The Issue Whether Rule 67-48.005, Florida Administrative Code, and Section VII on Page 16 of Form 1 of the 1999 Housing Credit Application Package adopted by Rule 67-48.002(10) Florida Administrative Code, are invalid exercises of delegated legislative authority. If so, whether Petitioners are entitled to an award of attorney's fees and costs.
Findings Of Fact Part V of Chapter 420, Florida Statutes, consisting of Sections 420.501 - 420.517, Florida Statutes, is the Florida Housing Finance Corporation Act. Respondent, Florida Housing Corporation (FHFC), is a public corporation created by the provisions of Section 420.504, Florida Statutes. Pursuant to Section 420.5099, Florida Statutes, FHFC is the designated housing agency for the State of Florida. FHFC administers the Low Income Housing Tax Credit Program and other housing programs in Florida pursuant to other provisions of the Florida Housing Finance Corporation Act. Pursuant to Section 420.504(2), Florida Statutes, FHFC is an agency of the State of Florida for the purposes of Chapter 120, Florida Statutes. FHFC is governed by an independent member Board of Directors appointed by the Governor. The Board members come from specifically designated industries and backgrounds as set forth in Section 420.504(3), Florida Statutes. Pursuant to Section 420.507, Florida Statutes, FHFC has all the powers necessary or convenient to carry out and effectuate the purposes and provisions of the Florida Housing Finance Corporation Act, including the power to enact rules. 2/ Petitioner submitted an application to the FHFC for 1999 Low Income Housing Tax Credits. The parties stipulated that Petitioner has standing to challenge the validity of the rules at issue in this proceeding. The parties further stipulated that Shepland does not have standing to challenge the validity of the rules at issue in this proceeding. Intervenors, Miami River Park, Ltd., and Wynwood Tower Apartments, Ltd., submitted applications to FHFC for 1999 Low Income Housing Tax Credits. The parties stipulated that these two entities have standing to intervene in this proceeding. The Low Income Housing Tax Credit Program is a federal program whose purpose is to encourage the development of housing for low-income families in the various states. 3/ Section 42 of the Internal Revenue Code (Title 26 of the United States Code) creates federal income tax credits that are allocated to each state and are awarded through state-administered programs to developers of low-income housing projects. The tax credits equate to a dollar-for-dollar reduction of the holder's tax liability which can be taken each year that the project satisfies the Internal Revenue Code requirements, for up to ten years. The developer typically sells or syndicates the tax credit to generate funding for the proposed project. Section 42 of the Internal Revenue Code requires that each state adopt a Qualified Allocation Plan (QAP) establishing procedures to be followed in awarding low-income credits allocated to the states. Section 420.5099, Florida Statutes, provides as follows: The Florida Housing Finance Corporation is designated the housing credit agency for the state within the meaning of s. 42(h)(7)(A) of the Internal Revenue Code of 1986 and shall have the responsibility and authority to establish procedures necessary for proper allocation and distribution of low-income housing tax credits and shall exercise all powers necessary to administer the allocation of such credits. The corporation shall adopt allocation procedures that will ensure the maximum use of available tax credits in order to encourage development of low-income housing in the state, taking into consideration the timeliness of the application, the location of the proposed housing project, the relative need in the area for low-income housing and the availability of such housing, the economic feasibility of the project, and the ability of the applicant to proceed to completion of the project in the calendar year for which the credit is sought. The corporation may request such information from applicants as will enable it to make the allocations according to the guidelines set forth in subsection (2), including, but not limited to, the information required to be provided the corporation by chapter 9I-21, Florida Administrative Code. The executive director of the corporation shall administer the allocation procedures and determine allocations on behalf of the corporation. Any applicant disputing the amount of an allocation or the denial of a request for an allocation may request an appeal to the board of directors of the corporation. For purposes of implementing this program in Florida and in assessing the property for ad valorem taxation under s. 193.011, neither the tax credits, nor financing generated by tax credits, shall be considered as income to the property, and the rental income from rent restricted units in a low-income tax credit development shall be recognized by the property appraiser. The corporation is authorized to expend fees received in conjunction with the allocation of low-income housing tax credits only for the purpose of administration of the program, including private legal services which relate to interpretation of s. 42 of the Internal Revenue Code of 1986, as amended. Pursuant to the provisions of Section 420.5099, Florida Statutes, FHFC has established rules for processing applications for housing tax credits. These rules, found in Chapter 67-48, Florida Administrative Code, constitute Florida's QAP. A prime consideration in developing the application process is that the process be completed in a timely manner, since the failure of a state to use all of its allocated credits in a timely manner will result in a loss of housing tax credits. Such a loss is contrary to the statutory mandate that FHFC ensure the maximum use of available tax credits. Petitioner has challenged FHFC's Rule 67-48.005, Florida Administrative Code, which is entitled Applicant Administrative Appeal Procedures, and provides, in pertinent part, as follows: Following the Review Committee's determination of preliminary scores and ranking, notice of intended funding or denial of funding will be provided to each Applicant with a statement that: Applicants who wish to contest the decision relative to their own Application must petition for review of the decision in writing within 10 calendar days of the date of the notice. The request must specify in detail the forms and the scores sought to be appealed. Unless the appeal involves disputed issues of material fact, the appeal will be conducted on an informal basis. The Review Committee will review the appeal and will provide to the Applicant a written position paper which recommends either no change in score or an increase or decrease in a score which it deems to be in error. If the Applicant disagrees with the Review Committee's recommendation, the Applicant will be given an opportunity to participate in the informal administrative appeal hearings scheduled by the Review Committee. If the appeal raises issues of material fact, a formal administrative hearing will be conducted pursuant to Section 120.57(1), Florida Statutes. Failure to timely file a petition shall constitute a waiver of the right of the Applicant to such an appeal. Applicants who wish to notify the Corporation of possible scoring errors relative to another Applicant's Application must file with the Corporation, within 10 calendar days of the date of the notice, a written request for a review of the other Applicant's score. Each request must specify in detail the assigned Application number, the forms and the scores in question. Each request is limited to the review of only one Application's score. Requests which seek the review of more than one Application's score will be considered improperly filed and ineligible for review. There is no limit to the number of requests which may be submitted. The Review Committee will review each written request timely received and will prepare a written position paper, which will be provided to each Applicant who timely filed a notification and to the Applicant whose score has been questioned, which recommends either no change in score or an increase or decrease in a score which it deems to be in error. Failure to timely and properly file a request shall constitute a waiver of the right of the Applicant to such a review. Notice will be provided to all Applicants whose score is reduced or whose Application is deemed ineligible pursuant to 67-48.005(1)(b) that they may contest the decision relative to their own Application by petitioning for review of the decision in writing within 10 calendar days of the date of the notice. The request must specify in detail the forms and the scores sought to be appealed. Unless the appeal involves disputed issues of material fact, the appeal will be conducted on an informal basis. The Review Committee will review the appeal and will provide to the Applicant a written position paper which recommends either no change in score or an increase or decrease in a score which it deems to be in error. If the Applicant disagrees with the Review Committee's recommendation, the Applicant will be given an opportunity to participate in the informal administrative appeal hearings scheduled by the Review Committee. No Applicant or other person or entity will be allowed to intervene in the appeal of another Applicant. If the appeal raises issues of material fact, a formal administrative hearing will be conducted pursuant to Section 120.57(1), Florida Statutes. Failure to timely file a petition shall constitute a waiver of the right of the Applicant to such an appeal. Petitioner has also challenged the following portion of the application form which has been adopted by reference by FHFC's Rule 67-48.002(10), Florida Administrative Code: . . . In consideration for the Corporation processing and scoring this Application, the Applicant and all Financial Beneficiaries hereby understand and agree that the Corporation will hear appeals only on the Applicant's own score. . . . In 1996, FHFC combined the application processes for the subject low-income tax credit program, the State Apartment Incentive Loan (SAIL) Program (Section 420.587, Florida Statutes) and the Home Investment Partnership (HOME) Program (Section 420.5089, Florida Statutes) to make the application process easier and more efficient. Each year FHFC initiates rulemaking to refine the application process from the previous year and to implement any changes in the application process. The administrative rules, with any amendments, are adopted annually. All prospective applicants under any of the three combined programs are invited to attend rulemaking workshops. After the allocation of tax credits for Florida is known, a Notice of Funding Availability setting forth that allocation, is published in the Florida Law Weekly. For the 1999 allocation period, the notice was published on October 23, 1998. Due to the limited number of housing credits available in each annual application cycle and the number of applications for those credits, there are not enough credits available for distribution in Florida for all applicants to receive housing credits in the year in which they apply. Consequently, applicants are competing for a fixed pool of resources. For the 1999 period, the application cycle was opened and the application form was available to interested persons on October 30, 1998. From November 9 through 11, 1998, application workshops were held in Tallahassee, Miami, and Orlando, to address any questions regarding the application process. Applicants are given what is referred to as the Application Package, which contains all pertinent forms and sets forth the instructions and criteria by which the applications will be evaluated by FHFC staff. Applicants were required to complete the applications and submit them to FHFC by January 7, 1999. Ninety applications for the three combined programs were filed. Each application was evaluated by FHFC staff pursuant to the instructions and criteria contained in the Application Package. Partly because FHFC staff is required to verify information reflected in each application, the evaluation process takes six to eight weeks to complete. The evaluation process results in a score for each application. The scores are reviewed and approved by a Review Committee, consisting of FHFC staff. On March 12, 1999, after scores were approved by the Review Committee, a pre-review score was mailed to each applicant. After the applicants were notified of their pre-review score, they had the week beginning March 15, 1999, to review the scoring of all applications. FHFC rules provide an opportunity for an applicant to question its pre-review score and to challenge the pre-review scores received by other applicants. The challenge to an applicant's own score is referred to as a Direct Appeal. The challenge by an applicant to another applicant's score is referred to as a Competitive Appeal. All Direct and Competitive Appeals were due on or before March 22, 1999. Upon receipt of the Direct Appeals and Competitive Appeals, FHFC staff first review the Competitive Appeals and draft a Competitive Appeal Position Paper for each unique issue raised. The Competitive Appeal Position Papers are approved by the Review Committee before being released, which, for 1999, was on April 5, 1999. The same process is followed for the Direct Appeals. The Direct Appeal Position Papers were approved by the Review Committee and released on April 7, 1999. An applicant whose application was adversely affected by a Competitive Appeal Position Paper (as the result of a Competitive Appeal filed by a competing applicant) has the opportunity to file what is referred to as a Direct Appeal of a Competitive Appeal (DACA). Thereafter, FHFC staff evaluates all issues raised by the Direct Appeals and by the DACAs, and prepares a position paper for each issue. On April 27, 1999, the Review Committee approved the Direct Appeal and DACA position papers. On May 4, 1999, these position papers were mailed to the interested parties. An applicant who was not satisfied with the Direct Appeal or DACA position paper for its application was given a limited period to request a proceeding pursuant to Chapter 120, Florida Statutes. If there were no disputed issues of material fact, the matter proceeded as an informal hearing. If there were disputed issues of material fact, the matter proceeded as a formal hearing. On June 11 and July 30, 1999, the Board of Directors of FHFC considered the Recommended Order that resulted from each administrative hearing and entered a Final Order, which determined the final scores for each application. Thereafter, the final ranking of the competing applications were completed and approved. Preliminary approval of a tax credit allocation to an applicant is based on the final ranking. An applicant selected for a tax credit allocation is thereafter "invited" by FHFC to a "credit underwriting" whereby the credit-worthiness of the applicant and the proposed project is further scrutinized by a credit underwriter and a draft credit underwriting report is prepared. The credit underwriting process takes fifty to sixty days to complete. For the 1999 cycle, the draft credit underwriting reports were due September 28, 1999. Once the credit underwriting reports are finished, the successful applicant is given a preliminary tax credit allocation. For the 1999 cycle, the applicant then must complete its project or certify that it has expended at least ten percent of its reasonably expected tax credit basis. If the project cannot be completed by the end of the calendar year, the applicant must enter into a Carryover Agreement. The applicant must have expended ten percent of its reasonably expected tax credit basis before it can enter into a Carryover Agreement. The applicant typically has to be prepared to spend large sums of money in a relatively short period of time to meet these requirements. An applicant does not have the opportunity for an administrative hearing pursuant to Chapter 120, Florida Statutes, on the scoring of a competing application after the Competitive Appeal Position Paper has been issued by FHFC staff. 4/ Pursuant to the challenged rules, an applicant who was not satisfied with the Direct Appeal or DACA position paper for another applicant's application is not permitted a Chapter 120 proceeding and is not permitted to intervene if the other applicant has requested a Chapter 120 proceeding. Such appeals, referred to as Cross Appeals, were once permitted by the rules of FHFC. FHFC determined that Cross Appeals disrupted the application process and placed too great a burden on the FHFC staff. Cross Appeals resulted in a process that was difficult to bring to closure and resulted in litigation expenses that were assessed against the total project cost for the development. Using rule development workshops that were appropriately advertised, FHFC adopted rules permitting Competitive Appeals, but prohibiting Cross Appeals. FHFC did not act arbitrarily or capriciously in adopting these rules.
The Issue The issue in this case is whether Florida Housing's proposed action to deem Madison Landing eligible for an award of housing tax credit funds, as contemplated under Request for Applications 2020-202 Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach and Pinellas Counties ("the 2020 RFA"), is contrary to governing statutes, rules or policies, or the 2020 RFA specifications. The standard of proof is whether Florida Housing's proposed action is clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Florida Housing is a public corporation organized pursuant to Chapter 420, Part V, Florida Statutes, whose address is 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301, and for the purposes of these proceedings, an agency of the State of Florida. Madison Landing is an Applicant requesting an allocation of $1,950,000 in competitive housing credits in in the 2020 RFA. Its application, 2021-021C, was deemed eligible, but was not selected for funding by Florida Housing. Madison Park is an Applicant requesting an allocation of $2,881,960 in competitive housing credits in the 2020 RFA. Its application, 2021-004C, was deemed eligible, but was not selected for funding by Florida Housing. WRDG is an Applicant requesting an allocation of $2,375,000 in competitive housing credits in the 2020 RFA. Its application, 2021-025C, was deemed eligible and was preliminarily selected for funding by Florida Housing. Florida Housing administers various affordable housing programs, including the Housing Credit Program, pursuant to Section 42 of the Internal Revenue Code (the "IRC" or "the Code") and section 420.5099, under which Florida Housing is designated as the Housing Credit agency for the State of Florida within the meaning of Section 42(h)(7)(A) of the IRC, and Florida Administrative Code Chapters 67-48 and 67-60. Florida Housing has established, by rule, a competitive solicitation process known as the Request for Applications ("RFA") to assess the relative merits of proposed developments, pursuant to chapters 67-48 and 67-60. An 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. While there are numerous references to Florida Housing's rules throughout the RFA, RFAs themselves are not adopted or incorporated by rule. Florida Housing issues many RFAs each year. Although an issued RFA may be similar to these issued in previous years, each RFA is unique. The RFA process begins when Florida Housing requests the Florida Housing Board of Directors ("the Board") to approve Florida Housing's plan for allocating its resources through the various RFAs. If the plan is approved by the Board, Florida Housing begins working on each individual RFA. Florida Housing posts draft documents to its website for public review, such as a draft of the RFA, and holds a workshop in which the RFA is discussed in detail, highlighting language that changed from the previous year. The public is given the opportunity to ask questions and submit written comments for further suggestions and/or additional edits prior to the RFA's issuance. Marisa Button, Director of Multifamily Programs for Florida Housing, credibly and persuasively testified that Questions and Answers are provided as guidance, but do not provide new requirements to override the terms of an RFA. In the event of an inconsistency between Questions and Answers and another form of guidance for applicants, Florida Housing has maintained the position that the least restrictive guidance controls. Rule 67-60.006 provides, in pertinent part, that "[t]he failure of an Applicant to supply required information in connection with any competitive solicitation pursuant to this rule chapter shall be grounds for a determination of non-responsiveness with respect to its Application." By applying, each Applicant certifies that: Proposed Developments funded under this RFA will be subject to the requirements of the RFA, inclusive of all Exhibits, the Application requirements outlined in Rule Chapter 67-60, F.A.C., the requirements outlined in Rule Chapter 67-48, F.A.C. and the Compliance requirements of Rule Chapter 67-53, F.A.C. On August 26, 2020, Florida Housing issued the 2020 RFA, proposing to provide an estimated $18,669,520 of Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas Counties. Modifications to the 2020 RFA were made on September 11 and October 12, 2020. The Application Deadline for the 2020 RFA was October 20, 2020. On or about October 20, 2020, 35 applications were submitted in response to the 2020 RFA. A Review Committee was appointed to review the applications and make recommendations to the Board. The Review Committee found 34 applications eligible and one application ineligible. Through the ranking and selection process outlined in the 2020 RFA, eight applications were recommended for funding. In accordance with the funding selection process set forth in the 2020 RFA, one application was selected from each of Duval, Palm Beach, Pinellas, Hillsborough, and Orange counties; two applications were selected from Broward County; and one application (WRDG) was selected from any of these counties. On December 4, 2020, the Board approved these recommendations. On December 17, 2020, Madison Landing timely filed a Petition for Formal Administrative Proceedings, which was referred to DOAH and assigned Case No. 21-0146BID. This petition challenged the eligibility of both WRDG and MHP FL II, LLC. On January 13, 2021, Madison Landing dismissed all of its allegations against MHP FL II, LLC. On December 17, 2020, Madison Park timely filed a Petition for Formal Administrative Proceedings, which was referred to DOAH and assigned Case No. 21-0147BID. An amended petition was filed on January 13, 2021. This petition challenged the eligibility of both WRDG and Madison Landing. On January 26, 2021, all parties entered into a Stipulation for Entry of Findings of Fact in which WRDG conceded that its application should have been found ineligible. WRDG is ineligible for funding under the 2020 RFA. With WRDG ineligible for funding, Madison Landing would be selected for funding in place of WRDG. If both WRDG and Madison Landing were found to be ineligible for funding, Madison Park would be selected for funding in place of WRDG and Madison Landing. No other Applicant selected for funding will be impacted regardless of the outcome of this case. No challenges were made to the terms of the 2020 RFA. Madison Landing's application includes an executed Applicant Certification and Acknowledgment Form, which provides, "The Applicant, the Developer and all Principals are in good standing among all other state agencies and have not been prohibited from applying for funding." The phrase "good standing among all other state agencies" is not defined; and no evidence was presented as to the definitive meaning of the phrase. No evidence was presented that Madison Landing's Principals are not in good standing with any state agency or have been prohibited from applying for funding. The 2020 RFA at Section Four A.3.a. provides that Applicants must disclose the name of the Applicant entity and provide evidence that it is legally formed: (2) The Applicant must be a legally formed entity [i.e., limited partnership, limited liability company, etc.] qualified to do business in the state of Florida as of the Application Deadline. Include, as Attachment 2 to Exhibit A, evidence from the Florida Department of State, Division of Corporations, that the Applicant satisfies the foregoing requirements. Such evidence may be in the form of a certificate of status or other reasonably reliable information or documentation issued, published or made available by the Florida Department of State, Division of Corporations. Rule 67-48.002(9) (6/23/2020), defines "Applicant" as follows: (9) "Applicant" means any person or legal entity of the type and with the management and ownership structure described herein that is seeking a loan or funding from the Corporation by submitting an Application or responding to a competitive solicitation pursuant to rule Chapter 67-60, F.A.C., for one or more of the Corporation's programs. For purposes of Rules 67-48.0105, 67-48.0205 and 67- 48.031, F.A.C., Applicant also includes any assigns or successors in interest of the Applicant. Unless otherwise stated in a competitive solicitation, as used herein, a 'legal entity' means a legally formed corporation, limited partnership or limited liability company. The 2020 RFA at Section Four A.3.c. provides that Applicants must disclose Principals of both the Applicant and Developer entities. The 2020 RFA provides in pertinent part: c. Principals Disclosure for the Applicant and for each Developer (5 points) (1) Eligibility Requirements To meet the submission requirements, upload the Principals of the Applicant and Developer(s) Disclosure Form (Form Rev. 05-2019) ("Principals Disclosure Form") as outlined in Section Three above. Prior versions of the Principal Disclosure Form will not be accepted. To meet eligibility requirements, the Principals Disclosure Form must identify, pursuant to Subsections 67-48.002(94), 67-48.0075(8) and 67- 48.0075(9), F.A.C., the Principals of the Applicant and Developer(s) as of the Application Deadline. A Principals Disclosure Form should not include, for any organizational structure, any type of entity that is not specifically included in the Rule definition of Principals. For Housing Credits, the investor limited partner of an Applicant limited partnership or the investor member of an Applicant limited liability company must be identified on the Principal Disclosure Form. Rule 67-48.002(94) defines "Principal" as follows: (94) "Principal" means: For a corporation, each officer, director, executive director, and shareholder of the corporation. For a limited partnership, each general partner, and each limited partner of the limited partnership. For a limited liability company, each manager and each member of the limited liability company. For a trust, each trustee of the trust and all beneficiaries of majority age (i.e., 18 years of age) as of the Application Deadline. Page 10 of 22. For a Public Housing Authority, each officer, director, commissioner, and executive director of the Authority. The requirement to provide evidence that the Applicant is a legally formed entity, as well as the requirement to provide a Principals for Applicant and Developer(s) Disclosure Form, are identified as "Eligibility Items." Section Five A.1. of the 2020 RFA states that "only Applications that meet all of the following Eligibility Items will be eligible for funding and considered for funding selection." Madison Landing submitted Principals of the Applicant and Developer(s) Disclosure Form(s) with its application. Both forms were approved during the Advance Review Process. On the Principals of the Applicant form, Madison Landing II, LLC, was identified as the Applicant entity. The Principals of the Applicant entity were identified as Patrick E. Law, Manager; Madison Landing II Apartments, LLC, Non-Investor Member; and Patrick E. Law, Investor Member. Madison Landing II Apartments, LLC, filed Articles of Organization for Florida Limited Liability Company with the Florida Division of Corporations on January 5, 2021, with an effective date of December 31, 2020. The 2020 RFA requires that the Applicant demonstrate that it is a legally formed entity as of the Application Deadline; however, there is no explicit requirement in the 2020 RFA that each Principal of the Applicant demonstrate that it is a legally formed entity as of the Application Deadline. Ms. Button testified that her initial view was that the failure of Madison Landing's Principal, Madison Landing II Apartments, LLC, to incorporate by the application deadline should render the application ineligible. However, upon further research, she changed her position, believing that Florida Housing was precedentially bound by a previous final order, which found that an application was eligible under similar legal and factual circumstances. The previous case, on which Florida Housing relied, was decided before Florida Housing adopted the current RFA procedures for awarding funding. Ms. Button testified, however, that while some of the processes followed during the Universal Cycle, in place at that time, were different than the RFA process, the requirements for disclosure of Principals were essentially the same. Florida Housing allows interested parties to submit written questions to be answered by Florida Housing staff for each RFA that is issued. The Question-Answer period is referenced specifically within each RFA. The following Question and Answer are posted on Florida Housing's website for RFA 2018-111: Question 12: Do the entities listed on the Principal Disclosure Form have to be active as of the stamped "Approved" date or as of the Application Deadline? Answer: As of the Application Deadline. The Applicant may upload a Principals Disclosure Form stamped "Approved" during the Advance Review Process provided (a) it is still correct as of the Application Deadline, (b) it was approved for the type of funding being requested (i.e., Housing Credits or Non-Housing Credits) The same Question and Answer above are on Florida Housing's website for RFA 2018-110; RFA 2018-112; and RFA 2018-113. The same Question and Answer, however, do not appear in Questions and Answers for the 2020 RFA at issue in this case. Although Questions and Answers from past RFAs remain on the Florida Housing website, they are discrete to the specific RFA for which they were issued. Rule 67-48.002(9) (7/2018) defines Applicant as follows: (9) "Applicant" means any person or legal entity of the type and with the management and ownership structure described herein that is seeking a loan or funding from the Corporation by submitting an Application or responding to a competitive solicitation pursuant to rule chapter 67-60, F.A.C., for one or more of the Corporations programs. For purposes of rules 67-48.0105. 67-48.0205 and 67- 48.031, F.A.C., Applicant also includes any assigns or successors in interest of the Applicant. Unless otherwise stated in a competitive solicitation, as used herein, a legal entity means a legally formed corporation, limited partnership or limited liability company with a management and ownership structure that consists exclusively of all natural persons by the third principal disclosure level. For Applicants seeking Housing Credits, the Housing Credits Syndicator/Housing Credit investor need only be disclosed at the first principal level and no other disclosure is required. The terms "first principal disclosure level" and "third principal disclosure level" have the meanings attributed to them in the definition of "Principal." Rule 67-48.002(9) (11/2011) defines Applicant as follows: (9) "Applicant" means any person or legally formed entity that is seeking a loan or funding from the Corporation by submitting an Application or responding to a request for proposal for one or more of the Corporation's programs. For purposes of Rules 67-48.0105, 67-48.0205 and 67-48031, F.A.C., Applicants also includes any assigns or successors in interest of the Applicant. Madison Park argues that Madison Landing's Principal, Madison Landing II Apartments, LLC, did not demonstrate that it was a legally- formed entity as of the Application Deadline, and therefore, Madison Landing's Principal Disclosure Form did not satisfy the 2020 RFA's requirements. Madison Park argues that Madison Landing's application should be deemed ineligible for funding as a result. Based on the weight of the credible evidence and the language of the 2020 RFA and the governing law, the undersigned finds that Florida Housing did not contravene the 2020 RFA, or any other applicable authority, through the process by which it determined that Madison Landing's application was eligible for the award.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order: (1) finding the application of WRDG ineligible for funding; (2) finding the application of Madison Landing eligible for funding; and (3) dismissing the protest of Madison Park. DONE AND ENTERED this 29th day of March, 2021, in Tallahassee, Leon County, Florida. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 Christopher Dale McGuire, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC S BRITTANY O. FINKBEINER Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of March, 2021. J. Timothy Schulte, Esquire Zimmerman, Kiser & Sutcliffe, P.A. 315 East Robinson Street Post Office Box 3000 (32802) Orlando, Florida 32801 Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 1400 Village Square Boulevard, Suite 3-231 Tallahassee, Florida 32312
The Issue The issues are (1) whether Florida Administrative Code Rules 67-48.002(95) and 67-60.010(3) are invalid exercises of delegated legislative authority; and (2) whether certain statements in Request for Application 2016-113 (RFA-113) issued by Respondent, Florida Housing Finance Corporation (Florida Housing or agency), are unlawful unadopted rules in violation of section 120.54(1)(a), Florida Statutes (2016).
Findings Of Fact The Parties Florida Housing is a public corporation created pursuant to section 420.504. One of its responsibilities is to award low-income housing tax credits, which developers use to finance the construction of affordable housing. Tax credits are made available to states annually by the United States Treasury Department and are then awarded pursuant to a competitive cycle that starts with Florida Housing's issuance of an RFA. This proceeding concerns RFA-113. Petitioners ARD and Madison are developers of affordable housing units and submit applications for tax credits. Law and Wolf are principals of a developer of affordable housing units. Berkshire, Hawthorne, and Southwick are limited partnerships that have submitted applications for tax credits. All Petitioners intend to submit applications in response to RFA-113 and will be subject to rule chapters 67-48 and 67-60. Intervenors Heritage and HTG are developers of affordable housing who intend to file applications pursuant to RFA-113. Background On October 28, 2016, Florida Housing published on its website proposed solicitation RFA-113, a 121-page document inviting applications for the award of up to $14,669,052.00 in housing tax credits for the development of affordable, multifamily housing located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas Counties. After Petitioners gave notice of their intent to challenge RFA-113, Florida Housing attempted to resolve the dispute by modifying the solicitation on November 13, 2016. The modification did not resolve the dispute. On November 14, 2016, Petitioners timely filed with DOAH two Petitions, each challenging rules 67-48.002(95) and 67-60.010(3) and various statements in RFA-113. On the same date, they filed with Florida Housing two petitions challenging certain specifications in the solicitation. Although the Petitions include allegations that two existing rules are invalid, Petitioners' main concern appears to be directed at various provisions in RFA-113 that they assert limit their ability to be awarded tax credits. These contentions are addressed separately below. C. Rule 67-48.002(95) The federal Low-Income Housing Credit Program is governed by 26 U.S.C.S. § 42 (section 42). The program allocates annually federal income tax credits to states on a per capita basis to help facilitate private development of affordable low-income housing. As the housing credit agency for the State of Florida, Florida Housing has the authority to administer various federal and state affordable housing programs, including the Low-Income Housing Credit Program. See § 420.5099(1), Fla. Stat. Section 42(m)(l)(A)(i) requires each state that administers low-income housing credits to adopt a QAP, which identifies the selection criteria used for distributing the housing credits. To comply with this requirement, rule 67-48.002(95) adopts and incorporates by reference the 2016 QAP. The rule reads as follows: (95) "QAP" or "Qualified Allocation Plan" means, with respect to the HC [Housing Credit] program, the 2016 Qualified Allocation Plan which is adopted and incorporated herein by reference, effective upon the approval by the Governor of the State of Florida, pursuant to Section 42(m)(1)(B) of the IRC and sets forth the selection criteria and the preferences of the Corporation for Developments which will receive Housing Credits. The QAP is available on the Corporation's Website under the Multifamily Programs link or by contacting the Housing Credit Program at 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301-1329, or from http://flrules.org/Gateway/reference/asp?No= Ref-07355. The 2016 QAP is a five-page document that replaces the 2015 QAP and generally describes the process for allocating 2017 housing credits. In summary, it identifies Florida Housing as the housing credit agency for the State, lists the federally- mandated preferences and selection criteria to be used when allocating housing credits, describes in brief terms the competitive solicitation process, describes the process for awarding competitive and noncompetitive housing credits, and describes the procedures for monitoring and reporting a project's noncompliance with IRC requirements. Section 42(m)(1)(C) lists ten selection criteria that must be incorporated into the QAP. To comply with this requirement, section I.B. of the 2016 QAP provides that the following selection criteria will be considered when determining the allocation of housing credits: project location; housing needs characteristics; project characteristics including housing as part of a community revitalization plan; sponsor characteristics; tenant populations with special housing needs; public housing waiting lists; tenant populations of individuals with children; projects intended for eventual tenant ownership; energy efficiency of the projects; and historic nature of project. These criteria are identical to those listed in section 42(m)(1)(C) and are intended to provide general guidance for the entire housing credit program, and not just RFA-113. Other than the ten criteria, the IRC requires no further detail regarding the selection criteria. However, more specific guidance is found in the individual RFAs, tailored to each type of solicitation. Since late 2013, when the RFA solicitation process began, around 15 to 20 RFAs have been issued annually. Petitioners assert the QAP violates the IRC by not listing the RFA criteria. However, neither the Department of Housing and Urban Development nor the Internal Revenue Service has ever told Florida Housing that the QAP does not comply with the IRC or other applicable federal regulations. The rule cites section 420.507 as Florida Housing's rulemaking authority. That statute has 49 subsections that identify the various powers necessary for Florida Housing to carry out and effectuate the provisions of the law. Pertinent to this dispute is subsection (12), a general grant of authority for Florida Housing "[t]o make rules necessary to carry out the purposes of [part V, chapter 420]," which governs the various low-income housing programs administered by the agency. The rule cites section 420.5099(1) as the law being implemented. That provision designates Florida Housing as the housing credit agency for the state, along with its "responsibility and authority to establish procedures necessary for proper allocation and distribution of low-income housing tax credits and [to] exercise all powers necessary to administer the allocation of such credits." While consistency with section 42 is required in order to satisfy federal requirements, the IRC is not the law being implemented. Petitioners allege the rule exceeds the agency's grant of rulemaking authority and enlarges, modifies, or contravenes the specific provisions of law implemented. See § 120.52(8)(b) and (c), Fla. Stat. In short, they contend that other than the generic selection criteria required by section 42(m)(1)(C), the QAP fails to include the other selection criteria in RFA-113 that are used during the competitive process. D. Rule 67-60.010(3) Petitioners also challenge rule 67-60.010(3). The entire rule, entitled "Funding Preferences," reads as follows: In connection with any competitive solicitation, where all other competitive elements are equal, the Corporation may establish a preference for developers and general contractors who demonstrate the highest rate of Florida job creation in the development and construction of affordable housing. In any competitive solicitation, the Corporation may prescribe a priority to fund affordable housing projects in the Florida Keys Area of Critical State Concern and the City of Key West Area of Critical State Concern where, due to challenging environmental, land use, transportation, workforce, and economic factors, it is extremely difficult to successfully finance, develop, and construct affordable housing. The Corporation may establish other funding priorities as deemed appropriate for a competitive program or solicitation. The rule cites section 420.507(12) as the source of rulemaking authority. That statute is a general grant of authority allowing Florida Housing to adopt rules necessary to carry out the purposes of part V, chapter 420, which includes the issuance of tax credits under the Low-Income Housing Credit Program. The rule cites sections 420.507(47), (48), and (49), 420.5087, 420.5089(2), and 420.5099 as the laws being implemented. In their totality, those provisions authorize Florida Housing to adopt rules and procedures for allocating housing credits and loans for programs that it administers pursuant to chapter 420. One authorized procedure is the authority to use RFAs when awarding low-income housing tax credits. See § 420.507(48), Fla. Stat. On the faulty premise that RFA-113 derives its authority from subsection (3) of the rule, rather than statutory law, Petitioners argue that Florida Housing is allocating low- income housing tax credits in a manner that violates section 42 and chapter 420. They contend authority is delegated by the RFA to local governments to choose which developer will receive local funding, thus giving that developer more preferential treatment in the selection process. By doing so, Petitioners assert subsection (3) violates section 120.52(8)(d) by failing to establish adequate standards for agency decisions and vesting unbridled discretion in the agency. As the record shows, the authority to allocate tax credits is not derived from a rule. The source of authority is a statute. Subsection (3) simply informs readers that, besides the statutorily-mandated procedures spelled out in subsections (1) and (2), other types of funding priorities or preferences may be enacted at some future time by the legislature. As these changes occur, the reader is told that specific rules will be adopted to implement those changes. Agency Statements The allegations concerning unadopted rules, all in the RFA, are somewhat confusing. In their PFO, Petitioners request that a final order be entered determining "the policies that make up virtually all of RFA 2016-113 are invalid non-rule policies." Pet'r PFO, p. 23. In paragraph 38 of the PFO, they make reference to RFA pages 2, 13, 20, 22, 40-45, 53-54, 62-63, 67-68, 72, and 110, but elsewhere provide the actual text of only six statements and a brief description of a few others. In the parties' Joint Stipulation, Petitioners assert only that "RFA 2016-113 contains numerous provisions that are invalid exercises of non-rule policy and are without a basis in or are contrary to the law implemented." Jt. Stip., p. 2, § B.1. No statements are identified or described. As detailed in endnote 1, however, their initial Petitions identify the text of some statements and provide a brief description of others, along with the page number on which they are found.1/ Only these statements will be addressed. Petitioners contend that Florida Housing must immediately discontinue all reliance upon them, stop the solicitation process, and issue a new RFA. It is unnecessary to recite each statement in full in order to resolve this dispute. An RFA is issued for each solicitation involving low- income housing credits. Before posting an RFA, Florida Housing typically conducts workshops and posts on-line information to inform prospective applicants of all requirements and any new provisions. By reading the RFA, each prospective applicant is placed on equal footing with the others. RFA-113 consists of six sections: Introduction; Definitions; Procedures and Provisions; Information to be Provided in Application; Evaluation Process; and Award Process. The definitions and funding selection criteria being challenged are found in sections Two and Four, respectively. A lengthy Exhibit A is attached to RFA-113, which includes various forms, instructions, and the like. The evidence shows that RFAs in the low-income rental housing program are not always the same, as they vary depending on such things as the type of project, size of the county, applicable selection criteria, proximity of other developments, program being implemented, demographics being served, and economic conditions in the area. Also, changes in the substantive law or federal regulations require a modification of an RFA's terms and conditions from time to time. For example, RFA-113 contains new criteria used by Florida Housing for the very first time. In short, RFA-113 is tailored to a very narrow class of persons in the six-county area who seek tax credits to build affordable low-income rental property in that area. The selection criteria in RFA-113 are not cast in stone and some are subject to discretionary application. And applicants can achieve points in different ways. During the review process, evaluators have the discretion to either waive or enforce irregularities, depending on how they characterize the irregularity. It is fair to assume from the record that different members of the evaluation committee might assign a different score to the same section of an application. Is Rulemaking Impracticable? Petitioners contend that Florida Housing must adopt by rule the detailed selection criteria, preferences, and definitions contained in every RFA. These terms and conditions change from cycle to cycle and would require Florida Housing to engage in repetitive rulemaking each year, which more than likely would unduly delay the solicitation process. Assuming arguendo the statements are a rule, which they are not, under the circumstances presented here, it is not reasonable to adopt by rule precise or detailed principles, criteria, or standards for every solicitation. See § 120.54(1)(a)2.a., Fla. Stat. Attorney's Fees and Costs As a condition precedent to seeking an award of attorney's fees and costs against an agency for having an illegal unadopted rule, the person bringing the challenge must give the agency 30 days' notice before filing a petition under section 120.56(4), which notice must inform the agency that the disputed statement might constitute an unadopted rule. See § 120.595(4)(b), Fla. Stat. The parties have stipulated that Petitioners failed to provide this notice.
The Issue The issue in this case is whether a portion of Florida Administrative Code Rule 67-48.0072 is an invalid exercise of delegated legislative authority.
Findings Of Fact The Petitioner is a limited partnership and developer of affordable housing in Florida. The Petitioner is seeking to construct a 116-unit affordable housing family apartment complex ("Elmwood Terrace") in Fort Myers, Lee County, Florida. The Petitioner has standing to initiate and participate in this proceeding. The Respondent is a public corporation organized under Chapter 420, Florida Statutes (2010), to administer state programs that provide financial support to developers seeking to construct affordable housing. Such support is provided through a variety of mechanisms, including the use of federal tax credits. The federal tax credit program was created in 1986 to promote the construction and operation of privately-developed affordable housing. The tax credits relevant to this proceeding provide a dollar-for-dollar credit against federal tax liabilities for a period of ten years. The Respondent is the designated Florida agency responsible for distribution of the federal tax credits. The tax credits are awarded pursuant to a "Qualified Allocation Plan" (QAP) that must be annually approved by the Governor and adopted as an administrative rule by the Respondent. As a matter of course, developers receiving the federal tax credits sell them through syndicators for discounted cash. The sale of the tax credits generates debt-free cash equity for developers. Developers seeking financial support to build affordable housing units submit applications to the Respondent during an annual competitive process known as the "Universal Cycle." Every three years, the Respondent commissions a study (the "Shimberg Report"), which measures, within each Florida county, the number of "cost-burden" renters earning 60 percent or less of an area's median income (AMI) who pay more than 40 percent of their income in rent. The AMI is determined by the federal government. The cost-burden households are further classified into four groups: families, the elderly, farm workers, and commercial fishermen. The Shimberg Report also assesses needs related to homeless people in the state. Developers seeking to obtain affordable housing financing are required to set aside a portion of the proposed units for income-limited residents. Access to affordable housing units is generally targeted towards persons receiving no more than 60 percent of the AMI. The Universal Cycle process allows the Respondent to target specific housing deficiencies in terms of geographic availability and population demographics and to preserve the stock of existing affordable housing. During the Universal Cycle process, the Respondent identifies areas where additional affordable housing is unnecessary, to discourage additional development in weak markets and to encourage development in those locations where there is a lack of access to affordable housing. The Respondent classifies areas where there is little need for additional affordable housing as "Location A" areas. Each application filed during the Universal Cycle is evaluated, scored, and competitively ranked against other applications filed during the same Universal Cycle. After the Respondent completes the competitive ranking of the applications submitted in the Universal Cycle, the applicants are provided with an opportunity to review and comment on the evaluation and scoring of the proposals. Applicants may also cure defects in their own proposals. After the close of the review and comment period, the Respondent publishes a revised competitive ranking of the proposals. Developers may challenge the second ranking through an administrative hearing. After the second ranking process is final, developers achieving an acceptable score receive preliminary funding commitments and proceed into a "credit underwriting" evaluation process. The credit underwriting process is governed by Florida Administrative Code Rule 67-48.0072. The Respondent selects an independent credit underwriter who reviews each proposal according to requirements set forth by administrative rule (the "Credit Underwriting Rule"). The cost of the credit underwriting review is paid by the developer. The credit underwriter considers all aspects of the proposed development, including financing sources, plans and specifications, cost analysis, zoning verification, site control, environmental reports, construction contracts, and engineering and architectural contracts. The responsibility for the market study is assigned by the credit underwriter to an independent market analyst. The credit underwriter prepares a report for each applicant invited into the process. The reports are submitted to the Respondent's nine-member, statutorily-created Board of Directors (Board). The Board approves or denies each application for financial support. The Petitioner applied for funds for the Elmwood Terrace project during the 2007 Universal Cycle. The Petitioner's application received a perfect score, maximum points, and was allocated tax credits in the amount of $1,498,680. The Petitioner thereafter entered the credit underwriting process. The credit underwriting analysis was performed by Seltzer Management Group (SMG). SMG contracted with a market analyst, Vogt, Williams & Bowen Research, Inc. (VWB), to prepare the required market study. The affordable units at Elmwood Terrace were initially intended for persons receiving incomes no more than 60 percent of the AMI. The VWB research indicated that the Elmwood Terrace project would adversely affect the existing affordable housing developments, if the Elmwood Terrace units were available to the 60 percent AMI population. The existing affordable housing developments, also serving the 60 percent AMI population, included two developments that had participated in the Respondent's "Guarantee Fund" program, addressed elsewhere herein. VWB determined that the impact of the Elmwood Terrace project on the existing developments could be ameliorated were some of the Elmwood Terrace units targeted during "lease-up" to persons at income levels of not more than 50 percent of the AMI. The lease-up period is the time required for a new development to reach anticipated occupancy levels. The issue was the subject of discussions between the Petitioner, VWB, and SMG. To resolve the anticipated negative impact on the existing affordable housing developments, the Petitioner agreed to target the 50 percent AMI population. In September 2008, the credit underwriter issued his report and recommended that the Petitioner receive the previously-allocated tax credits. On September 22, 2008, the Respondent's Board accepted the credit underwriting report and followed the recommendation. In the fall of 2008, after the Petitioner received the tax credits, the nation's economic environment deteriorated considerably. As a result, the syndicator with whom the Petitioner had been working to sell the tax credits advised that the sale would not occur. The Petitioner was unable to locate an alternate purchaser for the tax credits. The Petitioner considered altering the target population of the project in an attempt to attract a buyer for the tax credits, and there were discussions with the Respondent about the option, but there was no credible evidence presented that such an alteration would have resulted in the sale of the Petitioner's tax credits. Lacking a buyer for the tax credits, the Petitioner was unable to convert the credits to cash, and they were of little value in providing funds for the project. The Petitioner was not alone in its predicament, and many other developers who received tax credits in the 2007 and 2008 Universal Cycles found themselves unable to generate cash through the sale of their tax credits. In early 2009, Congress adopted the American Recovery and Reinvestment Act of 2009 (PL 111-5), referred to herein as ARRA, which incorporated a broad range of economic stimulus activities. Included within the ARRA was the "Tax Credit Exchange Program" that provided for the return by the appropriate state agency of a portion of the unused tax credits in exchange for a cash distribution of 85 percent of the tax credit value. The State of Florida received $578,701,964 through the Tax Credit Exchange Program. The ARRA also provided additional funds to state housing finance agencies through a "Tax Credit Assistance Program" intended to "resume funding of affordable housing projects across the nation while stimulating job creation in the hard-hat construction industry." On July 31, 2009, the Respondent issued a Request for Proposals (RFP 2009-04) to facilitate the distribution of the ARRA funds. The Respondent issued the RFP because the 2009 QAP specifically required the Respondent to allocate the relevant federal funds by means of a "competitive request for proposal or competitive application process as approved by the board." The 2009 QAP was adopted as part of the 2009 Universal Cycle rules. Projects selected for funding through the RFP would be evaluated through the routine credit underwriting process. Participation in the RFP process was limited to developers who held an "active award" of tax credits as of February 17, 2009, and who were unable to close on the sale of the credits. The RFP included restrictions against proposals for development within areas designated as "Location A." Although the location of the Elmwood Terrace project had not been within an area designated as "Location A" during the 2007 Universal Cycle process, the Respondent had subsequently designated the area as "Location A" by the time of the 2009 Universal Cycle. The RFP also established occupancy standards for projects funded under the RFP that exceeded the standards established in the Universal Cycle instructions and an evaluation process separate from the Universal Cycle requirements. Although the restrictions in the RFP would have automatically precluded the Petitioner from being awarded funds, the Petitioner submitted a response to the RFP and then filed a successful challenge to the RFP specifications (DOAH Case No. 09-4682BID). In a Recommended Order issued on November 12, 2009, the Administrative law Judge presiding over the RFP challenge determined that certain provisions of the RFP, including the automatic rejection of Location A projects, the increased occupancy standards, and the RFP evaluation criteria, were invalid. The Respondent adopted the Recommended Order by a Final Order issued on December 4, 2009, and invited the Petitioner into the credit underwriting process by a letter dated December 9, 2009. The credit underwriter assigned to analyze the Petitioner's project was SMG, the same credit underwriter that performed the original analysis of the Petitioner's project during the 2007 Universal Cycle. SMG retained Meridian Appraisal Group, Inc. (Meridian), to prepare the required market study. The Respondent was not consulted regarding the SMG decision to retain Meridian for the market analysis. The decision to retain Meridian for the market analysis was entirely that of SMG. The Respondent did not direct SMG or Meridian in any manner regarding the assessment or evaluation of any negative impact of the proposed project on existing affordable housing developments. Meridian completed the market study and forwarded it to SMG on January 26, 2010. The Meridian market analysis included a review of the relevant data as well as consideration of the actual economic conditions experienced in Lee County, Florida, including the extremely poor performance of the existing housing stock, as well as significant job losses and considerable unemployment. The Meridian market analysis determined that the Elmwood Terrace development would have a negative impact on two existing affordable housing apartment developments that were underwritten by the Respondent through a Guarantee Fund created at Section 420.5092, Florida Statutes, by the Florida Legislature in 1992. The existing Guarantee Fund properties referenced in the SMG recommendation are "Bernwood Trace" and "Westwood," both family-oriented apartment developments within five miles of the Elmwood Terrace location. The Guarantee Fund essentially obligates the Respondent to satisfy mortgage debt with the proceeds of Florida's documentary stamp taxes, if an affordable housing development is unable to generate sufficient revenue to service the debt. Because the Guarantee Fund program essentially serves to underwrite the repayment of mortgage debt for a "guaranteed" affordable housing development, the program increases the availability, and lowers the cost, of credit for developers. The Guarantee Fund program has participated in the financing of more than 100 projects, most of which closed between 1999 and 2002. Since 2005, the Respondent has not approved any additional Guarantee Fund participation in any affordable housing developments. The Respondent's total risk exposure through the Guarantee Fund is approximately 750 million dollars. Prior to October 2008, no claims were made against the Guarantee Fund. Since November 2008, there have been eight claims filed against the Guarantee Fund. Affordable housing financing includes restrictions that mandate the inclusion of a specific number of affordable housing units. Such restrictions are eliminated through foreclosure proceedings, and, accordingly, access to affordable housing units can be reduced if a development fails. Presuming that the eight claims pending against the Guarantee Fund eventually proceeded through foreclosure, as many as 2,300 residential units could be deducted from the stock of affordable housing. When there is a claim on the Guarantee Fund, the Respondent has to assume payment of the mortgage debt. The claims are paid from the Guarantee Fund capital, which is detrimental to the Respondent's risk-to-capital ratio. The risk-to-capital ratio is presently four to one. The maximum risk-to-capital ratio acceptable to rating agencies is five to one. The eight claims against the Guarantee Fund have ranged between ten and 18 million dollars each. The Respondent's bond rating has declined because of the eight claims. A continued decline in the Respondent's bond rating could result in documentary stamp tax receipts being used for payment of Guarantee Fund claims and directed away from the Respondent's programs that are intended to support the creation of affordable housing. In an effort to prevent additional claims against the Guarantee Fund, the Respondent has created the "Subordinate Mortgage Initiative" to provide assistance in the form of two- year loans to troubled Guarantee Fund properties. When preparing the 2010 market study, Meridian did not review the VWB market analysis performed as part of the 2007 application. Although the Petitioner has asserted that Meridian should have reviewed the 2007 VWB analysis, there is no evidence that Meridian's decision to conduct an independent market study without reference to the prior market review was inappropriate. On February 8, 2010, SMG issued a recommendation that the Petitioner's funding request be denied "because of the proposed development's potential financial impacts on developments in the area previously funded by Florida Housing and an anticipated negative impact to the two Guarantee Fund properties located within five miles of the proposed development." There is no evidence that the Meridian analysis was inadequate or improperly completed. There is no evidence that the SMG's reliance on the Meridian analysis was inappropriate. For purposes of this Order, the Meridian analysis and the SMG credit underwriting report have been accepted. Elmwood Terrace, a newer development with newer amenities, would compete for residents with the Bernwood Trace and Westwood developments. The financing for Bernwood Trace and Westwood was premised on projections that the affordable housing units would be leased to the 60 percent AMI population; however, the developments have been unable to maintain full occupancy levels, even though a number of units in the two properties are leased at reduced rates based on 50 percent AMI income levels. A rent reduction implemented by an existing development, whether based on economic conditions or resulting from competition, constitutes a negative impact on the development. There is no credible evidence that the occupancy rates are attributable to any difficulty in management of the two developments. It is reasonable to conclude that the leasing issues are related to economic conditions present in Lee County, Florida. In January 2010, VWB conducted an alternative market analysis. The VWB analysis was not provided to SMG or to the Respondent at any time during the credit underwriting process. Based on the 2010 VWB analysis, the Petitioner asserted that economic conditions in Lee County, Florida, have improved since the first credit underwriting report was completed in 2008 and that the improvement is expected to continue. There is no noteworthy evidence that economic conditions have improved or will significantly improve in the Lee County, Florida, market in the predictable future, and the VWB analysis is rejected. The Petitioner offered to mitigate any negative impact on the Guarantee Fund properties by committing affordable units to 50 percent AMI income levels. Given the existing economic and rental market conditions in Lee County, Florida, the evidence fails to establish that the offer would actually alleviate the negative impact on the affected Guarantee Fund developments. The 2010 VWB analysis states that there is substantial unmet demand for housing at 50 percent AMI and that there will be no impact on the Guarantee Fund units if the Elmwood Terrace units were set aside for such individuals. There is no credible evidence that there is a substantial and relevant unmet affordable housing demand in Lee County, Florida. The VWB analysis is rejected. Following the completion of each annual Universal Cycle process, the Respondent actively solicits feedback from developers and the public and then amends the Universal Cycle requirements to address the issues raised, as well as to reflect existing affordable housing needs and general concerns of the Board. The amendments are applicable for the following Universal Cycle. In 2009, the Respondent amended subsection (10) of the Credit Underwriting Rule as part of the annual revisions to the Universal Cycle process. The relevant amendment (referred to by the parties as the "Impact Rule") added this directive to the credit underwriter: The Credit Underwriter must review and determine whether there will be a negative impact to Guarantee Fund Developments within the primary market area or five miles of the proposed development, whichever is greater. The amendment was prompted by the Respondent's experience in the fall of 2008 when considering two separate applications for affordable housing financing. The potential negative impact of a proposed development on an existing Guarantee Fund property was central to the Board's consideration of one application, and the Board ultimately denied the application. In the second case, the Board granted the application, despite the potential negative impact on a competing development that was not underwritten by the Guarantee Fund. The intent of the language was to advise developers that the existence of Guarantee Fund properties within the competitive market area would be part of the credit underwriting evaluation and the Board's consideration. Notwithstanding the language added to the rule, the credit underwriter is charged with reviewing the need for additional affordable housing. Even in absence of the added language, consideration of any negative impact to competing developments based on inadequate need for additional affordable housing would be appropriate. In rendering the 2010 credit underwriting report on Elmwood Terrace, the credit underwriter complied with the directive. Prior to determining that the Petitioner's funding application should be denied, the Respondent's Board was clearly aware of the Petitioner's application, the credit underwriting report and market analysis, and the economic conditions in Lee County, Florida. There is no credible evidence of any need for additional affordable housing in Lee County, Florida. There is no credible evidence that the Lee County, Florida, market can sustain the addition of the units proposed by the Petitioner without adversely affecting the financial feasibility of the existing Guarantee Fund developments. The Board was aware that the Elmwood Terrace development could attract residents from the nearby Guarantee Fund properties and that local economic conditions threatened the financial viability of the properties. Given current economic conditions, approval of the application at issue in this proceeding would reasonably be expected to result in a negative impact to existing affordable housing developments. The protection of Guarantee Fund developments is necessary to safeguard the resources used to support the creation and availability of affordable housing in the state.
The Issue The issue for determination is whether Respondent's proposed amendment to the Qualified Allocation Plan (QAP), specifically paragraph 16 of the proposed 2012 QAP allowing Respondent to allocate certain tax credits by means of Request for Proposals (RFPs), adopted by and incorporated by reference into Florida Administrative Code Rule 67-48.002(94), constitutes an invalid exercise of delegated legislative authority pursuant to section 120.52(8), Florida Statutes.
Findings Of Fact Petitioner Allapattah Housing Partners, LLC, is a Florida limited liability company whose address is 1172 South Dixie Highway, Suite 500 Coral Gables, Florida 33146. Petitioner Tower Road Gardens, Ltd., is a limited partnership whose address is 5709 NW 158 Street, Miami Lakes, Florida 33014. Petitioner City River Apartments, Ltd., is a limited partnership whose address is 1666 Kennedy Causeway, Ste. 505, North Bay Village, Florida 33141. Respondent is a public corporation created by section 420.504, Florida Statutes, to administer the governmental function of financing or refinancing affordable housing and related facilities in Florida. Respondent's statutory authority and mandates appear in Part V of chapter 420, Florida Statutes. See §§ 420.501 through 420.55, Fla. Stat. Respondent is governed by a Board of Directors consisting of nine individuals appointed by the Governor and confirmed by the Senate. Respondent's address is 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301. In the July 1, 2011, Florida Administrative Weekly (FAW), Volume 37, No. 26, pages 1831 through 1872, Respondent gave notice of the proposed amendments to Florida Administrative Code Chapter 67-48 and to forms and instructions that make up the Universal Cycle Application Package, incorporated by reference into Florida Administrative Code Rule 67-48.004(1)(a). The July 1, 2011, Notice of Proposed Rule indicated that a public hearing would be held at Respondent's office in Tallahassee, Florida, on Tuesday, July 26, 2011, at 10:00 a.m. The Amended Petition was filed within ten days of the final public hearing and, thus, is timely pursuant to section 120.56(2), Florida Statutes. Under federal law memorialized in Section 42 of the Internal Revenue Code (IRC or the Code), each state is given an amount of federal Low-Income Rental Housing Tax Credits (Housing Credits) based upon its population. In 2011, each state is entitled to $2.15 per capita of Housing Credits. Florida is entitled to receive approximately $40,422,817.00 in 2011 Housing Credits. These Housing Credits are then allocated to specific qualifying housing projects and can be utilized by project investors each year for a ten-year period. Accordingly, the 2011 Florida Housing Credits entitlement will represent a total value of $404,228,170.00 ($40,422,817.00 each year for ten years) in Housing Credits. Developers typically sell the tax credits to investors to generate equity investments in such projects. For example, an equity "price" of 90 cents for each dollar of the 2011 allocation of Housing Credits would generate approximately $360 million in investor equity for the statewide allocation. More than seven million seven hundred thousand dollars ($7,700,000.00) of 2011 Housing Credits remain unallocated by Respondent. The amount of Housing Credits available for 2012 will not be known until the Internal Revenue Service publishes its state population estimates in early 2012. As in 2011, the amount will be the product of Florida's population multiplied by $2.15. Section 42 of the Code requires that each state designate a "housing credit agency" which is responsible for the proper allocation and distribution of Housing Credits in compliance with the criteria and guidelines of section 42. Respondent's rules incorporate section 42 of the Code at Florida Administrative Code Rule 67-48.002(71). Respondent is designated as Florida's housing credit agency by section 420.5099, Florida Statutes, and, as such, is responsible for the allocation and distribution of Housing Credits. Respondent administers various federal and state affordable housing programs, including the Housing Credit Program, pursuant to section 420.5099 and chapter 67-48. Respondent's rulemaking authority to implement this process is set forth in section 420.507(12), Florida Statutes. Under federal law, Respondent must distribute Low- Income Rental Housing Tax Credits to applicants pursuant to a specific QAP. IRC § 42(m)(l)(A)v. The QAP must contain certain criteria mandated by federal law, referred to as "Selection Criteria." IRC § 42(m)(l)(B). The Code further provides that a state's federal Housing Credit award will be deemed to be zero if its QAP fails to include a complete plan setting forth (a) selection criteria, (b) preferences for lowest income, longest terms and development in qualified census tracts, and (c) procedures for monitoring and reporting a project's non- compliance. IRC § 42(m)(l)(A). Respondent's QAP must be approved by its Board of Directors and by the Governor and must be adopted as a rule. IRC § 42(m)(A)(i); § 120.56. Typically, each year, Respondent embarks on a public rule-making process to adopt the applicable rule and QAP which control the complex and critical processes for evaluation, review, notice, opportunity to be heard, and, ultimately, ranking and approval of developments to receive allocations of Housing Credits for that year. Because the demand for allocation of Housing Credits exceeds that which is available under the Housing Credit Program, applicants of qualified affordable housing developments must compete for this funding. Applicants apply for funding, under various affordable housing programs, through Respondent's Universal Cycle application process, which is set forth in Florida Administrative Code Rules 67-21.002 through -21.00351 and 67-48.001 through -48.005. Applicants for tax credits provide information as required by the forms and instructions of the Universal Cycle Application Package, which is adopted by and incorporated into rule 67-48.004(1)(a). To assess the relative merits of proposed developments, Respondent has established a competitive application process known as the Universal Cycle. Fla. Admin. Code Chapter 67-48. Respondent scores and competitively ranks the applications to determine which applications will be allocated Housing Credits. Respondent's scoring and evaluation process for Housing Credit applications is set forth in rule 67-48.004. Under these rules, the applications are evaluated and scored based upon factors contained in the Universal Cycle Application Package and Respondent's adopted rules. Respondent then issues preliminary scores to all applicants. Fla. Admin. Code R. 67- 48.004(3). Following release of the preliminary scores, competitors can alert Respondent of alleged scoring errors in other applications by filing a written Notice of Possible Scoring Error (NOPSE) within a specified time frame. Respondent reviews the NOPSE and notifies the affected applicant of its decision by issuing a NOPSE scoring summary. Fla. Admin. Code R. 67-48.004(4). Applicants then have an opportunity to submit "additional documentation, revised pages and such other information as the Applicant deems appropriate ('cures') to address the issues" raised by preliminary or NOPSE scoring. See Fla. Admin. Code R. 67-21.003 and 67-48.004(6). In other words, within parameters established by the rules, applicants may cure certain errors and omissions in their applications pointed out during preliminary scoring or raised by a competitor during the NOPSE process. After affected applicants submit their "cure" documentation, competitors can file a Notice of Alleged Deficiency (NOAD) challenging the sufficiency of an applicant's cure. Respondent considers the challenged cure materials and reviews the NOADs, then issues final scores for all the applications. Fla. Admin. Code R. 67-48.004(9). Florida Administrative Code Rule 67-48.005 establishes a procedure through which an applicant can challenge the final scoring of its application. The Notice of Rights that accompanies an applicant's final score advises an adversely affected applicant of its right to appeal Respondent's scoring decision in a proceeding conducted under chapter 120. Ultimately, Respondent ranks each application and allocates available Housing Credits based on such rankings. The last time the QAP in the State of Florida was promulgated and adopted as a rule was in 2009, which allocated 2009 Housing Credits. During 2010, there were no new amendments to Respondent's rules or the QAP. At the end of 2010, Respondent drafted a 2011 QAP, which was signed by the Governor, but never adopted as a rule. The draft 2011 QAP allocated Housing Credits in accordance with a Universal Application Cycle, but Respondent did not adopt the QAP as a rule pursuant to chapter 120.56. The 2011 Cycle did not take place. On June 26, 2011, Respondent's Board authorized publication of proposed rule amendments to chapter 67-48. The proposed rule amendments adopt and incorporate the 2012 QAP by reference at proposed rule 67-48.002(94). Proposed rule 67-48.002(94) provides: "QAP" or "Qualified Allocation Plan" means, with respect to the HC Program, the 2012 Qualified Allocation Plan which is adopted and incorporated herein by reference, effective upon 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 2011 Universal Application link labeled Related References and Links or by contacting the Housing Credit Program at 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301-1329. The 2012 QAP proposed rule purports to govern the process and allocation for both 2011 and 2012 Housing Credits. The only mention in the 2012 QAP proposed rule of the allocation of 2011 Housing Credits is contained in Paragraph 16 of the 2012 QAP proposed rule, which states in its entirety: "Any available 2011 Housing Credit Allocation Authority may be awarded by the FHFC [Respondent's] Board by means of Request for Proposals based on criteria approved by the FHFC [Respondent's] Board." Petitioners challenge proposed rule 67-48.002(94) (which incorporates by reference the 2012 QAP proposed rule) and those portions of the 2012 QAP proposed rule which purport to govern the allocation of 2011 Housing Credits. It is undisputed that Petitioners have standing to initiate and participate in this rule challenge proceeding. § 120.56(1)(a).
The Issue Whether the Petitions filed by Ambar Trail, Ltd.; Sierra Meadows Apartments, Ltd.; and Quail Roost Transit Village IV, Ltd., should be dismissed for lack of standing.
Findings Of Fact Florida Housing is a public corporation created under Florida law to administer the governmental function of financing or refinancing affordable housing and related facilities in Florida. Florida Housing administers a competitive solicitation process to implement the provisions of the housing credit program, under which developers apply and compete for funding for projects in response to RFAs developed by Florida Housing. The RFA in this case was specifically targeted to provide affordable housing in Miami-Dade County, Florida. The RFA introduction provides: 2 As this Recommended Order of Dismissal is based upon a motion to dismiss, the factual allegations of the three Petitions filed by the Petitioners in this consolidate case are accepted as true, and the Findings of Fact are derived from the four corners of those Petitions, see Madison Highlands. LLC v. Florida Housing Finance Corp., 220 So. 3d 467, 473 (Fla. 5th DCA 2017), and facts that are not otherwise in dispute. This Request for Applications (RFA) is open to Applicants proposing the development of affordable, multifamily housing located in Miami- Dade County. Under this RFA, Florida Housing Finance Corporation (the Corporation) expects to have up to an estimated $7,195,917 of Housing Credits available for award to proposed Developments located in Miami-Dade County. After Florida Housing announced its preliminary funding award decisions for RFA 2019-112 for Housing Credit Financing for Affordable Housing Developments Located in Miami-Dade County, each of the Petitioners filed Petitions challenging the decisions. Petitioners do not allege that Florida Housing improperly scored or evaluated the applications selected for funding, nor do they contend that Petitioners' applications should be funded. Instead, Petitioners allege that the evaluation was fundamentally unfair and seeks to have the entire RFA rescinded based on alleged improprieties of one responding entity and its affiliates. Petitioners claim that the evaluation process was fundamentally unfair is based entirely on allegations that several entities associated with Housing Trust Group, LLC (HTG), combined to submit 15 Priority I applications in contravention of the limitation in the RFA on the number of Priority I applications that could be submitted. Even assuming Petitioners' assertions are correct, there is no scenario in which Petitioners can reach the funding range for this RFA. In order to break ties for those applicants that achieve the maximum number of points and meet the mandatory eligibility requirements, the RFA sets forth a series of tie-breakers to determine which applications will be awarded funding. The instant RFA included specific goals to fund certain types of developments and sets forth sorting order tie-breakers to distinguish between applicants. The relevant RFA provisions are as follows: Goals The Corporation has a goal to fund one (1) proposed Development that (a) selected the Demographic Commitment of Family at questions 2.a. of Exhibit A and (b) qualifies for the Geographic Areas of Opportunity/SADDA Goal as outlined in Section Four A. 11. a. The Corporation has a goal to fund one (1) proposed Development that selected the Demographic Commitment of Elderly (Non-ALF) at question 2.a. of Exhibit A. *Note: During the Funding Selection Process outlined below, Developments selected for these goals will only count toward one goal. Applicant Sorting Order All eligible Priority I Applications will be ranked by sorting the Applications as follows, followed by Priority II Applications. First, from highest score to lowest score; Next, by the Application's eligibility for the Proximity Funding Preference (which is outlined in Section Four A.5.e. of the RFA) with Applications that qualify for the preference listed above Applications that do not qualify for the preference; Next, by the Application's eligibility for the Per Unit Construction Funding Preference which is outlined in Section Four A.lO.e. of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Application's eligibility for the Development Category Funding Preference which is outlined in Section Four A.4.(b)(4) of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Applicant's Leveraging Classification, applying the multipliers outlined in Item 3 of Exhibit C of the RFA (with Applications having the Classification of A listed above Applications having the Classification of B); Next, by the Applicant's eligibility for the Florida Job Creation Funding Preference which is outlined in Item 4 of Exhibit C of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); and And finally, by lotterv number, resulting in the lowest lottery number receiving preference. This RFA was similar to previous RFAs issued by Florida Housing, but included some new provisions limiting the number of Priority I applications that could be submitted. Specifically, the RFA provided: Priority Designation of Applications Applicants may submit no more than three (3) Priority I Applications. There is no limit to the number of Priority II Applications that can be submitted; however, no Principal can be a Principal, as defined in Rule Chapter 67- 48.002(94), F.A.C., of more than three ( 3) Priority 1 Applications. For purposes of scoring, Florida Housing will rely on the Principals of the Applicant and Developer(s) Disclosure Form (Rev. 05-2019) outlined below in order to determine if a Principal is a Principal on more than three (3) Priority 1 Applications. If during scoring it is determined that a Principal is disclosed as a Principal on more than three (3) Priority I Applications, all such Priority I Applications will be deemed Priority II. If it is later determined that a Principal, as defined in Rule Chapter 67-48.002(94), F.A.C., was not disclosed as a Principal and the undisclosed Principal causes the maximum set forth above to be exceeded, the award(s) for the affected Application(s) will be rescinded and all Principals of the affected Applications may be subject to material misrepresentation, even if Applications were not selected for funding, were deemed ineligible, or were withdrawn. The Petitioners all timely submitted applications in response to the RFA. Lottery numbers were assigned by Florida Housing, at random, to all applications shortly after the applications were received and before any scoring began. Lottery numbers were assigned to the applications without regard to whether the application was a Priority I or Priority II. The RFA did not limit the number of Priority II Applications that could be submitted. Review of the applications to determine if a principal was a principal on more than three Priority 1 Applications occurred during the scoring process, well after lottery numbers were assigned. The leveraging line, which would have divided the Priority I Applications into Group A and Group B, was established after the eligibility determinations were made. All applications were included in Group A. There were no Group B applications. Thus, all applications were treated equally with respect to this preference. The applications were ultimately ranked according to lottery number and funding goal. . If Florida Housing had determined that an entity or entities submitted more than three Priority I Applications with related principals, the relief set forth in the RFA was to move those applications to Priority II. Florida Housing did not affirmatively conclude that any of the 15 challenged applications included undisclosed principals so as to cause a violation of the maximum number of Priority I Applications that could be submitted. All of the applications that were deemed eligible for funding, including the Priority II Applications, scored equally, and met all of the funding preferences. After the applications were evaluated by the Review Committee appointed by Florida Housing, the scores were finalized and preliminary award recommendations were presented and approved by Florida Housing's Board. Consistent with the procedures set forth in the RFA, Florida Housing staff reviewed the Principal Disclosure Forms to determine the number of Priority I Applications that had been filed by each applicant. This review did not result in a determination that any applicant had exceeded the allowable number of Priority I Applications that included the same principal. One of the HTG Applications (Orchid Pointe, App. No. 2020-148C) was initially selected to satisfy the Elderly Development goal. Subsequently, three applications, including Slate Miami, that had initially been deemed ineligible due to financial arrearages were later determined to be in full compliance and, thus, eligible as of the close of business on January 8, 2020. The Review Committee reconvened on January 21, 2020, to reinstate those three applications. Slate Miami was then recommended for funding. The Review Committee ultimately recommended to the Board the following applications for funding: Harbour Springs (App. No. 2020-101C), which met the Geographic Areas of Opportunity/SADDA Goal; Slate Miami (App. No. 2020-122C), which met the Elderly (non-ALF) Goal; and Naranja Lakes (App. No. 2020-117C), which was the next highest-ranked eligible Priority I Application. The Board approved the Committee's recommendations at its meeting on January 23, 2020, and approved the preliminary selection of Harbour Springs, Slate Miami, and Naranja Lakes for funding. The applications selected for funding held Lottery numbers 1 (Harbour Springs), 2 (Naranja Lakes), and 4 (Slate Miami). Petitioners' lottery numbers were 16 (Quail Roost), 59 (Sierra Meadows) and 24 (Ambar Trail). The three applications selected for funding have no affiliation or association with HTG, or any of the entities that may have filed applications in contravention of the limitation in the RFA for Priority I applications. The applications alleged in the Petitions as being affiliated with HTG received a wide range of lottery numbers in the random selection, including numbers: 3, 6, 14, 19, 30, 38, 40, 42, 44, 45, 49, 52 through 54, and 58. If Petitioners prevailed in demonstrating an improper principal relationship between the HTG applications, the relief specified in the RFA (the specifications of which were not challenged) would have been the conversion of the offending HTG applications to Priority II applications. The relief would not have been the removal of those applications from the pool of applications, nor would it have affected the assignment of lottery numbers to any of the applicants, including HTG. The Petitions do not allege any error in scoring or ineligibility with respect to the three applications preliminarily approved for funding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Petitioners lack standing and dismissing the Petitions with prejudice. DONE AND ENTERED this 3rd day of April, 2020, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of April, 2020. COPIES FURNISHED: Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC Suite 3-231 1400 Village Square Boulevard Tallahassee, Florida 32312 (eServed) Michael P. Donaldson, Esquire Carlton Fields Jorden Burt, P.A. 215 South Monroe Street, Suite 500 Post Office Drawer 190 Tallahassee, Florida 32302-0190 (eServed) Donna Elizabeth Blanton, Esquire Brittany Adams Long, Esquire Radey Law Firm, P.A. Suite 200 301 South Bronough Street Tallahassee, Florida 32301 (eServed) Hugh R. Brown, General Counsel Betty Zachem, Esquire Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) M. Christopher Bryant, Esquire Oertel, Fernandez, Bryant & Atkinson, P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 (eServed) J. Stephen Menton, Esquire Tana D. Storey, Esquire Rutledge Ecenia, P.A. 119 South Monroe Street, Suite 202 Post Office Box 551 (32302) Tallahassee, Florida 32301 (eServed) Corporation Clerk Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed)
The Issue The issue in Case No. 98-3441RX is whether a 15 percent penalty provision of the Florida Housing Finance Corporation's 1998 Application Package for Low Income Housing Tax Credits, adopted and incorporated into the Florida Administrative Code, by reference pursuant to Rules 67-48.002(10) and 67-48.004(1), Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority. The issue in Case No. 98-3873 is whether Respondent appropriately applied the 15 percent penalty to Petitioner on its 1998 Application for Low Income Housing Tax Credits.
Findings Of Fact The Parties. Petitioner, Lakewood Senior Apartments Limited Partnership (hereinafter referred to as "Lakewood"), was an applicant for 1998 Low Income Housing Tax Credit funding. Respondent, the Florida Housing Finance Corporation (hereinafter referred to as "FHFC"), has been designated by the State of Florida to administer a Low Income Housing Tax Credit Program. Section 420.5099, Florida Statutes. FHFC is governed by a nine-member board (hereinafter referred to as the "Board"). The members of the Board are appointed by the Governor. Intervenors, LCA Development, Inc. (hereinafter referred to as "LCA"), The Gatehouse Group, Inc. (hereinafter referred to as "Gatehouse"), Vestcor Equities, Inc. (hereinafter referred to as "Vestcor"), and The Wilson Company (hereinafter referred to as "Wilson"), were all applicants for 1998 Low Income Housing Tax Credit funding. The Low Income Housing Tax Credit Program. To encourage the development of low-income housing for families, Section 42 of the Internal Revenue Code of 1986, creates federal income tax credits that are allocated to each of the states for award through state-administered programs to developers of rental housing for low-income and very low-income families. Tax credits allocated to developers through the program may be sold by the developer to generate a substantial portion of the funding necessary for construction of low-income housing projects. The program has been in existence in Florida since 1987. Since its inception, in excess of 43,000 affordable housing units have been produced in Florida through the program. Every year each state receives an annual allotment of tax credits. Generally, Florida's annual allotment of tax credits is apportioned among three county groupings based on population: large counties, medium counties, and small counties. Applicants compete for the tax credits allocated to a group based upon which county an applicant's proposed housing is to be located in. Section 420.5099, Florida Statutes, establishes FHFC's responsibility for the allocation of Florida's share of tax credits: The corporation shall adopt allocation procedures that will ensure the maximum use of available tax credits in order to encourage development of low- income housing in the state, taking into consideration the timeliness of the application, the location of the proposed housing project, the relative need in the area for low-income housing and the availability of such housing, the economic feasibility of the project, and the ability of the applicant to proceed to completion of the project in the calendar year for which the credit is sought. Section 42 of the Internal Revenue Code of 1986, requires that each state ensure that the minimum amount of tax credits necessary for an applicant to implement a proposed project are awarded in order to ensure the maximum use of a state's available credits. How tax credits are allocated is required to be reviewed at three distinct phases in order to carry out this goal: the first phase is the initial application/allocation phase; the second phase is a credit underwriting carryover stage; and the last phase is a final cost certification stage. Section 42 of the Internal Revenue Code of 1986, requires that each state establish a qualified allocation plan (hereinafter referred to as the "Allocation Plan") establishing the procedures to be followed in awarding low income tax credits allocated to the state. Consistent with this requirement, FHFC has adopted an Allocation Plan for Florida through the adoption of Chapter 67-48, Florida Administrative Code. The Allocation Plan establishes a competitive application process intended to carry out the first stage required by the Internal Revenue Code. The actual application (hereinafter referred to as the "Application") used to carry out the first stage of the allocation process provided for in the Application Plan is revised by FHFC on an annual basis. The Application is adopted as part of an Application Package, which includes the Application, tabs, and instructions thereto adopted by FHFC. The Application Package is amended each year to refine and clarify the Application Package, and to implement any new directives from the Board. Once revised, the Application Package is adopted by rule. Once the annual Application Package is adopted and an annual application cycle opens, the adopted Application Package is made available to interested persons for completion and submission to FHFC. Completed Applications received by FHFC are evaluated and scored pursuant to the Application Package, projects are ranked within their respective county groupings, and the highest ranked projects are invited to participate in the second stage of the allocation process, credit underwriting. Once an applicant completes credit underwriting and receives a Preliminary Allocation Certification indicating the amount of tax credits preliminarily allocated to the project, the applicant may proceed to construct the project. Once the project is completed, the applicant enters the final phase of the process, the Final Cost Certification phase. The Internal Revenue Code requires that all credits allocated to a state for a particular year must be allocated by December 31 of that year. Any credits not allocated go into a national pool consisting of all credits not used by December 31. All states that use all their credits by December 31 are then eligible to share in the credits available in the national pool. FHFC makes every effort to ensure that it allocates all of Florida's allocated credits so that the State may participate in the national pool. The Application Process. Prior to each application cycle, FHFC revised its previous year's Application Package and adopts an Application Package for the upcoming year by rule. After adopting the Application Package by rule, FHFC opens the cycle and makes the Application Package available. All Applications are required to be fully completed and filed by a date certain specified in the rules. Information contained in the Application is required to be certified true and accurate by the applicant. All submitted Applications are evaluated and scored by a Review Committee pursuant to the procedures established in the rules. See Rule 67-48.004, Florida Administrative Code. In 1998, the Review Committee was a committee of eight persons designated by the rules to organize the scoring of all applications. The Review Committee was made up of seven members of the staff of FHFC appointed to by the Board and one member of the staff of the Department of Community Affairs. Rule 67- 48.002(80), Florida Administrative Code. Following the notification of preliminary scores, applicants are given a week to review the scores of all applicants. See Rule 67-48.005, Florida Administrative Code. Once notified of the preliminary scores, applicants have the right to file a written Notification of Possible Scoring Error (hereinafter referred to as a "NOPSE"). A NOPSE could be filed to point out a possible scoring error on the applicant's score or on any other applicants' score. All NOPSE's filed during the 1998 cycle were reviewed by FHFC to determine if any modification in an applicant's score should be made. Following the resolution of all NOPSE's, the preliminary scores of all applicants are reviewed by the Board. After the Board's review and approval of the preliminary scores and the ranking of applicants, notice of intended funding is provided to each applicant. Following approval of preliminary scores by the Board, applicants are given a second opportunity to challenge their preliminary score or the preliminary score of any other applicant by filing a Direct or Competitive Appeal. See Rule 67-48.005, Florida Administrative Code. No authority for re-scoring any Application, other than as the result of the filing of a NOPSE or a Direct or Competitive Appeal, was authorized for the 1998 cycle pursuant to Chapter 67- 48, Florida Administrative Code. Following the resolution of all Direct or Competitive Appeals, the Board approves the final scores awarded to each Application by final order of the FHFC. Final scores are ranked by county grouping and a "funding line" is determined. The funding line is the point on the ranking sheet for each county group which represents the cut- off between those applicants that will be funded and those that will not. Applicants ranked above the funding line are given the opportunity to advance to the next two phases of the process required for them to receive funds. See Rule 67-48.026, Florida Administrative Code. For example, for the large county group, the amount of tax credits requested by the highest ranked applicant is deducted from the total tax credits available for the large county group. The amount of tax credits sought by the next highest ranked applicant is then deducted from the remaining tax credits. This process is followed until all the tax credits available for the large county group are allocated. The Credit Underwriting Phase. Those applicants to whom tax credits are tentatively allocated during the application process are next invited to "credit underwriting." Rule 67-48.026, Florida Administrative Code. A "credit underwriter" is defined in Rule 67- 48.002(25), Florida Administrative Code, as follows: (25) "Credit Underwriter" means the legal representative under contract with [FHFC] having the responsibility for providing stated credit underwriting services. Such services shall include, but not be limited to, reviewing the financial feasibility and viability of Projects and proposing to the Corporation the amount of a SAIL or HOME loan and/or the amount of Tax Credit needed, if any. The credit underwriter provides a comprehensive analysis of the preliminarily approved Applications, the applicant, the real estate market, the development economics, and the project's ability to proceed. The credit underwriter verifies the accuracy of information contained in the Application, confirms that the Application complies with applicable statutory and rule requirements of the FHFC, and determines whether the project is financially feasible as presented. Although Applications are required by the rules to be reviewed on their face, during the credit underwriting phase the credit underwriter is allowed to look at pertinent information not contained within the submitted Application. The credit underwriter verifies the accuracy and reasonableness of the information provided in an Application. The credit underwriter looks at the availability of financing, the structure of the proposal, and the estimated total project cost. The credit underwriter may adjust the financial projections set forth in the Application. Historically, the credit underwriter typically increases project costs. Ultimately, the credit underwriter recommends a preliminary allocation of tax credits to each applicant above the funding line. The amount of tax credits recommended may differ from that requested by the applicant. The amount initially requested by the applicant, however, cannot be exceeded. The applicant is limited to the lower of the amount applied for, the lowest amount needed for financial viability, or the qualified basis calculation amount. FHFC may accept, modify, or reject the credit underwriter's recommendations. Rule 67-48.026(10), Florida Administrative Code. Applicants successfully completing the credit underwriting phase are issued a Preliminary Allocation Certification which indicates the amount of tax credits preliminarily allocated to the project. The Final Cost Certification Phase. Construction of the project typically takes two to three years from the submittal of the Application. If a project cannot be completed by the end of the calendar year, the applicant must enter into a Carryover Agreement. Pursuant to this agreement, FHFC promises to allocate a "not to exceed" amount of tax credits to the project if it is completed within two years in accordance with the Carryover Agreement. Once the project is completed, the applicant is required to submit a Final Cost Certification. The Final Cost Certification details the actual costs incurred in completing the project, verified by an independent certified public accountant. Prior to 1998, the Final Cost Certification had to be certified by a credit underwriter. One purpose for the Final Cost Certification is to ensure that actual costs are consistent with, and do not exceed, those allowed by federal and state requirements. The applicant is issued an IRS Form 8609 which establishes the amount of tax credits allocated to the applicant. The amount of tax credits allocated after the Final Cost Certification may be less than the originally approved tax credits for the project. The 1998 Application Package; Project Funding & Economic Viability (Project Cost Pro Forma), Form 4. Effective January 6, 1998, FHFC adopted by reference in its rules the 1998 Application Package, "Form CAP98." Rules 67- 48.002(10) and 67-48.004(1), Florida Administrative Code. The adoption of the 1998 Application Package and the allocation of tax credits through the application phase was consistent with the description of the application process, supra. Among the forms required to be submitted as part of the 1998 Application was Form 4, "Project Funding & Economic Viability (Project Cost Pro Forma)." The purpose of Form 4 is to ensure that an applicant had firm commitments for funding from financially capable sources sufficient to cover the costs of the project which would not be covered by tax credits. A total of 150 points were available for the information on Form 4. This was the highest possible single award of points in the 1998 Application. To the extent that firm commitments were not demonstrated on Form 4, an applicant was to be awarded less than 150 points. In two places on Form 4, applicants are informed that they could not request a developer fee in excess of the limits established by the FHFC rules and the 1998 Application Package. For Lakewood's Application, the maximum developer fee was 20 percent of project cost. The parties stipulated that Lakewood's Form 4 demonstrated that all necessary funding for its project was firmly secured. Therefore, the parties agreed that, but for the imposition of the penalty provision at issue in this proceeding, Lakewood was entitled to an award of 150 points for Form 4. The 15% Penalty. The following provision appears on Form 4 of the 1998 Application: FULL POINTS WILL BE AWARDED ONLY IN THE EVENT THAT ALL INFORMATION REQUIRED BY THIS FORM IS PROVIDED IN STRICT ACCORDANCE WITH THE FORM'S REQUIREMENTS. FAILURE TO PROVIDE COMPLETE, ACCURATE INFORMATION IN THE FORMAL AND LOCATIONPRESCRIBED BY THIS FORM WILL RESULT IN A 15% REDUCTION OF POINTS FOR FORM 4. ONLY INFORMATION CONTAINED WITH THIS APPLICATION WILL BE CONSIDERED FOR PURPOSES OF POINTS AWARDED OR APPEALED. (This provision will hereinafter be referred to as the "15% Penalty"). The 15% Penalty appears in materially identical form on Forms 5, 6, 7, 8, 10, and 22 of the 1998 Application. The Development of the 15% Penalty. Since the inception of the Low Income Housing Tax Credit Program in Florida, the application process has become increasingly competitive and litigious. For example, for the 1998 cycle FHFC received Applications for approximately 72.6 million dollars but only approximately 10.7 million dollars of tax credits available. Consequently, only eleven of the ninety Applications will likely be funded from the 1998 cycle. Because of the increased competitiveness and the litigious nature the application process, the Board appointed a Combined Cycle Committee (hereinafter referred to as the "Cycle Committee") to work with the staff of FHFC to improve the Application and application process for the 1998 cycle. The Board also instructed staff to strictly construe the Application, make sure forms in the 1998 Application were as clear as possible, and to implement a penalty for failures to follow the instructions. The development of the 1998 Application Package began in the spring of 1997. On July 14, 1997, the first rule development workshop was held. The purpose of the workshop, which was attended by approximately forty individuals, was to provide a forum for comments and suggestions from developers and other interested persons concerning the Application Package and the process. Following the July 1997 workshop, FHFC prepared a draft of the 1998 Application Package. The draft consisted of the 1997 Application Package with changes proposed for the 1998 cycle noted with strike-through for deleted language and underlining for added language. See Respondent's Exhibit 2, the "Red Book." Among the proposed changes to the 1997 Application Package contained in the Red Book was the inclusion of the following language on Page 1 of the Instructions: FULL POINTS WILL BE AWARDED ONLY IN THE EVENT THAT ALL INFORMATION REQUIRED BY EACH FORM IS PROVIDED IN STRICT ACCORDANCE WITH THE APPLICATION REQUIREMENTS. FAILURE TO PROVIDE COMPLETE, ACCURATE INFORMATION IN THE FORMAT AND LOCATION PRESCRIBED BY THE APPLICATION WILL RESULT IN A REDUCTION OF POINTS AS INDICATED ON EACH FORM. ONLY INFORMATION CONTAINED WITH THIS APPLICATION WILL BE CONSIDERED FOR PURPOSES OF POINTS AWARDED OR APPEALED. This language was repeated throughout the Red Book, modified only to specify that the penalty was 15 percent and to refer to the specific section or form the language was included in. The 15% Penalty applied only to the points available for a form on which an error or omission occurred. The penalty applied regardless of the number of errors or omissions on a form and regardless of the significance of the error or omission. FHFC was aware at the time that it was considering the 15% Penalty that the point difference between the highest and lowest point totals above the funding line for the 1997 cycle for the large county category was 43.03 points. FHFC also knew that historically only a half point to two points separated funded applicants and unfunded applicants. The 15% Penalty modified the previous treatment of errors or omissions on Applications. Prior to 1998 if an error was made in an Application, the Application was either rejected if the error related to certain specified "threshold requirements" or staff simply corrected the error. For example, if an applicant requested a developer fee in excess of the developer fee cap, scorers would adjust the claimed fee downward. No penalty would be imposed on the applicant. Copies of the Red Book were made available to interested persons to review before and during a second rule development workshop held on September 22, 1997. The purpose of this workshop was to review the proposed changes in the Red Book and to give the approximately sixty-five individuals that attended the workshop an opportunity to make comments and suggestions as to how to improve the Application Package and the application process. The 15% Penalty was specifically explained during the September 22, 1997, workshop. Lakewood was represented at the meeting. The following explanation of the 15% Penalty was given: Before we go on into rules and QAP things, I want to add one more global comment to be sure everybody in this room understands the new big change in the application whereby you [sic] if you don't fill it out exactly the way the instructions tell you, you're going to get penalized then and there, okay? There's a 15% penalty on many of these forms. On Form 3 we set out a chart for you to show that if you don't give all the information exactly where you say it is in the application, all your T's are crossed and your I's dotted, you're going to get reduced points. Now, the whole purpose of this is not to make your life miserable or to make our lives miserable. It is to make you pay attention to the application and to reduce appeals, okay? FHFC Exhibit 11. In addition to the two workshops, two public meetings were held by the Cycle Committee to discuss the proposed Application Package. Questions and comments concerning the proposed Application Package were invited. FHFC staff were also available to answer questions concerning the 1998 Application Package and the process at any time up until the deadline for submittal of the 1998 Application. Throughout the period of time during which the 1998 Application Package was being developed, FHFC staff emphasized the need for accuracy on the Application and explained to prospective applicants that the 15% Penalty existed. FHFC formally adopted the 1998 Application Package containing the 15% Penalty. No challenges to the rule which incorporated the 1998 Application Package were filed before the rule became effective. Full-day workshops were subsequently conducted by FHFC throughout the State to explain how to complete the 1998 Application and to answer questions thereon. The 15% Penalty was explained during these workshops. Purpose for the 15% Penalty. It is important for Applications to be complete and accurate during the application phase. The application phase is FHFC's first opportunity to analyze proposed projects in accordance with the Internal Revenue Code and FHFC's rules. The Internal Revenue Code requires that the minimum number of tax credits necessary to complete a project be determined during the application phase. Therefore, even though modifications may be made during the credit underwriting and final phases, FHFC is still required to make sure that Applications approved in the application phase are as accurate as possible. FHFC's purpose for adopting the 15% Penalty was described by Gwen Lightfoot, Deputy Development Officer for FHFC: Well, it's - we have to go into a little bit of history in order to really understand from whence this approach came. When I first came to the Agency, that was in 1992, we had enough credits that everybody that applied that was really ready to go would be able to get the credits. And there were times at the end of the year when staff would be frantically calling up developers and saying, Do you have a site, are you ready to go? You know, you told me that you were going to turn this application in and we didn't get it and we need one more to secure the national pool. And so, you know, that was the atmosphere under which the credit program was operating six years ago. It was critical for us to get the national pool in those days because that would add, oh, $6 million to the amount of credits that we would have, which is thousands of unit. So, each year we got more and more competitive, more and more developers learned about the program, more and more developers realized that they could make a good living with, you know, affordable housing. The mechanism that the code creates encourages public/private partnerships, so this is a good way for the private community to provide affordable housing and make a living. So, the competition became more and more intense. In 1997, by then, it was extremely contentious, litigious, extremely competitive. I can remember - I think it was in 1996, it might have been the year before, we had over 300 issues on appeal, and that's just insanity. So in this scope of things we tried to come up with a way to make sure that this application was accurate and complete and - well, I guess those are the best words - because we have a mandate in the Federal code and in the State code that we can allocate no more credits than is absolutely necessary for the project viability. That means it is critical for us to have an accurate and complete application. The overall purpose of the app is to be an objective mechanism by which we can maximize the use of the credits. We have got to have a way to be sure that we are getting the best bang for our buck, I guess is a good way to say it. So, when we laid the penalty over the entire application, we were searching for a rational, fair, objective approach which was designed to reduce appeals, to be fair to everybody, come up with a mechanism by which we could award partial points for people who had done, you know, the main thrust of the particular question but had for some reason not done it perfectly, rather than make them lose all of the points for an issue, we only make them lose a%age of the points. The other big thing that played into the decision to go with this penalty approach is that in the six years that I have been reviewing these applications there is a very strong and direct correlation between an applicant's ability to put together a complete, thorough, accurate, well thought out and organized application. And the product that they produce and the way that they handle the compliance period. These properties are not just coming in the door, getting their credits and going out the door and never seeing the agency again. We have to monitor them for 50 years. So, the attention to detail is so critical that, in addition to being a mechanism to select between really good applicants, it is also - it lets them know, it helps teach the applicant what they are in for with regard to detail and long-term commitments. It is just the whole thing to help us get an accurate and complete application so we can accurately allocate credits. (Transcript 71) By its terms, the 15% Penalty applied regardless of the magnitude of the error committed on an Application. For example, if an amount was overstated by $1.00, a 15 percent penalty applied. The application of the 15% Penalty was based upon an objective determination of whether an error occurred. The staff had no discretion to make a subjective determination as to the significance of an error or omission. Although it was not the intent of FHFC for the imposition of the 15% Penalty to be the determining factor in whether an applicant was awarded tax credits, the effect of the 15% Penalty can have that impact. Imposition of the 15% Penalty on Lakewood. On or about March 10, 1998, Lakewood submitted a completed 1998 Application to FHFC for 1998 tax credit funding. Lakewood sought approximately 1.14 million dollars in tax credits for a 150-unit apartment complex to be located in Orange County, Florida. Lakewood's Application was completed by Don Paxton, an employee of the developer, contractor, and management company for Lakewood. Mr. Paxton attended the September 22, 1997, rule development workshop. Mr. Paxton was aware and understood that the 15% Penalty had been included in the 1998 Application and that it was intended to punish for inaccuracies contained in submitted Applications. He also was aware that the 15% Penalty applied to inaccuracies on Form 4. Finally, Mr. Paxton was aware that the developer fee available for Lakewood's proposed project was limited to 20 percent of project cots. On Form 4 of Lakewood's Application, Lakewood claimed a developer fee in excess of the 20 percent of project cost limitation Lakewood was subject to. The developer fee requested by Lakewood was $1,959,714.00, or $240,000.00 in excess of the maximum developer fee Lakewood could request. The excess amount included in the developer fee cost claimed by Mr. Paxton represented an advisory fee which Lakewood had agreed to pay to Affordable Housing, an advisory group specializing in the development and marketing of tax credit- financed housing for senior citizens. Nothing in Lakewood's submitted 1998 Application informed FHFC that the excess amount included as a development fee by Lakewood was attributable to Affordable Housing. Based upon what was provided to FHFC by Lakewood in its Application, it was reasonable for FHFC to conclude that Lakewood was requesting a developer's fee in excess of 20 percent of project cost. Mr. Paxton included the advisory fee because of an instruction of page 10 of Form 4 that "Consulting fees, if any, must be paid out of the developer fee." Mr. Paxton knew, however, that Affordable Housing was not a consultant as the term "consultant" is used in the 1998 Application Package. Mr. Paxton's interpretation of the instruction concerning the payment of consultant fees on page 10 of Form 4 was not reasonable. Mr. Paxton also included the advisory fee as part of the developer fee because that was the only way for Lakewood to treat the $240,000.00 fee as a cost eligible for tax credit reimbursement. While it was a part of the total project cost, it was not part of the project cost eligible for reimbursement with tax credits. The inclusion of the advisory fee as part of the developer fee did not diminish the fact that Lakewood's Form 4 demonstrated secure financing and, consequently, the economic feasibility of its project and its ability to proceed. Due to the excessive developer fee included by Lakewood on Form 4, the scorers of Lakewood's Application imposed the 15% Penalty. A total of 22.5 points was deducted from the 150 points Lakewood would otherwise have been entitled to for Form 4. With the reduction of Lakewood's total score by 22.5 points, Lakewood fell below the funding line for the 1998 cycle. Without the 22.5 point penalty, Lakewood would have been above the funding line. Other Applications of the 15% Penalty. FHFC applied the 15% Penalty to other applicants during the 1998 cycle for errors on Form 4, including the inclusion of developer fees in excess of applicable limits. For example, the penalty was imposed on Applications 8, 9, 30, 58, and 59. FHFC initially imposed the 15% Penalty on the Application of Kay Larkin because the requested developer fee combined with the requested consulting fee, which was separately listed, exceeded the applicable developer fee. FHFC took this position even though the separately listed consulting fee was included as an ineligible cost. Kay Larkin challenged the 15% Penalty. FHFC subsequently agreed to remove the penalty because it was decided that FHFC should not have combined the eligible developer costs and the ineligible consulting fee. The developer fee standing alone did not exceed the developer fee cap. The Kay Larkin matter is distinguishable from this matter because Lakewood listed the entire amount as an eligible developer fee. In the case of the 1998 Application filed by Harvard House, FHFC did fail to impose the 15% Penalty for the inclusion of a developer fee in excess of the developer fee cap. It failed to impose the penalty through oversight. Although Lakewood pointed this error out in a NOPSE it filed concerning its score, no NOPSE or direct or competitive appeal was filed by any applicant concerning the Harvard House Application. FHFC, therefore, had no authority pursuant to the 1998 Application to modify the score it had awarded Harvard House. FHFC committed the same error in scoring the Application submitted by Orchid Trace, which had included a developer fee in excess of the limit of $1.00. Again, although Lakewood raised this error in a NOPSE concerning its score, no NOPSE or direct or competitive appeal concerning Orchid Trace's score was filed. FHFC's imposition of the 15% Penalty to Applications which included developer fees in excess of the developer fee caps was consistent except to the extent that FHFC inadvertently failed to impose the penalty on Harvard House and Orchid Trace. Some applicants failed to include a general contractor fee on the Project Cost Pro Forma of Form 4. General contractor fees were limited to 14 percent of project cost. FHFC did not, however, impose the 15% Penalty on those applicants for their omission. Two applicants above the funding line, Magnolia Pointe and Nantucket Bay, failed to include any general contractor fee on the appropriate line. Most applicants, including Lakewood, left some line blank on the 1998 Application and were not penalized. The following instruction was included on page 1 of the 1998 Application: BE SURE TO ANSWER ALL QUESTIONS, FOLLOW ALL INSTRUCTIONS AND FILL IN ALL LINES. DO NOT LEAVE ANY BLANKS. IF AN ITEM IS NOT APPLICABLE TO THIS PROJECT, INDICATE BY USING "N/A". INCOMPLETE OR BLANK ITMES WILL RESULT IN LOSS OF POINTS. Applicants were not specifically required to report a general contractor fee on their Form 4. In some cases, applicants did not incur general contractor fees. Consequently, on those forms where the applicant did not include a general contractor fee, the FHFC had to assume that the applicant did not intend to pay a general contractor fee. Where a particular item was not specifically required or FHFC could not know whether an item had been left off in error, FHFC interpreted the 15% Penalty to not require the imposition of a penalty for merely failing to mark the item "N/A." Intervenors' Standing. Intervenors are engaged in the business of providing affordable residential rental units for low income and/or very low income persons. Intervenors, through subsidiaries or affiliates, submitted Applications to FHFC seeking allocation of tax credits from the 1998 combined cycle pursuant to Section 420.5099, Florida Statutes (1998). Intervenors, through subsidiaries or affiliates, also submitted Applications seeking tax credits from one or both of the preceding two cycles (1996 and 1997), and anticipate filing Applications in the 1999 cycle. For the 1998 cycle, Intervenors, through subsidiaries or affiliates, submitted the following Applications for projects located in FHFC's large county group and were awarded the following points: Company Project Scores LCA 050C - Magnolia Pointe 652.75 Gatehouse 075CS - Nantucket Bay Apartments 644.47 077C - The Rosemary 656.00 Vestor 040C - Courtney Manor Apartments 640.75 Wilson 047C - Windermere Apartments 640.75 The scores for Intervenors' projects were based upon FHFC staff's comparative review and scoring of the Applications submitted in the 1998 cycle, resolution of all direct and competitive appeals, informal hearings conducted by FHFC designated Hearing Officers, and Board action at its August 21 and September 11, 1998, meetings. At the commencement of the final hearing in these cases, the Board had not entered final orders on the scoring of the 1998 Application. The projects of LCA and Gatehouse, however, were above the funding line and were issued "at risk" invitations to credit underwriting. The projects of Vestcor and Wilson were tied with a third applicant for the remaining tax credits for the large county group, which was not sufficient to fund all three projects. On October 16, 1998, the Board voted to issue final orders confirming the scores of all applicants except Lakewood. The Board issued final orders for the funding of all of Intervenors' projects. If Lakewood prevailed in this proceeding and the 15% Penalty was not imposed, its score would rank it ahead of Vestcor's and Wilson's projects. Based upon the Board's action at the October 16, 1998, meeting, however, the projects of Vestcor and Wilson will still be funded.
The Issue The issues are (1) whether Florida Housing Finance Corporation's (Florida Housing) intended decision to award low- income housing tax credits for an affordable housing development in medium-size counties to Grove Manor Phase I, LTD (Grove Manor), JIC Grand Palms, LLC (Grand Palms), Madison Palms, Ltd. (Madison Palms), and RST The Pines, LP (The Pines), was contrary to solicitation specifications, and if so, whether that determination was clearly erroneous, arbitrary, capricious, or contrary to competition; and (2) whether Florida Housing's determination that Brownsville Manor, LP (Brownsville), achieved the maximum available score of 28 points was contrary to solicitation specifications, and if so, whether that determination was clearly erroneous, arbitrary, capricious, or contrary to competition.
Findings Of Fact 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. On September 3, 2015, Florida Housing issued an RFA in which it expected to award up to an estimated $10,763,426.00 of tax credits for affordable housing developments in medium counties. The RFA also requested proposals for housing developments in small counties, but that portion of the RFA is not at issue. All applicants in this proceeding proposed developments in medium counties. They include Redding (Seminole County), HTG (Hernando County), Brownsville (Escambia), Grove Manor (Polk County), Grand Palms (Manatee County), Madison Palms (Brevard County), and The Pines (Volusia County). Florida Housing retained the right to "waive Minor Irregularities in an otherwise valid Application" filed pursuant to the RFA. Fla. Admin. Code R. 67-60.008. A "minor irregularity" is defined as "a variation or condition of the Application pursuant to this rule chapter that does not provide a competitive advantage or benefit not enjoyed by other Applicants, and does not adversely impact the interests of the Corporation or the public." Fla. Admin. Code R. 67-60.002(6). These rules are particularly relevant in this case, as during the scoring process Florida Housing waived minor irregularities for several applicants. Florida Housing's Executive Director appointed a review committee comprised of Florida Housing staff to evaluate the applications for eligibility and scoring. Ninety-eight applications were received, processed, deemed eligible or ineligible, scored, and ranked pursuant to the terms of the RFA, administrative rules, and applicable federal regulations. Applications are considered for funding only if they are deemed "eligible," based on whether the application complies with various content requirements. Of the 98 applications filed in response to the RFA, 88 were found to be eligible, and ten were found ineligible. All applicants in this case were preliminarily deemed to have eligible applications and received a maximum score of 28 points. The RFA specifies a sorting order for funding eligible applicants. Recognizing that there would be more applications than available credits, Florida Housing established an order for funding for applicants with tied scores using a sequence of five tie breakers, with the last being a lottery number assigned by the luck of the draw. Applications with lower lottery numbers (closer to zero) are selected before those with higher lottery numbers. On January 29, 2016, Florida Housing posted a notice informing the participants that it intended to award funding to eight developments in medium counties, including those of Grove Manor, Grand Palms, Madison Palms, and The Pines. While the applications of HTG, Brownsville, and Redding were deemed to be eligible, they were not entitled to a preliminary award of funding because of their lottery number ranking. The randomly assigned lottery numbers of those applicants are as follows: HTG (14), Brownsville (16), and Redding (17). HTG and Redding timely filed formal written protests. HTG's protest is directed only at Grove Manor's application. Because Grove Manor agreed that its score should be adjusted downward, HTG is the next applicant in the funding range and should be awarded tax credits, assuming it successfully emerges from the credit underwriting process. No party has challenged the scoring of HTG's application. Redding's protest is directed at the applications of The Pines, Madison Palms, Grand Palms, and Grove Manor, who were selected for funding. Redding also contends that Brownsville, which has a lower lottery number, should have been deemed ineligible or assigned a lower score so that it would no longer be in the funding range. In an unusual twist of events that occurred after the posting of the notice on January 29, 2016, Madison Palms and Grove Manor agreed that they are either ineligible or out of the funding range. Therefore, assuming that adequate funds are available, in order for Redding to be awarded credits, it must establish that at least one of its remaining targets (Grand Palms, Brownsville, and The Pines) is ineligible or should be assigned fewer points. No party has challenged the scoring of Redding's application. Under the RFA, applicants are awarded points in three categories: general development experience, local government contributions, and proximity to services. Depending on whether family or elderly units are being proposed, to obtain proximity to service points, an applicant may select among several types of community services, including transit, a grocery store, a medical facility, a pharmacy, or a public school. Redding has challenged the number of proximity points awarded to The Pines for proximity to a medical facility and public school, Grand Palms for proximity to a pharmacy, and Brownsville for proximity to a public bus transfer stop. Based on Florida Housing's preliminary review of the applications, all three achieved a total proximity score of 18 points. The RFA requires that an applicant submit a Surveyor Certification Form with its application. The form identifies a Development Location Point (DLP), which is representative of where the development is located and must be on or within 100 feet of an existing residential building or a building to be constructed. The DLP is represented by a latitude and longitude coordinate. The distance from the DLP to the selected service is how the proximity points are awarded. The services on which an applicant intends to rely must also be identified on the form, along with the location of the service, as well as the latitude and longitude coordinates for each service. The RFA requires that the coordinates "represent a point that is on the doorway threshold of an exterior entrance that provides direct public access to the building where the service is located." Jt. Ex. 1, p. 25. Redding contends that the coordinates for certain services selected by The Pines, Grand Palms, and Brownsville are not on the "doorway threshold of an exterior entrance that provides direct public access to the building where the service is located." Accordingly, it argues that the number of proximity points awarded to each applicant must be lowered. The Pines selected a public school that has no doors allowing direct public access to the facility. Instead, the school is a series of buildings and classrooms connected by sidewalks and covered breezeways, making a primary "doorway threshold" problematic. The office is interior to the school. Given this unusual configuration, The Pines placed the coordinates at a student drop-off area in front of the school, where students then walk under the covered breezeways to their classrooms, and members of the public walk to offices and/or classrooms. Even if Redding's desired point for the coordinates was used, there would be no difference in the awarded proximity points, as the change in distance would be minimal. The coordinates for The Pines' medical facility are approximately 90 feet from the door that provides direct public access. This was due to an error by the surveyor, who used the back of the facility, rather than the front doorway threshold. Even if the front door had been used for the threshold, The Pines would still be entitled to the same amount of proximity points, as the change in distance would be minimal and not change the scoring. The slight error in the form is a waivable minor irregularity. Brownsville selected a public bus transfer stop for its transit service. Due more than likely to a digital error in one of the satellites used to pinpoint the spot, the coordinates were approximately 150 feet from the canopy where passengers load and unload. Even if the correct point had been used, it would not change the amount of proximity points awarded to Brownsville. The slight error in the form is a waivable minor irregularity. Finally, Grand Palms selected a pharmacy for one of its services. During the process of locating the doorway threshold at the pharmacy, a traverse point was established 70 feet east of the doorway threshold. This was necessary because of an overhang above the doorway threshold. A measurement was then made from the traverse point to the doorway threshold. By mistake, the coordinates on the form represented the location of the traverse point, instead of the doorway threshold of the pharmacy. However, this 70-foot error did not affect the distance from the pharmacy to the DLP or the points awarded to Grand Palms for proximity to a pharmacy. The slight error in the form is a waivable minor irregularity. Florida Housing determined that the coordinates used by The Pines, Brownsville, and Grand Palms yielded the same proximity point score had they been located at the "doorway threshold" and/or "embark/disembark location" as defined in the RFA. Because there is no language in the RFA that provides direction on how to treat these types of minor errors, or mandates that Florida Housing treat them as a non-waivable item, Florida Housing considers them to be a minor irregularity that can be waived. In sum, the deviations were immaterial, no competitive advantage was realized by the applicants, and they were entitled to the proximity points awarded during the preliminary review. Redding also contends that Brownsville is ineligible for funding because it failed to comply with a material requirement in the RFA. In its application, Brownsville stated that it intends to place an 87-unit development on a "scattered site" consisting of two parcels (Site I and Site II) with an intervening roadway (North X Street) between them. The RFA defines a development which consists of a scattered site "to mean a single point on the site with the most units that is located within 100 feet of a residential building existing or to be constructed as part of the required Development." Jt. Ex. 1, p. 25. Stated another way, if multiple parcels are used for the development, the DLP must be located on the site which contains the majority of the residential units. Florida Housing considers this to be a material, non-waivable requirement of the RFA. In Brownsville's Surveyor Certification Form, the DLP is located on Site I, a 1.49-acre parcel that is zoned Commercial and lies west of Site II. In making its preliminary decision to award funding to Brownsville, Florida Housing relied upon the validity of the DLP as of the application deadline and assumed that Site I would have the majority of the units. It had no way to verify the accuracy of that information during the initial scoring process. The RFA requires an applicant to attach to its application a form entitled, "Local Government Verification that Development is Consistent with Zoning and Land Use Regulations." Brownsville's verification form was signed by Horace L. Jones, Director of Development Services for Escambia County, who confirmed that the intended use of the property was consistent with local zoning regulations. The verification forms do not include any information regarding the number of units on each parcel of the site. Florida Housing defers to the local government in determining whether local zoning requirements will be met. Mr. Jones later testified by deposition that Escambia County zoning regulations allow only "25 dwelling units per acre" on Site I. Therefore, on a 1.49-acre parcel, the maximum number of units allowed is 36, or less than a majority of the 87 units. Because Brownsville did not comply with a material requirement of the RFA for a scattered site, Florida Housing now considers the DLP for proximity purposes to be invalid. Had it concluded otherwise, Brownsville would be given a competitive advantage over the other applicants. Brownsville contends, however, that during the County site review process, it will utilize a procedure by which the County can consider the two parcels as a "Single Unified Development" and "cluster" the dwelling units. Although the County has a process to allow the transfer of density from one parcel to another, Brownsville had not started this process as of October 15, 2015, the due date for all applications and the cutoff date for any changes. Also, this process would entail a public hearing before the Board of County Commissioners (Board), and there is no guarantee that the Board would approve the density transfer. In fact, Mr. Jones testified that he was not sure if the density transfer was even a viable option. Therefore, the application of Brownsville contains a material deviation from the RFA and is not eligible for funding.
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 preliminary award to Grove Manor Phase I, Ltd. and Madison Palms, Ltd.; determining that Brownsville Manor, LP, is ineligible for funding; and designating HTG Hammock Ridge, LLC, and Redding Development Partners, LLC, as the recipients of tax credits being made available for developments in RFA 1015-106. DONE AND ENTERED this 19th day of April, 2016, 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 19th day of April, 2016. COPIES FURNISHED: Kate Fleming, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) Michael P. Donaldson, Esquire Carlton Fields Jorden Burt, P.A. Post Office Box 190 Tallahassee, Florida 32302-0190 (eServed) Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) Betty C. Zachem, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) M. Christopher Bryant, Esquire Oertel, Fernandez, Bryant & Atkinson, P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 (eServed) Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC Suite 340 1725 Capital Circle Northeast Tallahassee, Florida 32308-1591 (eServed) Donna Elizabeth Blanton, Esquire Radey Law Firm, P.A. Suite 200 301 South Bronough Street Tallahassee, Florida 32301-1706 (eServed) Douglas P. Manson, Esquire Manson Bolves Donaldson, P.A. 1101 West Swann Avenue Tampa, Florida 33606-2637 (eServed)
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.
