The Issue The issue for determination in this consolidated bid protest proceeding is whether the Florida Housing Finance Corporation’s (“FHFC”) 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 FHFC and Affordable Housing Tax Credits FHFC is a public corporation that finances affordable housing in Florida by allocating and distributing low income housing tax credits. See § 420.504(1), Fla. Stat. (providing that FHFC is “an entrepreneurial public corporation organized to provide and promote the public welfare by administering the governmental function of financing or refinancing housing and related facilities in this state.”); § 420.5099(2), Fla. Stat. (providing that “[t]he corporation shall adopt allocation procedures that will ensure the maximum use of available tax credits in order to encourage development of low-income housing in the state, taking into consideration the timeliness of the application, the location of the proposed housing project, the relative need in the area for low-income housing and the availability of such housing, the economic feasibility of the project, and the ability of the applicant to proceed to completion of the project in the calendar year for which the credit is sought.”). The tax credits allocated by FHFC encourage investment in affordable housing and are awarded through competitive solicitations to developers of qualifying rental housing. Tax credits are not tax deductions. For example, a $1,000 deduction in a 15-percent tax bracket reduces taxable income by $1,000 and reduces tax liability by $150. In contrast, a $1,000 tax credit reduces tax liability by $1,000. Not surprisingly, the demand for tax credits provided by the federal government exceeds the supply. A successful applicant/developer normally sells the tax credits in order to raise capital for a housing development. That results in the developer being less reliant on debt financing. In exchange for the tax credits, a successful applicant/developer must offer affordable rents and covenant to keep those rents at affordable levels for 30 to 50 years. The Selection Process FHFC awards tax credits through competitive solicitations, and that process is commenced by the issuance of a Request for Applications (“RFA”). Florida Administrative Code Rule 67-60.009(2) provides that unsuccessful applicants for tax credits “may only protest the results of the competitive solicitation process pursuant to the procedures set forth in Section 120.57(3), F.S., and Chapter 28-110, F.A.C.” For purposes of section 120.57(3), an RFA is equivalent to a “request for proposal.” See Fla. Admin. Code R. 67.60.009(4), F.A.C. FHFC issued RFA 2015-111 on October 23, 2015, and responses from applicants were due on December 4, 2015. Through RFA 2015-111, FHFC seeks to award up to $5,901,631 of tax credits to qualified applicants that commit to preserve existing affordable multifamily housing developments for the demographic categories of “Families,” “the Elderly,” and “Persons with a Disability.” FHFC only considered an application eligible for funding from RFA 2015-111, if that particular application complied with certain content requirements. FHFC ranked all eligible applications pursuant to an “Application Sorting Order” set forth in RFA 2015-111. The first consideration was the applicants’ scores. Each application could potentially receive up to 23 points based on the developer’s experience and the proximity to services needed by the development’s tenants. Applicants demonstrating that their developments received funding from a U.S. Department of Agriculture (“USDA”) Rural Development program known as RD 515 were entitled to a 3.0 point proximity score “boost.” That proximity score boost was important because RFA 2015-111 characterized counties as small, medium, or large. Applications associated with small counties had to achieve at least four proximity points to be considered eligible for funding. Applications associated with medium-sized counties and those associated with large counties had to achieve at least seven and 10.25 proximity points respectively in order to be considered eligible for funding. Because it is very common for several tax credit applicants in a particular RFA to receive identical scores, FHFC incorporated a series of “tie-breakers” into RFA 2015-111. The tie-breakers for RFA 2015-111, in order of applicability, were: First, by Age of Development, with developments built in 1985 or earlier receiving a preference over relatively newer developments. Second, if necessary, by a Rental Assistance (“RA”) preference. Applicants were to be assigned an RA level based on the percentage of units receiving rental assistance through either a U.S. Department of Housing and Urban Development (“HUD”) or USDA Rural Development program. Applicants with an RA level of 1, 2, or 3 (meaning at least 75 percent of the units received rental assistance) were to receive a preference. Third, by a Concrete Construction Funding Preference, with developments incorporating certain specified concrete or masonry structural elements receiving the preference. Fourth, by a Per Unit Construction Funding Preference, with applicants proposing at least $32,500 in Actual Construction Costs per unit receiving the preference. Fifth, by a Leveraging Classification favoring applicants requiring a lower amount in housing credits per unit than other applicants. Generally, the least expensive 80 percent of eligible applicants were to receive a preference over the most expensive 20 percent. Sixth, by an Applicant’s specific RA level, with Level 1 applicants receiving the most preference and Level 6 the least. Seventh, by a Florida Job Creation Preference, which estimated the number of jobs created per $1 million of housing credit equity investment the developments were to receive based on formulas contained in the RFA. Applicants achieving a Job Creation score of at least 4.0 were to receive the preference. Eighth, by lottery number, with the lowest (smallest) lottery number receiving the preference. Rental assistance from the USDA or HUD is provided to existing developments in order to make up for shortfalls in monthly rent paid by tenants. For example, if an apartment’s base rent is $500 per month and the tenant’s income limits him or her to paying only $250 towards rent, then the USDA or HUD rental assistance pays the other $250 so that the total rent received by the development is $500. As evident from the tie-breakers incorporated into RFA 2015-111, the amount of rental assistance, or “RA Level,” played a prominent role in distinguishing between RFA 2015-111 applicants having identical scores. RFA 2015-111 required that applicants demonstrate RA Levels by providing a letter containing the following information: (a) the development’s name; (b) the development’s address; (c) the year the development was built; (d) the total number of units that currently receive PBRA and/or ACC;/3 (e) the total number of units that would receive PBRA and/or ACC if the proposed development were to be funded; (f) all HUD or RD financing program(s) originally and/or currently associated with the existing development; and (g) confirmation that the development had not received financing from HUD or RD after 1995 when the rehabilitation was at least $10,000 per unit in any year. In order to determine an applicant’s RA Level Classification, RFA 2015-111 further stated that Part of the criteria for a proposed Development that qualifies as a Limited Development Area (LDA) Development to be eligible for funding is based on meeting a minimum RA Level, as outlined in Section Four A.7.c of the RFA. The total number of units that will receive rental assistance (i.e., PBRA and/or ACC), as stated in the Development Category qualification letter provided as Attachment 7, will be considered to be the proposed Development’s RA units and will be the basis of the Applicant’s RA Level Classification. The Corporation will divide the RA units by the total units stated by the Applicant at question 5.e. of Exhibit A, resulting in a Percentage of Total Units that are RA units. Using the Rental Assistance Level Classification Chart below, the Corporation will determine the RA Level associated with both the Percentage of Total Units and the RA units. The best rating of these two (2) levels will be assigned as the Application’s RA Level Classification. RFA 2015-111 then outlined a Rental Assistance Level Classification Chart to delineate between the RA Levels. That chart described six possible RA Levels, with one being developments that have the most units receiving rental assistance and six pertaining to developments with the fewest units receiving rental assistance. A development with at least 100 rental assistance units and greater than 50 percent of the total units receiving rental assistance was to receive an RA Level of 1. FHFC also utilized a “Funding Test” to assist in the selection of applications for funding. The Funding Test required that the amount of unawarded housing credits be enough to satisfy any remaining applicant’s funding request. In other words, FHFC prohibited partial funding. In addition, RFA 2015-111 applied a “County Award Tally” designed to prevent a disproportionate concentration of funded developments in any one county. As a result, all other applicants from other counties had to receive an award before a second application from a particular county could be funded. After ranking of the eligible applicants, RFA 2015-111 set forth an order of funding selection based on county size, demographic category, and the receipt of RD 515 financing. The Order was: One RD 515 Development (in any demographic category) in a medium or small county; One Non-RD 515 Development in the Family Demographic Category (in any size county); The highest ranked Non-RD 515 application or applications with the demographic of Elderly or Persons with a Disability; and If funding remains after all eligible Non- RD 515 applicants are funded, then the highest ranked RD 515 applicant in the Elderly demographic (or, if none, then the highest ranked RD 515 applicant in the Family demographic). Draft versions of every RFA are posted on-line in order for stakeholders to provide FHFC with their comments. In addition, every RFA goes through at least one workshop prior to being finalized. FHFC often makes changes to RFAs based on stakeholder comments. No challenge was filed to the terms, conditions, or requirements of RFA 2015-111. A review committee consisting of FHFC staff members reviewed and scored all 24 applications associated with RFA 2015-111. During this process, FHFC staff determined that none of the RD-515 applicants satisfied all of the threshold eligibility requirements. On June 24, 2016, FHFC’s Board of Directors announced its intention to award funding to five applicants, subject to those applicants successfully completing the credit underwriting process. Pineda Village in Brevard County was the only successful applicant in the Non-RD 515 Family Demographic. The four remaining successful applicants were in the Non-RD 515 Elderly or Persons with Disability Demographic: Three Round Tower in Miami-Dade County; Cathedral Towers in Duval County; Isles of Pahokee in Palm Beach County; and Lummus Park in Miami- Dade County. The randomly-assigned lottery number tie-breaker played a role for the successful Non-RD 515 applicants with Three Round Tower having lottery number one, Cathedral Towers having lottery number nine, and Isles of Pahokee having lottery number 18. While Lummus Park had a lottery number of 12, the County Award Tally prevented it from being selected earlier because Three Round Tower had already been selected for funding in Miami-Dade County. However, after the first four applicants were funded, only $526,880 of credits remained, and Lummus Park was the only eligible applicant with a request small enough to be fully funded. All Petitioners timely filed Notices of Protest and petitions for administrative proceedings. The Challenge by Woodcliff, Colonial, and St. Johns Woodcliff is seeking an award of tax credits in order to acquire and preserve a 34-unit development for elderly residents in Lake County.4/ Colonial is seeking an award of tax credits in order to acquire and preserve a 30-unit development for low-income families in Lake County.5/ St. Johns is seeking an award of tax credits to acquire and preserve a 48-unit development for elderly residents in Putnam County.6/ FHFC deemed Woodcliff, Colonial and St. Johns to be ineligible because of a failure to demonstrate the existence or availability of a particular source of financing relied upon in their applications. Specifically, FHFC determined that the availability of USDA RD 515 financial assistance was not properly documented. For applicants claiming the existence of RD 515 financing, RFA 2015-111 stated: If the proposed Development will be assisted with funding under the United States Department of Agriculture RD 515 Program and/or RD 538 Program, the following information must be provided: Indicate the applicable RD Program(s) at question 11.b.(2) of Exhibit A. For a proposed Development that is assisted with funding from RD 515 and to qualify for the RD 515 Proximity Point Boost (outlined in Section Four A.6.b.(1)(b) of the RFA), the Applicant must: Include the funding amount at the USDA RD Financing line item on the Development Funding Pro Forma (Construction/Rehab Analysis and/or Permanent Analysis); and Provide a letter from RD, dated within six (6) months of the Application Deadline, as Attachment 17 to Exhibit A, which includes the following information for the proposed Preservation Development: Name of existing development; Name of proposed Development; Current RD 515 Loan balance; Acknowledgment that the property is applying for Housing Credits; and Acknowledgment that the property will remain in the USDA RD 515 loan portfolio. (emphasis added). FHFC was counting on the letter mentioned directly above to function as proof that: (a) there was RD 515 financing in place when the letter was issued; and that (b) the RD 515 financing would still be in place as of the application deadline for RFA 2015-111. FHFC deemed Woodcliff, Colonial and St. Johns ineligible because their RD letters were not dated within six months of the December 4, 2015, deadline for RFA 2015-111 applications. The Woodcliff letter was dated May 15, 2015, the Colonial letter was dated May 15, 2015, and the St. Johns letter was dated May 5, 2015. FHCA had previously issued RFA 2015-104, which also proposed to award Housing Credit Financing for the Preservation of Existing Affordable Multifamily Housing Developments. The deadline for RFA 2015-104 was June 23, 2015, and Woodcliff, Colonial, and St. Johns applied using the same USDA letter that they used in their RFA 2015-111 applications. Woodcliff, Colonial, and St. Johns argued during the final hearing that FHFC should have accepted their letters because: (a) they gained no competitive advantage by using letters that were more than six months old; (b) waiving the six- month “shelf life” requirement would enable FHFC to satisfy one of its stated goals for RFA 2015-111, i.e., funding of an RD 515 development; and (c) other forms of financing (such as equity investment) have no “freshness” or “shelf life” requirement. However, it is undisputed that no party (including Woodcliff, Colonial, and St. Johns) challenged any of the terms, conditions, or requirements of RFA 2015-111. In addition, Kenneth Reecy (FHFC’s Director of Multifamily Programs) testified that there must be a point at which FHFC must ensure the viability of the information submitted by applicants. If the information is “too old,” then it may no longer be relevant to the current application process. Under the circumstances, it was not unreasonable for FHFC to utilize a six-month shelf life for USDA letters.7/ Furthermore, Mr. Reecy testified that excusing Woodcliff, Colonial, and St. Johns’ noncompliance could lead to FHFC excusing all deviations from all other date requirements in future RFAs. In other words, applicants could essentially rewrite those portions of the RFA, and that would be an unreasonable result. Excusing the noncompliance of Woodcliff, Colonial, and St. Johns could lead to a “slippery slope” in which any shelf- life requirement has no meaning. The letters utilized by Woodcliff, Colonial, and St. Johns were slightly more than six months old. But, exactly when would a letter become too old to satisfy the “shelf life” requirement? If three weeks can be excused today, will four weeks be excused next year? St. Elizabeth’s and Marian Towers’ Challenge St. Elizabeth is seeking low-income housing tax credit financing in order to acquire and preserve a 151-unit development for elderly residents in Broward County, Florida. Marian Towers is an applicant for RFA 2015-111 funding seeking low-income housing tax credits to acquire and preserve a 220-unit development for elderly residents in Miami-Dade County, Florida. The same developer is associated with the St. Elizabeth and Marian Towers projects. In its scoring and ranking process, FHFC assigned St. Elizabeth an RA Level of two. RFA 2015-111 requires that Applicants demonstrate RA Levels by providing a letter from HUD or the USDA with specific information. That information is then used to establish an RA Level for the proposed development. As noted above, the RFA requires the letter to contain several pieces of information, including: (a) the total number of units that currently receive PBRA and/or ACC; and (b) the total number of units that will receive PBRA and/or ACC if the proposed development is funded. RFA 2015-111 provided that a development with at least 100 rental units would receive an RA Level of one. St. Elizabeth included with its application a letter from HUD’s Miami field office stating in pertinent part that: Total number of units that currently receive PBRA and/or ACC: 99 units. Total number of units that will receive PBRA and/or ACC if the proposed Development is funded: 100 units*. The asterisk in the preceding paragraph directed readers of St. Elizabeth’s HUD letter to a paragraph stating that: HUD is currently processing a request from the owner to increase the number of units subsidized under a HAP Contract to 100 by transferring budget authority for the one additional unit from another Catholic Housing Services Section 8 project under Section 8(bb) in accordance with Notice H-2015-03. Because of the foregoing statement from HUD, FHFC concluded that St. Elizabeth did not have 100 units receiving rental assistance as of the application deadline. Accordingly, FHFC used 99 units as the total number of units that would receive rental assistance when calculating St. Elizabeth’s RA Level, and that led to FHFC assigning an RA Level of two to St. Elizabeth’s application.8/ If St. Elizabeth had been deemed eligible and if FHFC had used 100 units as the total number of units that would receive rental assistance, then St. Elizabeth would have received an RA Level of one. Given the application sorting order and the selection process outlined in RFA 2015-111, St. Elizabeth (with a lottery number of six) would have been recommended for funding by FHFC, and that outcome would have resulted in Intervenors Isles of Pahokee and Lummus Park losing their funding. St. Elizabeth asserted during the final hearing that the 100th unit had obtained rental assistance financing since the application deadline on December 4, 2015. However, FHFC could only review, score, and calculate St. Elizabeth’s RA Level based on the information available as of the application deadline. While St. Elizabeth argues that the asterisk paragraph sets forth a “condition,” Kenneth Reecy (FHFC’s Director of Multifamily Housing) agreed during the final hearing that the asterisk paragraph was more akin to information that was not explicitly required by RFA 2015-111. FHFC did not use that additional information to declare St. Elizabeth’s application ineligible for funding. Despite being assigned an RA Level of two, St. Elizabeth’s application still could have been selected for funding because RFA 2015-111 merely established RA Level as a basis for breaking ties among competing applications. However, too many applicants for RFA 2015-111 had identical scores, and RFA 2015-111’s use of RA Level as a tiebreaker forced St. Elizabeth’s application out of the running. Under the circumstances, FHFC’s treatment of St. Elizabeth’s application was not clearly erroneous, contrary to competition, arbitrary, or capricious. As noted above, tie- breakers are very important, because there is often very little to distinguish one application for tax credits from another. Given that there was a degree of uncertainty about whether St. Elizabeth’s would have 100 qualifying units, FHFC acted reasonably by assigning St. Elizabeth’s application an RA Level of two for this tie-breaker rather than an RA Level of one. St. Elizabeth and Marian Towers argue that other applications contained language that indicated a degree of uncertainty. Nevertheless, those other applications received an RA Level of one. For example, FHFC assigned an RA Level of one to Three Round and Haley Sofge even though their HUD letters stated that both developments would be “subject to a Subsidy Layering Review to be conducted by HUD.” Marian Towers argued that if FHFC does not accept HUD or RD letters containing conditional language about the number of units that will be subsidized, then FHFC should have assigned an RA Level of six to Three Round and Haley Sofge. If Three Round and Haley Sofge had been assigned an RA Level of six, then Marian Towers (with a lottery number of five) would have been recommended for funding. St. Elizabeth and Marian Towers cited another instance in which an application received an RA Level of one, even though its application contained a letter from the RD program stating that “USDA Rural Development will consent to the transfer if all regulatory requirements are met.” (emphasis added). However, St. Elizabeth and Marian Towers failed to demonstrate that the language cited above applied only to those particular applications rather than to all applications for tax credits. For example, if all applications are subject to a subsidy layering review and compliance with all regulatory requirements, then inclusion of such language in a HUD letter (in and of itself) should not prevent an applicant from being assigned an RA Level of one. St. Elizabeth and Marian Towers also cited a HUD Letter used in another recent RFA by an applicant that received an RA Level of one. The HUD letter in question contained an asterisk followed by the following statement: “It is HUD’s understanding that two separate applications are being submitted – one for each tower comprising St. Andrew Towers. If funded, HUD will consider a request from the owner to bifurcate the St. Andrew Towers HAP contract in order to facilitate the separate financing of each tower.” However, St. Elizabeth and Marian Towers failed to demonstrate why the language quoted directly above should have resulted in the applicant in question being awarded an RA Level less than one. There is no indication that the total number of units receiving rental assistance would change.
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 awarding funding to Three Round Tower A, LLC; Cathedral Towers, Ltd; Isles of Pahokee Phase II, LLC; SP Manor, LLC; and Pineda Village. DONE AND ENTERED this 18th day of October, 2016, in Tallahassee, Leon County, Florida. S G.W. CHISENHALL 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 18th day of October, 2016.
The Issue Whether Respondent, Florida Housing Finance Corporation’s ("Florida Housing") intended action to award housing tax credit funding to Intervenors Westside Phase, I, LLLP ("Westside"), HTG Edgewood, Ltd. ("HTG Edgewood"), Diplomat South, LLC ("Diplomat"), and Tranquility at Milton, LLC ("Tranquility"), under Request for Applications 2019-113 Housing Credit Financing for Affordable Housing Developments Located in Medium and Small Counties (the "RFA"), is contrary to governing statutes, rules, the RFA specifications, and clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. 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. 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 housing tax credits are awarded competitively to housing developers in Florida for rental housing projects that qualify. These credits are then normally sold by developers for cash to raise capital for their projects. The effect is that the credits reduce the amount that the developer would otherwise have to borrow. Because the total debt is lower, a housing 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 housing credits. The demand for housing tax credits provided by the federal government exceeds the supply. The Competitive Application Process Florida Housing is authorized to allocate housing tax credits and other funding by means of a request for applications or other competitive solicitation in section 420.507(48) and Florida Administrative Code Chapter 67-60, which govern the competitive solicitation process for several different programs, including the program for housing tax credits. Chapter 67-60 provides that Florida Housing allocate its competitive funding through the bid protest provisions of section 120.57(3), Florida Statutes. 1 In their applications, applicants request a specific dollar amount of housing tax credits to be given to the applicant each year for a period of ten years. Applicants normally sell the rights to that future stream of income housing tax credits (through the sale of almost all of the ownership interest in the applicant entity) to an investor to generate the amount of capital needed to build the development. The amount which can be received depends 1 A request for application is equivalent to a "request for proposal" as indicated in rule 67- 60.009(3). upon the accomplishment of several factors, such as 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. This, however, is not an exhaustive list of the factors considered. The RFA was issued on August 20, 2019, and responses were initially due October 29, 2019. The RFA was modified on September 10, 2019, and the application deadline was extended to November 5, 2019. No challenges were made to the terms of the RFA. Through the RFA, Florida Housing expects to award up to an estimated $14,805,028 of housing tax credits to proposed developments in medium counties and up to an estimated $1,413,414 of housing credits to proposed developments in small counties. Florida Housing received 184 applications in response to the RFA. A review committee was appointed to review the applications and make recommendations to Florida Housing's Board of Directors (the "Board"). The review committee found 169 applications eligible and 15 applications ineligible. Through the ranking and selection process outlined in the RFA, 11 applications were preliminarily recommended for funding. The review committee developed charts listing its eligibility and funding recommendations to be presented to the Board. On March 6, 2020, the Board met and considered the recommendations of the review committee. Also, on March 6, 2020, at approximately 9:35 a.m., Petitioners and all other applicants received notice that the Board determined whether applications were eligible or ineligible for consideration for funding, and that certain eligible applicants were selected for award of housing credits, subject to satisfactory completion of the credit underwriting process. Such notice was provided by the posting of two spreadsheets on the Florida Housing website, www.floridahousing.org, one listing the Board approved scoring results and one identifying the applications which Florida Housing proposed to fund. In the March 6, 2020, posting, Florida Housing announced its intention to award funding to 11 applicants, including Westside, HTG Edgewood, Diplomat, and Tranquility. Petitioners timely filed notices of protest and petitions for formal administrative proceedings, and Intervenors timely intervened. The RFA Ranking and Selection Process The RFA contemplates a structure in which the applicant is scored on eligibility items and obtains points for other items. A summary of the eligibility items is available in section 5.A.1., beginning on page 64 of the RFA. Only applications that meet all the eligibility items will be eligible for funding and considered for funding selection. There were two total point items scored in this RFA. Applicants could receive five points for Submission of Principals Disclosure Form, stamped by the Corporation as "Pre-Approved," and five points for Development Experience Withdrawal Disincentive, for a total application score of up to ten points. The RFA has three funding goals: The Corporation has a goal to fund four Medium County Developments that qualify for the Local Government Areas of Opportunity Funding Goal outlined in Section Four A.11.a. of the RFA. The Corporation has a goal to fund two Developments with a Demographic commitment of Family that select and qualify for the Geographic Areas of Opportunity/SADDA Goal outlined in Section Four A.11.b. of the RFA. The Corporation has a goal to fund one (1) Development that qualifies for the Local Community Revitalization Initiative Goal outlined in Section Four A.11.c. of the RFA. *Note: During the Funding Selection Process outlined below, Developments selected for these goals will only count toward one goal. As part of the funding selection process, the RFA starts with the application sorting order on page 68. The highest scoring applications are determined by first sorting together all eligible applications from the highest score to lowest score, with any scores that are tied separated as follows: First, by the Application's eligibility for the Proximity Funding Preference (which is outlined in Section Four A.5.e. of the RFA) with Applications that qualify for the preference listed above Applications that do not qualify for the preference; Next, by the Application's eligibility for the Per Unit Construction Funding Preference which is outlined in Section Four A.10.e. of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Application's eligibility for the Development Category Funding Preference which is outlined in Section Four A.4.b.(4) of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Application's Leveraging Classification, applying the multipliers outlined in item 3 of Exhibit C of the RFA (with Applications having the Classification of A listed above Applications having the Classification of B); Next, by the Application's eligibility for the Florida Job Creation Funding Preference which is outlined in Item 4 of Exhibit C of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); And finally, by lottery number, resulting in the lowest lottery number receiving preference. The RFA includes a Funding Test where small county applications will be selected for funding only if there is enough small county funding available to fully fund the eligible housing credit request amount, and medium county applications will be selected for funding only if there is enough medium county funding available to fully fund the eligible housing credit request amount. The RFA outlines a specific County’s Award Tally: As each application is selected for tentative funding, the county where the proposed Development is located will have one Application credited towards the County’s Award Tally. The Corporation will prioritize eligible unfunded Applications that meet the Funding Test and are located within counties that have the lowest County Award Tally above other eligible unfunded Applications with a higher County Award Tally that also meet the Funding Test, even if the Applications with a higher County Award Tally are higher ranked. According to the RFA, the funding selection process is as follows: The first Application selected for funding will be the highest ranking eligible Applications that qualifies for the Local Community Revitalization Initiative Goal. The next four Applications selected for funding will be the highest ranking eligible Medium County Applications that qualify for the Local Government Areas of Opportunity Funding Goal, subject to the Funding Test and the County Award Tally. The next two Applications selected for funding will be the highest ranking eligible Family Applications that qualify for the Geographic Areas of Opportunity/HUD-designated SADDA Goal, subject to the Funding Test and the County Award Tally. The next Applications selected for funding will be the highest ranking eligible unfunded Small County Applications that (i) can meet the Small County Funding Test and (ii) have a County Award Tally that is less than or equal to any other eligible unfunded Small County Applications. If Small County funding remains and no unfunded eligible Small County Application can meet the Small County Funding Test, no further Small County Applications will be selected and the remaining Small County funding will be added to the Medium County funding amount. The next Application(s) selected for funding will be the highest ranking eligible unfunded Medium County Applications that (i) can meet the Medium County Funding Test and (ii) have a County Award Tally that is less than or equal to any other eligible unfunded Medium County Applications. If Medium County funding remains and no unfunded eligible Medium County Application can meet the Medium County Funding Test, no further Applications will be selected and the remaining funding will be distributed as approved by the Board. According to the terms of the RFA: Funding that becomes available after the Board takes action on the [Review] Committee’s recommendation(s), due to an Applicant withdrawing its Application, an Applicant declining its invitation to enter credit underwriting, or an Applicant’s inability to satisfy a requirement outlined in this RFA, will be distributed as approved by the Board. All 184 applications for the RFA were received, processed, deemed eligible or ineligible, scored, and ranked, pursuant to the terms of the RFA, Florida Administrative Code Chapters 67-48 and 67-60, and applicable federal regulations. HTG Edgewood’s Application (DOAH Case No. 20-1778BID) During scoring, Florida Housing determined that the HTG Edgewood application was eligible and, pursuant to the terms of the RFA, selected HTG Edgewood for funding. HTG Edgewood, Florida Housing, and Rochester now agree that HTG Edgewood’s application is ineligible for consideration for funding and the application of Rochester is eligible for funding. Accordingly, HTG Edgewood, Florida Housing, and Rochester agree that Florida Housing should deem the HTG Edgewood application ineligible for funding and Rochester’s application eligible for funding. Diplomat’s Application (DOAH Case No. 20-1779BID) During scoring, Florida Housing deemed the Diplomat application eligible and, pursuant to the terms of the RFA, preliminarily selected Diplomat for funding. Diplomat and Madison Square now agree that Diplomat is ineligible for funding. Florida Housing does not contest Diplomat’s admission of ineligibility. Madison Square, Diplomat, and Florida Housing agree that Madison Square is eligible for funding. Tranquility’s Application (DOAH Case No. 20-1780BID) Florida Housing deemed the Tranquility application eligible for funding, and pursuant to the terms of the RFA, Tranquility was selected for preliminary funding. Tranquility’s Principals Disclosure Form Madison Oaks contests Florida Housing’s preliminary selection of Tranquility for an award of housing tax credits. In its challenge, Madison Oaks argues that Tranquility failed to correctly complete its Principals Disclosure Form by not identifying the multiple roles of its disclosed principal. Specifically, Madison Oaks argues that Tranquility failed to list Tranquility Milton Manager, LLC, which is disclosed as a manager, as a non- investor member as well. Accordingly, Madison Oaks contends Tranquility is not eligible or should lose five points. The purpose of the Principals Disclosure Form is to allow Florida Housing to track an entity’s past and future dealings with Florida Housing so that Florida Housing is aware of the entity with which it is dealing. In regard to principal disclosure, the RFA states, in relevant part: c. Principals Disclosure for the Applicant and for each Developer (5 points) Eligibility Requirements To meet the submission requirements, the Applicant must upload the Principals of the Applicant and Developer(s) Disclosure Form (Form Rev. 05-2019)("Principals Disclosure Form") with the Application and Development Cost Pro Forma, as outlined in Section Three above. Prior versions of the Principal Disclosure Form will not be accepted. The Principals Disclosure Form must identify, pursuant to subsections 67-48.002(94), 67- 48.0075(8) and 67-48.0075(9), the Principals of the Applicant and Developer(s) as of the Application Deadline. The investor limited partner of an Applicant limited partnership or the investor member of an Applicant limited liability company investor must be identified. A Principals Disclosure Form should not include, for any organizational structure, any type of entity that is not specifically included in the Rule definition of Principals. Point Item Applicants will receive 5 points if the uploaded Principal Disclosure Form was stamped "Approved" during the Advance Review Process. The Advance Review Process for Disclosure of Applicant and Developer Principals is available on the RFA Website and also includes samples which may assist the Applicant in completing the required Principals Disclosure Form. Note: It is the sole responsibility of the Applicant to review the Advance Review Process procedures and to submit any Principals Disclosure Form for review in a timely manner in order to meet the Application Deadline. The RFA website provides guidance and instructions to assist applicants in completing the principal disclosure. The instructions state: "List the name of each Member of the Applicant Limited Liability Company and label each as either non-investor Member or investor Member (i.e., equity provider and/or placeholder), as applicable." The RFA website guidance and instructions further provides Frequently Asked Questions ("FAQ’s") concerning principal disclosures. FAQ number 4 states: Q: If the Applicant entity is a member managed limited liability company, how should it be reflected on the form since there is no "member-manager" choice at the First Principal Disclosure Level? A: Each member-manager entity/person should be listed twice—once as a non-investor member and once as a manger. If Housing Credits are being requested, the investor-member(s) must also be listed in order for the form to be approved for a Housing Credit Application. On its Principals Disclosure Form, Tranquility listed two entities at the first principal disclosure level: Tranquility Milton Manager, LLC, identified as a manager of the applicant and Timshel Partners, LLC, identified as an investor member of the applicant. However, Tranquility failed to identify the dual role of Tranquility Milton Manager, LLC, as a non- investor member in addition to its disclosed role as a manger. Nevertheless, Tranquility’s equity proposal letter submitted as part of its application identified Tranquility Milton Manager, LLC, as a member of the LLC because according to the equity proposal, Tranquility Milton Manager, LLC, would retain a .01% ownership interest in the company. Thus, the role of Tranquility Milton Manager, LLC, as a member is available within Tranquility’s application. Tranquility participated in Florida Housing’s Advance Review Process, and on October 17, 2019, Florida Housing approved the Principals Disclosure Form submitted by Tranquility during the Advance Review Process for an award of housing credits. During scoring, Tranquility received five points for having its Principals Disclosure Form stamped "Approved" by Florida Housing. Tranquility’s Principals Disclosure Form met the eligibility requirements of the RFA and Tranquility is entitled to the five points. In addition, Ms. Button persuasively and credibly testified that even if Tranquility’s failure to list the dual role of its disclosed principal on the Principals Disclosure Form is an error, it is so minor as to constitute a waivable, minor irregularity. As detailed above, Tranquility Milton Manager, LLC, was specifically designated as a manager on the form and information identifying Tranquility Milton Manager, LLC’s, additional role as a member is included in the equity proposal letter submitted with the application. Madison Oak’s Application (DOAH Case No. 20-1779BID) Madison Oaks’ application was deemed eligible for funding, but pursuant to the terms of the RFA, Madison Oaks was not selected for preliminary funding. Madison Oaks Site Control Certification Florida Housing and Tranquility now argue that Madison Oaks failed to demonstrate site control. As an eligibility item, the RFA requires applicants to demonstrate site control by providing a properly completed and executed Florida Housing Finance Corporation Site Control Certification form ("Site Control Form"). For the Site Control Form to be considered complete, the applicant must attach documentation demonstrating that it is a party to an eligible contract or lease or is the owner of the subject property. Applicants can demonstrate site control by providing documentation that meets the requirements in the RFA for an eligible contract, deed or certificate of title, or a lease. An eligible contract must meet all of the following conditions: It must have a term that does not expire before April 30, 2020 or that contains extension options exercisable by the purchaser and conditioned solely upon payment of additional monies which, if exercised, would extend the term to a date that is not earlier than April 30, 2020; It must specifically state that the buyer’s remedy for default on the part of the seller includes or is specific performance; The Applicant must be the buyer unless there is an assignment of the eligible contract, signed by the assignor and the assignee, which assigns all of the buyer’s rights, title and interests in the eligible contract to the Applicant; and The owner of the subject property must be the seller, or is a party to one or more intermediate contracts, agreements, assignments, options, or conveyances between or among the owner, the Applicant, or other parties, that have the effect of assigning the owner’s right to sell the property to the seller. Any intermediate contract must meet the criteria for an eligible contract in (a) and (b) above. In demonstrating site control, the RFA states: Note: The Corporation will not review the site control documentation that is submitted with the Site Control Certification form during the scoring process unless there is a reason to believe that the form has been improperly executed, nor will it in any case evaluate the validity or enforceability of any such documentation. During scoring, the Corporation will rely on the properly executed Site Control Certification form to determine whether an Applicant has met the requirements of this RFA to demonstrate site control. The Corporation has no authority to, and will not, evaluate the validity or enforceability of any eligible site control documentation that is attached to the Site Control Certification form during the scoring process. During credit underwriting, if is determined that the site control documents do not meet the above requirements, the Corporation may rescind the award. Additionally, the RFA requires that the site control "documentation include all relevant intermediate contracts, agreements, assignments, options, conveyances, intermediate leases, and subleases." In the instant case, Madison Oaks attached a Purchase and Sale Agreement ("Madison Oaks Agreement") to its Site Control Form. The Madison Oaks Agreement lists West Oak Developers, LLC, as the "Seller" and Madison Oaks East, LLC, as the "Purchaser." However, the City of Ocala owns the property in question. The Madison Oaks Agreement in section 12 states that: "Seller has a valid and binding agreement with the City of Ocala, Florida pursuant to which Seller has the right to acquire fee simple title to the Property …." Tranquility and Florida Housing contend that Madison Oaks failed to demonstrate site control because Madison Oaks failed to include the City of Ocala Redevelopment Agreement for Pine Oaks ("Redevelopment Agreement") in its site control documentation. Madison Oaks maintains that the City of Ocala is a seller, pursuant to the Joinder and Section 28 of the Madison Oaks Agreement, and therefore, the Redevelopment Agreement did not need to be included. However, the Madison Oaks Agreement clearly identifies West Oak as the "Seller" and the City of Ocala as the "City." At hearing, Ms. Button persuasively and credibly testified that the Madison Oaks application is ineligible because it did not include the Redevelopment Agreement, which is a relevant agreement for purposes of demonstrating site control. The Redevelopment Agreement was a relevant intermediate contract, which was required to be included in Madison Oak’s application. Madison Oak’s failure to include the Redevelopment Agreement renders its application ineligible. Madison Oaks contends that including the Redevelopment Agreement in its application was unnecessary because of a joinder provision within the Madison Oaks Agreement. The Madison Oaks Agreement contains a Joinder and Consent of the City of Ocala approved by the City Council ("the Joinder"), whereby the City of Ocala joined and consented to the Madison Oaks Agreement "solely for the purposes set forth in, and subject to, Section 28 herein." The Madison Oaks Agreement in Section 28 states that: "Seller hereby acknowledges and agrees that in the event of Seller’s default hereunder, that is not timely cured, or Seller's refusal to close hereunder, Purchaser shall be entitled to close on the property subject to this Agreement … directly with the City on the terms and conditions set forth in this Section 28." However, Section 28 only applies in the event of a default by West Oaks that is not timely cured or West Oak’s refusal to close. There is no information within the Madison Oaks application to determine whether a default or termination of the Redevelopment Agreement occurred as of the application deadline. Westside’s Application (DOAH Case No. 20-1770BID) Florida Housing deemed Westside’s application eligible and, pursuant to the terms of the RFA, Westside was preliminary selected for funding to meet the goal to fund one development that qualifies for the Local Community Revitalization Initiative Goal. Westside’s Election to Compete for the Local Community Revitalization Initiative Goal In order to qualify for the Local Community Revitalization Initiative Goal, the RFA states: Applicants for proposed Developments that are part of a local revitalization plan may elect to compete for this goal. To qualify for this goal, the Applicant must submit the properly completed Florida Housing Finance Corporation Local Government/Community Redevelopment Agency Verification That Development Is Part Of A Local Community Revitalization Plan form (Form Rev. 08-2019) as Attachment 18. The form is available on the RFA Website. Included with the form must be either (1) a link to the local community revitalization plan or (2) a copy of the local community revitalization plan. The plan must have been adopted on or before January 1, 2019. Florida Housing, pursuant to the terms of the RFA, also has a goal to fund four medium county developments that qualify for the Local Government Areas of Opportunity Funding Goal. Westside included an executed Florida Housing Finance Corporation Local Government/Community Redevelopment Agency Verification that Development is Part of a Local Community Revitalization Plan form (the "Local Community Revitalization Plan Form") and a link to the local government revitalization plan at Attachment 18 of its application. At question 11.c. in the application, applicants are asked to select "Yes" or "No" from a drop-down menu in response to the question: "Is the proposed Development eligible for the Local Community Revitalization Initiative Goal?" Westside selected "No" from the Yes/No drop-down menu in answering question 11.c. regarding the Local Community Revitalization Initiative Goal. At question 11.a. in the application, applicants are asked to select "Yes" or "No" from a drop-down menu in response to the question: "Is the proposed Development eligible for the Local Government Areas of Opportunity Funding Goal?" Westside selected "Yes" from the Yes/No drop-down menu in answering questions 11.a. regarding the Local Government Areas of Opportunity Funding Goal. During scoring, Westside was deemed to have qualified for the Local Government Areas of Opportunity Funding Goal and the Local Community Revitalization Initiative Goal. During the funding selection process, Westside was selected for funding to meet the Local Government Community Revitalization Initiative Goal. HTG Addison selected "Yes" from the Yes/No drop-down menu in answering question 11.c. regarding the Local Community Revitalization Initiative Goal. HTG Addison included an executed Local Community Revitalization Plan Form at Attachment 18 of its application. HTG Addison selected "No" from the Yes/No drop-down menu in answering question 11.a. regarding the Local Government Areas of Opportunity Funding Goal. HTG Addison is the next highest ranked eligible applicant qualified for the Local Community Revitalization Initiative Goal after Westside. If Westside is deemed not to have qualified for the revitalization goal, then HTG Addison, as the next highest ranked eligible applicant, would qualify for that goal. HTG Addison alleges that Westside should not be selected to meet the Local Community Revitalization Initiative Goal because Westside selected "No" from the drop-down menu in response Question 11.c. Ms. Button persuasively and credibly testified that Florida Housing does not rely on the drop-down responses to questions 11a., b., or c. in determining whether an applicant "elects to be eligible for a certain goal" because answering "Yes" or "No" to these requirements is not a requirement of the RFA. Rather, Ms. Button persuasively and credibly testified that in determining whether an applicant qualifies for a funding goal, Florida Housing relies on the documentation submitted with the application that is required for the funding goal. In the instant case, Westside included the executed Florida Housing Finance Corporation Local Government Revitalization Plan form and a link to the local community revitalization plan at Attachment 18 of its application.2 In addition, Ms. Button persuasively and credibly testified that even if Westside erred in selecting "Yes" in response to question 11.c., it is so minor as to constitute a waivable, minor irregularity because Florida Housing has the required information within the application (the executed form and a link to the local community revitalization plan at Attachment 18). 2 Notably, another applicant responding to the RFA, Tranquility at Ferry Pass, selected "Yes" in response to question 11.c., but failed to include at Attachment 18 either a copy of or a link to the local community revitalization plan. During scoring, Florida Housing determined that Tranquility at Ferry Pass did not qualify for the revitalization goal. Florida Housing’s scoring of the Westside application is consistent with its scoring of the Tranquility at Ferry Pass application because in both cases, Florida Housing scored the application based on the requirements of the RFA for the revitalization goal and the documentation submitted in response to those requirements. Florida Housing did not rely on the applicant’s response to question 11.c. regarding the applicant’s expressions of its own eligibility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order: dismissing the protests of HTG Addison and Madison Oaks; (2) finding the HTG Edgewood, Diplomat, and Madison Oaks applications ineligible for funding; and (3) finding the Rochester, Madison Square, Tranquility, and Westside applications eligible for funding. DONE AND ENTERED this 19th day of June, 2020, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ 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 COPIES FURNISHED: Filed with the Clerk of the Division of Administrative Hearings this 19th day of June, 2020. Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC 1400 Village Square Boulevard, Suite 3-231 Tallahassee, Florida 32312 (eServed) Amy Wells Brennan, Esquire Manson Bolves Donaldson Varn, P.A. 109 North Brush Street, Suite 300 Tampa, Florida 33602 (eServed) Michael P. Donaldson, Esquire Carlton Fields 215 South Monroe Street, Suite 500 Tallahassee, Florida 32302 (eServed) Sarah Pape, Esquire Zimmerman, Kiser & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Post Office Box 3000 (32802) Orlando, Florida 32801 (eServed) J. Timothy Schulte, Esquire Zimmerman, Kiser & Sutcliffe, P.A. 315 East Robinson Street Post Office Box 3000 (32802) Orlando, Florida 32801 (eServed) Craig D. Varn, Esquire Manson Bolves Donaldson Varn, P.A. 106 East College Avenue, Suite 820 Tallahassee, Florida 32301 (eServed) Donna Elizabeth Blanton, Esquire Radey Law Firm, P.A. 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) M. Christopher Bryant, Esquire Oertel, Fernandez, Bryant & Atkinson, P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 (eServed) Betty Zachem, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed)
The Issue The issues are (1) whether Florida Administrative Code Rules 67-48.002(95) and 67-60.010(3) are invalid exercises of delegated legislative authority; and (2) whether certain statements in Request for Application 2016-113 (RFA-113) issued by Respondent, Florida Housing Finance Corporation (Florida Housing or agency), are unlawful unadopted rules in violation of section 120.54(1)(a), Florida Statutes (2016).
Findings Of Fact The Parties Florida Housing is a public corporation created pursuant to section 420.504. One of its responsibilities is to award low-income housing tax credits, which developers use to finance the construction of affordable housing. Tax credits are made available to states annually by the United States Treasury Department and are then awarded pursuant to a competitive cycle that starts with Florida Housing's issuance of an RFA. This proceeding concerns RFA-113. Petitioners ARD and Madison are developers of affordable housing units and submit applications for tax credits. Law and Wolf are principals of a developer of affordable housing units. Berkshire, Hawthorne, and Southwick are limited partnerships that have submitted applications for tax credits. All Petitioners intend to submit applications in response to RFA-113 and will be subject to rule chapters 67-48 and 67-60. Intervenors Heritage and HTG are developers of affordable housing who intend to file applications pursuant to RFA-113. Background On October 28, 2016, Florida Housing published on its website proposed solicitation RFA-113, a 121-page document inviting applications for the award of up to $14,669,052.00 in housing tax credits for the development of affordable, multifamily housing located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas Counties. After Petitioners gave notice of their intent to challenge RFA-113, Florida Housing attempted to resolve the dispute by modifying the solicitation on November 13, 2016. The modification did not resolve the dispute. On November 14, 2016, Petitioners timely filed with DOAH two Petitions, each challenging rules 67-48.002(95) and 67-60.010(3) and various statements in RFA-113. On the same date, they filed with Florida Housing two petitions challenging certain specifications in the solicitation. Although the Petitions include allegations that two existing rules are invalid, Petitioners' main concern appears to be directed at various provisions in RFA-113 that they assert limit their ability to be awarded tax credits. These contentions are addressed separately below. C. Rule 67-48.002(95) The federal Low-Income Housing Credit Program is governed by 26 U.S.C.S. § 42 (section 42). The program allocates annually federal income tax credits to states on a per capita basis to help facilitate private development of affordable low-income housing. As the housing credit agency for the State of Florida, Florida Housing has the authority to administer various federal and state affordable housing programs, including the Low-Income Housing Credit Program. See § 420.5099(1), Fla. Stat. Section 42(m)(l)(A)(i) requires each state that administers low-income housing credits to adopt a QAP, which identifies the selection criteria used for distributing the housing credits. To comply with this requirement, rule 67-48.002(95) adopts and incorporates by reference the 2016 QAP. The rule reads as follows: (95) "QAP" or "Qualified Allocation Plan" means, with respect to the HC [Housing Credit] program, the 2016 Qualified Allocation Plan which is adopted and incorporated herein by reference, effective upon the approval by the Governor of the State of Florida, pursuant to Section 42(m)(1)(B) of the IRC and sets forth the selection criteria and the preferences of the Corporation for Developments which will receive Housing Credits. The QAP is available on the Corporation's Website under the Multifamily Programs link or by contacting the Housing Credit Program at 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301-1329, or from http://flrules.org/Gateway/reference/asp?No= Ref-07355. The 2016 QAP is a five-page document that replaces the 2015 QAP and generally describes the process for allocating 2017 housing credits. In summary, it identifies Florida Housing as the housing credit agency for the State, lists the federally- mandated preferences and selection criteria to be used when allocating housing credits, describes in brief terms the competitive solicitation process, describes the process for awarding competitive and noncompetitive housing credits, and describes the procedures for monitoring and reporting a project's noncompliance with IRC requirements. Section 42(m)(1)(C) lists ten selection criteria that must be incorporated into the QAP. To comply with this requirement, section I.B. of the 2016 QAP provides that the following selection criteria will be considered when determining the allocation of housing credits: project location; housing needs characteristics; project characteristics including housing as part of a community revitalization plan; sponsor characteristics; tenant populations with special housing needs; public housing waiting lists; tenant populations of individuals with children; projects intended for eventual tenant ownership; energy efficiency of the projects; and historic nature of project. These criteria are identical to those listed in section 42(m)(1)(C) and are intended to provide general guidance for the entire housing credit program, and not just RFA-113. Other than the ten criteria, the IRC requires no further detail regarding the selection criteria. However, more specific guidance is found in the individual RFAs, tailored to each type of solicitation. Since late 2013, when the RFA solicitation process began, around 15 to 20 RFAs have been issued annually. Petitioners assert the QAP violates the IRC by not listing the RFA criteria. However, neither the Department of Housing and Urban Development nor the Internal Revenue Service has ever told Florida Housing that the QAP does not comply with the IRC or other applicable federal regulations. The rule cites section 420.507 as Florida Housing's rulemaking authority. That statute has 49 subsections that identify the various powers necessary for Florida Housing to carry out and effectuate the provisions of the law. Pertinent to this dispute is subsection (12), a general grant of authority for Florida Housing "[t]o make rules necessary to carry out the purposes of [part V, chapter 420]," which governs the various low-income housing programs administered by the agency. The rule cites section 420.5099(1) as the law being implemented. That provision designates Florida Housing as the housing credit agency for the state, along with its "responsibility and authority to establish procedures necessary for proper allocation and distribution of low-income housing tax credits and [to] exercise all powers necessary to administer the allocation of such credits." While consistency with section 42 is required in order to satisfy federal requirements, the IRC is not the law being implemented. Petitioners allege the rule exceeds the agency's grant of rulemaking authority and enlarges, modifies, or contravenes the specific provisions of law implemented. See § 120.52(8)(b) and (c), Fla. Stat. In short, they contend that other than the generic selection criteria required by section 42(m)(1)(C), the QAP fails to include the other selection criteria in RFA-113 that are used during the competitive process. D. Rule 67-60.010(3) Petitioners also challenge rule 67-60.010(3). The entire rule, entitled "Funding Preferences," reads as follows: In connection with any competitive solicitation, where all other competitive elements are equal, the Corporation may establish a preference for developers and general contractors who demonstrate the highest rate of Florida job creation in the development and construction of affordable housing. In any competitive solicitation, the Corporation may prescribe a priority to fund affordable housing projects in the Florida Keys Area of Critical State Concern and the City of Key West Area of Critical State Concern where, due to challenging environmental, land use, transportation, workforce, and economic factors, it is extremely difficult to successfully finance, develop, and construct affordable housing. The Corporation may establish other funding priorities as deemed appropriate for a competitive program or solicitation. The rule cites section 420.507(12) as the source of rulemaking authority. That statute is a general grant of authority allowing Florida Housing to adopt rules necessary to carry out the purposes of part V, chapter 420, which includes the issuance of tax credits under the Low-Income Housing Credit Program. The rule cites sections 420.507(47), (48), and (49), 420.5087, 420.5089(2), and 420.5099 as the laws being implemented. In their totality, those provisions authorize Florida Housing to adopt rules and procedures for allocating housing credits and loans for programs that it administers pursuant to chapter 420. One authorized procedure is the authority to use RFAs when awarding low-income housing tax credits. See § 420.507(48), Fla. Stat. On the faulty premise that RFA-113 derives its authority from subsection (3) of the rule, rather than statutory law, Petitioners argue that Florida Housing is allocating low- income housing tax credits in a manner that violates section 42 and chapter 420. They contend authority is delegated by the RFA to local governments to choose which developer will receive local funding, thus giving that developer more preferential treatment in the selection process. By doing so, Petitioners assert subsection (3) violates section 120.52(8)(d) by failing to establish adequate standards for agency decisions and vesting unbridled discretion in the agency. As the record shows, the authority to allocate tax credits is not derived from a rule. The source of authority is a statute. Subsection (3) simply informs readers that, besides the statutorily-mandated procedures spelled out in subsections (1) and (2), other types of funding priorities or preferences may be enacted at some future time by the legislature. As these changes occur, the reader is told that specific rules will be adopted to implement those changes. Agency Statements The allegations concerning unadopted rules, all in the RFA, are somewhat confusing. In their PFO, Petitioners request that a final order be entered determining "the policies that make up virtually all of RFA 2016-113 are invalid non-rule policies." Pet'r PFO, p. 23. In paragraph 38 of the PFO, they make reference to RFA pages 2, 13, 20, 22, 40-45, 53-54, 62-63, 67-68, 72, and 110, but elsewhere provide the actual text of only six statements and a brief description of a few others. In the parties' Joint Stipulation, Petitioners assert only that "RFA 2016-113 contains numerous provisions that are invalid exercises of non-rule policy and are without a basis in or are contrary to the law implemented." Jt. Stip., p. 2, § B.1. No statements are identified or described. As detailed in endnote 1, however, their initial Petitions identify the text of some statements and provide a brief description of others, along with the page number on which they are found.1/ Only these statements will be addressed. Petitioners contend that Florida Housing must immediately discontinue all reliance upon them, stop the solicitation process, and issue a new RFA. It is unnecessary to recite each statement in full in order to resolve this dispute. An RFA is issued for each solicitation involving low- income housing credits. Before posting an RFA, Florida Housing typically conducts workshops and posts on-line information to inform prospective applicants of all requirements and any new provisions. By reading the RFA, each prospective applicant is placed on equal footing with the others. RFA-113 consists of six sections: Introduction; Definitions; Procedures and Provisions; Information to be Provided in Application; Evaluation Process; and Award Process. The definitions and funding selection criteria being challenged are found in sections Two and Four, respectively. A lengthy Exhibit A is attached to RFA-113, which includes various forms, instructions, and the like. The evidence shows that RFAs in the low-income rental housing program are not always the same, as they vary depending on such things as the type of project, size of the county, applicable selection criteria, proximity of other developments, program being implemented, demographics being served, and economic conditions in the area. Also, changes in the substantive law or federal regulations require a modification of an RFA's terms and conditions from time to time. For example, RFA-113 contains new criteria used by Florida Housing for the very first time. In short, RFA-113 is tailored to a very narrow class of persons in the six-county area who seek tax credits to build affordable low-income rental property in that area. The selection criteria in RFA-113 are not cast in stone and some are subject to discretionary application. And applicants can achieve points in different ways. During the review process, evaluators have the discretion to either waive or enforce irregularities, depending on how they characterize the irregularity. It is fair to assume from the record that different members of the evaluation committee might assign a different score to the same section of an application. Is Rulemaking Impracticable? Petitioners contend that Florida Housing must adopt by rule the detailed selection criteria, preferences, and definitions contained in every RFA. These terms and conditions change from cycle to cycle and would require Florida Housing to engage in repetitive rulemaking each year, which more than likely would unduly delay the solicitation process. Assuming arguendo the statements are a rule, which they are not, under the circumstances presented here, it is not reasonable to adopt by rule precise or detailed principles, criteria, or standards for every solicitation. See § 120.54(1)(a)2.a., Fla. Stat. Attorney's Fees and Costs As a condition precedent to seeking an award of attorney's fees and costs against an agency for having an illegal unadopted rule, the person bringing the challenge must give the agency 30 days' notice before filing a petition under section 120.56(4), which notice must inform the agency that the disputed statement might constitute an unadopted rule. See § 120.595(4)(b), Fla. Stat. The parties have stipulated that Petitioners failed to provide this notice.
The Issue The issue in this case is whether a portion of Florida Administrative Code Rule 67-48.0072 is an invalid exercise of delegated legislative authority.
Findings Of Fact The Petitioner is a limited partnership and developer of affordable housing in Florida. The Petitioner is seeking to construct a 116-unit affordable housing family apartment complex ("Elmwood Terrace") in Fort Myers, Lee County, Florida. The Petitioner has standing to initiate and participate in this proceeding. The Respondent is a public corporation organized under Chapter 420, Florida Statutes (2010), to administer state programs that provide financial support to developers seeking to construct affordable housing. Such support is provided through a variety of mechanisms, including the use of federal tax credits. The federal tax credit program was created in 1986 to promote the construction and operation of privately-developed affordable housing. The tax credits relevant to this proceeding provide a dollar-for-dollar credit against federal tax liabilities for a period of ten years. The Respondent is the designated Florida agency responsible for distribution of the federal tax credits. The tax credits are awarded pursuant to a "Qualified Allocation Plan" (QAP) that must be annually approved by the Governor and adopted as an administrative rule by the Respondent. As a matter of course, developers receiving the federal tax credits sell them through syndicators for discounted cash. The sale of the tax credits generates debt-free cash equity for developers. Developers seeking financial support to build affordable housing units submit applications to the Respondent during an annual competitive process known as the "Universal Cycle." Every three years, the Respondent commissions a study (the "Shimberg Report"), which measures, within each Florida county, the number of "cost-burden" renters earning 60 percent or less of an area's median income (AMI) who pay more than 40 percent of their income in rent. The AMI is determined by the federal government. The cost-burden households are further classified into four groups: families, the elderly, farm workers, and commercial fishermen. The Shimberg Report also assesses needs related to homeless people in the state. Developers seeking to obtain affordable housing financing are required to set aside a portion of the proposed units for income-limited residents. Access to affordable housing units is generally targeted towards persons receiving no more than 60 percent of the AMI. The Universal Cycle process allows the Respondent to target specific housing deficiencies in terms of geographic availability and population demographics and to preserve the stock of existing affordable housing. During the Universal Cycle process, the Respondent identifies areas where additional affordable housing is unnecessary, to discourage additional development in weak markets and to encourage development in those locations where there is a lack of access to affordable housing. The Respondent classifies areas where there is little need for additional affordable housing as "Location A" areas. Each application filed during the Universal Cycle is evaluated, scored, and competitively ranked against other applications filed during the same Universal Cycle. After the Respondent completes the competitive ranking of the applications submitted in the Universal Cycle, the applicants are provided with an opportunity to review and comment on the evaluation and scoring of the proposals. Applicants may also cure defects in their own proposals. After the close of the review and comment period, the Respondent publishes a revised competitive ranking of the proposals. Developers may challenge the second ranking through an administrative hearing. After the second ranking process is final, developers achieving an acceptable score receive preliminary funding commitments and proceed into a "credit underwriting" evaluation process. The credit underwriting process is governed by Florida Administrative Code Rule 67-48.0072. The Respondent selects an independent credit underwriter who reviews each proposal according to requirements set forth by administrative rule (the "Credit Underwriting Rule"). The cost of the credit underwriting review is paid by the developer. The credit underwriter considers all aspects of the proposed development, including financing sources, plans and specifications, cost analysis, zoning verification, site control, environmental reports, construction contracts, and engineering and architectural contracts. The responsibility for the market study is assigned by the credit underwriter to an independent market analyst. The credit underwriter prepares a report for each applicant invited into the process. The reports are submitted to the Respondent's nine-member, statutorily-created Board of Directors (Board). The Board approves or denies each application for financial support. The Petitioner applied for funds for the Elmwood Terrace project during the 2007 Universal Cycle. The Petitioner's application received a perfect score, maximum points, and was allocated tax credits in the amount of $1,498,680. The Petitioner thereafter entered the credit underwriting process. The credit underwriting analysis was performed by Seltzer Management Group (SMG). SMG contracted with a market analyst, Vogt, Williams & Bowen Research, Inc. (VWB), to prepare the required market study. The affordable units at Elmwood Terrace were initially intended for persons receiving incomes no more than 60 percent of the AMI. The VWB research indicated that the Elmwood Terrace project would adversely affect the existing affordable housing developments, if the Elmwood Terrace units were available to the 60 percent AMI population. The existing affordable housing developments, also serving the 60 percent AMI population, included two developments that had participated in the Respondent's "Guarantee Fund" program, addressed elsewhere herein. VWB determined that the impact of the Elmwood Terrace project on the existing developments could be ameliorated were some of the Elmwood Terrace units targeted during "lease-up" to persons at income levels of not more than 50 percent of the AMI. The lease-up period is the time required for a new development to reach anticipated occupancy levels. The issue was the subject of discussions between the Petitioner, VWB, and SMG. To resolve the anticipated negative impact on the existing affordable housing developments, the Petitioner agreed to target the 50 percent AMI population. In September 2008, the credit underwriter issued his report and recommended that the Petitioner receive the previously-allocated tax credits. On September 22, 2008, the Respondent's Board accepted the credit underwriting report and followed the recommendation. In the fall of 2008, after the Petitioner received the tax credits, the nation's economic environment deteriorated considerably. As a result, the syndicator with whom the Petitioner had been working to sell the tax credits advised that the sale would not occur. The Petitioner was unable to locate an alternate purchaser for the tax credits. The Petitioner considered altering the target population of the project in an attempt to attract a buyer for the tax credits, and there were discussions with the Respondent about the option, but there was no credible evidence presented that such an alteration would have resulted in the sale of the Petitioner's tax credits. Lacking a buyer for the tax credits, the Petitioner was unable to convert the credits to cash, and they were of little value in providing funds for the project. The Petitioner was not alone in its predicament, and many other developers who received tax credits in the 2007 and 2008 Universal Cycles found themselves unable to generate cash through the sale of their tax credits. In early 2009, Congress adopted the American Recovery and Reinvestment Act of 2009 (PL 111-5), referred to herein as ARRA, which incorporated a broad range of economic stimulus activities. Included within the ARRA was the "Tax Credit Exchange Program" that provided for the return by the appropriate state agency of a portion of the unused tax credits in exchange for a cash distribution of 85 percent of the tax credit value. The State of Florida received $578,701,964 through the Tax Credit Exchange Program. The ARRA also provided additional funds to state housing finance agencies through a "Tax Credit Assistance Program" intended to "resume funding of affordable housing projects across the nation while stimulating job creation in the hard-hat construction industry." On July 31, 2009, the Respondent issued a Request for Proposals (RFP 2009-04) to facilitate the distribution of the ARRA funds. The Respondent issued the RFP because the 2009 QAP specifically required the Respondent to allocate the relevant federal funds by means of a "competitive request for proposal or competitive application process as approved by the board." The 2009 QAP was adopted as part of the 2009 Universal Cycle rules. Projects selected for funding through the RFP would be evaluated through the routine credit underwriting process. Participation in the RFP process was limited to developers who held an "active award" of tax credits as of February 17, 2009, and who were unable to close on the sale of the credits. The RFP included restrictions against proposals for development within areas designated as "Location A." Although the location of the Elmwood Terrace project had not been within an area designated as "Location A" during the 2007 Universal Cycle process, the Respondent had subsequently designated the area as "Location A" by the time of the 2009 Universal Cycle. The RFP also established occupancy standards for projects funded under the RFP that exceeded the standards established in the Universal Cycle instructions and an evaluation process separate from the Universal Cycle requirements. Although the restrictions in the RFP would have automatically precluded the Petitioner from being awarded funds, the Petitioner submitted a response to the RFP and then filed a successful challenge to the RFP specifications (DOAH Case No. 09-4682BID). In a Recommended Order issued on November 12, 2009, the Administrative law Judge presiding over the RFP challenge determined that certain provisions of the RFP, including the automatic rejection of Location A projects, the increased occupancy standards, and the RFP evaluation criteria, were invalid. The Respondent adopted the Recommended Order by a Final Order issued on December 4, 2009, and invited the Petitioner into the credit underwriting process by a letter dated December 9, 2009. The credit underwriter assigned to analyze the Petitioner's project was SMG, the same credit underwriter that performed the original analysis of the Petitioner's project during the 2007 Universal Cycle. SMG retained Meridian Appraisal Group, Inc. (Meridian), to prepare the required market study. The Respondent was not consulted regarding the SMG decision to retain Meridian for the market analysis. The decision to retain Meridian for the market analysis was entirely that of SMG. The Respondent did not direct SMG or Meridian in any manner regarding the assessment or evaluation of any negative impact of the proposed project on existing affordable housing developments. Meridian completed the market study and forwarded it to SMG on January 26, 2010. The Meridian market analysis included a review of the relevant data as well as consideration of the actual economic conditions experienced in Lee County, Florida, including the extremely poor performance of the existing housing stock, as well as significant job losses and considerable unemployment. The Meridian market analysis determined that the Elmwood Terrace development would have a negative impact on two existing affordable housing apartment developments that were underwritten by the Respondent through a Guarantee Fund created at Section 420.5092, Florida Statutes, by the Florida Legislature in 1992. The existing Guarantee Fund properties referenced in the SMG recommendation are "Bernwood Trace" and "Westwood," both family-oriented apartment developments within five miles of the Elmwood Terrace location. The Guarantee Fund essentially obligates the Respondent to satisfy mortgage debt with the proceeds of Florida's documentary stamp taxes, if an affordable housing development is unable to generate sufficient revenue to service the debt. Because the Guarantee Fund program essentially serves to underwrite the repayment of mortgage debt for a "guaranteed" affordable housing development, the program increases the availability, and lowers the cost, of credit for developers. The Guarantee Fund program has participated in the financing of more than 100 projects, most of which closed between 1999 and 2002. Since 2005, the Respondent has not approved any additional Guarantee Fund participation in any affordable housing developments. The Respondent's total risk exposure through the Guarantee Fund is approximately 750 million dollars. Prior to October 2008, no claims were made against the Guarantee Fund. Since November 2008, there have been eight claims filed against the Guarantee Fund. Affordable housing financing includes restrictions that mandate the inclusion of a specific number of affordable housing units. Such restrictions are eliminated through foreclosure proceedings, and, accordingly, access to affordable housing units can be reduced if a development fails. Presuming that the eight claims pending against the Guarantee Fund eventually proceeded through foreclosure, as many as 2,300 residential units could be deducted from the stock of affordable housing. When there is a claim on the Guarantee Fund, the Respondent has to assume payment of the mortgage debt. The claims are paid from the Guarantee Fund capital, which is detrimental to the Respondent's risk-to-capital ratio. The risk-to-capital ratio is presently four to one. The maximum risk-to-capital ratio acceptable to rating agencies is five to one. The eight claims against the Guarantee Fund have ranged between ten and 18 million dollars each. The Respondent's bond rating has declined because of the eight claims. A continued decline in the Respondent's bond rating could result in documentary stamp tax receipts being used for payment of Guarantee Fund claims and directed away from the Respondent's programs that are intended to support the creation of affordable housing. In an effort to prevent additional claims against the Guarantee Fund, the Respondent has created the "Subordinate Mortgage Initiative" to provide assistance in the form of two- year loans to troubled Guarantee Fund properties. When preparing the 2010 market study, Meridian did not review the VWB market analysis performed as part of the 2007 application. Although the Petitioner has asserted that Meridian should have reviewed the 2007 VWB analysis, there is no evidence that Meridian's decision to conduct an independent market study without reference to the prior market review was inappropriate. On February 8, 2010, SMG issued a recommendation that the Petitioner's funding request be denied "because of the proposed development's potential financial impacts on developments in the area previously funded by Florida Housing and an anticipated negative impact to the two Guarantee Fund properties located within five miles of the proposed development." There is no evidence that the Meridian analysis was inadequate or improperly completed. There is no evidence that the SMG's reliance on the Meridian analysis was inappropriate. For purposes of this Order, the Meridian analysis and the SMG credit underwriting report have been accepted. Elmwood Terrace, a newer development with newer amenities, would compete for residents with the Bernwood Trace and Westwood developments. The financing for Bernwood Trace and Westwood was premised on projections that the affordable housing units would be leased to the 60 percent AMI population; however, the developments have been unable to maintain full occupancy levels, even though a number of units in the two properties are leased at reduced rates based on 50 percent AMI income levels. A rent reduction implemented by an existing development, whether based on economic conditions or resulting from competition, constitutes a negative impact on the development. There is no credible evidence that the occupancy rates are attributable to any difficulty in management of the two developments. It is reasonable to conclude that the leasing issues are related to economic conditions present in Lee County, Florida. In January 2010, VWB conducted an alternative market analysis. The VWB analysis was not provided to SMG or to the Respondent at any time during the credit underwriting process. Based on the 2010 VWB analysis, the Petitioner asserted that economic conditions in Lee County, Florida, have improved since the first credit underwriting report was completed in 2008 and that the improvement is expected to continue. There is no noteworthy evidence that economic conditions have improved or will significantly improve in the Lee County, Florida, market in the predictable future, and the VWB analysis is rejected. The Petitioner offered to mitigate any negative impact on the Guarantee Fund properties by committing affordable units to 50 percent AMI income levels. Given the existing economic and rental market conditions in Lee County, Florida, the evidence fails to establish that the offer would actually alleviate the negative impact on the affected Guarantee Fund developments. The 2010 VWB analysis states that there is substantial unmet demand for housing at 50 percent AMI and that there will be no impact on the Guarantee Fund units if the Elmwood Terrace units were set aside for such individuals. There is no credible evidence that there is a substantial and relevant unmet affordable housing demand in Lee County, Florida. The VWB analysis is rejected. Following the completion of each annual Universal Cycle process, the Respondent actively solicits feedback from developers and the public and then amends the Universal Cycle requirements to address the issues raised, as well as to reflect existing affordable housing needs and general concerns of the Board. The amendments are applicable for the following Universal Cycle. In 2009, the Respondent amended subsection (10) of the Credit Underwriting Rule as part of the annual revisions to the Universal Cycle process. The relevant amendment (referred to by the parties as the "Impact Rule") added this directive to the credit underwriter: The Credit Underwriter must review and determine whether there will be a negative impact to Guarantee Fund Developments within the primary market area or five miles of the proposed development, whichever is greater. The amendment was prompted by the Respondent's experience in the fall of 2008 when considering two separate applications for affordable housing financing. The potential negative impact of a proposed development on an existing Guarantee Fund property was central to the Board's consideration of one application, and the Board ultimately denied the application. In the second case, the Board granted the application, despite the potential negative impact on a competing development that was not underwritten by the Guarantee Fund. The intent of the language was to advise developers that the existence of Guarantee Fund properties within the competitive market area would be part of the credit underwriting evaluation and the Board's consideration. Notwithstanding the language added to the rule, the credit underwriter is charged with reviewing the need for additional affordable housing. Even in absence of the added language, consideration of any negative impact to competing developments based on inadequate need for additional affordable housing would be appropriate. In rendering the 2010 credit underwriting report on Elmwood Terrace, the credit underwriter complied with the directive. Prior to determining that the Petitioner's funding application should be denied, the Respondent's Board was clearly aware of the Petitioner's application, the credit underwriting report and market analysis, and the economic conditions in Lee County, Florida. There is no credible evidence of any need for additional affordable housing in Lee County, Florida. There is no credible evidence that the Lee County, Florida, market can sustain the addition of the units proposed by the Petitioner without adversely affecting the financial feasibility of the existing Guarantee Fund developments. The Board was aware that the Elmwood Terrace development could attract residents from the nearby Guarantee Fund properties and that local economic conditions threatened the financial viability of the properties. Given current economic conditions, approval of the application at issue in this proceeding would reasonably be expected to result in a negative impact to existing affordable housing developments. The protection of Guarantee Fund developments is necessary to safeguard the resources used to support the creation and availability of affordable housing in the state.
The Issue At issue in this proceeding is whether the actions of the Florida Housing Finance Corporation (“Florida Housing”) concerning the review and scoring of the responses to Request for Applications 2016-110, Housing Credit Financing for Affordable Housing Developments Located in Medium and Small Counties (the “RFA”), was clearly erroneous, contrary to competition, arbitrary or capricious. Specifically, the issue is whether Florida Housing acted contrary to the agency’s governing statutes, rules, policies, or the RFA specifications in finding that the applications of Petitioners JPM Outlook One Limited Partnership (“JPM Outlook”) and Grande Park Limited Partnership (“Grande Park”) were ineligible for funding.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: JPM Outlook is a Florida limited partnership based in Jacksonville, Florida, that is in the business of providing affordable housing. Grande Park is a Florida limited partnership based in Jacksonville, Florida, that is in the business of providing affordable housing. Hammock Ridge is a Florida limited liability company based in Coconut Grove, Florida, that is in the business of providing affordable housing. Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. For the purposes of this proceeding, Florida Housing is 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. The low income housing tax credit program 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 that qualify. The credits are then normally sold by developers for cash to raise capital for their projects. The effect of this sale is to reduce 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. Housing tax credits are not tax deductions. For example, a $1,000 deduction in a 15-percent tax bracket reduces taxable income by $1,000 and reduces tax liability by $150, while a $1,000 tax credit reduces tax liability by $1,000. The demand for tax credits provided by the federal government exceeds the supply. Florida Housing is authorized to allocate housing tax credits and other funding by means of a request for proposal or other competitive solicitation in section 420.507(48). Florida Housing has adopted 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 housing tax credits, which are made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3). In their applications, applicants request a specific dollar amount of housing tax 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 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; 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 area of some counties. This, however, is not an exhaustive list of the factors considered. Housing tax credits are made available through a competitive application process commenced by the issuance of a Request for Applications. A Request for Applications is equivalent to a “request for proposal,” as indicated in rule 67-60.009(3). The RFA in this case was issued on October 7, 2016. A modification to the RFA was issued on November 10, 2016, and responses were due December 2, 2016. A challenge was filed to the terms, conditions, or requirements of the RFA by parties not associated with the instant case, but that challenge was dismissed prior to hearing. Through the RFA, Florida Housing seeks to award up to an estimated $12,312,632 of housing tax credits to qualified applicants to provide affordable housing developments in Medium Counties, as well as up to an estimated $477,091 of housing tax credits to qualified applicants to provide affordable housing developments in Small Counties other than Monroe County. By the terms of the RFA, a review committee made up of Florida Housing staff reviewed and scored each application. These scores were presented in a public meeting and the committee ultimately made a recommendation as to which projects should be funded. This recommendation was presented to Florida Housing’s Board of Directors (“the Board”) for final agency action. On March 24, 2017, all applicants received notice that the Board had approved the recommendation of the review committee concerning which applications were eligible or ineligible for funding and which applications were selected for awards of housing tax credits, subject to satisfactory completion of the credit underwriting process. The notice was provided by the posting on Florida Housing’s website (www.floridahousing.org) of two spreadsheets, one listing the “eligible” and “ineligible” applications and one identifying the applications which Florida Housing proposed to fund. Florida Housing announced its intention to award funding to 10 developments, including Intervenor Hammock Ridge. Petitioners JPM Outlook and Grande Park were deemed ineligible. If JPM Outlook and Grande Park had been deemed eligible, each would have been in the funding range based on its assigned lottery number and the RFA selection criteria. If Grande Park had been deemed eligible, Hammock Ridge would not have been recommended for funding. Petitioners JPM Outlook and Grande Park timely filed notices of protest and petitions for administrative proceedings. The scoring decision at issue in this proceeding is based on Florida Housing’s decision that Petitioners failed to submit as Attachment 1 to Exhibit A the correct and properly signed version of the Applicant Certification and Acknowledgment Form. Petitioners’ admitted failure to submit the correct Applicant Certification and Acknowledgement Form was the sole reason that Florida Housing found Petitioners’ applications to be ineligible for funding. Section Four of the RFA was titled, “INFORMATION TO BE PROVIDED IN APPLICATION.” Listed there among the Exhibit A submission requirements was the Applicant Certification and Acknowledgement Form, described as follows: The Applicant must include a signed Applicant Certification and Acknowledgement form as Attachment 1 to Exhibit A to indicate the Applicant’s certification and acknowledgement of the provisions and requirements of the RFA. The form included in the copy of the Application labeled “Original Hard Copy” must reflect an original signature (blue ink is preferred). The Applicant Certification and Acknowledgement form is provided in Exhibit B of this RFA and on the Corporation’s Website http://www.floridahousing.org/Developers/ MultiFamilyPrograms/Competitive/2016- 110/RelatedForms/ (also accessible by clicking here). Note: If the Applicant provides any version of the Applicant Certification and Acknowledgement form other than the version included in this RFA, the form will not be considered. The final sentence of the quoted language is referred to by Florida Housing as the “effects clause.” The November 10, 2016, modifications to the RFA were communicated to applicants in three ways. First, Florida Housing provided a Web Board notice. The Florida Housing Web Board is a communication tool that allows interested parties and development partners to stay apprised of modifications to procurement documents. Second, each RFA issued by Florida Housing, including the one at issue in this proceeding, has its own specific page on Florida Housing's website with hyperlinks to all documents related to that RFA. Third, Florida Housing released an Official Modification Notice that delineated every modification, including a “blackline” version showing the changes with underscoring for emphasis. Brian Parent is a principal for both JPM Outlook and Grande Park. Mr. Parent received the Web Board notification of the RFA modifications via email. Upon receiving the email, Mr. Parent reviewed the modifications on the Florida Housing website. The modification to the RFA, posted on Florida Housing’s website on November 10, 2016, included the following modification of the Applicant Certification and Acknowledgement Form, with textual underscoring indicating new language: Pursuant to Rule 67-60.005, F.A.C., Modification of Terms of Competitive Solicitations, Florida Housing hereby modifies Item 2.b.(4) of the Applicant Certification and Acknowledgement Form to read as follows: (4) Confirmation that, if the proposed Development meets the definition of Scattered Sites, all Scattered Sites requirements that were not required to be met in the Application will be met, including that all features and amenities committed to and proposed by the Applicant that are not unit- specific shall be located on each of the Scattered Sites, or no more than 1/16 mile from the Scattered Site with the most units, or a combination of both. If the Surveyor Certification form in the Application indicates that the proposed Development does not consist of Scattered Sites, but it is determined during credit underwriting that the proposed Development does meet the definition of Scattered Sites, all of the Scattered Sites requirements must have been met as of Application Deadline and, if all Scattered Sites requirements were not in place as of the Application Deadline, the Applicant’s funding award will be rescinded; Note: For the Application to be eligible for funding, the version of the Applicant Certification and Acknowledgement Form reflecting the Modification posted 11-10-16 must be submitted to the Corporation by the Application Deadline, as outlined in the RFA. Rule 67-48.002(105) defines “Scattered Sites” as follows: “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. The RFA modification included other changes concerning Scattered Sites. Those changes either modified the Surveyor Certification Form itself or required applicants to correctly provide information concerning Scattered Sites in the Surveyor Certification Form. Each Petitioner included in its application a Surveyor Certification Form indicating that its proposed development sites did not consist of Scattered Sites. The Surveyor Certification Forms submitted were the forms required by the modified RFA. There was no allegation that Petitioners incorrectly filled out the Surveyor Certification Forms. However, the Applicant Certification and Acknowledgement Form submitted by each of the Petitioners was the original form, not the form as modified to include the underscored language set forth in Finding of Fact 20 regarding the effect of mislabeling Scattered Sites on the Surveyor Certification Form. The failure of JPM Outlook and Grande Park to submit the correct Applicant Certification and Acknowledgement Form was the sole reason that Florida Housing found them ineligible for funding. In deposition testimony, Ken Reecy, Florida Housing’s Director of Multifamily Programs, explained the purpose of the Applicant Certification and Acknowledgement Form: There’s a number of things that we want to be sure that the applicants are absolutely aware of in regard to future actions or requirements by the Corporation. If they win the award, there are certain things that they need to know that they must do or that they are under certain obligations, that there’s certain obligations and commitments associated with the application to make it clear what the requirements--what certain requirements are, not only now in the application, but also perhaps in the future if they won awards. At the conclusion of a lengthy exposition on the significance of the modified language relating to Scattered Sites, Mr. Reecy concluded as follows: [W]e wanted to make sure that if somebody answered the question or did not indicate that they were a scattered site, but then we found out that they were, in fact, a scattered site, we wanted to make it absolutely clear to everyone involved that in the event that your scattered sites did not meet all of those requirements as of the application deadline, that the funding would be rescinded. Petitioners argue that the failure to submit the modified Applicant Certification and Acknowledgement Form should be waived as a minor irregularity. Their simplest argument on that point is that their applications did not in fact include Scattered Sites and therefore the cautionary language added to the Applicant Certification and Acknowledgement Form by the November 10, 2016, modifications did not apply to them and could have no substantive effect on their applications. Petitioners note that their applications included the substantive changes required by the November 10, 2016, modifications, including those related to Scattered Sites. Petitioners submitted the unmodified Applicant Certification and Acknowledgement Form as Attachment 1 to their modified Exhibit A. Petitioners further note that the “Ability to Proceed Forms” they submitted with their applications on December 2, 2016, were the forms as modified on November 10, 2016. They assert that this submission indicates their clear intent to acknowledge and certify the modified RFA and forms, regardless of their error in submitting the unmodified Applicant Certification and Acknowledgement Form. Petitioners assert that the Scattered Sites language added to the Applicant Certification and Acknowledgement Form by the November 10, 2016, modifications was essentially redundant. Mr. Reecy conceded that the warning regarding Scattered Sites was not tied to any specific substantive modification of the RFA. The language was added to make it “more clear” to the applicant that funding would be rescinded if the Scattered sites requirements were not met as of the application deadline. Petitioners point out that this warning is the same as that applying to underwriting failures generally. Petitioners assert that the new language had no substantive effect on either the Applicant Certification and Acknowledgement Form or on the certifications and acknowledgements required of the applicants. Even in the absence of the modified language, Petitioners would be required to satisfy all applicable requirements for Scattered Sites if it were determined during underwriting that their applications included Scattered Sites. Petitioners conclude that, even though the modified Applicant Certification and Acknowledgement Form was not included with either of their applications, the deviation should be waived as a minor irregularity. Florida Housing could not have been confused as to what Petitioners were acknowledging and certifying. The unmodified Applicant Certification and Acknowledgement Form was submitted with a modified Attachment 1 that included all substantive changes made by the November 10, 2016, modifications to the RFA. Petitioners gained no advantage by mistakenly submitting an unmodified version of the Applicant Certification and Acknowledgement Form. The submittal of the unmodified version of the form was an obvious mistake and waiving the mistake does not adversely impact Florida Housing or the public. Mr. Reecy testified that he could recall no instance in which Florida Housing had waived the submittal of the wrong form as a minor irregularity. He also observed that the credibility of Florida Housing could be negatively affected if it waived the submission of the correct form in light of the “effects clause” contained in Section Four: Due to the fact that we did have an effects clause in this RFA and we felt that, in accordance with the rule requirements regarding minor irregularities, that it would be contrary to competition because we wanted everybody to sign and acknowledge the same criteria in the certification; so we felt that if some did--some certified some things and some certified to others, that that would be problematic. And the fact that we had very specifically instructed that if we did not get the modified version, that we would not consider it, and then if we backed up and considered it, that that would erode the credibility of the Corporation and the scoring process. Mr. Reecy testified that the modification to the Applicant Certification and Acknowledgement Form was intended not merely to clarify the Scattered Sites requirement but to strengthen Florida Housing’s legal position in any litigation that might ensue from a decision to rescind the funding of an applicant that did not comply with the Scattered Sites requirements as of the application deadline. He believed that waiving the “effects clause” would tend to weaken Florida Housing’s legal position in such a case. Petitioners had clear notice that they were required to submit the modified Applicant Certification and Acknowledgement Form. They did not avail themselves of the opportunity to protest the RFA modifications. There is no allegation that they were misled by Florida Housing or that they had no way of knowing they were submitting the wrong form. The relative importance of the new acknowledgement in the modified form may be a matter of argument, but the consequences for failure to submit the proper form were plainly set forth in the effects clause. Florida Housing simply applied the terms of the modified RFA to Petitioners’ applications and correctly deemed them ineligible for funding.
Recommendation Based on the foregoing, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order confirming its initial decision finding JPM Outlook One Limited Partnership and Grande Park Limited Partnership ineligible for funding, and dismissing each Formal Written Protest and Petition for Administrative Hearing filed by JPM Outlook One Limited Partnership and Grande Park Limited Partnership. DONE AND ENTERED this 29th day of June, 2017, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 29th day of June, 2017.
The Issue Whether the Petitions filed by Ambar Trail, Ltd.; Sierra Meadows Apartments, Ltd.; and Quail Roost Transit Village IV, Ltd., should be dismissed for lack of standing.
Findings Of Fact Florida Housing is a public corporation created under Florida law to administer the governmental function of financing or refinancing affordable housing and related facilities in Florida. Florida Housing administers a competitive solicitation process to implement the provisions of the housing credit program, under which developers apply and compete for funding for projects in response to RFAs developed by Florida Housing. The RFA in this case was specifically targeted to provide affordable housing in Miami-Dade County, Florida. The RFA introduction provides: 2 As this Recommended Order of Dismissal is based upon a motion to dismiss, the factual allegations of the three Petitions filed by the Petitioners in this consolidate case are accepted as true, and the Findings of Fact are derived from the four corners of those Petitions, see Madison Highlands. LLC v. Florida Housing Finance Corp., 220 So. 3d 467, 473 (Fla. 5th DCA 2017), and facts that are not otherwise in dispute. This Request for Applications (RFA) is open to Applicants proposing the development of affordable, multifamily housing located in Miami- Dade County. Under this RFA, Florida Housing Finance Corporation (the Corporation) expects to have up to an estimated $7,195,917 of Housing Credits available for award to proposed Developments located in Miami-Dade County. After Florida Housing announced its preliminary funding award decisions for RFA 2019-112 for Housing Credit Financing for Affordable Housing Developments Located in Miami-Dade County, each of the Petitioners filed Petitions challenging the decisions. Petitioners do not allege that Florida Housing improperly scored or evaluated the applications selected for funding, nor do they contend that Petitioners' applications should be funded. Instead, Petitioners allege that the evaluation was fundamentally unfair and seeks to have the entire RFA rescinded based on alleged improprieties of one responding entity and its affiliates. Petitioners claim that the evaluation process was fundamentally unfair is based entirely on allegations that several entities associated with Housing Trust Group, LLC (HTG), combined to submit 15 Priority I applications in contravention of the limitation in the RFA on the number of Priority I applications that could be submitted. Even assuming Petitioners' assertions are correct, there is no scenario in which Petitioners can reach the funding range for this RFA. In order to break ties for those applicants that achieve the maximum number of points and meet the mandatory eligibility requirements, the RFA sets forth a series of tie-breakers to determine which applications will be awarded funding. The instant RFA included specific goals to fund certain types of developments and sets forth sorting order tie-breakers to distinguish between applicants. The relevant RFA provisions are as follows: Goals The Corporation has a goal to fund one (1) proposed Development that (a) selected the Demographic Commitment of Family at questions 2.a. of Exhibit A and (b) qualifies for the Geographic Areas of Opportunity/SADDA Goal as outlined in Section Four A. 11. a. The Corporation has a goal to fund one (1) proposed Development that selected the Demographic Commitment of Elderly (Non-ALF) at question 2.a. of Exhibit A. *Note: During the Funding Selection Process outlined below, Developments selected for these goals will only count toward one goal. Applicant Sorting Order All eligible Priority I Applications will be ranked by sorting the Applications as follows, followed by Priority II Applications. First, from highest score to lowest score; Next, by the Application's eligibility for the Proximity Funding Preference (which is outlined in Section Four A.5.e. of the RFA) with Applications that qualify for the preference listed above Applications that do not qualify for the preference; Next, by the Application's eligibility for the Per Unit Construction Funding Preference which is outlined in Section Four A.lO.e. of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Application's eligibility for the Development Category Funding Preference which is outlined in Section Four A.4.(b)(4) of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Applicant's Leveraging Classification, applying the multipliers outlined in Item 3 of Exhibit C of the RFA (with Applications having the Classification of A listed above Applications having the Classification of B); Next, by the Applicant's eligibility for the Florida Job Creation Funding Preference which is outlined in Item 4 of Exhibit C of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); and And finally, by lotterv number, resulting in the lowest lottery number receiving preference. This RFA was similar to previous RFAs issued by Florida Housing, but included some new provisions limiting the number of Priority I applications that could be submitted. Specifically, the RFA provided: Priority Designation of Applications Applicants may submit no more than three (3) Priority I Applications. There is no limit to the number of Priority II Applications that can be submitted; however, no Principal can be a Principal, as defined in Rule Chapter 67- 48.002(94), F.A.C., of more than three ( 3) Priority 1 Applications. For purposes of scoring, Florida Housing will rely on the Principals of the Applicant and Developer(s) Disclosure Form (Rev. 05-2019) outlined below in order to determine if a Principal is a Principal on more than three (3) Priority 1 Applications. If during scoring it is determined that a Principal is disclosed as a Principal on more than three (3) Priority I Applications, all such Priority I Applications will be deemed Priority II. If it is later determined that a Principal, as defined in Rule Chapter 67-48.002(94), F.A.C., was not disclosed as a Principal and the undisclosed Principal causes the maximum set forth above to be exceeded, the award(s) for the affected Application(s) will be rescinded and all Principals of the affected Applications may be subject to material misrepresentation, even if Applications were not selected for funding, were deemed ineligible, or were withdrawn. The Petitioners all timely submitted applications in response to the RFA. Lottery numbers were assigned by Florida Housing, at random, to all applications shortly after the applications were received and before any scoring began. Lottery numbers were assigned to the applications without regard to whether the application was a Priority I or Priority II. The RFA did not limit the number of Priority II Applications that could be submitted. Review of the applications to determine if a principal was a principal on more than three Priority 1 Applications occurred during the scoring process, well after lottery numbers were assigned. The leveraging line, which would have divided the Priority I Applications into Group A and Group B, was established after the eligibility determinations were made. All applications were included in Group A. There were no Group B applications. Thus, all applications were treated equally with respect to this preference. The applications were ultimately ranked according to lottery number and funding goal. . If Florida Housing had determined that an entity or entities submitted more than three Priority I Applications with related principals, the relief set forth in the RFA was to move those applications to Priority II. Florida Housing did not affirmatively conclude that any of the 15 challenged applications included undisclosed principals so as to cause a violation of the maximum number of Priority I Applications that could be submitted. All of the applications that were deemed eligible for funding, including the Priority II Applications, scored equally, and met all of the funding preferences. After the applications were evaluated by the Review Committee appointed by Florida Housing, the scores were finalized and preliminary award recommendations were presented and approved by Florida Housing's Board. Consistent with the procedures set forth in the RFA, Florida Housing staff reviewed the Principal Disclosure Forms to determine the number of Priority I Applications that had been filed by each applicant. This review did not result in a determination that any applicant had exceeded the allowable number of Priority I Applications that included the same principal. One of the HTG Applications (Orchid Pointe, App. No. 2020-148C) was initially selected to satisfy the Elderly Development goal. Subsequently, three applications, including Slate Miami, that had initially been deemed ineligible due to financial arrearages were later determined to be in full compliance and, thus, eligible as of the close of business on January 8, 2020. The Review Committee reconvened on January 21, 2020, to reinstate those three applications. Slate Miami was then recommended for funding. The Review Committee ultimately recommended to the Board the following applications for funding: Harbour Springs (App. No. 2020-101C), which met the Geographic Areas of Opportunity/SADDA Goal; Slate Miami (App. No. 2020-122C), which met the Elderly (non-ALF) Goal; and Naranja Lakes (App. No. 2020-117C), which was the next highest-ranked eligible Priority I Application. The Board approved the Committee's recommendations at its meeting on January 23, 2020, and approved the preliminary selection of Harbour Springs, Slate Miami, and Naranja Lakes for funding. The applications selected for funding held Lottery numbers 1 (Harbour Springs), 2 (Naranja Lakes), and 4 (Slate Miami). Petitioners' lottery numbers were 16 (Quail Roost), 59 (Sierra Meadows) and 24 (Ambar Trail). The three applications selected for funding have no affiliation or association with HTG, or any of the entities that may have filed applications in contravention of the limitation in the RFA for Priority I applications. The applications alleged in the Petitions as being affiliated with HTG received a wide range of lottery numbers in the random selection, including numbers: 3, 6, 14, 19, 30, 38, 40, 42, 44, 45, 49, 52 through 54, and 58. If Petitioners prevailed in demonstrating an improper principal relationship between the HTG applications, the relief specified in the RFA (the specifications of which were not challenged) would have been the conversion of the offending HTG applications to Priority II applications. The relief would not have been the removal of those applications from the pool of applications, nor would it have affected the assignment of lottery numbers to any of the applicants, including HTG. The Petitions do not allege any error in scoring or ineligibility with respect to the three applications preliminarily approved for funding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Petitioners lack standing and dismissing the Petitions with prejudice. DONE AND ENTERED this 3rd day of April, 2020, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III 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 3rd day of April, 2020. COPIES FURNISHED: Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC Suite 3-231 1400 Village Square Boulevard Tallahassee, Florida 32312 (eServed) Michael P. Donaldson, Esquire Carlton Fields Jorden Burt, P.A. 215 South Monroe Street, Suite 500 Post Office Drawer 190 Tallahassee, Florida 32302-0190 (eServed) Donna Elizabeth Blanton, Esquire Brittany Adams Long, Esquire Radey Law Firm, P.A. Suite 200 301 South Bronough Street Tallahassee, Florida 32301 (eServed) Hugh R. Brown, General Counsel Betty Zachem, Esquire Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) M. Christopher Bryant, Esquire Oertel, Fernandez, Bryant & Atkinson, P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 (eServed) J. Stephen Menton, Esquire Tana D. Storey, Esquire Rutledge Ecenia, P.A. 119 South Monroe Street, Suite 202 Post Office Box 551 (32302) Tallahassee, Florida 32301 (eServed) Corporation Clerk Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed)
The Issue The issues are whether the actions of Florida Housing concerning the review and scoring of the responses to Request for Applications 2020-208 (“RFA”), titled “SAIL and Housing Credit Financing for the Construction of Workforce Housing,” were contrary to the agency’s governing statutes, rules, policies, or the RFA specifications and, if so, whether the challenged award was contrary to competition, clearly erroneous, or arbitrary and/or capricious.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: THE PARTIES Quail Roost was an applicant for funding in the RFA. Quail Roost’s application was assigned number 2020-461SC and was preliminarily deemed eligible for consideration for funding, but was not selected for funding. Ali Baba was an applicant for funding in the RFA. Ali Baba’s application was assigned number 2020-476BS and proposed a development named City Terrace in Miami-Dade County. Ali Baba’s application was preliminarily deemed eligible and was selected for funding under the terms of the RFA. 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. 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. § 420.5099, Fla. Stat. Florida Housing has the responsibility and authority to establish procedures for allocating and distributing low income housing tax credits. For purposes of this proceeding, Florida Housing is an agency of the State of Florida. THE COMPETITIVE APPLICATION PROCESS The low-income housing tax credit program was enacted to incentivize the private market to invest in affordable rental housing. Housing credits are awarded competitively to housing developers in Florida for qualifying rental housing projects. These credits are then typically sold by developers for cash to raise capital for their projects. The effect is to reduce the amount of money that the developer is required to borrow commercially. In return for the subsidized debt reduction, a housing credit property is required to offer lower, more affordable rents. Developers must also agree to keep rents at affordable levels for periods of thirty to fifty years. Florida Housing is authorized to allocate low-income housing tax credits, SAIL funding, and other named funding by section 420.507(48). Florida Housing has adopted Florida Administrative Code Chapter 67-60 to govern the competitive solicitation process. Rule 67-60.009(1) provides that parties wishing to protest any aspect of a Florida Housing competitive solicitation must do so pursuant to section 120.57(3), Florida Statutes. Funding is made available through a competitive application process commenced by the issuance of a request for applications. Rule 67-60.009(4) provides that a request for application is considered a “request for proposal” for purposes of section 120.57(3)(f). Applicants request a specific dollar amount of housing credits to be awarded to the applicant each year for a period of ten years. A successful applicant usually sells the rights to the future income stream of housing credits to an investor to generate the amount of capital needed to build the development. This sale is usually by way of an ownership interest in the applicant entity. The amount of funding that Florida Housing can award to an applicant depends on such factors as an RFA-designated 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. The RFA was issued on February 24, 2020, with responses due on March 30, 2020. The RFA was modified on March 13, 2020, and March 19, 2020, but the application deadline was unchanged. No challenges were made to the terms of the RFA. Florida Housing expects to award up to $17,954,000 in SAIL funding and up to $2,980,000 of housing credits through the RFA. Florida Housing received 22 applications in response to the RFA. A Review Committee was appointed to review the applications and make recommendations to Florida Housing’s Board of Directors (the “Board”). The Review Committee found 19 applications eligible and three applications ineligible for funding. Through the ranking and selection process outlined in the RFA, three applications were preliminarily recommended for funding, including that submitted by Ali Baba. The Review Committee developed charts listing its eligibility and funding recommendations to be presented to the Board. On June 11, 2020, Florida Housing’s Board met and considered the recommendations of the Review Committee. Also, on June 11, 2020, at approximately 4:35 p.m., Quail Roost and all other applicants in the RFA received notice via the Florida Housing website of the Board’s eligibility determinations and of the preliminary selection of certain eligible applicants for funding, subject to satisfactory completion of the credit underwriting process. The notice consisted of two spreadsheets, one listing the Board approved scoring results in RFA 2020-208 and one identifying the applications which Florida Housing proposed to fund. Ali Baba’s was one of the applications proposed for funding. Under the scoring and ranking mechanism of the RFA explained below, Quail Roost’s application would be selected for funding were Ali Baba’s application to lose points or be found ineligible. Quail Roost timely filed the Petition. Ali Baba timely intervened. The Petition was referred to the DOAH. The RFA provided point scoring for mandatory “eligibility items.” The RFA then set forth an “Application Sorting Order” of funding goals and priorities that were used to break ties in the point scoring. Only applications that met all the eligibility items could participate in the ranking scheme that determined funding selection. The RFA included only one point scoring item. Applicants could receive five points for submission of a Principals Disclosure Form stamped by Florida Housing as “Approved” during the Advance Review Process. The Advance Review Process is available online and includes instructions and samples to assist the applicant in completing the Principals Disclosure Form. Section Four A.3.c.(2) of the RFA states: “Note: It is the sole responsibility of the Applicant to review the Advance Review Process procedures and to submit any Principals Disclosure Form for review in a timely manner in order to meet the Application Deadline.” The stated goal of the RFA was to fund one application in Monroe County and one application in a “Large County,” i.e., Broward, Duval, Hillsborough, Miami-Dade, Orange, Palm Beach, or Pinellas County. The Application Sorting Order was set forth as follows at Section Five B.2. of the RFA: The highest scoring Applications will be determined by first sorting together all eligible Applications from highest score to lowest score, with any scores that are tied separated in the following order: First, by the Application’s eligibility for the Proximity Funding Preference (which is outlined in Section Four A.5.e. of the RFA) with Applications that qualify for the preference listed above Applications that do not qualify for the preference; Next, by the Application’s Leveraging Level which is outlined in Item 3 of Exhibit C of the RFA (with Applications that have a lower Leveraging Level listed above Applications with a higher Leveraging Level); Next, by the Application’s eligibility for the Florida Job Creation Funding Preference (which is outlined in Item 4 of Exhibit C) with Applications that qualify for the preference listed above Applications that do not qualify for the preference; and By lottery number, resulting in the lowest lottery number receiving preference. The RFA’s “Funding Test” provision at Section Five B.3. stated that applications “will only be selected for funding if there is enough Workforce SAIL funding available to fully fund the Applicant’s Workforce SAIL Request Amount, and, Monroe County Applications will only be selected for funding if there is enough Workforce SAIL funding available to fully fund the Applicant’s Workforce SAIL Request Amount, and enough Competitive 9% Housing Credit funding available to fully fund the Applicant’s Competitive 9% Housing Credit Request Amount.” The total available amount was $17,954,000 in SAIL funding, with at least $2,520,000 of that amount reserved for Monroe County. Section Five B.4. of the RFA described a “County Award Tally” that provided as follows: As each Application is selected for tentative funding, the county where the proposed Development is located will have one Application credited towards the County Award Tally. The Corporation will prioritize eligible unfunded Applications that meet the Funding Test and are located within counties that have the lowest County Award Tally above other eligible unfunded Applications with a higher County Award Tally that also meet the Funding Test, even if the Applications with a higher County Award Tally are higher ranked. The RFA’s “Funding Selection Order” was set forth as follows at Section Five B.5.: The first Application selected for funding will be the highest ranking eligible Application that is eligible for Monroe County Goal. The next Application selected for funding will be the highest ranking eligible Application that is eligible for the Large County Goal. Once the goals are met or if there are no eligible Applications that can meet the goals, then the Corporation will select the highest ranking eligible unfunded Application(s) subject to the Funding Test and County Award Tally. If funding remains after funding all eligible Application(s) that can meet the Funding Test or because there is no eligible unfunded Application that can be fully funded, then no further Applications will be selected for funding and any remaining Total Remaining SAIL funding, as well as any unallocated 9% HC funding, will be distributed as approved by the Board. PRINCIPALS DISCLOSURE FORM The RFA required applicants to upload the Principals Disclosure Form, the full title of which is “Principals of the Applicant and Developer(s) Disclosure Form” (Form Rev. 05-2019). As an eligibility item, Section Four A.3.c.(1) of the RFA required that the Principals Disclosure Form: must identify, pursuant to Subsections 67- 48.002(94), 67-48.0075(8) and 67-48.0075(9), F.A.C., the Principals of the Applicant and Developer(s) as of the Application Deadline. A Principals Disclosure Form should not include, for any organizational structure, any type of entity that is not specifically included in the Rule definition of Principals. As stated above, applicants received 5 points if the uploaded Principals Disclosure Form was stamped “Approved” during the Advance Review Process. Ali Baba’s Principals Disclosure Form went through the Advance Review Process and was stamped “Approved for Housing Credits” by Florida Housing staff on March 16, 2020. Ali Baba’s application was awarded the requisite 5 points. Rule 67-48.002(94)(a) defines “Principal” for entities including corporations, limited partnerships, limited liability companies, trusts, and public housing authorities. For a corporation, “Principal” means “each officer, director, executive director, and shareholder of the corporation.” Quail Roost alleges that Ali Baba is ineligible for funding and should lose 5 points for failure to disclose all of the principals of the applicant and its developer, Opa-Locka Community Development Corporation, Inc. (“Opa- Locka Corp.”). Specifically, Quail Roost alleges that the name of Chad Jackson, a member of the Board of Directors of Opa-Locka Corp., was not disclosed on Ali Baba’s Principals Disclosure Form. Ali Baba concedes that members of the Board of Directors of the Opa- Locka Corp. are by definition principals who must be included on the Principals Disclosure Form. Ali Baba also conceded that Mr. Jackson was a member of the Board of Directors and was not included on Ali Baba’s Principals Disclosure Form. Dr. Willie Logan, the President and CEO of Opa-Locka Corp., testified that Mr. Jackson is a local low-income housing resident who is an appointed member of the Board of Directors of Opa-Locka Corp. Dr. Logan testified that a resident such as Mr. Jackson must be on the Board of Directors in order for Opa-Locka Corp. to receive funding from the U.S. Department of Housing and Urban Development. Though Mr. Jackson’s name is not included on the Principals Disclosure Form, Ali Baba did disclose Mr. Jackson’s name in a list of its 2019-2020 Board of Directors included as part of Attachment 3 of its application. Non-Profit entities are required to submit “the names and addresses of the members of the governing board of the Non-Profit entity” in Attachment 3. Ali Baba argues that this submission should be sufficient to render Ali Baba’s failure to include Mr. Jackson’s name on the Principals Disclosure Form a minor irregularity. Marisa Button, Director of Multifamily Programs for Florida Housing, testified as to the reasons Florida Housing requires disclosure of all principals on the Principals Disclosure Form. The RFA includes a financial arrearage requirement stating that an application will be deemed ineligible for funding if the applicant or any affiliated entity is in financial arrears to Florida Housing. Ms. Button testified that Florida Housing uses the information on the Principals Disclosure Form to ensure that the financial arrearage requirement is met and no principals are in financial arrearages to Florida Housing. Ms. Button testified that Florida Housing also uses the Principals Disclosure Form as a cross-reference to determine whether any of the disclosed entities or individuals have been de-obligated or barred from participation in Florida Housing’s programs. Ms. Button testified that Florida Housing considers it a material deviation from the RFA requirements when an applicant fails to disclose a principal on the Principals Disclosure Form. She testified that the disclosure of Mr. Jackson’s name elsewhere in Ali Baba’s application does not change the analysis because Florida Housing cannot take it upon itself to presume that an individual not named in the Principals Disclosure Form is a principal of the applicant. Ms. Button explained that before adopting the RFA process in which a number of solicitations are issued for various funding sources over the course of a year, Florida Housing used a single annual application called the “Universal Cycle.” She stated that Attachment 3 is a holdover from the Universal Cycle process, which did not require the filing of a Principals Disclosure Form. Florida Housing used Attachment 3 to verify an applicant’s status as a nonprofit entity for those projects that included funding goals for nonprofits. Ms. Button testified that Florida Housing currently reviews Attachment 3 to ensure that entities designating themselves as nonprofits have included their supporting information. It is in no way interchangeable with the Principals Disclosure Form. Ms. Button also noted that the list of Ali Baba’s Board of Directors included in Attachment 3 was dated March 26, 2020. The application deadline was March 30, 2020. Ms. Button testified that, even if Florida Housing were inclined to allow Attachment 3 to supplement the Principals Disclosure Form, the time difference between the two documents would render Attachment 3 unreliable as an indicator of Ali Baba’s principals as of the application deadline. Quail Roost pointed to another discrepancy in Ali Baba’s Principals Disclosure Form. As stated above, the name of the applicant entity is “675 Ali Baba, LLC.” The project manager of 675 Ali Baba, LLC, is “675 Ali Baba Manager, LLC.” However, Ali Baba’s Principals Disclosure Form identified the manager as “Ali Baba Manager, LLC.” Ali Baba concedes that its manager was not accurately disclosed on the Principals Disclosure Form. Dr. Logan testified that this was a mere typographical error and that to his knowledge no entity called “Ali Baba Manager, LLC,” existed. Ali Baba pointed to multiple other places in its application that correctly identified the manager as “675 Ali Baba Manager, LLC.” Ms. Button testified that Florida Housing considers the misnaming of the management entity to be a material error for the same reason it finds the omission of an individual principal to be a material error: Florida Housing cannot perform due diligence checks on the entity if it is not correctly identified. Ms. Button acknowledged that Florida Housing has treated typographical or grammatical errors as minor irregularities in the past; however, this was not a minor irregularity because the failure to correctly name the manager affected Florida Housing’s ability to investigate the entity for financial arrears or debarment. As in the case of Mr. Jackson, the fact that 675 Ali Baba Manager, LLC, was correctly identified elsewhere in Ali Baba’s application did not affect the analysis. Ms. Button testified that Florida Housing does not, and cannot, under its rules and the principles of competitive bidding, look beyond the Principals Disclosure Form to determine the identities of the applicant’s principals. SCATTERED SITES As an eligibility requirement in the RFA, applicants were required to provide information regarding the location of their proposed developments. Section Four A.5.d.(1) of the RFA required that a Development Location Point (“DLP”) be stated for the latitude/longitude coordinates in decimal degrees, rounded to at least the sixth decimal place. The DLP identified by Ali Baba is not in dispute in this proceeding. Section Four A.5.d.(2) of the RFA stated that if the proposed development consists of Scattered Sites, i.e, non-contiguous parcels,2 then in addition to the DLP information, the applicant must “provide the latitude and longitude coordinates of one point located anywhere on the Scattered Site” for each Scattered Site. As with the DLP, the coordinates for the Scattered Sites were required to be stated in decimal degrees and rounded to at least the sixth decimal place. In its application, Ali Baba proposed a development that included three Scattered Sites. Ali Baba provided the following latitude and longitude coordinates for those sites: A) 25.901060, -80.251883; B) 25.901267, -80.251473; and C) 25.901884, -80.253365. Ms. Button testified that Florida Housing takes the coordinates in the application at face value and does not verify whether the coordinates provided for the Scattered Sites are actually on the proposed sites. During discovery in this proceeding, Quail Roost established that, due to a mapping error, Ali Baba’s identified coordinates for the three Scattered Sites were not located on the Scattered Sites, but approximately 35, 73, and 75 feet off the Scattered Sites, respectively. As an eligibility item, the RFA included a mandatory distance requirement. In Miami-Dade County, the distance between the DLP and the coordinates provided for any Scattered Sites must be at least 0.5 miles from the closest development that is identified as serving the same demographic as that proposed by the applicant. Ms. Button testified that the mandatory distance requirement ensures that Florida Housing does not fund developments in close proximity to other 2 A detailed definition of “Scattered Sites” is set forth in rule 67-48.002(106). recently funded developments serving the same demographic, thus avoiding issues with leasing and occupancy rates for new developments. To confirm distances from other developments, the RFA instructs applicants to use Florida Housing’s Development Proximity List, dated August 16, 2019 (“Proximity List”). The Proximity List contains information on recently funded developments, including latitude and longitude coordinates, addresses, and whether the demographic of the development is classified as Family, Elderly, Non-ALF, ALF, or Workforce Housing. Florida Housing uses the DLP and Scattered Sites coordinates provided by successful applicants to develop the Proximity List for the next funding cycle of applications. The developments receiving funding in this RFA will be added to the Proximity List for prospective applicants in the 2020-2021 funding cycle to evaluate for the mandatory distance requirement. Florida Housing has created a draft Proximity List for the next funding cycle that includes the coordinates provided in the Ali Baba application. The draft Proximity List puts future applicants on notice of applications that are in litigation, including the Ali Baba application. In its application, Ali Baba selected the Workforce Housing demographic. According to the Proximity List, the closest Workforce Housing development is approximately 5 miles from Ali Baba’s proposed development. Ali Baba argues that its inaccurate Scattered Sites coordinates should be considered a minor irregularity because the distances from the sites are less than 100 feet and did not change the finding that the Ali Baba development would not be located within 0.5 miles of the closest Workforce Housing development funded by Florida Housing. Ali Baba argues that because the draft Proximity List provides notice that its application is subject to litigation, no reasonable prospective applicant would rely on Ali Baba’s coordinates. Ali Baba notes that Florida Housing retains the authority to revise the coordinates on the draft Proximity List. Ali Baba contends that the purpose of the mandatory distance requirement is to measure proximity to the nearest development and that it is undisputed that Ali Baba’s proposed development is more than 0.5 miles away from the nearest Workforce Housing development funded by Florida Housing. Ali Baba urges that the minimal error as to the Scattered Sites coordinates in its application should be deemed a minor irregularity that conferred no competitive advantage on Ali Baba. Ms. Button testified that the error in Ali Baba’s coordinates for its Scattered Sites is a material deviation that renders the Ali Baba application ineligible for funding. The fact that the next closest Workforce Housing development was over 5 miles away does not make Ali Baba’s error a waivable minor irregularity because the coordinates provided did not meet the requirements of the RFA. Ms. Button testified that Scattered Sites coordinates are an eligibility item and Ali Baba’s error thus renders its application ineligible for funding. Absent litigation, Florida Housing would have no way of knowing that an applicant’s Scattered Sites coordinates were not accurate. Florida Housing takes the coordinates at face value and does not take measurements or have surveyors confirm the information. Instead, it relies on the application and the fact that the applicant certifies that the information in the application is true and correct. Ms. Button testified that inaccurate coordinates can affect a prospective applicant’s decision on whether to apply for funding because applicants rely on the coordinates in the Proximity List to determine whether or not they can meet the mandatory distance requirement. Florida Housing reasonably concludes that an applicant bears ultimate responsibility for the accuracy of the information submitted in its application. The fact that litigation has in this case provided a correction to Ali Baba’s erroneous Scattered Sites coordinates does not transform Ali Baba’s failure to comply with an eligibility item into a minor irregularity.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order as to 2020-208 finding that Ali Baba is ineligible for funding and awarding funding to Quail Roost, subject to the successful completion of credit underwriting. DONE AND ENTERED this 23rd day of September, 2020, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 September, 2020. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) Michael P. Donaldson, Esquire Carlton Fields, P.A. Suite 500 215 South Monroe Street Tallahassee, Florida 32302 (eServed) Betty Zachem, Esquire Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301 (eServed) Brittany Adams Long, Esquire Radey Law Firm, P.A. Suite 200 301 South Bronough Street Tallahassee, Florida 32301 (eServed) Corporation Clerk Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed)
The Issue The issue for determination in this consolidated bid protest proceeding is whether the Florida Housing Finance Corporation (“Florida Housing”) acted arbitrarily, capriciously, or contrary to competition by deeming the applications of Joe Moretti Phase Three, LLC. (“Moretti Phase Three”) and Stirrup Plaza Phase Three, LLC. (“Stirrup Plaza Phase Three”) ineligible for Request for Applications 2016-114, Housing Credit Financing for Affordable Housing Developments Located in Miami-Dade County (“RFA 2016-114”).
Findings Of Fact Facts Regarding Florida Housing and Affordable Housing Tax Credits Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes.1/ 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. Accordingly, Florida Housing 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 to incentivize the private market to invest in affordable rental housing. 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. This reduces the amount of capital that developers have to borrow. 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. Tax credits are not tax deductions. For example, a $1,000 deduction in a 15 percent tax bracket reduces taxable income by $1,000 and reduces tax liability by $150, while a $1,000 tax credit reduces tax liability by $1,000. The demand for tax credits provided by the federal government exceeds the supply. Accordingly, Florida Administrative Code Chapter 67-60 provides that Florida Housing allocates its tax credits, which are made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3), Florida Statutes. In their applications for tax credits, applicants request a specific dollar amount of housing credits to be supplied 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 entity) to an investor to generate the amount of capital needed to build the development. Tax credits are made available through a competitive application process commenced by the issuance of a Request for Applications (“RFA”). An RFA is equivalent to a “request for proposal.” See Fla. Admin. Code R. 67-60.009(4)(providing that “[f]or purposes of Section 120.57(3), F.S., any competitive solicitation issued under this rule chapter shall be considered a ‘request for proposal.’”). “Applicants not selected for funding under any competitive solicitation issued pursuant to [Chapter 67-60, F.A.C.] may only protest the results of the competitive solicitation process pursuant to the procedures set forth in Section 120.57(3), F.S., and Chapter 28-110, F.A.C.” Fla. Admin. Code R. 67-60.009(2). Facts Specific to RFA 2016-114 RFA 2016-114 describes its purpose as follows: This Request for Applications (RFA) is open to Applicants proposing the development of affordable, multifamily housing located in Miami-Dade County. Under this RFA, Florida Housing Financing Corporation (the Corporation) expects to have up to an estimated $5,682,725 of Housing Credits available for award to proposed Developments located in Miami-Dade County. The Corporation is soliciting applications from qualified Applicants that commit to provide housing in accordance with the terms and conditions of this RFA, inclusive of Exhibits A, B, C, an D, applicable laws, rules and regulations, and the Corporation’s generally applicable construction and financial standards. Florida Housing’s Board of Directors approved the issuance of RFA 2016-114 on June 24, 2016. Prior to the issuance of RFA 2016-114, Florida Housing conducted a public workshop on August 25, 2016. A draft version of RFA 2016-114 was posted on Florida Housing’s website on September 15, 2016. The final version of RFA 2016-114 was issued on October 28, 2016, and applications were due by 11:00 a.m., Eastern Time on December 15, 2016. There were no challenges to the terms of RFA 2016- 114 after it was issued. A provision within RFA 2016-114 stated that “[a]pplicants should review subsection 67-48.023(1), F.A.C., to determine eligibility to apply for the Housing Credits offered in this RFA.” The aforementioned rule provides in pertinent part that an applicant is ineligible to apply for competitive housing credits if [t]he proposed Development site or any part thereof is subject to any Land Use Restriction Agreement or Extended Use Agreement, or both, in conjunction with any Corporation affordable housing finance intended to foster the development or maintenance of affordable housing ” (emphasis added). An Extended Use Agreement (“EUA”) is an agreement between an applicant seeking tax credits and Florida Housing. An EUA runs with a particular piece of property and is meant to assure that the property is devoted to affordable housing. In addition, Florida Administrative Code Rule 67- 48.002(44) defines an “EUA” in the context of this tax credit program as “an agreement which sets forth the set aside requirements and other Development requirements under the housing credit program.” Set aside requirements reflect how much of the development is set aside for low-income tenants. An applicant can seek to have an EUA amended by filing a request with Florida Housing. The request would begin with a staff member of Florida Housing, move to Florida Housing’s assistant director of multifamily programs, and then to the director of multifamily programs for an ultimate decision. The process by which an EUA is amended is not set forth in a rule or policy manual. There is no established time by which Florida Housing must act on a request to amend an EUA. There is no typical time by which Florida Housing grants or denies a request to amend an EUA. Also, there is nothing requiring Florida Housing to expedite a decision on whether to grant or deny a request to amend an EUA. Florida Housing received 25 applications in response to RFA 2016-114. Florida Housing received, processed, evaluated, scored, and ranked each of the applications pursuant to the terms of RFA 2016-114, Florida Administrative Code Chapters 67-48 and 67-60, and applicable federal regulations. The Executive Director of Florida Housing, Ken Reecy, appointed a Review Committee of Florida Housing staff to conduct the aforementioned evaluation, scoring, and ranking. Florida Housing only considered an application for funding if it was deemed “eligible” based on whether that application complied with Florida Housing’s various content requirements. Of the 25 applications submitted, Florida Housing deemed 19 to be “eligible,” and six were deemed “ineligible.” Florida Housing proposed to award funding to three developments: Ambar Key, Verbena, and Northside Property IV, Ltd. As discussed below, Florida Housing deemed the Moretti Phase Three and Stirrup Plaza Phase Three applications to be ineligible because the properties associated with those applications were still subject to EUAs at the December 15, 2016, deadline for RFA 2016-114. Facts Regarding Moretti Phase Three’s and Stirrup Plaza Phase Three’s Applications Moretti Phase Three submitted an application seeking $2,400,000 in annual allocation of housing credits to finance the construction of a 103-unit development. Stirrup Plaza Phase Three submitted an application seeking $1,950,000 in annual allocation of housing credits to finance the construction of an 85-unit development. The Moretti Phase Three and Stirrup Plaza Phase Three applications represent subsequent phases of existing developments, and both of those developments are devoted to affordable housing. All of the land associated with both developments had been subject to EUAs since 2015. Because Moretti Phase Three and Stirrup Plaza Phase Three wanted to obtain tax credit financing, they needed to have those EUAs amended.2/ Anthony Del Pozzo is the vice president for Moretti Phase Three and Stirrup Plaza Phase Three. Mr. Del Pozzo focuses much of his attention on affordable housing and has assisted with the preparation of 30 to 50 tax credit applications to Florida Housing. After RFA 2016-114 was issued, Mr. Del Pozzo contacted Florida Housing via telephone calls and e-mails in order to ascertain the process by which the EUAs could be amended. Mr. Del Pozzo’s initial e-mail to Florida Housing regarding amending the EUAs was transmitted on November 1, 2016, and stated the following: Libby, I will be sending this request to you, Amy and Lisa to modify the EUA’s for our Joe Moretti (first phase) and Stirrup Plaza (first phase) properties, both of which are 9% deals. I will also have to modify the EUA for our Seville Place deal, which was financed with bonds and 4% credits. Will that one also go to the same people or should I reach out to Bill Cobb or someone else?? Thanks!! Mr. Del Pozzo’s initial e-mail was acknowledged by an Florida Housing employee (Libby O’Neil) later that day. On November 2, 2016, Mr. Del Pozzo transmitted an e-mail to Amy Garmon, Libby O’Neil, and Lisa Nickerson of Florida Housing formally requesting to amend the Moretti Phase Three EUA: Please accept this e-mail as our formal request to modify the legal description of the EUA for Joe Moretti Preservation Phase One, LLC. Attached please find a copy of the recorded EUA, a sketch with Phase I modified legal description and a site plan showing the entire site and the portion where the Phase One building is located (cross-hatched). As you can see from the sketch we are modifying the legal description to include only the portion of the property where the building is located. We will be submitting a portion of the remainder of the property for 9% tax credits in the 2016 RFA.[3/] (emphasis added). Lisa Nickerson is a multifamily programs manager at Florida Housing, and one of her duties involves working with developers seeking EUA amendments. Ms. Nickerson completed the initial processing of all EUA Amendment requests at all times relevant to the instant case. However, Ms. Nickerson was not responsible for approving EUA amendments. On November 3, 2016, Ms. Nickerson responded to Mr. Del Pozzo’s November 2, 2016, e-mail with the following e- mail: We are happy to assist. Because this is a change to the legal description, we will treat it as a site change. Before we can amend the EUA we need the following, as outlined in the carryover agreement: $500 processing fee Affidavit from a Florida licensed surveyor certifying that the tie-breaker measurement point has not moved and that the change in the development site has not affected any zoning requirements. If the tie-breaker measurement point has moved from the location provided in the application, the change in location cannot affect the score and a new surveyor certification form is required. Upon receipt of the above items, we will process [an] amendment to the EUA. On November 8, 2016, Mr. Del Pozzo sent Ms. Nickerson an e-mail stating that he has a “PDF copy of the Survey Affidavit.” Mr. Del Pozzo then asked if he needed the surveyor to send him “an original for my package to FHFC??” Ms. Nickerson responded three minutes later by stating that Florida Housing “can use the PDF to start drafting the amendment, but we will need the original for the file.” On November 9, 2015, Ms. Nickerson sent an e-mail to Mr. Del Pozzo stating that she had reviewed the affidavit and found that application number was incorrect. She gave Mr. Del Pozzo the correct application number, asked him to make that change, and resend the affidavit. In another e-mail transmitted to Mr. Del Pozzo on November 9, 2016, Ms. Nickerson also asked him to send an updated legal description. At 6:52 p.m. on November 9, 2016, Mr. Del Pozzo transmitted an e-mail asking Ms. Nickerson to confirm “if this revised affidavit is acceptable. As requested, I’ve also attached a copy of the legal description. Thanks again for all your help.” At 10:04 a.m. on November 10, 2016, Mr. Nickerson responded with an e-mail stating, “This looks good. As soon as I receive the originals and the $500 fee I will send the amended EUA for you to sign.” On November 10, 2016, Mr. Del Pozzo transmitted an e-mail notifying Ms. Nickerson that he “will be submitting a similar modification request for Stirrup Plaza Preservation Phase One, LLC.” Accordingly, Ms. Nickerson received later that day a draft affidavit, a copy of the legal description of the property associated with the Stirrup Plaza Phase Three property, and a survey identifying the two parcels that were being carved out. However, on November 14, 2016, Mr. Del Pozzo sent Ms. Nickerson an e-mail stating that “[w]e will be making some additional revisions to the legal description for Stirrup Plaza. Please hold off on the request to modify the EUA on that one until I confirm the correct legal description. I apologize for the inconvenience.” By November 14, 2016, Florida Housing had received an explanation letter, a $500 fee, an affidavit, and a new legal description for the Moretti Phase Three EUA amendment. Florida Housing cashed a $500 check pertaining to the Moretti Phase Three application on approximately November 14, 2016. As a result, the request to amend the Moretti Phase Three EUA was transferred to Ken Reecy on November 29, 2016, for final approval. Ken Reecy is Florida Housing’s Director of Multifamily Programs and is generally responsible for the program that allocates tax credits in order to finance affordable housing. In addition, Mr. Reecy is the person ultimately responsible for determining whether a request to amend an EUA will be approved. Upon receiving the paperwork associated with the request to amend the Moretti Phase Three EUA, Mr. Reecy noticed that it was seeking to release an unusually large amount of land. That was a concern for Mr. Reecy because releasing that land from the EUA’s restrictions would enable it to become a “market rate development that could be worth . . . millions of dollars.” In contrast, Florida Housing wants land to remain affordable in the future and thus takes a very conservative approach toward releasing land under restrictions. Due to his concern regarding the amount of land in question and because he was very busy with other work, Mr. Reecy put the Moretti Phase Three EUA amendment aside. At this point in time, Mr. Reecy was unaware that the Moretti Phase Three EUA had to be amended prior to the December 15, 2016, deadline for RFA 2016-114. On December 1, 2016, Ms. Nickerson transmitted an e-mail to Mr. Del Pozzo regarding the Moretti Phase Three amendment stating that, “I received your voicemail. I am waiting for the site change approval to come back to me. Once I have it, I will email a copy of the EUA amendment with instructions. I am hopeful you will have it early next week, if not before.” While all of the required documentation for the Moretti Phase Three EUA amendment was received by November 14, 2016, Florida Housing did not receive the explanation letter or the affidavit pertaining to the Stirrup Plaza Phase Three EUA until December 5, 2016. After receiving the affidavit pertaining to the Stirrup Plaza Phase Three EUA, Ms. Nickerson sent Mr. Del Pozzo an e-mail on December 5, 2016, stating, “Thank you, Tony. I will get this underway, this week.” Mr. Reecy received the paperwork for the Stirrup Plaza Phase Three EUA amendment on approximately December 7, 2016. However, he was unaware that this amendment was necessary in order for Stirrup Plaza Phase Three to apply for RFA 2016-114. As the December 15, 2016, deadline for the RFA 2016- 114 applications drew near, Florida Housing had yet to approve Moretti Phase Three’s and Stirrup Plaza Plaza Phase Three’s requests to amend their EUAs. Accordingly, Mr. Del Pozzo wrote the following e-mail to Ms. Nickerson on Monday, December 12, 2016, at 1:54 p.m.: I left a voicemail message for Ken [Reecy] this morning, asking him to follow up with me if he had any questions or needed any additional information to sign-off on the modifications to the EUAs. I also wanted to make sure he was aware that we are modifying the EUA’s so that we can submit new phases to the projects in this year’s 9% LIHTC RFA for Miami-Dade County. Applications are due on 12/15. So, we would greatly appreciate it if he could sign off on the modifications in advance of the application deadline. I will take scanned copies whenever they are ready. This was the first time that Mr. Del Pozzo had communicated to Florida Housing staff that there was any sort of time constraint associated with the requests to amend the Moretti Phase Three and Stirrup Plaza Phase Three EUAs. On Tuesday, December 13, 2016, at 11:50 a.m., Mr. Del Pozzo sent the following e-mail to Mr. Reecy and Ms. Nickerson: I know that you are both extremely busy, so I’m sorry for being so persistent. As I mentioned to Lisa over the phone and indicated in my e-mail below, we will be submitting new phases of the Joe Moretti and Stirrup Plaza projects for funding in RFA #2016-114 for Miami-Dade County. As such, we have been working with Lisa for the past several weeks to ensure that we have submitted all of the information necessary to modify the Extended Use Agreements for the initial phases of these properties. We are removing the portion of the land that will be part of the new phases from the legal descriptions in the EUAs. Based on our latest discussions, I believe everything is in order and we are only awaiting final sign-off. If you could please sign off on these modifications in advance of the RFA due date (12/15/16), we would greatly appreciate it. Please call me if you have any questions or need any additional information. Thanks for all of your help. Four minutes later, Ms. Nickerson responded to the above e-mail by stating, “We are aware and your requests are currently under review. Thank you for your patience.” December 13, 2016, is the first day that Ms. Nickerson was aware that Moretti Phase Three and Stirrup Plaza Phase Three were planning to file applications in response to RFA 2016-114. On Thursday, December 15, 2016, at 8:30 a.m., Albert Milo4/ sent the following e-mail to Ms. Nickerson and Mr. Reecy: Good morning, Lisa I hope you are doing well. Just wanted to follow up again on the EUA modifications for our two projects since today is the Application Deadline. Can you please let me know if FHFC has finalized it? Thanks for your assistance. Have a great day. Mr. Reecy responded at 9:01 a.m. with an e-mail asking Mr. Milo “what is the best number to call you right now?” Mr. Reecy wanted to confer with Mr. Milo because Florida Housing had no verification that the land associated with the Stirrup Plaza Phase Three project was under a declaration of trust (“DOT”). Without a DOT, Mr. Reecy was concerned that the land would not be used for affordable housing. In contrast, Florida Housing already had verification that the land associated with Moretti Phase Three was under a DOT. On December 15, 2016, prior to 11:00 a.m., Mr. Reecy advised a representative from Moretti Phase Three and Stirrup Plaza Phase Three via a telephone call that he would approve Stirrup Plaza Phase Three’s EUA Amendment request if he could be provided with verification that the Stirrup Plaza Phase Three development site was subject to a DOT. During the same phone call, Mr. Reecy advised the representative that he did not believe that Moretti Phase Three and Stirrup Plaza Phase Three would be eligible for funding under RFA 2016-114 because their proposed development locations would still be subject to EUAs at the application deadline. On December 15, 2016, at 9:55 a.m., Mr. Milo sent an e-mail to Mr. Reecy providing him with the copy of the Stirrup Plaza Phase Three DOT: Hi Ken as per our conversation here is a copy of the actual DOT for Stirrup Plaza Preservation Phase one. I have also requested a letter from PHCD confirming the same. As I mentioned this was a Preservation deal that consisted of the rehabilitation of 100 Public Housing units. Please let me know if you need anything else from us. Thanks for your assistance getting this finalized. We really appreciate it. Exactly one hour later, Mr. Milo sent the following e-mail to Mr. Reecy: Hi Ken just want to confirm our conversation this morning where you informed me that you had approved and signed off on the EUA modification for Joe Moretti Preservation Phase One. As it relates to Stirrup Plaza Preservation Phase One, we have sent you a copy of the DOT and a letter from PHCD confirming the DOT. Please let me know if you require any additional information from us to finalize your approval as you mentioned in our phone conversation. Thanks for your assistance in this matter. Moretti Phase Three and Stirrup Plaza Phase Three filed applications for funding under RFA 2016-114 by the application deadline. As of the 11:00 a.m. application deadline, the Moretti Phase Three and Stirrup Plaza Phase Three proposed developments were subject to existing EUAs. At 1:05 p.m. on December 15, 2016, Ms. Nickerson e-mailed the following information to Mr. Milo: Attached, please find the First Amendment to the EUAs for Joe Moretti Preservation Phase One and for Stirrup Plaza Preservation Phase One. The amendments reflect the changes to the legal descriptions found at Exhibit A. Please review and execute the amendments, and return to me with a check made payable to the appropriate county in which the agreements will be recorded. Standard recording fees are $10 for the first page and $8.50 for every page thereafter. However, please contact the appropriate county for confirmation of their fees and any form of payment restrictions. On December 15, 2016, at 2:37 p.m., Moretti Phase Three and Stirrup Plaza Phase Three e-mailed Florida Housing PDF copies of the executed Amended EUAs and indicated the originals and recording fee checks were being sent via FEDEX the same day. Mr. Reecy received the signed amendments and then signed them himself on December 20, 2016. Mr. Reecy’s signature was the final step in the EUA amendment process other than the actual recording of the amended EUAs. The amended EUAs for Moretti Phase Three and Stirrup Plaza Phase Three were recorded on February 6, 2017. Florida Housing scored the applications for RFA 2016- 114 on January 25, 2017. On February 3, 2017, Florida Housing announced its intention to award funding to three applicants, two of which were Ambar Key and Verbena. Florida Housing did not select the applications of Moretti Phase Three and Stirrup Plaza Phase Three for funding because those applications were deemed ineligible given that the proposed development sites were subject to EUAs at the time their applications were filed. Findings Regarding Florida Housing’s Treatment of the EUA Amendment Applications The greater weight of the evidence demonstrates that no relevant personnel at Florida Housing knew about the time- sensitive nature of the requests to amend the EUAs before December 12, 2016. If Ms. Nickerson and/or Mr. Reecy had been advised of the time-sensitive nature within a reasonable time prior to December 15, 2016, the greater weight of the evidence indicates they would have made good faith efforts to expedite the process and that the EUAs would have likely been amended prior to the deadline. The greater weight of the evidence demonstrates that no one at Florida Housing did anything to delay the applications, to amend the EUAs, or anything to undermine Moretti Phase Three’s or Stirrup Plaza Phase Three’s applications for RFA 2016-114. In sum, the greater weight of the evidence demonstrates that Florida Housing did not act arbitrarily, capriciously, or contrary to competition.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation issue a final order awarding funding to Ambar Key, Ltd.; Verbena, LLC; and Northside Property IV, Ltd. DONE AND ENTERED this 9th day of June, 2017, in Tallahassee, Leon County, Florida. S G. W. CHISENHALL 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 9th day of June, 2017.
Findings Of Fact Section 420.5099, Florida Statutes, designates Respondent as the "housing credit agency" responsible for allocating Florida's share of federal income tax credits for low- income housing. Section 42 of the Internal Revenue Code provides federal income tax credits for qualifying low-income housing expenditures. The amount of the tax credit is nine percent of the qualifying basis, and this nine percent credit is available annually for ten years. Calculation of the qualifying basis starts with the project cost, less the cost of land acquisition. The difference is then multiplied by a ratio of affordable units (or floor space, if a smaller ratio results) over total units (or floor space) in the proposed project. The amount of federal income tax credit is based on the population of each state. In Florida, the demand exceeds the supply of these credits, so Florida's allocation plan includes procedures for the allocation of these limited credits. Section 42(m)(2)(A), Internal Revenue Code, limits the credit allocation for any project to the amount Respondent "determines is necessary for the financial feasibility of the project and its viability as a qualified low- income housing project throughout the credit period." Section 42(m)(2)(B)(iv), Internal Revenue Code, requires Respondent, in determining the feasibility and viability of the project, to consider "the reasonableness of the developmental and operational costs of the project." Certain guidelines have evolved in the low-income housing tax credit (LIHTC) program to limit the fees payable to developers and contractors, on which credits may be calculated. The portion of an allocation based on developer's fees is limited to fees constituting no more than 20 percent of a project's hard costs plus land acquisition. The 20 percent developer's limitation, which is not a promulgated rule, is not directly involved in any of the four cases. Another guideline, which is contingently involved in these cases, is that the portion of an allocation based on contractor's fees is limited to fees constituting no more than 14 percent of a project's hard costs. The so-called "626 rule" breaks the contractor's maximum fees into 6 percent general requirements, 2 percent overhead, and 6 percent profit. Each Petitioner is a limited partnership that constructed, owns, and leases low-income houses. Each Petitioner has applied for and received an allocation of LIHTCs for the construction and leasing of these low-income houses. In the related cases, Respondent tried to reduce Petitioners' LIHTCs for the two projects. Respondent claimed that the apparent general contractor, Heritage Construction Co. Inc. (Heritage), was not the real general contractor because Heritage had entered into prime subcontracts on both projects with Picerne Construction Corp. (Picerne) assuming nearly all of the work described in the contracts for lower costs. Respondent proposed instead to allocate LIHTCs based on the lower costs of the prime subcontracts. If Respondent failed to prevail in disregarding the contract costs in the contract between each Petitioner and Heritage, the 14 percent limitation would not limit the allocations of LIHTCs to Petitioners. These transactions were structured so that the total contractor's fees payable to Heritage did not exceed the 14 percent limitation or the individual components of the 14 percent limitation. However, if Respondent prevailed in disregarding the contract costs in the contract between each Petitioner and Heritage, and instead succeeded in using the lower contract amounts in the two Picerne prime subcontracts, then the 14 percent limitation would limit the allocation of LIHTCs. In this event, Petitioners challenge the 14 percent limitation in order to try to recover some of the lost tax credits. The 14 percent limitation, which is not promulgated as a rule, is recorded in two documents: the Best Practices Manual for the LIHTC program and the Underwriting Guidebook. It is undisclosed when the Best Practices Manual first included the 14 percent limitation, but this limitation has been in effect for about three years. The reference to the 14 percent limitation was included in the Underwriting Guidebook after March 1995, or else the Underwriting Guidebook itself was not in existence until after March 1995. The Underwriting Guidebook, which was prepared jointly by Respondent and underwriters, prohibits the allowance of general contracting fees in excess of 14 percent of hard costs. Respondent is not engaged in rulemaking as to the 14 percent limitation. Respondent presented no evidence that rulemaking as to this limitation was not feasible. To the contrary, rulemaking as to the 14 percent limitation is both feasible and practicable.
