STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MIAMI SUNSET BAY APARTMENTS, ) LIMITED PARTNERSHIP, )

)

Petitioner, )

)

vs. ) Case No. 01-3502

)

FLORIDA HOUSING FINANCE )

CORPORATION, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on November 8, 2001, in Tallahassee, Florida, before J. D. Parrish, a designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Margaret-Ray Kemper, Esquire

Ruden, McClosky, Smith, Schuster & Russell, P.A.

215 South Monroe Street Suite 815

Tallahassee, Florida 32301

For Respondent: Andrew T. Price, Esquire

Elizabeth G. Arthur, Esquire Florida Housing Finance Corporation

227 North Bronough Street Suite 5000

Tallahassee, Florida 32301-1329

STATEMENT OF THE ISSUE

Whether the Respondent, Florida Housing Finance Corporation, properly rejected the application filed by the Petitioner, Miami Sunset Bay Apartments, Limited Partnership, for State Apartment Incentive Loan (SAIL) funds during the 2001 Combined Cycle. In rejecting the application the Respondent concluded that the bond closing of December 15, 2000, constituted "permanent financing" such that the Petitioner was not entitled to participate in the allocation of SAIL funds.

PRELIMINARY STATEMENT

On September 4, 2001, the Respondent forwarded the instant case to the Division of Administrative Hearings for formal proceedings. The Petitioner challenged the Respondent's determination that it had failed to meet the threshold requirements of Rule 67-48.002(97)(b), Florida Administrative Code, and was therefore properly disallowed pursuant to Rule 67-48.004(17), Florida Administrative Code. More specifically, the Petitioner contested the determination that the closing on bond financing constituted "permanent financing."

At the hearing, the Petitioner presented testimony from Oliver Pfeffer, president of the Petitioner's general partner, and Patricia Green, an expert in

affordable housing development transactions. Mark Mustian, an expert in bond transactions, testified on behalf of the Respondent. Joint Exhibits 1 through 23 were admitted into evidence as were Petitioner's Exhibits

1 through 4.

The transcript of these proceedings was filed on November 19, 2001. Thereafter, the Petitioner filed an agreed motion for the extension of time to file Proposed Recommended Orders that was granted. The parties timely filed such proposed orders which have been considered in the preparation of this order.

FINDINGS OF FACT

1. On February 26, 2001, the Petitioner applied to the Respondent for SAIL funding for the 2001 Combined Cycle.

2. The Petitioner seeks funding for the construction of Sunset Bay Apartments, a 308-unit residential housing development, located in Miami-Dade County, Florida.

3. The Petitioner's application for funding was designated Application No. 2001-007S. It is undisputed that the Petitioner's project is the type eligible for SAIL funding.

4. The Respondent determined the Petitioner's application did not meet threshold requirements for consideration.

5. The Petitioner timely challenged the rejection of its application.

6. The Respondent is a public corporation organized to provide and promote funding for decent, safe, and sanitary housing for persons and families of low, moderate, and middle incomes.

7. The Respondent receives its funds for the SAIL program from an allocation of documentary stamp tax revenue. When such funds are available, the Respondent processes applications for entities seeking to participate in the SAIL funds.

8. On December 22, 2000, the Respondent published a Notice of Fund Availability that represented

   $36,470,000.00 was available for the SAIL 2001 Combined Cycle.

9. In response, the Respondent received requests for SAIL funding that totaled $65,565,926.00.

10. The Respondent is obligated by law to apportion the SAIL funds among counties and to competitively award the funds based upon the statutory and rule criteria.

11. Each applicant for SAIL funds is reviewed to assure compliance with the threshold requirements and to assign a score based upon review criteria.

12. In this instance, the Petitioner was initially approved and scored. Such approval was challenged and a Notice of Possible Scoring Error (NOPSE) was filed.

13. The Respondent was then obligated to investigate the allegations of the NOPSE. Accordingly, the Respondent determined that the Petitioner had failed to meet the threshold requirement found in Rule 67- 48.002(97)(b), Florida Administrative Code.

14. The Petitioner was given an opportunity to explain its apparent non-compliance and to submit additional documentation regarding the issue. All applicants considered for funding had the opportunity to review the information submitted by the Petitioner.

15. Thereafter, any applicant could submit a Notice of Alleged Deficiencies (NOAD) to the Respondent. In fact, the Respondent received NOADs challenging this Petitioner's application.

16. After reviewing the matter further, the Respondent determined that the Petitioner failed to meet threshold requirements because it had closed on its

    permanent financing prior to the submission of the SAIL application.

17. The Petitioner closed on a $13,335,000.00 Housing Finance Authority of Miami-Dade County, Florida Multifamily Housing Revenue Bond Series 2000-5A, and a

    $740,000.00 Housing Finance Authority of Miami-Dade County, Florida Taxable Multifamily Housing Revenue Bond Series 2000-5B on December 15, 2000. Thereafter, the Petitioner began construction of the project.

18. The financing described in paragraph 17 constituted a substantial portion of the financing for the construction of this project. It was not, however, the only source of financing for the development.

19. On June 27, 2001, the Petitioner closed on a Surtax Loan from Miami-Dade County that provided financing in the amount of $281,000.00 for the subject development.

20. Additionally, the Petitioner has applied to Miami-Dade County for an additional surtax loan in the amount of $719,000.00 for the 2002 cycle for this development.

21. The Respondent maintains that the bond closing of December 15, 2000, constituted "permanent financing"

    such that Petitioner is not entitled to participate in the SAIL funds.

22. Unlike conventional financing that may require two closings (one for the construction phase, one for the mortgage phase), the Petitioner sought bond financing that was completed with one closing. Thus, all loan documents (Joint Exhibits 8 through 23) were brought to closing and executed on December 15, 2000.

23. The bond documents recognized the construction phase of the project as well as the permanent terms that would govern the repayment of the monies. The bond documents provided for a draw process during the period of construction similar to conventional financing.

24. A second closing after the construction phase is completed is not necessary as the bond documents have pre-determined how the indebtedness is to be calculated and repaid.

25. The Petitioner fully and accurately disclosed bond financing on its application for SAIL funds. As of the date of its application, the Petitioner had begun construction of its development. Moreover, all SAIL funds sought in this cause were to be used for construction of the project, its various amenities, and were not for the refinancing of the project.

    CONCLUSIONS OF LAW

    
    

26. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings. Section 120.57, Florida Statutes.

27. Rule 67-48.002(97), Florida Administrative Code, provides, in pertinent part:

    "SAIL Development" means a residential development which provides one or more housing units proposed to be constructed or substantially rehabilitated with SAIL funds for Eligible Persons. A SAIL Development which is under construction, in the process of rehabilitation or which has been completed may be considered for the SAIL Program funding only if:

    * * *

    (b) Permanent financing of the costs associated with construction or rehabilitation of the SAIL Development has not closed as of the date the SAIL loan Application was received by the Corporation

    
    

28. The term "Permanent Financing" is not defined by rule or statute. The Respondent has interpreted such term to mean financing that provides for a repayment of the loan by an amortization from revenues derived from the project.

29. As such, the Respondent maintains that the bond closing (which contained all material provisions to compute the repayment of the loan) constitutes the point

    in time from which the "permanent financing" must be considered.

30. Such conclusion presumes the bond financing constituted the entire amount needed to construct the project. It also ignores the surtax loan not closed until June 27, 2001.

31. Additionally, such conclusion requires that bond financed projects be treated differently from those financed through conventional means that hold a separate closing subsequent to the construction phase.

32. Under the Respondent's view, the rule would not preclude an applicant that has closed on construction financing from filing an application for SAIL funds.

33. The Petitioner's substantial interests have been affected by the Respondent's determination that the bond closing constituted permanent financing.

34. Additionally, the Petitioner's substantial interests have been affected since the Respondent treated the bond closing as the only permanent financing for the project.

35. The surtax loan, also identified as part of the Petitioner's financial package, was part of its permanent financing.

36. In this case the Petitioner has demonstrated that the bond documents recognize and provide for a 24- month construction period. The "permanent financing phase" follows that period. During the construction period there is no amortization of the principal. Thus "permanent financing" is not finalized until the construction is completed. More critical, however, it is the undisputed fact that SAIL funds will not refinance enhancements to the project. Thus it is clear that the SAIL funds would be used as contemplated by the rules.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent enter a final order that approves the Petitioner for consideration of SAIL funds as it has demonstrated compliance with the threshold requirements of Rule 67- 48.002(97)(b), Florida Administrative Code.

DONE AND ENTERED this 30th day of January, 2002, in Tallahassee, Leon County, Florida.

___________________________________

J. D. 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 30th day of January, 2002.

COPIES FURNISHED:

Margaret-Ray Kemper, Esquire Ruden, McClosky, Smith,

Schuster & Russell, P.A.

215 South Monroe Street Suite 815

Tallahassee, Florida 32301

Andrew T. Price, Esquire

Florida Housing Finance Corporation

227 North Bronough Street Suite 5000

Tallahassee, Florida 32301-1329

Mark Kaplan, Executive Director Florida Housing Finance Corporation

227 North Bronough Street Suite 5000

Tallahassee, Florida 32301

Steven M. Seibert, Secretary Department of Community Affairs 2555 Shumard Oak Boulevard Suite 100

Tallahassee, Florida 32399-2100

Cari L. Roth, General Counsel Department of Community Affairs

2555 Shumard Oak Boulevard, Suite 325

Tallahassee, Florida 32399-2100

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: 01-003502

Orders for Case No: 01-003502