then allowed to submit, on or before June 19, 2003, cure materials to correct any alleged deficiencies in their applications previously identified by Florida Housing.
Applicants were also allowed to file NOADs on competing applications on or before June 27, 2003. After considering the submitted NOADs, Florida Housing issued notice to Provincetown, Riverside, and others of their adjusted scores on or about July 21, 2003.
Commitment to Affordability Period
Florida Administrative Code Rule 67-21.006, entitled "Development Requirements," lists certain minimum requirements that a development shall meet or that an applicant shall be able to certify that such requirements shall be met. One of these
requirements is "The Applicant shall have no present plan to convert the Development to any use other than the use as affordable residential rental property."
Part III.E.3 of the Application provides a line for an applicant to commit to an "affordability period" for its application. This subsection of the application form reads in its entirety:
3. Affordability Period for MMRB, SAIL, HOME, and HC Application:
Applicant irrevocably commits to set aside units in the proposed Development for a total of years.
Both Provincetown and Riverside filled in the number "50" on the blank line in this subsection of their respective applications.
An applicant’s score on its application is determined in part by the length of its affordability period commitment. An applicant who commits to an affordability period commitment of 50 or more years received 5 points; 45 to 49 years, 4 points;
40 to 44 years, 3 points; 35 to 39 years, 2 points; 31 to 34 years, 1 point; and 30 years or less, 0 points.
Scoring of Provincetown and Riverside Applications
In its preliminary scoring of the Provincetown and Riverside applications, Florida Housing awarded each applicant the full 5 points on Part III.E.3 of his or her application for the 50-year affordability period commitment. Also, in the
preliminary scoring of the Provincetown and Riverside applications, Florida Housing did not find any threshold failure regarding an alleged present plan to convert the development to a use other than affordable residential rental property.
In its preliminary scoring of the Provincetown application, Florida Housing identified an alleged threshold failure related to the validity of the contract for purchase of the site of the proposed development. A subsequent cure submitted by Provincetown regarding the contract for purchase of the site has resolved this issue, and Florida Housing no longer takes the position that the Provincetown application fails threshold for any reason related to site control.
In its preliminary scoring of the Riverside application, Florida Housing identified a threshold failure related to documentation of the status of site plan approval, or plat approval, for the proposed development. A subsequent cure submitted by Riverside regarding the status of site plan approval has resolved this issue, and Florida Housing no longer takes the position that the Riverside application fails threshold for any reason related to site plan approval, or plat approval.
During the scoring process, Florida Housing received NOPSEs on both the Provincetown and Riverside applications, which asserted that these applicants were proposing transactions
that were not financially feasible and would not pass subsequent credit underwriting requirements. The NOPSEs also alleged that the Riverside and Provincetown applications were for townhouses designed with an intent to eventually convert to home ownership in violation of Florida Administrative Code Rule 67-21.006(6).
According to that rule, the applicant shall have no present plan to convert the development to any use other than the use as affordable residential rental property.
After reviewing these NOPSEs, but before issuing revised NOPSE scores, Florida Housing determined that it was inappropriate to apply subsequent credit underwriting requirements during the scoring of these applications, and therefore, disagreed with the allegations of the NOPSEs on those grounds. Accordingly, Florida Housing's scoring summaries for Riverside and Provincetown issued, after receipt of the NOPSEs, raised no issues concerning financial feasibility, and it was not placed at issue in this proceeding.
Following the filing of NOPSEs, Florida Housing released NOPSE scores for all applicants, including Riverside and Provincetown. The NOPSE scores are reflected on a NOPSE Scoring Summary dated June 9, 2003. For both Provincetown and Riverside, the NOPSE Scoring Summary contained the following statement regarding alleged threshold failure, identifying two separate reasons for the alleged threshold failure:
The proposed Development does not satisfy the minimum Development requirements stated in Rule 67-21.006, F.A.C. The Development is not a multifamily residential rental property comprised of buildings or structures each containing four or more dwelling units. Further, the Applicant has a present plan to convert the Development to a use other than as an affordable residential rental property.
The first threshold failure noted in the preceding paragraph relates to Florida Administrative Code Rule
67-21.006(2), which requires that there be four or more residential units per building for projects financed with MMRB. A subsequent cure regarding the design of the proposed developments has resolved this issue, and Florida Housing no longer contends that these applications, as cured, exhibit a threshold failure related to the number of residential units per building.
The second threshold failure noted in the NOPSE Scoring Summary and quoted in paragraph 30 above, relates to Florida Administrative Code Rule 67-21.006(6), which requires that applicants "shall have no present plan to convert the Development to any use other than the use as affordable residential rental property."
In response to the NOPSE Scoring Summaries, both Provincetown and Riverside submitted cures to their respective applications. In the cures, Provincetown and Riverside
presented their explanations of how they believed their applications, as submitted, demonstrated a 50-year affordability period commitment and included these applicants’ contentions that they had no present plan to convert the developments to a use other than affordable residential rental property.
For Provincetown, an issue had also been raised by a NOPSE concerning whether the Provincetown application was entitled to certain "tie-breaker" points for the distance from the proposed development to a public transportation stop. The points awardable to Provincetown for tie-breaker purposes are not in dispute, and Provincetown, if its application is otherwise deemed to meet threshold requirements, would be entitled to 5.0 of a possible 7.5 tie-breaker points.
If Riverside's application were deemed to meet threshold requirements and if the 5 points for the affordability period commitment were restored, Riverside would have been within the funding range for applicants within the 2003 Universal Application cycle at the time the Board took final action on the ranking of applications on October 9, 2003.
If Provincetown's application were deemed to meet threshold requirements and if the five points for the affordability period commitment were restored, Provincetown would have been within the funding range for applicants within
the 2003 Universal Application cycle at the time the Board took final action on the ranking of applications on October 9, 2003.
The Sciarrino Letter and Cures
After reviewing the NOPSEs filed against the Provincetown and Riverside applications, Florida Housing received a letter dated June 2, 2003 (Sciarrino letter or letter), from Michael Sciarrino, president of the CED Companies, addressed to Orlando Cabrera, executive director of Florida Housing, with a copy to Kerey Carpenter, deputy development officer of Florida Housing.
Michael Sciarrino is a manager of the sole general partner (CED Capital Holdings 2003 Y, LLC., a Florida limited liability company) of Provincetown. Mr. Sciarrino is also a Class B limited partner of the sole member of the general partner (CED Capital Holdings XVI, LTD., a Florida limited partnership).
Michael Sciarrino is a manager of the sole general partner (CED Capital Holdings 2003 K, LLC., a Florida limited liability company) of Riverside. Mr. Sciarrino is also a Class B limited partner of the sole member of the general partner (CED Capital Holdings 2003 XVI, LTD., a Florida limited partnership).
As manager of the sole general partner of Provincetown and Riverside, Mr. Sciarrino had supervisory authority and
editorial control over the processing and preparation of the Provincetown and Riverside applications.
The Sciarrino letter was drafted, in part, to respond to the allegations of the NOPSEs filed against Provincetown and Riverside applications and specifically addressed those issues pertaining to Provincetown and Riverside applications. Also, while the letter does not mention Petitioners by name, the description and location of the properties, as detailed in the letter, clearly refer to these applicants.
The Sciarrino letter evinces a present plan on the part of Petitioners to convert the proposed developments to a use other than that of affordable residential rental housing. First, the letter describes in detail the economic motivations for the subsequent sale of the units of the proposed development within the 50-year extended affordability period stating that the "residual value potential" of such an arrangement "is the single biggest economic reason for our desire to develop these communities." Next, the letter describes in detail the means by which Petitioners would be relieved of the commitment to a
50-year affordability period as stated in their applications, that is, by seeking a waiver from Board after the 15-year period of tax credit recapture exposure had expired. Third, the letter plainly states that Petitioners had intended to request such relief from the 50-year affordability period in the future.
Petitioners' present plan to convert the proposed developments for sale to homeowners during the 50-year extended affordability period is further evident by the fact that the concept of such a conversion existed prior to and at the time the applications were filed. Moreover, the Provincetown and Riverside developments were specially selected to test the concept.
On or about June 19, 2003, Petitioners filed cures with Florida Housing addressing the issues raised in the NOPSEs. While the cures presented argument in favor of their respective applications and reiterated Petitioners' commitment to the
50-year extended affordability period for each proposed development, they did not deny that it was their intention to seek relief from this period in the future.
Following review of the Sciarrino letter and the cures submitted by Petitioners, Florida Housing rejected both the Provincetown and Riverside applications for failing to meet the mandatory development requirement set forth in Florida Administrative Code Rule 67-21.006(6). The applications also had five points deducted from their scores on the grounds that, under the circumstances, their commitment to an affordability period could not be determined.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2003).
Pursuant to its rulemaking authority, the Florida Housing promulgated Florida Administrative Code Rule Chapters 67-21 and 67-48. The Universal Application Instructions, Universal Application Form, and the Application Exhibits Forms, all designated Form UA1016 (Rev. 4-03), are incorporated by reference into Florida Administrative Code Rules 67-21.002(97) and 67-48.002(111).
Florida Administrative Code Rule 67-21.006 governs Florida Housing's MMRB program and provides in pertinent part:
A Development shall at a minimum meet the following requirements or an Applicant shall be able to certify that the following requirements shall be met with respect to a Development:
* * *
(6) The Applicant shall have no present plan to convert the Development to any use other than the use as affordable residential rental property. . . .
The evidence established that Riverside and Provincetown had, at the time their applications were filed, a present plan to convert their respective proposed developments to a use other than that of affordable residential rental
property. Moreover, Petitioners never denied such plan in the cures submitted to Florida Housing. The plan to convert units from rental property to ownership is clearly a violation of Florida Administrative Code Rule 67-21.006(6). Having violated that rule, Petitioners' applications were properly rejected and the applicants were likewise appropriately determined to be ineligible to compete for funds under the MMRB program.
The evidence also established that Petitioners intended to seek relief from the commitment to a 50-year affordability period they had indicated on the applications. Although Provincetown and Riverside were not required to commit to the 50-year affordability period, they chose to do so and for that commitment, they were each awarded five points for that category. However, because of information contained in the Sciarrino letter, no determination could be made by Florida Housing regarding Petitioner's affordability commitment. Therefore, Florida Housing appropriately deducted five points from each applicant's score on Part III.E.3 of the applications.
Petitioners assert that Florida Housing improperly considered the Sciarrino letter in making any determinations regarding their applications and that the use of the letter violates the agency's "four corners" policy. Under that policy, Petitioners contend that Florida Housing routinely refuses to review and/or deem as relevant any material outside the four
corners of the original application, NOPSEs, and cures related to the application.
The cases cited by Petitioners as support for the "four corners" policy are factually distinguishable from this case. See Tidewater Revitalization v. FHFC, FHFC Case
No. 2002-0023, Application 2002-067C; Camellia Pointe Limited
v. FHFC, FHFC Case No. 2002-0051, Application No. 2002-118C; Walton County Development Corporation v. FHFC, FHFC Case
No. 2002-0066, Application No. 2002-719H. In those cases cited by Petitioners, the applicants were not allowed to supplement their applications with documentation submitted after the filing deadline and/or during the scoring process.
In this case, Florida Housing properly used the Sciarrino letter in its independent review, analysis, and verification of information contained in the applications. The applications completed by Petitioners authorized such action by Florida Housing and also provided notice to applicants of the same.
Exhibit 1 to Petitioners' applications states:
The Applicant acknowledges that the Corporation may conduct its own independent review, analysis and verification of all information contained in this Application and that any funding preliminarily secured by the Applicant is expressly conditioned upon such verification, the successful completion of credit underwriting, all necessary approvals by the Board of
Directors, Florida Housing legal counsel, Bond Counsel, if applicable, the Credit Underwriter, and Corporation Staff.
Respondent not only had the authority to consider the Sciarrino letter in evaluating whether these applications met the mandatory requirements of Florida Administrative Code
Rule Chapter 67-21, but was obligated to do so.
Petitioners also asserted at the final hearing that their commitments to keep the proposed developments as affordable residential rental properties for 50 years, as stated in their original applications, constitute irrevocable commitments. Petitioners contend that their commitments are incorporated into LURAs or Extended Use Agreements that are covenants that run with the land and cannot be modified without express permission from the Board.
In light of the facts established in this case, Petitioners' argument that the applications and other documents associated thereto constitute irrevocable commitments is unpersuasive. While the commitments Petitioners made in their applications are not in dispute, the evidence clearly established that Petitioners intended to and had a plan to seek relief from those commitments. Petitioners were not only aware of the procedures necessary to accomplish this, but also communicated their intent to seek relief from the commitments
and/or modifications to the applications/agreements by requesting waivers from the Board.
Based on the foregoing Findings of Fact and Conclusions of Law, it is
RECOMMENDED that the Florida Housing Finance Corporation enter a final order that upholds the scoring of the applications of Riverside Village Partners, LTD., and Provincetown Village Partners, LTD.; that rejects the applications of Riverside Village Partners, LTD., and Provincetown Village Partners, LTD.; and that denies the relief requested in the Petitions.
DONE AND ENTERED this 27th day of February, 2004, in Tallahassee, Leon County, Florida.
S
CAROLYN S. HOLIFIELD
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 27th day of February, 2004.
COPIES FURNISHED:
Hugh R. Brown, Esquire
Florida Housing Finance Corporation
227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329
M. Christopher Bryant, Esquire Oertel, Fernandez & Cole, P.A.
301 South Bronough Street, Fifth Floor Post Office Box 1110
Tallahassee, Florida 32302-1110
Orlando J. Cabrera, Executive Director Florida Housing Finance Corporation
227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301
Wellington H. Meffert, II, General Counsel Florida Housing Finance Corporation
227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.
| Issue Date | Document | Summary |
|---|---|---|
| Apr. 02, 2004 | Agency Final Order | |
| Feb. 27, 2004 | Recommended Order | Respondent properly rejected Petitioners` applications where the evidence established that Petitioners had presented a plan to convert developments to a use other than as an affordable residential property. |
