The Issue Whether Respondent Florida Housing Finance Corporation’s intended decision to find the application of Clearlake Village, L.P., ineligible for funding is contrary to Respondent’s governing statutes, rules, policies, or the solicitation specifications.
Findings Of Fact Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. Its purpose is to promote the public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Statutes, Florida Housing is designated as the housing credit agency for Florida for purposes of allocating low-income housing tax credits. The low-income housing tax credit program incentivizes the private market to invest in affordable rental housing. Tax credits are competitively awarded to housing developers in Florida for qualified rental housing projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the developer would otherwise have to borrow. When sold to investors, the tax credits provide equity that reduces the debt associated with the project. With lower debt, the affordable housing tax credit property can (and must) offer lower, more affordable rent. As consideration for receipt of tax credits, developers covenant to keep rent at affordable levels for periods of 30 to 50 years. The demand for tax credits provided by the federal government far exceeds the supply. The Competitive Application Process Florida Housing is authorized to allocate tax credits and other funding by means of requests for proposals or other competitive solicitations allowed by section 420.507(48), Florida Statutes. Florida Housing adopted Florida Administrative Code Chapter 67-60 to govern the competitive solicitation process for several different programs, including the one for tax credits. Chapter 67-60 was adopted on August 20, 2013, replacing prior procedures used by Florida Housing for allocating tax credits, and provides that the bid protest provisions of section 120.57(3) govern its process for allocating tax credits. Applicants request in their applications a specific dollar amount of housing tax credits to be given to the applicant each year for a period of 10 years. The amount of housing tax credits an applicant may request is based on several factors, including, but not limited to, a certain percentage of the projected total development cost; a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated areas of some counties. On November 21, 2014, Florida Housing issued the RFA at issue in the instant dispute. According to the RFA, Florida Housing expects to award an estimated $12,914,730 of housing tax credits which are available for award to proposed developments located in medium counties, and up to an estimated $1,513,170 of housing tax credits available for award to proposed developments located in small counties. On January 21, 2015, Petitioner, in response to the RFA, submitted an application seeking $1,418,185 in housing tax credits to finance the construction of an 80-unit residential rental development in Brevard County, Florida (a medium county), to be known as Clearlake Village. Though Petitioner has submitted other applications for housing tax credits, this is the first time Petitioner has done so in Florida. Petitioner’s application was assigned lottery number 4 by Florida Housing. On January 20, 2015, Intervenor, in response to the RFA, submitted an application requesting $1,475,000 in housing tax credits to support the construction on an 80-unit affordable housing development also in Brevard County. As part of the RFA process, Florida Housing announced its intention to award funding to nine medium county developments, including Intervenor’s application number 2015-073C for Brevard County. Notice On March 20, 2015, Petitioner received notice that Florida Housing intended to designate Petitioner’s application ineligible for funding and that other applications were selected for funding, subject to satisfactory completion of the credit underwriting process. In response to Respondent’s notice of intended action, Petitioner timely filed a Notice of Protest, and Petitioner’s Formal Written Protest and Petition for Formal Administrative Proceedings. RFA 2014-114 Ranking and Selection Process Florida Housing received 82 applications seeking funding in response to the RFA, including 76 for medium county developments. Developments were proposed in 21 different medium counties throughout the State, including four in Brevard County. The process employed by Florida Housing for this RFA makes it virtually impossible for more than one application to be selected for funding in any given medium county. Because of the amount of funding available for medium counties, many medium counties will not receive an award of housing tax credit funding in this RFA, due to the typical amount of an applicant’s housing tax credit request (generally $1.0 to $1.5 million), and the number of medium counties for which developments are proposed. Florida Housing intends to award funding to nine developments in nine different medium counties. The RFA requires that applicants file an online electronic application with development cost pro forma. Each applicant is also required to submit several hard copies of its application and attachments. One of the applications is designated by the applicant as the “original,” which must contain an original signature in blue ink; and two others it designates as “copies,” which are used by Florida Housing staff to score the applications. Florida Housing scans the application attachments from the original and posts the online application with the scanned attachments on its web page. The applications were received, processed, deemed eligible or ineligible, scored, and ranked, pursuant to the terms of the RFA, Florida Administrative Code Rule Chapters 67-48 and 67-60, and applicable federal regulations. Applications are considered for funding only if they are deemed “eligible,” which means that the application complies with Florida Housing’s various content requirements. Of the 82 applications submitted to Florida Housing for the RFA, 69 were found “eligible,” and 13 were found ineligible. Petitioner’s application was found ineligible. A five-page spreadsheet created by Florida Housing, entitled “RFA 2014-114 – All Applications,” which identifies all eligible and ineligible applications, was provided to each applicant. The first consideration in sorting eligible applications for funding is application scores. Applicants can achieve a maximum score of 23 points. Eighteen of those 23 points are attributable to “proximity” scores based on the distance of the proposed development from services needed by tenants and the remaining five points are attributable to local government contributions. All 69 eligible applications received the maximum score of 23 points. Petitioner’s application was not fully scored, because it was deemed ineligible. If Petitioner’s application had been scored, rather than being found ineligible, it would have received a score of 23. Many applicants achieve tie scores, and in anticipation of that occurrence Florida Housing designed the RFA and rules to incorporate a series of “tie breakers,” the last of which is randomly assigned lottery numbers. Lottery numbers have historically played a significant role in the outcome of Florida Housing’s funding cycles, and lottery numbers were determinative of funding selections in the current RFA. Florida Housing employs a “funding test” to be used in the selection of medium county applications for funding in this RFA. The “funding test” requires that the amount of tax credits remaining (unawarded) when a particular medium county application is being considered for selection must be enough to fully fund that applicant’s request amount, and partial funding will not be given. The RFA also specifies a sorting order for funding selection, with applications first arranged from highest score to lowest. Applicants with tie scores are separated based on criteria not relevant to resolving the instant protest. Suffice to say that Petitioner’s application qualified for each funding preference and it had a better lottery number than Intervenor. County Award Tally In selecting among eligible applicants for funding, Florida Housing also applies a “County Award Tally.” The County Award Tally is designed to prevent a disproportionate concentration of funded developments in any one county. Generally, before a second application can be funded in any given county, all other counties that are represented by an eligible applicant must receive an award of funding. As there were eligible medium county applications submitted from 21 different counties for the RFA, there cannot be more than one applicant funded from any given medium county. The nine medium county applicants selected for funding had lottery numbers 1, 2, 6, 7, 9, 20, 26, 27, and 28. The applicant with lottery number 6 (Intervenor), is from Brevard County. If Petitioner is deemed eligible, it would be selected for funding because it has a lower lottery number (4) than Intervenor and would displace Intervenor as the only project funded in Brevard County. Basis for Petitioner’s Ineligibility Florida Housing reviewed Petitioner’s application and determined that it was ineligible as it failed to meet the RFA requirement that applicants must demonstrate control of the site upon which the development is to be constructed. Florida Housing rejected Petitioner’s site control documentation. Site control is an important element of an application––the “meat and potatoes of the application.” Proof that the applicant has control of the development site is a matter of “do or die if you miss a document.” The RFA has a general requirement that each application be complete, and must include all applicable documentation. Site control can be established through a deed, a long-term lease, or a contract for purchase and sale. In each case, the entity with control of the site must be the applicant entity. If the purchaser under a contract for purchase and sale is not the applicant, then the application must contain one or more assignments that give the applicant all rights and remedies of the purchaser. Section 4.A.7 of the RFA, at page 23, lists the requirements for site control. The instructions provide, in relevant part: Site Control: The Applicant must demonstrate site control by providing, as Attachment 7 to Exhibit A, the documentation required in Items a., b., and/or c., as indicated below. a. Eligible Contract - For purposes of the RFA, an eligible contract is one that[:] has a term that does not expire before a date that is six (6) months after the Application Deadline 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 six (6) months after the Application Deadline; specifically states that the buyer’s remedy for default on the part of the seller includes or is specific performance; and the buyer MUST be the Applicant unless an assignment of the eligible contract which assigns all of the buyer's rights, title and interests in the eligible contract to the Applicant, is provided. As an overall submittal requirement, the RFA requires that each application be complete and include all “applicable documentation.” The RFA process does not provide an opportunity for applicants to cure errors or omissions discovered after submission of an application to Florida Housing. Petitioner’s application sought to establish site control through attachment 13 to its application, which includes, among other things, a vacant land contract, and an assignment and assumption agreement. The vacant land contract pertains to the land that Petitioner intends to use for the site identified in its application. The vacant land contract was prepared using a Florida Association of Realtors form contract. Paragraph 12 of the vacant land contract contains boilerplate language which reads as follows: “ASSIGNABILITY; PERSONS BOUND: Buyer may not assign this Contract without Seller’s written consent.” According to Petitioner, the word “not” was struckthrough in the following manner, to wit: not. Amy Garmon, Florida Housing’s multi-family programs manager, scored the site control element of all 82 applications filed in response to the RFA. Ms. Garmon has scored site control applications for nine to ten years, and is very familiar with the Florida Association of Realtors’ form contract, having scored hundreds of contracts submitted on that form. Ms. Garmon reviewed paragraph 12 of the vacant land contract submitted by Petitioner and concluded that the language set forth therein does not allow for an assignment of the contract without written consent from the seller. Ms. Garmon reached her conclusion because in her opinion, the strikethrough of the word “not” in paragraph 12, although the word itself appears somewhat darker and not as clear as some of the other words in the paragraph, is not sufficiently obvious so as to alert a reader to the presence of the strikethrough. Upon review of paragraph 12, the undersigned agrees with Ms. Garmon, and concludes that the strikethrough of the word “not” is not sufficiently observable so as to alert a reviewer to the presence of the strikethrough. Given the findings in paragraph 31, the provision of the vacant land contract which provides that “[h]andwritten or typewritten terms inserted in or attached to th[e] contract prevail over preprinted terms” is not triggered because the purported strikethrough of the word “not” in paragraph 12 of the contract, given its ambiguity, does not rise to the level of constituting a “handwritten or typewritten” modification of a preprinted contractual term. Additionally, the finding in paragraph 31 also means that Petitioner, in order to demonstrate site control, must prove that the seller gave written consent to DPKY Development Company’s assignment of its interest in the vacant land contract to Petitioner. Petitioner also submitted with its application an assignment and assumption agreement which relates to paragraph 12 of the vacant land contract. The assignment and assumption agreement provides that DPKY Development Company, LLC, is assigning to Petitioner its interest in the vacant land contract it has with William T. Taylor. The vacant land contract provides that “William T. Taylor, in his capacity as trustee of the Hidden Creek Land Trust Agreement dated January 15, 2004,” is the “seller” of the land and “DPKY Development Company, LLC, or assigns” is the “buyer” of land. While the assignment and assumption agreement lists the name of the seller, it does not include a signature line for the seller or any other acknowledgement by the seller expressing consent to the assignment. Petitioner does not dispute that the assignment and assumption agreement is deficient in this regard. Turning to the vacant land contract, Petitioner contends that the first page of the vacant land contract identifies the buyer as “DPKY Development Company, LLC, or assigns,” and because the seller initialed the bottom of the first page of the vacant land contract this means that Respondent should have reasonably known that the presence of seller’s initials means that the seller is consenting to the assignment of DPKY Development Company’s interest in the property. The portion of page one of the vacant land contract initialed by the seller provides that “Buyer ( ) and Seller ( ) acknowledge receipt of a copy of this page, which is page 1 of 7.” Contrary to Petitioner’s assertion, the introductory provision of the vacant land contract that identifies the “buyer” as “DPKY Development Company, LLC, or assigns,” cannot be read in isolation when there is another provision in the contract which specifically addresses the issue of assignability, to wit: “[b]uyer may not assign th[e] contract without [s]ellers written approval.” The introductory provision of the vacant land contract relied upon by Petitioner may have conveyed a stronger expression of the seller’s purported intent to consent to an assignment if Petitioner removed from paragraph 12 of the vacant land contract any reference to assignability. Because Petitioner failed to do so, the fact that the seller acknowledged that it received a copy of the page of the contract identifying the buyer as “DPKY Development Company, LLC, or assigns” is not sufficient, in itself, to establish that the seller consented to DPKY Development Company’s assignment of its interest in the contract to Petitioner.2/ Ms. Garmon, after determining that the required consent of the seller to the assignment was not included in the original copy of Petitioner’s application, reviewed each of the other copies of Petitioner’s application in Respondent’s possession. Ms. Garmon’s review of the other copies of Petitioner’s application confirmed that the seller’s written consent to assignment was not a part of Petitioner’s application. The evidence supports the conclusions reached by Ms. Garmon and Florida Housing.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is recommended that Petitioner’s protest be dismissed. DONE AND ENTERED this 25th day of June, 2015, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN 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 25th day of June, 2015.
Findings Of Fact The Tax-Credit Allocation Program Section 42(h)(3) of the Internal Revenue Code of 1986, as amended, provides for federal income tax credits for the development of low income housing. The tax credits are allocated among the states based on state population. Respondent allocates the low income housing federal income tax credits available in Florida. The present case involves the 1992 tax credit- allocation cycle, which was unusual in one respect. The relevant provisions of Section 42 of the Internal Revenue Code are due to expire on June 30, 1992. Respondent expedited the application and evaluation process for the 1992 cycle because of uncertainty concerning whether credits not allocated by June 30 can be allocated after the expiration of Section 42. As in past cycles, applicants in the 1992 cycle sought more tax credits than Respondent had to allocate. In some categories, the sum of tax credits sought by applicants is four times greater than the total available tax credits. Since 1990, as a result of changes in the Internal Revenue Code, Respondent has implemented a competitive process to determine which applicants should be awarded tax credits. In general, the selection process consists of an application and evaluation process followed by an underwriting process involving only those applicants and projects that were determined to be in the funding range after completion of the application and evaluation process. The objective of both stages is to identify proposed projects that offer the best opportunities for the development of affordable housing in Florida. This case involves only the first stage in which Respondent evaluates the application. The Subject Applications General Each Petitioner is a limited partnership formed to develop a low income rental housing project in Osceola County. The Ravenwood project is in the unincorporated county, and the Oakcrest project is in St. Cloud. Ronnie C. Davis is the general partner of both partnerships and controls the activities of these entities. His accountant, Steven Scott, has worked closely with Mr. Davis in connection with these and numerous other similar projects. As it had done successfully in past cycles, Petitioners applied to obtain federal income tax credits and sell the limited partnership interests (with tax credits) to a third party. The third party would combine Petitioners' projects with others like them and syndicate limited partnership interests to individual investors seeking, among other things, the available tax credits in order to lower their federal income tax liability. This indirect federal subsidy of development costs is intended to encourage the development of affordable housing. The application completed by Petitioners and other applicants in the 1992 cycle consists of numerous questions divided into 16 Forms. Each applicant receives a maximum of 1285 points based on the answers to the questions. Varying amounts of points are available for 12 of the 16 Forms. (Four Forms seek background information or constitute request forms.) The Ravenwood Application Form 1 of the Ravenwood application, which is dated January 30, 1992, consists of summarized information, which, where important, is requested elsewhere in the application. Due to its background nature, Form 1 involves no points. Form 1 of the Ravenwood application describes the proposed project as consisting of 181 units with eight units each in 23 different buildings. (Three units are reserved for on- site workers.) The project is situated on 11 acres and is projected to cost $9,537,049. Petitioner Ravenwood seeks $858,334 in federal income tax credits. Form 1 states that there is federal, state, or local financing "committed or to be committed to this Project." The financing is SAIL financing in the amount of $1.3 million representing 13.6% of the total project cost. Form 1 also states that the present owner acquired the property by gift on November 18, 1991. Form 4 addresses project feasibility and ability to proceed. Form 4 offers a maximum of 225 points. With Form 5, which concerns project funding, Form 4 is worth the most points of all the Forms. Form 4 of the Ravenwood application states, among other things, that the developer controls the site by County deed, which is intended to serve the purpose of a warranty deed. Attached as an exhibit to Form 4 is a letter dated November 20, 1991, from the Osceola County Administrator to Mr. Davis accompanying the delivery of a deed to the property from Osceola County to Ravenwood of Kissimmee, Ltd. The deed, which is dated November 18, 1991, recites as consideration "general benefit of the public." The deed conveys title to 11 acres "conditioned upon the grantee being awarded a state apartment incentive loan and tax credits no later than December 31, 1992. If this condition is not met by December 31, 1992, the property described herein shall revert to the grantor." The manner by which the limited partnership acquired the property is also covered in Form 6, which addresses local government contributions and planning efforts. Form 6 is worth 155 points, which is more than any other Form except Forms 4 and 5. The first part of Form 6 is directed to local government contributions. The first portion of the first part states: Attach evidence of any contribution or recommendation. Maximum points shall be awarded only when evidence of a contribution includes a signed statement from a chief elected official or his designee detailing the contribution from the appropriate local government. The value of the contribution must be stated in terms of a percentage of cost savings to the project. . . . Form 6 of the Ravenwood application answers affirmatively the question, "Has this project received any contributions from a local government?" In response to the request, "Describe the type of contribution," the application states: "Land as well as other government support and assistance." Form 6 states that the value of the contribution is $1,089,000. In response to a question as to how the value was calculated, the application reports that the value was calculated by a "local realtor." The application notes that the total project cost is $9,537,049. Form 6 contains a scoring sheet that awards points based on the ratio of the value of the local government contribution to the total project cost. If the local government contribution amounts to at least 10% of the total project cost, then the maximum of 75 points are earned for the first part of Form 6. Lower percentages earn fewer points, as follows: 9%-- 67.5 points, 8% 60 points, 7%--52.5 points, 6%--45 points, 5%-- 37.5 points, 4%--30 points, 3%-- 22.5 points, 2%--15 points, and 1%--7.5 points. As support for the information provided in the first part of Form 6, the application contains various attachments in the back of Form 6. One attachment is a letter dated November 18, 1991, from Barney Veal, Broker/President of ERA--Osceola Brokerage Co., Realtor. The Veal letter, which is addressed to Mr. Davis, states in its entirety: Per your request, and after careful consideration, I have reviewed the value of the land donated to you by the Osceola County Board of County Commissioners. Weighted consideration was given for the following: *Development Improvements to the municipal water system *Development Improvements to the municipal sewer system *Development Improvements to the transportation system *Superior site use through off-site drainage *Ease of access via the John Young Parkway Extension to the "high tech" corridor of neighboring Orange County *Property aesthetics This property contains 11 acres, and has a current density of 18 units per acre, thus allowing construction of 198 multi-family units. Therefore, the estimated valuation is approximately $5500 per residential unit, which equals a total amount of 1,089,000 [sic]. Another attachment to Form 6 is a letter from Ron Howse, P.A., an engineering and land planning firm. Mr. Howse, whose office is in St. Cloud, incorporates Mr. Veal's letter and provides the above-described responses to the questions contained in the first part of Form 6. The remaining attachments to Form 6 address the second part, which involves local government planning efforts with respect to affordable housing. This part of Form 6 is not relevant to the subject case. The Oakcrest Application The Oakcrest application, which is also dated January 30, 1992, is similar to the Ravenwood application. Form 1 of the Oakcrest application describes the proposed project as consisting of 189 units with eight units each in 24 different buildings. (Three units are reserved for on-site workers.) The project is situated on 19.4 acres and is projected to cost $10,164,207. Petitioner Oakcrest seeks $914,778 in federal income tax credits. Form 1 states that there is federal, state, or local financing "committed or to be committed to this Project." The financing is SAIL financing in the amount of $1.4 million representing 13.8% of the total project cost. Form 1 also states that the present owner acquired the property by gift on November 21, 1991. Form 4 of the Oakcrest application states, among other things, that the developer controls the site by warranty deed. Attached as an exhibit to Form 4 is a letter dated November 21, 1991, from Larry F. Hopper, Executive Director of the St. Cloud Area Chamber of Commerce. The letter is to Mr. Davis and accompanies the delivery of a deed to the property from the St. Cloud Housing & Revitalization Agency, Inc. to Oakcrest of St. Cloud, Ltd. The deed, which is dated November 21, 1991, conveys title to 19.4 acres conditioned upon the grantee being awarded a state apartment incentive loan and tax credits to construct no less than 193 units, with construction thereon to commence no later than December 31, 1992. If the above cited incentive loan and tax credits are not received and construction not begun by December 31, 1992, the property described herein shall revert to the grantor. Form 6 of the Oakcrest application answers affirmatively the question, "Has this project received any contributions from a local government?" In response to the request, "Describe the type of contribution," the application states: "Land Contribution, as well as other government support and assistance." Form 6 states that the value of the contribution is $1,018,000. In response to a question as to how the value was calculated, the application reports that the value was calculated by a "local realtor." The application notes that the total project cost is $10,164,207. As support for the information provided in the first part of Form 6, the application contains various attachments in the back of Form 6. One attachment is a letter dated November 18, 1991, from Barney Veal, Broker/President of ERA--Osceola Brokerage Co., Realtor. The Veal letter, which is addressed to Mr. Davis, states in its entirety: Per your request, and after careful consideration, I have reviewed the value of the land donated to you by the St. Cloud Housing and Revitalization Agency, Inc. Weighted consideration was given for the following: *Development Improvements to the municipal water system *Development Improvements to the municipal sewer system *Development Improvements to the transportation system *Location Proximity to a new growth area *Property Aesthetics This property contains 19.4 acres, and has a current density of 10 units per acre, thus allowing construction of 194 multi-family units. Therefore, the estimated valuation is approximately $5250 per residential unit, which equals a total amount of $1,018,500. Another attachment to Form 6 is a letter from Ron Howse, P.A., an engineering and land planning firm. Mr. Howse, whose office is in St. Cloud, incorporates Mr. Veal's letter and provides the above-described responses to the questions contained in the first part of Form 6. Another attachment to Form 6 of the Oakcrest application is a copy of the first two pages of the Articles of Incorporation of the St. Cloud Housing & Revitalization Agency, Inc., a not-for-profit corporation. According to the articles, the not-for-profit corporation was incorporated by the St. Cloud Area Chamber of Commerce, Inc. Relevant Practices of Respondent The head of Respondent is its Board of Directors. Each review cycle, the Board appoints a Review Committee, which normally consists of five or six persons. Different employees of Respondent serve on the Review Committee each year. The Review Committee assigns scores for each Form of each application. These determinations are then submitted to the Board of Directors for further action. Certain practices have evolved in connection with the scoring of applications. To the extent that any of these practices may constitute nonrule policy, Respondent has amply explicated the practices, which appear to be necessary and proper to the discharge of its responsibilities in the allocation of low income housing federal tax credits. First, the Review Committee generally limits its review of an application to the material contained within the four corners of the application. The reason for this practice is that the Review Committee is typically operating under time pressures. However, there are two circumstances in which the Review Committee may refer to information not contained within the application. The first and more frequent exception to the general rule is if something is unclear in the application. In this case, a member of the Review Committee or staff of Respondent may contact the applicant to obtain a clarification. Sometimes, the contact may be with a third party, such as a third-party lender to whom questions concerning the scope of a commitment letter may be directed. By limiting these inquiries to clarifications, Respondent avoids the possibility of the eliciting information that constitutes post-deadline amendments of material aspects of the application. The second exception to the general rule is when a third party informs the Review Committee that certain information contained in an application is inaccurate. To a great extent, the accuracy of the contents of the application is checked in the underwriting stage of the allocation process. But, if time permits, the Review Committee or other representatives of Respondent may, if they so choose, undertake a necessarily limited investigation of statements in an application. In the couple of years that the allocation process has been competitive, the only application rejected as "untrue," aside from Ravenwood and Oakcrest, was an application for a project known as Woodside. Ironically, this application appears to have been challenged by Mr. Davis and Mr. Ginsburg, 1/ who alerted Respondent to the fact that, contrary to representations contained in the application, the Resolution Trust Corporation, not the developer, owned the site. 2/ It appears that, due to timing, the Board itself rejected the Woodside application because the true facts were uncovered during the underwriting stage, rather than the application and evaluation stage. It appears that, also during underwriting, another application was rejected due to ineligibility, if not actual untruthfulness. In that case, an application for a project known as Golden Acres was rejected when representatives of the Board checked the project site and confirmed that the buildings had already been placed in service and thus would not be eligible for any or a full tax credit. Except for one case in which the wrong application form was used, the record does not disclose if other applications have been summarily rejected for reasons other than satisfying a scoring threshold described in the application form and irrelevant to this case. Rather than reject an application, at least prior to the underwriting process, the Review Committee and Board will often rescore an application. Not infrequently, a developer submits an application containing information that may be described, in the words of one witness, as optimistic in nature. If the application contains sufficient material for the Review Committee or Board to rescore a Form, possibly with the assistance of a clarification from the applicant or a third party, the application will be rescored so that a lower score results. It is not always easy to describe what renders an application "untrue." One example of an untrue application would be if an applicant fabricated a loan commitment letter when no such commitment had been made. On the other hand, if the applicant claimed more points than the letter, on its face, justified due to its numerous contingencies and conditions, the application would clearly be rescored. Although it may contain inaccuracies, a true application must disclose all material facts so that each Form may be scored reasonably accurately. The materiality of an omitted fact depends largely on the importance and purpose of the requested information. The decisions as to what information is important, material, or untrue and when to reject and when to rescore an application must be based on a balancing of at least two considerations. The first is that the purpose of the application and evaluation and underwriting processes is to ensure that the available tax credits go to the best projects, in terms of meeting the critical needs of low income persons for affordable housing. Superior applications should not be rejected too readily. The second is that the integrity of the evaluation process would be compromised if the "untrue application" language is interpreted so that all instances of applicant untruthfulness are reduced to over-optimism, thus meaning that untrue applications would be always rescored and never rejected. Without the potential penalty of rejection, the process by which applications are evaluated and projects underwritten would become increasingly burdened by the chore of detecting growing numbers of misrepresentations. At some point, the resources of Respondent would become overtaxed, misrepresentations would probably escape detection, and the overall objective of the entire program--facilitating the availability of affordable housing--would eventually be defeated. V. Preliminary Scoring of the Applications in the 1992 Cycle In the present case, on or about February 27, 1992, the Review Committee tentatively scored all of the applications. For medium counties, 3/ eight applications fell within the funding range, one application fell partly in the funding range, 16 applications meeting the scoring threshold fell outside the funding range, and one application failed to meet the scoring threshold. The tentative scoring assigned Ravenwood 1190 points and Oakcrest 1153.87 points for the two highest scores among the nine projects tentatively allocated, in whole or in part, the tax credits requested. On March 6, 1992, the Board of Directors reviewed the tentative scoring determined by the Review Committee. By this time, representatives of Respondent had determined that the contribution of the land from the local governments, as asserted in both applications, was not as represented. The Board decided to reject both applications. If the Ravenwood and Oakcrest applications had been merely rescored so as to lose all 75 points for the first part of Form 6, they would have remained in the funding range. In fact, Ravenwood would have remained first, and Oakcrest would have been third, tied with another project. Respondent has implemented an appeal process by which scores set by the Board, following review of the tentative scoring of the Review Committee, may be re-evaluated by the Board. In the 1992 cycle, 36 applicants took advantage of this process. The appeals hearing, which took place on May 1, 1992, resulted in the issuance of the final scoring tabulation, which is Petitioner Exhibit 14. However, no material changes took place with respect to medium counties, and the Ravenwood and Oakcrest applications remained rejected. Facts Not Disclosed on Applications Ravenwood The basic problem with the Ravenwood application is that it states that the local government, Osceola County, contributed the raw land to the applicant. In substance, the County has conveyed nothing to the Ravenwood limited partnership. Through a series of step transactions, Mr. Davis, using an agent, obtained title to the land from a genuine third party, conveyed the land to the County, and caused the County to convey the land to the Ravenwood limited partnership. The few details of the transactions that are relevant begin with the fact that, by contract dated April 9, 1991, Mr. Davis agreed to pay the original owners $300,000 for 12.5 acres. On October 30, 1991, Mr. Davis assigned the contract to his accountant's brother, Jimmy Alan Scott. By quitclaim deed acknowledged November 9, 1991, Mr. Scott quitclaimed any interest he had in the land to Osceola County. On November 18, 1991, Mr. Davis, Mr. Scott, and Osceola County entered into a trilateral agreement. The parties agreed that Mr. Scott would convey the property to the County, which would convey the property to the Ravenwood limited partnership. Also, the County agreed that if the property reverted to it under the condition to be contained in its deed to the partnership, then it would reconvey the property to Mr. Scott. Another significant aspect of the trilateral agreement is that the deeds from Mr. Scott to the County and the County to the Ravenwood limited partnership are to be "held in escrow pending the County's negotiations with [other parties including the original owners of the subject land] to acquire additional property for the recreational complex." By letter dated March 2, 1991, the attorney for the Ravenwood limited partnership discloses that the escrow had not been broken, inferentially because escrow conditions remained unsatisfied, and the deeds had not been recorded. On November 16, 1991, Mr. Davis lent Mr. Scott the funds necessary to purchase the land from the original owners. A note for the amount was to be forgiven if Mr. Scott donated the land to Osceola County. By warranty deed dated January 6, 1992, the original owners conveyed the land to Mr. Scott, who, on the same date, conveyed the land to the County. The two deeds were identical except that deed into the County contains a reverter clause covering all but a small part of the property. The condition is that the majority of the land reverts to Mr. Scott if construction of no less than 184 units of affordable housing does not begin by December 31, 1991. The only deed from the County to the Ravenwood limited partnership is dated November 14, 1991. Copies of the deed were produced at the hearing and attached to the Ravenwood application in Form 4. In the instrument, the County "has granted, bargained and sold" the subject land to the Ravenwood limited partnership conditioned upon the partnership "being awarded a state apartment incentive loan and tax credits no later than December 31, 1992. If this condition is not met by December 31, 1992, the property described herein shall revert to the grantor." There are no warranties, such as a warranty of title, contained in this deed. The underlying problem with the Ravenwood application is as basic as the problem in the Woodside application, where Mr. Davis objected that the RTC, not the applicant, owned the land, contrary to the assertions contained in the application. The County has not contributed anything to the Ravenwood limited partnership because the partnership does not own the land. First, unspecified escrow conditions have left uncompleted the conveyances to the County and the Ravenwood limited partnership. Tied up in escrow, the deeds have not been delivered, which is as basic an aspect to the conveyance of property as is their execution. Second, the application shows that the limited partnership owns the land as a result of a deed from Osceola County. The deed predates the date on which the original owners conveyed the land to Mr. Scott and he purportedly, using an escrow arrangement, conveyed the land to Osceola County. In a deed without any warranties, it is questionable whether the doctrine of after- acquired interest or estoppel by deed would operate here. In light of the problems identified in the preceding two paragraphs, the overstatement problem is less substantial. Although the County has contributed something in the way of services, there is no evidence that the contribution of such services anywhere approaches the claimed amount of $1,089,000, which is more than three times the value of the land as of April, 1991. However, in view of the failure of the Ravenwood limited partnership to obtain any title to the land, the value of the contribution is not $1,089,000, but zero. Oakcrest The basic problem with the Oakcrest application also involves the contribution of raw land to the partnership. The land has not yet been conveyed to the partnership. The relevant details of the Oakcrest transactions are similar to those of the Ravenwood transactions. On November 18, 1991, Mr. Scott and a genuine third party entered into an agreement for deed for 19.4 acres for payment of $300,000. The condition of a closing, which is set for no later than January 5, 1993, is that the Oakcrest limited partnership be awarded tax credits no later than December 31, 1992. Notwithstanding its title as an agreement for deed, the subject instrument operates like a purchase and sales contract, in part because Mr. Scott has not placed any money unconditionally at risk and a closing is set at a point in the future once certain contingencies have been satisfied. On November 19, 1991, Mr. Scott conveyed by warranty deed to the St. Cloud Housing and Revitalization Agency, Inc. the same 19.4 acres subject to the condition that the "grantee [i.e., the Agency] being awarded a state apartment incentive loan and tax credits to construct no less than 193 units with construction thereon to commence no later than December 31, 1992." If the condition is unsatisfied, it provides for the property to revert to Mr. Scott. On November 21, 1991, the St. Cloud Housing and Revitalization Agency, Inc. conveyed by warranty deed to the Oakcrest limited partnership the same 19.4 acres subject to the same condition concerning 193 units. The Oakcrest transfers are ineffective and leave the Oakcrest limited partnership with no interest in the land and thus in receipt of no contribution from a local government. The application, which adequately discloses the nature of the St. Cloud Housing and Revitalization Agency, Inc. as other than a local governmental entity, contains only the warranty deed from the Agency to the Oakcrest limited partnership. The omission of the sales contract (i.e., Agreement for Deed) leaves the incorrect impression that the Agency had an interest to convey to the Oakcrest limited partnership. The Agency had no such interest because Mr. Scott had no such interest. 4/ But the valuation problem is greater in the Oakcrest case. Unlike the Ravenwood case, in which months passed between the contract and the date on which the applicant asserted the value of the land, the Oakcrest sales contract calling for a $300,000 purchase price was signed just three days before the deed purportedly conveying the land from the Agency to the Oakcrest limited partnership. Unlike the Ravenwood case, the Agency was making no other contributions to the partnership. Even assuming an effective conveyance, the application thus grossly overstates the value of the contribution at $1,018,500, when the original sellers only three days earlier agreed to sell the property, under substantial conditions favorable to the buyer, for only $300,000. Whether the Applications are Untrue For the reasons set forth above, the Ravenwood and Oakcrest applications were untrue at the time that they were submitted and were properly rejected by Respondent. The materiality of the omissions is indisputable. Contrary to the assertions in both applications, the applicant in each case not only had not received a contribution of the land from a local government, but the applicant had not even obtained an interest in the land.
Recommendation Based on the foregoing, it is hereby recommended that the Florida Housing Finance Agency enter a final order rejecting the Ravenwood and Oakcrest applications as untrue. RECOMMENDED this 9th day of June, 1992, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1992.
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 Respondent violated the Fair Housing Act, Section 760.20, et seq., Florida Statutes (2008), by denying Petitioner housing based on her gender (female) and familial status (pregnant).
Findings Of Fact Petitioner, Victoire Merceron, is a single mother with three children. At all times relevant hereto, she was living at an apartment complex known as The Pines pursuant to a Lease with NDC Management. There was an Employee Lease Addendum dated February 2, 2008, attached to Petitioner's Lease. The Addendum was signed by Petitioner to reflect her status as an employee of NDC Management and, therefore, eligible for a reduction in her monthly rent. Respondent, The Partnership, Inc., is a real estate management company specializing in managing affordable housing properties which are experiencing problems or business difficulties. Respondent began managing The Pines on August 1, 2008. Prior to that time, The Pines had been managed by NDC Management. Petitioner had worked as a leasing consultant with NDC Management at The Pines from October 2007 until July 2008. During that time, she enjoyed the benefit of a 20 percent reduction in her rent (which was provided to all employees of NDC Management who lived in a managed property). The Pines is owned by Punta Gorda Pines, Ltd. It is a 336-unit apartment complex which provides low income housing (affordable housing) for qualified persons. One hundred percent of the units at The Pines are set aside for low income residents. Of the 336 units, 202 units (60 percent) have a rental amount which does not exceed 60 percent of the area median income. One hundred and one units (33 percent) have an even lower rental amount. The rental amounts and number of units is established annually by the Florida Housing Finance Corporation. Respondent was contacted by the owner of The Pines at some point in 2008 concerning the assumption of management of The Pines due to problems existing at the property. Respondent visited the property in July and met with some of the existing staff and management. Respondent then assumed management of The Pines on August 1, 2008. At that time, approximately 40 percent of the units at The Pines were not under lease to a tenant, i.e., the property was only 60 percent occupied. Sixty percent occupancy is evidence of a "problem affordable property" from Respondent's perspective. When Respondent took over management of The Pines, it terminated some of NDC Management's employees and retained some other employees. Petitioner was not retained by Respondent as an employee. The Employee Lease Addendum to Petitioner's Lease at The Pines included a clause that required Petitioner to vacate her apartment within 15 days of termination of her employment with NDC Management. Petitioner was terminated as of July 31, 2008. Upon termination of her employment, Petitioner requested from Respondent that she be allowed to remain in her current apartment beyond the 15-day extension period. That request was granted by Respondent, and Petitioner was ultimately allowed to stay in the apartment through the end of August 2008. As of July 31, 2008, Petitioner had two children and was pregnant with a third. Inasmuch as she would need a home for her family, Petitioner asked Respondent to consider her as a new, non-employee tenant. Respondent agreed to consider Petitioner's request and asked Petitioner to provide proof of income so that a predetermination review could be conducted. It was Respondent's policy to do a predetermination review prior to the formal application process. The stated reason for this practice was that Respondent did not want an applicant to have to pay the non-refundable application fee, if the applicant was unlikely to be qualified to obtain an apartment. Respondent made its predetermination of eligibility using an Income and Rental Rates Chart which Respondent had developed. The chart indicates the income necessary for rental of different size apartments within the complex. In response to Respondent's request for income verification, Petitioner provided Respondent with a form (or letter) indicating that she had applied for payment of unemployment compensation for a two-week period. The form indicated that Petitioner would receive $225.00 per week for that two-week period. Petitioner represented to Respondent's agents that she had been approved for up to six months of unemployment compensation at $225.00 per week.1 There was, however, no competent evidence of that fact presented to Respondent (or introduced into evidence at the final hearing). Respondent calculated the amount of Petitioner's anticipated income based on the stated unemployment compensation payments to be made. Two-hundred and twenty-five dollars per week for an entire year (52 weeks) would be a total of $11,700.00. However, inasmuch as Petitioner only represented that she might receive up to six months of unemployment compensation, her anticipated annual income would be one-half that amount, or $5,850.00. That amount of income was not sufficient to warrant approval for even the lowest priced units available at The Pines, i.e., $10,660.00 per year.2 Based upon its predetermination review, Respondent denied Petitioner's initial inquiry concerning eligibility for an apartment at The Pines. That being the case, Respondent did not provide Petitioner a formal application to fill out. It would have been a fruitless exercise based on Petitioner's stated level of income. Respondent does not appear to discriminate on the basis of gender or familial relationship when renting to other residents. In its Rent Roll from March 31, 2009, Respondent can point to over 70 single women with children living at The Pines. A large number of those women were at The Pines when Respondent took over management. Others became residents during Respondent's tenure as manager. Respondent based its decision to deny Petitioner's inquiry solely on the information provided by Petitioner. Petitioner did not suggest to Respondent that she was receiving child support, alimony, or any other kind of support from a third party. However, Petitioner maintains that the fathers of her children would provide support on an as-needed basis (but since Respondent didn't ask her about such support, she did not volunteer the information). In January 2008, when Petitioner filled out a Residency Application to obtain an apartment at The Pines, she said she was not receiving any alimony or child support, nor had any such support been court ordererd.3 Petitioner did not present any evidence at final hearing as to the amount or frequency of child support she received from her children's fathers. It is, therefore, impossible to impute any certain amount for the purpose of determining Petitioner's eligibility for an apartment at The Pines. When Petitioner was working at The Pines and a person seeking an apartment did not qualify financially, Petitioner would ask the person whether he or she could get someone to co-sign for him/her, guarantee his/her rent, etc., or whether he or she could receive child support. It is not clear at what point in the application process (i.e., during predetermination or upon filing of a formal application form) Petitioner would make this inquiry. It appears Respondent did not seek further financial information from Petitioner after the predetermination review indicated she would not qualify. However, there is no evidence that Respondent had a policy to make such inquiries. There is no evidence in the record that Petitioner re-applied to Respondent with an updated or amended statement of income after she was denied. Upon being denied a new apartment, Petitioner remained in her then-current apartment for some time after her lease was terminated. Petitioner owed slightly over $1,000.00 in rent and fees for the apartment when she finally vacated it, but Respondent did not pursue payment of that arrearage.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Florida Commission on Human Relations upholding its Determination: No Cause and dismissing Petitioner, Victoire Merceron's, complaint. DONE AND ENTERED this 21st day of May, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN 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 21st day of May, 2009.
The Issue The issues in this case are whether the Florida Housing Finance Corporation (“Florida Housing”) employed an unadopted rule when it used rounding on a competing application to place Petitioner’s application for Low Income Housing Tax Credits (“HC” or “Tax Credits”) in the 2004 Universal Application Cycle in the “B” leveraging tie-breaker group, and if so, whether Florida Housing complied with the requirements of Section 120.57(1)(e), Florida Statutes, when it employed rounding.
Findings Of Fact Petitioner is a Florida limited partnership. Reliance- Andrews, LLC, the sole general partner of Petitioner, is a non- profit entity under Florida Administrative Code Rule 67- 48.002(81). Petitioner’s address is 516 Northeast 13th Street, Fort Lauderdale, Florida 33304. The affected agency is the Florida Housing Finance Corporation (“Florida Housing”), 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301-1329. Florida Housing is a public corporation organized under Part V, Chapter 420, Florida Statutes, to provide and promote the public welfare by administering the governmental function of financing and refinancing houses and related facilities in Florida in order to provide decent, safe, and sanitary housing to persons and families of low, moderate, and middle income. Petitioner filed an application, number 2004-102C, with Florida Housing for tax credits under the Housing Credit (“HC”) program for a proposed development in Broward County, Florida, known as Flagler Point. Under the HC program, successful applicants receive a dollar-for-dollar reduction in federal tax liability in exchange for the development of units to be occupied by low-income households. Florida Housing is designated as the housing credit agency for the State of Florida and is authorized to establish procedures necessary for the allocation of Tax Credits under Section 420.5099, Florida Statutes. Florida Housing scores and ranks applications for the HC program pursuant to the Universal Application Package Instructions ("Application Instructions") which are adopted as rules pursuant to Florida Administrative Code Rule 67- 48.002(111). The applicants for housing credits are sophisticated, and the application process is highly competitive. Most applicants achieve a perfect score on applications, so Florida Housing has created a series of “tiebreakers” to determine which projects receive allocations of tax credits. These include “leveraging,” (the amount of requested funding over the number of set-aside units), proximity to services, proximity of other Florida Housing developments, and, finally, a lottery. Petitioner and numerous other applicants for the HC program received the maximum score on the application, 66 points. Florida Housing then ranked the applications that received perfect scores to determine priority for funding according to certain Ranking and Selection Criteria as outlined in the Application Instructions. Part of the Ranking Selection Criteria process includes "tie-breakers" as enumerated in the Application Instructions. The first of the applicable tie-breakers separates the applications into groups A and B based upon a formula used by Florida Housing to determine funding request per set-aside unit. Group A is comprised of the 80 percent of applications with the lowest amount of total funding request per set-aside unit. The 20 percent of applications with the highest per unit request amount are placed in Group B. Applications in Group A receive preference over Group B. The A/B leveraging tiebreaker alone does not determine who gets funded. Some leveraging Group B projects are funded. The total number of set-aside units for each Application is computed by multiplying the total number of units within the proposed development by the highest total set- aside percentage the applicant committed to in the Set-Aside Commitment section of the Application. Florida Housing rounded up the total set-aside units on application 2004-084C from 182.7 (the product of the total number of units (203) and the highest total set aside percentage (90%)) to 183. Rounding this figure produces a lower per unit funding request amount for application 2004-084C ($51,857.95 instead of $51,943.10). Petitioner's per unit funding request is $51,882.28, which would be lower than application number 2004-084C if the total set-aside unit figure was not rounded. Petitioner's application was placed in Group B instead of Group A. On May 7, 2004, Petitioner filed a Notice of Possible Scoring Error ("NOPSE") requesting correction of the set-aside unit rounding, which Petitioner contended was in error. Respondent did not adopt Petitioner’s NOPSE, and on May 28, 2004, issued its scoring summary for application number 2004- 084C indicating a per unit Florida Housing funding request of $51,857.95. On July 9, 2004, Respondent issued the 2004 Final Score Corporation Funding Per Set-Aside for A and B Groups indicating that Petitioner had been placed in Leveraging Group B. Florida Housing has used rounding to determine the number of set-aside units in the same manner each year from the 2002 Universal Application Cycle through the 2004 Universal Application Cycle. Applicants are encouraged to, and more often than not do, set aside 100 percent of the units for low or very low income tenants. As most applicants for Tax Credits do just that, rounding is not often an issue. The number of set-aside units represents a commitment the developer makes in return for funding, and the number in the application is the number of set aside units the developer must provide, and is used to determine whether the development is in compliance with its commitment to Florida Housing, and to the Internal Revenue Service. As a practical matter, the number of set-aside units cannot be a fraction of a unit. Rounding up to the next whole number is the only option, because if the unit number is rounded down, the percentage of set-aside units would be below the set- aside commitment, the IRS would deem that the property had not met its set-aside commitment, and the investors would not receive their tax credits. Florida Housing revises its Universal Cycle Application and Instructions through the rulemaking process each year, in response to stakeholder input, in reaction to litigation, and to clarify issues which arise during the year. During the rulemaking process, there is considerable dialogue between developers and Florida Housing. Public hearings (rule development workshops) are noticed in the Florida Administrative Weekly, with the agendas being posted on Florida Housing’s website and also made available for distribution at the public hearings. The affordable housing development community is small and its members pay close attention to Florida Housing’s application process, which is intensely competitive. Petitioner is an experienced developer, and has previously received funding from Florida Housing. Petitioner is a member of a coalition of affordable housing developers, which meets before the rule development workshops to discuss the agenda, and to attempt to reach consensus on agenda issues. Petitioner is part of the development community, which normally participates in the rule development process, and Petitioner has been an active participant in the 2005 rule development process. An active member of the affordable housing developer’s coalition, and a veteran participant in the Florida Housing application and funding process, would have been aware of Florida Housing’s use of rounding to determine the number of set-aside units to which each applicant committed. The rounding issue that is at the heart of this proceeding has been addressed by Florida Housing in its proposed rule amendments to Florida Administrative Code Rule 67-48.002 for the 2005 Universal Application Cycle.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued in this case dismissing the petition and denying all relief sought by Petitioner. DONE AND ENTERED this 18th day of November, 2004, in Tallahassee, Leon County, Florida. S MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 2004.
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 At issue in this proceeding is whether the decision of the Florida Housing Finance Corporation (“Florida Housing”) to award State Apartment Incentive Loan (“SAIL”) funding to Intervenor, La Joya Estates, Ltd. (“La Joya”), pursuant to Request for Applications 2015-112 (the “RFA”) was contrary to the agency’s governing statutes, rules, policies, or the RFA specifications.
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: Douglas Gardens is a Florida limited partnership based in Coconut Grove, Florida, that is in the business of providing affordable housing. Florida Housing is a public corporation organized pursuant to chapter 420, Part V, Florida Statutes. For the purposes of this proceeding, Florida Housing is an agency of the State of Florida. Florida Housing has the responsibility and authority to establish procedures for allocating and distributing various types of funding for affordable housing. One of the programs administered by Florida Housing is the SAIL program, created in section 420.5087, Florida Statutes. Florida Housing has adopted Chapter 67-60, Florida Administrative Code, which governs the competitive solicitation process for several programs, including the SAIL program. Other administrative rule chapters relevant to the selection process are chapter 67-48, F.A.C., which governs competitive affordable multifamily rental housing programs; chapter 67-21, Florida Administrative Code, which governs multifamily mortgage revenue bonds ("MMRB") and non-competitive housing credits; and chapter 67-53, Florida Administrative Code, governing compliance procedures. Applicants for funding, pursuant to the RFA, are required to comply with provisions of the RFA and the applicable rule chapters. La Joya is a Florida limited partnership based in Miami, Florida, and is also in the business of providing affordable housing. On October 9, 2015, Florida Housing issued the RFA, seeking applications from developers proposing to construct multifamily housing for families and for the elderly. The RFA outlined a process for the selection of developments to share the estimated $49 million in funding for eligible applicants. Among the stated goals of the RFA is to fund one new construction development serving the elderly in a large county, with priority given to the highest ranked eligible new construction application for the elderly that is located in Miami-Dade County. The RFA provides that if there are no eligible Miami-Dade County applications that qualify, then the highest ranking eligible new construction development serving the elderly in Broward County will be selected. A total of 23 applications were filed in response to the RFA. On November 9, 2015, Douglas Gardens timely submitted its Application, numbered 2016-177BS, seeking $5,781,900 in SAIL funding to assist in the development of a proposed new construction development for the elderly in Broward County. Douglas Gardens’ was the only “new construction” application submitted for Broward County. Also on November 9, 2015, La Joya timely filed its Application, numbered 2016-178S, seeking $5,778,100 in SAIL funding to assist in the development of a proposed new construction development for the elderly in Miami- Dade County. La Joya’s was the only application submitted for Miami-Dade County in any development category. The executive director of Florida Housing selected a review committee to review and score the applications. The review committee issued a recommendation of preliminary rankings and allocations. Florida Housing’s Board of Directors approved these recommendations on December 11, 2015. The Board of Directors found both La Joya and Douglas Gardens eligible for funding, but awarded funding to La Joya on the basis that it was the highest ranked, eligible, elderly, new construction application located in Miami-Dade County. On December 16, 2015, Douglas Gardens timely filed a notice of intent to protest. On December 28, 2015, Douglas Gardens timely submitted a Formal Written Protest and Petition for Administrative Hearing. The RFA awarded up to 18 “proximity points” to an applicant based on its project’s location in relation to transit and community services such as grocery stores, medical facilities, and pharmacies. The RFA required each applicant to submit a “Surveyor Certification” form, which included longitude and latitude coordinates corresponding to the location of the proposed development site and the site’s proximity to listed services that would presumably serve the proposed development. Each applicant was required to retain a Florida licensed surveyor to prepare and submit the Surveyor Certification form and to sign the form attesting, under penalty of perjury, that the information on the form is true and correct. In the bottom left hand corner of each page of the form is a blank line on which the applicant or surveyor was to indicate the RFA number for which the form was being submitted. Beneath the blank line is a parenthetical indicating the identification number of the form, e.g., (Form Rev. 07-15). Section Four A.6.a.(1) of the RFA provided the following regarding the Surveyor Certification form: In order to meet the Mandatory requirement and be eligible for proximity points, all Applicants must provide an acceptable Surveyor Certification form, (Form Rev. 07- 15), as Attachment 14 to Exhibit A, reflecting the information outlined below. The Surveyor Certification form (Form Rev. 07-15) is provided in Exhibit B of this RFA and on the Corporation’s website Note: The Applicant may include the Florida Housing Surveyor Certification form that was included in a previous RFA submission for the same proposed Development, provided (i) the form used for this RFA is labeled Form Rev. 07-15, (ii) other than the RFA reference number on the form, none of the information entered on the form and certified to by the signatory has changed in any way, and (iii) the requirements outlined in this RFA are met. The previous RFA number should be crossed through and RFA 2015-112 inserted. If the Applicant provides any prior version of the Surveyor Certification form, the form will not be considered. (Emphasis added). Section Three C.1. of the RFA provided that Florida Housing reserved the right to waive “Minor Irregularities” in the applications. Florida Administrative Code Rule 67-002(6) defines “Minor Irregularity” as variation in a term or condition of an Application pursuant to this rule chapter that does not provide a competitive advantage or benefit not enjoyed by other Applicants, and does not adversely impact the interests of the Corporation or the public. Florida Administrative Code Rule 67-60.008 titled “Right to Waive Minor Irregularities,” provides as follows: The Corporation may waive Minor Irregularities in an otherwise valid Application. Mistakes clearly evident to the Corporation on the face of the Application, such as computation and typographical errors, may be corrected by the Corporation; however, the Corporation shall have no duty or obligation to correct any such mistake. La Joya submitted a Surveyor Certification form as Attachment 14 of its Application. The identification number in the parenthetical in the bottom left hand corner was “(Form Rev. 10-14)” rather than the specified “(Form Rev. 07-15).” Form Rev. 10-14 was the Surveyor Certification form used for 2014 applications. The only difference between Form Rev. 10-14 and Form Rev. 07-15 is that the latter contains a revised list of location coordinates for several Sun Rail stations in the Orlando area. This difference was of no matter to the RFA under discussion. For the substantive purposes of this RFA, the forms were identical. If La Joya’s Surveyor Certification form had not been considered and not scored, La Joya would have been ineligible for funding and Douglas Gardens would have been selected as the applicant meeting Florida Housing’s goal of funding one new construction development for elderly residents in a large county. Heather Boyd, multifamily loan manager for Florida Housing, sat on the review committee and was assigned to score the proximity portion of the applications. Based on the distances provided in the Surveyor Certification form, Ms. Boyd awarded La Joya a total of 11.5 proximity points as follows: 5.5 points for proximity for Public School Bus Rapid Transit Stop, 3 points for proximity to a Grocery Store, and 3 points for proximity to a Medical Facility. (La Joya also included coordinates for a Public School, but the proposed elderly development was not eligible for Public School proximity points.) To be considered eligible for funding, an applicant needed to receive at least 10.25 proximity points, including at a minimum 2 points for Transit Services. No issue was raised as to the accuracy of the information submitted by La Joya or of Ms. Boyd’s calculation. If it was permissible to consider La Joya’s Surveyor Certification form, then La Joya satisfied the proximity requirements in the RFA and was properly awarded funding. If La Joya’s Surveyor Certification form had been rejected, La Joya would not have been awarded funding and Douglas Gardens would have been awarded funding. Florida Housing’s decision to award funding to La Joya was based in part on Ms. Boyd’s scoring of the Surveyor Certification form and reflected the agency’s support of Ms. Boyd’s action. However, during the pendency of Douglas Gardens’ protest, Florida Housing changed its position and determined that La Joya’s Surveyor Certification form should not have been considered, based on the mandatory language of section Four A.6.a.(1) of the RFA. Ms. Boyd testified that she did not notice that La Joya’s Surveyor Certification form was a prior version and that she scored it as if it were the current version. She testified that she should not have scored the form “[b]ecause it specifically says in the RFA, if they do not have the correct form, they will not be considered.” Jean Salmonsen, housing development manager, acted as a backup to Ms. Boyd in reviewing the Surveyor Identification forms and verifying the award of proximity points. Ms. Salmonsen testified that she, too, missed the fact that La Joya had filed the wrong version of the form and that she would have rejected the form had she correctly recognized it. Evidence presented at the hearing indicated that in January 2016, Ms. Salmonsen had in fact disqualified an application in a different RFA for submitting the 2014 version of the Surveyor Identification form. Several valid policy reasons were cited for the RFA’s requirement that applicants use only the current version of the Surveyor Identification form. Ken Reecy, Florida Housing’s Director of Multifamily Programs, testified that it is important to apply the rules and RFA criteria in a consistent manner because of the tremendous volume of applications the agency receives. Mr. Reecy stated, “For like criteria, yes, consistency. We live and die by consistency, frankly.” As to the Surveyor Certification form specifically, Mr. Reecy explained that over the years Florida Housing had used a number of different forms with different contents. Allowing applicants to submit different forms would add to the difficulty of scoring the hundreds of applications received from around the state. Uniformity and consistency as to applicant submissions allow Florida Housing to process all of these applications in a cost efficient manner. Though he expressed his concern with consistency of review and ensuring that all applicants provide the same information as reasons for rejecting La Joya’s submission of the 2014 Surveyor Certification form, Mr. Reecy conceded that one of the reasons Florida Housing moved away from the previous rigid Universal Application Cycle allocation process was to allow for flexibility in determining that insignificant scoring errors need not be the basis for disqualifying an otherwise acceptable application. Florida Housing’s recent adoption in 2013 of the “Minor Irregularity” rule is further indication of its intent to employ more flexible evaluation criteria than it has in the past. See Findings of Fact 14 and 15, supra. Mr. Reecy acknowledged that in the instant case, the substance of the 2014 and 2015 Surveyor Certification forms was identical, and that the information provided by La Joya using the 2014 form was the same information required by the 2015 form.
Recommendation Based on the foregoing, it is RECOMMENDED that a final order be entered by the Florida Housing Finance Corporation dismissing the Formal Written Protest and Petition for Administrative Hearing filed by Douglas Gardens V, Ltd., and finding that La Joya, Ltd. is eligible for funding under Request for Applications 2015-112. DONE AND ENTERED this 29th day of February, 2016, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of February, 2016.
The Issue In 2009, Elmwood Terrace Limited Partnership (Petitioner) filed an application with the Florida Housing Finance Corporation (Respondent), seeking funding to develop an affordable housing apartment complex in Ft. Myers, Florida. The Respondent denied the application. The issue in this case is whether the Petitioner's application should have been granted.
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.
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 denying the application for funding filed by Elmwood Terrace Limited Partnership. DONE AND ENTERED this 6th day of October, 2010, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 6th day of October, 2010. COPIES FURNISHED: Hugh R. Brown, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 J. Stephen Menton, Esquire Rutledge, Ecenia, & Purnell, P.A. 119 South Monroe Street, Suite 202 Post Office Box 551 Tallahassee, Florida 32302 Wellington Meffert, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 Della Harrell, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329
