Findings Of Fact On October 5, 1989, Respondent filed an Order to Show Cause seeking to take disciplinary action against the certification of authority issued to Petitioner, The Administrators Corporation, and the insurance licenses issued to Petitioner, Charles N. Zalis. Petitioners timely requested a formal hearing, and the case was transferred to the Division of Administrative Hearings for the conduct of a formal hearing regarding the allegations contained in that Order to Show Cause. Upon receipt, the matter was assigned DOAH Case No. 89-5981. The final hearing in that disciplinary matter was conducted on May 14, 1990. Thereafter, a Recommended Order was entered on July 9, 1990, recommending to Respondent that a final order be entered finding Petitioners not guilty of the allegations contained in the Order to Show Cause and dismissing the Order to Show Cause filed against them. None of the parties filed exceptions to the Recommended Order. On August 15, 1990, the Treasurer and Insurance Commissioner entered a Final Order adopting in full the Findings of Fact, Conclusions of Law, and Recommendation contained within that Recommended Order; finding the Petitioners not guilty of the allegations contained in the Order to Show Cause filed against them, and dismissing the Order to Show Cause. On September 21, 1990, Petitioners filed with the Division of Administrative Hearings their Petitions for Costs and Fees, pursuant to Section 57.111, Florida Statutes, and Rule 221-6.035, Florida Administrative Code. On September 27, 1990, an Initial Order was entered in each of the above-captioned causes. The Initial Order is a form order automatically prepared by the Clerk's Office and signed by the Director of the Division of Administrative Hearings in every case filed with the Division of Administrative Hearings pursuant to Section 120.57(1), Florida Statutes, except for those proceedings conducted on an expedited basis pursuant to statutory directives. The Initial Order advises the parties as to the name of the Hearing Officer assigned to hear the matter, provides certain procedural information, and solicits specific information from the parties so that the matter can be scheduled for an evidentiary hearing appropriately. On October 8, 1990, Respondent filed a joint Response to Initial Order on behalf of all parties, and on October 10, 1990, Respondent filed a joint Amended Response to Initial Order on behalf of all parties in this proceeding. The Amended Response to Initial Order advised that the parties had agreed that the final hearing should be scheduled for one day during the month of February, 1991, in Tallahassee. Pursuant to the agreement of the parties regarding the scheduling of the evidentiary hearing in this cause, on October 19, 1990, these causes were consolidated sua sponte, and a formal hearing was scheduled in these consolidated causes for February 14, 1991, in Tallahassee, Florida. No response by Respondent to either the Petition for Costs and Fees filed by The Administrators Corporation or the Petition for Costs and Fees filed by Charles N. Zalis has ever been filed in this cause even in the face of the Motion for Summary Final Order based upon Respondent's failure to respond. Accordingly, this matter is decided on the basis of the petitions filed in these consolidated causes, together with the documentation attached to those petitions, Petitioners' Motion for Summary Final Order, together with the documentation attached to that motion, and Respondent's Response to Motion for Summary Final Order. Since the Respondent has failed to controvert or dispute any of the factual allegations contained within those pleadings, there is no factual allegation in dispute in these consolidated causes. Petitioners are small business parties as defined by Section 57.111, Florida Statutes. By virtue of the Final Order entered in DOAH Case No. 89- 5981, Petitioners are prevailing small business parties in an administrative proceeding pursuant to Chapter 120 initiated by a state agency. The actions of Respondent both in initiating and in pursuing the Order to Show Cause filed in DOAH Case No. 89-5981 were substantially unjustified, and no special circumstance exists which would make unjust the award of attorney's fees and costs to Petitioners in these consolidated causes. The itemized affidavits filed in these consolidated causes reveal the nature, extent, and monetary value of the services rendered by Petitioners' attorneys, as well as the costs incurred in the underlying proceeding. Petitioners incurred attorney's fees in the amount of $49,581.25 and costs in the amount of $7,351.72 in the underlying administrative proceeding. The amounts of attorney's fees and costs claimed by Petitioners are reasonable and necessary. The Department of Insurance and Treasurer was not a nominal party only in the underlying administrative proceeding. Petitioners filed their Petitions for Costs and Fees within 60 days after the date that they became prevailing small business parties.
The Issue Whether HTG Harbor Village, Ltd's, as Applicant for Crestwood Apartments, ("Petitioner" or "Crestwood") application for funding of Housing Credits and Exchange Funding awards should be granted by Florida Housing Corporation ("Florida Housing").
Findings Of Fact Based on the entire record of this proceeding including the necessary stipulated facts submitted by parties, oral and documentary evidence presented at the final hearing, the following findings of fact are made: Florida Housing is a public corporation organized under chapter 420, Florida Statutes, promote the public welfare by administering the governmental function of financing and refinancing houses and related facilities in Florida in order to provide decent, safe, and affordable housing to persons and families of low, moderate, and middle income. Florida Housing is governed by the Board consisting of nine individuals appointed by the Governor and confirmed by the Florida Senate. Florida Housing provides funding through a number of different federal and state programs to assist in the development of affordable housing in this state. As required by the federal government, the state each year adopts a Qualified Allocation Plan ("QAP"), which is incorporated into Florida Housing's rules. The QAP sets forth the selection criteria and the preferences for developments that will be awarded Housing Credits each year. Each year Florida Housing conducts a "Universal Cycle," through which applicants for certain Florida Housing multi- family programs submit a single application by which projects are evaluated, scored, and competitively ranked. Among the programs included in the Universal Cycle is the Housing Credit program, which was created by the federal government in 1986. Housing Credits (also called tax credits) come in two varieties: competitively awarded nine percent credits and non-competitively awarded four percent credits. For the nine percent credits, the federal government annually allocates to each state a specific amount of credits using a population-based formula. Housing Credits are a dollar for-dollar offset to federal income tax liability over a 10-year period. Developers receiving the federal awarded Housing Credits often sell the future stream of credits to a syndicator, which in turn sell the credits to investors seeking to shelter income from federal income taxes. The sale of the credits generates dept-free cash equity for developers. With the recent economic downturn, the market for Housing Credits dropped significantly. A number of development projects awarded funding in recent Universal Cycles have been unable to close on such funding because of the poor market for Housing Credits. In recognition of the Housing Credit market collapse, the federal government, as part of its economic stimulus efforts, established mechanisms to assist in the development of affordable housing. The American Recovery and Reinvestment Act ("ARRA"), was enacted on February 17, 2009, and includes provisions relating to the Low Income Housing Tax Credit Program. Among those provisions are the Tax Credit Exchange Program, which allows agencies that allocate Housing Credits (such as Florida Housing) to "exchange" a portion of their 2009 Housing Credit ceiling, as well as previously awarded and returned housing credits, for cash grants from the U.S. Treasury that can be used to make "sub-awards" to finance the construction of, or acquisition and rehabilitation of, qualified low-income buildings. Following the enactment of ARRA, Florida Housing issued several Requests for Proposals ("RFPs")to take advantage of the federal stimulus funds. The federal programs have quick deadlines to stimulate activity. RFP 2010-04, issued on February 26, 2010, anticipated that $150 million in Exchange Funding would be available through the RFP. In order to be eligible for funding under RFP 2010-04, applicants were required to have an active award of nine percent Housing Credits. RFP 2010-04 provided that proposed developments receiving Exchange Funding would be governed by the same rules that govern the Universal Cycle's Housing Credit Program, including credit underwriting requirements.1 HTG Harbor Village Ltd,2 a Florida-limited partnership, submitted an application for funding for Crestwood to Florida Housing in 2009. Crestwood is a proposed 114-unit affordable housing complex in Palm Beach county that will serve elderly residents. Crestwood submitted an application for nine-percent low-income Housing Tax Credits during the 2009 Universal Application Cycle. On February 26, 2010, the Board approved the final rankings for the 2009 Universal Application Cycle and Crestwood was awarded the Housing Credits. Florida Housing staff issued an invitation to Crestwood to enter into the credit underwriting. Crestwood also received a recommendation for Exchange Funding pursuant to RFP 2010-04, which the Board accepted on March 17, 2010. Subsequently, Crestwood was included in the ranked list of proposed developments that were awarded Exchange Funding and invited into credit underwriting. The credit underwriting process is governed by Florida Administrative Code Rule 67-48.0072 ("Credit Underwriting Rule"). Florida Housing is obligated to satisfy mortgage dept under its Guarantee Fund. It has close to $800 million in outstanding mortgage guarantee commitments. Florida Housing's Guarantee Fund has paid out eight claims since November 2008 for approximately 90 million dollars when borrowers failed to make their payments. Each payout impacted Florida Housing's risk-to capital-ratio. Before the 2009 Universal Cycle in order to try to prevent future defaults and protect the fund from additional claims, the Board amended rule 67-48.0072(10) to require the credit underwriter to review and determine whether a proposed development "will be a negative impact on a Guarantee Fund development within the primary market area." The costs associated with the credit underwriting review is paid by the developer, including the credit underwriting fee and costs of a market study. Florida Housing selects an independent credit underwriter for each developer who reviews each proposal according to requirements set forth by the Credit Underwriting Rule. The credit underwriter prepares a report, known as the Preliminary Recommendation Letter ("PRL"), for each applicant invited into the process. The reports are submitted to Florida Housing's Board, who makes the final decision for funding by approving or denying each application. Florida Housing chose Seltzer Management Group, Inc. ("Seltzer") as the credit underwriter for Crestwood. Seltzer conducted both the credit underwriting for Crestwood's Housing Credit allocation and its Exchange Funding simultaneously. As the credit underwriter, Seltzer, has to re-evaluate the proposed development by performing a comprehensive analysis of all of the aspects of the proposed development. Seltzer sent Crestwood an email checklist to complete in order to have the PRL ready for the July 2010 Board meeting. The responsibility for the market study is assigned by the credit underwriter to an independent market analyst. Seltzer retained Clobus, McLemore & Duke, Inc. ("CMD") of Fort Lauderdale to conduct the market study for Crestwood. CMD completed the market study and issued it on April 6, 2010. CMD's market study report stated in its cover letter that: There are two Elderly Guarantee Fund Developments within the subject's PMA. It is CMD's opinion that the subject's units will not have a negative impact on one or any of the Guarantee Fund Developments. Historically, low-income properties are not significantly affected by new developments other than during lease-up. Occupancy is lower now primarily due to the current economic conditions, not over-improvement. There has always been a demand for low- income housing and the impact on additional properties, including Guarantee Fund Developments may be on occupancy during lease-up. In mid-April of 2010, Seltzer provided a copy of the market study to Crestwood's developers. Crestwood compared CMD's market study with their own conducted by Reinhold Wolff and determined that it was a positive market study. The determination helped Petitioner decide to continue the credit underwriting process and increase its efforts to comply with Seltzer's checklist and quick driven federal deadlines by expending additional funds to complete the process. While seeking credit underwriting approval, Crestwood was required to expend considerable time and money to proceed as an applicant in the process seeking credit underwriting approval. Crestwood developers spent approximately $653,854.94. Soon thereafter, Seltzer prepared the Crestwood PRL signed by John Elasser and emailed it to Florida Housing on May 3, 2010. The cover email stated that the PRL draft was attached. The PRL discussed the CMD market study noting specifically that CMD's opinion is that Crestwood "will not have a long-term negative impact" on Guarantee fund properties near the proposed development. Seltzer concludes the May 3, 2010, PRL by recommending that Crestwood receive both Exchange Funding and Housing Credits. Three days later, on May 6, 2010, Lindsay Lockhart, Florida Housing's Guarantee Program Asset Manager, sent an email to Ben Johnson, the president of Seltzer, providing additional information on Windsor Park Apartments ("Windsor"), one of the Guarantee Fund developments referenced in the May 3, 2010, PRL. Lockhart's email discussed occupancy figures for Windsor, as well as rent concession policies and marketing strategies of Windsor. Windsor was built in the late 1990s and is 1.4 miles northeast of the proposed Crestwood site. Historically, Windsor has struggled financially. Windsor has had over three-and-half million dollars in operating deficits. The next day, May 7, 2010, Seltzer's president emailed Tatreau, Director of multi-family development programs at Florida Housing and stated: The market study indicated that adding the Crestwood units may have a negative impact on the Guarantee Properties during the lease up period. I have reviewed the market study and other economic data and I think that I support that conclusion. That being said, what additional data, analysis, conclusions, recommendations, etc., are you requesting that we include in the PRL? I would appreciate w[hat] ever guidance you ca[n] give us. On May 12, 2010, Johnson followed up and emailed his employee, Elasser, instructing him to incorporate and wordsmith the language attached to the email and utilize it while revising the PRL. On May 13, 2010, Elasser signed and sent a second draft Crestwood PRL to Florida Housing. His cover email states: Revised Preliminary Recommendation Letter for Crestwood, with expanded discussion of Windsor Park and Pinnacle Palms (the two Guarantee fund transactions within Crestwood's submarket). The May 13, 2010, draft PRL again referred to the CMD market study not anticipating "a long-term negative impact" on any Guarantee Fund properties. However, the letter further delineated some of Seltzer's "concerns" regarding Windsor Park by stating: Crestwood will provide potential Windsor Park residents an additional choice when looking for rental housing-an option that will be newer and with a better unit mix. CMDuke suggests, and it is reasonable to conclude, that occupancy at Windsor may drop during Crestwood's lease-up. It is difficult, however, to quantify the number of units lost or how long Crestwood will impact Windsor Park. Seltzer again concludes its May 13, 2010, PRL by recommending that Crestwood receive both Exchange Funding and Housing Credits. Two days after the second draft PRL was sent by Seltzer to Florida Housing, Tatreau emailed Johnson and set up a teleconference call meeting with Florida Housing staff to discuss several proposed developments under review by Seltzer that have Guarantee Fund developments nearby. Crestwood was specifically included. The call took place the following day, May 19, 2010. Most of the talking was done by the Guarantee Fund staff. During the Crestwood credit underwriting process, numerous appropriate communications took place between Seltzer and Florida Housing staff about the impact that the Crestwood transaction would have on Windsor Park and Pinnacle Palms. Florida Housing Staff wanted to make sure that Seltzer had enough information relating to Guarantee Fund developments in the Crestwood market area for Seltzer's analysis and recommendation to be complete. Throughout the process, Florida Housing staff provided Seltzer some of Windsor's data. Seltzer received Windsor information including the: demographic demand; good management; poor unit design of 2/3 bedrooms; occupancy problems; good maintenance; long term struggling finances; operating deficit; and rental concessions and incentives. On May 26, 2010, Seltzer sent a third draft Crestwood PRL to Florida Housing. Unlike the first two draft PLRs, Seltzer had looked through all the information received regarding Windsor for the May 26, 2010, PRL and recognized Windsor's vulnerability to new developments. Even though the third draft was signed by both Elasser and Johnson, and reversed Seltzer's earlier recommendation that Crestwood receive funding, Florida Housing neither told nor instructed Seltzer to change its recommendation for Crestwood. Seltzer concluded after its complete analysis the following: Based upon the information presented in CMDuke's Market Study and its own Due Diligence, SMG concludes that the average occupancy rate within the Subject's submarket meets the minimum requirement of 90%. In accordance with the RFP 2010-04, however, SMG finds its concerns with regard to historical and current occupancy rates for the Elderly at prior and existing Guarantee Fund Properties within the Subject's submarket leads it to recommend FHFC rescind Applicant's tentative award of Exchange Program Funding. Construction of the Subject Development has the potential to negatively impact Affordable Housing Properties previously funded by FHFC in the area, especially the' two Guarantee Fund Properties located within Crestwood's submarket. Seltzer subsequently sent a fourth draft PRL to Florida Housing on June 1, 2010, and a fifth final PRL to Florida Housing on June 3, 2010. The last PRL's cover email stated "Here is the final." The negative recommendations remained in both the PRL of June 1 and 3, 2010, even though the language was slightly different from the language used in previous PRLs. The final June 3, 2010, PRL discusses the operating deficits and Seltzer's "serious concerns." It recommends not only that Crestwood's Exchange Funding be rescinded, but that its Housing Credit allocation also be taken back. Additionally, the recommendation in the June 1 PRL and the final June 3 PRL is based only on an the negative impact on Windsor Park, not on any other Guarantee Fund development or other affordable housing development in the area. The final version provides: Information presented by CMDuke's Market Study and developed through its own Due Diligence leads SMG to conclude the average occupancy rate within the Subject's submarket meets the minimum requirement of 90% for the same demographic population. RFP 2010-04, however, also requires consideration of the potential impact of the Subject Development on existing Guarantee Fund Properties. Based upon marginal occupancy rates and resulting Operating Deficits, SMG has serious concerns regarding the potential negative impact of the Subject Development on Windsor Park. SMG therefore recommends FHFC rescind Applicant's HC allocation award and its Exchange Program Funding. The June 3, 2010, PRL from Seltzer concerning Crestwood was the subject of the Staff Recommendation from the Florida Housing staff to the Florida Housing Board on June 18, 2010. The Staff Recommendation states: Staff has received a preliminary recommendation letter for Crestwood Apartments (Exhibit A) containing a negative recommendation because the Development would cause a negative impact on a Guarantee Fund transaction in the area. Staff has reviewed this report and finds that the Development does not meet all of the requirements of Rule Chapter 67-48., F.A.C. and RFP 2010-04 to be approved for further credit underwriting consideration. The Staff Recommendation concluded by recommending that the Board "[r]escind and return the nine-percent Low-Income Housing Tax Credit award and Exchange Funding to Florida Housing Finance Corporation." Petitioner was first notified of the negative recommendation concerning Crestwood by email on June 2, 2010. After notification of the negative recommendation, Crestwood's developer presented several proposals to Florida Housing's staff in an effort to mitigate any impact of Crestwood on Windsor, the nearby Guarantee Fund development. All of Crestwood's proposals were rejected including the proposal to provide a reserve after Florida Housing determined that what was offered did not mitigate the risk for the Guaranteed Fund. At the June 18, 2010, Florida Housing Board meeting, the Board considered the final PRL of June 3, 2010, with the Crestwood application. Seltzer's president, Johnson, presented Seltzer's recommendation and stated "[it] just doesn't match what's happening on the ground" and that he found it "prudent" to protect the Windsor development.3 There was no discussion at the Board meeting about Seltzer's first two draft recommendations to approve the Housing Credit allocation and Exchange Funding for Crestwood. Steve Auger, executive director of Florida Housing, admitted to the Board at the meeting that he did not know whether Crestwood would have any negative impact on Windsor, but said: And, Mr. Chair, if I may, just one thing, potential impact is all we've got. You know, we're talking about a development that's not built and we're talking about guessing about people's behavior. So potential - we will never have anything other than potential when we're talking about, you know, the possibilities there. At the meeting, the Florida Housing Board considered the Staff Recommendation for Crestwood and voted unanimously to accept it, which denied Crestwood's application and rescinded the award of Housing Credits and Exchange Funding. Petitioner received formal notice of Florida Housing's decision to rescind the Housing Credit and Exchange Program funding awarded to Crestwood on June 25, 2010. On July 12, 2010, Crestwood filed a petition with Florida Housing that commenced this proceeding. A day after the hearing closed, on January, 21, 2011, the Florida Housing Board voted through Item N on its Consent Agenda to approve a credit underwriting letter authorizing $1.8 million loan to Windsor from RFP 2010-16. The credit underwriting letter states "[T]he Guarantee Program's credit exposure will be eliminated or greatly reduced." Upon the approval, staff was directed to proceed with loan closing activities. During 2010, Windsor Park's occupancy rate increased. The occupancy report for Windsor shows the following occupancy rate increases: January 2010, 87.08 percent; February 2010, 88.75 percent; March 2010, 87.50 percent; April 2010, 89.17 percent; May 2010, 89.58 percent; June 2010, 88.75 percent; July 2010, 92.25 percent; August 2010, 94.17 percent; September 2010, 96.25 percent; and October 2010, 95.00 percent. No credible evidence was presented to show that the increased occupancy rate trend had a correlating financial improvement for Windsor's long term financial struggles. There is insufficient evidence to show that the addition of Crestwood to the Windsor market area would not adversely affect the financial feasibility of the existing Guarantee Fund. Florida Housing's priority to protect the Guarantee Fund is necessary to safeguard the resources used to support the creation and availability of affordable housing in the state.
Recommendation Upon consideration of the Findings of Fact and the Conclusions of Law reached, it is RECOMMENDED that the Florida Housing enter a final order denying Petitioner's application for funding. DONE AND ENTERED this 16th day of March, 2011, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of March, 2011.
The Issue The issue is whether Florida Housing Finance Corporation ("Florida Housing") erred in its scoring of Universal Cycle Application No. 2011-106C.
Findings Of Fact Landings is a Florida limited liability partnership with its address at 200 South Division Street, Buffalo, New York 14204. Landings is in the business of providing affordable rental housing units in Florida. Florida Housing is a public corporation created by section 420.504, Florida Statutes, to administer the governmental function of financing or refinancing of affordable housing and related facilities in Florida. Pursuant to section 420.5099, Florida Housing has been designated as the housing credit agency for the state within the meaning of 26 U.S.C. §42(h)(7)(A)1/ with the responsibility to administer the federal Tax Credit program in Florida. Florida Administrative Code Chapter 67-48 sets forth the rules for the program. The 2011 Universal Cycle Application, through which affordable housing developers applied for funding under various affordable housing programs administered by Florida Housing, was adopted as the Universal Application Package or UA1016 (Rev. 2- 11) by Florida Administrative Code Rule 67-48.004(1)(a). The Application Package consists of Parts I through V with exhibit forms and instructions. Because the demand for shares of low income housing tax credits exceeds the credits available under the Tax Credit program, qualified affordable housing developments must compete for this funding. To assess the relative merits of proposed developments, Florida Housing has established a competitive application process known as the Universal Cycle. The application process for the 2011 Universal Cycle is set forth in rules 67-48.001 through 67-48.004 and may be summarized as follows: The publication and adoption by rule of a Universal Application package; The completion and submission of applications by developers; Florida Housing's preliminary scoring of applications; An initial round of administrative challenge in which an applicant may take issue with Florida Housing's scoring of another application by filing a Notice of Possible Scoring Error ("NOPSE"); Florida Housing's consideration of the NOPSEs submitted, with notice to applicants of any resulting changes in their preliminary scores; An opportunity for the applicant to submit additional materials to Florida Housing to "cure" any items for which the applicant was deemed to have failed to satisfy threshold requirements or received less than the maximum score;2/ A second round of administrative challenges whereby an applicant may raise scoring issues arising from another applicant's cure materials by filing a Notice of Alleged Deficiency ("NOAD"); Florida Housing's consideration of the NOADs submitted, with notice to applicants of any resulting change in their scores; An opportunity for applicants to challenge, via informal or formal administrative proceedings, Florida Housing's evaluation of any item for which the applicant was deemed to have failed to satisfy threshold requirements or received less than the maximum score; Final ranking scores, ranking of applications, and allocation of Housing Credits or other funding to successful applicants as well as those who successfully appeal through the adoption of final orders; and A final appeals process through which applicants may be allocated award funding from future credits by making the case that their application would have received funding "but for" specific scoring errors Florida Housing made in their application or competing applications. On December 6, 2011, Landings, along with other competing applicants, submitted an application to Florida Housing for funding in the 2011 Universal Cycle. Landings sought Tax Credit funding to finance the development of its project, a 184-unit apartment complex in St. Petersburg, Florida. The Landings project was built decades ago as a public housing project and requires major rehabilitation. All of the units in this complex receive rental assistance from the United States Department of Housing and Urban Development ("HUD"). In the 2011 application cycle, Florida Housing set aside 35 percent of its allocation for the preservation of existing subsidized properties. In Pinellas County, two preservation projects, Landings and MLF Towers, directly competed for this preservation set-aside funding.3/ On June 8, 2012, Florida Housing's Board of Directors adopted "Final Post-Appeal Scores and Ranking." Landings met all of Florida Housing's threshold application requirements, received the maximum base application score of 79 points out of 79 points, the maximum ability-to-proceed tire breaker score of 6.0 points and the 23.75 proximity tie-breaker points. This score would have placed Landings in the funding range "but for" Florida Housing's scoring of the MLF Towers application. Part III of the Universal Application Package requires an applicant to provide information concerning the proposed development. Section C of Part III requires the applicant to provide information concerning the proposed development's " Ability To Proceed," including information concerning Site Control and Zoning. In its initial application, MLF Towers submitted documentation to satisfy the Ability To Proceed requirements. Its Site Control information included Exhibit 27, an agreement for purchase and sale of the subject properties. The MLF Towers project included "scattered sites" as defined in rule 67- 48.002(105), meaning that the proposed development site comprises properties that are not contiguous. Exhibit 19 to the MLF Towers application provided the addresses and geographic coordinates of each of the three properties in the project. The addresses were on 2nd Avenue South and 3rd Avenue South in St. Petersburg. MLF Towers also submitted documentation indicating that the zoning for the Development site was "Downtown Center-1" ("DC-1"), a designation providing for intense mixed-use development. The two documents that identified the zoning as DC-1 were Exhibit 26, "Local Government Verification of Status of Site Plan Approval For Multifamily Housing," and Exhibit 32 "Local Government Verification that Development is Consistent with Zoning and Land Use Regulations." Both of these exhibits were signed by Phillip T. Lazzara, the Zoning Official for the City of St. Petersburg.4/ Landings submitted a NOPSE to Florida Housing pointing out an inconsistency between the address of the MLF Towers development site as shown in Exhibit 19 and the legal description provided with the agreement for purchase and sale submitted as Exhibit 27. The legal description in Exhibit 27 referenced an 1890 plat showing different street names than those used in the Application to identify the Development site. In response to Landings' NOPSE, Florida Housing issued a scoring summary dated March 27, 2012, that found as follows: Based on a plat provided in a NOPSE, the legal description provided with the Agreement for Purchase and Sale is inconsistent with the Scattered Sites locations listed on Exhibit 19. The legal description shows the sites to be located on 7th Avenue or the north side of 8th Avenue. (Lots 14 through 16 of Block 39, a portion of Lot 3 and all of Lots 4 through 8 of Block 52, and Lot 17 of Block 52), while the locations listed on Exhibit 19 are (i) 540 2nd Avenue South, (ii) the north side of 2nd Avenue South, east of 6th Street South, and (iii) north side of 3rd Avenue South, west of 5th Street South. Florida Housing determined that this inconsistency constituted a failure in the MLF Towers application of Part III.C.2 of the Universal Application instructions, a threshold item titled "Evidence of Site Control." To cure the a ddress issue raised by Florida Housing, MLF Towers provided a letter from Mr. Lazzara, dated February 27, 2012, explaining that the street names had changed between the time of the 1890 plat and the present. Seventh and Eighth Avenues on the 1890 plat were currently Second Avenue South and Third Avenue South, respectively. Mr. Lazzara's letter included as "Attachment A" an engineering map prepared by the City of St. Petersburg's engineering section to show the current street addresses. At the bottom of the map was the following notation: "ALL PROPERTIES ZONED 'CBD-2' EXCEPT AS NOTED." In his deposition, Mr. Lazzara testified that he included the engineering map purely to illustrate that the street names had changed since the 1890 plat. Mr. Lazzara stated that the CBD-2 zoning classification was obsolete, having been abolished in 2007 when the City's land development code was revised.5/ The subject parcels were not and could not have been zoned CBD-2 at the time of the MLF Towers application. Landings reviewed the cure materials submitted by MLF Towers and concluded that the applicant had not cured the address issue because neither the plat nor the legal description had been changed to make them consistent with one another. MLF Towers had not cured the inconsistency; it had merely explained it. Landings believed it had uncovered another inconsistency in the CBD-2 zoning designation on the engineering map.6/ Landings submitted a NOAD arguing that the cure submitted by MLF Towers included information that was inconsistent with other information in the MLF Towers application. Exhibits 26 and 32 in the initial application indicated that the property was zoned DC-1, whereas the engineering map submitted as Attachment A to the cure letter included a statement that the property was zoned CBD-2. In its final scoring summary issued on or about June 8, 2012, Florida Housing accepted the cure materials submitted by MLF Towers, rejected the NOAD and rescinded the point deduction and threshold failure imposed on the MLF Towers application as a result of the NOPSE. On or about June 25, 2012, a Norstar representative named Richard Cavalieri sent an email to Mr. Lazzara that attempted to persuade Mr. Lazzara to state that there was an inconsistency sufficient to show that MLF Towers should not have been funded. Mr. Cavalieri pointed out that a finding of inconsistency at this late date would not affect MLF Towers' current funding award, but would assist Landings in obtaining "but for" funding from future tax credits. Mr. Lazzara replied as follows: Hi, Rick. The subject property is currently zoned DC-1. It used to be zoned CBD-2 prior to adoption of the City's new Land Development Regulations (LDRs) in 2007. The CBD-2 zoning classification no longer exists. The map that was used for the letter we provided on Feb. 27, 2012, was out of date with regard to any zoning references and was only used for the purposes of providing clarification of what street names applied. I hope that helps. Florida Housing concluded that there can be no inconsistency between the DC-1 and the CBD-2 zoning designations because the CBD-2 designation did not exist at any time material to this action. Moreover, MLF Towers' Exhibit 32 provided evidence of appropriate zoning sufficient to meet the threshold requirements of Part III.C.4 of the Universal Application, and Florida Housing is not required to consider evidence of zoning beyond Exhibit 32.7/ Landings contends that there was a plain inconsistency on the face of the MLF Towers application and cure documents. Landings argues that Florida Housing's established practice mandates that it cannot look beyond the contents of the application, attempt to gauge the subjective intent of the applicant, or determine that a given inconsistency is not material when dealing with inconsistencies in applications. At the final hearing, Stephen Auger, Florida Housing's executive director, testified as to the agency's rationale for accepting the cure materials submitted by MLF Towers and disregarding the apparent internal inconsistency in the zoning designations in the MLF application. Mr. Auger testified that Florida Housing did not believe that the engineering map included by Mr. Lazzara created an inconsistency because Mr. Lazzara was also the official who had signed the zoning and site plan approval forms that confirmed the correctness of the zoning designations in the MLF Towers application. When directly addressing the issue of zoning, Mr. Lazzara correctly stated that the designation was DC- 1, a statement that Mr. Auger found was not rendered ambiguous or inconsistent by Mr. Lazzara's inclusion of the engineering map as a demonstrative aid to show the changed street names. Mr. Auger emphasized that Mr. Lazzara was the local zoning expert, and that Florida Housing was entitled to rely on Mr. Lazzara's explicit statement that the zoning on the subject properties was DC-1, regardless of the statement on the engineering map that the properties were zoned CBD-2 unless noted otherwise. Mr. Lazzara was consistent in his information on the zoning forms; the engineering map was not submitted for a zoning designation; therefore, the apparently contradictory statement as to CBD-2 zoning was disregarded by Florida Housing. Mr. Auger further testified that the final result would have been the same even if Florida Housing had preliminarily rejected the cure materials submitted by MLF Towers and accepted the NOAD filed by Landings. MLF Towers would have filed a petition appealing the decision, after which We would have gone into discovery working towards a trial here at DOAH. We would have deposed Philip Lazzara. He would have said that [CBD-2] hasn't been in existence since 2007, and that would have been the end of the case and we would have given MLF, you know, the points back. . . . So we would have wound up in the same place with MLF having the correct zoning designation. Mr. Auger testified that Florida Housing's rules regarding inconsistencies "are about figuring out what's right." The notion of "inconsistency" means a dispute as to the factual basis of a statement in an application. Nothing submitted by MLF Towers called into question Mr. Lazzara's express statements that the properties were zoned DC-1. No zoning claims were made for the engineering map, which was submitted solely to cure an inconsistency regarding street names. Mr. Auger stated that Florida Housing "got it right here," and pointed to rule 67-48.004(9) as providing Florida Housing the discretion to overlook an engineering map submitted as "a cure for something else" where the zoning officer correctly cited the zoning "on two forms specifically related to the zoning." Mr. Auger stated, "I don't understand how you can ask us to interpret our rules in a way that doesn't help us get to the right conclusion, the factually accurate conclusion."
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 finding that it erred in its scoring of Universal Cycle Application No. 2011-106C and that Petitioner Landings at Cross Bayou, LLLP, is entitled to an award of Low Income Housing Tax Credit funds from the next available allocation. DONE AND ENTERED this 22nd day of January, 2013, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of January, 2013.
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.
