The Issue At issue in this proceeding is whether the decision of the Florida Housing Finance Corporation (“Florida Housing”) to award State Apartment Incentive Loan (“SAIL”) funding to Intervenor, La Joya Estates, Ltd. (“La Joya”), pursuant to Request for Applications 2015-112 (the “RFA”) was contrary to the agency’s governing statutes, rules, policies, or the RFA specifications.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: Douglas Gardens is a Florida limited partnership based in Coconut Grove, Florida, that is in the business of providing affordable housing. Florida Housing is a public corporation organized pursuant to chapter 420, Part V, Florida Statutes. For the purposes of this proceeding, Florida Housing is an agency of the State of Florida. Florida Housing has the responsibility and authority to establish procedures for allocating and distributing various types of funding for affordable housing. One of the programs administered by Florida Housing is the SAIL program, created in section 420.5087, Florida Statutes. Florida Housing has adopted Chapter 67-60, Florida Administrative Code, which governs the competitive solicitation process for several programs, including the SAIL program. Other administrative rule chapters relevant to the selection process are chapter 67-48, F.A.C., which governs competitive affordable multifamily rental housing programs; chapter 67-21, Florida Administrative Code, which governs multifamily mortgage revenue bonds ("MMRB") and non-competitive housing credits; and chapter 67-53, Florida Administrative Code, governing compliance procedures. Applicants for funding, pursuant to the RFA, are required to comply with provisions of the RFA and the applicable rule chapters. La Joya is a Florida limited partnership based in Miami, Florida, and is also in the business of providing affordable housing. On October 9, 2015, Florida Housing issued the RFA, seeking applications from developers proposing to construct multifamily housing for families and for the elderly. The RFA outlined a process for the selection of developments to share the estimated $49 million in funding for eligible applicants. Among the stated goals of the RFA is to fund one new construction development serving the elderly in a large county, with priority given to the highest ranked eligible new construction application for the elderly that is located in Miami-Dade County. The RFA provides that if there are no eligible Miami-Dade County applications that qualify, then the highest ranking eligible new construction development serving the elderly in Broward County will be selected. A total of 23 applications were filed in response to the RFA. On November 9, 2015, Douglas Gardens timely submitted its Application, numbered 2016-177BS, seeking $5,781,900 in SAIL funding to assist in the development of a proposed new construction development for the elderly in Broward County. Douglas Gardens’ was the only “new construction” application submitted for Broward County. Also on November 9, 2015, La Joya timely filed its Application, numbered 2016-178S, seeking $5,778,100 in SAIL funding to assist in the development of a proposed new construction development for the elderly in Miami- Dade County. La Joya’s was the only application submitted for Miami-Dade County in any development category. The executive director of Florida Housing selected a review committee to review and score the applications. The review committee issued a recommendation of preliminary rankings and allocations. Florida Housing’s Board of Directors approved these recommendations on December 11, 2015. The Board of Directors found both La Joya and Douglas Gardens eligible for funding, but awarded funding to La Joya on the basis that it was the highest ranked, eligible, elderly, new construction application located in Miami-Dade County. On December 16, 2015, Douglas Gardens timely filed a notice of intent to protest. On December 28, 2015, Douglas Gardens timely submitted a Formal Written Protest and Petition for Administrative Hearing. The RFA awarded up to 18 “proximity points” to an applicant based on its project’s location in relation to transit and community services such as grocery stores, medical facilities, and pharmacies. The RFA required each applicant to submit a “Surveyor Certification” form, which included longitude and latitude coordinates corresponding to the location of the proposed development site and the site’s proximity to listed services that would presumably serve the proposed development. Each applicant was required to retain a Florida licensed surveyor to prepare and submit the Surveyor Certification form and to sign the form attesting, under penalty of perjury, that the information on the form is true and correct. In the bottom left hand corner of each page of the form is a blank line on which the applicant or surveyor was to indicate the RFA number for which the form was being submitted. Beneath the blank line is a parenthetical indicating the identification number of the form, e.g., (Form Rev. 07-15). Section Four A.6.a.(1) of the RFA provided the following regarding the Surveyor Certification form: In order to meet the Mandatory requirement and be eligible for proximity points, all Applicants must provide an acceptable Surveyor Certification form, (Form Rev. 07- 15), as Attachment 14 to Exhibit A, reflecting the information outlined below. The Surveyor Certification form (Form Rev. 07-15) is provided in Exhibit B of this RFA and on the Corporation’s website Note: The Applicant may include the Florida Housing Surveyor Certification form that was included in a previous RFA submission for the same proposed Development, provided (i) the form used for this RFA is labeled Form Rev. 07-15, (ii) other than the RFA reference number on the form, none of the information entered on the form and certified to by the signatory has changed in any way, and (iii) the requirements outlined in this RFA are met. The previous RFA number should be crossed through and RFA 2015-112 inserted. If the Applicant provides any prior version of the Surveyor Certification form, the form will not be considered. (Emphasis added). Section Three C.1. of the RFA provided that Florida Housing reserved the right to waive “Minor Irregularities” in the applications. Florida Administrative Code Rule 67-002(6) defines “Minor Irregularity” as variation in a term or condition of an Application pursuant to this rule chapter that does not provide a competitive advantage or benefit not enjoyed by other Applicants, and does not adversely impact the interests of the Corporation or the public. Florida Administrative Code Rule 67-60.008 titled “Right to Waive Minor Irregularities,” provides as follows: The Corporation may waive Minor Irregularities in an otherwise valid Application. Mistakes clearly evident to the Corporation on the face of the Application, such as computation and typographical errors, may be corrected by the Corporation; however, the Corporation shall have no duty or obligation to correct any such mistake. La Joya submitted a Surveyor Certification form as Attachment 14 of its Application. The identification number in the parenthetical in the bottom left hand corner was “(Form Rev. 10-14)” rather than the specified “(Form Rev. 07-15).” Form Rev. 10-14 was the Surveyor Certification form used for 2014 applications. The only difference between Form Rev. 10-14 and Form Rev. 07-15 is that the latter contains a revised list of location coordinates for several Sun Rail stations in the Orlando area. This difference was of no matter to the RFA under discussion. For the substantive purposes of this RFA, the forms were identical. If La Joya’s Surveyor Certification form had not been considered and not scored, La Joya would have been ineligible for funding and Douglas Gardens would have been selected as the applicant meeting Florida Housing’s goal of funding one new construction development for elderly residents in a large county. Heather Boyd, multifamily loan manager for Florida Housing, sat on the review committee and was assigned to score the proximity portion of the applications. Based on the distances provided in the Surveyor Certification form, Ms. Boyd awarded La Joya a total of 11.5 proximity points as follows: 5.5 points for proximity for Public School Bus Rapid Transit Stop, 3 points for proximity to a Grocery Store, and 3 points for proximity to a Medical Facility. (La Joya also included coordinates for a Public School, but the proposed elderly development was not eligible for Public School proximity points.) To be considered eligible for funding, an applicant needed to receive at least 10.25 proximity points, including at a minimum 2 points for Transit Services. No issue was raised as to the accuracy of the information submitted by La Joya or of Ms. Boyd’s calculation. If it was permissible to consider La Joya’s Surveyor Certification form, then La Joya satisfied the proximity requirements in the RFA and was properly awarded funding. If La Joya’s Surveyor Certification form had been rejected, La Joya would not have been awarded funding and Douglas Gardens would have been awarded funding. Florida Housing’s decision to award funding to La Joya was based in part on Ms. Boyd’s scoring of the Surveyor Certification form and reflected the agency’s support of Ms. Boyd’s action. However, during the pendency of Douglas Gardens’ protest, Florida Housing changed its position and determined that La Joya’s Surveyor Certification form should not have been considered, based on the mandatory language of section Four A.6.a.(1) of the RFA. Ms. Boyd testified that she did not notice that La Joya’s Surveyor Certification form was a prior version and that she scored it as if it were the current version. She testified that she should not have scored the form “[b]ecause it specifically says in the RFA, if they do not have the correct form, they will not be considered.” Jean Salmonsen, housing development manager, acted as a backup to Ms. Boyd in reviewing the Surveyor Identification forms and verifying the award of proximity points. Ms. Salmonsen testified that she, too, missed the fact that La Joya had filed the wrong version of the form and that she would have rejected the form had she correctly recognized it. Evidence presented at the hearing indicated that in January 2016, Ms. Salmonsen had in fact disqualified an application in a different RFA for submitting the 2014 version of the Surveyor Identification form. Several valid policy reasons were cited for the RFA’s requirement that applicants use only the current version of the Surveyor Identification form. Ken Reecy, Florida Housing’s Director of Multifamily Programs, testified that it is important to apply the rules and RFA criteria in a consistent manner because of the tremendous volume of applications the agency receives. Mr. Reecy stated, “For like criteria, yes, consistency. We live and die by consistency, frankly.” As to the Surveyor Certification form specifically, Mr. Reecy explained that over the years Florida Housing had used a number of different forms with different contents. Allowing applicants to submit different forms would add to the difficulty of scoring the hundreds of applications received from around the state. Uniformity and consistency as to applicant submissions allow Florida Housing to process all of these applications in a cost efficient manner. Though he expressed his concern with consistency of review and ensuring that all applicants provide the same information as reasons for rejecting La Joya’s submission of the 2014 Surveyor Certification form, Mr. Reecy conceded that one of the reasons Florida Housing moved away from the previous rigid Universal Application Cycle allocation process was to allow for flexibility in determining that insignificant scoring errors need not be the basis for disqualifying an otherwise acceptable application. Florida Housing’s recent adoption in 2013 of the “Minor Irregularity” rule is further indication of its intent to employ more flexible evaluation criteria than it has in the past. See Findings of Fact 14 and 15, supra. Mr. Reecy acknowledged that in the instant case, the substance of the 2014 and 2015 Surveyor Certification forms was identical, and that the information provided by La Joya using the 2014 form was the same information required by the 2015 form.
Recommendation Based on the foregoing, it is RECOMMENDED that a final order be entered by the Florida Housing Finance Corporation dismissing the Formal Written Protest and Petition for Administrative Hearing filed by Douglas Gardens V, Ltd., and finding that La Joya, Ltd. is eligible for funding under Request for Applications 2015-112. DONE AND ENTERED this 29th day of February, 2016, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of February, 2016.
The Issue The issue in this bid protest matter is whether Respondent, Florida Housing Finance Corporation's, intended award of funding under Request for Applications 2020-203 was contrary to its governing statutes, rules, or the solicitation specifications.
Findings Of Fact Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. Its purpose is to provide and promote public welfare by administering the governmental function of financing affordable housing in the state of Florida. For purposes of this administrative proceeding, Florida Housing is considered an agency of the state of Florida. Arthur Mays is a properly registered business entity in Florida and engaged in the business of providing affordable housing. Arthur Mays 2 On February 15, 2021, Florida Housing referred two other protests to RFA 2020-203 to DOAH, including DOAH Case Nos. 21-0611 and 21-0612. Florida Housing moved to consolidate all cases pursuant to Florida Administrative Code Rule 28-106.108, which was granted. As part of the Order of Consolidation, MHP, who was Petitioner in Case No. 21-0612, was joined as a Respondent in Case No. 21-0610. MHP subsequently moved to dismiss its separate, independent action in Case No. 21-0612, and continue as a party in Case No. 21-0610. Thereafter, Petitioner in Case No. 21-0611 (Hibiscus Grove, LP) voluntarily moved to dismiss its case, and the motion was granted. submitted an application to RFA 2020-203 seeking funding to help finance its housing redevelopment project in Miami-Dade County known as Arthur Mays Senior Villas. Arthur Mays' application was deemed eligible for, but was not selected for an award of, housing credits under RFA 2020-203. Florida Housing has been designated as the housing credit agency for the state of Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code. As such, Florida Housing is authorized to establish procedures to distribute low-income housing tax credits and to exercise all powers necessary to administer the allocation of those credits. § 420.5099, Fla. Stat. Florida Housing's low-income housing tax credit program (commonly referred to as "housing credits" or "tax credits") was enacted to incentivize the private market to invest in affordable rental housing. The affordable housing industry relies heavily on public funding, subsidies, and tax credits to support projects that may not be financially sustainable in light of the sub- market rents they charge. Because tax credits allow developers to reduce the amount necessary to fund a housing project, they can (and must) offer the tax credit property at lower, more affordable rents. As background, Florida Housing uses a competitive solicitation process to award low-income housing credits. Florida Housing initiates the solicitation process by issuing a request for applications ("RFA"). §§ 420.507(48) and 420.5093, Fla. Stat.; and Fla. Admin. Code Chapters 67- 48 and 67-60. The RFA competitive solicitation process begins when Florida Housing requests its Board of Directors (the "Board") to approve Florida Housing's plan for allocating resources through various RFAs. If the Board approves the plan, Florida Housing begins work on each individual RFA. The RFA at issue in this matter is RFA 2020-203, entitled "Housing Credit Financing for Affordable Housing Developments Located in Miami- Dade County." The purpose of RFA 2020-203 is to distribute funding to create affordable housing developments in Miami-Dade County, Florida. Through RFA 2020-203, Florida Housing intends to provide an estimated $7,420,440.00 of housing tax financing. Florida Housing's goal under RFA 2020-203 is to fund developments that qualified for the demographic commitment of Family, Elderly, and Urban Center Designation, selecting one Applicant per category. Florida Housing issued RFA 2020-203 on August 26, 2020.3 The RFA set forth the information each Applicant was required to provide. This information included a number of submission requirements, as well as a general description of the type of project that would be considered for funding. Applications were due to Florida Housing by November 17, 2020. Arthur Mays and MHP both timely applied for funding. Florida Housing appointed a Review Committee from amongst its staff to evaluate and score the applications. Florida Housing received 50 applications for housing credits under RFA 2020-203. The Review Committee reviewed, deemed eligible or ineligible, scored, and ranked applications pursuant to the terms of RFA 2020-203, as well as Florida Administrative Code Chapters 67-48 and 67-60, and applicable federal regulations.4 The Review Committee found 46 applications eligible for funding. Thereafter, through the ranking and selection process outlined in RFA 2020- 203, the Review Committee recommended three applications to the Board for funding for the Family, Elderly, and Urban Center Designation categories. On January 22, 2021, the Board formally approved the Review Committee recommendations. As part of its determinations, the Board selected MHP's development known as Southpointe Vista for the Urban 3 Florida Housing subsequently modified RFA 2020-203 on September 11, October 12, and November 9, 2020. 4 No protests were made to the specifications or terms of RFA 2020-203. Center Designation funding. The Board awarded $2,882,000 in tax credits to MHP to help finance Southpointe Vista. Arthur Mays protests the Board's selection of MHP's development instead of its own. Arthur Mays, the second ranked Applicant for the Urban Center Designation, challenges Florida Housing's determination of the eligibility of, and award to, MHP. If Arthur Mays successfully demonstrates that Florida Housing erred in accepting, then scoring, MHP's application, or the evidence demonstrates that MHP's application was ineligible or nonresponsive, then Arthur Mays will be entitled to an award of housing credits instead of MHP.5 Lewis Swezy testified on behalf of Arthur Mays. Mr. Swezy is a developer in South Florida and has vast experience developing major real estate developments in Miami-Dade County. Mr. Swezy also represented that he has significant experience with housing credit procurements having submitted well over 100 applications in response to Florida Housing RFAs. Mr. Swezy stated that Florida Housing has awarded him tax credits on approximately 20 occasions. Mr. Swezy raised two objections to MHP's application. Mr. Swezy argued that these two alleged deficiencies render MHP's application ineligible for funding. Therefore, Florida Housing should have disqualified MHP from an award of housing credits under RFA 2020-203. One of MHP's Principal Entities is not Registered to Transact Business in Florida as of the Application Deadline: First, Arthur Mays claims that information MHP included on its Principals of the Applicant and Developer(s) Disclosures Form causes MHP's application to be ineligible for consideration for housing credits. Arthur Mays specifically complains that one of the Second Level Principals that MHP identifies on its Principal Disclosures for the Applicant form (the "Principal 5 No party alleged that Arthur Mays' application failed to satisfy all eligibility requirements or was otherwise ineligible for funding under RFA 2020-203. Disclosures Form") is a foreign entity not authorized to do business in Florida. Arthur Mays argues that Florida law prohibits a corporate entity who has not obtained a certificate of authority from the Florida Department of State to transact business in Florida from serving as a principal of an Applicant for housing credits. Consequently, Florida Housing acted contrary to Florida statutes by considering MHP's application for housing credits under RFA 2020-203. To set the stage, RFA 2020-203 requires an Applicant for housing credits to produce evidence that it is legally formed in the State of Florida. Specifically, RFA 2020-203 Section Four, A.3.a(2), directs that: 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. Thereafter, RFA 2020-203 Section Four, A.3.c, entitled "Principals Disclosure for the Applicant and for each Developer," provides: (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. * * * 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 67-48.0075(8) further instructs that: Unless otherwise stated in a competitive solicitation, disclosure of the Principals of the Applicant must comply with the following: The Applicant must disclose all of the Principals of the Applicant (first principal disclosure level). * * * The Applicant must disclose all of the Principals of all the entities identified in paragraph (a) above (second principal disclosure level); The Applicant must disclose all of the Principals of all of the entities identified in paragraph (b) above (third principal disclosure level). Unless the entity is a trust, all of the Principals must be natural persons; With its application, MHP submitted a Principals Disclosure Form per RFA 2020-203 Section Four, A.3.c. In the Principal Disclosures for the Applicant portion, in accordance with rule 67-48.0075(8), MHP disclosed three levels of principals. In the First Principal Disclosure Level, MHP listed "MHP FL I Manager, LLC" as both a "Manager" and "Non-Investor Member" of MHP. On the Second Principal Disclosure Level, MHP identified the principals associated with MHP FL I Manager, LLC, to include Archipelago Housing, LLC ("Archipelago"), W. Patrick McDowell 2001 Trust, and Shear Holdings, LLC. On the Third Principal Disclosure Level, MHP named the "natural person" principals of Archipelago as Kenneth P. Lee and Michael C. Lee. Arthur Mays, through Mr. Swezy, argues that Florida law requires all principals, i.e., Archipelago, to be legally formed entities authorized to do business in the State of Florida. At the final hearing, Mr. Swezy represented that Archipelago is legally registered in the State of Delaware. However, as of the application deadline for RFP 2020-203, Archipelago did not have a certificate of authority from the Florida Department of State to operate as a foreign limited liability company in Florida. Consequently, Florida Housing should have disqualified and rejected MHP's application. As legal authority for its position, Arthur Mays asserts that the provisions of chapter 605, Florida Statutes, apply to this procurement. Section 605.0902(1) states: A foreign limited liability company may not transact business in this state until it obtains a certificate of authority from the [Department of State]. From a philosophical standpoint, Mr. Swezy urged that obtaining authority to transact business in Florida is more than a mere ministerial act. A foreign entity that secures the appropriate certification from the Department of State must disclose the identities of all of its directors and officers to the State of Florida. In addition, Mr. Swezy explained that Florida Housing maintains a "bad actors" list of those persons who are disqualified from an award of housing credits, such as: individuals in arrears to Florida Housing, individuals with certain felony convictions, and members of the Florida Housing Board, among others. Because Archipelago did not register with the Department of State, however, Florida Housing has no effective avenue to confirm whether Archipelago's management team (and hence MHP's Third Level Principals) is eligible for an award of housing credits. Consequently, Florida Housing cannot know for certain whether MHP's Principal Disclosures Form is accurate. Florida Housing is also ignorant regarding what persons are actually making business decisions for MHP and/or its principals. Mr. Swezy further asserted that, because MHP was not required to ensure that all its principals (i.e., Archipelago) obtained the necessary certification to transact business in Florida, MHP gained a competitive advantage over other Applicants who fully disclosed all their management team members. MHP garnered an unfair advantage because Florida Housing could more easily verify corporate information on other Applicants' principals who were registered with the State of Florida. MHP's Site Control Documentation Contains a Material Misrepresentation: Second, Mr. Swezy questioned whether MHP's site control documentation complies with RFA 2020-203 requirements. Specifically, Mr. Swezy asserted that MHP made a "material misrepresentation" in its application by artificially increasing the cost of the land it purchased for its development. This maneuver allegedly allowed MHP to request a higher amount of housing credits. Therefore, Mr. Swezy insisted that MHP's improper distortion of the price of its property should render its application ineligible for tax credit funding. See § 420.518(1)(a), Fla. Stat. For the legal authority behind his argument, Mr. Swezy pointed to RFA 2020-203 Section Four, A.7, which required an Applicant to establish control over its development site. Under RFA 2020-203 Section Four, A.7.a, an Applicant demonstrated site control by submitting documentation showing "that it is a party to an eligible contract or lease, or is the owner of the subject property." MHP, to demonstrate evidence of its site control, included in its application an Agreement, dated November 15, 2020, wherein MHP agreed to buy certain real property from McDowell Acquisitions, LLC ("McDowell"), for a purchase price of $7,000,000. As revealed in an "Underlying Contract" dated October 22, 2020, McDowell acquired the property from Cutler Ridge Investment Group, LLC ("Cutler Ridge"), also for the amount of $7,000,000. The property McDowell bought from Cutler Ridge consists of a two- acre parcel of land that was divided into two separate lots. However, the subsequent sale between MHP and McDowell, only involved one of the two lots.6 Consequently, Mr. Swezy decried the fact that MHP agreed to pay $7,000,000 for a piece of property that was worth half that amount one month earlier. Compounding this turn of events, MHP, in its application, reported the "Total Land Cost" of its one-acre development (Southpointe Vista) as $7,000,000. Mr. Swezy argued that the two "eligible contracts" evince that MHP misrepresented the value for the land on which it intends to construct Southpointe Vista ($7,000,000 versus $3,500,000). Furthermore, based on this manipulation of the purchase price, Mr. Swezy asserts that MHP will be unjustly enriched by an additional $300,000 in housing credits annually (or over three million dollars in the aggregate) in excess of what it should receive from Florida Housing had MHP reported the true value of the land on which it will locate its development. Mr. Swezy stated that Arthur Mays computed the alleged housing credit overpayment using what he referred to as the "gap calculation" formula. Mr. Swezy explained that MHP sought $2,882,000 in housing credits, which was the maximum amount available under RFA 2020-203. See RFP 2020-203 Section Four, A.10(1)(a). Mr. Swezy contended that the "gap calculation" formula indicates that if MHP recorded the "true" cost of its 6 Mr. Swezy remarked that the other one-acre lot was attached to another application for RFA 2020-203 from MHP MD Senior I, LLLP ("MHP Senior"), which shares some of the same principals with MHP. MHP Senior submitted an application for a project called Southpointe Senior. (The Southpointe Senior application was not selected for funding by Florida Housing.) MHP Senior also reported the total value of its one-acre piece of property as $7,000,000. property ($3,500,000), then MHP would have been awarded only $2,517,380 in housing credits for Southpointe Vista.7 Based on MHP's material misrepresentation, Mr. Swezy argues that Florida Housing should have deemed MHP's application ineligible for funding under RFA 2020-203. Instead, Florida Housing should have awarded housing credits to Arthur Mays as the next eligible Applicant. Otherwise, Florida Housing will be allowing MHP to receive an undeserved financial windfall. Florida Housing, in support of its intended award to MHP, presented the testimony of Marisa Button. Ms. Button is Florida Housing's Director of Multifamily Allocations. In her job, Ms. Button oversees Florida Housing's RFA process. At the final hearing, Ms. Button testified that Florida Housing appropriately deemed MHP's application for Southpointe Vista eligible for funding. Ms. Button agreed with Mr. Swezy that RFA 2020-203 required the Applicant (MHP) to demonstrate that it is a legally formed entity qualified to do business in the State of Florida. (Which MHP did.8) However, she advised that no language in chapter 420, chapter 67-48, or the RFA explicitly requires the Applicant to establish that its principals were also qualified to do business in Florida. Ms. Button specifically pointed to the language of RFA 2020-203 Section Four, A.3.a(2), which only directs the "Applicant" (and the "Developer entity") to be "a legally formed entity … qualified to do business in the state of Florida as of the Application Deadline." See also RFP 2020-203 Section Five, A.1. Conversely, Ms. Button testified that Florida Housing has never enacted or imposed a requirement that principals, other than the Applicant 7 As described in his testimony, the gap calculation determines the "gap need" between the total cost of the housing project and the housing credit financing actually needed to make the housing project feasible. 8 MHP filed to operate as a limited liability company with the Florida Department of State on October 9, 2020. itself, must register to transact business in Florida. The only related provision of RFA 2020-203 that applies to principals required that: [t]he Applicant, the Developer and all Principals are in good standing among all other state agencies and have not been prohibited from applying for funding.[9] Since the information in MHP's application reported that Archipelago was legally formed to operate in the State of Delaware, Ms. Button relayed that Florida Housing was satisfied that MHP met this condition at the time of the application deadline. Although, Ms. Button conceded that Florida Housing did not independently verify the veracity of MHP's Principal Disclosures Form. Instead, Florida Housing accepted MHP's application as valid on its face (as it did for all Applicants). As Mr. Swezy commented, Ms. Button articulated that the purpose behind the Principal Disclosures Form is to allow Florida Housing the means to survey all names associated with an application to ensure that no principal (or Applicant or Developer) is included on Florida Housing's "bad actors" list. Such entities, which would include companies or individuals who owe arrearages to Florida Housing or have taken part in certain criminal activities, are prohibited from participating in a competitive solicitation for housing credits. See Fla. Admin. Code R. 67-48.004(2). Consequently, an Applicant that does not fully disclose or misrepresents its principals may be rendered ineligible for an award through an RFA. Regarding MHP's application, Ms. Button was not aware of any principal identified on MHP's Principal Disclosures Form (particularly Archipelago) who was precluded from participating in RFA 2020-203. To further support her position, Ms. Button relayed that Florida Housing faced a similar situation in the case of Heritage Village Commons, Ltd v. Florida Housing Finance Corporation, FHFC Case No. 2012-013-UC (Fla. FHFC RO May 23, 2012; FO June 8, 2012). In Heritage Village, following an informal hearing under section 120.57(2), Florida Housing ultimately determined that neither the administrative rules (at that time) nor the relevant solicitation specifications required the Developer of an Applicant to be a legally formed entity in the State of Florida. Florida Housing reasoned that, because the governing law did not require the Developer to be a legally formed entity, Florida Housing could not penalize the applicant "for failure to comply with a nonexistent rule." Ms. Button advanced that Heritage Village offers an instructive analysis to apply to the present matter. Ms. Button further commented that Florida Housing believes that Heritage Village creates a precedent that it should follow regarding the legal status of a principal of an RFA Applicant. Regarding the applicability of chapter 605, Ms. Button asserted that chapter 605 does not control Florida Housing's competitive solicitation process. Instead, procurements involving housing credits are governed by the provisions of chapter 420, which do not contain any requirement that an Applicant's principals must be registered to transact business in the state of Florida. Ms. Button maintained that the specific language of section 605.0902(1) does not dictate who may receive housing credits under chapter 420 or chapters 67-48 and 67-60. Neither has Florida Housing incorporated section 605.0902 into the RFA competitive solicitation process. Similarly, Ms. Button stated that the terms of RFA 2020-203 only required MHP as the Applicant, as well as Southpointe Vista's Developer, to be legally formed entities qualified to do business in the state of Florida, not Archipelago, as one of MHP's Second Level Principals. Finally, Ms. Button testified that whether MHP's principals were officially registered to transact business in Florida was not considered during the scoring of RFA 2020-203. Therefore, the fact that Archipelago was 9 See RFA 2020-203, Applicant Certification and Acknowledgement Form ("Certification and Acknowledgement Form"), para. 13. registered in the State of Delaware, not Florida, did not have any impact on Florida Housing's selection of MHP's application for housing credits. Neither did it somehow give MHP's application a competitive advantage. Accordingly, because Florida Housing's governing statutes, administrative rules, and the RFA 2020-203 specifications did not independently require an Applicant's principals to be registered to transact business in the State of Florida, Ms. Button took the position that MHP's application is eligible for funding, despite Archipelago's legal status in Florida as of the application deadline. Therefore, since MHP disclosed the required information regarding its principals in its application, Ms. Button declared that Florida Housing's decision to award housing credits to MHP did not contravene applicable law. Regarding Arthur Mays' claim that MHP's application should be disqualified for misrepresenting the cost of the land MHP intends to use for its housing site, Ms. Button relayed that the property cost of a development's location has no relation to an Applicant's eligibility for housing credits. Therefore, the fact that MHP allegedly represented that its development property cost twice its actual value is not a "material" representation that would affect Florida Housing's award of tax credits. Ms. Button explained that Florida Housing only reviews the land cost during the credit underwriting phase, which occurs after the competitive solicitation process is completed.10 Consequently, the cost for MHP to obtain the Southpointe Vista property had no bearing on the Review Committee's evaluation of its application for tax credits under RFA 2020-203. Expanding on her testimony, Ms. Button initially expressed that the cost of purchasing land is not an "eligible cost" that Florida Housing considers in determining whether an Applicant qualifies for housing credits. In practice, an Applicant is required to submit with their application information regarding its "Total Land Cost" on a Development Cost Pro Forma form (the "Development Cost Form"). See RFA 2020-203 Section Four, A.10.c, and Fla. Admin. Code R. 67-48.0075(3). The Development Cost Form reports an Applicant's funding "sources/uses." In layman's terms, to provide Florida Housing a better understanding of the financial viability of its housing development, the Applicant completes the Development Cost Form to identify its funding "sources," as well as the anticipated expenses (i.e., "uses") of bringing its development to fruition. If an Applicant shows that its "sources" equal or exceed its "uses," then the Development Cost Form demonstrates to Florida Housing that an Applicant's development is financially feasible. MHP, on its Development Costs Form, wrote that its Total Land Cost was $7,000,000 (as attested by Mr. Swezy). MHP included this figure in calculating its Total Development Cost, which MHP anticipated would reach 10 See RFA 2020-203 Section Four, A.7.a, which states that Florida Housing: [W]ill not review the site control documentation that is submitted with the Site Control Certification form during the scoring process unless there is a reason to believe that the form has been improperly executed, nor will it in any case evaluate the validity or enforceability of any such documentation. During scoring the Corporation will rely on the properly executed Site Control Certification form to determine whether an Applicant has met the requirement of this RFA to demonstrate site control. … During credit underwriting, if it is determined that the site control documents do not meet the above requirements, [Florida Housing] may rescind the award. a combined amount of $41,747,241. On the other side of the ledger, MHP reported that its anticipated funding sources equaled $45,704,400. Based on these numbers, Ms. Button relayed that MHP showed that its development carries a funding surplus of $3,957,159. Therefore, MHP demonstrated that its housing development, Southpointe Vista, is financially feasible. (Conversely, if MHP's Development Cost Form revealed a funding shortfall, i.e., that the costs ("uses") to develop Southpointe Vista exceeded the funding "sources," then Florida Housing would have had serious concerns regarding the development's financial health, which would have led to Florida Housing finding MHP ineligible for funding.) Regarding Arthur Mays' allegation that MHP doubled the actual cost of its land from $3,500,000 to $7,000,000, Ms. Button was not alarmed that MHP may have overstated the value of the property on which it intends to locate Southpointe Vista. Because MHP reported a funding surplus, Ms. Button stated that even if the actual cost of the land was half of what MHP reported ($3,500,000), MHP still would have reported a funding surplus for its project. (In fact, the surplus would have been $3,500,000 larger.) Consequently, Ms. Button contended that the fact that MHP may have overvalued the cost of its property on its Development Cost Form did not affect MHP's eligibility for housing credits under the terms of RFA 2020-203. Further, Ms. Button rejected Arthur Mays' charge that by increasing its land cost, MHP was able to improperly request a larger tax credit. Ms. Button relayed that after Florida Housing selects an application for award of housing credits, the Applicant is invited to enter the credit underwriting process. During this stage, Florida Housing underwriters will evaluate the application to ensure that it complies with all RFA eligibility requirements.11 As part of this review, a property appraisal report will typically be ordered to calculate the impact of the land cost on the Applicant's development. The credit underwriters also specifically assess the "gap calculation result" in recommending the actual housing credit allocation. See Fla. Admin. Code R. 67-48.0072(28)(e), (f), and (g) and 67-48.0075(3). Ms. Button reemphasized that the property cost for MHP's development is only considered during the credit underwriting phase, not during the scoring of its application. Ms. Button expressed that based on the results of the credit underwriting review, the total tax credits that MHP requested for Southpointe Vista are not necessarily the amount that it will receive. Ms. Button relayed that if credit underwriting determines that an award of housing credits to MHP would be inappropriate based on the circumstances, or that MHP materially misrepresented information in its application, then Florida Housing would likely reduce, if not completely reject, the award of housing credits for MHP's development. Finally, Ms. Button reiterated that the development property cost that MHP associated with Southpointe Vista had no bearing on the Review 11 Florida Housing's credit underwriting procedures are described in rule 67-48.0072, which provides: Credit underwriting is a de novo review of all information supplied, received or discovered during or after any competitive solicitation scoring and funding preference process, prior to the closing on funding … The success of an Applicant in being selected for funding is not an indication that the Applicant will receive a positive recommendation from the Credit Underwriter or that the Development team's experience, past performance or financial capacity is satisfactory. The credit underwriting review shall include a comprehensive analysis of the Applicant, the real estate, the economics of the Development, the ability of the Applicant and the Development team to proceed, the evidence of need for affordable housing in order to determine that the Development meets the program requirements and determine a recommended … Housing Credit allocation amount … , if any. (emphasis added) Committee's evaluation of its application. The Review Committee did not consider land acquisition cost when it scored MHP's application. Therefore, Ms. Button maintained that the fact that MHP listed its Total Land Cost as $7,000,000 did not give MHP a competitive advantage. Neither did the fact that MHP may have overstated its Total Land Cost by $3,500,000 increase its chance of winning the housing credits. Consequently, the numbers MHP listed on its Development Costs Form did not adversely prejudice other Applicants. Neither did they provide MHP a scoring benefit during the competitive solicitation process. Ms. Button asserted that MHP's Total Land Cost did not have any impact on Florida Housing's decision to select MHP's development for award of tax credits under RFA 2020-203. Ms. Button also testified that RFA 2020-203 did not require applicants to provide a property appraisal to substantiate the land cost recorded on the Development Cost Form. She further added that no evidence shows that MHP's agreement to purchase the property from McDowell was an invalid contract, or that $7,000,000 was not a reasonable price for the one-acre lot for Southpointe Vista. Consequently, Ms. Button contended that the fact that MHP may have inflated the cost of its development site to twice its actual value is not a "material" representation that affected Florida Housing's award of tax credits to MHP. Ms. Button's explanation detailing why MHP's application was eligible for consideration for housing credits under RFA 2020-203 is credible and is credited. Ms. Button persuasively testified that the information MHP included in its application legally complied with RFA requirements and allowed Florida Housing to effectively evaluate its request for funding for its housing development. Ms. Button further capably refuted Arthur Mays' allegation that MHP somehow received a competitive advantage during the solicitation process. Accordingly, based on the evidence in the record, Arthur Mays did not demonstrate, by a preponderance of the evidence, that Florida Housing's award of housing credits to MHP was clearly erroneous, contrary to competition, arbitrary, or capricious. Therefore, Arthur Mays did not meet its burden of proving that Florida Housing's intended award of housing credit funding to MHP under RFA 2020-203 was contrary to its governing statutes, rules or policies, or the solicitation specifications.
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 dismissing the protest of Arthur Mays. It is further recommended that the Florida Housing Finance Corporation select MHP's application as the recipient of housing credit funding for the Urban Center Designation under RFA 2020-203. DONE AND ENTERED this 26th day of May, 2021, in Tallahassee, Leon County, Florida. COPIES FURNISHED: Seann M. Frazier, Esquire Parker, Hudson, Rainer & Dobbs, LLP Suite 750 215 South Monroe Street Tallahassee, Florida 32301 Lawrence E. Sellers, Jr., Esquire Holland & Knight, LLP Suite 600 315 South Calhoun Street Tallahassee, Florida 32301 Christopher Dale McGuire, Esquire Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301 S J. BRUCE CULPEPPER 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 26th day of May, 2021. Tiffany A. Roddenberry, Esquire Holland & Knight, LLP Suite 600 315 South Calhoun Street Tallahassee, Florida 32301 Jeffrey Stephen Woodburn, Esquire Woodburn & Maine 204 South Monroe Street Suite 201 Tallahassee, Florida 32301 Kristen Bond Dobson, Esquire 215 South Monroe Street Suite, 750 Tallahassee, Florida 32301 Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 Jason L. Maine, General Counsel Woodburn & Maine, Attorneys at Law 204 South Monroe St Suite 201 Tallahassee, Florida 32301 Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329
The Issue The issue in this case is whether the specifications, terms, and conditions of the Request for Proposals 2009-04 issued by Respondent are contrary to Respondent’s governing statutes, rules, or policies.
Findings Of Fact Elmwood is a Florida limited partnership and is engaged in the development of affordable housing in Florida. RST is a Florida limited partnership authorized to do business in Florida and is in the business of providing affordable housing. Florida Housing is a public corporation created by Section 420.504, Florida Statutes (2009),1 to administer the governmental function of financing or refinancing of affordable housing and related facilities in Florida. Florida Housing’s statutory authority and mandates are contained in Chapter 420, Part IV, Florida Statutes. Florida Housing is governed by a Board of Directors (Board), consisting of nine individuals appointed by the Governor and confirmed by the Senate. On July 31, 2009, Florida Housing issued the RFP, setting forth criteria and qualifications for developers to seek funding for affordable housing projects from funds that Florida has received through the American Recovery and Reinvestment Act of 2009, PL 111-5 (ARRA). ARRA was enacted in 2009 by Congress as part of the federal economic stimulus efforts and was signed into law on February 17, 2009. Elmwood and RST received notice of the RFP through e-mail notification on July 31, 2009. The RFP required applicants to submit proposals to Florida Housing no later than 2:00 p.m. on August 14, 2009. Elmwood and RST are “applicants” as defined in the RFP. Elmwood and RST submitted separate applications, intending to seek financing for their affordable housing projects by applying for funding from the sources that are proposed to be allocated through the RFP. On August 5, 2009, Elmwood timely submitted notice of its intent to protest the RFP, and, on August 17, 2009, timely filed its Formal Written Protest and Petition for Administrative Hearing, in accordance with the provisions of Subsection 120.57(3)(b), Florida Statutes, and Florida Administrative Code Rule 28-110.004. As an interested developer, who intended to, and did, seek funding from the sources being allocated through the RFP, Elmwood’s substantial interests are affected by the terms of the RFP. On August 18, 2009, Florida Housing issued its RFP 2009-04 Statement of Necessity to Continue RFP Process After Bid Protest is Filed (Statement of Necessity), pursuant to Subsection 120.57(3)(c), Florida Statutes. The Statement of Necessity was not challenged. On August 20, 2009, Florida Housing proceeded with making determinations of eligibility for funding under the RFP. Both RST and Brownsville were selected for funding and invited into credit underwriting as provided in the RFP. Elmwood was not selected for funding. On September 9, 2009, RST filed its Petition for Leave to Intervene on behalf of Elmwood to challenge the minimum occupancy standard of 92% required in the RFP. On September 10, 2009, Brownsville filed its Petition for Leave to Intervene on behalf of Florida Housing. Florida Housing administers several programs aimed at assisting developers to build affordable multi-family rental housing in an attempt to protect financially marginalized citizens in Florida from excessive housing costs. The programs through which Florida Housing allocates resources to fund such affordable housing in Florida include: a federally funded multi-family mortgage revenue bond program (MMRB), established under Section 420.509, et. seq., Florida Statutes; the State Apartment Incentive Loan Program (SAIL), created pursuant to Section 420.5087, et seq., Florida Statutes; and the federal Low Income Housing Tax Credit Program (the Tax Credit Program), established in Florida pursuant to Section 420.5099, Florida Statutes. These funding sources are allocated by Florida Housing to finance the construction or substantial rehabilitation of affordable housing. A portion of the units constructed based on funding from these programs must be set aside for residents earning a certain percentage of area median income (AMI). Generally, the units are targeted to tenants earning 60% of AMI or below. The primary program at issue in this proceeding is the Tax Credit Program. The Tax Credit Program was created by the Federal Income Tax Reconciliation Act of 1986, as a means to induce the private sector to construct and manage affordable housing projects. The Tax Credit Program is governed by the Internal Revenue Code, 26 U.S.C. Section 42. Low income housing tax credits (Tax Credits) come in two varieties: competitively awarded “9%” Tax Credits and non- competitively awarded “4%” Tax Credits. For the 9% Tax Credits, the federal government annually allocates a specific amount of Tax Credits to each state using a population-based formula. Tax Credits are a dollar-for-dollar offset to federal income tax liability. Developers awarded the Tax Credits get the credit amount every year for ten years. The developer will often sell the future stream of Tax Credits to a syndicator, who, in turn, sells them to investors seeking to shelter income from federal income taxes. For example, a developer who receives a $1,000,000 award of Tax Credits is entitled to that amount of tax credit paid each year for ten years, for a face value of $10,000,000. The developer sells the Tax Credits to a syndicator or investor who has tax liability sufficient to absorb the amount of credits. If the selling price is 85 cents on the dollar, the sale of the Tax Credits would generate $8,500,000 cash. Unlike a loan or the proceeds from issuance of bonds, a developer who is awarded Tax Credits and syndicates those Tax Credits receives cash equity with no debt associated with it. Thus, Tax Credits provide an attractive subsidy and, consequently, are a highly sought-after funding source. Florida Housing is the designated agency in Florida to allocate Tax Credits to developers of affordable housing, pursuant to Section 420.5099, Florida Statutes. Every year since 1986, Florida has received an allocation of Tax Credits to be used to fund construction of affordable housing. As required by Section 42 of the Internal Revenue Code, each year Florida Housing adopts a Qualified Allocation Plan (QAP), which sets forth the allocation methodology for the competitive 9% Tax Credits. The QAP must be approved by the Governor each year. The QAP is also adopted and incorporated by reference into Florida Housing’s rules. See Fla. Admin. Code R. 67-48.002(95). The 2009 QAP includes the following provision: In order for the Corporation to implement the provisions of the Recovery and Reinvestment Act of 2009 (the “2009 Stimulus Act”), any funds received pursuant to 2009 Stimulus Act may be allocated by a competitive request for proposal or competitive application process as approved by the Board. Any such process will be governed by Section 42, IRC, and Chapter 67- 48, F.A.C., as applicable, or, an emergency rule authorized by the Florida Legislature specifically for the 2009 Stimulus Act, if any. The 2009 QAP was adopted as part of the 2009 Universal Cycle rules by Florida Housing’s Board on March 13, 2009. At that time, Florida Housing had not yet received guidance from the federal government as to how the ARRA funds should be allocated. The Florida Affordable Housing Guarantee Program was created in Section 420.5092, Florida Statutes, for the purposes of stimulating creative private section lending activities to increase the supply and lower the cost of financing or refinancing eligible housing, creating security mechanisms to allow lenders to sell affordable housing loans in the secondary market, and encouraging affordable housing lending activities that would not have taken place or that serve persons who would not have been served but for the creation of this program. Florida Housing has accomplished these goals by issuing capitalizing bonds to create the Guarantee Fund, which lowers the interest paid on the MMRB bond debt by serving as a credit enhancer. Since 2002, Florida Housing has allocated funding from the MMRB, SAIL, and Tax Credit Programs through a single annual competitive application process known as the “Universal Cycle,” in which the applicants compete against one another for funding. The Universal Cycle and the attendant complex application review process are intended to equitably and reasonably distribute affordable housing throughout Florida. Florida Housing has adopted rules which incorporate by reference the application forms and instructions for the Universal Cycle to govern the allocation of funds from the various programs it administers. Florida Housing amends it Universal Cycle rules, forms, and instructions every year. Following the completion of the Universal Cycle, Florida Housing engages in an extensive public comment process through which it solicits feedback and comments from developers for the next year’s cycle. Any new amendments are adopted to take effect prior to an established Application Deadline for the ensuing year. The process used by Florida Housing to review and approve the Universal Cycle applications is set forth in Florida Administrative Code Rule 67-48.004. Florida Housing reviews all timely-filed applications to determine if threshold requirements are met and scores each application based on factors such as programs for tenants, amenities of the development as a whole and of the tenants’ units, local government contributions to the specific development, and local government ordinances and planning efforts that support affordable housing in general. The process includes a series of tiebreakers to choose among applications with otherwise equal scores. After the initial review and scoring by Florida Housing, all applications and included exhibits, along with the scores for the applications, are posted on Florida Housing’s website. Applicants are given a specific time period to alert Florida Housing of any errors they believe Florida Housing made in its initial scoring. Florida Administrative Code Rule 67- 48.005 sets forth an appeal procedure for challenging the scores. After any appeal proceedings, Florida Housing publishes final rankings which determine which applications are preliminarily selected for funding. The applicants for those applications selected are invited to participate in the credit underwriting process, which is governed by Florida Administrative Code Rule 67-48.0072. A third party financial consultant, who is selected by Florida Housing but paid for by the individual applicant, determines whether the proposed project is financially sound. The credit underwriter reviews all aspects of the proposed development, including financing sources, plans and specifications, cost analysis, zoning, site control, environmental reports, construction contracts, and engineering and architectural contracts. Florida Administrative Code Rule 67-48.0072(10) requires an appraisal and market study. The credit underwriter is required to consider the market study, as well as the development’s financial impact on other developments in the area previously funded by Florida Housing, and make a recommendation for approval or disapproval of funding. Each year the Universal Cycle provides a mechanism for selecting applications to meet statutory geographic requirements; for certain targeting goals that address housing needs of particular demographic groups, such as farm workers, commercial fishery workers, the homeless, or the elderly; for specific set-asides or targeting goals aimed at addressing identified needs, such as the Florida Keys, inner city areas, or rural development; and for the preservation of existing affordable housing complexes. Each set-aside group essentially has its own separate funding from its share of the funds distributed by Florida Housing. After the set-aside goals are addressed, Florida Housing then uses the final rankings to try to achieve a distribution of affordable housing units among the county groupings (small, medium, and large, based on population) in accordance with the adopted percentages. Each of the three groups must receive at least 10% of the funds. Within the county size groups, Florida Housing uses a formula called SAUL, which is an acronym for Set-Aside Unit Limitation. The formula is set forth in the application instructions and incorporated by reference into the rules for each Universal Cycle in an attempt to evenly distribute the units. As part of the Universal Cycle process, Florida Housing designates certain geographic areas of the state that are considered soft markets as “Location A” areas. Florida Housing first began incorporating into its application process a mechanism for identifying weak markets, known as “Location A” in 2003. The Location A designations are included in the Universal Cycle Application Instructions, which are incorporated by reference in the rules of Florida Housing. Elmwood timely filed an application in the 2007 Universal Cycle, seeking an award of Tax Credits and a supplemental loan to construct a 116-unit family apartment complex, Elmwood Terrace, in Fort Myers, Lee County, Florida. Elmwood’s application received a perfect score and maximum tiebreaker points. As a result, Elmwood was allocated $1,498,680 in Tax Credits. During the credit underwriting process, Elmwood committed to set aside more than the required units for Extremely Low-Income (ELI) households. Based on the final ranking of its application, Elmwood was invited into the credit underwriting process. The credit underwriter designated by Florida Housing conducted the analysis required under Florida Housing’s rules and issued a favorable recommendation for funding. The Credit Underwriting Report for Elmwood Terrace was accepted by the Florida Housing Board on September 22, 2008. By the fall of 2008, significant changes were taking place in the economic environment and the housing market in particular, and it became evident that the market for Tax Credits had precipitously dropped. Tax credits had typically sold in the range of 85 to 95-cents on the dollar in recent years, but the value of Tax Credits had plummeted in the last two years. Sales, when a buyer can be found, are currently in the low 60-cents on the dollar range. Shortly before Elmwood was scheduled to close on its Tax Credits in the fall of 2008, the syndicator who had originally expressed its intent to purchase Elmwood’s Tax Credits informed Elmwood that it would not go forward with the syndication. Many other projects that were awarded Tax Credits during the 2007 and 2008 Universal Cycles similarly experienced difficulty in finding syndicators to purchase the awarded Tax Credits and, thus, were unable to proceed to closing. In order to accomplish the legislative mandate to pay, Florida Housing attempted to assist these troubled projects by granting extensions of time to meet various benchmarks in the Tax Credit program. In January 2009, the Florida Legislature met in special session to address budget revenue shortfalls for the 2008-2009 fiscal year. Legislation was adopted and signed into law on January 27, 2009, which swept trust fund balances, transferred $30 million from multi-family housing programs to the State Housing Initiative Partnership (SHIP) program, and required Florida Housing to pay $190 million in previously appropriated funds to the treasury by June 1, 2009. These funds were to be taken first from developments that would provide new construction. In order to accomplish the legislative mandate to pay $190 million to the treasury, Florida Housing had to deobligate approximately $80 to $90 million of funds preliminarily committed to SAIL-funded projects and from funds preliminarily committed to the Community Workforce Housing Innovation Pilot Program (CWHIP) projects. For the first time in Florida Housing’s history, it was compelled to take money away from people at the Legislature’s direction. In early 2009, in recognition of the collapse of the housing market and the difficulty in marketing Tax Credits, the federal government, as part of it economic stimulus efforts, established mechanisms to assist in the development of affordable housing and offset some of the economic devastation to developers. Congress included specific provisions in ARRA intended to address the condition of the Tax Credit market. Section 1602 of ARRA allows the state Tax Credit allocating agencies to return up to 40% of the state’s annual Tax Credit allocation, as well as Tax Credits awarded in 2007 and 2008 to the federal government, to be exchanged for a cash distribution of 85 cents for each tax credit dollar returned. The exchange of Tax Credits generated a pool of $578,701,964 for the State of Florida. The Tax Credit Assistance Program (TCAP), a separate provision in ARRA, includes a direct allocation of funds to state housing finance agencies from the Department of Housing and Urban Development to provide gap financing for affordable housing projects that have been affected by the economic downturn. These funds were allocated to the states to “resume funding of affordable rental housing projects across the nation while stimulating job creation in the hard-hat construction industry.” Florida Housing issued the RFP as the method for allocating the Exchange Funds and to provide an opportunity for applicants to request TCAP funds. The RFP solicits proposals from applicants with an “Active Award” of Tax Credits who were unable to close and are seeking alternate funding to construct affordable housing utilizing Exchange Funds from the Tax Credit Exchange Program authorized under Section 1602 of ARRA. Section 4D.2 of the RFP provides: Proposed Developments located within a 2009 Location A Area are eligible to apply only under the following circumstances: Developments where the original Application for the Proposed Development was funded under the Housing Credit Hope VI goal. Developments where the Original Application for the Proposed Development reflects the Housing Credit Preservation Designation. Proposed Developments that are located in a 2009 Location A Area that does not have a Guarantee Fund Development with the same Demographic category located in the same county. (Emphasis in original) The Location A areas in the RFP are the Location A areas in the rules adopted for the 2009 Universal Cycle. The Elmwood Terrace project is located in Lee County, which was not designated as a part of Location A in the 2007 Universal Cycle. The rules for the 2008 Universal Cycle provided that Location A included that part of Lee County lying south of State Road 80 and the Caloosahatchee River. The 2008 Location A for Lee County did not specify demographic categories. For the 2009 Universal Cycle, all of Lee County was designated Location A for both the family and elderly designations. The Universal Application Package, which is incorporated by reference in Florida Administrative Code Rule 67-48.004(1)(a), provides: (1) Set-Aside Location A Development (Threshold) A proposed Development qualifies as a Set- Aside Location A Development if the location of the proposed Development is within a Set- Aside Location A Area and the Applicant selected the applicable Demographic Commitment (Elderly or Family) at Part III.D of the Application. The only exception to this provision is if the proposed Development also qualifies as a HOPE VI Development at Part III.A.2.d. of the Application. Applicants with a Set-Aside Location A Development must meet the following set- aside requirements: Applicants requesting Competitive HC must commit to set aside 100 percent of the Development’s residential units at 50 percent AMI or less; or Applicants requesting MMRB must commit to set aside at least 85 percent of the Development’s residential units at 50 percent AMI or less. All Applicants must meet the minimum ELI Set-Aside threshold set out in Part III E.1.b.(2)(a)(iii) of these instructions. Because Elmwood’s proposed development is located in Lee County, Florida, the specifications of the RFP prohibit Elmwood from being considered for the allocation of funds in exchange for its Tax Credits. The RFP provides that any project that receives an allocation of Exchange Funds and/or TCAP Funds will be required to go through the credit underwriting process, including an assessment of market need and impact. Section 5B.1b of the RFP states that a tentative funding award under the RFP will be rescinded “if the submarket of the Proposed Development does not have an average occupancy rate of 92% or greater for the same Demographic population, as determined by a market study ordered by the Credit Underwriter, and analyzed by the Credit Underwriter and Florida Housing staff, as well as approved by the Board.” The term “submarket” is used in Florida Housing’s credit underwriting rules in Florida Administrative Code Rule 67-48.0072. “Submarket” and “primary market area” are synonymous terms. Determining a submarket or primary area market is very subjective; even two adjacent sites may have different submarkets. Determination of a submarket is an art that involves making judgments. The market analysis, which is required to be done as part of the credit underwriting process, will delineate the primary market area or submarket area of the proposed project. Such delineation will be based on criteria which may be unique to that proposed site. Thus, it is not practical to specify what criteria are used to establish the primary market area or submarket area of a proposed project. The RFP provides that the demographic grouping submitted in the original application cannot be changed. The RFP allows applicants to change other aspects of their original proposal, including that an applicant may increase the number of proposed units. Subsequent to the withdrawal of its anticipated equity syndicator in September 2008, Elmwood explored other options that could potentially enable it to proceed to closing. One option that Elmwood proposed to Florida Housing was to change the demographic grouping of Elmwood Terrace to an elderly project. Elmwood formally requested a change to its demographic grouping in a letter from Elmwood’s attorney, Warren Husband, to Florida Housing’s deputy development officer, Deborah Blinderman, dated January 26, 2009. That request was not approved. Elmwood contends that the prohibition on changing a development’s demographic grouping is contrary to Florida Housing’s policy of allowing other developers to change their demographic groupings. Florida Housing did allow two developments to change their demographic groupings. On April 24, 2009, the Board granted River Trace Senior Apartments’ request to change its demographic grouping from elderly to family. River Trace Senior Apartments was a development which had been funded in 2000 as an elderly development. It operated for eight years as an elderly development without achieving satisfactory occupancy in its 178 units. Based on the development’s history, the Board allowed a demographic grouping change in hopes of achieving satisfactory occupancy levels. Unlike Elmwood’s proposed development, River Trace Senior Apartments was a housing development, which was already built and in operation. In October 2008, Florida Housing approved a request for a change in demographic grouping in a proposed project. The proposed development, Bradenton Village II, was the third phase of a large HOPE VI redevelopment project and consisted of 36 units designated as family units. During the permitting process, the City of Bradenton informed the developer that the proposed site could not accommodate the number of parking spaces required for a family development, but the required parking could be provided if 32 of the units were designated as elderly units. Bradenton Village had an investor who was willing to remain in and go forward with the project redesignated as elderly. Florida Housing did not allow changes in pending deals after the Legislature’s special session budget action in January 2009 because of the large number of projects that had lost their funding and proposed changing the scope of their projects to qualify for ARRA funds. These included a number of CWHIP projects. The director for Florida Housing felt that he could not justify allowing Elmwood to change its demographic designation while refusing to allow the deobligated CWHIP developers to change their target markets. The evaluation process for the RFP is set forth in Section 7 of the RFP and provides that the Florida Housing Review Committee will: [S]elect Applicants most likely to be considered for award, make any adjustments deemed necessary to best serve the interest of Florida Housing’s mission, and develop a recommendation or series of recommendations to the Board. The Committee will then rank the Applications deemed eligible for funding with preference given to Applications that are Shovel-Ready. The Board may use the Proposals, the Committee’s scoring, and any other information or recommendation provided by the Committee or staff, and any other information the Board deems relevant in the selection of Applicants to whom to award funding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding: The specifications of the RFP which exclude consideration of funding for projects located in a Location A area without regard to whether the applicant is willing to lower the AMI for its units to 50% or less are contrary to Florida Housing’s governing statutes. The provision in the RFP which precludes the applicant from changing its demographic grouping is not contrary to Florida Housing’s policies. The provision of the RFP which requires 92% occupancy is contrary to Florida Housing’s governing statutes. The lack of a definition of “submarket” in the RFP is not arbitrary, capricious, clearly erroneous, or contrary to competition. The provisions of the RFP which eliminate from consideration for funding any project in a county with a Guarantee Fund development is contrary to Florida Housing’s governing statutes. The evaluation criteria in Section 7 of the RFP which sets forth the evaluation procedure is contrary to the Florida Housing’s governing rules and statutes. DONE AND ENTERED this 12th day of November, 2009, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 12th day of November, 2009.
The Issue The issues in this case are whether Florida Housing Finance Corporation ("Florida Housing" or "Respondent") made a decision to determine Oasis at Renaissance Preserve I, LP ("Oasis" or "Petitioner") ineligible for SAIL funding for Request for Applications 2016-109 SAIL Financing of Affordable Multifamily Housing Developments to be used in Conjunction with Tax-Exempt Bond Financing and Non-competitive Housing Credits ("RFA"), that was contrary to a governing statute, rule, or solicitation specification, and, if so, whether that action was clearly erroneous, arbitrary, capricious, or contrary to competition.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation, enter a final order consistent with its initial decisions: (1) dismissing the formal written protests of Oasis at Renaissance Preserve I, LP, and (2) awarding funding to Osceola Palos Verdes, Ltd. DONE AND ENTERED this 15th day of March, 2017, 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 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 2017. COPIES FURNISHED: Hugh R. Brown, General Counsel 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. 215 South Monroe Street, Suite 500 Tallahassee, Florida 32302 (eServed) Betty Zachem, Esquire Marisa G. Button, 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) Kate Flemming, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed)
The Issue The issue is whether Florida Housing and Finance Corporation's intended decision to award low income housing tax credits for an affordable housing development in Miami-Dade County to Rio at Flagler, LP (Rio), was contrary to solicitation specifications, and if so, whether that determination was clearly erroneous 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 a RFA. In this case, the RFA was issued on November 21, 2014, modified slightly on January 30, 2015, and required the filing of applications by February 10, 2015. According to the RFA, Florida Housing is expected to award up to an estimated $4,367,107 of housing credits for the following demographic set- aside: housing projects targeted for either the family or elderly population in Miami-Dade County. The credits will be awarded to the applicants with the highest total scores. Pinnacle submitted Application No. 2015-211C seeking $2,560,000.00 in annual allocation of housing credits to finance the construction of a 104-unit residential rental development to be known as Pinnacle Heights. Rio submitted Application No. 2015-217C seeking $1,940,000.00 in annual allocation of housing credits to finance the construction of a 76-unit residential development to be known as Rio at Flagler. The agency's Executive Director appointed a review committee comprised of Florida Housing staff to evaluate the applications for eligibility and scoring. Fifty-three 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 53 applications filed in response to the RFA, 43 were found to be eligible, and ten were found ineligible. Both Pinnacle and Rio were found eligible for the family/elderly demographic. The RFA specifies a sorting order for funding eligible applicants. All eligible applicants in the family/elderly demographic, including Pinnacle and Rio, achieved the maximum score of 23 based on criteria in the RFA. 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 six tiebreakers, 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. Both Pinnacle and Rio received the maximum 23 points and met all tiebreaker criteria. In other words, both had so- called "perfect" applications. The ultimate deciding factor for perfect applications is a randomly generated lottery number that is assigned at the time each application is filed. Rio's number is four, while Pinnacle's number is six. Because Rio had a lower lottery number than Pinnacle, Florida Housing issued its notice of intent to award tax credits to Rio and another applicant (with a lower lottery number) not relevant here. Pinnacle timely filed a formal written protest. As amended, Pinnacle's protest is narrowed to a single issue -- whether the bus stop identified in Rio's application is a Public Bus Transfer Stop, as defined in the RFA. A failure to comply with this provision would lower Rio's total proximity score and make it ineligible to receive tax credit funding. The RFA specifies two Point Items in the family/elderly demographic category. The first Point Item is "Local Government Contributions," for which a maximum of five points could be awarded. The second is "Proximity to Transit and Community Services," for which points are awarded based on the distance between the proposed development and the selected transit and community service. A maximum of six proximity points are allowed for Transit Services, while a maximum of 12 proximity points are allowed for Community Services for a total maximum of 18 proximity points. Under the terms of the RFA, if an applicant achieves a minimum of 12.25 proximity points for Community Services and Transit Services, a "point boost" up to the maximum total score of 18 proximity points is added to the applicant's score. Rio's transit score of six points is the focus of this dispute. The RFA lists five types of Transit Services that an applicant can self-select to obtain proximity points, including Public Bus Stop (maximum two points) and Public Bus Transfer Stop (maximum six points). Applicants may select only one type of transit services on which to base their transit score. Depending on the type of transit service selected, an applicant may receive up to a maximum of six points for Transit Services. To verify the information in the application, an applicant must submit a Surveyor Certification Form, which is completed and signed by a licensed surveyor. In making its preliminary decision to award tax credits, Florida Housing relies on the information provided in the form and does not second-guess the surveyor. Issues regarding the accuracy of the information in the form are presented through challenges by other applicants. Because Rio had only ten points for proximity to Community Services, it needed at least 2.25 transit points in order to obtain the minimum 12.25 proximity points necessary to achieve a point boost up to 18 points and be in the running for funding. Accordingly, Rio's application sought six points for the project site's proximity to a Public Bus Transfer Stop. A Public Bus Transfer Stop is defined on page 19 of the RFA as follows: This service may be selected by Family and Elderly Demographic Applicants. For purposes of proximity points, a Public Bus Transfer Stop means a fixed location at which passengers may access at least three routes of public transportation via buses. Each qualifying route must have a scheduled stop at the Public Bus Transfer Stop at least hourly during the times of 7 a.m. to 9 a.m. and also during the times of 4 p.m. to 6 p.m. Monday through Friday, excluding holidays, on a year-round basis. This would include both bus stations (i.e. hubs) and bus stops with multiple routes. Bus routes must be established or approved by a Local Government department that manages public transportation. Buses that travel between states will not be considered. In sum, a Public Bus Transfer Stop is a fixed location at which passengers may access "at least three routes of public transportation via buses," with each route having a scheduled stop at that location at least hourly during morning and afternoon rush hours, Monday through Friday, on a year-round basis. To comply with this requirement, and based upon oral information provided by customer service at Miami-Dade Transit Authority (Authority), Rio selected a bus stop located at West Flagler Street and Northwest 8th Avenue. Rio represented that this location was served by three qualifying routes: Route 6 (Coconut Grove), Route 11 (Florida International University- University Park Campus), and Route 208 (Little Havana Circulator). The RFA requires that a bus route be established or approved by the "local government department" that manages public transportation, in this case the Authority. Florida Housing defers to the local government in determining whether a selected bus route is a qualifying bus route within the meaning of the RFA. The head of the local government department that manages public transportation is Gerald Bryan, the chief of service planning and scheduling. By deposition, Mr. Bryan testified that the location selected by Rio has only two qualifying routes: 11 and 208. Route 6, the third route relied upon by Rio, does not run hourly during the requisite rush hour times as required by the RFA and therefore is not a qualifying route. With only two qualifying routes, the transit service selected by Rio is a Public Bus Stop for which only two points, rather than six, can be awarded. Had this information been available to Florida Housing when it reviewed Rio's application, Rio's proximity score would have been less than 12.25, making it ineligible to receive a point boost and achieve the maximum total score of 18 proximity points. Because Rio is ineligible for funding, the next applicant in line is Pinnacle, as it has the next lowest lottery number among the eligible applications that received 23 points. Rio does not dispute that Route 6 fails to make the requisite stops during rush hours to be considered a qualifying route. However, it contends that Route 11 functionally serves as two distinct routes because it has two separate destinations: the Mall of the Americas and Florida International University Park Campus. But whether Route 11 is a single route or two routes is a determination that must be made by the local government, and not the applicant. Mr. Bryan testified that the Authority established Route 11 as a single route with two separate termination points. He further explained that it is a standard practice for a single route, such as Route 11, to have more than one terminus in order to provide a higher level of customer service. Because Florida Housing does not second guess the determination of the local government, the undersigned has rejected Rio's assertion that the bus stop is a Public Bus Transfer Stop. Without the inclusion of the six proximity points for this type of transit service, Rio's application is not eligible for funding in this cycle.
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 Rio's application is ineligible for funding and that Pinnacle's application should be selected for funding under RFA 2014-116. DONE AND ENTERED this 31st day of August, 2015, 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 31st day of August, 2015. COPIES FURNISHED: Kate Fleming, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1367 (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 32301-1367 (eServed) Betty C. Zachem, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1367 (eServed) J. Stephen Menton, Esquire Rutledge Ecenia, P.A. 119 South Monroe Street, Suite 202 Tallahassee, Florida 32301-1591 (eServed) Gary J. Cohen, Esquire Shutts and Bowen, LLP 1500 Miami Center 201 South Biscayne Boulevard Miami, Florida 33131-4329 (eServed)
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 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 The issues for determination are: (1) whether Riverside Village Partners, LTD. (Riverside or Petitioner), has, or had at the time of application, a present plan to convert its proposed development to any use other than affordable residential rental property; (2) whether Provincetown Village Partners, LTD. (Provincetown or Petitioner), has, or had at the time of application, a present plan to convert its proposed development to any use other than affordable residential rental property; (3) whether Riverside irrevocably committed to set aside units in its proposed development for a total of 50 years; and (4) whether Provincetown irrevocably committed to set aside units in its proposed development for a total of 50 years.
Findings Of Fact Parties Petitioner, Provincetown Village Partners, LTD., is a Florida limited partnership with its business address at 1551 Sandspur Road, Maitland, Florida 32751, and is in the business of providing affordable housing units. Petitioner, Riverside Village Partners, LTD., is a Florida limited partnership with its business address at 1551 Sandspur Road, Maitland, Florida 32751, and is in the business of providing affordable housing units. Respondent, Florida Housing Finance Corporation (Florida Housing), is a public corporation that administers governmental programs relating to the financing and refinancing of affordable housing and related facilities in Florida pursuant to Section 420.504, Florida Statutes (2003). Florida Housing's Financing Mechanisms To encourage the development of affordable rental housing for low-income families, Florida Housing provides low-interest mortgage loans to developers of qualified multi-family housing projects. In exchange for an interest rate lower than conventional market rates, the developer agrees to "set-aside" a specific percentage of the rental units for low-income tenants. Through its Multi-Family Mortgage Revenue Bond (MMRB) program, Florida Housing funds these mortgage loans through the sale of tax-exempt and taxable bonds. Applicants then repay the loans from the revenues generated by their respective projects. Applicants who receive MMRB proceeds are required to execute a Land Use Restriction Agreement (LURA or Land Use Restriction Agreement), which is recorded in the official records of the county in which the applicant’s development is located. Through the State Apartment Incentive Loan (SAIL) program, Florida Housing funds low-interest mortgage loans to developers from various sources of state revenue, which are generally secured by second mortgages on the property. Applicants who receive SAIL proceeds are required to execute and record a LURA in the county records as with MMRB's Land Use Restriction Agreements. Florida Housing also distributes federal income tax credits for the development of affordable rental housing for low-income tenants; those tax credits are referred to as "housing credits." Generally, applicants who utilize tax-exempt bond financing for at least 50 percent of the cost of their development are entitled to receive an award of housing credits on a non-competitive basis. These non-competitive housing credits are received by the qualified applicant each year for ten consecutive years. Typically, applicants sell this future stream of housing credits at the initiation of the development process in order to generate a portion of the funds necessary for the construction of the development. The Application, Scoring, and Ranking Process Because Florida Housing’s available pool of tax-exempt bond financing and SAIL funds is limited, qualified projects must compete for this funding. To determine which proposed projects will put the available funds to best use, Florida Housing has established a competitive application process to assess the relative merits of proposed projects. Florida Housing’s competitive application process for MMRB and SAIL financing is included with other financing programs within a single application process (the 2003 Universal Application) governed by Florida Administrative Code Rule Chapters 67-21 and 67-48. The 2003 Universal Application form and accompanying instructions are incorporated as Form "UA1016" by reference into Florida Administrative Code Chapters 67-21 and 67-48 and by Florida Administrative Code Rules 67-21.002(97), and 67-48.002(111), respectively. For the 2003 Universal Application cycle, each applicant who completed and submitted Form UA1016 with attachments was given a preliminary score by Florida Housing. Following the issuance of preliminary scores, applicants are provided an opportunity to challenge the scoring of any competing application through the filing of a Notice of Possible Scoring Error (NOPSE). Florida Housing considers each NOPSE filed and provides each applicant with notice of any resulting change in their preliminary scores (the NOPSE scores). Following the issuance of NOPSE scores, Florida Housing provides an opportunity for applicants to submit additional materials to "cure" any items for which the applicant received less than the maximum score or for which the application may have been rejected for failure to achieve "threshold." There are certain portions of the application which cannot be cured; the list of noncurable items appears in Florida Administrative Code Rules 67-21.003(14) (for MMRB applicants) and 67-48.004(14) (for SAIL applicants). Following the cure period, applicants may again contest the scoring of a competing application by filing a Notice of Alleged Deficiencies (NOAD), identifying deficiencies arising from the submitted cure materials. After considering the submitted NOADs, Florida Housing provides notice to applicants of any resulting scoring changes. The resulting scores are known as "pre-appeal" scores. Applicants may appeal and challenge, via formal or informal hearings, Florida Housing’s scoring of any item for which the applicant received less than the maximum score or for any item that resulted in the rejection of the application for failure to meet "threshold." Upon the conclusion of the informal hearings, and of formal hearings where appropriate, Florida Housing issues the final scores and ranking of applicants. Applicants are then awarded tentative MMRB and/or SAIL funding in order of rank; Florida Housing issues final orders allocating the tentative funding and inviting successful applicants in the credit underwriting process. If an applicant who requests a formal hearing ultimately obtains a final order that modifies its score and threshold determinations so that its application would have been in the funding range had the final order been entered prior to the date the final rankings were presented to the Florida Housing Board of Directors (Board), that applicant’s requested funding will be provided from the next available funding or allocation. The 2003 Application Process On or about April 8, 2003, Riverside, Provincetown, and others submitted applications for MMRB and SAIL financing in the 2003 Universal Application cycle. Riverside requested $3,205,000 in tax-exempt MMRB funding and $1.6 million in SAIL funding to help finance its proposed development, a 34-unit development in Pinellas County, Florida. In its application, Riverside committed to lease all or most of these units to house families earning 60 percent or less of the area median income (AMI). However, depending on which Florida Housing funding source(s) Riverside’s application was deemed eligible to receive, it would commit to lease at least 17 percent of the units to families earning 50 percent or less of AMI, or would commit to lease only a total of 85 percent of the units to families earning 60 percent or less of AMI. Provincetown requested $4.5 million in tax-exempt MMRB funding and $2.0 million in SAIL funding to help finance its proposed development, a 50-unit development in Gadsden County, Florida. In its application, Provincetown committed to lease all or most of the units to families earning 60 percent or less of AMI. However, depending on which Florida Housing program(s) Provincetown’s application was deemed eligible to receive, it would commit to lease at least 11 percent of the units to families earning 50 percent or less of AMI, or would commit to lease only a total of 85 percent of the units to families earning 60 percent or less of AMI. Florida Housing evaluated all applications and notified applicants of their preliminary scores on or before May 12, 2003. Applicants were then given an opportunity to file NOPSEs on or before May 20, 2003. After considering all NOPSEs, Florida Housing notified applicants by overnight mail on or about June 9, 2003, of any resulting changes in the scoring of their applications. Applicants were then allowed to submit, on or before June 19, 2003, cure materials to correct any alleged deficiencies in their applications previously identified by Florida Housing. Applicants were also allowed to file NOADs on competing applications on or before June 27, 2003. After considering the submitted NOADs, Florida Housing issued notice to Provincetown, Riverside, and others of their adjusted scores on or about July 21, 2003. Commitment to Affordability Period Florida Administrative Code Rule 67-21.006, entitled "Development Requirements," lists certain minimum requirements that a development shall meet or that an applicant shall be able to certify that such requirements shall be met. One of these requirements is "The Applicant shall have no present plan to convert the Development to any use other than the use as affordable residential rental property." Part III.E.3 of the Application provides a line for an applicant to commit to an "affordability period" for its application. This subsection of the application form reads in its entirety: 3. Affordability Period for MMRB, SAIL, HOME, and HC Application: Applicant irrevocably commits to set aside units in the proposed Development for a total of years. Both Provincetown and Riverside filled in the number "50" on the blank line in this subsection of their respective applications. An applicant’s score on its application is determined in part by the length of its affordability period commitment. An applicant who commits to an affordability period commitment of 50 or more years received 5 points; 45 to 49 years, 4 points; 40 to 44 years, 3 points; 35 to 39 years, 2 points; 31 to 34 years, 1 point; and 30 years or less, 0 points. Scoring of Provincetown and Riverside Applications In its preliminary scoring of the Provincetown and Riverside applications, Florida Housing awarded each applicant the full 5 points on Part III.E.3 of his or her application for the 50-year affordability period commitment. Also, in the preliminary scoring of the Provincetown and Riverside applications, Florida Housing did not find any threshold failure regarding an alleged present plan to convert the development to a use other than affordable residential rental property. In its preliminary scoring of the Provincetown application, Florida Housing identified an alleged threshold failure related to the validity of the contract for purchase of the site of the proposed development. A subsequent cure submitted by Provincetown regarding the contract for purchase of the site has resolved this issue, and Florida Housing no longer takes the position that the Provincetown application fails threshold for any reason related to site control. In its preliminary scoring of the Riverside application, Florida Housing identified a threshold failure related to documentation of the status of site plan approval, or plat approval, for the proposed development. A subsequent cure submitted by Riverside regarding the status of site plan approval has resolved this issue, and Florida Housing no longer takes the position that the Riverside application fails threshold for any reason related to site plan approval, or plat approval. During the scoring process, Florida Housing received NOPSEs on both the Provincetown and Riverside applications, which asserted that these applicants were proposing transactions that were not financially feasible and would not pass subsequent credit underwriting requirements. The NOPSEs also alleged that the Riverside and Provincetown applications were for townhouses designed with an intent to eventually convert to home ownership in violation of Florida Administrative Code Rule 67-21.006(6). According to that rule, the applicant shall have no present plan to convert the development to any use other than the use as affordable residential rental property. After reviewing these NOPSEs, but before issuing revised NOPSE scores, Florida Housing determined that it was inappropriate to apply subsequent credit underwriting requirements during the scoring of these applications, and therefore, disagreed with the allegations of the NOPSEs on those grounds. Accordingly, Florida Housing's scoring summaries for Riverside and Provincetown issued, after receipt of the NOPSEs, raised no issues concerning financial feasibility, and it was not placed at issue in this proceeding. Following the filing of NOPSEs, Florida Housing released NOPSE scores for all applicants, including Riverside and Provincetown. The NOPSE scores are reflected on a NOPSE Scoring Summary dated June 9, 2003. For both Provincetown and Riverside, the NOPSE Scoring Summary contained the following statement regarding alleged threshold failure, identifying two separate reasons for the alleged threshold failure: The proposed Development does not satisfy the minimum Development requirements stated in Rule 67-21.006, F.A.C. The Development is not a multifamily residential rental property comprised of buildings or structures each containing four or more dwelling units. Further, the Applicant has a present plan to convert the Development to a use other than as an affordable residential rental property. The first threshold failure noted in the preceding paragraph relates to Florida Administrative Code Rule 67-21.006(2), which requires that there be four or more residential units per building for projects financed with MMRB. A subsequent cure regarding the design of the proposed developments has resolved this issue, and Florida Housing no longer contends that these applications, as cured, exhibit a threshold failure related to the number of residential units per building. The second threshold failure noted in the NOPSE Scoring Summary and quoted in paragraph 30 above, relates to Florida Administrative Code Rule 67-21.006(6), which requires that applicants "shall have no present plan to convert the Development to any use other than the use as affordable residential rental property." In response to the NOPSE Scoring Summaries, both Provincetown and Riverside submitted cures to their respective applications. In the cures, Provincetown and Riverside presented their explanations of how they believed their applications, as submitted, demonstrated a 50-year affordability period commitment and included these applicants’ contentions that they had no present plan to convert the developments to a use other than affordable residential rental property. For Provincetown, an issue had also been raised by a NOPSE concerning whether the Provincetown application was entitled to certain "tie-breaker" points for the distance from the proposed development to a public transportation stop. The points awardable to Provincetown for tie-breaker purposes are not in dispute, and Provincetown, if its application is otherwise deemed to meet threshold requirements, would be entitled to 5.0 of a possible 7.5 tie-breaker points. If Riverside's application were deemed to meet threshold requirements and if the 5 points for the affordability period commitment were restored, Riverside would have been within the funding range for applicants within the 2003 Universal Application cycle at the time the Board took final action on the ranking of applications on October 9, 2003. If Provincetown's application were deemed to meet threshold requirements and if the five points for the affordability period commitment were restored, Provincetown would have been within the funding range for applicants within the 2003 Universal Application cycle at the time the Board took final action on the ranking of applications on October 9, 2003. The Sciarrino Letter and Cures After reviewing the NOPSEs filed against the Provincetown and Riverside applications, Florida Housing received a letter dated June 2, 2003 (Sciarrino letter or letter), from Michael Sciarrino, president of the CED Companies, addressed to Orlando Cabrera, executive director of Florida Housing, with a copy to Kerey Carpenter, deputy development officer of Florida Housing. Michael Sciarrino is a manager of the sole general partner (CED Capital Holdings 2003 Y, LLC., a Florida limited liability company) of Provincetown. Mr. Sciarrino is also a Class B limited partner of the sole member of the general partner (CED Capital Holdings XVI, LTD., a Florida limited partnership). Michael Sciarrino is a manager of the sole general partner (CED Capital Holdings 2003 K, LLC., a Florida limited liability company) of Riverside. Mr. Sciarrino is also a Class B limited partner of the sole member of the general partner (CED Capital Holdings 2003 XVI, LTD., a Florida limited partnership). As manager of the sole general partner of Provincetown and Riverside, Mr. Sciarrino had supervisory authority and editorial control over the processing and preparation of the Provincetown and Riverside applications. The Sciarrino letter was drafted, in part, to respond to the allegations of the NOPSEs filed against Provincetown and Riverside applications and specifically addressed those issues pertaining to Provincetown and Riverside applications. Also, while the letter does not mention Petitioners by name, the description and location of the properties, as detailed in the letter, clearly refer to these applicants. The Sciarrino letter evinces a present plan on the part of Petitioners to convert the proposed developments to a use other than that of affordable residential rental housing. First, the letter describes in detail the economic motivations for the subsequent sale of the units of the proposed development within the 50-year extended affordability period stating that the "residual value potential" of such an arrangement "is the single biggest economic reason for our desire to develop these communities." Next, the letter describes in detail the means by which Petitioners would be relieved of the commitment to a 50-year affordability period as stated in their applications, that is, by seeking a waiver from Board after the 15-year period of tax credit recapture exposure had expired. Third, the letter plainly states that Petitioners had intended to request such relief from the 50-year affordability period in the future. Petitioners' present plan to convert the proposed developments for sale to homeowners during the 50-year extended affordability period is further evident by the fact that the concept of such a conversion existed prior to and at the time the applications were filed. Moreover, the Provincetown and Riverside developments were specially selected to test the concept. On or about June 19, 2003, Petitioners filed cures with Florida Housing addressing the issues raised in the NOPSEs. While the cures presented argument in favor of their respective applications and reiterated Petitioners' commitment to the 50-year extended affordability period for each proposed development, they did not deny that it was their intention to seek relief from this period in the future. Following review of the Sciarrino letter and the cures submitted by Petitioners, Florida Housing rejected both the Provincetown and Riverside applications for failing to meet the mandatory development requirement set forth in Florida Administrative Code Rule 67-21.006(6). The applications also had five points deducted from their scores on the grounds that, under the circumstances, their commitment to an affordability period could not be determined.
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 that upholds the scoring of the applications of Riverside Village Partners, LTD., and Provincetown Village Partners, LTD.; that rejects the applications of Riverside Village Partners, LTD., and Provincetown Village Partners, LTD.; and that denies the relief requested in the Petitions. DONE AND ENTERED this 27th day of February, 2004, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD 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 27th day of February, 2004. COPIES FURNISHED: Hugh R. Brown, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 M. Christopher Bryant, Esquire Oertel, Fernandez & Cole, P.A. 301 South Bronough Street, Fifth Floor Post Office Box 1110 Tallahassee, Florida 32302-1110 Orlando J. Cabrera, Executive Director Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 Wellington H. Meffert, II, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301
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.
