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 is whether Florida Housing Finance Corporation’s (Florida Housing) intended decision on January 29, 2016, to award low-income housing tax credits for an affordable housing development in Hillsborough County pursuant to Request for Applications 2015-107 (RFA-107) was contrary to Florida Housing’s rules, policies, or solicitation specifications; and, if so, whether that determination was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact The Parties Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. 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 then are awarded pursuant to a competitive cycle that starts with Florida Housing’s issuance of an RFA. This proceeding concerns RFA-107. Madison is an applicant entity for a proposed affordable housing development in Hillsborough County. ARD is a developer entity of affordable housing. SP Gardens and City Edge are entities in the business of providing affordable housing and filed applications pursuant to RFA-107. Background On September 21, 2015, Florida Housing published on its website proposed solicitation RFA-107, inviting applications for the award of tax credits for the development of affordable housing located in six counties, including Hillsborough County. The RFA provided that only one applicant would be awarded tax credits for Hillsborough County. In response to the RFA, six applications were submitted for Hillsborough County. A scoring committee appointed by Florida Housing evaluated the applications and submitted a recommendation to the Board of Directors (Board). On January 29, 2016, all participants received notice that the Board had determined which applicants were eligible or ineligible for consideration of funding. Only the application filed by a non- party, Mango Blossoms, was found ineligible. The Board determined that SP Gardens and City Edge satisfied all mandatory and eligibility requirements for funding and received “perfect” scores of 28 points out of a total of 28 points. They were ranked one and four, respectively, based on random lottery numbers assigned by the luck of the draw. Because Bethune and The Boulevard are no longer parties, and their applications have been deemed to be ineligible by Florida Housing, SP Gardens and City Edge are now ranked one and two. The Board also determined that Petitioners satisfied all mandatory and eligibility requirements for funding; however, they received a score of 23 out of 28 total points, and were ranked below SP Gardens and City Edge. In this bid dispute, Petitioners contend that Florida Housing erred in the scoring, eligibility, and award decision of the applications of SP Gardens and City Edge. But for the incorrect scoring of those two applications, Petitioners argue they would have been entitled to an allocation of housing credits or would have been moved up in the ranking. SP Gardens Consistent with its policy, even though an appeal was taken by Petitioners, in 2016, Florida Housing awarded tax credits to the highest ranked applicant, SP Gardens. On April 21, 2016, Florida Housing issued an invitation to credit underwriting, which was accepted by the applicant on April 25, 2016. SP Gardens closed on the purchase and sale agreement, as amended, on June 15, 2016, and Florida Housing issued a carry- over allocation agreement on August 5, 2016. The applicant has since completed a credit underwriting with a positive recommendation, closed on the financing with the tax credit investor, and commenced construction of its development. Petitioners contend the application of SP Gardens is deficient in three respects, which renders the applicant ineligible for funding. First, they contend SP Gardens failed to demonstrate control over the site of the project, as required by the RFA. Second, they contend the purchase and sale agreement is invalid because the applicant cannot enforce the specific performance of the contract. Finally, they contend the development location point (DLP) is not located on the parcel where most of the units will be constructed. Section 4.A.8.a. of the RFA requires in part that the applicant demonstrate site control in the following manner: The Applicant must demonstrate site control by providing, as Attachment 15 to Exhibit A, the documentation required in Items a., b., and/or c., as indicated below. If the proposed Development consists of Scattered Sites, site control must be demonstrated for all of the Scattered Sites. SP Gardens submitted documentation to satisfy item a., which requires that an “eligible contract” be provided with the application in order to demonstrate control over the project site. An applicant typically submits an address, property description, metes and bounds, folio number, intersections of streets, or other information that describes the subject property. Florida Housing’s practice is to accept the representations of an applicant. SP Gardens’ purchase and sale agreement (contract) identifies the subject property using an engineer’s drawing with sketched hash marks, a description of the property as “approximately two acres,” and an address of “1108 E. Bloomingdale Avenue” in Valrico. County records do not reflect that such an address exists. However, the records do indicate an address of 1108 East Bloomindale Avenue that is on the proposed site and is owned by GF Financial, LLC, the seller of the property. Except for this scrivener’s error, the purchase and sale agreement is otherwise an acceptable agreement. An eligible contract must include a specific performance remedy. Petitioners contend the purchase and sale agreement cannot be enforced because of various alleged deficiencies in the agreement, including a failure to provide a legal description of the property and language in the agreement which does not reflect a meeting of the minds of the buyer and seller. However, a legal description of the property is not required. Then, too, Florida Housing does not attempt to determine if there was a meeting of the minds of the parties or if the agreement is legally enforceable. Only a circuit court may do so. See § 26.012, Fla. Stat. Petitioners also contend the DLP is not located on a parcel where most of the units will be constructed. The DLP is located on the property that is identified in the purchase and sale agreement. Whether or not the property ends up consisting of scattered sites will be addressed during the credit underwriting process. Florida Administrative Code Rule 67- 48.0072 provides in part that “credit underwriting is a de novo review of all information supplied, received or discovered during or after any competitive solicitation scoring and funding preference process, prior to the closing on funding.” Pursuant to this rule, during the credit underwriting process, a scattered site applicant must demonstrate compliance with the RFA. Also, in the final site plan approval process, the configuration of the proposed development will be fleshed out. With the advantage of hindsight in this case, this is exactly what SP Gardens did after it was issued an invitation to credit underwriting. By providing all required forms, a DLP, and appropriate assurances that it would comply with all RFA terms, SP Gardens has satisfied all RFA requirements. See, e.g., Brownsville Manor, LP v. Redding Dev. Partners, LLC, 224 So. 3d 891, 894 (Fla. 1st DCA 2017). The preponderance of the evidence supports a finding that the application of SP Gardens is eligible for funding. City Edge Petitioners allege that City Edge failed to disclose all of the principals of the applicant and developer. They also contend that City Edge is unable to pursue specific performance of its sale and agreement contract against the developer or the seller of the property. The RFA requires an applicant to “provide a list identifying the principals for the applicant and for each developer.” The application identifies City Edge as the applicant entity. It also identifies the general partner of the applicant entity, City Edge Senior GP, LLC, and its limited partner, The Richman Group of Florida, Inc. (TRGF). TRGF is both the limited partner of the applicant entity and the developer entity for City Edge. City Edge identified the principals for TRGF as of the application deadline. Florida Housing determined that this form was adequate to meet the requirements of the RFA. The application names James P. Hussey as the developer entity’s Treasurer. At hearing, Mr. Hussey’s position with TRGF was verified by TRGF’s vice president and a corporate document. Petitioners point out that, according to a printout of the annual report filed by TRGF with the Secretary of State, as shown on the SunBiz website, at the time the application was filed, the Treasurer of TRGF was Doreen Cole, and not Mr. Hussey. However, the evidence shows that Ms. Cole was removed from the position of Treasurer on or about September 1, 2015, and she subsequently separated from the company in late 2015. Through sworn testimony and a corporate record, City Edge established that Mr. Hussey was Treasurer at the time of the application deadline, November 5, 2015. Notably, Florida Housing does not rely on SunBiz for establishing who the principals of an entity are as of the application deadline. This is because SunBiz does not definitively identify the corporate officers as of the application deadline, and it sometimes contains errors. See, e.g., Warley Park, LTD v. Fla. Housing Fin. Corp., Case No. 17- 3996BID (Fla. DOAH Oct. 19, 2017; FHFC Dec. 8, 2017). For this reason, Florida Housing does not require applicants to provide SunBiz printouts to verify the names of the principals. Petitioners also contend that because of various deficiencies, the purchase and sale agreement cannot be enforced in circuit court. For the reasons expressed above, this determination does not lie within the jurisdiction of Florida Housing. In any event, the RFA requires that if the owner of the property is not a party to the eligible contract, the applicant must submit documents evidencing intermediate agreements between or among the owner, or other parties, and the applicant. Here, City Edge included in its application: (a) a purchase and sale agreement between 301 and Bloomingdale, LLC (the seller), and TRGF (the purchaser), and (b) a purchase and sale agreement between TRGF (the seller) and City Edge (the buyer). The latter document is the intermediate contract and meets all RFA-specified requirements for an intermediate contract. The documents reflect that TRGF possesses a specific performance remedy to compel 301 and Bloomingdale, LLC, to sell the property, and City Edge possesses the right to compel TRGF to perform under the intermediate contract. For purposes of ascertaining compliance with the RFA, the documents submitted by City Edge suffice. In a similar vein, Petitioners contend City Edge did not demonstrate site control because it did not include an eligible contract. Currently, 301 and Bloomingdale, LLC, is the owner of the property on which the housing will be built. City Edge attached to its application a purchase and sale agreement and an intermediate contract. The two contracts satisfy the elements of an eligible contract necessary to demonstrate control over the project site, they provide a specific performance remedy, and they conform to the RFA. The preponderance of the evidence supports a finding that City Edge’s application is eligible for funding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order dismissing the Protest of Petitioners. It is further recommended that Florida Housing reaffirm its decision to award tax credits to SP Gardens. DONE AND ENTERED this 6th day of June, 2018, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER 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 June, 2018. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) Sarah Pape, Esquire Zimmerman, Kiser & Sutcliffe, P.A. Suite 600 315 East Robinson Street Orlando, Florida 32801-1607 (eServed) J. Timothy Schulte, Esquire Zimmerman, Kiser & Sutcliffe, P.A. Suite 600 315 East Robinson Street Orlando, Florida 32801-1607 (eServed) Craig D. Varn, Esquire Manson Bolves Donaldson Varn Suite 820 106 East College Avenue Tallahassee, Florida 32301-7740 (eServed) Christopher Dale McGuire, Esquire Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) Lawrence E. Sellers, Jr., Esquire Holland and Knight, LLP Suite 600 315 South Calhoun Street Tallahassee, Florida 32301-1872 (eServed) Tiffany A. Roddenberry, Esquire Holland & Knight, LLP Suite 600 315 South Calhoun Street Tallahassee, Florida 32301-1872 (eServed) M. Christopher Bryant, Esquire Oertel, Fernandez, Bryant & Atkinson, P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 (eServed) Amy Wells Brennan, Esquire Manson Bolves Donaldson Varn, P.A. Suite 300 109 North Brush Street Tampa, Florida 33602-2637 (eServed) Douglas P. Manson, Esquire Manson Bolves Donaldson Varn, P.A. Suite 300 109 North Brush Street Tampa, Florida 33602-2637 (eServed) Corporation Clerk Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed)
The Issue The issue in this case is whether the specifications, terms, and conditions of the Request for Proposals 2009-04 issued by Respondent are contrary to Respondent’s governing statutes, rules, or policies.
Findings Of Fact Elmwood is a Florida limited partnership and is engaged in the development of affordable housing in Florida. RST is a Florida limited partnership authorized to do business in Florida and is in the business of providing affordable housing. Florida Housing is a public corporation created by Section 420.504, Florida Statutes (2009),1 to administer the governmental function of financing or refinancing of affordable housing and related facilities in Florida. Florida Housing’s statutory authority and mandates are contained in Chapter 420, Part IV, Florida Statutes. Florida Housing is governed by a Board of Directors (Board), consisting of nine individuals appointed by the Governor and confirmed by the Senate. On July 31, 2009, Florida Housing issued the RFP, setting forth criteria and qualifications for developers to seek funding for affordable housing projects from funds that Florida has received through the American Recovery and Reinvestment Act of 2009, PL 111-5 (ARRA). ARRA was enacted in 2009 by Congress as part of the federal economic stimulus efforts and was signed into law on February 17, 2009. Elmwood and RST received notice of the RFP through e-mail notification on July 31, 2009. The RFP required applicants to submit proposals to Florida Housing no later than 2:00 p.m. on August 14, 2009. Elmwood and RST are “applicants” as defined in the RFP. Elmwood and RST submitted separate applications, intending to seek financing for their affordable housing projects by applying for funding from the sources that are proposed to be allocated through the RFP. On August 5, 2009, Elmwood timely submitted notice of its intent to protest the RFP, and, on August 17, 2009, timely filed its Formal Written Protest and Petition for Administrative Hearing, in accordance with the provisions of Subsection 120.57(3)(b), Florida Statutes, and Florida Administrative Code Rule 28-110.004. As an interested developer, who intended to, and did, seek funding from the sources being allocated through the RFP, Elmwood’s substantial interests are affected by the terms of the RFP. On August 18, 2009, Florida Housing issued its RFP 2009-04 Statement of Necessity to Continue RFP Process After Bid Protest is Filed (Statement of Necessity), pursuant to Subsection 120.57(3)(c), Florida Statutes. The Statement of Necessity was not challenged. On August 20, 2009, Florida Housing proceeded with making determinations of eligibility for funding under the RFP. Both RST and Brownsville were selected for funding and invited into credit underwriting as provided in the RFP. Elmwood was not selected for funding. On September 9, 2009, RST filed its Petition for Leave to Intervene on behalf of Elmwood to challenge the minimum occupancy standard of 92% required in the RFP. On September 10, 2009, Brownsville filed its Petition for Leave to Intervene on behalf of Florida Housing. Florida Housing administers several programs aimed at assisting developers to build affordable multi-family rental housing in an attempt to protect financially marginalized citizens in Florida from excessive housing costs. The programs through which Florida Housing allocates resources to fund such affordable housing in Florida include: a federally funded multi-family mortgage revenue bond program (MMRB), established under Section 420.509, et. seq., Florida Statutes; the State Apartment Incentive Loan Program (SAIL), created pursuant to Section 420.5087, et seq., Florida Statutes; and the federal Low Income Housing Tax Credit Program (the Tax Credit Program), established in Florida pursuant to Section 420.5099, Florida Statutes. These funding sources are allocated by Florida Housing to finance the construction or substantial rehabilitation of affordable housing. A portion of the units constructed based on funding from these programs must be set aside for residents earning a certain percentage of area median income (AMI). Generally, the units are targeted to tenants earning 60% of AMI or below. The primary program at issue in this proceeding is the Tax Credit Program. The Tax Credit Program was created by the Federal Income Tax Reconciliation Act of 1986, as a means to induce the private sector to construct and manage affordable housing projects. The Tax Credit Program is governed by the Internal Revenue Code, 26 U.S.C. Section 42. Low income housing tax credits (Tax Credits) come in two varieties: competitively awarded “9%” Tax Credits and non- competitively awarded “4%” Tax Credits. For the 9% Tax Credits, the federal government annually allocates a specific amount of Tax Credits to each state using a population-based formula. Tax Credits are a dollar-for-dollar offset to federal income tax liability. Developers awarded the Tax Credits get the credit amount every year for ten years. The developer will often sell the future stream of Tax Credits to a syndicator, who, in turn, sells them to investors seeking to shelter income from federal income taxes. For example, a developer who receives a $1,000,000 award of Tax Credits is entitled to that amount of tax credit paid each year for ten years, for a face value of $10,000,000. The developer sells the Tax Credits to a syndicator or investor who has tax liability sufficient to absorb the amount of credits. If the selling price is 85 cents on the dollar, the sale of the Tax Credits would generate $8,500,000 cash. Unlike a loan or the proceeds from issuance of bonds, a developer who is awarded Tax Credits and syndicates those Tax Credits receives cash equity with no debt associated with it. Thus, Tax Credits provide an attractive subsidy and, consequently, are a highly sought-after funding source. Florida Housing is the designated agency in Florida to allocate Tax Credits to developers of affordable housing, pursuant to Section 420.5099, Florida Statutes. Every year since 1986, Florida has received an allocation of Tax Credits to be used to fund construction of affordable housing. As required by Section 42 of the Internal Revenue Code, each year Florida Housing adopts a Qualified Allocation Plan (QAP), which sets forth the allocation methodology for the competitive 9% Tax Credits. The QAP must be approved by the Governor each year. The QAP is also adopted and incorporated by reference into Florida Housing’s rules. See Fla. Admin. Code R. 67-48.002(95). The 2009 QAP includes the following provision: In order for the Corporation to implement the provisions of the Recovery and Reinvestment Act of 2009 (the “2009 Stimulus Act”), any funds received pursuant to 2009 Stimulus Act may be allocated by a competitive request for proposal or competitive application process as approved by the Board. Any such process will be governed by Section 42, IRC, and Chapter 67- 48, F.A.C., as applicable, or, an emergency rule authorized by the Florida Legislature specifically for the 2009 Stimulus Act, if any. The 2009 QAP was adopted as part of the 2009 Universal Cycle rules by Florida Housing’s Board on March 13, 2009. At that time, Florida Housing had not yet received guidance from the federal government as to how the ARRA funds should be allocated. The Florida Affordable Housing Guarantee Program was created in Section 420.5092, Florida Statutes, for the purposes of stimulating creative private section lending activities to increase the supply and lower the cost of financing or refinancing eligible housing, creating security mechanisms to allow lenders to sell affordable housing loans in the secondary market, and encouraging affordable housing lending activities that would not have taken place or that serve persons who would not have been served but for the creation of this program. Florida Housing has accomplished these goals by issuing capitalizing bonds to create the Guarantee Fund, which lowers the interest paid on the MMRB bond debt by serving as a credit enhancer. Since 2002, Florida Housing has allocated funding from the MMRB, SAIL, and Tax Credit Programs through a single annual competitive application process known as the “Universal Cycle,” in which the applicants compete against one another for funding. The Universal Cycle and the attendant complex application review process are intended to equitably and reasonably distribute affordable housing throughout Florida. Florida Housing has adopted rules which incorporate by reference the application forms and instructions for the Universal Cycle to govern the allocation of funds from the various programs it administers. Florida Housing amends it Universal Cycle rules, forms, and instructions every year. Following the completion of the Universal Cycle, Florida Housing engages in an extensive public comment process through which it solicits feedback and comments from developers for the next year’s cycle. Any new amendments are adopted to take effect prior to an established Application Deadline for the ensuing year. The process used by Florida Housing to review and approve the Universal Cycle applications is set forth in Florida Administrative Code Rule 67-48.004. Florida Housing reviews all timely-filed applications to determine if threshold requirements are met and scores each application based on factors such as programs for tenants, amenities of the development as a whole and of the tenants’ units, local government contributions to the specific development, and local government ordinances and planning efforts that support affordable housing in general. The process includes a series of tiebreakers to choose among applications with otherwise equal scores. After the initial review and scoring by Florida Housing, all applications and included exhibits, along with the scores for the applications, are posted on Florida Housing’s website. Applicants are given a specific time period to alert Florida Housing of any errors they believe Florida Housing made in its initial scoring. Florida Administrative Code Rule 67- 48.005 sets forth an appeal procedure for challenging the scores. After any appeal proceedings, Florida Housing publishes final rankings which determine which applications are preliminarily selected for funding. The applicants for those applications selected are invited to participate in the credit underwriting process, which is governed by Florida Administrative Code Rule 67-48.0072. A third party financial consultant, who is selected by Florida Housing but paid for by the individual applicant, determines whether the proposed project is financially sound. The credit underwriter reviews all aspects of the proposed development, including financing sources, plans and specifications, cost analysis, zoning, site control, environmental reports, construction contracts, and engineering and architectural contracts. Florida Administrative Code Rule 67-48.0072(10) requires an appraisal and market study. The credit underwriter is required to consider the market study, as well as the development’s financial impact on other developments in the area previously funded by Florida Housing, and make a recommendation for approval or disapproval of funding. Each year the Universal Cycle provides a mechanism for selecting applications to meet statutory geographic requirements; for certain targeting goals that address housing needs of particular demographic groups, such as farm workers, commercial fishery workers, the homeless, or the elderly; for specific set-asides or targeting goals aimed at addressing identified needs, such as the Florida Keys, inner city areas, or rural development; and for the preservation of existing affordable housing complexes. Each set-aside group essentially has its own separate funding from its share of the funds distributed by Florida Housing. After the set-aside goals are addressed, Florida Housing then uses the final rankings to try to achieve a distribution of affordable housing units among the county groupings (small, medium, and large, based on population) in accordance with the adopted percentages. Each of the three groups must receive at least 10% of the funds. Within the county size groups, Florida Housing uses a formula called SAUL, which is an acronym for Set-Aside Unit Limitation. The formula is set forth in the application instructions and incorporated by reference into the rules for each Universal Cycle in an attempt to evenly distribute the units. As part of the Universal Cycle process, Florida Housing designates certain geographic areas of the state that are considered soft markets as “Location A” areas. Florida Housing first began incorporating into its application process a mechanism for identifying weak markets, known as “Location A” in 2003. The Location A designations are included in the Universal Cycle Application Instructions, which are incorporated by reference in the rules of Florida Housing. Elmwood timely filed an application in the 2007 Universal Cycle, seeking an award of Tax Credits and a supplemental loan to construct a 116-unit family apartment complex, Elmwood Terrace, in Fort Myers, Lee County, Florida. Elmwood’s application received a perfect score and maximum tiebreaker points. As a result, Elmwood was allocated $1,498,680 in Tax Credits. During the credit underwriting process, Elmwood committed to set aside more than the required units for Extremely Low-Income (ELI) households. Based on the final ranking of its application, Elmwood was invited into the credit underwriting process. The credit underwriter designated by Florida Housing conducted the analysis required under Florida Housing’s rules and issued a favorable recommendation for funding. The Credit Underwriting Report for Elmwood Terrace was accepted by the Florida Housing Board on September 22, 2008. By the fall of 2008, significant changes were taking place in the economic environment and the housing market in particular, and it became evident that the market for Tax Credits had precipitously dropped. Tax credits had typically sold in the range of 85 to 95-cents on the dollar in recent years, but the value of Tax Credits had plummeted in the last two years. Sales, when a buyer can be found, are currently in the low 60-cents on the dollar range. Shortly before Elmwood was scheduled to close on its Tax Credits in the fall of 2008, the syndicator who had originally expressed its intent to purchase Elmwood’s Tax Credits informed Elmwood that it would not go forward with the syndication. Many other projects that were awarded Tax Credits during the 2007 and 2008 Universal Cycles similarly experienced difficulty in finding syndicators to purchase the awarded Tax Credits and, thus, were unable to proceed to closing. In order to accomplish the legislative mandate to pay, Florida Housing attempted to assist these troubled projects by granting extensions of time to meet various benchmarks in the Tax Credit program. In January 2009, the Florida Legislature met in special session to address budget revenue shortfalls for the 2008-2009 fiscal year. Legislation was adopted and signed into law on January 27, 2009, which swept trust fund balances, transferred $30 million from multi-family housing programs to the State Housing Initiative Partnership (SHIP) program, and required Florida Housing to pay $190 million in previously appropriated funds to the treasury by June 1, 2009. These funds were to be taken first from developments that would provide new construction. In order to accomplish the legislative mandate to pay $190 million to the treasury, Florida Housing had to deobligate approximately $80 to $90 million of funds preliminarily committed to SAIL-funded projects and from funds preliminarily committed to the Community Workforce Housing Innovation Pilot Program (CWHIP) projects. For the first time in Florida Housing’s history, it was compelled to take money away from people at the Legislature’s direction. In early 2009, in recognition of the collapse of the housing market and the difficulty in marketing Tax Credits, the federal government, as part of it economic stimulus efforts, established mechanisms to assist in the development of affordable housing and offset some of the economic devastation to developers. Congress included specific provisions in ARRA intended to address the condition of the Tax Credit market. Section 1602 of ARRA allows the state Tax Credit allocating agencies to return up to 40% of the state’s annual Tax Credit allocation, as well as Tax Credits awarded in 2007 and 2008 to the federal government, to be exchanged for a cash distribution of 85 cents for each tax credit dollar returned. The exchange of Tax Credits generated a pool of $578,701,964 for the State of Florida. The Tax Credit Assistance Program (TCAP), a separate provision in ARRA, includes a direct allocation of funds to state housing finance agencies from the Department of Housing and Urban Development to provide gap financing for affordable housing projects that have been affected by the economic downturn. These funds were allocated to the states to “resume funding of affordable rental housing projects across the nation while stimulating job creation in the hard-hat construction industry.” Florida Housing issued the RFP as the method for allocating the Exchange Funds and to provide an opportunity for applicants to request TCAP funds. The RFP solicits proposals from applicants with an “Active Award” of Tax Credits who were unable to close and are seeking alternate funding to construct affordable housing utilizing Exchange Funds from the Tax Credit Exchange Program authorized under Section 1602 of ARRA. Section 4D.2 of the RFP provides: Proposed Developments located within a 2009 Location A Area are eligible to apply only under the following circumstances: Developments where the original Application for the Proposed Development was funded under the Housing Credit Hope VI goal. Developments where the Original Application for the Proposed Development reflects the Housing Credit Preservation Designation. Proposed Developments that are located in a 2009 Location A Area that does not have a Guarantee Fund Development with the same Demographic category located in the same county. (Emphasis in original) The Location A areas in the RFP are the Location A areas in the rules adopted for the 2009 Universal Cycle. The Elmwood Terrace project is located in Lee County, which was not designated as a part of Location A in the 2007 Universal Cycle. The rules for the 2008 Universal Cycle provided that Location A included that part of Lee County lying south of State Road 80 and the Caloosahatchee River. The 2008 Location A for Lee County did not specify demographic categories. For the 2009 Universal Cycle, all of Lee County was designated Location A for both the family and elderly designations. The Universal Application Package, which is incorporated by reference in Florida Administrative Code Rule 67-48.004(1)(a), provides: (1) Set-Aside Location A Development (Threshold) A proposed Development qualifies as a Set- Aside Location A Development if the location of the proposed Development is within a Set- Aside Location A Area and the Applicant selected the applicable Demographic Commitment (Elderly or Family) at Part III.D of the Application. The only exception to this provision is if the proposed Development also qualifies as a HOPE VI Development at Part III.A.2.d. of the Application. Applicants with a Set-Aside Location A Development must meet the following set- aside requirements: Applicants requesting Competitive HC must commit to set aside 100 percent of the Development’s residential units at 50 percent AMI or less; or Applicants requesting MMRB must commit to set aside at least 85 percent of the Development’s residential units at 50 percent AMI or less. All Applicants must meet the minimum ELI Set-Aside threshold set out in Part III E.1.b.(2)(a)(iii) of these instructions. Because Elmwood’s proposed development is located in Lee County, Florida, the specifications of the RFP prohibit Elmwood from being considered for the allocation of funds in exchange for its Tax Credits. The RFP provides that any project that receives an allocation of Exchange Funds and/or TCAP Funds will be required to go through the credit underwriting process, including an assessment of market need and impact. Section 5B.1b of the RFP states that a tentative funding award under the RFP will be rescinded “if the submarket of the Proposed Development does not have an average occupancy rate of 92% or greater for the same Demographic population, as determined by a market study ordered by the Credit Underwriter, and analyzed by the Credit Underwriter and Florida Housing staff, as well as approved by the Board.” The term “submarket” is used in Florida Housing’s credit underwriting rules in Florida Administrative Code Rule 67-48.0072. “Submarket” and “primary market area” are synonymous terms. Determining a submarket or primary area market is very subjective; even two adjacent sites may have different submarkets. Determination of a submarket is an art that involves making judgments. The market analysis, which is required to be done as part of the credit underwriting process, will delineate the primary market area or submarket area of the proposed project. Such delineation will be based on criteria which may be unique to that proposed site. Thus, it is not practical to specify what criteria are used to establish the primary market area or submarket area of a proposed project. The RFP provides that the demographic grouping submitted in the original application cannot be changed. The RFP allows applicants to change other aspects of their original proposal, including that an applicant may increase the number of proposed units. Subsequent to the withdrawal of its anticipated equity syndicator in September 2008, Elmwood explored other options that could potentially enable it to proceed to closing. One option that Elmwood proposed to Florida Housing was to change the demographic grouping of Elmwood Terrace to an elderly project. Elmwood formally requested a change to its demographic grouping in a letter from Elmwood’s attorney, Warren Husband, to Florida Housing’s deputy development officer, Deborah Blinderman, dated January 26, 2009. That request was not approved. Elmwood contends that the prohibition on changing a development’s demographic grouping is contrary to Florida Housing’s policy of allowing other developers to change their demographic groupings. Florida Housing did allow two developments to change their demographic groupings. On April 24, 2009, the Board granted River Trace Senior Apartments’ request to change its demographic grouping from elderly to family. River Trace Senior Apartments was a development which had been funded in 2000 as an elderly development. It operated for eight years as an elderly development without achieving satisfactory occupancy in its 178 units. Based on the development’s history, the Board allowed a demographic grouping change in hopes of achieving satisfactory occupancy levels. Unlike Elmwood’s proposed development, River Trace Senior Apartments was a housing development, which was already built and in operation. In October 2008, Florida Housing approved a request for a change in demographic grouping in a proposed project. The proposed development, Bradenton Village II, was the third phase of a large HOPE VI redevelopment project and consisted of 36 units designated as family units. During the permitting process, the City of Bradenton informed the developer that the proposed site could not accommodate the number of parking spaces required for a family development, but the required parking could be provided if 32 of the units were designated as elderly units. Bradenton Village had an investor who was willing to remain in and go forward with the project redesignated as elderly. Florida Housing did not allow changes in pending deals after the Legislature’s special session budget action in January 2009 because of the large number of projects that had lost their funding and proposed changing the scope of their projects to qualify for ARRA funds. These included a number of CWHIP projects. The director for Florida Housing felt that he could not justify allowing Elmwood to change its demographic designation while refusing to allow the deobligated CWHIP developers to change their target markets. The evaluation process for the RFP is set forth in Section 7 of the RFP and provides that the Florida Housing Review Committee will: [S]elect Applicants most likely to be considered for award, make any adjustments deemed necessary to best serve the interest of Florida Housing’s mission, and develop a recommendation or series of recommendations to the Board. The Committee will then rank the Applications deemed eligible for funding with preference given to Applications that are Shovel-Ready. The Board may use the Proposals, the Committee’s scoring, and any other information or recommendation provided by the Committee or staff, and any other information the Board deems relevant in the selection of Applicants to whom to award funding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding: The specifications of the RFP which exclude consideration of funding for projects located in a Location A area without regard to whether the applicant is willing to lower the AMI for its units to 50% or less are contrary to Florida Housing’s governing statutes. The provision in the RFP which precludes the applicant from changing its demographic grouping is not contrary to Florida Housing’s policies. The provision of the RFP which requires 92% occupancy is contrary to Florida Housing’s governing statutes. The lack of a definition of “submarket” in the RFP is not arbitrary, capricious, clearly erroneous, or contrary to competition. The provisions of the RFP which eliminate from consideration for funding any project in a county with a Guarantee Fund development is contrary to Florida Housing’s governing statutes. The evaluation criteria in Section 7 of the RFP which sets forth the evaluation procedure is contrary to the Florida Housing’s governing rules and statutes. DONE AND ENTERED this 12th day of November, 2009, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL 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 12th day of November, 2009.
The Issue Whether HTG Harbor Village, Ltd's, as Applicant for Crestwood Apartments, ("Petitioner" or "Crestwood") application for funding of Housing Credits and Exchange Funding awards should be granted by Florida Housing Corporation ("Florida Housing").
Findings Of Fact Based on the entire record of this proceeding including the necessary stipulated facts submitted by parties, oral and documentary evidence presented at the final hearing, the following findings of fact are made: Florida Housing is a public corporation organized under chapter 420, Florida Statutes, 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 affordable housing to persons and families of low, moderate, and middle income. Florida Housing is governed by the Board consisting of nine individuals appointed by the Governor and confirmed by the Florida Senate. Florida Housing provides funding through a number of different federal and state programs to assist in the development of affordable housing in this state. As required by the federal government, the state each year adopts a Qualified Allocation Plan ("QAP"), which is incorporated into Florida Housing's rules. The QAP sets forth the selection criteria and the preferences for developments that will be awarded Housing Credits each year. Each year Florida Housing conducts a "Universal Cycle," through which applicants for certain Florida Housing multi- family programs submit a single application by which projects are evaluated, scored, and competitively ranked. Among the programs included in the Universal Cycle is the Housing Credit program, which was created by the federal government in 1986. Housing Credits (also called tax credits) come in two varieties: competitively awarded nine percent credits and non-competitively awarded four percent credits. For the nine percent credits, the federal government annually allocates to each state a specific amount of credits using a population-based formula. Housing Credits are a dollar for-dollar offset to federal income tax liability over a 10-year period. Developers receiving the federal awarded Housing Credits often sell the future stream of credits to a syndicator, which in turn sell the credits to investors seeking to shelter income from federal income taxes. The sale of the credits generates dept-free cash equity for developers. With the recent economic downturn, the market for Housing Credits dropped significantly. A number of development projects awarded funding in recent Universal Cycles have been unable to close on such funding because of the poor market for Housing Credits. In recognition of the Housing Credit market collapse, the federal government, as part of its economic stimulus efforts, established mechanisms to assist in the development of affordable housing. The American Recovery and Reinvestment Act ("ARRA"), was enacted on February 17, 2009, and includes provisions relating to the Low Income Housing Tax Credit Program. Among those provisions are the Tax Credit Exchange Program, which allows agencies that allocate Housing Credits (such as Florida Housing) to "exchange" a portion of their 2009 Housing Credit ceiling, as well as previously awarded and returned housing credits, for cash grants from the U.S. Treasury that can be used to make "sub-awards" to finance the construction of, or acquisition and rehabilitation of, qualified low-income buildings. Following the enactment of ARRA, Florida Housing issued several Requests for Proposals ("RFPs")to take advantage of the federal stimulus funds. The federal programs have quick deadlines to stimulate activity. RFP 2010-04, issued on February 26, 2010, anticipated that $150 million in Exchange Funding would be available through the RFP. In order to be eligible for funding under RFP 2010-04, applicants were required to have an active award of nine percent Housing Credits. RFP 2010-04 provided that proposed developments receiving Exchange Funding would be governed by the same rules that govern the Universal Cycle's Housing Credit Program, including credit underwriting requirements.1 HTG Harbor Village Ltd,2 a Florida-limited partnership, submitted an application for funding for Crestwood to Florida Housing in 2009. Crestwood is a proposed 114-unit affordable housing complex in Palm Beach county that will serve elderly residents. Crestwood submitted an application for nine-percent low-income Housing Tax Credits during the 2009 Universal Application Cycle. On February 26, 2010, the Board approved the final rankings for the 2009 Universal Application Cycle and Crestwood was awarded the Housing Credits. Florida Housing staff issued an invitation to Crestwood to enter into the credit underwriting. Crestwood also received a recommendation for Exchange Funding pursuant to RFP 2010-04, which the Board accepted on March 17, 2010. Subsequently, Crestwood was included in the ranked list of proposed developments that were awarded Exchange Funding and invited into credit underwriting. The credit underwriting process is governed by Florida Administrative Code Rule 67-48.0072 ("Credit Underwriting Rule"). Florida Housing is obligated to satisfy mortgage dept under its Guarantee Fund. It has close to $800 million in outstanding mortgage guarantee commitments. Florida Housing's Guarantee Fund has paid out eight claims since November 2008 for approximately 90 million dollars when borrowers failed to make their payments. Each payout impacted Florida Housing's risk-to capital-ratio. Before the 2009 Universal Cycle in order to try to prevent future defaults and protect the fund from additional claims, the Board amended rule 67-48.0072(10) to require the credit underwriter to review and determine whether a proposed development "will be a negative impact on a Guarantee Fund development within the primary market area." The costs associated with the credit underwriting review is paid by the developer, including the credit underwriting fee and costs of a market study. Florida Housing selects an independent credit underwriter for each developer who reviews each proposal according to requirements set forth by the Credit Underwriting Rule. The credit underwriter prepares a report, known as the Preliminary Recommendation Letter ("PRL"), for each applicant invited into the process. The reports are submitted to Florida Housing's Board, who makes the final decision for funding by approving or denying each application. Florida Housing chose Seltzer Management Group, Inc. ("Seltzer") as the credit underwriter for Crestwood. Seltzer conducted both the credit underwriting for Crestwood's Housing Credit allocation and its Exchange Funding simultaneously. As the credit underwriter, Seltzer, has to re-evaluate the proposed development by performing a comprehensive analysis of all of the aspects of the proposed development. Seltzer sent Crestwood an email checklist to complete in order to have the PRL ready for the July 2010 Board meeting. The responsibility for the market study is assigned by the credit underwriter to an independent market analyst. Seltzer retained Clobus, McLemore & Duke, Inc. ("CMD") of Fort Lauderdale to conduct the market study for Crestwood. CMD completed the market study and issued it on April 6, 2010. CMD's market study report stated in its cover letter that: There are two Elderly Guarantee Fund Developments within the subject's PMA. It is CMD's opinion that the subject's units will not have a negative impact on one or any of the Guarantee Fund Developments. Historically, low-income properties are not significantly affected by new developments other than during lease-up. Occupancy is lower now primarily due to the current economic conditions, not over-improvement. There has always been a demand for low- income housing and the impact on additional properties, including Guarantee Fund Developments may be on occupancy during lease-up. In mid-April of 2010, Seltzer provided a copy of the market study to Crestwood's developers. Crestwood compared CMD's market study with their own conducted by Reinhold Wolff and determined that it was a positive market study. The determination helped Petitioner decide to continue the credit underwriting process and increase its efforts to comply with Seltzer's checklist and quick driven federal deadlines by expending additional funds to complete the process. While seeking credit underwriting approval, Crestwood was required to expend considerable time and money to proceed as an applicant in the process seeking credit underwriting approval. Crestwood developers spent approximately $653,854.94. Soon thereafter, Seltzer prepared the Crestwood PRL signed by John Elasser and emailed it to Florida Housing on May 3, 2010. The cover email stated that the PRL draft was attached. The PRL discussed the CMD market study noting specifically that CMD's opinion is that Crestwood "will not have a long-term negative impact" on Guarantee fund properties near the proposed development. Seltzer concludes the May 3, 2010, PRL by recommending that Crestwood receive both Exchange Funding and Housing Credits. Three days later, on May 6, 2010, Lindsay Lockhart, Florida Housing's Guarantee Program Asset Manager, sent an email to Ben Johnson, the president of Seltzer, providing additional information on Windsor Park Apartments ("Windsor"), one of the Guarantee Fund developments referenced in the May 3, 2010, PRL. Lockhart's email discussed occupancy figures for Windsor, as well as rent concession policies and marketing strategies of Windsor. Windsor was built in the late 1990s and is 1.4 miles northeast of the proposed Crestwood site. Historically, Windsor has struggled financially. Windsor has had over three-and-half million dollars in operating deficits. The next day, May 7, 2010, Seltzer's president emailed Tatreau, Director of multi-family development programs at Florida Housing and stated: The market study indicated that adding the Crestwood units may have a negative impact on the Guarantee Properties during the lease up period. I have reviewed the market study and other economic data and I think that I support that conclusion. That being said, what additional data, analysis, conclusions, recommendations, etc., are you requesting that we include in the PRL? I would appreciate w[hat] ever guidance you ca[n] give us. On May 12, 2010, Johnson followed up and emailed his employee, Elasser, instructing him to incorporate and wordsmith the language attached to the email and utilize it while revising the PRL. On May 13, 2010, Elasser signed and sent a second draft Crestwood PRL to Florida Housing. His cover email states: Revised Preliminary Recommendation Letter for Crestwood, with expanded discussion of Windsor Park and Pinnacle Palms (the two Guarantee fund transactions within Crestwood's submarket). The May 13, 2010, draft PRL again referred to the CMD market study not anticipating "a long-term negative impact" on any Guarantee Fund properties. However, the letter further delineated some of Seltzer's "concerns" regarding Windsor Park by stating: Crestwood will provide potential Windsor Park residents an additional choice when looking for rental housing-an option that will be newer and with a better unit mix. CMDuke suggests, and it is reasonable to conclude, that occupancy at Windsor may drop during Crestwood's lease-up. It is difficult, however, to quantify the number of units lost or how long Crestwood will impact Windsor Park. Seltzer again concludes its May 13, 2010, PRL by recommending that Crestwood receive both Exchange Funding and Housing Credits. Two days after the second draft PRL was sent by Seltzer to Florida Housing, Tatreau emailed Johnson and set up a teleconference call meeting with Florida Housing staff to discuss several proposed developments under review by Seltzer that have Guarantee Fund developments nearby. Crestwood was specifically included. The call took place the following day, May 19, 2010. Most of the talking was done by the Guarantee Fund staff. During the Crestwood credit underwriting process, numerous appropriate communications took place between Seltzer and Florida Housing staff about the impact that the Crestwood transaction would have on Windsor Park and Pinnacle Palms. Florida Housing Staff wanted to make sure that Seltzer had enough information relating to Guarantee Fund developments in the Crestwood market area for Seltzer's analysis and recommendation to be complete. Throughout the process, Florida Housing staff provided Seltzer some of Windsor's data. Seltzer received Windsor information including the: demographic demand; good management; poor unit design of 2/3 bedrooms; occupancy problems; good maintenance; long term struggling finances; operating deficit; and rental concessions and incentives. On May 26, 2010, Seltzer sent a third draft Crestwood PRL to Florida Housing. Unlike the first two draft PLRs, Seltzer had looked through all the information received regarding Windsor for the May 26, 2010, PRL and recognized Windsor's vulnerability to new developments. Even though the third draft was signed by both Elasser and Johnson, and reversed Seltzer's earlier recommendation that Crestwood receive funding, Florida Housing neither told nor instructed Seltzer to change its recommendation for Crestwood. Seltzer concluded after its complete analysis the following: Based upon the information presented in CMDuke's Market Study and its own Due Diligence, SMG concludes that the average occupancy rate within the Subject's submarket meets the minimum requirement of 90%. In accordance with the RFP 2010-04, however, SMG finds its concerns with regard to historical and current occupancy rates for the Elderly at prior and existing Guarantee Fund Properties within the Subject's submarket leads it to recommend FHFC rescind Applicant's tentative award of Exchange Program Funding. Construction of the Subject Development has the potential to negatively impact Affordable Housing Properties previously funded by FHFC in the area, especially the' two Guarantee Fund Properties located within Crestwood's submarket. Seltzer subsequently sent a fourth draft PRL to Florida Housing on June 1, 2010, and a fifth final PRL to Florida Housing on June 3, 2010. The last PRL's cover email stated "Here is the final." The negative recommendations remained in both the PRL of June 1 and 3, 2010, even though the language was slightly different from the language used in previous PRLs. The final June 3, 2010, PRL discusses the operating deficits and Seltzer's "serious concerns." It recommends not only that Crestwood's Exchange Funding be rescinded, but that its Housing Credit allocation also be taken back. Additionally, the recommendation in the June 1 PRL and the final June 3 PRL is based only on an the negative impact on Windsor Park, not on any other Guarantee Fund development or other affordable housing development in the area. The final version provides: Information presented by CMDuke's Market Study and developed through its own Due Diligence leads SMG to conclude the average occupancy rate within the Subject's submarket meets the minimum requirement of 90% for the same demographic population. RFP 2010-04, however, also requires consideration of the potential impact of the Subject Development on existing Guarantee Fund Properties. Based upon marginal occupancy rates and resulting Operating Deficits, SMG has serious concerns regarding the potential negative impact of the Subject Development on Windsor Park. SMG therefore recommends FHFC rescind Applicant's HC allocation award and its Exchange Program Funding. The June 3, 2010, PRL from Seltzer concerning Crestwood was the subject of the Staff Recommendation from the Florida Housing staff to the Florida Housing Board on June 18, 2010. The Staff Recommendation states: Staff has received a preliminary recommendation letter for Crestwood Apartments (Exhibit A) containing a negative recommendation because the Development would cause a negative impact on a Guarantee Fund transaction in the area. Staff has reviewed this report and finds that the Development does not meet all of the requirements of Rule Chapter 67-48., F.A.C. and RFP 2010-04 to be approved for further credit underwriting consideration. The Staff Recommendation concluded by recommending that the Board "[r]escind and return the nine-percent Low-Income Housing Tax Credit award and Exchange Funding to Florida Housing Finance Corporation." Petitioner was first notified of the negative recommendation concerning Crestwood by email on June 2, 2010. After notification of the negative recommendation, Crestwood's developer presented several proposals to Florida Housing's staff in an effort to mitigate any impact of Crestwood on Windsor, the nearby Guarantee Fund development. All of Crestwood's proposals were rejected including the proposal to provide a reserve after Florida Housing determined that what was offered did not mitigate the risk for the Guaranteed Fund. At the June 18, 2010, Florida Housing Board meeting, the Board considered the final PRL of June 3, 2010, with the Crestwood application. Seltzer's president, Johnson, presented Seltzer's recommendation and stated "[it] just doesn't match what's happening on the ground" and that he found it "prudent" to protect the Windsor development.3 There was no discussion at the Board meeting about Seltzer's first two draft recommendations to approve the Housing Credit allocation and Exchange Funding for Crestwood. Steve Auger, executive director of Florida Housing, admitted to the Board at the meeting that he did not know whether Crestwood would have any negative impact on Windsor, but said: And, Mr. Chair, if I may, just one thing, potential impact is all we've got. You know, we're talking about a development that's not built and we're talking about guessing about people's behavior. So potential - we will never have anything other than potential when we're talking about, you know, the possibilities there. At the meeting, the Florida Housing Board considered the Staff Recommendation for Crestwood and voted unanimously to accept it, which denied Crestwood's application and rescinded the award of Housing Credits and Exchange Funding. Petitioner received formal notice of Florida Housing's decision to rescind the Housing Credit and Exchange Program funding awarded to Crestwood on June 25, 2010. On July 12, 2010, Crestwood filed a petition with Florida Housing that commenced this proceeding. A day after the hearing closed, on January, 21, 2011, the Florida Housing Board voted through Item N on its Consent Agenda to approve a credit underwriting letter authorizing $1.8 million loan to Windsor from RFP 2010-16. The credit underwriting letter states "[T]he Guarantee Program's credit exposure will be eliminated or greatly reduced." Upon the approval, staff was directed to proceed with loan closing activities. During 2010, Windsor Park's occupancy rate increased. The occupancy report for Windsor shows the following occupancy rate increases: January 2010, 87.08 percent; February 2010, 88.75 percent; March 2010, 87.50 percent; April 2010, 89.17 percent; May 2010, 89.58 percent; June 2010, 88.75 percent; July 2010, 92.25 percent; August 2010, 94.17 percent; September 2010, 96.25 percent; and October 2010, 95.00 percent. No credible evidence was presented to show that the increased occupancy rate trend had a correlating financial improvement for Windsor's long term financial struggles. There is insufficient evidence to show that the addition of Crestwood to the Windsor market area would not adversely affect the financial feasibility of the existing Guarantee Fund. Florida Housing's priority to protect the Guarantee Fund is necessary to safeguard the resources used to support the creation and availability of affordable housing in the state.
Recommendation Upon consideration of the Findings of Fact and the Conclusions of Law reached, it is RECOMMENDED that the Florida Housing enter a final order denying Petitioner's application for funding. DONE AND ENTERED this 16th day of March, 2011, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY 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 16th day of March, 2011.
Findings Of Fact Section 420.5099, Florida Statutes, designates Respondent as the "housing credit agency" responsible for allocating Florida's share of federal income tax credits for low- income housing. Section 42 of the Internal Revenue Code provides federal income tax credits for qualifying low-income housing expenditures. The amount of the tax credit is nine percent of the qualifying basis, and this nine percent credit is available annually for ten years. Calculation of the qualifying basis starts with the project cost, less the cost of land acquisition. The difference is then multiplied by a ratio of affordable units (or floor space, if a smaller ratio results) over total units (or floor space) in the proposed project. The amount of federal income tax credit is based on the population of each state. In Florida, the demand exceeds the supply of these credits, so Florida's allocation plan includes procedures for the allocation of these limited credits. Section 42(m)(2)(A), Internal Revenue Code, limits the credit allocation for any project to the amount Respondent "determines is necessary for the financial feasibility of the project and its viability as a qualified low- income housing project throughout the credit period." Section 42(m)(2)(B)(iv), Internal Revenue Code, requires Respondent, in determining the feasibility and viability of the project, to consider "the reasonableness of the developmental and operational costs of the project." Certain guidelines have evolved in the low-income housing tax credit (LIHTC) program to limit the fees payable to developers and contractors, on which credits may be calculated. The portion of an allocation based on developer's fees is limited to fees constituting no more than 20 percent of a project's hard costs plus land acquisition. The 20 percent developer's limitation, which is not a promulgated rule, is not directly involved in any of the four cases. Another guideline, which is contingently involved in these cases, is that the portion of an allocation based on contractor's fees is limited to fees constituting no more than 14 percent of a project's hard costs. The so-called "626 rule" breaks the contractor's maximum fees into 6 percent general requirements, 2 percent overhead, and 6 percent profit. Each Petitioner is a limited partnership that constructed, owns, and leases low-income houses. Each Petitioner has applied for and received an allocation of LIHTCs for the construction and leasing of these low-income houses. In the related cases, Respondent tried to reduce Petitioners' LIHTCs for the two projects. Respondent claimed that the apparent general contractor, Heritage Construction Co. Inc. (Heritage), was not the real general contractor because Heritage had entered into prime subcontracts on both projects with Picerne Construction Corp. (Picerne) assuming nearly all of the work described in the contracts for lower costs. Respondent proposed instead to allocate LIHTCs based on the lower costs of the prime subcontracts. If Respondent failed to prevail in disregarding the contract costs in the contract between each Petitioner and Heritage, the 14 percent limitation would not limit the allocations of LIHTCs to Petitioners. These transactions were structured so that the total contractor's fees payable to Heritage did not exceed the 14 percent limitation or the individual components of the 14 percent limitation. However, if Respondent prevailed in disregarding the contract costs in the contract between each Petitioner and Heritage, and instead succeeded in using the lower contract amounts in the two Picerne prime subcontracts, then the 14 percent limitation would limit the allocation of LIHTCs. In this event, Petitioners challenge the 14 percent limitation in order to try to recover some of the lost tax credits. The 14 percent limitation, which is not promulgated as a rule, is recorded in two documents: the Best Practices Manual for the LIHTC program and the Underwriting Guidebook. It is undisclosed when the Best Practices Manual first included the 14 percent limitation, but this limitation has been in effect for about three years. The reference to the 14 percent limitation was included in the Underwriting Guidebook after March 1995, or else the Underwriting Guidebook itself was not in existence until after March 1995. The Underwriting Guidebook, which was prepared jointly by Respondent and underwriters, prohibits the allowance of general contracting fees in excess of 14 percent of hard costs. Respondent is not engaged in rulemaking as to the 14 percent limitation. Respondent presented no evidence that rulemaking as to this limitation was not feasible. To the contrary, rulemaking as to the 14 percent limitation is both feasible and practicable.
The Issue At issue in this proceeding is whether the actions of the Florida Housing Finance Corporation (“Florida Housing”) concerning the review and scoring of the responses to Request for Applications 2016-110, Housing Credit Financing for Affordable Housing Developments Located in Medium and Small Counties (the “RFA”), was clearly erroneous, contrary to competition, arbitrary or capricious. Specifically, the issue is whether Florida Housing acted contrary to the agency’s governing statutes, rules, policies, or the RFA specifications in finding that the applications of Petitioners JPM Outlook One Limited Partnership (“JPM Outlook”) and Grande Park Limited Partnership (“Grande Park”) were ineligible for funding.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: JPM Outlook is a Florida limited partnership based in Jacksonville, Florida, that is in the business of providing affordable housing. Grande Park is a Florida limited partnership based in Jacksonville, Florida, that is in the business of providing affordable housing. Hammock Ridge is a Florida limited liability company based in Coconut Grove, Florida, that is in the business of providing affordable housing. Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. For the purposes of this proceeding, Florida Housing is an agency of the State of Florida. Its purpose is to promote public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Housing is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code and has the responsibility and authority to establish procedures for allocating and distributing low-income housing tax credits. The low income housing tax credit program was enacted to incentivize the private market to invest in affordable rental housing. These tax credits are awarded competitively to housing developers in Florida for rental housing projects that qualify. The credits are then normally sold by developers for cash to raise capital for their projects. The effect of this sale is to reduce the amount that the developer would have to borrow otherwise. Because the total debt is lower, a tax credit property can (and must) offer lower, more affordable rents. Developers also covenant to keep rents at affordable levels for periods of 30 to 50 years as consideration for receipt of the tax credits. Housing tax credits are not tax deductions. For example, a $1,000 deduction in a 15-percent tax bracket reduces taxable income by $1,000 and reduces tax liability by $150, while a $1,000 tax credit reduces tax liability by $1,000. The demand for tax credits provided by the federal government exceeds the supply. Florida Housing is authorized to allocate housing tax credits and other funding by means of a request for proposal or other competitive solicitation in section 420.507(48). Florida Housing has adopted chapter 67-60 to govern the competitive solicitation process for several different programs, including the program for tax credits. Chapter 67-60 provides that Florida Housing allocate its housing tax credits, which are made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3). In their applications, applicants request a specific dollar amount of housing tax credits to be given to the applicant each year for a period of 10 years. Applicants will normally sell the rights to that future stream of income tax credits (through the sale of almost all of the ownership interest in the applicant entity) to an investor to generate the amount of capital needed to build the development. The amount which can be received depends upon the accomplishment of several factors, such as a certain percentage of the projected Total Development Cost; a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated area of some counties. This, however, is not an exhaustive list of the factors considered. Housing tax credits are made available through a competitive application process commenced by the issuance of a Request for Applications. A Request for Applications is equivalent to a “request for proposal,” as indicated in rule 67-60.009(3). The RFA in this case was issued on October 7, 2016. A modification to the RFA was issued on November 10, 2016, and responses were due December 2, 2016. A challenge was filed to the terms, conditions, or requirements of the RFA by parties not associated with the instant case, but that challenge was dismissed prior to hearing. Through the RFA, Florida Housing seeks to award up to an estimated $12,312,632 of housing tax credits to qualified applicants to provide affordable housing developments in Medium Counties, as well as up to an estimated $477,091 of housing tax credits to qualified applicants to provide affordable housing developments in Small Counties other than Monroe County. By the terms of the RFA, a review committee made up of Florida Housing staff reviewed and scored each application. These scores were presented in a public meeting and the committee ultimately made a recommendation as to which projects should be funded. This recommendation was presented to Florida Housing’s Board of Directors (“the Board”) for final agency action. On March 24, 2017, all applicants received notice that the Board had approved the recommendation of the review committee concerning which applications were eligible or ineligible for funding and which applications were selected for awards of housing tax credits, subject to satisfactory completion of the credit underwriting process. The notice was provided by the posting on Florida Housing’s website (www.floridahousing.org) of two spreadsheets, one listing the “eligible” and “ineligible” applications and one identifying the applications which Florida Housing proposed to fund. Florida Housing announced its intention to award funding to 10 developments, including Intervenor Hammock Ridge. Petitioners JPM Outlook and Grande Park were deemed ineligible. If JPM Outlook and Grande Park had been deemed eligible, each would have been in the funding range based on its assigned lottery number and the RFA selection criteria. If Grande Park had been deemed eligible, Hammock Ridge would not have been recommended for funding. Petitioners JPM Outlook and Grande Park timely filed notices of protest and petitions for administrative proceedings. The scoring decision at issue in this proceeding is based on Florida Housing’s decision that Petitioners failed to submit as Attachment 1 to Exhibit A the correct and properly signed version of the Applicant Certification and Acknowledgment Form. Petitioners’ admitted failure to submit the correct Applicant Certification and Acknowledgement Form was the sole reason that Florida Housing found Petitioners’ applications to be ineligible for funding. Section Four of the RFA was titled, “INFORMATION TO BE PROVIDED IN APPLICATION.” Listed there among the Exhibit A submission requirements was the Applicant Certification and Acknowledgement Form, described as follows: The Applicant must include a signed Applicant Certification and Acknowledgement form as Attachment 1 to Exhibit A to indicate the Applicant’s certification and acknowledgement of the provisions and requirements of the RFA. The form included in the copy of the Application labeled “Original Hard Copy” must reflect an original signature (blue ink is preferred). The Applicant Certification and Acknowledgement form is provided in Exhibit B of this RFA and on the Corporation’s Website http://www.floridahousing.org/Developers/ MultiFamilyPrograms/Competitive/2016- 110/RelatedForms/ (also accessible by clicking here). Note: If the Applicant provides any version of the Applicant Certification and Acknowledgement form other than the version included in this RFA, the form will not be considered. The final sentence of the quoted language is referred to by Florida Housing as the “effects clause.” The November 10, 2016, modifications to the RFA were communicated to applicants in three ways. First, Florida Housing provided a Web Board notice. The Florida Housing Web Board is a communication tool that allows interested parties and development partners to stay apprised of modifications to procurement documents. Second, each RFA issued by Florida Housing, including the one at issue in this proceeding, has its own specific page on Florida Housing's website with hyperlinks to all documents related to that RFA. Third, Florida Housing released an Official Modification Notice that delineated every modification, including a “blackline” version showing the changes with underscoring for emphasis. Brian Parent is a principal for both JPM Outlook and Grande Park. Mr. Parent received the Web Board notification of the RFA modifications via email. Upon receiving the email, Mr. Parent reviewed the modifications on the Florida Housing website. The modification to the RFA, posted on Florida Housing’s website on November 10, 2016, included the following modification of the Applicant Certification and Acknowledgement Form, with textual underscoring indicating new language: Pursuant to Rule 67-60.005, F.A.C., Modification of Terms of Competitive Solicitations, Florida Housing hereby modifies Item 2.b.(4) of the Applicant Certification and Acknowledgement Form to read as follows: (4) Confirmation that, if the proposed Development meets the definition of Scattered Sites, all Scattered Sites requirements that were not required to be met in the Application will be met, including that all features and amenities committed to and proposed by the Applicant that are not unit- specific shall be located on each of the Scattered Sites, or no more than 1/16 mile from the Scattered Site with the most units, or a combination of both. If the Surveyor Certification form in the Application indicates that the proposed Development does not consist of Scattered Sites, but it is determined during credit underwriting that the proposed Development does meet the definition of Scattered Sites, all of the Scattered Sites requirements must have been met as of Application Deadline and, if all Scattered Sites requirements were not in place as of the Application Deadline, the Applicant’s funding award will be rescinded; Note: For the Application to be eligible for funding, the version of the Applicant Certification and Acknowledgement Form reflecting the Modification posted 11-10-16 must be submitted to the Corporation by the Application Deadline, as outlined in the RFA. Rule 67-48.002(105) defines “Scattered Sites” as follows: “Scattered Sites,” as applied to a single Development, means a Development site that, when taken as a whole, is comprised of real property that is not contiguous (each such non-contiguous site within a Scattered Site Development, is considered to be a “Scattered Site”). For purposes of this definition “contiguous” means touching at a point or along a boundary. Real property is contiguous if the only intervening real property interest is an easement, provided the easement is not a roadway or street. All of the Scattered Sites must be located in the same county. The RFA modification included other changes concerning Scattered Sites. Those changes either modified the Surveyor Certification Form itself or required applicants to correctly provide information concerning Scattered Sites in the Surveyor Certification Form. Each Petitioner included in its application a Surveyor Certification Form indicating that its proposed development sites did not consist of Scattered Sites. The Surveyor Certification Forms submitted were the forms required by the modified RFA. There was no allegation that Petitioners incorrectly filled out the Surveyor Certification Forms. However, the Applicant Certification and Acknowledgement Form submitted by each of the Petitioners was the original form, not the form as modified to include the underscored language set forth in Finding of Fact 20 regarding the effect of mislabeling Scattered Sites on the Surveyor Certification Form. The failure of JPM Outlook and Grande Park to submit the correct Applicant Certification and Acknowledgement Form was the sole reason that Florida Housing found them ineligible for funding. In deposition testimony, Ken Reecy, Florida Housing’s Director of Multifamily Programs, explained the purpose of the Applicant Certification and Acknowledgement Form: There’s a number of things that we want to be sure that the applicants are absolutely aware of in regard to future actions or requirements by the Corporation. If they win the award, there are certain things that they need to know that they must do or that they are under certain obligations, that there’s certain obligations and commitments associated with the application to make it clear what the requirements--what certain requirements are, not only now in the application, but also perhaps in the future if they won awards. At the conclusion of a lengthy exposition on the significance of the modified language relating to Scattered Sites, Mr. Reecy concluded as follows: [W]e wanted to make sure that if somebody answered the question or did not indicate that they were a scattered site, but then we found out that they were, in fact, a scattered site, we wanted to make it absolutely clear to everyone involved that in the event that your scattered sites did not meet all of those requirements as of the application deadline, that the funding would be rescinded. Petitioners argue that the failure to submit the modified Applicant Certification and Acknowledgement Form should be waived as a minor irregularity. Their simplest argument on that point is that their applications did not in fact include Scattered Sites and therefore the cautionary language added to the Applicant Certification and Acknowledgement Form by the November 10, 2016, modifications did not apply to them and could have no substantive effect on their applications. Petitioners note that their applications included the substantive changes required by the November 10, 2016, modifications, including those related to Scattered Sites. Petitioners submitted the unmodified Applicant Certification and Acknowledgement Form as Attachment 1 to their modified Exhibit A. Petitioners further note that the “Ability to Proceed Forms” they submitted with their applications on December 2, 2016, were the forms as modified on November 10, 2016. They assert that this submission indicates their clear intent to acknowledge and certify the modified RFA and forms, regardless of their error in submitting the unmodified Applicant Certification and Acknowledgement Form. Petitioners assert that the Scattered Sites language added to the Applicant Certification and Acknowledgement Form by the November 10, 2016, modifications was essentially redundant. Mr. Reecy conceded that the warning regarding Scattered Sites was not tied to any specific substantive modification of the RFA. The language was added to make it “more clear” to the applicant that funding would be rescinded if the Scattered sites requirements were not met as of the application deadline. Petitioners point out that this warning is the same as that applying to underwriting failures generally. Petitioners assert that the new language had no substantive effect on either the Applicant Certification and Acknowledgement Form or on the certifications and acknowledgements required of the applicants. Even in the absence of the modified language, Petitioners would be required to satisfy all applicable requirements for Scattered Sites if it were determined during underwriting that their applications included Scattered Sites. Petitioners conclude that, even though the modified Applicant Certification and Acknowledgement Form was not included with either of their applications, the deviation should be waived as a minor irregularity. Florida Housing could not have been confused as to what Petitioners were acknowledging and certifying. The unmodified Applicant Certification and Acknowledgement Form was submitted with a modified Attachment 1 that included all substantive changes made by the November 10, 2016, modifications to the RFA. Petitioners gained no advantage by mistakenly submitting an unmodified version of the Applicant Certification and Acknowledgement Form. The submittal of the unmodified version of the form was an obvious mistake and waiving the mistake does not adversely impact Florida Housing or the public. Mr. Reecy testified that he could recall no instance in which Florida Housing had waived the submittal of the wrong form as a minor irregularity. He also observed that the credibility of Florida Housing could be negatively affected if it waived the submission of the correct form in light of the “effects clause” contained in Section Four: Due to the fact that we did have an effects clause in this RFA and we felt that, in accordance with the rule requirements regarding minor irregularities, that it would be contrary to competition because we wanted everybody to sign and acknowledge the same criteria in the certification; so we felt that if some did--some certified some things and some certified to others, that that would be problematic. And the fact that we had very specifically instructed that if we did not get the modified version, that we would not consider it, and then if we backed up and considered it, that that would erode the credibility of the Corporation and the scoring process. Mr. Reecy testified that the modification to the Applicant Certification and Acknowledgement Form was intended not merely to clarify the Scattered Sites requirement but to strengthen Florida Housing’s legal position in any litigation that might ensue from a decision to rescind the funding of an applicant that did not comply with the Scattered Sites requirements as of the application deadline. He believed that waiving the “effects clause” would tend to weaken Florida Housing’s legal position in such a case. Petitioners had clear notice that they were required to submit the modified Applicant Certification and Acknowledgement Form. They did not avail themselves of the opportunity to protest the RFA modifications. There is no allegation that they were misled by Florida Housing or that they had no way of knowing they were submitting the wrong form. The relative importance of the new acknowledgement in the modified form may be a matter of argument, but the consequences for failure to submit the proper form were plainly set forth in the effects clause. Florida Housing simply applied the terms of the modified RFA to Petitioners’ applications and correctly deemed them ineligible for funding.
Recommendation Based on the foregoing, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order confirming its initial decision finding JPM Outlook One Limited Partnership and Grande Park Limited Partnership ineligible for funding, and dismissing each Formal Written Protest and Petition for Administrative Hearing filed by JPM Outlook One Limited Partnership and Grande Park Limited Partnership. DONE AND ENTERED this 29th day of June, 2017, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 2017.
The Issue The issue for determination in this bid protest proceeding is whether the Florida Housing Finance Corporation’s (“Florida Housing”) intended award of tax credits for the preservation of existing affordable housing developments was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Based on the oral and documentary evidence presented at hearing, and the entire record in this proceeding, the Findings of Fact are as follows: Parties Petitioner, Madison Point, is a Florida limited liability company and the designated applicant for funding through the RFA to construct an 85-unit development for low- income elderly persons in Pinellas County, Florida. Petitioner, American Residential Development, LLC, is the designated developer for the proposed development. Intervenor, Heritage Oaks, is a Florida limited liability limited partnership in the business of providing affordable housing. Heritage Oaks is an applicant for financing in response to the RFA to construct an 85-unit development for low-income elderly persons in Pinellas County, Florida. Intervenor, HTG Hudson, is a Florida limited liability company in the business of developing affordable housing. HTG Hudson was an applicant for financing in response to the RFA to construct an 87-unit development for low-income elderly persons in Pinellas County, Florida. However, all issues regarding HTG Hudson have been resolved pursuant to a settlement agreement which was attached as Exhibit “A” to the Joint Prehearing Stipulation. Pursuant to the settlement agreement, HTG Hudson’s application is ineligible for funding. Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes, and for the purpose of this proceeding, an agency of the State of Florida. Its purpose is to promote public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Housing is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code and has the responsibility and authority to establish procedures for allocating and distributing low income housing tax credits. Affordable Housing Tax Credits The low-income housing tax credit program (commonly referred to as “tax credits” or “housing credits”) was enacted to incentivize the private market to invest in affordable rental housing. These tax credits are awarded competitively to housing developers in Florida for rental housing projects which qualify. These credits are then normally sold by developers for cash to raise capital for their projects. The effect is that it reduces the amount that the developer would have to borrow otherwise. Because the total debt is lower, a tax credit property can (and must) offer lower, more affordable rents. Developers also covenant to keep rents at affordable levels for periods of 30 to 50 years as consideration for receipt of the tax credits. The demand for tax credits provided by the federal government exceeds the supply. Florida Housing is authorized to allocate tax credits, State Apartment Incentive Loan (“SAIL”) funding, and other funding by means of request for proposal or other competitive solicitation in section 420.507(48), and adopted Florida Administrative Code Chapter 67-60, to govern the competitive solicitation process for several different programs, including the program for tax credits. Chapter 67-60 provides that Florida Housing allocate its tax credits, which were made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3). Application Process In their applications, applicants request a specific dollar amount of housing credits to be given to the applicant each year for a period of 10 years. Applicants will normally sell the rights to that future stream of income tax credits (through the sale of almost all of the ownership interest in the applicant’s entity) to an investor to generate the amount of capital needed to build the development. The amount which can be received depends upon the accomplishment of several factors such as a certain percentage of the projected “total development cost” (total costs incurred in the completion of a development); a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated areas of some counties. This, however, is not an exhaustive list of the factors considered. Tax credits are made available through a competitive application process commenced by the issuance of an RFA. An RFA is equivalent to a “request for proposal” as indicated in rule 67-60.009(3). The RFA at issue here is RFA 2016-113, Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas counties. The RFA was issued on October 28, 2016, and responses were initially due December 8, 2016. The RFA was modified on November 10, 2016, and, among other revisions, the application deadline was extended to December 30, 2016. Through the RFA, Florida Housing seeks to award up to an estimated $14,669,052 of housing credits to qualified applicants in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas counties. In response to RFA 2016-113, 43 applications were submitted for funding, including Madison Point and Heritage Oaks. Madison Point submitted application No. 2017-232C seeking $1,660,000 in annual allocation of housing credits to finance the construction of an 80-unit development in Pinellas County. Heritage Oaks submitted application No. 2017-201C, seeking $1,660,000 in annual allocation of housing credits to finance the construction of an 85-unit development in Pinellas County. The RFA sets forth the information required to be provided by an applicant, which includes a general description of the type of projects that will be considered eligible for funding and delineates the submission requirements. In order to be considered for funding selection, the application must meet all of the eligibility requirements set forth in the RFA. The eligibility requirements include, among other things, “[a]ll “Mandatory Items” described in section five of the RFA.” The RFA sets forth a list of mandatory items that must be included in a response including, but are not limited to, appropriate zoning, site control, development category, and occupancy status of any existing units. As part of the general development information, the RFA requires applicants to select a development category applicable to its proposed development. This is a mandatory item of the RFA. Applicants are instructed to select amongst the following categories: New Construction (where 50 percent or more of the units are new construction) Rehabilitation (where less than 50 percent of the units are new construction) Acquisition and Rehabilitation (acquisition and less than 50 percent of the units are new construction) Redevelopment (where 50 percent or more of the units are new construction) Acquisition and Redevelopment (acquisition and 50 percent or more of the units are new construction) Once disclosed in the application, the development category cannot be changed. In the RFA, “new construction” while capitalized is not a defined term. However, rule 67-48.002(98), defines “redevelopment” as follows: With regard to a proposed Development that involves demolition of multifamily rental residential structures currently or previously existing that were originally built in 1986 or earlier and either originally received financing or are currently financed through one or more of the following HUD or RD programs: Sections 202 of the Housing Act of 1959 (12 U.S.C. §1701q), 236 of the National Housing Act (12 U.S.C. §1701), 514, 515, or 516 of the U.S. Housing Act of 1949 (42 U.S.C. §1484), 811 of the U.S. Housing Act of 1937 (42 U.S.C. §1437), or have PBRA; and new construction of replacement structures on the same site maintaining at least the same number of PBRA units; or With regard to proposed Developments that involve demolition of public housing structures currently or previously existing on a site with a Declaration of Trust that were originally built in 1986 or earlier and that are assisted through ACC; and new construction of replacement structures on the same site, providing at least 25 percent of the total new units with PBRA, ACC, or both, after Redevelopment. Although the Rehabilitation Category is defined, it is not relevant for purposes of this proceeding. Additionally, the RFA requires applicants to answer whether the proposed development consists of: a) 100 percent new construction units; b) 100 percent rehabilitation units; or c) a combination of new construction units and rehabilitation units, and state the quantity of each type. This is a mandatory item of the RFA. Selection Process Florida Housing received 43 applications seeking funding in RFA 2016-113. Florida Housing’s executive director appointed a Review Committee of Florida Housing staff to evaluate the applications for eligibility and scoring and to make recommendations to Florida Housing’s Board of Directors. Pursuant to the terms of the RFA, the applications were received, processed, deemed eligible or ineligible, scored, and ranked. The Review Committee determined that, among other applicants, the applications of Heritage Oaks and Madison Point were eligible for funding. Through the ranking and selection process outlined in the RFA, Heritage Oaks was recommended to the Board of Directors to be selected for funding within Pinellas County. The Review Committee developed a chart listing its funding recommendations for the RFA to be presented to Florida Housing’s Board of Directors. On May 5, 2017, Florida Housing’s Board of Directors met and considered the recommendations of the Review Committee for RFA 2016-113. Also, on May 5, 2017 following the Board meeting, Petitioners, and all other applicants in RFA 2016-113, received notice that Florida Housing’s Board of Directors determined whether applications were eligible or ineligible for consideration for funding, and that certain eligible applicants were selected for award of tax credits. Such notice was provided by the posting of two spreadsheets, one listing the “eligible” and “ineligible” applications in RFA 2016-113 and one identifying the applications which Florida Housing proposed to fund on the Florida Housing website, www.floridahousing.org. Of the 43 applications submitted, 37 were deemed “eligible” and six were deemed “ineligible.” In that May 5, 2017, posting, Florida Housing announced its intention to award funding to seven applications, including Heritage Oaks. Madison Point was deemed eligible but not selected for funding. Madison Point timely filed a Notice of Protest and Petition for Formal Administrative Proceedings. Heritage Oaks intervened as a named party and intervention was granted. The scoring decisions at issue in this proceeding are related to Florida Housing’s decision to award funding to Heritage Oaks based on its responses regarding occupancy status and local government contribution. The RFA specifies an “application sorting order” to rank applicants for potential funding. The first consideration in sorting eligible applications for potential funding is application score. The maximum score an applicant can achieve is 28 points. In the case of a tie score, Florida Housing incorporated a series of “tie breakers” into the sorting process. The tiebreakers for this RFA, in order of applicability, are: First, by Development Category Funding Preference; Second, by a Per Unit Construction Funding Preference; Third, by a Leveraging Classification based on the amount of total Florida Housing funding per set-aside unit; Fourth, by the eligibility for the 75 or More Total Unit Funding Preference; Fifth, by satisfaction of a Florida Job Creation Funding preference, which applies a formula to reflect the estimated number of jobs created per $1 million of funding; Lastly, if necessary, by randomly assigned lottery number. The RFA set out a selection process for eligible applicants, after the sorting and ranking process outlined above. That selection process consisted of selecting the highest ranking eligible application for a proposed development in each of the following counties first: Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas. If funding remained after those selections, then the highest ranking eligible unfunded application in Broward would be selected next. Heritage Oaks and Madison Point selected the elderly non-Assisted Living Facility (“ALF”) demographic and the proposed developments were located in Pinellas County. Florida Housing’s preliminary agency action selected Heritage Oaks for funding for Pinellas County. Heritage Oaks’ Application Heritage Oaks’ proposed development site consists of approximately 4.99 acres. Heritage Oaks’ proposed development site contains existing roads owned by Pinellas County. Heritage Oaks indicates that its proposed development site was comprised of scattered sites. There are existing housing units on Heritage Oaks’ development site. However, Heritage Oaks’ application indicates that “there are no existing units.” Heritage Oaks’ application selected “new construction” as its development category. Heritage Oaks’ proposed development involves demolition of currently-occupied, multifamily, public housing rental structures that were originally built in 1986 or earlier and either originally received financing or are currently financed through one or more of the following HUD or RD programs: Sections 202 of the Housing Act of 1959 (12 U.S.C. § 1701 q); 236 of the National Housing Act (12 U.S.C. § 1701); 514, 515, or 516 of the U.S. Housing Act of 1949 (42 U.S.C. § 1484); and 811 of the U.S. Housing Act of 1937 (42 U.S.C. § 1437). Development Category In response to the RFA requirements, Heritage Oaks selected “New Construction” as its development category. Heritage Oaks also indicated that its proposed development consists of 100 percent new construction. Mr. Evjen acknowledged that Heritage Oaks’ proposed development involves the demolition of existing structures on the proposed development site and the construction of 85 new units. Mr. Evjen explained that the proposed development includes 71 senior units in a three-story, mid-rise building, and seven duplex buildings, which would include the other 14 units on the proposed development site. The testimony at hearing indicated that at the time of the application deadline, Heritage Oaks’ proposed development did not satisfy all of the criteria set forth in the definition of redevelopment, as set forth in paragraph 18, supra. At hearing, Mr. Evjen and Ms. Blinderman testified that to qualify as redevelopment, at least 25 percent of the new units must receive Project Based Rental Assistance (“PBRA”). PBRA units are those with a rental subsidy through a contract with the United States Department of Housing and Urban Development (“HUD”) or the Rural Development Services (formerly the Farmer’s Home Administration) of the United States Department of Agriculture. See Fla. Admin. Code Rules 67-48.002(72), (85), and (98). Heritage Oaks intends to develop the proposed development with Pinellas County Housing Authority (“Housing Authority”). At the time of the application deadline, the Housing Authority was in discussions with HUD regarding the final count, if any, of PBRA units. The lack of a resolution with HUD is beyond the authority of Heritage Oaks and remains uncertain. As of the application deadline, Heritage Oaks could not know if 25 percent of its new units would receive PBRA and, therefore, could not classify the proposed development as redevelopment. While it may be possible that Heritage Oaks’ proposed development may meet the definition of redevelopment at some point in the future, at the time of the application it did not meet the definition. At hearing, no testimony or documentary evidence was offered to establish that the proposed development currently falls within the definition of redevelopment. Respondent found this classification to be acceptable. Petitioners assert that it is reasonable that Heritage Oaks would meet the threshold to satisfy the criteria for the redevelopment category. However, it was more reasonable that Heritage Oaks would not meet the threshold and be ineligible for funding, if the redevelopment category had been incorrectly selected. Therefore, the evidence supports that it was reasonable for Heritage Oaks to identify its development project as new construction. Occupancy Status Petitioners also argue that Heritage Oaks should not be awarded funding because it failed to disclose the occupancy status of existing units on the proposed development site. In the RFA, the subheading and language for section four (A)(5)(e)(3) provides as follows: Number of Units in Proposed Development: The Applicant must indicate which of the following applies with regard to the occupancy status of any existing units: Existing units are currently occupied Existing units are not currently occupied There are no existing units The section then instructs the applicant to refer to section four (A)(5)(e) of the RFA instructions before answering the occupancy status question. The RFA instructions at section four (A)(5)(e) provide as follows: e. Number of Units in Proposed Development: The Applicant must state the total number of units. Note: The proposed Development must consist of a minimum of 50 total units. Proposed Developments consisting of 75 or more total units will be eligible for the 75 or More Total Unit Funding Preference (outlined at Section Four B.2. of the RFA). If the Elderly Demographic Commitment (ALF or Non- ALF) is selected at question 2.b. of Exhibit A, the proposed Development cannot exceed the maximum total number of units outlined in Item 1 of Exhibit C of the RFA. The Applicant must indicate whether the proposed Development consists of (a) 100% new construction units, (b) 100% rehabilitation units, or (c) a combination of new construction units and rehabilitation units, and state the quantity of each type. The Applicant must indicate the occupancy status of any existing units at question 5.e.(3) of Exhibit A. Developments that are tentatively funded will be required to provide to the Credit Underwriter a plan for relocation of existing tenants, as outlined in Item 2.b.(6) of the Applicant Certification and Acknowledgement form. The plan shall provide information regarding the relocation site; accommodations relevant to the needs of the residents and length of time residents will be displaced; moving and storage of the contents of a resident’s dwelling unit; as well as the approach to inform and prepare the residents for the rehabilitation activities. In response to this RFA requirement and the cited RFA Instructions concerning Occupancy Status, Heritage Oaks indicated that “there are no existing units” in its proposed development. However, Mr. Evjen testified that there were existing units on the development site as of the application deadline and some of those units were occupied. Heritage Oaks pointed out that a review of the RFA reflects that it is organized in an outline format with headings and subheadings. For example, section four concerns information to be provided in the application. Section four A(5) then requests general development information. Section four (A)(5)(e) requests information concerning the number of units in the proposed development. Mr. Evjen further testified that, based on review of the RFA and the instructions, Heritage Oaks took a three-step approach in responding to the occupancy status question. Heritage Oaks properly answered the first two questions. First, Heritage Oaks provided the total number of units as 85. Second, Heritage Oaks indicated that “all 85 units would be new construction.” In the final question, Heritage Oaks considered whether any existing units would remain as a “part of its proposed development.” Because no existing units would be part of its proposed development, Heritage Oaks responded “there are no existing units” in its proposed development. However, the term “proposed” was not used in question 5.e.(3) as was the case in the prior questions in the same subsection. Mr. Evjen also testified that he read the question as “if there are rehab[ilitation] units, are they occupied? Heritage Oaks’ erroneous interpretation of the question resulted in its failure to provide an accurate answer. The question simply requested the “occupancy status of any existing units.” The question was clear and unambiguous. The parties have stipulated that there are existing housing units on the Heritage Oaks proposed development site. However, Heritage Oaks’ application indicates that there are no existing units. The representation that there were no existing units was a false statement of material fact. It is worth noting that the parties stipulated at the beginning of the hearing that there is no allegation of fraud or intentional deception. There is also no evidence in the record of intentional deception and therefore, there is no finding by the undersigned that Heritage Oaks engaged in intentional misconduct. However, whether intentional or not, Heritage Oaks’ representation of no existing units is a false statement. According to Mr. Reecy, Florida Housing asks the question regarding occupancy status of existing units because Florida Housing wants to make sure that the developer can handle the cost issues related to relocation and that the relocation needs of the existing tenants will be met. Additionally, Mr. Reecy testified that Florida Housing relies upon applicants to accurately respond to questions in the RFA because, at the time of scoring, no independent research is conducted to verify responses. Regarding a relocation plan, Heritage Oaks relies on the Declaration of Trust’s requirement to have a tenant relocation plan as a remedy for the failure to properly respond to the occupancy status question. However, the Declaration of Trust is a HUD requirement that is not controlled by Florida Housing. In fact, Mr. Evjen testified that Heritage Oaks’ co-developer was researching terminating the Declaration of Trust. Given the fact that Heritage Oaks could terminate its Declaration of Trust, the Declaration of Trust does not provide adequate assurance that the tenants in the existing housing units will be adequately relocated once Florida Housing allocates its funding. Florida Housing has a material interest in ensuring that tenants located in existing housing units are properly and adequately relocated during the development phase of any Florida Housing-funded development. Accordingly, Florida Housing’s scoring decision with regard to Heritage Oaks’ response to the occupancy status question was contrary to the terms of the RFA and clearly erroneous. Heritage Oaks is ineligible for funding under RFA 2016-113. Local Government Contribution At section four (A)(10)(b), an applicant can obtain 10 points if it can demonstrate a high level of local government interest in its project via an increased amount of local government contribution. To satisfy this requirement, an applicant must attach a properly completed and executable Florida Housing Finance Corporation Local Government Verification of Contribution-Loan Form (“loan form”). The RFA establishes a contribution threshold amount which qualifies an application for the local government area of opportunity points. The RFA defines “local government areas of opportunity” as follows: Developments receiving a high level of Local Government interest in the project as demonstrated by an irrevocable funding contribution that equals or exceeds 2.5 times the Total Development Cost Per Unit Base Limitation (exclusive of any add-ons or multipliers), as provided in Item 7 of Exhibit C to the RFA, for the Development Type committed to for the proposed Development. The minimum local government areas of opportunity funding amounts are outlined in section four A.10.b. of the RFA. A single jurisdiction (i.e., the county or a municipality) may not contribute cash loans and/or cash grants for any other proposed development applying in the same competitive solicitation in an amount sufficient to qualify as Local Government Areas of Opportunity, per the competitive solicitation. In response to this RFA requirement, Heritage Oaks submitted Attachment 15, a loan form from Pinellas County, Florida, in the amount of $551,000. Based upon the minimum local government area of opportunity funding amounts established in the RFA, this amount qualified Intervenor Heritage Oaks for 10 points. Petitioners challenge Intervenor Heritage Oaks’ loan form for two reasons. First, Petitioners opine that the face value of the commitment and the net present value included in the loan form cannot be the same amount and, therefore, a calculation error must have occurred. Petitioners rely on examples of various calculations found in the RFA. Next, Petitioners allege that the loan form was not properly signed and no final approval was given by Pinellas County. Intervenor Heritage Oaks provided a loan form from Pinellas County. The loan form committed Pinellas County to a loan in the amount of $551,000. Mr. Bussey, the individual who processed the application and award of commitment, indicated that the commitment was a loan that would be forgiven as long as certain requirements were met and kept. Mr. Bussey further indicated that there were no loan payments or interest rates associated with the loan. Accordingly, he indicated that the loan value was the net present value of the loan, which means the commitment amount and the net present value for the Pinellas County loan is the same number, $551,000. While Petitioners allege that the loan form was not appropriately signed and no final approval had occurred, the greater weight of the evidence shows otherwise. Specifically, Petitioners opine that either a resolution or some action by the Pinellas County Board of County Commissioners or the County Administrator was necessary as asserted by their witness, Mr. Banach. While Mr. Banach was critical of the loan verification form, he acknowledged that he is not an expert regarding the process for Pinellas County loan contribution and he did not process the loan application. He further acknowledged that Mr. Bussey, the individual who processed the loan, found no error with the form. The evidence shows that the loan form was executed by Charles Justice, who at the time of the loan form’s execution was the Chairman of the Pinellas County Board of County Commissioners. Mr. Bussey explained the process for approving the loan form and indicated that Mr. Justice, as Chairman, had the authority to sign the loan form. Mr. Bussey also pointed out language in the loan form which provides as follows: “This certification must be signed by the chief appointed official (staff) responsible for such approval, . . . Chairperson of the Board of the County Commissioners.” Mr. Justice is one of the designated individuals the form itself indicated is acceptable. Mr. Bussey indicated that no further approvals were necessary. At hearing, Florida Housing indicated that the loan form submitted by Heritage Oaks satisfied the requirements of the RFA and this position was not shown to be erroneous or unreasonable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order rescinding the intended award to Heritage Oaks and designating Madison Point and America Residential Development, LLC, as the recipients of the funding under RFA 2016-113. DONE AND ENTERED this 11th day of August, 2017, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2017. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Betty Zachem, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) Marisa G. Button, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Michael G. Maida, Esquire Michael G. Maida, P.A. 1709 Hermitage Boulevard, Suite 201 Tallahassee, Florida 32308 (eServed) Douglas P. Manson, Esquire Manson Bolves Donaldson & Varn, P.A. 1101 West Swann Avenue Tampa, Florida 33606-2637 (eServed) Paria Shirzadi, Esquire Manson Bolves Donaldson & Varn, P.A. 1101 West Swann Avenue Tampa, Florida 33606-2637 (eServed) Craig D. Varn, Esquire Manson Bolves Donaldson Varn, P.A. 204 South Monroe Street, Suite 201 Tallahassee, Florida 32301 (eServed) J. Timothy Schulte, Esquire Zimmerman, Kiser, & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Orlando, Florida 32801 (eServed) Sarah Pape, Esquire Zimmerman, Kiser, & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Orlando, Florida 32801 (eServed) Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC 1725 Capital Circle Northeast, Suite 304 Tallahassee, Florida 32308 (eServed) Michael P. Donaldson, Esquire Carlton Fields Jorden Burt, P.A. Post Office Drawer 190 215 South Monroe Street, Suite 500 Tallahassee, Florida 32302-0190 (eServed) Kate Flemming, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed)
The Issue The issues are (1) whether Florida Administrative Code Rules 67-48.002(95) and 67-60.010(3) are invalid exercises of delegated legislative authority; and (2) whether certain statements in Request for Application 2016-113 (RFA-113) issued by Respondent, Florida Housing Finance Corporation (Florida Housing or agency), are unlawful unadopted rules in violation of section 120.54(1)(a), Florida Statutes (2016).
Findings Of Fact The Parties Florida Housing is a public corporation created pursuant to section 420.504. One of its responsibilities is to award low-income housing tax credits, which developers use to finance the construction of affordable housing. Tax credits are made available to states annually by the United States Treasury Department and are then awarded pursuant to a competitive cycle that starts with Florida Housing's issuance of an RFA. This proceeding concerns RFA-113. Petitioners ARD and Madison are developers of affordable housing units and submit applications for tax credits. Law and Wolf are principals of a developer of affordable housing units. Berkshire, Hawthorne, and Southwick are limited partnerships that have submitted applications for tax credits. All Petitioners intend to submit applications in response to RFA-113 and will be subject to rule chapters 67-48 and 67-60. Intervenors Heritage and HTG are developers of affordable housing who intend to file applications pursuant to RFA-113. Background On October 28, 2016, Florida Housing published on its website proposed solicitation RFA-113, a 121-page document inviting applications for the award of up to $14,669,052.00 in housing tax credits for the development of affordable, multifamily housing located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas Counties. After Petitioners gave notice of their intent to challenge RFA-113, Florida Housing attempted to resolve the dispute by modifying the solicitation on November 13, 2016. The modification did not resolve the dispute. On November 14, 2016, Petitioners timely filed with DOAH two Petitions, each challenging rules 67-48.002(95) and 67-60.010(3) and various statements in RFA-113. On the same date, they filed with Florida Housing two petitions challenging certain specifications in the solicitation. Although the Petitions include allegations that two existing rules are invalid, Petitioners' main concern appears to be directed at various provisions in RFA-113 that they assert limit their ability to be awarded tax credits. These contentions are addressed separately below. C. Rule 67-48.002(95) The federal Low-Income Housing Credit Program is governed by 26 U.S.C.S. § 42 (section 42). The program allocates annually federal income tax credits to states on a per capita basis to help facilitate private development of affordable low-income housing. As the housing credit agency for the State of Florida, Florida Housing has the authority to administer various federal and state affordable housing programs, including the Low-Income Housing Credit Program. See § 420.5099(1), Fla. Stat. Section 42(m)(l)(A)(i) requires each state that administers low-income housing credits to adopt a QAP, which identifies the selection criteria used for distributing the housing credits. To comply with this requirement, rule 67-48.002(95) adopts and incorporates by reference the 2016 QAP. The rule reads as follows: (95) "QAP" or "Qualified Allocation Plan" means, with respect to the HC [Housing Credit] program, the 2016 Qualified Allocation Plan which is adopted and incorporated herein by reference, effective upon the approval by the Governor of the State of Florida, pursuant to Section 42(m)(1)(B) of the IRC and sets forth the selection criteria and the preferences of the Corporation for Developments which will receive Housing Credits. The QAP is available on the Corporation's Website under the Multifamily Programs link or by contacting the Housing Credit Program at 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301-1329, or from http://flrules.org/Gateway/reference/asp?No= Ref-07355. The 2016 QAP is a five-page document that replaces the 2015 QAP and generally describes the process for allocating 2017 housing credits. In summary, it identifies Florida Housing as the housing credit agency for the State, lists the federally- mandated preferences and selection criteria to be used when allocating housing credits, describes in brief terms the competitive solicitation process, describes the process for awarding competitive and noncompetitive housing credits, and describes the procedures for monitoring and reporting a project's noncompliance with IRC requirements. Section 42(m)(1)(C) lists ten selection criteria that must be incorporated into the QAP. To comply with this requirement, section I.B. of the 2016 QAP provides that the following selection criteria will be considered when determining the allocation of housing credits: project location; housing needs characteristics; project characteristics including housing as part of a community revitalization plan; sponsor characteristics; tenant populations with special housing needs; public housing waiting lists; tenant populations of individuals with children; projects intended for eventual tenant ownership; energy efficiency of the projects; and historic nature of project. These criteria are identical to those listed in section 42(m)(1)(C) and are intended to provide general guidance for the entire housing credit program, and not just RFA-113. Other than the ten criteria, the IRC requires no further detail regarding the selection criteria. However, more specific guidance is found in the individual RFAs, tailored to each type of solicitation. Since late 2013, when the RFA solicitation process began, around 15 to 20 RFAs have been issued annually. Petitioners assert the QAP violates the IRC by not listing the RFA criteria. However, neither the Department of Housing and Urban Development nor the Internal Revenue Service has ever told Florida Housing that the QAP does not comply with the IRC or other applicable federal regulations. The rule cites section 420.507 as Florida Housing's rulemaking authority. That statute has 49 subsections that identify the various powers necessary for Florida Housing to carry out and effectuate the provisions of the law. Pertinent to this dispute is subsection (12), a general grant of authority for Florida Housing "[t]o make rules necessary to carry out the purposes of [part V, chapter 420]," which governs the various low-income housing programs administered by the agency. The rule cites section 420.5099(1) as the law being implemented. That provision designates Florida Housing as the housing credit agency for the state, along with its "responsibility and authority to establish procedures necessary for proper allocation and distribution of low-income housing tax credits and [to] exercise all powers necessary to administer the allocation of such credits." While consistency with section 42 is required in order to satisfy federal requirements, the IRC is not the law being implemented. Petitioners allege the rule exceeds the agency's grant of rulemaking authority and enlarges, modifies, or contravenes the specific provisions of law implemented. See § 120.52(8)(b) and (c), Fla. Stat. In short, they contend that other than the generic selection criteria required by section 42(m)(1)(C), the QAP fails to include the other selection criteria in RFA-113 that are used during the competitive process. D. Rule 67-60.010(3) Petitioners also challenge rule 67-60.010(3). The entire rule, entitled "Funding Preferences," reads as follows: In connection with any competitive solicitation, where all other competitive elements are equal, the Corporation may establish a preference for developers and general contractors who demonstrate the highest rate of Florida job creation in the development and construction of affordable housing. In any competitive solicitation, the Corporation may prescribe a priority to fund affordable housing projects in the Florida Keys Area of Critical State Concern and the City of Key West Area of Critical State Concern where, due to challenging environmental, land use, transportation, workforce, and economic factors, it is extremely difficult to successfully finance, develop, and construct affordable housing. The Corporation may establish other funding priorities as deemed appropriate for a competitive program or solicitation. The rule cites section 420.507(12) as the source of rulemaking authority. That statute is a general grant of authority allowing Florida Housing to adopt rules necessary to carry out the purposes of part V, chapter 420, which includes the issuance of tax credits under the Low-Income Housing Credit Program. The rule cites sections 420.507(47), (48), and (49), 420.5087, 420.5089(2), and 420.5099 as the laws being implemented. In their totality, those provisions authorize Florida Housing to adopt rules and procedures for allocating housing credits and loans for programs that it administers pursuant to chapter 420. One authorized procedure is the authority to use RFAs when awarding low-income housing tax credits. See § 420.507(48), Fla. Stat. On the faulty premise that RFA-113 derives its authority from subsection (3) of the rule, rather than statutory law, Petitioners argue that Florida Housing is allocating low- income housing tax credits in a manner that violates section 42 and chapter 420. They contend authority is delegated by the RFA to local governments to choose which developer will receive local funding, thus giving that developer more preferential treatment in the selection process. By doing so, Petitioners assert subsection (3) violates section 120.52(8)(d) by failing to establish adequate standards for agency decisions and vesting unbridled discretion in the agency. As the record shows, the authority to allocate tax credits is not derived from a rule. The source of authority is a statute. Subsection (3) simply informs readers that, besides the statutorily-mandated procedures spelled out in subsections (1) and (2), other types of funding priorities or preferences may be enacted at some future time by the legislature. As these changes occur, the reader is told that specific rules will be adopted to implement those changes. Agency Statements The allegations concerning unadopted rules, all in the RFA, are somewhat confusing. In their PFO, Petitioners request that a final order be entered determining "the policies that make up virtually all of RFA 2016-113 are invalid non-rule policies." Pet'r PFO, p. 23. In paragraph 38 of the PFO, they make reference to RFA pages 2, 13, 20, 22, 40-45, 53-54, 62-63, 67-68, 72, and 110, but elsewhere provide the actual text of only six statements and a brief description of a few others. In the parties' Joint Stipulation, Petitioners assert only that "RFA 2016-113 contains numerous provisions that are invalid exercises of non-rule policy and are without a basis in or are contrary to the law implemented." Jt. Stip., p. 2, § B.1. No statements are identified or described. As detailed in endnote 1, however, their initial Petitions identify the text of some statements and provide a brief description of others, along with the page number on which they are found.1/ Only these statements will be addressed. Petitioners contend that Florida Housing must immediately discontinue all reliance upon them, stop the solicitation process, and issue a new RFA. It is unnecessary to recite each statement in full in order to resolve this dispute. An RFA is issued for each solicitation involving low- income housing credits. Before posting an RFA, Florida Housing typically conducts workshops and posts on-line information to inform prospective applicants of all requirements and any new provisions. By reading the RFA, each prospective applicant is placed on equal footing with the others. RFA-113 consists of six sections: Introduction; Definitions; Procedures and Provisions; Information to be Provided in Application; Evaluation Process; and Award Process. The definitions and funding selection criteria being challenged are found in sections Two and Four, respectively. A lengthy Exhibit A is attached to RFA-113, which includes various forms, instructions, and the like. The evidence shows that RFAs in the low-income rental housing program are not always the same, as they vary depending on such things as the type of project, size of the county, applicable selection criteria, proximity of other developments, program being implemented, demographics being served, and economic conditions in the area. Also, changes in the substantive law or federal regulations require a modification of an RFA's terms and conditions from time to time. For example, RFA-113 contains new criteria used by Florida Housing for the very first time. In short, RFA-113 is tailored to a very narrow class of persons in the six-county area who seek tax credits to build affordable low-income rental property in that area. The selection criteria in RFA-113 are not cast in stone and some are subject to discretionary application. And applicants can achieve points in different ways. During the review process, evaluators have the discretion to either waive or enforce irregularities, depending on how they characterize the irregularity. It is fair to assume from the record that different members of the evaluation committee might assign a different score to the same section of an application. Is Rulemaking Impracticable? Petitioners contend that Florida Housing must adopt by rule the detailed selection criteria, preferences, and definitions contained in every RFA. These terms and conditions change from cycle to cycle and would require Florida Housing to engage in repetitive rulemaking each year, which more than likely would unduly delay the solicitation process. Assuming arguendo the statements are a rule, which they are not, under the circumstances presented here, it is not reasonable to adopt by rule precise or detailed principles, criteria, or standards for every solicitation. See § 120.54(1)(a)2.a., Fla. Stat. Attorney's Fees and Costs As a condition precedent to seeking an award of attorney's fees and costs against an agency for having an illegal unadopted rule, the person bringing the challenge must give the agency 30 days' notice before filing a petition under section 120.56(4), which notice must inform the agency that the disputed statement might constitute an unadopted rule. See § 120.595(4)(b), Fla. Stat. The parties have stipulated that Petitioners failed to provide this notice.
The Issue The issue in this case is whether a portion of Florida Administrative Code Rule 67-48.0072 is an invalid exercise of delegated legislative authority.
Findings Of Fact The Petitioner is a limited partnership and developer of affordable housing in Florida. The Petitioner is seeking to construct a 116-unit affordable housing family apartment complex ("Elmwood Terrace") in Fort Myers, Lee County, Florida. The Petitioner has standing to initiate and participate in this proceeding. The Respondent is a public corporation organized under Chapter 420, Florida Statutes (2010), to administer state programs that provide financial support to developers seeking to construct affordable housing. Such support is provided through a variety of mechanisms, including the use of federal tax credits. The federal tax credit program was created in 1986 to promote the construction and operation of privately-developed affordable housing. The tax credits relevant to this proceeding provide a dollar-for-dollar credit against federal tax liabilities for a period of ten years. The Respondent is the designated Florida agency responsible for distribution of the federal tax credits. The tax credits are awarded pursuant to a "Qualified Allocation Plan" (QAP) that must be annually approved by the Governor and adopted as an administrative rule by the Respondent. As a matter of course, developers receiving the federal tax credits sell them through syndicators for discounted cash. The sale of the tax credits generates debt-free cash equity for developers. Developers seeking financial support to build affordable housing units submit applications to the Respondent during an annual competitive process known as the "Universal Cycle." Every three years, the Respondent commissions a study (the "Shimberg Report"), which measures, within each Florida county, the number of "cost-burden" renters earning 60 percent or less of an area's median income (AMI) who pay more than 40 percent of their income in rent. The AMI is determined by the federal government. The cost-burden households are further classified into four groups: families, the elderly, farm workers, and commercial fishermen. The Shimberg Report also assesses needs related to homeless people in the state. Developers seeking to obtain affordable housing financing are required to set aside a portion of the proposed units for income-limited residents. Access to affordable housing units is generally targeted towards persons receiving no more than 60 percent of the AMI. The Universal Cycle process allows the Respondent to target specific housing deficiencies in terms of geographic availability and population demographics and to preserve the stock of existing affordable housing. During the Universal Cycle process, the Respondent identifies areas where additional affordable housing is unnecessary, to discourage additional development in weak markets and to encourage development in those locations where there is a lack of access to affordable housing. The Respondent classifies areas where there is little need for additional affordable housing as "Location A" areas. Each application filed during the Universal Cycle is evaluated, scored, and competitively ranked against other applications filed during the same Universal Cycle. After the Respondent completes the competitive ranking of the applications submitted in the Universal Cycle, the applicants are provided with an opportunity to review and comment on the evaluation and scoring of the proposals. Applicants may also cure defects in their own proposals. After the close of the review and comment period, the Respondent publishes a revised competitive ranking of the proposals. Developers may challenge the second ranking through an administrative hearing. After the second ranking process is final, developers achieving an acceptable score receive preliminary funding commitments and proceed into a "credit underwriting" evaluation process. The credit underwriting process is governed by Florida Administrative Code Rule 67-48.0072. The Respondent selects an independent credit underwriter who reviews each proposal according to requirements set forth by administrative rule (the "Credit Underwriting Rule"). The cost of the credit underwriting review is paid by the developer. The credit underwriter considers all aspects of the proposed development, including financing sources, plans and specifications, cost analysis, zoning verification, site control, environmental reports, construction contracts, and engineering and architectural contracts. The responsibility for the market study is assigned by the credit underwriter to an independent market analyst. The credit underwriter prepares a report for each applicant invited into the process. The reports are submitted to the Respondent's nine-member, statutorily-created Board of Directors (Board). The Board approves or denies each application for financial support. The Petitioner applied for funds for the Elmwood Terrace project during the 2007 Universal Cycle. The Petitioner's application received a perfect score, maximum points, and was allocated tax credits in the amount of $1,498,680. The Petitioner thereafter entered the credit underwriting process. The credit underwriting analysis was performed by Seltzer Management Group (SMG). SMG contracted with a market analyst, Vogt, Williams & Bowen Research, Inc. (VWB), to prepare the required market study. The affordable units at Elmwood Terrace were initially intended for persons receiving incomes no more than 60 percent of the AMI. The VWB research indicated that the Elmwood Terrace project would adversely affect the existing affordable housing developments, if the Elmwood Terrace units were available to the 60 percent AMI population. The existing affordable housing developments, also serving the 60 percent AMI population, included two developments that had participated in the Respondent's "Guarantee Fund" program, addressed elsewhere herein. VWB determined that the impact of the Elmwood Terrace project on the existing developments could be ameliorated were some of the Elmwood Terrace units targeted during "lease-up" to persons at income levels of not more than 50 percent of the AMI. The lease-up period is the time required for a new development to reach anticipated occupancy levels. The issue was the subject of discussions between the Petitioner, VWB, and SMG. To resolve the anticipated negative impact on the existing affordable housing developments, the Petitioner agreed to target the 50 percent AMI population. In September 2008, the credit underwriter issued his report and recommended that the Petitioner receive the previously-allocated tax credits. On September 22, 2008, the Respondent's Board accepted the credit underwriting report and followed the recommendation. In the fall of 2008, after the Petitioner received the tax credits, the nation's economic environment deteriorated considerably. As a result, the syndicator with whom the Petitioner had been working to sell the tax credits advised that the sale would not occur. The Petitioner was unable to locate an alternate purchaser for the tax credits. The Petitioner considered altering the target population of the project in an attempt to attract a buyer for the tax credits, and there were discussions with the Respondent about the option, but there was no credible evidence presented that such an alteration would have resulted in the sale of the Petitioner's tax credits. Lacking a buyer for the tax credits, the Petitioner was unable to convert the credits to cash, and they were of little value in providing funds for the project. The Petitioner was not alone in its predicament, and many other developers who received tax credits in the 2007 and 2008 Universal Cycles found themselves unable to generate cash through the sale of their tax credits. In early 2009, Congress adopted the American Recovery and Reinvestment Act of 2009 (PL 111-5), referred to herein as ARRA, which incorporated a broad range of economic stimulus activities. Included within the ARRA was the "Tax Credit Exchange Program" that provided for the return by the appropriate state agency of a portion of the unused tax credits in exchange for a cash distribution of 85 percent of the tax credit value. The State of Florida received $578,701,964 through the Tax Credit Exchange Program. The ARRA also provided additional funds to state housing finance agencies through a "Tax Credit Assistance Program" intended to "resume funding of affordable housing projects across the nation while stimulating job creation in the hard-hat construction industry." On July 31, 2009, the Respondent issued a Request for Proposals (RFP 2009-04) to facilitate the distribution of the ARRA funds. The Respondent issued the RFP because the 2009 QAP specifically required the Respondent to allocate the relevant federal funds by means of a "competitive request for proposal or competitive application process as approved by the board." The 2009 QAP was adopted as part of the 2009 Universal Cycle rules. Projects selected for funding through the RFP would be evaluated through the routine credit underwriting process. Participation in the RFP process was limited to developers who held an "active award" of tax credits as of February 17, 2009, and who were unable to close on the sale of the credits. The RFP included restrictions against proposals for development within areas designated as "Location A." Although the location of the Elmwood Terrace project had not been within an area designated as "Location A" during the 2007 Universal Cycle process, the Respondent had subsequently designated the area as "Location A" by the time of the 2009 Universal Cycle. The RFP also established occupancy standards for projects funded under the RFP that exceeded the standards established in the Universal Cycle instructions and an evaluation process separate from the Universal Cycle requirements. Although the restrictions in the RFP would have automatically precluded the Petitioner from being awarded funds, the Petitioner submitted a response to the RFP and then filed a successful challenge to the RFP specifications (DOAH Case No. 09-4682BID). In a Recommended Order issued on November 12, 2009, the Administrative law Judge presiding over the RFP challenge determined that certain provisions of the RFP, including the automatic rejection of Location A projects, the increased occupancy standards, and the RFP evaluation criteria, were invalid. The Respondent adopted the Recommended Order by a Final Order issued on December 4, 2009, and invited the Petitioner into the credit underwriting process by a letter dated December 9, 2009. The credit underwriter assigned to analyze the Petitioner's project was SMG, the same credit underwriter that performed the original analysis of the Petitioner's project during the 2007 Universal Cycle. SMG retained Meridian Appraisal Group, Inc. (Meridian), to prepare the required market study. The Respondent was not consulted regarding the SMG decision to retain Meridian for the market analysis. The decision to retain Meridian for the market analysis was entirely that of SMG. The Respondent did not direct SMG or Meridian in any manner regarding the assessment or evaluation of any negative impact of the proposed project on existing affordable housing developments. Meridian completed the market study and forwarded it to SMG on January 26, 2010. The Meridian market analysis included a review of the relevant data as well as consideration of the actual economic conditions experienced in Lee County, Florida, including the extremely poor performance of the existing housing stock, as well as significant job losses and considerable unemployment. The Meridian market analysis determined that the Elmwood Terrace development would have a negative impact on two existing affordable housing apartment developments that were underwritten by the Respondent through a Guarantee Fund created at Section 420.5092, Florida Statutes, by the Florida Legislature in 1992. The existing Guarantee Fund properties referenced in the SMG recommendation are "Bernwood Trace" and "Westwood," both family-oriented apartment developments within five miles of the Elmwood Terrace location. The Guarantee Fund essentially obligates the Respondent to satisfy mortgage debt with the proceeds of Florida's documentary stamp taxes, if an affordable housing development is unable to generate sufficient revenue to service the debt. Because the Guarantee Fund program essentially serves to underwrite the repayment of mortgage debt for a "guaranteed" affordable housing development, the program increases the availability, and lowers the cost, of credit for developers. The Guarantee Fund program has participated in the financing of more than 100 projects, most of which closed between 1999 and 2002. Since 2005, the Respondent has not approved any additional Guarantee Fund participation in any affordable housing developments. The Respondent's total risk exposure through the Guarantee Fund is approximately 750 million dollars. Prior to October 2008, no claims were made against the Guarantee Fund. Since November 2008, there have been eight claims filed against the Guarantee Fund. Affordable housing financing includes restrictions that mandate the inclusion of a specific number of affordable housing units. Such restrictions are eliminated through foreclosure proceedings, and, accordingly, access to affordable housing units can be reduced if a development fails. Presuming that the eight claims pending against the Guarantee Fund eventually proceeded through foreclosure, as many as 2,300 residential units could be deducted from the stock of affordable housing. When there is a claim on the Guarantee Fund, the Respondent has to assume payment of the mortgage debt. The claims are paid from the Guarantee Fund capital, which is detrimental to the Respondent's risk-to-capital ratio. The risk-to-capital ratio is presently four to one. The maximum risk-to-capital ratio acceptable to rating agencies is five to one. The eight claims against the Guarantee Fund have ranged between ten and 18 million dollars each. The Respondent's bond rating has declined because of the eight claims. A continued decline in the Respondent's bond rating could result in documentary stamp tax receipts being used for payment of Guarantee Fund claims and directed away from the Respondent's programs that are intended to support the creation of affordable housing. In an effort to prevent additional claims against the Guarantee Fund, the Respondent has created the "Subordinate Mortgage Initiative" to provide assistance in the form of two- year loans to troubled Guarantee Fund properties. When preparing the 2010 market study, Meridian did not review the VWB market analysis performed as part of the 2007 application. Although the Petitioner has asserted that Meridian should have reviewed the 2007 VWB analysis, there is no evidence that Meridian's decision to conduct an independent market study without reference to the prior market review was inappropriate. On February 8, 2010, SMG issued a recommendation that the Petitioner's funding request be denied "because of the proposed development's potential financial impacts on developments in the area previously funded by Florida Housing and an anticipated negative impact to the two Guarantee Fund properties located within five miles of the proposed development." There is no evidence that the Meridian analysis was inadequate or improperly completed. There is no evidence that the SMG's reliance on the Meridian analysis was inappropriate. For purposes of this Order, the Meridian analysis and the SMG credit underwriting report have been accepted. Elmwood Terrace, a newer development with newer amenities, would compete for residents with the Bernwood Trace and Westwood developments. The financing for Bernwood Trace and Westwood was premised on projections that the affordable housing units would be leased to the 60 percent AMI population; however, the developments have been unable to maintain full occupancy levels, even though a number of units in the two properties are leased at reduced rates based on 50 percent AMI income levels. A rent reduction implemented by an existing development, whether based on economic conditions or resulting from competition, constitutes a negative impact on the development. There is no credible evidence that the occupancy rates are attributable to any difficulty in management of the two developments. It is reasonable to conclude that the leasing issues are related to economic conditions present in Lee County, Florida. In January 2010, VWB conducted an alternative market analysis. The VWB analysis was not provided to SMG or to the Respondent at any time during the credit underwriting process. Based on the 2010 VWB analysis, the Petitioner asserted that economic conditions in Lee County, Florida, have improved since the first credit underwriting report was completed in 2008 and that the improvement is expected to continue. There is no noteworthy evidence that economic conditions have improved or will significantly improve in the Lee County, Florida, market in the predictable future, and the VWB analysis is rejected. The Petitioner offered to mitigate any negative impact on the Guarantee Fund properties by committing affordable units to 50 percent AMI income levels. Given the existing economic and rental market conditions in Lee County, Florida, the evidence fails to establish that the offer would actually alleviate the negative impact on the affected Guarantee Fund developments. The 2010 VWB analysis states that there is substantial unmet demand for housing at 50 percent AMI and that there will be no impact on the Guarantee Fund units if the Elmwood Terrace units were set aside for such individuals. There is no credible evidence that there is a substantial and relevant unmet affordable housing demand in Lee County, Florida. The VWB analysis is rejected. Following the completion of each annual Universal Cycle process, the Respondent actively solicits feedback from developers and the public and then amends the Universal Cycle requirements to address the issues raised, as well as to reflect existing affordable housing needs and general concerns of the Board. The amendments are applicable for the following Universal Cycle. In 2009, the Respondent amended subsection (10) of the Credit Underwriting Rule as part of the annual revisions to the Universal Cycle process. The relevant amendment (referred to by the parties as the "Impact Rule") added this directive to the credit underwriter: The Credit Underwriter must review and determine whether there will be a negative impact to Guarantee Fund Developments within the primary market area or five miles of the proposed development, whichever is greater. The amendment was prompted by the Respondent's experience in the fall of 2008 when considering two separate applications for affordable housing financing. The potential negative impact of a proposed development on an existing Guarantee Fund property was central to the Board's consideration of one application, and the Board ultimately denied the application. In the second case, the Board granted the application, despite the potential negative impact on a competing development that was not underwritten by the Guarantee Fund. The intent of the language was to advise developers that the existence of Guarantee Fund properties within the competitive market area would be part of the credit underwriting evaluation and the Board's consideration. Notwithstanding the language added to the rule, the credit underwriter is charged with reviewing the need for additional affordable housing. Even in absence of the added language, consideration of any negative impact to competing developments based on inadequate need for additional affordable housing would be appropriate. In rendering the 2010 credit underwriting report on Elmwood Terrace, the credit underwriter complied with the directive. Prior to determining that the Petitioner's funding application should be denied, the Respondent's Board was clearly aware of the Petitioner's application, the credit underwriting report and market analysis, and the economic conditions in Lee County, Florida. There is no credible evidence of any need for additional affordable housing in Lee County, Florida. There is no credible evidence that the Lee County, Florida, market can sustain the addition of the units proposed by the Petitioner without adversely affecting the financial feasibility of the existing Guarantee Fund developments. The Board was aware that the Elmwood Terrace development could attract residents from the nearby Guarantee Fund properties and that local economic conditions threatened the financial viability of the properties. Given current economic conditions, approval of the application at issue in this proceeding would reasonably be expected to result in a negative impact to existing affordable housing developments. The protection of Guarantee Fund developments is necessary to safeguard the resources used to support the creation and availability of affordable housing in the state.
