STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RELIANCE-ANDREWS ASSOCIATES, LTD.,

Petitioner,

vs.

FLORIDA HOUSING FINANCE CORPORATION,

Respondent.

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) Case No. 04-3000

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RECOMMENDED ORDER

Pursuant to notice, a final hearing was held in this case pursuant to Sections 120.569 and 120.57(1)(e), Florida Statutes, on October 4, 2004, at Tallahassee, Florida, before Michael M. Parrish, an Administrative Law Judge of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Cynthia S. Tunnicliff, Esquire

Pennington, Moore, Wilkinson, Bell & Dunbar, P.A.

215 South Monroe Street, Second Floor Post Office Box 10095

Tallahassee, Florida 32302-2095

For Respondent: Wellington H. Meffert, II, General Counsel Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329

STATEMENT OF THE ISSUES

The issues in this case are whether the Florida Housing Finance Corporation (“Florida Housing”) employed an unadopted rule when it used rounding on a competing application to place Petitioner’s application for Low Income Housing Tax Credits (“HC” or “Tax Credits”) in the 2004 Universal Application Cycle in the “B” leveraging tie-breaker group, and if so, whether Florida Housing complied with the requirements of Section 120.57(1)(e), Florida Statutes, when it employed rounding.

PRELIMINARY STATEMENT

At the final hearing Petitioner offered five exhibits, all of which were received in evidence. Petitioner did not call any witnesses. Respondent presented the testimony of two witnesses, Steven Auger and Chris Buswell. Respondent also offered four exhibits, all of which were received in evidence. At the request of Respondent, official recognition was taken of some of the definitions in Florida Administrative Code Rule 67-48.002.

The parties’ Pre-Hearing Stipulation, which included a number of stipulated facts, was offered and received as Joint Exhibit 1.

At the conclusion of the hearing, the parties agreed that the deadline for filing proposed recommended orders would be twenty days from the filing of the hearing transcript. The transcript was filed on October 12, 2004. On November 1, 2004, both parties filed Proposed Recommended Orders containing

proposed findings of fact and conclusions of law. The proposals submitted by the parties have been carefully considered during the preparation of this Recommended Order.1

FINDINGS OF FACT

1. Petitioner is a Florida limited partnership. Reliance- Andrews, LLC, the sole general partner of Petitioner, is a non- profit entity under Florida Administrative Code Rule 67- 48.002(81). Petitioner’s address is 516 Northeast 13th Street, Fort Lauderdale, Florida 33304.

2. The affected agency is the Florida Housing Finance Corporation (“Florida Housing”), 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301-1329. Florida Housing is a public corporation organized under Part V, Chapter 420, Florida Statutes, to provide and promote the public welfare by administering the governmental function of financing and refinancing houses and related facilities in Florida in order to provide decent, safe, and sanitary housing to persons and families of low, moderate, and middle income.

3. Petitioner filed an application, number 2004-102C, with Florida Housing for tax credits under the Housing Credit (“HC”) program for a proposed development in Broward County, Florida, known as Flagler Point.

4. Under the HC program, successful applicants receive a dollar-for-dollar reduction in federal tax liability in exchange for the development of units to be occupied by low-income households.

5. Florida Housing is designated as the housing credit agency for the State of Florida and is authorized to establish procedures necessary for the allocation of Tax Credits under Section 420.5099, Florida Statutes.

6. Florida Housing scores and ranks applications for the HC program pursuant to the Universal Application Package Instructions ("Application Instructions") which are adopted as rules pursuant to Florida Administrative Code Rule 67- 48.002(111).

7. The applicants for housing credits are sophisticated, and the application process is highly competitive. Most applicants achieve a perfect score on applications, so Florida Housing has created a series of “tiebreakers” to determine which projects receive allocations of tax credits. These include “leveraging,” (the amount of requested funding over the number of set-aside units), proximity to services, proximity of other Florida Housing developments, and, finally, a lottery.

8. Petitioner and numerous other applicants for the HC program received the maximum score on the application,

   66 points. Florida Housing then ranked the applications that

   received perfect scores to determine priority for funding according to certain Ranking and Selection Criteria as outlined in the Application Instructions. Part of the Ranking Selection Criteria process includes "tie-breakers" as enumerated in the Application Instructions.

9. The first of the applicable tie-breakers separates the applications into groups A and B based upon a formula used by Florida Housing to determine funding request per set-aside unit. Group A is comprised of the 80 percent of applications with the lowest amount of total funding request per set-aside unit. The

   20 percent of applications with the highest per unit request amount are placed in Group B. Applications in Group A receive preference over Group B. The A/B leveraging tiebreaker alone does not determine who gets funded. Some leveraging Group B projects are funded.

10. The total number of set-aside units for each Application is computed by multiplying the total number of units within the proposed development by the highest total set- aside percentage the applicant committed to in the Set-Aside Commitment section of the Application.

11. Florida Housing rounded up the total set-aside units on application 2004-084C from 182.7 (the product of the total number of units (203) and the highest total set aside percentage (90%)) to 183. Rounding this figure produces a lower per

    unit funding request amount for application 2004-084C ($51,857.95 instead of $51,943.10). Petitioner's per unit funding request is $51,882.28, which would be lower than application number 2004-084C if the total set-aside unit figure was not rounded. Petitioner's application was placed in Group B instead of Group A.

12. On May 7, 2004, Petitioner filed a Notice of Possible Scoring Error ("NOPSE") requesting correction of the set-aside unit rounding, which Petitioner contended was in error. Respondent did not adopt Petitioner’s NOPSE, and on May 28, 2004, issued its scoring summary for application number 2004- 084C indicating a per unit Florida Housing funding request of $51,857.95. On July 9, 2004, Respondent issued the 2004 Final Score Corporation Funding Per Set-Aside for A and B Groups indicating that Petitioner had been placed in Leveraging Group B.

13. Florida Housing has used rounding to determine the number of set-aside units in the same manner each year from the 2002 Universal Application Cycle through the 2004 Universal Application Cycle.

14. Applicants are encouraged to, and more often than not do, set aside 100 percent of the units for low or very low income tenants. As most applicants for Tax Credits do just that, rounding is not often an issue.

15. The number of set-aside units represents a commitment the developer makes in return for funding, and the number in the application is the number of set aside units the developer must provide, and is used to determine whether the development is in compliance with its commitment to Florida Housing, and to the Internal Revenue Service.

16. As a practical matter, the number of set-aside units cannot be a fraction of a unit. Rounding up to the next whole number is the only option, because if the unit number is rounded down, the percentage of set-aside units would be below the set- aside commitment, the IRS would deem that the property had not met its set-aside commitment, and the investors would not receive their tax credits.

17. Florida Housing revises its Universal Cycle Application and Instructions through the rulemaking process each year, in response to stakeholder input, in reaction to litigation, and to clarify issues which arise during the year.

18. During the rulemaking process, there is considerable dialogue between developers and Florida Housing. Public hearings (rule development workshops) are noticed in the Florida Administrative Weekly, with the agendas being posted on Florida Housing’s website and also made available for distribution at the public hearings.

19. The affordable housing development community is small and its members pay close attention to Florida Housing’s application process, which is intensely competitive. Petitioner is an experienced developer, and has previously received funding from Florida Housing.

20. Petitioner is a member of a coalition of affordable housing developers, which meets before the rule development workshops to discuss the agenda, and to attempt to reach consensus on agenda issues.

21. Petitioner is part of the development community, which normally participates in the rule development process, and Petitioner has been an active participant in the 2005 rule development process.

22. An active member of the affordable housing developer’s coalition, and a veteran participant in the Florida Housing application and funding process, would have been aware of Florida Housing’s use of rounding to determine the number of set-aside units to which each applicant committed.

23. The rounding issue that is at the heart of this proceeding has been addressed by Florida Housing in its proposed rule amendments to Florida Administrative Code Rule 67-48.002 for the 2005 Universal Application Cycle.

    CONCLUSIONS OF LAW

    
    

24. Pursuant to Sections 120.569 and 120.57(1)(e), Florida Statutes, the Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding.

25. Florida Housing is authorized to institute, and has instituted, a competitive application process, for the HC programs. § 420.5099, Fla. Stat., and Fla. Admin. Code R. 67- 48.004.

26. Florida Housing’s application form and instructions have been adopted by Rule as Form UA1016 (Rev. 3-04). Fla. Admin. Code R. 67-48.002(111).

27. Petitioner has standing to proceed in this action. § 120.569, Fla. Stat.

28. A necessary prerequisite to the application of Section 120.57(1)(e), Florida Statutes, is a showing that the agency action at issue “is based on an unadopted rule.” With certain exceptions not relevant here, the term “rule” is defined as follows at Section 120.52(15), Florida Statutes:

    (15) “Rule” means each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule.

    The term also includes the amendment or repeal of a rule. . . .

    
    

29. Florida Housing has duly adopted Florida Administrative Code Rule 67-48.002, which contains numerous definitions of terms used in the course of Florida Housing’s administration of the HC program. Section 69 of that rule reads as follows: “(69) ‘Housing Credit Set-Aside’ means the number of units in a Housing Credit Development necessary to satisfy the percentage of Low-Income or Very Low-Income units chosen by the Applicant in the Application.”

30. At issue here is an agency statement explaining how an existing rule of general applicability will be applied in a particular set of facts. Specifically, the agency statement at issue here explains that when calculating an applicant’s Housing Credit Set-Aside, a calculation that includes a fraction will be rounded up to the next whole number. Such an explanation is not a rule. As noted in Environmental Trust v. State Department of Environmental Protection, 714 So. 2d 493 (1st DCA 1998), at 498:2

    An agency statement explaining how an existing rule of general applicability will be applied in a particular set of facts is not itself a rule. If that were true, the agency would be forced to adopt a rule for every possible variation on a theme, and private entities could continuously attack the government for its failure to have a rule that precisely addresses the facts at issue. Instead, these matters are left for the adjudication process under section

    120.57, Florida Statutes. (Emphasis in original.)

    
    

31. Because it is not a rule, the agency statement at issue here cannot be an “unadopted rule.” Accordingly, Section 120.57(1)(e), Florida Statutes, has no bearing on the disposition of this case.3

32. Florida Housing correctly and appropriately used rounding to determine the number of set-aside units used in the calculation which resulted in Application 2004-084C being placed in the “A” leveraging group.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued in this case dismissing the petition and denying all relief sought by Petitioner.

DONE AND ENTERED this 18th day of November, 2004, in Tallahassee, Leon County, Florida.

S

MICHAEL M. PARRISH

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 18th day of November, 2004.

ENDNOTES

1/ It should be noted that there is very little in the way of disputed issues of material fact in this case. The primary disputes in this case concern the disposition of the legal issues.

2/ To the same effect, see Bisz v. Florida Department of Agriculture, 802 So. 2d 385 (Fla. 3d DCA 2001), and Beverly Umilta Neblett v. Department of Health, Board of Nursing, DOAH Case No. 00-3198, 2000 WL 1880592 (Recommended Order issued December 18, 2000). See also DeDakis v. Florida Real Estate Commission, 338 So. 2d 22 (Fla. 1st DCA 1980).

3/ By reason of this conclusion, it is unnecessary to discuss at length whether the agency complied with all of the requirements itemized at Section 120.57(1)(e)2a through f, Florida Statutes.

Suffice it to note here that the administrative law judge is of the view, for the reasons set forth in paragraphs 10 through 19 of the Respondent’s proposed conclusions of law, that the agency has demonstrated compliance with all of the criteria itemized at Section 120.57(1)(e)2a through f, Florida Statutes.

COPIES FURNISHED:

Wellington H. Meffert, II, General Counsel Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329

Cynthia S. Tunnicliff, Esquire Pennington, Moore, Wilkinson,

Bell & Dunbar, P.A.

215 South Monroe Street, Second Floor Post Office Box 10095

Tallahassee, Florida 32302-2095

Orlando J. Cabrera, Executive Director Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329

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.

Docket for Case No: 04-003000

Orders for Case No: 04-003000