The Issue Whether Petitioner, IMH Healthcare, LLC, was required to submit an application for acquisition of Westport Holdings Tampa, L.P., d/b/a University Village, a specialty insurer licensed to operate a facility that undertakes to provide continuing care, pursuant to section 628.4615, Florida Statutes, and, if so, whether Petitioner has proven its entitlement to approval of the acquisition application.
Findings Of Fact The Department of Financial Services (Department) is the agency of the State of Florida having authority, among its other duties and responsibilities, to enforce the provisions of the Florida Insurance Code. The Financial Services Commission is a separate and independent budget entity within the Department composed of the Governor, the Attorney General, the Chief Financial Officer, and the Commissioner of Agriculture. § 20.121(3), Fla. Stat. The OIR is the agency within the Financial Services Commission responsible for all activities concerning insurers and other risk-bearing entities as provided under the Florida Insurance Code. § 20.121(3)(a)1., Fla. Stat. Westport Holdings Tampa, L.P. (Westport), is a limited partnership formed and existing under the laws of the State of Delaware. Westport operates the University Village continuing care retirement community (CCRC) in Hillsborough County, Florida. IMH Healthcare, LLC, is a limited liability corporation formed on March 24, 2014, and is in good standing under the laws of the State of Delaware. CCRCs offer a continuum of services that generally consist of independent living units, assisted living units, and skilled nursing care on a single campus. Persons choosing to live in a CCRC will typically start out in an independent living unit. As their needs change, they may move to an assisted living unit in which they may receive assistance and supervision for their activities of daily living. As residents of the CCRC transition to needing more care due to age, injury, or infirmity, they are entitled to care in the skilled nursing facility. In order to become a resident of a CCRC, a person enters into an individual continuing care contract with the CCRC. That contract, which includes an up-front entrance fee, part of which may be refundable, and monthly payments, is treated as the equivalent of a policy of insurance. Therefore, the owners and operators are regulated as “specialty insurers” and are required to obtain certificates of authority from OIR. Westport currently holds a certificate of authority to operate the University Village CCRC pursuant to chapter 651, Florida Statutes. University Village accommodates the spectrum of care at a single campus. Independent living facilities consist of 446 apartments in two multi-story apartment buildings known as the Towers, and 46 patio homes known as the Villas. The assisted living facility and skilled nursing facility, which includes a memory care facility, are housed in a three-story facility, generally known as the “health center,” located across the street from the independent living facilities. The skilled nursing facility, containing 120 beds, is located on the first floor, with the remaining 110 assisted living units located on the second and third floors. University Village currently has more than 400 residents. A person seeking to acquire a “triggering” ownership interest in a CCRC with an existing certificate of authority must file an application for acquisition under section 628.4615. The application is subject to review under statutory criteria designed to ensure the protection of the residents and the public. Westport has two partnership percentage interests; a 99-percent limited partnership interest, and a one-percent general partnership interest. Westport is governed by the Westport Holdings Tampa Limited Partnership Limited Partnership Agreement, dated October 23, 2000, as subsequently amended. Prior to March 2014, Westport Holdings University Village, LLC, held the one-percent general partnership interest and Westport Senior Living Investment Fund, L.P. (WSLIF) held the 99-percent limited partnership interest. Larry Landry was the president and sole manager of both entities. During the period leading up to the filing of the acquisition application by Petitioner, management of University Village was performed by AgeWell Senior Living, LLC. The executive director was Tim Parker, who had served in that role for a lengthy period. In 2006, Westport entered into two notes payable totaling $32,250,000, both of which related to and were secured by University Village. The original maturity date of both loans was January 2010. The maturity date was extended to January 2012 by the original lender, Capmark Bank, conditioned, in part, on a $10 million principal reduction payment. In August 2012, Horizon LP UV Lender, LLC (Horizon), purchased the debt, the obligations of which Westport was not keeping current. The maturity date was extended by agreement multiple times, with the last extension expiring December 15, 2013. By 2013, OIR had become concerned with the lack of funds to catch up on deferred maintenance to the University Village buildings, which included extraordinary maintenance to roofs and chillers, HVAC equipment, and the like, and with the amount maintained in reserve for the deferred maintenance and refunds. By February 28, 2014, the amount of refunds payable was estimated at $1.7 million. In early to mid-2013, BVM Management, Inc. (BVM Management) became interested in acquiring the 99-percent limited partnership interest in Westport. BVM Management is a 501(c)(3) charitable purpose corporation. It holds assets in affordable housing and senior housing, and offers consulting services to approximately 40 skilled nursing facilities and continuing care retirement communities. BVM Management’s president is John W. Bartle, whose scope of work includes identifying special assets that are in some event of foreclosure or distress, usually with banks or bankruptcy courts, receiverships, and conservatorships. In mid-2013, Mr. Landry and Mr. Bartle, among others, met with representatives of OIR to discuss the proposed acquisition of Westport’s 99-percent limited partnership ownership interest by BVM Management. By that time, OIR was very engaged in the status of University Village, monitoring its operations on almost a monthly basis. It was discussed that the acquisition would allow for the infusion of capital into Westport and University Village to address OIR’s concerns. During that meeting, a decision as to whether the acquisition of Westport’s 99-percent limited partnership interest would trigger a requirement for the purchaser to file an acquisition application was deferred. BVM Management undertook to arrange for the issuance of tax-exempt bonds to raise the capital to acquire Westport’s 99-percent limited partnership interest and provide funding to meet OIR’s concerns. On August 11, 2013, BVM Management/Westport Holdings, L.P., entered into a Limited Partnership Purchasing Agreement to purchase WSLIF’s 99-percent limited partnership interest in Westport. On December 6, 2013, OIR advised Mr. Landry “that if BVM buys the [99-percent] limited partnership interest of Westport Holdings Tampa, LP, that it would not be required to file an acquisition application.” However, OIR requested the submission of a Corrective Action Plan to address BVM’s “financial stability, debt structure, the management company, marketing efforts, etc.” The parties to the Limited Partnership Purchasing Agreement attempted to close before the December 15, 2013, loan maturity date expiration. However, due to the inability of the bond underwriter to deliver tax exempt bonds at the expected price, the closing did not occur. As a result of the failure to close the sale of the 99-percent ownership interest, Horizon began to pursue foreclosure. Before that occurred, Horizon issued a forbearance through March 31, 2014. After consultation with the accounting firm that was performing the feasibility study and market study, Mr. Bartle contacted lenders that might be interested in financing the University Village property. He approached USAmeriBank and Columbia Pacific Investment Fund (CPIF) Lending, LLC, with a structure for financing that would require additional limited partners as purchasers instead of BVM Management. Thereafter, BVM Management located investors interested in purchasing Westport’s 99-percent limited partnership interest. On March 29, 2014, a Promissory Note was entered which provided that its $1 million principal sum and interest would be paid to “Westport Senior Investment Fund, Limited Partnership, . . . attention Larry L. Landry,”1/ either upon delivery by BVM University Village, LLC, of “the Second 2014 Amendments to the Limited Partnership Agreements of Westport Holdings Tampa Limited Partnership . . . and Westport Tampa II, Limited Partnership,” by which the general partnership interest would be transferred, or upon the Note’s July 1, 2014, maturity date. At the time, pursuant to a conditional Partnership Interest Transfer Agreement, it was anticipated that the Westport one- percent general partnership interest would be transferred from Westport Holdings University Village, LLC, to BHMSILFGP, LLC. On March 31, 2014, WSLIF sold its 99-percent limited partnership interest in Westport to a group of limited partners. Westport Holdings University Village, LLC, retained its one-percent interest in Westport as the general partner. The one-percent general partnership interest was not transferred to BHMSILFGP, LLC. The sale of the limited partnership interest was memorialized in the First 2014 Amendment of Limited Partnership Agreement (Tampa), by which the limited partnership interest was sold and conveyed by WSLIF to BVM University Village, LLC. Immediately thereafter, and as part of the same transaction, the 99-percent limited partnership shares were allocated to the limited partners as follows: BVM University Village, LLC -- 39.6% BHMSILF, LLC -- 26.4% IMH Healthcare, LLC -- 19.8% JF Consultants, LLC -- 13.2% Pursuant to the First 2014 Amendment of Limited Partnership Agreement (Tampa), a majority interest of the four limited partners are entitled to remove Westport’s general partner, approve or disapprove the appointment of a successor general partner, dissolve the partnership, and amend the limited partnership agreement. Also on March 31, 2014, the limited partners authorized Westport to enter into two loan agreements, the proceeds from which were used to retire existing debt, to fund repairs and renovations of independent living units, and for other purposes related to the CCRC. As part of the loan transactions, Westport Nursing, LLC, was “spun off” of Westport as an accommodation of the loan agreement with USAmeriBank described below. It is not known if that transaction was reported to OIR, and it was not explained whether the transaction affected Westport’s certificate of authority to operate the University Village CCRC. One loan, in the amount of $9.5 million, was taken out by Westport Holdings Tampa, L.P., and Westport Holdings Tampa II, L.P. The lender was CPIF Lending, LLC. The loan was secured by a mortgage on the independent living facilities. Loan proceeds of $5.6 million were used to pay existing mortgage debt, and loan proceeds of $1.75 million were disbursed to a “capital expenditure reserve” for facility improvements in the form of “replacements and alterations.” The remaining proceeds went to various expenses, including $1 million to the seller of the partnership interest. The other loan, in the amount of $15 million, was taken out by Westport Nursing, LLC. The lender was USAmeriBank. Proceeds were to be used for the benefit of the assisted living and nursing care facility. The loan was also used to fund $3 million of “minimum liquid reserve” (MLR) for University Village, which was then pledged as cash collateral to secure the loan. The cash collateral was not contributed by BVM or the new limited partners. The owner or operator of a CCRC is required to maintain the MLR in an escrowed account to cover expenses of the CCRC in the event of financial difficulties. The MLR consists of an amount equal to principal and interest payments due during the next 12 months on any mortgage loan or other long-term financing of the facility, including property taxes; an operating reserve equal to 15 percent of the total annual operating expenses; and a renewal and replacement reserve equal to 15 percent of the facility’s average operating expenses for the past three fiscal years. An owner or operator of a CCRC may satisfy the MLR requirements by acquiring a clean, unconditional, irrevocable letter of credit equal to the sum of the three parts. The letter of credit must be issued by a financial institution participating in the State of Florida Treasury Certificate of Deposit Program, must name OIR as beneficiary, and must be approved by OIR before issuance. BVM Management, because of its more established financial footings, was required to guarantee both loans due to uncertainty on the part of the lenders as to whether University Village could “turn-around” in a two or three-year period. Neither of the loans involved any contribution or investment of cash or assets by the new Westport limited partners or BVM Management. Rather, the loans were obtained, and costs paid, by pledging the equity in the independent living facilities and the assisted living and skilled nursing health center and collateralizing cash from the existing MLR. By April 2, 2014, OIR was made aware of the acquisition of the 99-percent partnership interest in Westport by the group of limited partners, and was provided with a copy of the First 2014 Amendment of Limited Partnership Agreement (Tampa). Although far greater than 10 percent of the ownership interest in Westport was transferred as a result of the transaction, OIR did not require that the entities acquiring the 99-percent partnership interest, either individually or as a group, submit an acquisition application. On April 18, 2014, OIR sent a request to Westport for a “Corrective Action Plan” to address BVM’s purchase of the Westport limited partnership interest, the uncertainty regarding ownership of the facility, a steady increase of overdue refunds, and delayed capital improvements to the University Village campus. BVM Management was retained by Westport to extricate the existing operator of the health center by canceling the lease and moving the personnel away from the property. By the fall of 2014, OIR determined the Westport MLR was underfunded by $300,000 to $400,000. Between April and December 2014, BVM Management commissioned a physical needs assessment (PNA) of the University Village physical plant. The PNA identified approximately $2.5 million in needed improvements over a five-year period. Projected needs included repair and replacement of roofs, HVAC units, guttering, and similar structural improvements. After the acquisition of the 99-percent partnership interest in Westport by the group of limited partners, $1.6 million was spent to remodel 106 residential units, with the improvements in the nature of new appliances and cabinetry, elevator repairs, and wireless internet. The improvements, though needed, were not those identified in the PNA. From April through December 2014, Westport Holdings University Village, LLC, remained as Westport’s general partner. During that period, Mr. Landry was an infrequent visitor to the University Village campus. OIR began to receive communications from residents of University Village that Mr. Bartle was acting as a spokesperson for University Village, and had taken a visible role in facility operations and capital improvements. Improvements at the facilities and changes in University Village policies and procedures were conveyed by BVM Management to Westport’s existing managing agent, AgeWell Senior Living, LLC, which then communicated instructions to Westport’s employees. BVM Management provided many services in the independent living portion of University Village, including oversight of construction and renovation, preparation of compliance reports due to lenders, oversight of the capital expenditure budget, approval of contracts, oversight of renovations, and assisting with marketing and public relations. On December 22, 2014, BVM University Village, LLC; Westport Senior Investment Fund, L.P.; AgeWell Senior Living, LLC; Westport Holdings Tampa, L.P.; and Westport Holdings Tampa II, L.P., entered into an Amendment to Promissory Note by which the due date for payment of sums under the note was extended, and by which the parties acknowledged that the management agreement with AgeWell Senior Living, LLC, would not be renewed upon its January 31, 2015, expiration. On December 29, 2014, Westport Holdings University Village, LLC, resigned as Westport’s general partner. A copy of the resignation was provided to OIR on that same day. On December 29, 2014, after learning of the resignation of Westport Holdings University Village, LLC, as Westport’s general partner, OIR sent an email to Mr. Bartle advising him that the “person or affiliated person” assuming the role of Westport’s general partner would be required to complete and file an acquisition application pursuant to section 628.4615(2). On January 2, 2015, OIR received a letter of notification regarding the proposed appointment of BHMSILFGP, LLC, as Westport’s new general partner. The submission requested a waiver of the requirement to file an acquisition application. OIR denied the request. The March 29, 2014, Second 2014 Amendment to the Westport Holdings Tampa Limited Partnership Limited Partnership Agreement was never executed, and BHMSILFGP, LLC, did not become the Westport general partner. On January 26, 2015, Westport’s limited partners elected Compliance Concepts, LLC, as Westport’s general partner. Compliance Concepts, LLC, was the managing member of BVM University Village, LLC, a 39.6-percent limited partner of Westport. On or about February 9, 2015, Compliance Concepts, LLC, filed an acquisition application with OIR. OIR determined the acquisition application to be incomplete. On February 11, 2015, OIR commenced an examination of the Westport CCRC. An OIR field staff examiner was assigned to University Village, and provided with office space in a University Village building. Upon arrival at University Village, the OIR examiner requested the books and records of the Westport CCRC. The records were not immediately produced. The evidence suggests that the reason for the delay in production was a desire on the part of Westport to have its attorney review the documents and approve their being turned over to the OIR examiner. On February 13, 2015, OIR issued an Initial Order of Suspension to Westport. The basis for the suspension order included the failure to immediately turn over financial records, as well as the operation and management of University Village by unapproved persons. Westport challenged the suspension order, thus staying its effect. On February 20, 2015, OIR sent a notice requesting additional information regarding the Compliance Concepts, LLC, acquisition application. The response was due on February 27, 2015. The notice did not request “background information issues,” which request was to be made under separate cover. On February 26, 2015, OIR made a request to DFS for the appointment of a receiver to manage the operation and finance of the Westport CCRC. At that point, with the request being in the nature of pending litigation, OIR required that all communications or meetings between Westport and OIR be arranged through counsel. On or about March 2, 2015, Compliance Concepts, LLC, resigned as Westport’s general partner, and Petitioner was elected by Westport’s limited partners as its general partner. As such, Petitioner was assigned Westport’s one-percent general partnership interest. The assignment was not accompanied by any monetary consideration. By letter dated March 2, 2015, OIR was informed that Petitioner, a 19.8-percent limited partner, had been elected as Westport’s new general partner. The March 2, 2015, letter also advised OIR that the Compliance Concepts, LLC, acquisition application would be updated and supplemented to reflect the change of ownership of Westport and its general partner. Along with its March 2, 2015, letter, Westport provided a response to the February 20, 2015, request for additional information regarding the Compliance Concepts, LLC, acquisition application. On March 6, 2015, Petitioner filed a “Statement of Acquisition Merger or Consolidation of a Specialty Insurer Pursuant to Florida Statutes 628.4615.” Petitioner was identified as the “Acquiring Company” and Westport was identified as the “Specialty Insurer Affected.” The application was submitted as an amendment to the application for acquisition filed by Compliance Concepts, LLC. In addition to information regarding Petitioner and its managing member, Eliyahu Freiden, the application relied in large part on information submitted in the Compliance Concepts, LLC, acquisition application. Mr. Freiden is Petitioner’s sole and managing member. Petitioner has no employees. As such, Petitioner’s competence, experience, and integrity are largely and fairly attributable to Mr. Freiden. Over the course of several months, OIR received a series of organizational charts offering different descriptions of Westport’s ownership and managerial structure. The revised acquisition application contained no financial information regarding Mr. Freiden or Petitioner. Mr. Freiden signed a Waiver of Public Hearing and Request for Approval and “respectfully request[ed] that the Director of the Office of Insurance Regulation approve the acquisition immediately.” OIR did not request additional information regarding Petitioner’s acquisition application. On March 27, 2015, the OIR director issued a notice of denial of the acquisition application. The notice provided that the denial was based on Petitioner’s failure to meet the requirements for approval set forth in section 628.4615(8)(a), (8)(b), and (8)(d)-(i). Mr. Freiden’s Educational and Employment History Mr. Freiden studied Talmudic law at Neveh Zion Talmudic University in Israel. He also studied biology and business management at Touro College in Brooklyn, New York. Mr. Freiden did not obtain a degree from Touro College, or elsewhere, choosing to terminate his studies to pursue employment. Since entering the work force, Mr. Freiden has held a number of positions with various companies. From January 2000 until June 2003, Mr. Freiden was involved in marketing and sales for the Carnival cruise line. From June 2003 until May 2007, Mr. Freiden was the principal and officer of Rental Quest, LLC, a property management company. During that period, the company managed hundreds of units of real estate in Connecticut. From May 2007 to August 2008, Mr. Freiden was employed as a senior account manager for HYC Logistics, a customs clearinghouse and shipping brokerage firm. His duties included sales and office management. From August 2008 to June 2012, Mr. Freiden was a senior account manager and supervisor for Primesource National, a company engaged in managing skilled nursing facilities. His duties included financial oversight of 30 skilled nursing facilities in the Midwest, specifically regarding their budgets, expenses, purchasing, and regulatory surveys. Mr. Freiden’s duties included on-site visits to the facilities. From June 2012 to November 2013, Mr. Freiden was an analyst and office director for Greystone Financial Group, a bank in Manhattan. His duties included property loan underwriting, and management of a team of loan originators. From September 2012 to the present, Mr. Freiden has been the principal and officer of Human Assurance, LLC, a credit reporting company engaged in providing background screening for healthcare facilities, daycare facilities, employment, and multi-family rental facilities. Mr. Freiden has no criminal history or record, has never been reprimanded by an employer, and has no negative professional disciplinary history. Mr. Freiden is heavily engaged in his community at his local synagogue, with the local YMCA, and with the creation of a girls’ Jewish high school. No evidence was presented that Mr. Freiden is not of reputable and responsible character. Mr. Freiden has no specific education, expertise, or formal training in insurance, or in CCRCs. He has never applied for an insurance license or a license in the healthcare field. He is not a healthcare professional. Mr. Freiden had no experience with operating a CCRC prior to his involvement at University Village beginning in March 2015. The focus on an applicant’s education and experience is for the purpose of determining the applicant’s background in the subject. The education and experience required of an applicant must be related to the applicant’s ability to operate and manage a CCRC facility, and not merely the applicant’s ability to hire others with the necessary education and experience to perform those duties. Mr. Freiden’s Background Information Section 628.4615(8)(e) provides that “natural persons for whom background information is required [must] have such backgrounds as to indicate that it is in the best interests of the insureds of the specialty insurer and in the public interest to permit such persons to exercise control over the specialty insurer.” Petitioner submitted a biographical affidavit and a fingerprint card for Mr. Freiden. The acquisition application form provides that “[b]ackground reports must be submitted by the selected background investigator vendor directly to OIR prior to or contemporaneously with the submission of the application filing.” The background investigation must be performed by an external company that has been approved by the National Association of Insurance Commissioners. The person submitting the application must pay for the background check and contact the approved vendor who is responsible for submitting the report to OIR. The report provides, among other items, background information from court records and other sources, and is crucial as verification of the information submitted by the applicant by an approved third party. The record of this proceeding contains a report generated by Accurint, a LexisNexis company, which includes information allegedly obtained from the Florida Department of Financial Services, as well as information from an undetermined source. The record is not clear as to whether the background information was provided by Petitioner or was accessed by OIR. In either event, the information does not comply with the established standards for background information. Petitioner’s Financial Capabilities The only assets of IMH identified in the record are its limited (19.8 percent) and general (one-percent) partnership interests in University Village. IMH was formed on March 24, 2014, one week before it acquired its limited partnership interest in Westport. Since the funding of the purchase of the limited partnership interest was accomplished through loans secured by Westport’s existing facilities, and guaranteed by BVM Management, and since there was no evidence of any cash contribution by the limited partners, IMH has no apparent financial investment in Westport. As part of the revised acquisition application, IMH submitted a letter from Ark Real Estate Group, LLC, which indicated that Ark Real Estate Group, LLC, “has the capacity to provide up to $5,000,000.00 (Five Million Dollars) in capital or subordinated debt to ensure that [IMH] has sufficient liquidity to support its role as limited partner. If you would like a formal term sheet for this commitment, please advise.” The financial stability and ability of Ark Real Estate Group, LLC, to provide such funds is unknown. The letter itself is vague, and does not establish Petitioner’s ability to access cash or credit. The information provided in the acquisition application was insufficient to establish the financial condition of IMH. Other Financial Issues The 2014 audited financial statement for Westport was due May 1, 2015. Westport did not timely file an audited financial statement and had not done so as of the final hearing in this matter. Although a draft report was provided, it did not include auditor’s notes necessary to evaluate the “going concern” portion of the audit. University Village is the only CCRC in Florida that did not timely file a 2014 audited financial statement. The statutory MLR for University Village is underfunded by approximately $400,000, and has been since fall 2014. On January 21, 2015, the CFO for University Village advised OIR that the MLR “is under funded by $370,324” and that there would be “a plan in place to have this shortfall funded within 30 days.” Petitioner has not addressed the MLR deficiency since becoming Westport’s general partner, despite the statement in the March 2, 2015, Response to Clarification Letter that the deficiency would be replenished within five business days of a calculation confirming a deficiency. Westport is currently subject to a targeted financial examination by OIR. The preponderance of the evidence indicates that Petitioner has not responded to OIR inquiries and has not provided access to requested information during the financial examination. Payments to vendors supplying goods and services to University Village are approximately $1 million in arrears, with some vendor invoices being more than 60 days past due. However, no services have been denied to residents. The March 31, 2014, loans secured by the University Village facilities, which loans total $24.5 million, come due in March 2016. BVM Management BVM Management, and its president, Mr. Bartle, have been extensively engaged in the operations of Westport, starting with BVM Management’s mid-2013 interest in acquiring Westport, to its guarantee of loans to buy Westport’s 99-percent limited partnership interest, and extending to Mr. Bartle’s participation as a representative of the acquiring entities in meetings with OIR. Beginning in April 2014 and extending through October 2014, BVM Management engaged in merger discussions between Westport’s designated facility manager, AgeWell Senior Living, LLC, and BVM Management beginning in April 2014 and extending through October 29, 2014. During that period, a lot of the work being done on the campus was coordinated between AgeWell Senior Living, LLC, and BVM Management. Although AgeWell Senior Living, LLC, had the management contract and was the OIR- identified overall management agent, BVM Management was participating in the plan of finance and the rehabilitation of the facility, and was involved in “extricating” the operator of the Westport health center. During that period, AgeWell Senior Living, LLC, personnel and BVM Management personnel were working in tandem on several projects. There were up to six BVM Management employees on the campus at any one time. Although Mr. Bartle was not the most frequent BVM Management employee on the campus, he tended to go to the board meetings or the finance committee meetings, and would make presentations for the health center and its financial condition. BVM Management’s presence on the facility grounds has remained active, particularly since the termination of AgeWell Senior Living, LLC, as the CCRC manager upon the expiration of its management contract, and the termination of the long-term executive director, Tim Parker. Because of Mr. Bartle’s ongoing involvement with the operations of University Village, and BVM Management’s substantial financial ties as guarantor for the two loans, OIR sought background information on Mr. Bartle as a person indirectly involved with the management of an acquiring entity. Petitioner’s acquisition application was absent any information regarding BVM Management or Mr. Bartle. In response to its inquiries for background and biographical information, OIR received only a handwritten note with the phrase “To be sent”. No further information was provided. As a result, OIR has little information regarding Mr. Bartle’s past employment, personal information, or financial background. Management and Consulting Services - NOVUM, LLC On May 15, 2015, after Petitioner became Westport’s general partner, Westport contracted with NOVUM, LLC, for “consulting management” services for the independent living facilities (Retirement Center) of University Village. NOVUM, LLC, has a background in nursing homes. NOVUM, LLC, has management contracts “with a couple of buildings” in Florida. The context of the testimony suggests that the services are performed at assisted living facilities, but the exact nature of the facilities was not described. Services provided include day-to-day operations, installing budgets, hiring and firing staff, training and development, and ensuring regulatory compliance. NOVUM, LLC, employs persons with education in science and healthcare management, and with experience in independent living facilities, assisted living facilities, and skilled nursing facilities. NOVUM, LLC, has provided services on behalf of Westport, including accounting, financial record keeping and reporting, marketing, sales, and attendance and participation in resident board meetings. NOVUM, LLC, has been engaged in hiring recommendations, including those for the executive director, director of sales, administrator of the assisted living facility, directors of nursing, and other staff positions. NOVUM, LLC, has Westport bank account signature authority, which it exercises in paying vendors, including NOVUM, LLC, itself.2/ Mr. Freiden regularly meets with NOVUM, LLC, employees who are on the University Village campus on a daily basis. After the termination of former executive director, Tim Parker, efforts to find a replacement have proven difficult. During the vacancy, Mr. Freiden testified, in response to a question as to whether the duties of the CCRC manager’s executive director were “going unmet,” that “I feel like we've got five executive directors. Besides Marc Flores, [NOVUM, LLC’s] chief operational officer, who's there every day and myself who act in that position, everybody knows they can grab someone from NOVUM or myself at any given time and we fill those shoes very well.” The preponderance of the evidence indicates that NOVUM, LLC, is performing managerial duties for University Village as described in Florida Administrative Code Rule 69O- 193.002(13). Rule 69O-193.007 requires that “[e]ach manager or management company must demonstrate that it meets the requirements of Section 651.022, F.S., and that the management agreement conforms with the cancellation requirements of Section 651.1151, F.S.” There is no evidence that Petitioner, Westport, or NOVUM, LLC, has made the requisite demonstration that NOVUM, LLC, meets the requirements of section 651.022.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED that the Department of Financial Services, Office of Insurance Regulation, enter a final order determining that IMH Healthcare, LLC’s, acquisition of the one-percent general partner ownership interest in Westport Holdings Tampa, L.P., was insufficient to meet the threshold requirement for an acquisition application pursuant to section 628.4615(2), Florida Statutes, and that the March 27, 2015, notice of denial of acquisition application be DISMISSED. It is, furthermore, RECOMMENDED that, if it is determined that an acquisition application is required when a one-percent general partner ownership interest in a CCRC is acquired, the Department of Financial Services, Office of Insurance Regulation, enter a final order determining that IMH Healthcare, LLC, failed to meet its burden of proving entitlement to the approval of the acquisition application, and that the application should therefore be DENIED. DONE AND ORDERED this 26th day of January, 2016, in Tallahassee, Leon County, Florida. S E. GARY EARLY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of January, 2016.
The Issue The threshold issue in this case is whether the decisions giving rise to the dispute, which concern the allocation and disbursement of funds appropriated to Respondent by the legislature and thus involve the preparation or modification of the agency's budget, are subject to quasi-judicial adjudication under the Administrative Procedure Act. If the Division of Administrative Hearings were possessed of subject matter jurisdiction, then the issues would be whether Respondent is estopped from implementing its intended decisions to "de- obligate" itself from preliminary commitments to provide low- interest loans to several projects approved for funding under the Community Workforce Housing Innovation Pilot Program; and whether such intended decisions would constitute breaches of contract or otherwise be erroneous, arbitrary, capricious, or abuses of the agency's discretion.
Findings Of Fact Petitioners Pasco CWHIP Partners, LLC ("Pasco Partners"); Legacy Pointe, Inc. ("Legacy"); Villa Capri, Inc. ("Villa Capri"); Prime Homebuilders ("Prime"); and MDG Capital Corporation ("MDG") (collectively, "Petitioners"), are Florida corporations authorized to do business in Florida. Each is a developer whose business activities include building affordable housing. The Florida Housing Finance Corporation ("FHFC") is a public corporation organized under Chapter 420, Florida Statutes, to implement and administer various affordable housing programs, including the Community Workforce Housing Innovation Pilot Program ("CWHIP"). The Florida Legislature created CWHIP in 2006 to subsidize the cost of housing for lower income workers performing "essential services." Under CWHIP, FHFC is authorized to lend up to $5 million to a developer for the construction or rehabilitation of housing in an eligible area for essential services personnel. Because construction costs for workforce housing developments typically exceed $5 million, developers usually must obtain additional funding from sources other than CWHIP to cover their remaining development costs. In 2007, the legislature appropriated $62.4 million for CWHIP and authorized FHFC to allocate these funds on a competitive basis to "public-private" partnerships seeking to build affordable housing for essential services personnel.1 On December 31, 2007, FHFC began soliciting applications for participation in CWHIP. Petitioners submitted their respective applications to FHFC on or around January 29, 2008. FHFC reviewed the applications and graded each of them on a point scale under which a maximum of 200 points per application were available; preliminary scores and comments were released on March 4, 2008. FHFC thereafter provided applicants the opportunity to cure any deficiencies in their applications and thereby improve their scores. Petitioners submitted revised applications on or around April 18, 2008. FHFC evaluated the revised applications and determined each applicant's final score. The applications were then ranked, from highest to lowest score. The top-ranked applicant was first in line to be offered the chance to take out a CWHIP loan, followed by the others in descending order to the extent of available funds. Applicants who ranked below the cut-off for potential funding were placed on a wait list. If, as sometimes happens, an applicant in line for funding were to withdraw from CWHIP or fail for some other reason to complete the process leading to the disbursement of loan proceeds, the highest-ranked applicant on the wait list would "move up" to the "funded list." FHFC issued the final scores and ranking of applicants in early May 2006. Petitioners each had a project that made the cut for potential CWHIP funding.2 Some developers challenged the scoring of applications, and the ensuing administrative proceedings slowed the award process. This administrative litigation ended on or around November 6, 2008, after the parties agreed upon a settlement of the dispute. On or about November 12, 2008, FHFC issued preliminary commitment letters offering low-interest CWHIP loans to Pasco Partners, Legacy, Villa Capri, Prime (for its Village at Portofino Meadows project), and MDG. Each preliminary commitment was contingent upon: Borrower and Development meeting all requirements of Rule Chapter 67-58, FAC, and all other applicable state and FHFC requirements; and A positive credit underwriting recommendation; and Final approval of the credit underwriting report by the Florida Housing Board of Directors. These commitment letters constituted the necessary approval for each of the Petitioners to move forward in credit underwriting, which is the process whereby underwriters whom FHFC retains under contract verify the accuracy of the information contained in an applicant's application and examine such materials as market studies, engineering reports, business records, and pro forma financial statements to determine the project's likelihood of success. Once a credit underwriter completes his analysis of an applicant's project, the underwriter submits a draft report and recommendation to FHFC, which, in turn, forwards a copy of the draft report and recommendation to the applicant. Both the applicant and FHFC then have an opportunity to submit comments regarding the draft report and recommendation to the credit underwriter. After that, the credit underwriter revises the draft if he is so inclined and issues a final report and recommendation to FHFC. Upon receipt of the credit underwriter's final report and recommendation, FHFC forwards the document to its Board of Directors for approval. Of the approximately 1,200 projects that have undergone credit underwriting for the purpose of receiving funding through FHFC, all but a few have received a favorable recommendation from the underwriter and ultimately been approved for funding. Occasionally a developer will withdraw its application if problems arise during underwriting, but even this is, historically speaking, a relatively uncommon outcome. Thus, upon receiving their respective preliminary commitment letters, Petitioners could reasonably anticipate, based on FHFC's past performance, that their projects, in the end, would receive CWHIP financing, notwithstanding the contingencies that remained to be satisfied. There is no persuasive evidence, however, that FHFC promised Petitioners, as they allege, either that the credit underwriting process would never be interrupted, or that CWHIP financing would necessarily be available for those developers whose projects successfully completed underwriting. While Petitioners, respectively, expended money and time as credit underwriting proceeded, the reasonable inference, which the undersigned draws, is that they incurred such costs, not in reliance upon any false promises or material misrepresentations allegedly made by FHFC, but rather because a favorable credit underwriting recommendation was a necessary (though not sufficient) condition of being awarded a firm loan commitment. On January 15, 2009, the Florida Legislature, meeting in Special Session, enacted legislation designed to close a revenue shortfall in the budget for the 2008-2009 fiscal year. Among the cuts that the legislature made to balance the budget was the following: The unexpended balance of funds appropriated by the Legislature to the Florida Housing Finance Corporation in the amount of $190,000,000 shall be returned to the State treasury for deposit into the General Revenue Fund before June 1, 2009. In order to implement this section, and to the maximum extent feasible, the Florida Housing Finance Corporation shall first reduce unexpended funds allocated by the corporation that increase new housing construction. 2009 Fla. Laws ch. 2009-1 § 47. Because the legislature chose not to make targeted cuts affecting specific programs, it fell to FHFC would to decide which individual projects would lose funding, and which would not. The legislative mandate created a constant-sum situation concerning FHFC's budget, meaning that, regardless of how FHFC decided to reallocate the funds which remained at its disposal, all of the cuts to individual programs needed to total $190 million in the aggregate. Thus, deeper cuts to Program A would leave more money for other programs, while sparing Program B would require greater losses for other programs. In light of this situation, FHFC could not make a decision regarding one program, such as CWHIP, without considering the effect of that decision on all the other programs in FHFC's portfolio: a cut (or not) here affected what could be done there. The legislative de-appropriation of funds then in FHFC's hands required, in short, that FHFC modify its entire budget to account for the loss. To enable FHFC to return $190 million to the state treasury, the legislature directed that FHFC adopt emergency rules pursuant to the following grant of authority: In order to ensure that the funds transferred by [special appropriations legislation] are available, the Florida Housing Finance Corporation shall adopt emergency rules pursuant to s. 120.54, Florida Statutes. The Legislature finds that emergency rules adopted pursuant to this section meet the health, safety, and welfare requirements of s. 120.54(4), Florida Statutes. The Legislature finds that such emergency rulemaking power is necessitated by the immediate danger to the preservation of the rights and welfare of the people and is immediately necessary in order to implement the action of the Legislature to address the revenue shortfall of the 2008-2009 fiscal year. Therefore, in adopting such emergency rules, the corporation need not publish the facts, reasons, and findings required by s. 120.54(4)(a)3., Florida Statutes. Emergency rules adopted under this section are exempt from s. 120.54(4)(c), Florida Statutes, and shall remain in effect for 180 days. 2009 Fla. Laws ch. 2009-2 § 12. The governor signed the special appropriations bills into law on January 27, 2009. At that time, FHFC began the process of promulgating emergency rules. FHFC also informed its underwriters that FHFC's board would not consider any credit underwriting reports at its March 2009 board meeting. Although FHFC did not instruct the underwriters to stop evaluating Petitioners' projects, the looming reductions in allocations, coupled with the board's decision to suspend the review of credit reports, effectively (and not surprisingly) brought credit underwriting to a standstill. Petitioners contend that FHFC deliberately intervened in the credit underwriting process for the purpose of preventing Petitioners from satisfying the conditions of their preliminary commitment letters, so that their projects, lacking firm loan commitments, would be low-hanging fruit when the time came for picking the deals that would not receive funding due to FHFC's obligation to return $190 million to the state treasury. The evidence, however, does not support a finding to this effect. The decision of FHFC's board to postpone the review of new credit underwriting reports while emergency rules for drastically reducing allocations were being drafted was not intended, the undersigned infers, to prejudice Petitioners, but to preserve the status quo ante pending the modification of FHFC's budget in accordance with the legislative mandate. Indeed, given that FHFC faced the imminent prospect of involuntarily relinquishing approximately 40 percent of the funds then available for allocation to the various programs under FHFC's jurisdiction, it would have been imprudent to proceed at full speed with credit underwriting for projects in the pipeline, as if nothing had changed. At its March 13, 2009, meeting, FHFC's board adopted Emergency Rules 67ER09-1 through 67ER09-5, Florida Administrative Code (the "Emergency Rules"), whose stated purpose was "to establish procedures by which [FHFC would] de- obligate the unexpended balance of funds [previously] appropriated by the Legislature " As used in the Emergency Rules, the term "unexpended" referred, among other things, to funds previously awarded that, "as of January 27, 2009, [had] not been previously withdrawn or de-obligated . . . and [for which] the Applicant [did] not have a Valid Firm Commitment and loan closing [had] not yet occurred." See Fla. Admin. Code R. 67ER09-2(29). The term "Valid Firm Commitment" was defined in the Emergency Rules to mean: a commitment issued by the [FHFC] to an Applicant following the Board's approval of the credit underwriting report for the Applicant's proposed Development which has been accepted by the Applicant and subsequent to such acceptance there have been no material, adverse changes in the financing, condition, structure or ownership of the Applicant or the proposed Development, or in any information provided to the [FHFC] or its Credit Underwriter with respect to the Applicant or the proposed Development. See Fla. Admin. Code R. 67ER09-2(33). There is no dispute concerning that fact that, as of January 27, 2009, none of the Petitioners had received a valid firm commitment or closed a loan transaction. There is, accordingly, no dispute regarding the fact that the funds which FHFC had committed preliminarily to lend Petitioners in connection with their respective developments constituted "unexpended" funds under the pertinent (and undisputed) provisions of the Emergency Rules, which were quoted above. In the Emergency Rules, FHFC set forth its decisions regarding the reallocation of funds at its disposal. Pertinent to this case are the following provisions: To facilitate the transfer and return of the appropriated funding, as required by [the special appropriations bills], the [FHFC] shall: * * * Return $190,000,000 to the Treasury of the State of Florida, as required by [law]. . . . The [FHFC] shall de-obligate Unexpended Funding from the following Corporation programs, in the following order, until such dollar amount is reached: All Developments awarded CWHIP Program funding, except for [a few projects not at issue here.] * * * See Fla. Admin. Code R. 67ER09-3. On April 24, 2009, FHFC gave written notice to each of the Petitioners that FHFC was "de-obligating" itself from the preliminary commitments that had been made concerning their respective CWHIP developments. On or about June 1, 2009, FHFC returned the de- appropriated funds, a sum of $190 million, to the state treasury. As a result of the required modification of FHFC's budget, 47 deals lost funding, including 16 CWHIP developments to which $83.6 million had been preliminarily committed for new housing construction.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that FHFC enter a Final Order dismissing these consolidated cases for lack of jurisdiction. DONE AND ENTERED this 18th day of February, 2010, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM 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 February, 2010.
The Issue Whether Florida Housing Finance Corporation’s (Florida Housing, Corporation, or Respondent) rejection of the funding for the application submitted by Capital Grove Limited Partnership (Capital Grove) was contrary to Florida Housing’s governing statutes, rules, policies, or the specifications of Request for Applications 2014-114 (the RFA). If so, whether Florida Housing’s decision to fund the application submitted by HTG Wellington Family, LLC (HTG Wellington), is contrary to governing statutes, rules, policies, or the RFA specifications.
Findings Of Fact Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. Its purpose is to promote the public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Housing is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code and has the responsibility and authority to establish procedures for allocating and distributing low-income housing tax credits. The low-income housing tax credit program was enacted by Congress in 1986 to incentivize the private market to invest in affordable rental housing. Tax credits are competitively awarded to applicants in Florida for qualified rental housing projects. Applicants then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the owner would otherwise have to borrow. Because the debt is lower, a tax-credit property can offer lower, more affordable rents. Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their federal tax liability each year over a period of ten years. The amount of the annual credit is based on the amount invested in the affordable housing. Tax credits are made available by the U.S. Treasury to the states annually. Florida Housing is authorized to allocate tax credits and other funding by means of request for proposal or other competitive solicitation in section 420.507(48), and adopted Florida Administrative Code chapter 67-60 to govern the competitive solicitation process for several different programs, including the one for tax credits. Rule 67-60.002(1) defines “Applicant” as “any person or legally-formed entity that is seeking a loan or funding from the Corporation by submitting an application or responding to a competitive solicitation pursuant to this rule chapter for one or more of the Corporation’s programs.” Applicants request in their applications a specific dollar amount of housing credits to be given to the applicant each year for a period of 10 years. Applicants typically sell the rights to that future stream of income tax credits (through the sale of almost all of the ownership interest in the Applicant entity) to an investor to generate the majority of the capital necessary to construct the Development. The amount of housing credits an Applicant may request is based on several factors, including but not limited to a certain percentage of the projected Total Development Cost; a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated areas of some counties. Florida Housing’s competitive application process for the allocation of tax credits is commenced by the issuance of a Request for Applications. In this case, that document is Request for Applications 2014-114 (the RFA). The RFA was issued November 20, 2014, and responses were due January 22, 2015. Capital Grove submitted Application No. 2015-045C in RFA 2014-114 seeking $1,509,500 in annual allocation of housing credits to finance the construction of a 94-unit residential rental development in Pasco County (a Medium County), to be known as Highland Grove Senior Apartments. HTG Wellington submitted Application No. 2015-101C seeking $1,510,000 in annual allocation of housing credits to finance the construction of a 110-unit multifamily residential development in Pasco County, Florida, to be known as Park at Wellington Apartments. Florida Housing has announced its intention to award funding to nine Medium County Developments, including Park at Wellington in Pasco County (Application No. 2015-101C), but not Highland Grove Senior Apartments. Florida Housing received 82 applications seeking funding in RFA 2014-114, including 76 for Medium County Developments. The process employed by Florida Housing for this RFA makes it virtually impossible for more than one application to be selected for funding in any given medium county. Because of the amount of funding available for medium counties, the typical amount of an applicant’s housing credit request (generally $1.0 to $1.5 million), and the number of medium counties for which developments are proposed, many medium counties will not receive an award of housing credit funding in this RFA. Florida Housing intends to award funding to nine developments in nine different medium counties. The applications were received, processed, deemed eligible or ineligible, scored, and ranked, pursuant to the terms of RFA 2014-114; Florida Administrative Code chapters 67- 48 and 67-60; and applicable federal regulations. Florida Housing’s executive director appointed a Review Committee of Florida Housing staff to evaluate the applications for eligibility and scoring. Applications are considered for funding only if they are deemed “eligible,” based on whether the application complies with Florida Housing’s various content requirements. Of the 82 applications submitted to Florida Housing in RFA 2014-114, 69 were found “eligible,” and 13 were found ineligible, including Capital Grove. Florida Housing determined that Capital Grove was ineligible on the ground that its Letter of Credit was deficient under the terms of the RFA. A five-page spreadsheet created by Florida Housing, entitled “RFA 2014-114 – All Applications,” identifying all eligible and ineligible applications was provided to all Applicants. In addition to scoring, Applicants received a lottery number to be applied in tie situations, with the lower number given preference. Capital Grove received lottery number 12. HTG Wellington received lottery number 9. On March 11, 2015, the Review Committee met and considered the applications submitted in response to the RFA, and made recommendations regarding the scoring and ranking of the applications to Florida Housing’s Board of Directors (the Board). Capital Grove’s Letter of Credit The RFA provides for a Withdrawal Disincentive in which an applicant could either provide a $25,000 check or a $25,000 Letter of Credit that would be forfeited if the application was withdrawn by the applicant before a certain period of time. Applicants so withdrawing would also suffer a deduction from the full developer-experience point total in certain future Requests for Applications issued by Florida Housing. According to specifications in the RFA, any Letter of Credit submitted must be in compliance with all the requirements of subsection 4.a. of Section Three, Procedures and Provisions of the RFA, which provides in pertinent part: 4. $25,000 Letter of Credit. Each Applicant not submitting a $25,000 Application Withdrawal Cash Deposit (as outlined in 3 above) must submit to the Corporation a letter of Credit that meets the following requirements with its Application: a. The Letter of Credit must: Be issued by a bank, the deposits of which are insured by the FDIC, and which has a banking office located in the state of Florida available for presentation of the Letter of Credit. Be on the issuing bank’s letterhead, and identify the bank’s Florida office as the office for presentation of the Letter of Credit. Be, in form, content and amount, the same as the Sample Letter of Credit set out in Item 14 of Exhibit C of the RFA, and completed with the following: Issue Date of the Letter of Credit (LOC) which must be no later than January 22, 2015. LOC number. Expiration Date of the LOC which must be no earlier than January 22, 2016. Issuing Bank’s legal name. Issuing Bank’s Florida Presentation Office for Presentation of the LOC. Florida Housing’s RFA number RFA 2014- 114. Applicant’s name as it appears on the Application for which the LOC is issued. Development name as it appears on the Application for which the LOC is issued. Signature of the Issuing Bank’s authorized signatory. Printed Name and Title of the Authorized Signatory. The Sample Letter of Credit included in Exhibit C, Item 14 of the RFA reads: (Issuing Bank’s Letterhead) Irrevocable Unconditional Letter of Credit To/Beneficiary: Florida Housing Finance Corporation Issue Date: [a date that is no later than January 22, 2015] Attention: Director of Multifamily Programs 227 N. Bronough Street, Suite 5000 Tallahassee, Florida 32301 Letter of Credit No.: Expiration Date: [a date that is no earlier than January 22, 2016] Issuing Bank: Florida Presentation Office: FHFC RFA # 2014-114 Applicant: Development: Gentlemen: For the account of the Applicant, we, the Issuing Bank, hereby authorize Florida Housing Finance Corporation to draw on us at sight up to an aggregate amount of Twenty- Five Thousand and No/100 Dollars ($25,000.00). This letter of credit is irrevocable, unconditional, and nontransferable. Drafts drawn under this letter of credit must specify the letter of credit number and be presented at our Florida Presentation Office identified above not later than the Expiration Date. Any sight draft may be presented to us by electronic, reprographic, computerized or automated system, or by carbon copy, but in any event must visibly bear the word “original.” If the document is signed, the signature may consist of (or may appear to us as) an original handwritten signature, a facsimile signature or any other mechanical or electronic method of authentication. Payment against this letter of credit may be made by wire transfer of immediately available funds to the account specified by you, or by deposit of same day funds in a designated account you maintain with us. Unless we notify you in writing at least thirty (30) days prior to the Expiration Date, the Expiration Date of this letter of credit must be extended automatically for successive one-month periods. This letter of credit sets forth in full the terms of our obligations to you, and such undertaking shall not in any way be modified or amplified by any agreement in which this letter is referred to or to which this letter of credit relates, and any such reference shall not be deemed to incorporate herein by reference any agreement. We engage with you that sight drafts drawn under, and in compliance with, the terms of this letter of credit will be duly honored at the Presentation Office. We are an FDIC insured bank, and our Florida Presentation Office is located in Florida as identified above. Yours very truly, [Issuing Bank] By Print Name Print Title Despite these requirements, Capital Grove submitted an “Irrevocable Standby Letter of Credit” issued by PNC Bank National Association (PNC). Capital Grove’s Letter of Credit provides, in pertinent part: Beneficiary: Applicant: Florida Housing Finance Westbrook Housing Corp. Corp. Development, LLC 4110 Southpoint Blvd., 227 North Bronough Street Ste 206 Suite 5000 Jacksonville, Fl 32216 Tallahassee, Fl 32301 ATTENTION: DIR. OF MULTI- FBO CAPITAL GROVE FAMILY PROGRAMS LIMITED PARTNERSHIP IRREVOCABLE STANDBY LETTER OF CREDIT OUR REFERENCE: 18123166-00-00 AMOUNT: USD $25,000.00 ISSUE DATE: JANUARY 20, 2015 EXPIRY DATE: JANUARY 22, 2016 EPIRY PLACE: OUR COUNTER RE: FHFC RFA #2014-114 DEVELOPMENT: HIGHLAND GROVE SENIOR APARTMENTS GENTLEMEN: WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. 18123166-00-000 IN FAVOR OF FLORIDA HOUSING FINANCE CORPORATION FOR THE ACCOUNT OF WESTBROOK HOUSING DEVELOPMENT LLC AVAILABLE FOR PAYMENT AT OUR COUNTERS IN AN AMOUNT OF USD $25,000.00 (TWENTY FIVE THOUSAND AND 00/100 UNITED STATES DOLLARS) AGAINST BENEFICIARY'S PURPORTEDLY SIGNED STATEMENT AS FOLLOWS: "I (INSERT NAME AND TITLE) CERTIFY THAT I AM AN AUTHORIZED REPRESENTATIVE OF FLORIDA HOUSING FINANCE CORPORATION AND HEREBY DEMAND PAYMENT OF USD (INSERT AMOUNT) UNDER PNC BANK, NATIONAL ASSOCIATION LETTER OF CREDIT NO. 18123166-00-000. I FURTHER CERTIFY THAT WESTBROOK HOUSING DEVELOPMENT, LLC HAS FAILED TO COMPLY UNDER THE PROJECT NAME: HIGHLAND GROVE SENIOR APARTMENTS BETWEEN FLORIDA HOUSING FINANCE CORPORATION AND WESTBROOK HOUSING DEVELOPMENT, LLC." Ken Reecy, Director of Multifamily Programs for Florida Housing, personally reviewed all Letters of Credit submitted by RFA applicants, and reported his findings to the Review Committee. The Review Committee recommended finding Capital Grove’s application nonresponsive and ineligible for funding because Capital Grove failed to include a responsive Letter of Credit. The Review Committee also found four other applications ineligible for failing to meet the Letter of Credit requirements, all of which used PNC Bank and involved entities related to Capital Grove, including Westbrook Housing Development, LLC, appearing as Co-Developer. All such PNC Letters of Credit failed for the same reasons. Mr. Reecy and the Review Committee found that the Letters of Credit from PNC Bank (including that submitted by Capital Grove) did not meet the facial requirements of the RFA, in that the Letters of Credit were not in the name of the applicant. The General Partner of the applicant, Capital Grove Limited Partnership, is Capital Grove GP, LLC. The Co-Developer entities are JPM Development, LLC, and Westbrook Housing Development, LLC. Co-Developer Westbrook Housing Development, LLC, a Michigan Company authorized to conduct business within the State of Florida, is a different legal entity from Co-Developer JPM Development, LLC. Mr. Reecy and the Review Committee also found the PNC Letters of Credit (including that submitted by Capital Grove) nonresponsive to the specification of the RFA because the Letters included a condition requiring Florida Housing, in order to draw on the Letter of Credit, to certify that the Co- Developer (and not the applicant) had “failed to comply under the project name: Highland Grove Senior Apartments.” However, under the RFA specifications, the action that is the basis for the presentment of the Letter of Credit is a withdrawal of the application by the applicant, not the developer. Only an applicant may withdraw an application. If the Letter of Credit cannot be drawn upon, the RFA provides that the applicant, “shall be responsible for the payment of the $25,000 to the Corporation; payment shall be due from the applicant to the Corporation within 10 calendar days following written notice from the Corporation.” Applicant Capital Grove is a single-purpose entity that has no assets. In order to collect on the Letter of Credit submitted by Capital Grove, Florida Housing would have to submit a different certification than that called for under the RFA sample letter of credit. According to Kathleen Spiers, Vice President of PNC Bank, to draw down the Letter of Credit, Florida Housing would have to copy the statement outlined in paragraph 2 of the Capital Grove Letter of Credit, sign it, and submit it to PNC to draw upon the letter of credit. At the final hearing, Mr. Reecy testified, “I am not prepared to certify to something that isn’t true. I am not going to certify that the developer didn’t comply by the Applicant withdrawing.” All other Letters of Credit submitted by applicants under this RFA were accepted as responsive. HTG Wellington’s Unit Count HTG Wellington indicated in its application to Florida Housing that its proposed Park at Wellington Development would be 110 multifamily units. In its application for Local Government Support, HTG Wellington described the Development as a 120-unit, multifamily development in five three-story buildings. The RFA requires a minimum $50,000 Local Government Contribution in Pasco County for an applicant to receive the maximum of five points. In order to obtain a Local Government Contribution, tax credit developers must submit an application to Pasco County at least six weeks before the matter is presented to the Board of County Commissioners for approval. Pasco County, in turn, has their underwriter, Neighborhood Lending Partners ("NLP"), organize the applications and create an underwriting package. NLP does not make a recommendation to the Board of County Commissioners for funding. Rather, NLP alerts Pasco County if there is a red flag concerning the Development and scores the applications based upon financial stability of the organization, financing of the project, and the development pro forma. HTG Wellington submitted an application for Local Government Contribution to Pasco County in November 2014. The application contemplated a 120-unit development. Impact fees schedules are adopted by the Pasco County Board of Commissioners. Pasco County has established an impact fee rate for affordable and non-affordable development and the difference between the two is multiplied by the number of units to determine the impact fee amount. The impact fee waiver amount approved for Park at Wellington Apartments was $219,600. This amount was calculated based upon 120 units contemplated in November 2014, multiplied by $1830.00, which is the difference between the normal impact fee rate, minus the rate for affordable housing development. The $219,600 figure was used in HTG Wellington’s application. At 110 units (as opposed to 120 units), the total Local Government Contribution available to HTG Wellington is $201,300. Either amount ($219,600 or $201,300) meets the minimum for HTG Wellington to receive five points for its Local Government Contribution. The change in the contribution amount would have no effect on the scoring of the HTG Wellington application. Pasco County’s Manager of Community Development and Officer of Community Development, George Romagnoli, testified that for approximately 15 years, Pasco County has employed a strategy to approve all applications for Local Government Contribution and then let Florida Housing choose which Development will receive tax credits. Pasco County is not concerned about the ultimate accuracy of the number of units submitted for a Contribution –- as stated by Mr. Romagnoli: "We funded 84, 120, whatever. It's really not material to the approval one way or the other." Although Florida Housing approved HTG Wellington’s application before discovering the discrepancy, had Florida Housing discovered the discrepancy in the number of units during the scoring process, the discrepancy would have been deemed a minor irregularity unless the discrepancy resulted in a change in scoring or otherwise rendered the application nonresponsive as to some material requirement and the discrepancy would generally be handled with a simple adjustment to the amount presented on the application Pro Forma, if necessary. Additionally, changes to the number of units in a development may be increased (but not decreased) under certain circumstances during the credit underwriting process which follows the competitive solicitation process. The discrepancy in the number of units does not provide any competitive advantage to HTG Wellington. The discrepancy in the number of units does not provide a benefit to HTG Wellington not enjoyed by others. Florida Housing’s waiver of the discrepancy in the number of units does not adversely impact the interests of the public. HTG Wellington’s Bus Stop The RFA allows an applicant to obtain 18 proximity points, including six points for a Public Bus Transfer Stop. Florida Housing awarded HTG Wellington 4.5 proximity points for its purported Public Bus Transfer Stop. The RFA defines a Public Bus Transfer Stop as: This service may be selected by all Applicants, regardless of the Demographic Commitment selected at question 2 of Exhibit For purposes of proximity points, a Public Bus Transfer Stop means fixed location at which passengers may access at least three routes of public transportation via buses. Each qualifying route must have a scheduled stop at the Public Bus Transfer Stop at least hourly during the times of 7 am to 9 am and also during the times of 4 pm to 6 pm Monday through Friday, excluding holidays on a year-round basis. This would include both bus stations (i.e. hub) and bus stop with multiple routes. Bus routes must be established or approved by a Local Government department that manages public transportation. Buses that travel between states will not be considered. In response to this requirement HTG Wellington submitted a Surveyor Certification Form which lists coordinates submitted to qualify for a Public Bus Transfer Stop. The site identified by HTG Wellington as a Public Bus Transfer Stop, however, is not a fixed location where passengers may access at least three routes of public transportation. While another bus stop which serves an additional two routes is within 700 feet, stops cannot be combined for purposes of the RFA. Therefore, the site designated as a Public Bus Transfer Stop by HTG Wellington is not a “fixed location” for purposes of the RFA and HTG Wellington is not entitled to obtain proximity points for a Public Bus Transfer Stop. Not including the 4.5 proximity points for a Public Bus Transfer Stop, HTG was awarded 11.5 total proximity points for selected Community Services. The required minimum total of proximity points for developments located in a medium county that must be achieved in order to be eligible to receive the maximum amount of 18 points as set forth in the RFA is 9. HTG had more than the required minimum total of proximity points to receive the maximum award of 18 proximity points based on its Community Services score alone. The disqualification of HTG’s submitted Public Bus Transfer Stop would have no effect on the scoring or ranking of the HTG Wellington application, nor affect its ranking relative to any other application, nor affect the ultimate funding selection. The RFA requires each applicant to read and sign at Attachment A, an Applicant Certification and Acknowledgement Form (the Form). The signing of the Form is mandatory. Page 5, Paragraph 8 of the Form provides: In eliciting information from third parties required by and/or included in this Application, the Applicant has provided such parties information that accurately describes the Development as proposed in this Application. The Applicant has reviewed the third party information included in this Application and/or provided during the credit underwriting process and the information provided by any such party is based upon, and accurate with respect to, the Development as proposed in this Application. Even though there was a discrepancy in the unit numbers submitted to Pasco County for a Local Government Contribution and its application submitted in response to the RFA, HTG signed the Form. No evidence was submitted indicating that HTG signed the Form with knowledge of the discrepancy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order: Rejecting Capital Grove’s application as nonresponsive and denying the relief requested in its Petition; Concluding that Capital Grove lacks standing to bring allegations against HTG Wellington; and, Upholding Florida Housing’s scoring and ranking of the HTG Wellington application. DONE AND ENTERED this 3rd day of August, 2015, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, Florida32399-3060 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 2015.
The Issue The issue for determination in this bid protest proceeding is whether the Florida Housing Finance Corporation’s (“Florida Housing”) intended award of tax credits for the preservation of existing affordable housing developments was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Based on the oral and documentary evidence presented at hearing, and the entire record in this proceeding, the Findings of Fact are as follows: Parties Petitioner, Madison Point, is a Florida limited liability company and the designated applicant for funding through the RFA to construct an 85-unit development for low- income elderly persons in Pinellas County, Florida. Petitioner, American Residential Development, LLC, is the designated developer for the proposed development. Intervenor, Heritage Oaks, is a Florida limited liability limited partnership in the business of providing affordable housing. Heritage Oaks is an applicant for financing in response to the RFA to construct an 85-unit development for low-income elderly persons in Pinellas County, Florida. Intervenor, HTG Hudson, is a Florida limited liability company in the business of developing affordable housing. HTG Hudson was an applicant for financing in response to the RFA to construct an 87-unit development for low-income elderly persons in Pinellas County, Florida. However, all issues regarding HTG Hudson have been resolved pursuant to a settlement agreement which was attached as Exhibit “A” to the Joint Prehearing Stipulation. Pursuant to the settlement agreement, HTG Hudson’s application is ineligible for funding. Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes, and for the purpose of this proceeding, an agency of the State of Florida. Its purpose is to promote public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Housing is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code and has the responsibility and authority to establish procedures for allocating and distributing low income housing tax credits. Affordable Housing Tax Credits The low-income housing tax credit program (commonly referred to as “tax credits” or “housing credits”) was enacted to incentivize the private market to invest in affordable rental housing. These tax credits are awarded competitively to housing developers in Florida for rental housing projects which qualify. These credits are then normally sold by developers for cash to raise capital for their projects. The effect is that it reduces the amount that the developer would have to borrow otherwise. Because the total debt is lower, a tax credit property can (and must) offer lower, more affordable rents. Developers also covenant to keep rents at affordable levels for periods of 30 to 50 years as consideration for receipt of the tax credits. The demand for tax credits provided by the federal government exceeds the supply. Florida Housing is authorized to allocate tax credits, State Apartment Incentive Loan (“SAIL”) funding, and other funding by means of request for proposal or other competitive solicitation in section 420.507(48), and adopted Florida Administrative Code Chapter 67-60, to govern the competitive solicitation process for several different programs, including the program for tax credits. Chapter 67-60 provides that Florida Housing allocate its tax credits, which were made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3). Application Process In their applications, applicants request a specific dollar amount of housing credits to be given to the applicant each year for a period of 10 years. Applicants will normally sell the rights to that future stream of income tax credits (through the sale of almost all of the ownership interest in the applicant’s entity) to an investor to generate the amount of capital needed to build the development. The amount which can be received depends upon the accomplishment of several factors such as a certain percentage of the projected “total development cost” (total costs incurred in the completion of a development); a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated areas of some counties. This, however, is not an exhaustive list of the factors considered. Tax credits are made available through a competitive application process commenced by the issuance of an RFA. An RFA is equivalent to a “request for proposal” as indicated in rule 67-60.009(3). The RFA at issue here is RFA 2016-113, Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas counties. The RFA was issued on October 28, 2016, and responses were initially due December 8, 2016. The RFA was modified on November 10, 2016, and, among other revisions, the application deadline was extended to December 30, 2016. Through the RFA, Florida Housing seeks to award up to an estimated $14,669,052 of housing credits to qualified applicants in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas counties. In response to RFA 2016-113, 43 applications were submitted for funding, including Madison Point and Heritage Oaks. Madison Point submitted application No. 2017-232C seeking $1,660,000 in annual allocation of housing credits to finance the construction of an 80-unit development in Pinellas County. Heritage Oaks submitted application No. 2017-201C, seeking $1,660,000 in annual allocation of housing credits to finance the construction of an 85-unit development in Pinellas County. The RFA sets forth the information required to be provided by an applicant, which includes a general description of the type of projects that will be considered eligible for funding and delineates the submission requirements. In order to be considered for funding selection, the application must meet all of the eligibility requirements set forth in the RFA. The eligibility requirements include, among other things, “[a]ll “Mandatory Items” described in section five of the RFA.” The RFA sets forth a list of mandatory items that must be included in a response including, but are not limited to, appropriate zoning, site control, development category, and occupancy status of any existing units. As part of the general development information, the RFA requires applicants to select a development category applicable to its proposed development. This is a mandatory item of the RFA. Applicants are instructed to select amongst the following categories: New Construction (where 50 percent or more of the units are new construction) Rehabilitation (where less than 50 percent of the units are new construction) Acquisition and Rehabilitation (acquisition and less than 50 percent of the units are new construction) Redevelopment (where 50 percent or more of the units are new construction) Acquisition and Redevelopment (acquisition and 50 percent or more of the units are new construction) Once disclosed in the application, the development category cannot be changed. In the RFA, “new construction” while capitalized is not a defined term. However, rule 67-48.002(98), defines “redevelopment” as follows: With regard to a proposed Development that involves demolition of multifamily rental residential structures currently or previously existing that were originally built in 1986 or earlier and either originally received financing or are currently financed through one or more of the following HUD or RD programs: Sections 202 of the Housing Act of 1959 (12 U.S.C. §1701q), 236 of the National Housing Act (12 U.S.C. §1701), 514, 515, or 516 of the U.S. Housing Act of 1949 (42 U.S.C. §1484), 811 of the U.S. Housing Act of 1937 (42 U.S.C. §1437), or have PBRA; and new construction of replacement structures on the same site maintaining at least the same number of PBRA units; or With regard to proposed Developments that involve demolition of public housing structures currently or previously existing on a site with a Declaration of Trust that were originally built in 1986 or earlier and that are assisted through ACC; and new construction of replacement structures on the same site, providing at least 25 percent of the total new units with PBRA, ACC, or both, after Redevelopment. Although the Rehabilitation Category is defined, it is not relevant for purposes of this proceeding. Additionally, the RFA requires applicants to answer whether the proposed development consists of: a) 100 percent new construction units; b) 100 percent rehabilitation units; or c) a combination of new construction units and rehabilitation units, and state the quantity of each type. This is a mandatory item of the RFA. Selection Process Florida Housing received 43 applications seeking funding in RFA 2016-113. Florida Housing’s executive director appointed a Review Committee of Florida Housing staff to evaluate the applications for eligibility and scoring and to make recommendations to Florida Housing’s Board of Directors. Pursuant to the terms of the RFA, the applications were received, processed, deemed eligible or ineligible, scored, and ranked. The Review Committee determined that, among other applicants, the applications of Heritage Oaks and Madison Point were eligible for funding. Through the ranking and selection process outlined in the RFA, Heritage Oaks was recommended to the Board of Directors to be selected for funding within Pinellas County. The Review Committee developed a chart listing its funding recommendations for the RFA to be presented to Florida Housing’s Board of Directors. On May 5, 2017, Florida Housing’s Board of Directors met and considered the recommendations of the Review Committee for RFA 2016-113. Also, on May 5, 2017 following the Board meeting, Petitioners, and all other applicants in RFA 2016-113, received notice that Florida Housing’s Board of Directors determined whether applications were eligible or ineligible for consideration for funding, and that certain eligible applicants were selected for award of tax credits. Such notice was provided by the posting of two spreadsheets, one listing the “eligible” and “ineligible” applications in RFA 2016-113 and one identifying the applications which Florida Housing proposed to fund on the Florida Housing website, www.floridahousing.org. Of the 43 applications submitted, 37 were deemed “eligible” and six were deemed “ineligible.” In that May 5, 2017, posting, Florida Housing announced its intention to award funding to seven applications, including Heritage Oaks. Madison Point was deemed eligible but not selected for funding. Madison Point timely filed a Notice of Protest and Petition for Formal Administrative Proceedings. Heritage Oaks intervened as a named party and intervention was granted. The scoring decisions at issue in this proceeding are related to Florida Housing’s decision to award funding to Heritage Oaks based on its responses regarding occupancy status and local government contribution. The RFA specifies an “application sorting order” to rank applicants for potential funding. The first consideration in sorting eligible applications for potential funding is application score. The maximum score an applicant can achieve is 28 points. In the case of a tie score, Florida Housing incorporated a series of “tie breakers” into the sorting process. The tiebreakers for this RFA, in order of applicability, are: First, by Development Category Funding Preference; Second, by a Per Unit Construction Funding Preference; Third, by a Leveraging Classification based on the amount of total Florida Housing funding per set-aside unit; Fourth, by the eligibility for the 75 or More Total Unit Funding Preference; Fifth, by satisfaction of a Florida Job Creation Funding preference, which applies a formula to reflect the estimated number of jobs created per $1 million of funding; Lastly, if necessary, by randomly assigned lottery number. The RFA set out a selection process for eligible applicants, after the sorting and ranking process outlined above. That selection process consisted of selecting the highest ranking eligible application for a proposed development in each of the following counties first: Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas. If funding remained after those selections, then the highest ranking eligible unfunded application in Broward would be selected next. Heritage Oaks and Madison Point selected the elderly non-Assisted Living Facility (“ALF”) demographic and the proposed developments were located in Pinellas County. Florida Housing’s preliminary agency action selected Heritage Oaks for funding for Pinellas County. Heritage Oaks’ Application Heritage Oaks’ proposed development site consists of approximately 4.99 acres. Heritage Oaks’ proposed development site contains existing roads owned by Pinellas County. Heritage Oaks indicates that its proposed development site was comprised of scattered sites. There are existing housing units on Heritage Oaks’ development site. However, Heritage Oaks’ application indicates that “there are no existing units.” Heritage Oaks’ application selected “new construction” as its development category. Heritage Oaks’ proposed development involves demolition of currently-occupied, multifamily, public housing rental structures that were originally built in 1986 or earlier and either originally received financing or are currently financed through one or more of the following HUD or RD programs: Sections 202 of the Housing Act of 1959 (12 U.S.C. § 1701 q); 236 of the National Housing Act (12 U.S.C. § 1701); 514, 515, or 516 of the U.S. Housing Act of 1949 (42 U.S.C. § 1484); and 811 of the U.S. Housing Act of 1937 (42 U.S.C. § 1437). Development Category In response to the RFA requirements, Heritage Oaks selected “New Construction” as its development category. Heritage Oaks also indicated that its proposed development consists of 100 percent new construction. Mr. Evjen acknowledged that Heritage Oaks’ proposed development involves the demolition of existing structures on the proposed development site and the construction of 85 new units. Mr. Evjen explained that the proposed development includes 71 senior units in a three-story, mid-rise building, and seven duplex buildings, which would include the other 14 units on the proposed development site. The testimony at hearing indicated that at the time of the application deadline, Heritage Oaks’ proposed development did not satisfy all of the criteria set forth in the definition of redevelopment, as set forth in paragraph 18, supra. At hearing, Mr. Evjen and Ms. Blinderman testified that to qualify as redevelopment, at least 25 percent of the new units must receive Project Based Rental Assistance (“PBRA”). PBRA units are those with a rental subsidy through a contract with the United States Department of Housing and Urban Development (“HUD”) or the Rural Development Services (formerly the Farmer’s Home Administration) of the United States Department of Agriculture. See Fla. Admin. Code Rules 67-48.002(72), (85), and (98). Heritage Oaks intends to develop the proposed development with Pinellas County Housing Authority (“Housing Authority”). At the time of the application deadline, the Housing Authority was in discussions with HUD regarding the final count, if any, of PBRA units. The lack of a resolution with HUD is beyond the authority of Heritage Oaks and remains uncertain. As of the application deadline, Heritage Oaks could not know if 25 percent of its new units would receive PBRA and, therefore, could not classify the proposed development as redevelopment. While it may be possible that Heritage Oaks’ proposed development may meet the definition of redevelopment at some point in the future, at the time of the application it did not meet the definition. At hearing, no testimony or documentary evidence was offered to establish that the proposed development currently falls within the definition of redevelopment. Respondent found this classification to be acceptable. Petitioners assert that it is reasonable that Heritage Oaks would meet the threshold to satisfy the criteria for the redevelopment category. However, it was more reasonable that Heritage Oaks would not meet the threshold and be ineligible for funding, if the redevelopment category had been incorrectly selected. Therefore, the evidence supports that it was reasonable for Heritage Oaks to identify its development project as new construction. Occupancy Status Petitioners also argue that Heritage Oaks should not be awarded funding because it failed to disclose the occupancy status of existing units on the proposed development site. In the RFA, the subheading and language for section four (A)(5)(e)(3) provides as follows: Number of Units in Proposed Development: The Applicant must indicate which of the following applies with regard to the occupancy status of any existing units: Existing units are currently occupied Existing units are not currently occupied There are no existing units The section then instructs the applicant to refer to section four (A)(5)(e) of the RFA instructions before answering the occupancy status question. The RFA instructions at section four (A)(5)(e) provide as follows: e. Number of Units in Proposed Development: The Applicant must state the total number of units. Note: The proposed Development must consist of a minimum of 50 total units. Proposed Developments consisting of 75 or more total units will be eligible for the 75 or More Total Unit Funding Preference (outlined at Section Four B.2. of the RFA). If the Elderly Demographic Commitment (ALF or Non- ALF) is selected at question 2.b. of Exhibit A, the proposed Development cannot exceed the maximum total number of units outlined in Item 1 of Exhibit C of the RFA. The Applicant must indicate whether the proposed Development consists of (a) 100% new construction units, (b) 100% rehabilitation units, or (c) a combination of new construction units and rehabilitation units, and state the quantity of each type. The Applicant must indicate the occupancy status of any existing units at question 5.e.(3) of Exhibit A. Developments that are tentatively funded will be required to provide to the Credit Underwriter a plan for relocation of existing tenants, as outlined in Item 2.b.(6) of the Applicant Certification and Acknowledgement form. The plan shall provide information regarding the relocation site; accommodations relevant to the needs of the residents and length of time residents will be displaced; moving and storage of the contents of a resident’s dwelling unit; as well as the approach to inform and prepare the residents for the rehabilitation activities. In response to this RFA requirement and the cited RFA Instructions concerning Occupancy Status, Heritage Oaks indicated that “there are no existing units” in its proposed development. However, Mr. Evjen testified that there were existing units on the development site as of the application deadline and some of those units were occupied. Heritage Oaks pointed out that a review of the RFA reflects that it is organized in an outline format with headings and subheadings. For example, section four concerns information to be provided in the application. Section four A(5) then requests general development information. Section four (A)(5)(e) requests information concerning the number of units in the proposed development. Mr. Evjen further testified that, based on review of the RFA and the instructions, Heritage Oaks took a three-step approach in responding to the occupancy status question. Heritage Oaks properly answered the first two questions. First, Heritage Oaks provided the total number of units as 85. Second, Heritage Oaks indicated that “all 85 units would be new construction.” In the final question, Heritage Oaks considered whether any existing units would remain as a “part of its proposed development.” Because no existing units would be part of its proposed development, Heritage Oaks responded “there are no existing units” in its proposed development. However, the term “proposed” was not used in question 5.e.(3) as was the case in the prior questions in the same subsection. Mr. Evjen also testified that he read the question as “if there are rehab[ilitation] units, are they occupied? Heritage Oaks’ erroneous interpretation of the question resulted in its failure to provide an accurate answer. The question simply requested the “occupancy status of any existing units.” The question was clear and unambiguous. The parties have stipulated that there are existing housing units on the Heritage Oaks proposed development site. However, Heritage Oaks’ application indicates that there are no existing units. The representation that there were no existing units was a false statement of material fact. It is worth noting that the parties stipulated at the beginning of the hearing that there is no allegation of fraud or intentional deception. There is also no evidence in the record of intentional deception and therefore, there is no finding by the undersigned that Heritage Oaks engaged in intentional misconduct. However, whether intentional or not, Heritage Oaks’ representation of no existing units is a false statement. According to Mr. Reecy, Florida Housing asks the question regarding occupancy status of existing units because Florida Housing wants to make sure that the developer can handle the cost issues related to relocation and that the relocation needs of the existing tenants will be met. Additionally, Mr. Reecy testified that Florida Housing relies upon applicants to accurately respond to questions in the RFA because, at the time of scoring, no independent research is conducted to verify responses. Regarding a relocation plan, Heritage Oaks relies on the Declaration of Trust’s requirement to have a tenant relocation plan as a remedy for the failure to properly respond to the occupancy status question. However, the Declaration of Trust is a HUD requirement that is not controlled by Florida Housing. In fact, Mr. Evjen testified that Heritage Oaks’ co-developer was researching terminating the Declaration of Trust. Given the fact that Heritage Oaks could terminate its Declaration of Trust, the Declaration of Trust does not provide adequate assurance that the tenants in the existing housing units will be adequately relocated once Florida Housing allocates its funding. Florida Housing has a material interest in ensuring that tenants located in existing housing units are properly and adequately relocated during the development phase of any Florida Housing-funded development. Accordingly, Florida Housing’s scoring decision with regard to Heritage Oaks’ response to the occupancy status question was contrary to the terms of the RFA and clearly erroneous. Heritage Oaks is ineligible for funding under RFA 2016-113. Local Government Contribution At section four (A)(10)(b), an applicant can obtain 10 points if it can demonstrate a high level of local government interest in its project via an increased amount of local government contribution. To satisfy this requirement, an applicant must attach a properly completed and executable Florida Housing Finance Corporation Local Government Verification of Contribution-Loan Form (“loan form”). The RFA establishes a contribution threshold amount which qualifies an application for the local government area of opportunity points. The RFA defines “local government areas of opportunity” as follows: Developments receiving a high level of Local Government interest in the project as demonstrated by an irrevocable funding contribution that equals or exceeds 2.5 times the Total Development Cost Per Unit Base Limitation (exclusive of any add-ons or multipliers), as provided in Item 7 of Exhibit C to the RFA, for the Development Type committed to for the proposed Development. The minimum local government areas of opportunity funding amounts are outlined in section four A.10.b. of the RFA. A single jurisdiction (i.e., the county or a municipality) may not contribute cash loans and/or cash grants for any other proposed development applying in the same competitive solicitation in an amount sufficient to qualify as Local Government Areas of Opportunity, per the competitive solicitation. In response to this RFA requirement, Heritage Oaks submitted Attachment 15, a loan form from Pinellas County, Florida, in the amount of $551,000. Based upon the minimum local government area of opportunity funding amounts established in the RFA, this amount qualified Intervenor Heritage Oaks for 10 points. Petitioners challenge Intervenor Heritage Oaks’ loan form for two reasons. First, Petitioners opine that the face value of the commitment and the net present value included in the loan form cannot be the same amount and, therefore, a calculation error must have occurred. Petitioners rely on examples of various calculations found in the RFA. Next, Petitioners allege that the loan form was not properly signed and no final approval was given by Pinellas County. Intervenor Heritage Oaks provided a loan form from Pinellas County. The loan form committed Pinellas County to a loan in the amount of $551,000. Mr. Bussey, the individual who processed the application and award of commitment, indicated that the commitment was a loan that would be forgiven as long as certain requirements were met and kept. Mr. Bussey further indicated that there were no loan payments or interest rates associated with the loan. Accordingly, he indicated that the loan value was the net present value of the loan, which means the commitment amount and the net present value for the Pinellas County loan is the same number, $551,000. While Petitioners allege that the loan form was not appropriately signed and no final approval had occurred, the greater weight of the evidence shows otherwise. Specifically, Petitioners opine that either a resolution or some action by the Pinellas County Board of County Commissioners or the County Administrator was necessary as asserted by their witness, Mr. Banach. While Mr. Banach was critical of the loan verification form, he acknowledged that he is not an expert regarding the process for Pinellas County loan contribution and he did not process the loan application. He further acknowledged that Mr. Bussey, the individual who processed the loan, found no error with the form. The evidence shows that the loan form was executed by Charles Justice, who at the time of the loan form’s execution was the Chairman of the Pinellas County Board of County Commissioners. Mr. Bussey explained the process for approving the loan form and indicated that Mr. Justice, as Chairman, had the authority to sign the loan form. Mr. Bussey also pointed out language in the loan form which provides as follows: “This certification must be signed by the chief appointed official (staff) responsible for such approval, . . . Chairperson of the Board of the County Commissioners.” Mr. Justice is one of the designated individuals the form itself indicated is acceptable. Mr. Bussey indicated that no further approvals were necessary. At hearing, Florida Housing indicated that the loan form submitted by Heritage Oaks satisfied the requirements of the RFA and this position was not shown to be erroneous or unreasonable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order rescinding the intended award to Heritage Oaks and designating Madison Point and America Residential Development, LLC, as the recipients of the funding under RFA 2016-113. DONE AND ENTERED this 11th day of August, 2017, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2017. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Betty Zachem, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) Marisa G. Button, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Michael G. Maida, Esquire Michael G. Maida, P.A. 1709 Hermitage Boulevard, Suite 201 Tallahassee, Florida 32308 (eServed) Douglas P. Manson, Esquire Manson Bolves Donaldson & Varn, P.A. 1101 West Swann Avenue Tampa, Florida 33606-2637 (eServed) Paria Shirzadi, Esquire Manson Bolves Donaldson & Varn, P.A. 1101 West Swann Avenue Tampa, Florida 33606-2637 (eServed) Craig D. Varn, Esquire Manson Bolves Donaldson Varn, P.A. 204 South Monroe Street, Suite 201 Tallahassee, Florida 32301 (eServed) J. Timothy Schulte, Esquire Zimmerman, Kiser, & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Orlando, Florida 32801 (eServed) Sarah Pape, Esquire Zimmerman, Kiser, & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Orlando, Florida 32801 (eServed) Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC 1725 Capital Circle Northeast, Suite 304 Tallahassee, Florida 32308 (eServed) Michael P. Donaldson, Esquire Carlton Fields Jorden Burt, P.A. Post Office Drawer 190 215 South Monroe Street, Suite 500 Tallahassee, Florida 32302-0190 (eServed) Kate Flemming, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed)
The Issue Whether Respondent, Florida Housing Finance Corporation’s (“Florida Housing”), decision to award funding, pursuant to Request for Applications 2017-111 (“the RFA”), to HTG Sunset, LLC (“Sunset Lake”); HTG Creekside, LLC (“Oaks at Creekside”); and Harper’s Pointe, LP (“Harper’s Pointe”), is contrary to its governing statutes, rules, or the RFA specifications; and, if so, whether the decision is clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Petitioner Madison Oaks is the Applicant entity for a proposed affordable housing development to be located in Osceola County, Florida. Petitioner Sterling Terrace is the Applicant entity for a proposed affordable housing development to be located in Hernando County, Florida. American Residential and Sterling Terrace are Developer entities as defined by Florida Housing in Florida Administrative Code Rule 67-48.002(28). Sunset Lake, Oaks at Creekside, and Harper’s Pointe are all properly registered business entities in Florida in the business of providing affordable housing. Florida Housing is a public corporation organized pursuant to chapter 420, Part V, Florida Statutes, and, for the purposes of these proceedings, an agency of the State of Florida. Through the RFA, Florida Housing proposes to award an estimated $10,978,942 in Housing Credit Financing for Affordable Housing Developments located in medium and small counties (“affordable housing tax credits”). The RFA outlines a process for selecting developments for funding. Section Five B. outlines the Selection Process, and subsection 2. is the Application Sorting Order. On November 5, 2017, Florida Housing received 167 applications in response to the RFA. Madison Oaks, Sterling Terrace, Sunset Lake, Oaks at Creekside, and Harper’s Pointe timely submitted applications seeking funding to assist in the development of multi-family housing in medium counties. Florida Housing selected a review committee to score all submitted applications. The review committee issued a recommendation of preliminary rankings and allocations, and the Board of Directors of Florida Housing approved these recommendations on May 4, 2018. The Board found that the parties to this proceeding all satisfied the mandatory and eligibility requirements for funding, but awarded funding to Intervenors based upon the ranking criteria in the RFA. If Sterling Terrace can demonstrate that any two of the three Intervenors should not have been recommended for funding, it and Blue Sunbelt, LLC, will displace them as applications selected for funding. If Madison Oaks can demonstrate that all three Intervenors should not have been recommended for funding, Sterling Terrace and Blue Sunbelt, LLC, will displace them as applications selected for funding. Sunset Lake Section Four A.5.e.(3) of the RFA allows applicants to receive up to four points for proximity to certain community services. The RFA provides that applicants in medium counties must receive at least seven points to be eligible for funding, and at least nine points to be eligible for a Proximity Funding Preference. One of those community services is public schools, which are defined as follows: A public elementary, middle, junior and/or high school, where the principal admission criterion is the geographic proximity to the school. This may include a charter school, if the charter school is open to appropriately aged children in the radius area who apply, without additional requirements for admissions such as passing an entrance exam or audition, payment of fees or tuition, or demographic diversity considerations. Additionally, it must have been in existence and available for use by the general public as of the Application Deadline. (emphasis added). Sunset Lake identified the Jewett School of the Arts (“Jewett School”) as a public school, received four points for proximity, and as a result, was eligible for the Proximity Funding Preference. The Jewett School is a magnet school within the Polk County Florida School District. The Jewett School was in existence and available for use by the general public as of the application deadline. Petitioners maintain the Jewett School does not meet the definition of “public school.”4/ If the Jewett School does not meet the definition of a “public school,” Sunset Lake would not be entitled to four points for proximity to community services. As a result, it would have a total of seven points for proximity, and while it would remain eligible, it would lose the Proximity Funding Preference. As a result, Sunset Lake would not have been ranked as highly and would not have been recommended for funding. The Jewett School does not meet the RFA definition of “public school” because geographic proximity to the school is not the principal admission criterion. Although a student must live in Polk County Schools’ Magnet Zone B to apply for admission to the Jewett School, the principal admission criteria is a random lottery process. Geographic location within the Polk County magnet school zones is a threshold issue which qualifies a student to apply for admission. However, the magnet school decision-making process entails a subsequent elaborate demographic diversity analysis, sorting based on the outcome of that analysis, and, ultimately, a random lottery drawing which determines final admission. The Jewett School admission process is contrary to Florida Housing’s primary purpose of awarding proximity points to proposed housing developments--to ensure the intended residents can, in fact, use the services in proximity to the development. Sunset Lake is not entitled to four points for proximity to community services and should not be awarded Proximity Funding Preference. As a result, Sunset Lake should not have been ranked as highly and should not have been recommended for funding. Oaks at Creekside Oaks at Creekside identified the Manatee Charter School (“Manatee School”) as a public school, received three points for proximity, and, as a result, was eligible for funding but not for the Proximity Funding Preference. The Manatee School is a charter school located in Bradenton, Florida. The Manatee School was in existence and available for use by the general public as of the application deadline. Petitioners maintain the Manatee School does not meet the definition of a “public school.”5/ If the Manatee Charter School does not meet that definition, then Oaks at Creekside is not entitled to three points for proximity. As a result, it would have only six total proximity points, and would not be eligible for funding. Florida Housing maintains that a charter school must meet both parts of the definition of a public school in order for a proposed development to receive proximity points based on proximity to that school. That means a charter school must (1) use geographic proximity as the primary admission criteria, and (2) be “open to appropriately aged children in the radius area who apply, without additional requirements for admissions such as passing an entrance exam or audition, payment of fees or tuition, or demographic diversity considerations.” Geographic proximity is not the primary admission criterion for the Manatee School. On the contrary, the Manatee School is open for admission regardless of geographic proximity thereto. The Manatee School operates pursuant to a contract with the Manatee County School Board, and is “open to any student residing in the Manatee County School District, students covered in an interdistrict agreement and students as provided for in Section 1002.33(10), Florida Statutes (2010).”6/ The Manatee School operates a “controlled open enrollment” process. The application period opens in early January and closes at the end of February, and the School accepts students from any school district in the state whose parent or guardian can provide transportation to the school, if the school has not reached capacity. This process is sometimes referred to as “school choice” and is mandatory pursuant to section 1002.31, Florida Statutes.7/ The Manatee School has enrolled students throughout Manatee County, as well as from adjoining Sarasota County. Historically, the Manatee School has not reached capacity. Once the School reaches capacity in any one grade level or class, students will be selected by a system-generated, random lottery process. The term “radius area” is not defined in the RFA or in Florida Housing’s rules. Florida Housing introduced no evidence regarding the meaning of the term “radius area” within the definition of “public school.” When questioned about the meaning, Marisa Button, Florida Housing’s Director of Multifamily Allocations, stated she did not know, but “[I] assume it means if the charter school has a radius area. I don’t know.”8/ The term “radius” is defined as “a bounded or circumscribed area.” Merriam-Webster Online, www.merriam- webster.com (2018). The bounded or circumscribed area for admission to the Manatee School is the Manatee County School District, pursuant to its contract. The Manatee School is open to appropriately-aged children in the radius area who apply. The Manatee School does not apply additional requirements for admission, such as passing an entrance exam or audition, payment of fees or tuition, or demographic diversity considerations.9/ The Manatee School does provide admissions preferences to students of active duty military personnel, siblings of a student already enrolled, siblings of an accepted applicant, children of an employee of the School, and children of a charter board member. Each of these preferences is authorized pursuant to section 1002.33(10)(d). The preferences are not additional requirements for admission to the Manatee School. The Manatee School meets the second part of the definition of “public school” for purpose of qualifying Oaks at Creekside to receive proximity points pursuant to the RFA. Harper’s Pointe Madison Oaks argues Harper’s Pointe is ineligible for funding pursuant to the RFA because the Harper’s Pointe development site is a “scattered site,” and Harper’s Pointe did not identify the site as such and comply with the RFA requirement to designate latitude and longitude coordinates for both sites.10/ Rule 67-48.002(105) defines “scattered sites” as follows: (105) “Scattered sites,” as applied to a single Development, means a Development site that, when taken as a whole, is comprised of real property that is not contiguous (each such non-contiguous site within a Scattered Site Development, is considered to be a “Scattered Site”). For purposes of this definition “contiguous” means touching at a point or along a boundary. Real property is contiguous if the only intervening real property interest is an easement, provided the easement is not a roadway or street. All of the Scattered Sites must be located in the same county. Section Four A.5.c. of the RFA states: “The Applicant must state whether the Development consists of Scattered Sites.” Section Four A.5.d. of the RFA requires that applicants provide latitude and longitude coordinates for the Development Location Point and any scattered sites. Section Five A.1. provides that “only items that meet all of the following Eligibility Items will be eligible for funding and consideration for funding selection.” Among the items listed are “Question whether a Scattered Sites Development answered” and “Latitude and Longitude Coordinates for any Scattered Site provided, if applicable.” Harper’s Pointe did not state in its application that the development consists of scattered sites, and did not provide separate latitude and longitude coordinates for scattered sites. Harper’s Pointe’s proposed development site, as identified in its Site Control Documents, consists of land located within a platted tract of property. The plat recorded in Alachua County indicates that the site is bisected by a platted 50-foot street easement running east/west through the property. The parties stipulated the street has never been constructed. Although portions of the east/west easement area show signs of having been improved at some time in the past, the easement area has never been paved, and is currently impassible by car or truck due to vegetation in the easement area. Even if the easement area were improved, there is no roadway to the west of the property to which it would connect. A fence runs along the property line and the property beyond the fence is platted residential lots accessed by Northeast 22nd Street. An existing roadway, Northeast 23rd Avenue, terminates at the eastern property line just south of the east/west easement. The City has placed barriers at that property line prohibiting access to the property from Northeast 23rd Avenue. If the platted street is a “roadway or street” as those terms are used in rule 67-48.002(105), the site would meet the definition of a “scattered site.” Ms. Button testified on behalf of Florida Housing that the property meets the definition of a scattered site because “there is an easement that is a road or a street” that bisects the property. Ms. Button first testified that Florida Housing’s determination did not depend on whether a roadway or street is actually constructed within the easement, but rather, “it goes back to the easement, whether there is an easement that is a roadway or street.” Ms. Button’s testimony seemed logical enough. If the easement were a street easement, access between the northern and southern portions of the development site would be constrained. By contrast, if the easement were a conservation or utility easement, there would be no impairment of access between portions of the development site. However, on cross examination, Ms. Button testified that, in making the determination whether an easement for a road or street existed, Florida Housing would consider a number of other factors, including whether a roadway was actually constructed within the easement, whether there were physical obstructions preventing access to the “prospective” roadway or street, and whether the public had a right to use the “prospective” roadway or street. Ms. Button did not testify with specificity what factors she considered in making the determination that the easement, in this case, was “a roadway or street.” Ms. Button’s direct-examination testimony was conclusory: “Based on the documentation we received, there is an easement that is a road or street.” On direct examination, her determination appeared to be based solely on the plat designation of a street easement. On cross-examination, however, Ms. Button testified that “a street designated . . . on a plat could be evidence of the existence of a scattered site.” (emphasis added). Moreover, Ms. Button testified that Florida Housing could consider whether a roadway or street was actually constructed, whether there were obstructions to its use, and whether the public had a right to use the purported roadway. Ms. Button’s testimony that the Harper’s Point development site was a scattered site was equivocal, and the undersigned does not accept it as either reliable or persuasive.11/ There is no physical roadway or street constructed within the easement. While there is some evidence that some portions of the easement area were improved in the past, said improvement was at least 25 years old. The current condition of the property is fairly heavily wooded. To the extent a “path” exists on the property, it is not passable by a standard four- wheeled vehicle. Moreover, there are physical barriers preventing vehicular access to the property from the adjoining street to the east. There is no access to the property from the residential development to the west of the property. There is not an improved area preventing access from the northern to the southern portion of the development site. There is no structure built within the easement which would have to be demolished in order to build the project on the development site as a single parcel. Based on the entirety of the reliable evidence, the Harper’s Pointe development site is not a “scattered site” as defined in the RFA. Madison Oaks failed to prove that Florida Housing’s initial determination to award tax credits to Harper’s Pointe, pursuant to the RFA, was incorrect.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing issue a final order finding (1) that its initial scoring decision regarding Sunset Lake was erroneous, and awarding funding to the applicant with the next highest lottery number; and (2) awarding funding to Oaks at Creekside and Harper’s Pointe, pursuant to its initial scoring decision. DONE AND ENTERED this 23rd day of August, 2018, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of August, 2018.
The Issue Whether Petitioners " . . . provide[d] direct services in a local fiscal agent's area (so that they may) . . . receive the same percentage of undesignated funds as a percentage of designated funds they receive . . . ", Section 110.181 (2)(e), Florida Statutes (2006), in relation to the 2006 Florida State Employees' Charitable Campaign (the 2006 Campaign).
Findings Of Fact Stipulated Facts The Florida Legislature created the Florida State Employees' Charitable Campaign in 1993 ("Campaign"). § 110.181(1)(a), Fla. Stat. (2006). The Act requires the Department to "establish and maintain" an annual Campaign, which "is the only authorized charitable fundraising drive directed toward state employees within work areas during work hours, and for which the state will provide payroll deduction." § 110.181(1)(a), Fla. Stat. (2006). State employees are provided annually with a pledge card that allows them to direct their donations to particular charities. Each employee is given a booklet containing a list of those charities that have qualified to participate in the Campaign. Each employee can either pick from the pre-qualified list, or the employee can give "undesignated funds" that go to no particular charity. The Act requires the creation of a Statewide Steering Committee ("Committee") of seven members appointed by the Administration Commission, and two members appointed by the Department Secretary, all serving staggered terms. § 110.181(4), Fla. Stat. In addition to the Committee, the Act calls for the creation of several other steering committees, one "in each fiscal agent area," whose purpose is to "assist in conducting the campaign and to direct the distribution of undesignated funds" ("local steering committees"). § 110.181(2)(d), Fla. Stat. The Department is required to select through the competitive procurement process a "fiscal agent" or agent whose duties are limited to "receiv[ing], account[ing] for, and distribut[ing] charitable contributions among the participating charitable organizations." § 110.181(2)(a), Fla. Stat. United Way of Florida, Inc., served as the state wide fiscal agent during the 2006 Campaign. Petitioners are 21 charities that were approved by the Committee and participated in the 2006 Campaign. Petitioner Community Health Charities is a "federation" or "umbrella" agency within the meaning of Rule 60L-39.0015(j), Florida Administrative Code, representing each of the other Petitioners in the 2006 Florida State Employees' Charitable Campaign ("2006 Campaign" or "FSECC"). Each Petitioner is either a charity or a federation within the meaning of the Act that participates in the annual statewide campaign and has a direct interest in the proper administration of the Act, including the distribution of designated and undesignated charitable funds generated thereby. Additional Facts Section 110.181(3), Florida Statutes, grants rulemaking authority to the Respondent in association with the time and manner for charitable organizations to participate in the Campaign. This process is undertaken upon the recommendations of the Committee. In accordance with those opportunities Respondent had adopted administrative rules to implement Section 110.181, Florida Statutes. Among the rules in the Florida Administrative Code were the following: 60L-39.001 (scope and purpose); 60L- 39.002 (general requirements); 60L-39.003 (Statewide Steering Committee); 60L-39.004 (Eligibility Criteria for Participation by Charitable Organizations); 60L-39.005 (Application Procedures); and 60L-39.006 (Duties and Responsibilities of the Fiscal Agent). None of these rules defined the term "direct services" in a "local fiscal agent's area", referred to in Section 110.181(2)(e), Florida Statutes (2006), as that statute controls the opportunity for a charitable organization to receive undesignated funds from the 2006 Campaign. This has been explained as the "first tier distribution" of undesignated charitable contributions made by state employees. After the 2006 Campaign commenced, Respondent adopted a rule that defined the term "direct services." Florida Administrative Code Rule 60L-39.0015(1)(i) provided that definition. The rule was effective January 23, 2007. It defined the term "direct services" as: Direct services. Identifiable and specific services available in the local fiscal agent's area without any intervention between the services offered and persons served. The 2006 Campaign began in the summer of 2006. December 22, 2006, was the deadline for applying for first tier undesignated funds. Application was made upon a form created for use in the 2006 Campaign. Petitioner's Exhibit numbered 2. On October 17, 2006, by e-mail, Petitioners were made aware of the direct local services certification form and its guidelines, contained in one document, Petitioners' Exhibit numbered 2. Explanations were provided. The e-mail came from John Kuczwanski, Committee Chairman. This document referenced distribution of the first tier undesignated funds for the 2006 Campaign. It said in pertinent part: As a result of recent changes to the FSECC Law (s. 110.181(2)(d) and (e), Florida Statutes), the Statewide FSECC Steering Committee is in the process of implementing rules and a process by which federations and unaffiliated/independent organizations will submit information, regarding provision of direct local services in each fiscal agent United Way area, in order to receive a pro- rata share of undesignated funds. The final process and rules will take effect in 2007, and will become a part of the 2007 FSECC application cycle and are a result of input during our rules promulgation process. Because these formal rules will not be implemented until 2007, an interim process will be in place for the 2006 FSECC. As such, the following process will be utilized by federations and unaffiliated/independent organizations to determine where direct local services are being provided, and thereby eligibility for a pro-rata share of 2006 undesignated funds. Attached is a spreadsheet, which you must complete and submit to the Statewide FSECC Steering Committee no later than close of business on Friday, December 22, 2006. Instructions for Federations: On the attached spreadsheet, please enter the requested information for your federation and each of your member agencies (that have been approved to participate in the 2006 FSECC) that provide direct local services in the appropriate Fiscal Agent United Way sections. Each section identifies which county(ies) are included in that fiscal agent area. Only enter agencies in the fiscal agent section(s) in which that agency provides direct local services, as defined on the spreadsheet. The attached spreadsheet (form), in relevant part contained the following: 2006 Florida State Employees' Charitable Campaign Direct Local Services Certification Form GuidelinesDEADLINE: December 22, 2006 [Forms received after the deadline will result in ineligibility for a pro-rata share of undesignated funds.] Federation Name: OR Unaffiliated/Independent Organization Name: Contact Person: Email Address: Telephone Number: INSTRUCTIONS: Please enter the requested information below for each of your federation's member agencies (that have been approved to participate in the 2006 FSECC) that provide direct local services in the appropriate United Way Fiscal Agency sections below. Unaffiliated/independent organizations should provide the requested information in the appropriate sections for the areas in which your organization provides direct local services. Name of Organization Organization Address Address(es) where the direct service(s) were delivered in the previous calendar year (2005) Description of the type of direct service(s) delivered ["Direct services" is defined as identifiable and specific services available in the local fiscal agent's area without any intervention between the services offered and persons served.] # of people served/Population served * * * The form goes on to describe the areas served by the United Way fiscal agents, as examples United Way of the Big Bend, with its respective counties and the United Way of Brevard County, with its respective counties. It was contemplated that the charities seeking participation in distribution of first tier undesignated funds identify the organization by name, its address, addresses where direct services were delivered in the previous calendar year, etc., in relation to all of the United Way fiscal agent areas. Petitioners and other charities seeking participation in the first tier distribution of undesignated funds were expected to proceed without further direction from the Committee or Respondent when completing the 2006 Direct Local Services' Certification Form. Concerning the rule adoption process referred to in the e-mail, on October 16, 2007, the Committee had met to review proposed rules under consideration that supported the process of charitable campaigns recognized in Section 110.181, Florida Statutes. Prior to that date, the Respondent had held meetings and conducted workshops related to rule development. As a result, Florida Administrative Code Rule 60L-39.015, and an amendment to Florida Administrative Code Rule 60L-39.005, were adopted and became effective January 23, 2007. The amendment within Florida Administrative Code Rule 60L-39.005(5), incorporated by reference Form DMS-ADM-102, effective January 23, 2007, the same date the overall Florida Administrative Code Rule 60L-39.005 was amended. The incorporated form differed in appearance when compared to the 2006 Direct Local Services Certification Form with guidelines that had been provided in relation to the 2006 Campaign. The difference was that the Form incorporated by reference was titled "Agency Direct Local Services Certification Form". It spoke of a March 1 deadline with no specific year. It spoke of a need to provide the federation name, contact person and telephone number. It carried the same headings in the five columns related to the provision of the information about direct services in the 27 United Way fiscal agent areas. In its instructions it stated: Each federation is required to submit this form for all member agencies that provide direct local services, as defined in Rule 60L-39.0015(i), Florida Administrative Code, in the appropriate local fiscal agent sections below and provide with their annual application package. Independent or unaffiliated agencies must provide this form with their annual application. Gwen Cooper, president and CEO of Community health Charities of Florida (CCH), helped the members of the federation, the other Petitioners in this cause, complete the 2006 Direct Local Services Certification Form with guidelines. This included contacts by telephone and e-mails to address the proper response to the form on the part of the member charities. In addition, Ms. Cooper prepared a different form, designed to assist the member charities in presenting needed information. That form called for a deadline of December 5, 2006, for submission to her of information provided by the member charities on the form prepared by Ms. Cooper. The return information was then edited and utilized in her preparation of the 2006 Campaign Direct Local Services Certification Form with guidelines that had been made available by the Committee on October 17, 2006. An example of the instructions for a member charity as filled out by the charity on the form created by Ms. Cooper is Respondent's Exhibit numbered 6 pertaining to the Leukemia & Lymphoma Society, Palm Beach Chapter. The completed Direct Local Services Certification Forms with guidelines for the 2006 Campaign for all CHS member charities is Petitioners' Exhibit numbered 12A. Importantly, the instructions provided in the Cooper form directed to the CHC member charities, stated: INSTRUCTIONS: Please enter the requested information below for each fiscal agent regional area where your agency provides direct local services. Simply recording the office in that region is not enough. Please keep your descriptions concise and general. There is no need to give lengthy details for each region. If you know the number of people served in that region, please record it. If not, please provide an estimate or put NA. If you do not provide services in a particular regions (sic), please put NA in the Description column. If you have more than one office in a particular region, please list all the offices. We will review all submissions and call with questions. Feel free to add lines as needed. This record is for services rendered in Calendar Year 2005. As can be seen, this was a departure from the instructions provided by the Committee in the 2006 Campaign Direct Local Services Certification Form with guidelines previously described, Petitioners' Exhibit numbered 12A representing the completed form for all CHC member charities. The Committee met on February 14, 22, and 28, 2007, to consider the 2006 Campaign Direct Local Services Certification Forms with guidelines completed by Petitioners and other charitable groups. Dr. Kenneth Armstrong, Jr., Executive Director of the United Way of the Big Bend, attended the February 14, 2007, Committee meeting. At the meeting he presented the Committee members with a document intended to express his opinion concerning the basis for deciding whether Petitioners and other charitable organizations were entitled to receive first tier undesignated funds. Petitioners' Exhibit numbered 4. In this document, Dr. Armstrong critically comments on the entitlement of Petitioners, unaffiliated and independent charitable agencies to receive first tier undesignated funds. In his written remarks, he opposes the right for some Petitioners to receive the first tier undesignated funds, while explaining his reasons. These suggestions were favorably received by Respondent's counsel who advised the Committee during the meeting. In particular, counsel stated that he found Dr. Armstrong's approach created an " . . . incisive analysis of the kind of activities that could not reasonably be considered direct services . . . ". While the Committee was left to arrive at its own decision concerning Petitioners' entitlement to receive first tier undesignated funds, Dr. Armstrong's ideas given credence by Respondent's counsel were accepted as part of that process. The work was not completed on February 14, 2007, and the Committee reconvened on February 22, 2007, to continue consideration of the 2006 Campaign Direct Local Services Certification Forms. The Committee met again on February 28, 2007, to consider the 2006 Campaign Direct Local Services Certification Forms. By then the forms had been divided among the Committee members, with each Committee member being responsible for review and recommendation in relation to his or her part of the assignment. The discussion in the session was at best abbreviated concerning the decision to include or reject a charity in a locale in relation to receiving first tier undesignated funds. One Committee member left the meeting and his portion of the assignment was dealt with by the remaining Committee members reviewing the annotations of the missing member indicating denial or approval of a given charity. There were other notes as well on these materials assigned to the Committee member who left the meeting. The remaining Committee members approved the recommendations by the missing Committee member. On March 8, 2007, the Committee made its decision and e-mailed Petitioners concerning its position on the "2006 FSECC Direct Local Services Certification" spreadsheets (forms). The e-mail is Petitioners' Exhibit numbered 10. The reference line in the e-mail is "Distribution of 2006 FSECC undesignated funds -- Direct Local Services Certification". The reason for this preliminary decision was: After three meetings, the FSECC Statewide Steering Committee has completed its review and voted on all 2006 FSECC Direct and Local Service Certification spreadsheets previously submitted for its consideration. Attached is the final spreadsheet that lists all charitable organizations that were approved by the Committee and deemed, based on the information submitted, to be providing direct local services in at least one United Way fiscal agent area. Charitable organizations not included on the attached list were not deemed to be providing direct local services, based on the information submitted. Direct local services, as defined on the certification form and in Rule, are "identifiable and specific services available in the local fiscal agent's area without any intervention between the services offered and persons served." The 59 charitable organizations included on the attached list will receive a pro-rata share (based on their local designation percentages in 2006) of the 2006 undesignated funds, in the Fiscal Agent United Way areas within which they were deemed to be providing direct local services, as indicated on the attached by an "X" in specific United Way fiscal agent columns. Thank you, The FSECC Statewide Steering Committee The above-quoted language in the e-mail notification that refers to the certification form is understood to mean the 2006 Campaign Direct Local Services Certification Form with guidelines. The comment in the e-mail concerning the "rule" where it says "identifiable and specific services available in the local fiscal agent's area without any intervention between the services offered and persons served" is taken directly from Florida Administrative Code Rule 60-39.0015(1)(i), effective January 23, 2007, with its definition of "direct services." As the March 8, 2007, e-mail summarizes, CHC had 16 member originations approved. At the time the preliminary decision was communicated, the Committee had approved approximately 18.64 percent of Petitioners' individual submissions. The basis of the denial of the remaining submissions seeking receipt of first tier undesignated funds was not explained. This led to the original petition challenging the decision to deny rights to receive first tier undesignated funds filed on March 30, 2007. The history of the case beyond that point has been explained in the Preliminary Statement, to include the basis for proceeding before DOAH. On August 24, 2007, after the case had been referred to DOAH for hearing, Respondent published notice in the Florida Administrative Weekly, Volume 33 No. 34, to this effect: The Florida Department of Management Services announces a public meeting to which all persons are invited. DATE AND TIME: September 10, 2007, 9:00 a.m. - 12:00 Noon PLACE: 4050 Esplanade Way, Room 101, Tallahassee, Florida GENERAL SUBJECT MATTER TO BE CONSIDERED: Review and Approval of Local Steering Committee Members. Community Health Charities lawsuit and re-visit on direct services determinations. A copy of the agenda may be obtained by contacting: Erin Thoresen, Department of Management Services, 4050 Esplanade Way, Suite 235, Tallahassee, FL 32399-0950, (850)922-1274. If any person decides to appeal any decision made by the Board with respect to any matter considered at this meeting or hearing, he/she will need to ensure that a verbatim record of the proceeding is made, which record includes the testimony and evidence from which the appeal is to be issued. * * * Respondent's Exhibit numbered 24. The notice by its terms did not explain in any detail what might be achieved during the course of the meeting to consider the pending "lawsuit" and revisit issues in relation to direct services determinations. The "lawsuit" related to the pending administrative proceeding in DOAH Case No. 07-3547. Barton Cooper, CHC Director of Corporate Development, attended the meeting with Petitioners' counsel. No presentation was made by Petitioners, as they were uncertain of Respondent's intentions when the meeting was advertised in the Florida Administrative Weekly, and understood that litigation was ongoing before DOAH. Nonetheless, Mr. Cooper expressed his appreciation for the Committee's willingness to revisit the issue of the remaining Petitioners' entitlement to receive first tier undesignated funds. On this occasion the Committee conducted an additional review of material provided by Petitioners. Those materials were constituted of Petitioners' Exhibit numbered 12A, the original December 22, 2006, Direct Local Services Certification Forms for the rejected applicants for first tier undesignated funds and Exhibit 2 to the Amended Petition for Formal Administrative Hearing filed March 30, 2007, with the Respondent. (Exhibit 2 became Petitioners' Exhibit numbered 12B, admitted at the final hearing.) This exhibit provides additional information concerning member charities within CHC and supporting argument for their inclusion in the distribution of first tier undesignated funds. As a consequence of the Committee's efforts, approximately 77 percent of Petitioners' applications made originally were approved, leaving 21 Petitioners denied the ability to receive first tier designated funds in one or more of the United Way fiscal agent areas. On September 12, 2007, the Committee made known its "Amended and Revised FSECC Direct Services Determinations for the 2006 Campaign" in correspondence directed to Petitioners. Petitioners' Exhibit numbered 13. In explanation, the written communication stated: On September 10, 2007 the Statewide Steering committee decided to re-visit issues on direct services determinations. In accordance with Exhibit 2 of the Second Amended Petition for Formal Administrative Hearing, the participating Community Health Charities, within the fiscal area listed, were revisited. The Direct Local Services Certification Forms submitted on behalf of your organization and/or your member agencies were reexamined for compliance with the eligibility criteria for a receipt of undesignated funds based upon the provision of direct services. Direct services are defined as "[i]dentifiable and specific services available in the local fiscal agent's area without any intervention between the services offered and persons served." Rule 60L-39.0015(1)(i), Florida Administrative Code. Applicant organizations named above that did not meet the criteria for direct services were denied by the FSECC Statewide Steering Committee. This explanation referred to the definition of direct services found within Florida Administrative Code Rule 60-39.0015(1)(i), effective January 23, 2007. It also mentioned reliance upon Exhibit numbered 2 to the Second Amended Petition for Formal Administrative Hearing (Exhibit 2 accompanied the Amended Petition for Formal Administrative Hearing as well). The memorandum decision pointed out a spreadsheet attached describing those charities whose application forms had been reexamined on September 10, 2007, noting approvals and disapprovals. The attachment to the September 12, 2007, amended revised FSECC Direct Local Services determination for the 2006 Campaign breaks out the agencies approved as to locations within United Way fiscal agents areas, those approved earlier and those approved by actions taken on September 10, 2007. Those approvals are noted by marking the letter "X" in the column for each agency earlier approved or approved on September 10, 2007, as to each charity and every United Way fiscal agent area. Concerning the remaining requests to receive first tier undesignated funds by those 21 Petitioners, information necessary to decide entitlement is found within the 2006 Campaign Direct Local Services Certification Form with guidelines (Petitioners' Exhibit numbered 12A); the explanations found within Exhibit 2 to the Amended Petition for Formal Administrative Hearing, which became Petitioners' Exhibit numbered 12B and a series of exhibits admitted at hearing, Petitioners' Exhibit numbered 21 through 38. Those latter exhibits provide explanations pertaining to the 21 disappointed Petitioners, expanding what is known about the charities, their services, the manner that the services are provided, who receives the services and where the services are received, together with the address(es) of the respective organizations. In addition, the depositions of Paul Andrew Ledford of Florida Hospice and Palliative Care (Joint Exhibit numbered 2); Susanne Homant, National Association of Mentally Ill in Florida (Joint Exhibit numbered 3); Deborah Linton, Association for Retarded Citizens of Florida, Inc. (Joint Exhibit numbered 4); Suzanne Earle, Children's Tumor Foundation (Joint Exhibit numbered 5); Pamela Byrne, Leukemia & Lymphoma Society (Joint Exhibit numbered 6) and Tracy Tucker, Cystic Fibrosis Foundation (Joint Exhibit numbered 7) afford additional insight on the subject of who is served, where they are served etc., pertaining to the subject. Without recounting the details from the various sources previously described, all that information is accepted for purposes of this Recommended Order, as to the facts represented in the exhibits. Based upon information provided in the aforementioned exhibits, the Association for Retarded Citizens/Florida, CHC, Florida Hospices and Palliative Care and the National Alliance for the Mentally Ill of Florida do not provide direct services in fiscal agent areas without intervention between the services offered and persons served in any location. Based upon information provided in the aforementioned exhibits, ALS Association provides direct services in the Heart of Florida United Way fiscal agent area, contrary to the impression held by the Committee before the final hearing. Based upon information provided in the aforementioned exhibits, the Cystic Fibrosis Foundation provides direct services in the United Way fiscal agent areas in Lake and Sumter, Okaloosa-Walton, Santa Rosa, and Volusia-Flagler, for reasons comparable to the practice of the Committee when making its earlier determinations. Based upon information provided in the aforementioned exhibits, the Lupus Foundation of America, Southeast Florida Chapter, provides direct services in the United Way fiscal agent areas in Broward and Palm Beach counties. Of the unapproved requests for first tier undesignated funds made by remaining Petitioners in other specific United Way fiscal agent areas, the facts do not support those requests.
Recommendation Upon consideration, it is RECOMMENDED: That a final order be entered that allows Petitioners to receive first tier undesignated funds in relation to the 2006 Campaign to the extent identified and denies any additional relief requested in the Third Amended Petition for Formal Administrative Hearing. DONE AND ENTERED this 29th day of February, 2008, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS 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 29th day of February, 2008. COPIES FURNISHED: David C. Hawkins, Esquire David C. Hawkins, PLLC 3141 Brockton Way Tallahassee, Florida 32308 Matthew F. Minno, Esquire Gerard York, Esquire Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 David Andrew Byrne, Esquire Phillips Nizer LLP 666 5th Avenue New York, New York 10103-0001 James A. Peters, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Linda South, Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 John Brenneis, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue The issues presented, as framed by the Fifth District’s December 16, 2020, Order are: (1) whether the School Board is entitled to appellate attorney’s fees pursuant to section 1002.33(8)(b), Florida Statutes; and (2) the amount of attorney’s fees to which the School Board is entitled.
Findings Of Fact The Underlying Matter (DOAH Case No. 19-6424) The underlying matter concerned whether Legacy’s school charter for the Legacy Academy Charter School should be terminated for the reasons set forth in the School Board’s November 20, 2019, 90-Day Notice of Proposed Termination of Charter, pursuant to section 1002.33(8)(b). A detailed recounting of the underlying matter can be found in The School Board of Brevard County v. Legacy Academy Charter, Inc., DOAH Case No. 19-6424 (DOAH Aug. 18, 2020), which concluded that the School Board met its burden, by clear and convincing evidence, that it may terminate the Amended Charter. Attorneys’ Fees and Costs for Underlying Matter (DOAH Case No. 20-3911F) On August 28, 2020, the School Board filed a Motion for Attorneys’ Fees, Costs, and Sanctions, which was assigned DOAH Case No. 20-3911F. The undersigned conducted a final hearing in DOAH Case No. 20- 3911F on November 6, 2020. The School Board’s expert on attorneys’ fees at that hearing, Nicholas A. Shannin, Esquire, testified that the hourly rate of $200 for partners and associates at the School Board’s Orlando-based law firm of Garganese, Weiss, D’Agresta & Salzman, P.A. (GWDS), was “incredibly reasonable.” The undersigned held that the $200 hourly rate GWDS charged the School Board for its attorneys was reasonable, and ultimately ordered Legacy, pursuant to section 1002.33(8)(b), to pay the School Board a total of $312,147.80, broken down as follows: (a) $271,162.00 in attorneys’ fees; and (b) $40,985.80 in costs. See The School Bd. of Brevard Cty. v. Legacy Academy Charter, Inc., DOAH Case No 20-3911F (DOAH Dec. 4, 2020). Attorney’s Fees for Appeal (Case No. 5D20-1762) The School Board’s Affidavit of Attorneys’ Fees details the attorney’s fees that the School Board seeks in the appeal, and includes the detailed billing records of GWDS. This affidavit avers that the hourly rate actually billed by counsel was $200 for attorney Erin O’Leary, Esquire, who is Board Certified in Appellate Practice by The Florida Bar, and who handled the appeal. The affidavit further avers that Ms. O’Leary’s total number of hours billed in the appeal was 42.5 hours. Although GWDS attorney Debra Babb-Nutcher, Esquire, participated as counsel in the appeal, including supervising Ms. O’Leary and assisting in case strategy, preparation of documents, and communications with the School Board and opposing counsel, the School Board only seeks to recover the total amount of attorney’s fees charged by Ms. O’Leary. In DOAH Case No. 20-3911F, the undersigned found that the $200 hourly rate GWDS charged the School Board of its attorneys was reasonable, and the undersigned finds that a $200 hourly rate charged by Ms. O’Leary for representing the School Board on appeal is reasonable. The hours expended in this matter are reasonable given the time and labor required, the unique arguments raised by Legacy in attempting to stay the closure of its school, the lack of legal precedent, the multiple factual claims that required rebuttal, the short time frame in which to respond making other work impossible, the significant effort required to defend against the stay, as well as the ultimate success achieved in defeating Legacy’s attempted stay. The School Board has demonstrated that the attorney’s fees sought are reasonable based upon the reasonable rate charged and the reasonable hours expended in the appeal. Legacy has filed nothing to dispute the School Board’s request for appellate attorney’s fees. The Lodestar figure (i.e., the fees charged and hours expended) by Ms. O’Leary in this appeal is $8,500.00 for the work performed between August 19, 2020, through December 3, 2020. The undersigned finds that this Lodestar figure is reasonable in light of the factors enumerated in the Rules of Professional Conduct, found in Rule 4-1.5 of the Rules Regulating The Florida Bar, as well as Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985), and Standard Guaranty Insurance Company v. Quanstrom, 555 So. 2d 828 (Fla. 1990). The undersigned finds that the total fee amount of $8,500.00 for the appeal of the underlying matter, Case No. 5D20-1762, shall be recoverable by the School Board, as prescribed in section 1002.33(8)(b).2
