STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RAVENWOOD OF KISSIMMEE, LTD. ) and OAKCREST OF ST. CLOUD, ) LTD., )

)

Petitioners, )

)

vs. ) CASE NO. 92-2068

)

FLORIDA HOUSING FINANCE )

AGENCY, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled case was held in Tallahassee, Florida, on May 20-21, 1992, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioners: M. Christopher Bryant

Oertel, Hoffman

P.O. Box 6507

Tallahassee, Florida 32314-6507

For Respondent: Alfred O. Bragg, III

Assistant General Counsel Department of Community Affairs 2740 Centerview Drive

Tallahassee, Florida 32399-2100 STATEMENT OF THE ISSUE

The issue in this case is whether Petitioners are entitled to participate in the 1992 Florida allocation of low income housing income tax credits, subject to meeting underwriting requirements. Specifically, the question is whether Petitioners' applications are "untrue" so as to warrant their rejection by Respondent.

PRELIMINARY STATEMENT

By letter dated March 12, 1992, Respondent informed Petitioners that their applications for low income housing federal tax credits for the 1992 cycle had been rejected. The letter cites the reasons set forth in two letters dated March 9, 1992. In the earlier letters, Respondent rejected Petitioners' applications to participate in the SAIL program, from which Petitioners sought additional financial assistance for the same two housing projects that were the subject of the application for low income housing federal income tax credits.

One March 9 letter concerns a project known as Ravenwood. The letter rejects the application because of "irregularities." In particular, Respondent questions whether the contribution of land by the local government, as stated in the application, was bona fide.

The other March 9 letter concerns a project known as Oakcrest. In addition to questioning whether the claimed contribution of land was genuine, the letter asserts that the agency reportedly making the contribution was not a local governmental entity.

Petitioners filed a Petition for Formal Administrative Proceedings on March 19, 1992, challenging Respondent's rejection of the income tax credit applications for the Ravenwood and Oakcrest projects. Petitioners filed a Motion for Referral for Formal Proceedings on April 3, 1992, challenging Respondent's rejection of the SAIL applications for the two projects and requesting that informal proceedings, which had already been commenced, be converted to formal proceedings under Section 120.57(1), Florida Statutes.

Upon referral of both requests for hearing to the Division of Administrative Hearings, the undersigned consolidated for hearing the proceedings concerning the applications for low income housing federal tax credits and the SAIL program. Subsequently, Respondent suggested that the federal income tax credits might not be available after June 30, 1992, due to the repeal of the underlying tax credit provisions in the Internal Revenue Code.

The undersigned severed the cases to facilitate an expedited resolution of Petitioners' claim to federal income tax credits. For this reason, the parties were required to file proposed recommended orders by May 28, 1992, and did so. Rulings on proposed findings are detailed in the appendix.

At the hearing, Petitioners called four witnesses and offered into evidence

43 exhibits, including separately numbered subparts. Respondent called two witnesses and offered into evidence 13 exhibits, including subparts. All exhibits were admitted except Petitioners' 4b. Petitioners were given until May 28, 1992, to file Petitioners 4b1 (a copy of a signed promissory note; 4b was a copy of an unsigned note), 15a (additional portions of the St. Cloud comprehensive plan), 16 (missing pages from composite exhibit), 19 (transcript of May 1, 1992, FHFA meeting), and 25-29 (transcripts of depositions of Tompkins, Howse, Sandra Merritt, and Veal). Exhibits not filed timely are deemed withdrawn, as are those portions of exhibits not timely supplemented.

FINDINGS OF FACT

1. The Tax-Credit Allocation Program

   
   

   1. Section 42(h)(3) of the Internal Revenue Code of 1986, as amended, provides for federal income tax credits for the development of low income housing. The tax credits are allocated among the states based on state population. Respondent allocates the low income housing federal income tax credits available in Florida.

      
      

   2. The present case involves the 1992 tax credit- allocation cycle, which was unusual in one respect. The relevant provisions of Section 42 of the Internal Revenue Code are due to expire on June 30, 1992. Respondent expedited the application and evaluation process for the 1992 cycle because of uncertainty concerning whether credits not allocated by June 30 can be allocated after the expiration of Section 42.

   3. As in past cycles, applicants in the 1992 cycle sought more tax credits than Respondent had to allocate. In some categories, the sum of tax credits sought by applicants is four times greater than the total available tax credits. Since 1990, as a result of changes in the Internal Revenue Code, Respondent has implemented a competitive process to determine which applicants should be awarded tax credits.

      
      

   4. In general, the selection process consists of an application and evaluation process followed by an underwriting process involving only those applicants and projects that were determined to be in the funding range after completion of the application and evaluation process. The objective of both stages is to identify proposed projects that offer the best opportunities for the development of affordable housing in Florida. This case involves only the first stage in which Respondent evaluates the application.

      
      

2. The Subject Applications

   
   

   1. General

      
      

      1. Each Petitioner is a limited partnership formed to develop a low income rental housing project in Osceola County. The Ravenwood project is in the unincorporated county, and the Oakcrest project is in St. Cloud. Ronnie C. Davis is the general partner of both partnerships and controls the activities of these entities. His accountant, Steven Scott, has worked closely with Mr. Davis in connection with these and numerous other similar projects.

         
         

      2. As it had done successfully in past cycles, Petitioners applied to obtain federal income tax credits and sell the limited partnership interests (with tax credits) to a third party. The third party would combine Petitioners' projects with others like them and syndicate limited partnership interests to individual investors seeking, among other things, the available tax credits in order to lower their federal income tax liability. This indirect federal subsidy of development costs is intended to encourage the development of affordable housing.

         
         

      3. The application completed by Petitioners and other applicants in the 1992 cycle consists of numerous questions divided into 16 Forms. Each applicant receives a maximum of 1285 points based on the answers to the questions.

         Varying amounts of points are available for 12 of the 16 Forms. (Four Forms seek background information or constitute request forms.)

         
         

   2. The Ravenwood Application

      
      

      1. Form 1 of the Ravenwood application, which is dated January 30, 1992, consists of summarized information, which, where important, is requested elsewhere in the application. Due to its background nature, Form 1 involves no points.

         
         

      2. Form 1 of the Ravenwood application describes the proposed project as consisting of 181 units with eight units each in 23 different buildings. (Three units are reserved for on- site workers.) The project is situated on 11 acres and is projected to cost $9,537,049. Petitioner Ravenwood seeks $858,334 in federal income tax credits. Form 1 states that there is federal, state, or local financing "committed or to be committed to this Project." The financing is SAIL financing in the amount of $1.3 million representing 13.6% of the total

         project cost. Form 1 also states that the present owner acquired the property by gift on November 18, 1991.

         
         

      3. Form 4 addresses project feasibility and ability to proceed. Form 4 offers a maximum of 225 points. With Form 5,

         which concerns project funding, Form 4 is worth the most points of all the Forms.

         
         

      4. Form 4 of the Ravenwood application states, among other things, that the developer controls the site by County deed, which is intended to serve the purpose of a warranty deed. Attached as an exhibit to Form 4 is a letter dated November 20, 1991, from the Osceola County Administrator to Mr. Davis accompanying the delivery of a deed to the property from Osceola County to Ravenwood of Kissimmee, Ltd. The deed, which is dated November 18, 1991, recites as consideration "general benefit of the public." The deed conveys title to 11 acres "conditioned upon the grantee being awarded a state apartment incentive loan and tax credits no later than December 31, 1992. If this condition is not met by December 31, 1992, the property described herein shall revert to the grantor."

         
         

      5. The manner by which the limited partnership acquired the property is also covered in Form 6, which addresses local government contributions and planning efforts. Form 6 is worth 155 points, which is more than any other Form except Forms 4 and 5. The first part of Form 6 is directed to local government contributions. The first portion of the first part states:

         
         

         Attach evidence of any contribution or recommendation. Maximum points shall be awarded only when evidence of a contribution includes a signed statement from a chief elected official or his designee detailing the contribution from the appropriate local government. The value of the contribution must be stated in terms of a percentage of cost savings to the project. . . .

         
         

      6. Form 6 of the Ravenwood application answers affirmatively the question, "Has this project received any contributions from a local government?" In response to the request, "Describe the type of contribution," the application states: "Land as well as other government support and assistance."

         
         

      7. Form 6 states that the value of the contribution is $1,089,000. In response to a question as to how the value was calculated, the application reports that the value was calculated by a "local realtor." The application notes that the total project cost is $9,537,049.

      8. Form 6 contains a scoring sheet that awards points based on the ratio of the value of the local government contribution to the total project cost. If the local government contribution amounts to at least 10% of the total project cost, then the maximum of 75 points are earned for the first part of Form 6. Lower percentages earn fewer points, as follows: 9%-- 67.5 points, 8% 60

         points, 7%--52.5 points, 6%--45 points, 5%-- 37.5 points, 4%--30 points, 3%--

         22.5 points, 2%--15 points, and 1%--7.5 points.

         
         

      9. As support for the information provided in the first part of Form 6, the application contains various attachments in the back of Form 6. One attachment is a letter dated November 18, 1991, from Barney Veal,

         Broker/President of ERA--Osceola Brokerage Co., Realtor. The Veal letter, which is addressed to Mr. Davis, states in its entirety:

         
         

         Per your request, and after careful consideration, I have reviewed the value of the land donated to you by the Osceola County Board of County Commissioners. Weighted consideration was given for the following:

         *Development Improvements to the municipal water system

         *Development Improvements to the municipal sewer system

         *Development Improvements to the transportation system

         *Superior site use through off-site drainage

         *Ease of access via the John Young Parkway Extension to the "high tech" corridor of neighboring Orange County

         *Property aesthetics

         
         

         This property contains 11 acres, and has a current density of 18 units per acre, thus allowing construction of 198 multi-family units.

         Therefore, the estimated valuation is approximately

         $5500 per residential unit, which equals a total amount of 1,089,000 [sic].

         
         

      10. Another attachment to Form 6 is a letter from Ron Howse, P.A., an engineering and land planning firm. Mr. Howse, whose office is in St. Cloud, incorporates Mr. Veal's letter and provides the above-described responses to the questions contained in the first part of Form 6.

          
          

      11. The remaining attachments to Form 6 address the second part, which involves local government planning efforts with respect to affordable housing. This part of Form 6 is not relevant to the subject case.

          
          

   3. The Oakcrest Application

   
   

   1. The Oakcrest application, which is also dated January 30, 1992, is similar to the Ravenwood application. Form 1 of the Oakcrest application describes the proposed project as consisting of 189 units with eight units each in 24 different buildings. (Three units are reserved for on-site workers.) The project is situated on 19.4 acres and is projected to cost $10,164,207. Petitioner Oakcrest seeks $914,778 in federal income tax credits. Form 1 states that there is federal, state, or local financing "committed or to be committed to this Project." The financing is SAIL financing in the amount of $1.4 million representing 13.8% of the total project cost. Form 1 also states that the present owner acquired the property by gift on November 21, 1991.

      
      

   2. Form 4 of the Oakcrest application states, among other things, that the developer controls the site by warranty deed. Attached as an exhibit to Form 4 is a letter dated November 21, 1991, from Larry F. Hopper, Executive Director of the St. Cloud Area Chamber of Commerce. The letter is to Mr. Davis and accompanies the delivery of a deed to the property from the St. Cloud Housing & Revitalization Agency, Inc. to Oakcrest of St. Cloud, Ltd. The deed, which is dated November 21, 1991, conveys title to 19.4 acres

      conditioned upon the grantee being awarded a state apartment incentive loan and tax credits to construct no less than 193 units, with construction thereon to commence no later than December 31, 1992. If the above cited incentive loan and tax credits are not received and construction not begun by December 31, 1992,

      the property described herein shall revert to the grantor.

      
      

   3. Form 6 of the Oakcrest application answers affirmatively the question, "Has this project received any contributions from a local government?" In response to the request, "Describe the type of contribution," the application states: "Land Contribution, as well as other government support and assistance."

      
      

   4. Form 6 states that the value of the contribution is $1,018,000. In response to a question as to how the value was calculated, the application reports that the value was calculated by a "local realtor." The application notes that the total project cost is $10,164,207.

      
      

   5. As support for the information provided in the first part of Form 6, the application contains various attachments in the back of Form 6. One attachment is a letter dated November 18, 1991, from Barney Veal, Broker/President of ERA--Osceola Brokerage Co., Realtor. The Veal letter, which is addressed to Mr. Davis, states in its entirety:

      
      

      Per your request, and after careful consideration, I have reviewed the value of the land donated to you by the St. Cloud Housing and Revitalization Agency, Inc. Weighted consideration was given

      for the following:

      *Development Improvements to the municipal water system

      *Development Improvements to the municipal sewer system

      *Development Improvements to the transportation system

      *Location Proximity to a new growth area

      *Property Aesthetics

      
      

      This property contains 19.4 acres, and has a current density of 10 units per acre, thus allowing construction of 194 multi-family units.

      Therefore, the estimated valuation is approximately

      $5250 per residential unit, which equals a total amount of $1,018,500.

      
      

   6. Another attachment to Form 6 is a letter from Ron Howse, P.A., an engineering and land planning firm. Mr. Howse, whose office is in St. Cloud, incorporates Mr. Veal's letter and provides the above-described responses to the questions contained in the first part of Form 6.

      
      

   7. Another attachment to Form 6 of the Oakcrest application is a copy of the first two pages of the Articles of Incorporation of the St. Cloud Housing & Revitalization Agency, Inc., a not-for-profit corporation. According to the

      articles, the not-for-profit corporation was incorporated by the St. Cloud Area Chamber of Commerce, Inc.

      
      

3. Relevant Practices of Respondent

1. The head of Respondent is its Board of Directors. Each review cycle, the Board appoints a Review Committee, which normally consists of five or six persons. Different employees of Respondent serve on the Review Committee each year.

   
   

2. The Review Committee assigns scores for each Form of each application. These determinations are then submitted to the Board of Directors for further action.

   
   

3. Certain practices have evolved in connection with the scoring of applications. To the extent that any of these practices may constitute nonrule policy, Respondent has amply explicated the practices, which appear to be necessary and proper to the discharge of its responsibilities in the allocation of low income housing federal tax credits.

   
   

4. First, the Review Committee generally limits its

   review of an application to the material contained within the four corners of the application. The reason for this practice is that the Review Committee is typically operating under time pressures.

   
   

5. However, there are two circumstances in which the Review Committee may refer to information not contained within the application. The first and more frequent exception to the general rule is if something is unclear in the application. In this case, a member of the Review Committee or staff of Respondent may contact the applicant to obtain a clarification. Sometimes, the contact may be with a third party, such as a third-party lender to whom questions concerning the scope of a commitment letter may be directed. By limiting these inquiries to clarifications, Respondent avoids the possibility of the eliciting information that constitutes post-deadline amendments of material aspects of the application.

   
   

6. The second exception to the general rule is when a third party informs the Review Committee that certain information contained in an application is inaccurate. To a great extent, the accuracy of the contents of the application is checked in the underwriting stage of the allocation process. But, if time permits, the Review Committee or other representatives of Respondent may, if they so choose, undertake a necessarily limited investigation of statements in an application.

   
   

7. In the couple of years that the allocation process has been competitive, the only application rejected as "untrue," aside from Ravenwood and Oakcrest, was an application for a project known as Woodside. Ironically, this application appears to have been challenged by Mr. Davis and Mr. Ginsburg, 1/ who alerted Respondent to the fact that, contrary to representations contained in the application, the Resolution Trust Corporation, not the developer, owned the site. 2/

   
   

8. It appears that, due to timing, the Board itself rejected the Woodside application because the true facts were uncovered during the underwriting stage, rather than the application and evaluation stage. It appears that, also during underwriting, another application was rejected due to ineligibility, if not actual untruthfulness. In that case, an application for a project known as

   Golden Acres was rejected when representatives of the Board checked the project site and confirmed that the buildings had already been placed in service and thus would not be eligible for any or a full tax credit.

   
   

9. Except for one case in which the wrong application form was used, the record does not disclose if other applications have been summarily rejected for reasons other than satisfying a scoring threshold described in the application form and irrelevant to this case.

   
   

10. Rather than reject an application, at least prior to the underwriting process, the Review Committee and Board will often rescore an application. Not infrequently, a developer submits an application containing information that may be described, in the words of one witness, as optimistic in nature. If the application contains sufficient material for the Review Committee or Board to rescore a Form, possibly with the assistance of a clarification from the applicant or a third party, the application will be rescored so that a lower score results.

    
    

11. It is not always easy to describe what renders an application "untrue." One example of an untrue application would be if an applicant fabricated a loan commitment letter when no such commitment had been made. On the other hand, if the applicant claimed more points than the letter, on its face, justified due to its numerous contingencies and conditions, the application would clearly be rescored.

    
    

12. Although it may contain inaccuracies, a true application must disclose all material facts so that each Form may be scored reasonably accurately. The materiality of an omitted fact depends largely on the importance and purpose of the requested information. The decisions as to what information is important, material, or untrue and when to reject and when to rescore an application must be based on a balancing of at least two considerations.

    
    

13. The first is that the purpose of the application and evaluation and underwriting processes is to ensure that the available tax credits go to the best projects, in terms of meeting the critical needs of low income persons for affordable housing. Superior applications should not be rejected too readily.

    
    

14. The second is that the integrity of the evaluation process would be compromised if the "untrue application" language is interpreted so that all instances of applicant untruthfulness are reduced to over-optimism, thus meaning that untrue applications would be always rescored and never rejected.

    
    

15. Without the potential penalty of rejection, the process by which applications are evaluated and projects underwritten would become increasingly burdened by the chore of detecting growing numbers of misrepresentations. At some point, the resources of Respondent would become overtaxed, misrepresentations would probably escape detection, and the overall objective of the entire program--facilitating the availability of affordable housing--would eventually be defeated.

    
    

    V. Preliminary Scoring of the Applications in the 1992 Cycle

    
    

16. In the present case, on or about February 27, 1992, the Review Committee tentatively scored all of the applications. For medium counties, 3/ eight applications fell within the funding range, one application fell partly in the funding range, 16 applications meeting the scoring threshold fell outside the funding range, and one application failed to meet the scoring threshold.

17. The tentative scoring assigned Ravenwood 1190 points and Oakcrest 1153.87 points for the two highest scores among the nine projects tentatively allocated, in whole or in part, the tax credits requested.

    
    

18. On March 6, 1992, the Board of Directors reviewed the tentative scoring determined by the Review Committee. By this time, representatives of Respondent had determined that the contribution of the land from the local governments, as asserted in both applications, was not as represented. The Board decided to reject both applications.

    
    

19. If the Ravenwood and Oakcrest applications had been merely rescored so as to lose all 75 points for the first part of Form 6, they would have remained in the funding range. In fact, Ravenwood would have remained first, and Oakcrest would have been third, tied with another project.

    
    

20. Respondent has implemented an appeal process by which scores set by the Board, following review of the tentative scoring of the Review Committee, may be re-evaluated by the Board. In the 1992 cycle, 36 applicants took advantage of this process. The appeals hearing, which took place on May 1, 1992, resulted in the issuance of the final scoring tabulation, which is Petitioner Exhibit 14. However, no material changes took place with respect to medium counties, and the Ravenwood and Oakcrest applications remained rejected.

    
    

    1. Facts Not Disclosed on Applications

       
       

       1. Ravenwood

          
          

21. The basic problem with the Ravenwood application is that it states that the local government, Osceola County, contributed the raw land to the applicant. In substance, the County has conveyed nothing to the Ravenwood limited partnership.

    
    

22. Through a series of step transactions, Mr. Davis, using an agent, obtained title to the land from a genuine third party, conveyed the land to the County, and caused the County to convey the land to the Ravenwood limited partnership. The few details of the transactions that are relevant begin with the fact that, by contract dated April 9, 1991, Mr. Davis agreed to pay the original owners $300,000 for 12.5 acres. On October 30, 1991, Mr. Davis assigned the contract to his accountant's brother, Jimmy Alan Scott. By quitclaim deed acknowledged November 9, 1991, Mr. Scott quitclaimed any interest he had in the land to Osceola County.

    
    

23. On November 18, 1991, Mr. Davis, Mr. Scott, and Osceola County entered into a trilateral agreement. The parties agreed that Mr. Scott would convey the property to the County, which would convey the property to the Ravenwood limited partnership. Also, the County agreed that if the property reverted to it under the condition to be contained in its deed to the partnership, then it would reconvey the property to Mr. Scott.

    
    

24. Another significant aspect of the trilateral agreement is that the deeds from Mr. Scott to the County and the County to the Ravenwood limited partnership are to be "held in escrow pending the County's negotiations with [other parties including the original owners of the subject land] to acquire additional property for the recreational complex." By letter dated March 2, 1991, the attorney for the Ravenwood limited partnership discloses that the

    escrow had not been broken, inferentially because escrow conditions remained unsatisfied, and the deeds had not been recorded.

    
    

25. On November 16, 1991, Mr. Davis lent Mr. Scott the funds necessary to purchase the land from the original owners. A note for the amount was to be forgiven if Mr. Scott donated the land to Osceola County. By warranty deed dated January 6, 1992, the original owners conveyed the land to Mr. Scott, who, on the same date, conveyed the land to the County. The two deeds were identical except that deed into the County contains a reverter clause covering all but a small part of the property. The condition is that the majority of the land reverts to Mr. Scott if construction of no less than 184 units of affordable housing does not begin by December 31, 1991.

    
    

26. The only deed from the County to the Ravenwood limited partnership is dated November 14, 1991. Copies of the deed were produced at the hearing and attached to the Ravenwood application in Form 4. In the instrument, the County "has granted, bargained and sold" the subject land to the Ravenwood limited partnership conditioned upon the partnership "being awarded a state apartment incentive loan and tax credits no later than December 31, 1992. If this condition is not met by December 31, 1992, the property described herein shall revert to the grantor." There are no warranties, such as a warranty of title, contained in this deed.

    
    

27. The underlying problem with the Ravenwood application is as basic as the problem in the Woodside application, where Mr. Davis objected that the RTC, not the applicant, owned the land, contrary to the assertions contained in the application. The County has not contributed anything to the Ravenwood limited partnership because the partnership does not own the land.

    
    

28. First, unspecified escrow conditions have left uncompleted the conveyances to the County and the Ravenwood limited partnership. Tied up in escrow, the deeds have not been delivered, which is as basic an aspect to the conveyance of property as is their execution.

    
    

29. Second, the application shows that the limited partnership owns the land as a result of a deed from Osceola County. The deed predates the date on which the original owners conveyed the land to Mr. Scott and he purportedly, using an escrow arrangement, conveyed the land to Osceola County. In a deed without any warranties, it is questionable whether the doctrine of after- acquired interest or estoppel by deed would operate here.

    
    

30. In light of the problems identified in the preceding two paragraphs, the overstatement problem is less substantial. Although the County has contributed something in the way of services, there is no evidence that the contribution of such services anywhere approaches the claimed amount of

    $1,089,000, which is more than three times the value of the land as of April, 1991. However, in view of the failure of the Ravenwood limited partnership to obtain any title to the land, the value of the contribution is not $1,089,000, but zero.

    
    

    1. Oakcrest

       
       

31. The basic problem with the Oakcrest application also involves the contribution of raw land to the partnership. The land has not yet been conveyed to the partnership.

32. The relevant details of the Oakcrest transactions are similar to those of the Ravenwood transactions. On November 18, 1991, Mr. Scott and a genuine third party entered into an agreement for deed for 19.4 acres for payment of

    $300,000. The condition of a closing, which is set for no later than January 5, 1993, is that the Oakcrest limited partnership be awarded tax credits no later than December 31, 1992. Notwithstanding its title as an agreement for deed, the subject instrument operates like a purchase and sales contract, in part because Mr. Scott has not placed any money unconditionally at risk and a closing is set at a point in the future once certain contingencies have been satisfied.

    
    

33. On November 19, 1991, Mr. Scott conveyed by warranty deed to the St. Cloud Housing and Revitalization Agency, Inc. the same 19.4 acres subject to the condition that the "grantee [i.e., the Agency] being awarded a state apartment incentive loan and tax credits to construct no less than 193 units with construction thereon to commence no later than December 31, 1992." If the condition is unsatisfied, it provides for the property to revert to Mr. Scott.

    
    

34. On November 21, 1991, the St. Cloud Housing and Revitalization Agency, Inc. conveyed by warranty deed to the Oakcrest limited partnership the same 19.4 acres subject to the same condition concerning 193 units.

    
    

35. The Oakcrest transfers are ineffective and leave the Oakcrest limited partnership with no interest in the land and thus in receipt of no contribution from a local government. The application, which adequately discloses the nature of the St. Cloud Housing and Revitalization Agency, Inc. as other than a local governmental entity, contains only the warranty deed from the Agency to the Oakcrest limited partnership. The omission of the sales contract (i.e., Agreement for Deed) leaves the incorrect impression that the Agency had an interest to convey to the Oakcrest limited partnership. The Agency had no such interest because Mr. Scott had no such interest. 4/

    
    

36. But the valuation problem is greater in the Oakcrest case. Unlike the Ravenwood case, in which months passed between the contract and the date on which the applicant asserted the value of the land, the Oakcrest sales contract calling for a $300,000 purchase price was signed just three days before the deed purportedly conveying the land from the Agency to the Oakcrest limited partnership. Unlike the Ravenwood case, the Agency was making no other contributions to the partnership. Even assuming an effective conveyance, the application thus grossly overstates the value of the contribution at $1,018,500, when the original sellers only three days earlier agreed to sell the property, under substantial conditions favorable to the buyer, for only $300,000.

    
    

    1. Whether the Applications are Untrue

    
    

37. For the reasons set forth above, the Ravenwood and Oakcrest applications were untrue at the time that they were

    submitted and were properly rejected by Respondent. The materiality of the omissions is indisputable. Contrary to the assertions in both applications, the applicant in each case not only had not received a contribution of the land from a local government, but the applicant had not even obtained an interest in the land.

    
    

    CONCLUSIONS OF LAW

    
    

38. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes.

39. Respondent may reject an application for low income housing federal tax credits if "[t]he Applicant fails to file a timely, true or complete Application . . .." Rule 9I- 33.010(6)(c), Florida Administrative Code.

    
    

40. In each case, Petitioner has filed an application that is untrue.

RECOMMENDATION

Based on the foregoing, it is hereby recommended that the Florida Housing Finance Agency enter a final order rejecting the Ravenwood and Oakcrest applications as untrue.

RECOMMENDED this 9th day of June, 1992, in Tallahassee, Florida.

ROBERT E. MEALE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1992.

ENDNOTES

1/ Mr. Ginsburg's project, Reef Club Apartments Phase II, is at the bottom of the funding range for medium counties, which includes Osceola County. If one or both of Mr. Davis's projects were returned to the funding range, Mr. Ginsburg's project could be eliminated.

2/ As noted above, low income housing tax credits are scarce and demand for them is keen. A practice known as "narking" has developed among segments of the development community seeking credits from Respondent. Developers investigate the accuracy of information contained in other developers' applications and the scores given those applications. Then, the developers alert Respondent to incorrect statements or scores.

In the case of Woodside, which was in the 1991 cycle, Mr. Davis, as a general partner of a different limited partnership, sought tax credits in the same cycle. By letter to Respondent dated June 27, 1991, Mr. Davis' attorney at the time objected to the applications of other developers. The letter points out that one applicant could not possibly have the site control that he claimed in his application because the Resolution Trust Corporation was advertising the property for bids. In connection with other projects, the letter observes that so-called firm commitments are subject to unspecified conditions, thereby robbing the commitments of their firmness. With respect to another application, the letter notes that a zoning change would be required for the desired density. Lastly, the letter objects to all applications that, in violation of Rule 9I- 33.007(8), were bound in covers larger than 9"x11".

3/ The tax credits are allocated 60% to seven large counties, 30% to medium counties (including Osceola County), and 10% to small counties. In each category, 10% is reserved for not-for- profit developers.

4/ Even if the Agency had a property interest to convey on November 21, 1991, the conveyance, and thus the contribution, would have been ineffective due to the reverter clause. The Oakcrest application seeks credits to construct, at most, 192 units--one less than the number necessary to avoid the activation of the reverter clause.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-2068

Treatment Accorded Proposed Findings of Petitioner

All proposed findings are adopted or adopted in substance except as otherwise indicated.

Rejected as subordinate: 40-41; 57; 84-85; 103-39; and 151.

Rejected as legal argument: 45 (first sentence); 46; 56; and 60.

Rejected as unsupported by the evidence: 45 (third sentence); 55 (last sentence); 58 (last sentence); 59-62; 65-66; 76-83; 102 (last sentence and last independent clause of second to last sentence); 103-39 (in terms of comparison with Ravenwood and Oakcrest applications); 141 (first sentence); 143-45; 148; 150; 154; 156 (second sentence); and 157-58.

Rejected as irrelevant: 46; 57; 59; 73 (last independent clause); 84; 152;

and 155.

Rejected as unnecessary: 68-72; 85; 88-101; 146 (first two sentences); 149;

and 151.

Rejected as recitation of evidence: 150 and 153.

Treatment Accorded Proposed Findings of Respondent

All proposed findings are adopted or adopted in substance except as otherwise indicated.

Rejected as unnecessary: 25-26; 32; 37; 39; 58; and 77. Rejected as legal argument: 30.

Rejected as recitation of evidence: 30.

Rejected as subordinate: 37; 39; 46-51; and 79. Rejected as irrelevant: 45 (first sentence).

Rejected as repetitious: 51.

COPIES FURNISHED:

Kenneth G. Oertel

M. Christopher Bryant Oertel, Hoffman, et al.

P.O. Box 6507

Tallahassee, FL 32314-6507

Alfred O. Bragg, III, Assistant General Counsel Florida Housing Finance Agency

2574 Seagate Drive, Suite 101

Tallahassee, FL 32301-5026

Mark Hendrickson, Executive Director Florida Housing Finance Agency

2574 Seagate Drive, Suite 101

Tallahassee, FL 32301-5026

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to 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: 92-002068

Orders for Case No: 92-002068