The Issue The issue for determination in this consolidated bid protest proceeding is whether the Florida Housing Finance Corporation’s (“FHFC”) intended award of tax credits for the preservation of existing affordable housing developments was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact FHFC and Affordable Housing Tax Credits FHFC is a public corporation that finances affordable housing in Florida by allocating and distributing low income housing tax credits. See § 420.504(1), Fla. Stat. (providing that FHFC is “an entrepreneurial public corporation organized to provide and promote the public welfare by administering the governmental function of financing or refinancing housing and related facilities in this state.”); § 420.5099(2), Fla. Stat. (providing that “[t]he corporation shall adopt allocation procedures that will ensure the maximum use of available tax credits in order to encourage development of low-income housing in the state, taking into consideration the timeliness of the application, the location of the proposed housing project, the relative need in the area for low-income housing and the availability of such housing, the economic feasibility of the project, and the ability of the applicant to proceed to completion of the project in the calendar year for which the credit is sought.”). The tax credits allocated by FHFC encourage investment in affordable housing and are awarded through competitive solicitations to developers of qualifying rental housing. Tax credits are not tax deductions. For example, a $1,000 deduction in a 15-percent tax bracket reduces taxable income by $1,000 and reduces tax liability by $150. In contrast, a $1,000 tax credit reduces tax liability by $1,000. Not surprisingly, the demand for tax credits provided by the federal government exceeds the supply. A successful applicant/developer normally sells the tax credits in order to raise capital for a housing development. That results in the developer being less reliant on debt financing. In exchange for the tax credits, a successful applicant/developer must offer affordable rents and covenant to keep those rents at affordable levels for 30 to 50 years. The Selection Process FHFC awards tax credits through competitive solicitations, and that process is commenced by the issuance of a Request for Applications (“RFA”). Florida Administrative Code Rule 67-60.009(2) provides that unsuccessful applicants for tax credits “may only protest the results of the competitive solicitation process pursuant to the procedures set forth in Section 120.57(3), F.S., and Chapter 28-110, F.A.C.” For purposes of section 120.57(3), an RFA is equivalent to a “request for proposal.” See Fla. Admin. Code R. 67.60.009(4), F.A.C. FHFC issued RFA 2015-111 on October 23, 2015, and responses from applicants were due on December 4, 2015. Through RFA 2015-111, FHFC seeks to award up to $5,901,631 of tax credits to qualified applicants that commit to preserve existing affordable multifamily housing developments for the demographic categories of “Families,” “the Elderly,” and “Persons with a Disability.” FHFC only considered an application eligible for funding from RFA 2015-111, if that particular application complied with certain content requirements. FHFC ranked all eligible applications pursuant to an “Application Sorting Order” set forth in RFA 2015-111. The first consideration was the applicants’ scores. Each application could potentially receive up to 23 points based on the developer’s experience and the proximity to services needed by the development’s tenants. Applicants demonstrating that their developments received funding from a U.S. Department of Agriculture (“USDA”) Rural Development program known as RD 515 were entitled to a 3.0 point proximity score “boost.” That proximity score boost was important because RFA 2015-111 characterized counties as small, medium, or large. Applications associated with small counties had to achieve at least four proximity points to be considered eligible for funding. Applications associated with medium-sized counties and those associated with large counties had to achieve at least seven and 10.25 proximity points respectively in order to be considered eligible for funding. Because it is very common for several tax credit applicants in a particular RFA to receive identical scores, FHFC incorporated a series of “tie-breakers” into RFA 2015-111. The tie-breakers for RFA 2015-111, in order of applicability, were: First, by Age of Development, with developments built in 1985 or earlier receiving a preference over relatively newer developments. Second, if necessary, by a Rental Assistance (“RA”) preference. Applicants were to be assigned an RA level based on the percentage of units receiving rental assistance through either a U.S. Department of Housing and Urban Development (“HUD”) or USDA Rural Development program. Applicants with an RA level of 1, 2, or 3 (meaning at least 75 percent of the units received rental assistance) were to receive a preference. Third, by a Concrete Construction Funding Preference, with developments incorporating certain specified concrete or masonry structural elements receiving the preference. Fourth, by a Per Unit Construction Funding Preference, with applicants proposing at least $32,500 in Actual Construction Costs per unit receiving the preference. Fifth, by a Leveraging Classification favoring applicants requiring a lower amount in housing credits per unit than other applicants. Generally, the least expensive 80 percent of eligible applicants were to receive a preference over the most expensive 20 percent. Sixth, by an Applicant’s specific RA level, with Level 1 applicants receiving the most preference and Level 6 the least. Seventh, by a Florida Job Creation Preference, which estimated the number of jobs created per $1 million of housing credit equity investment the developments were to receive based on formulas contained in the RFA. Applicants achieving a Job Creation score of at least 4.0 were to receive the preference. Eighth, by lottery number, with the lowest (smallest) lottery number receiving the preference. Rental assistance from the USDA or HUD is provided to existing developments in order to make up for shortfalls in monthly rent paid by tenants. For example, if an apartment’s base rent is $500 per month and the tenant’s income limits him or her to paying only $250 towards rent, then the USDA or HUD rental assistance pays the other $250 so that the total rent received by the development is $500. As evident from the tie-breakers incorporated into RFA 2015-111, the amount of rental assistance, or “RA Level,” played a prominent role in distinguishing between RFA 2015-111 applicants having identical scores. RFA 2015-111 required that applicants demonstrate RA Levels by providing a letter containing the following information: (a) the development’s name; (b) the development’s address; (c) the year the development was built; (d) the total number of units that currently receive PBRA and/or ACC;/3 (e) the total number of units that would receive PBRA and/or ACC if the proposed development were to be funded; (f) all HUD or RD financing program(s) originally and/or currently associated with the existing development; and (g) confirmation that the development had not received financing from HUD or RD after 1995 when the rehabilitation was at least $10,000 per unit in any year. In order to determine an applicant’s RA Level Classification, RFA 2015-111 further stated that Part of the criteria for a proposed Development that qualifies as a Limited Development Area (LDA) Development to be eligible for funding is based on meeting a minimum RA Level, as outlined in Section Four A.7.c of the RFA. The total number of units that will receive rental assistance (i.e., PBRA and/or ACC), as stated in the Development Category qualification letter provided as Attachment 7, will be considered to be the proposed Development’s RA units and will be the basis of the Applicant’s RA Level Classification. The Corporation will divide the RA units by the total units stated by the Applicant at question 5.e. of Exhibit A, resulting in a Percentage of Total Units that are RA units. Using the Rental Assistance Level Classification Chart below, the Corporation will determine the RA Level associated with both the Percentage of Total Units and the RA units. The best rating of these two (2) levels will be assigned as the Application’s RA Level Classification. RFA 2015-111 then outlined a Rental Assistance Level Classification Chart to delineate between the RA Levels. That chart described six possible RA Levels, with one being developments that have the most units receiving rental assistance and six pertaining to developments with the fewest units receiving rental assistance. A development with at least 100 rental assistance units and greater than 50 percent of the total units receiving rental assistance was to receive an RA Level of 1. FHFC also utilized a “Funding Test” to assist in the selection of applications for funding. The Funding Test required that the amount of unawarded housing credits be enough to satisfy any remaining applicant’s funding request. In other words, FHFC prohibited partial funding. In addition, RFA 2015-111 applied a “County Award Tally” designed to prevent a disproportionate concentration of funded developments in any one county. As a result, all other applicants from other counties had to receive an award before a second application from a particular county could be funded. After ranking of the eligible applicants, RFA 2015-111 set forth an order of funding selection based on county size, demographic category, and the receipt of RD 515 financing. The Order was: One RD 515 Development (in any demographic category) in a medium or small county; One Non-RD 515 Development in the Family Demographic Category (in any size county); The highest ranked Non-RD 515 application or applications with the demographic of Elderly or Persons with a Disability; and If funding remains after all eligible Non- RD 515 applicants are funded, then the highest ranked RD 515 applicant in the Elderly demographic (or, if none, then the highest ranked RD 515 applicant in the Family demographic). Draft versions of every RFA are posted on-line in order for stakeholders to provide FHFC with their comments. In addition, every RFA goes through at least one workshop prior to being finalized. FHFC often makes changes to RFAs based on stakeholder comments. No challenge was filed to the terms, conditions, or requirements of RFA 2015-111. A review committee consisting of FHFC staff members reviewed and scored all 24 applications associated with RFA 2015-111. During this process, FHFC staff determined that none of the RD-515 applicants satisfied all of the threshold eligibility requirements. On June 24, 2016, FHFC’s Board of Directors announced its intention to award funding to five applicants, subject to those applicants successfully completing the credit underwriting process. Pineda Village in Brevard County was the only successful applicant in the Non-RD 515 Family Demographic. The four remaining successful applicants were in the Non-RD 515 Elderly or Persons with Disability Demographic: Three Round Tower in Miami-Dade County; Cathedral Towers in Duval County; Isles of Pahokee in Palm Beach County; and Lummus Park in Miami- Dade County. The randomly-assigned lottery number tie-breaker played a role for the successful Non-RD 515 applicants with Three Round Tower having lottery number one, Cathedral Towers having lottery number nine, and Isles of Pahokee having lottery number 18. While Lummus Park had a lottery number of 12, the County Award Tally prevented it from being selected earlier because Three Round Tower had already been selected for funding in Miami-Dade County. However, after the first four applicants were funded, only $526,880 of credits remained, and Lummus Park was the only eligible applicant with a request small enough to be fully funded. All Petitioners timely filed Notices of Protest and petitions for administrative proceedings. The Challenge by Woodcliff, Colonial, and St. Johns Woodcliff is seeking an award of tax credits in order to acquire and preserve a 34-unit development for elderly residents in Lake County.4/ Colonial is seeking an award of tax credits in order to acquire and preserve a 30-unit development for low-income families in Lake County.5/ St. Johns is seeking an award of tax credits to acquire and preserve a 48-unit development for elderly residents in Putnam County.6/ FHFC deemed Woodcliff, Colonial and St. Johns to be ineligible because of a failure to demonstrate the existence or availability of a particular source of financing relied upon in their applications. Specifically, FHFC determined that the availability of USDA RD 515 financial assistance was not properly documented. For applicants claiming the existence of RD 515 financing, RFA 2015-111 stated: If the proposed Development will be assisted with funding under the United States Department of Agriculture RD 515 Program and/or RD 538 Program, the following information must be provided: Indicate the applicable RD Program(s) at question 11.b.(2) of Exhibit A. For a proposed Development that is assisted with funding from RD 515 and to qualify for the RD 515 Proximity Point Boost (outlined in Section Four A.6.b.(1)(b) of the RFA), the Applicant must: Include the funding amount at the USDA RD Financing line item on the Development Funding Pro Forma (Construction/Rehab Analysis and/or Permanent Analysis); and Provide a letter from RD, dated within six (6) months of the Application Deadline, as Attachment 17 to Exhibit A, which includes the following information for the proposed Preservation Development: Name of existing development; Name of proposed Development; Current RD 515 Loan balance; Acknowledgment that the property is applying for Housing Credits; and Acknowledgment that the property will remain in the USDA RD 515 loan portfolio. (emphasis added). FHFC was counting on the letter mentioned directly above to function as proof that: (a) there was RD 515 financing in place when the letter was issued; and that (b) the RD 515 financing would still be in place as of the application deadline for RFA 2015-111. FHFC deemed Woodcliff, Colonial and St. Johns ineligible because their RD letters were not dated within six months of the December 4, 2015, deadline for RFA 2015-111 applications. The Woodcliff letter was dated May 15, 2015, the Colonial letter was dated May 15, 2015, and the St. Johns letter was dated May 5, 2015. FHCA had previously issued RFA 2015-104, which also proposed to award Housing Credit Financing for the Preservation of Existing Affordable Multifamily Housing Developments. The deadline for RFA 2015-104 was June 23, 2015, and Woodcliff, Colonial, and St. Johns applied using the same USDA letter that they used in their RFA 2015-111 applications. Woodcliff, Colonial, and St. Johns argued during the final hearing that FHFC should have accepted their letters because: (a) they gained no competitive advantage by using letters that were more than six months old; (b) waiving the six- month “shelf life” requirement would enable FHFC to satisfy one of its stated goals for RFA 2015-111, i.e., funding of an RD 515 development; and (c) other forms of financing (such as equity investment) have no “freshness” or “shelf life” requirement. However, it is undisputed that no party (including Woodcliff, Colonial, and St. Johns) challenged any of the terms, conditions, or requirements of RFA 2015-111. In addition, Kenneth Reecy (FHFC’s Director of Multifamily Programs) testified that there must be a point at which FHFC must ensure the viability of the information submitted by applicants. If the information is “too old,” then it may no longer be relevant to the current application process. Under the circumstances, it was not unreasonable for FHFC to utilize a six-month shelf life for USDA letters.7/ Furthermore, Mr. Reecy testified that excusing Woodcliff, Colonial, and St. Johns’ noncompliance could lead to FHFC excusing all deviations from all other date requirements in future RFAs. In other words, applicants could essentially rewrite those portions of the RFA, and that would be an unreasonable result. Excusing the noncompliance of Woodcliff, Colonial, and St. Johns could lead to a “slippery slope” in which any shelf- life requirement has no meaning. The letters utilized by Woodcliff, Colonial, and St. Johns were slightly more than six months old. But, exactly when would a letter become too old to satisfy the “shelf life” requirement? If three weeks can be excused today, will four weeks be excused next year? St. Elizabeth’s and Marian Towers’ Challenge St. Elizabeth is seeking low-income housing tax credit financing in order to acquire and preserve a 151-unit development for elderly residents in Broward County, Florida. Marian Towers is an applicant for RFA 2015-111 funding seeking low-income housing tax credits to acquire and preserve a 220-unit development for elderly residents in Miami-Dade County, Florida. The same developer is associated with the St. Elizabeth and Marian Towers projects. In its scoring and ranking process, FHFC assigned St. Elizabeth an RA Level of two. RFA 2015-111 requires that Applicants demonstrate RA Levels by providing a letter from HUD or the USDA with specific information. That information is then used to establish an RA Level for the proposed development. As noted above, the RFA requires the letter to contain several pieces of information, including: (a) the total number of units that currently receive PBRA and/or ACC; and (b) the total number of units that will receive PBRA and/or ACC if the proposed development is funded. RFA 2015-111 provided that a development with at least 100 rental units would receive an RA Level of one. St. Elizabeth included with its application a letter from HUD’s Miami field office stating in pertinent part that: Total number of units that currently receive PBRA and/or ACC: 99 units. Total number of units that will receive PBRA and/or ACC if the proposed Development is funded: 100 units*. The asterisk in the preceding paragraph directed readers of St. Elizabeth’s HUD letter to a paragraph stating that: HUD is currently processing a request from the owner to increase the number of units subsidized under a HAP Contract to 100 by transferring budget authority for the one additional unit from another Catholic Housing Services Section 8 project under Section 8(bb) in accordance with Notice H-2015-03. Because of the foregoing statement from HUD, FHFC concluded that St. Elizabeth did not have 100 units receiving rental assistance as of the application deadline. Accordingly, FHFC used 99 units as the total number of units that would receive rental assistance when calculating St. Elizabeth’s RA Level, and that led to FHFC assigning an RA Level of two to St. Elizabeth’s application.8/ If St. Elizabeth had been deemed eligible and if FHFC had used 100 units as the total number of units that would receive rental assistance, then St. Elizabeth would have received an RA Level of one. Given the application sorting order and the selection process outlined in RFA 2015-111, St. Elizabeth (with a lottery number of six) would have been recommended for funding by FHFC, and that outcome would have resulted in Intervenors Isles of Pahokee and Lummus Park losing their funding. St. Elizabeth asserted during the final hearing that the 100th unit had obtained rental assistance financing since the application deadline on December 4, 2015. However, FHFC could only review, score, and calculate St. Elizabeth’s RA Level based on the information available as of the application deadline. While St. Elizabeth argues that the asterisk paragraph sets forth a “condition,” Kenneth Reecy (FHFC’s Director of Multifamily Housing) agreed during the final hearing that the asterisk paragraph was more akin to information that was not explicitly required by RFA 2015-111. FHFC did not use that additional information to declare St. Elizabeth’s application ineligible for funding. Despite being assigned an RA Level of two, St. Elizabeth’s application still could have been selected for funding because RFA 2015-111 merely established RA Level as a basis for breaking ties among competing applications. However, too many applicants for RFA 2015-111 had identical scores, and RFA 2015-111’s use of RA Level as a tiebreaker forced St. Elizabeth’s application out of the running. Under the circumstances, FHFC’s treatment of St. Elizabeth’s application was not clearly erroneous, contrary to competition, arbitrary, or capricious. As noted above, tie- breakers are very important, because there is often very little to distinguish one application for tax credits from another. Given that there was a degree of uncertainty about whether St. Elizabeth’s would have 100 qualifying units, FHFC acted reasonably by assigning St. Elizabeth’s application an RA Level of two for this tie-breaker rather than an RA Level of one. St. Elizabeth and Marian Towers argue that other applications contained language that indicated a degree of uncertainty. Nevertheless, those other applications received an RA Level of one. For example, FHFC assigned an RA Level of one to Three Round and Haley Sofge even though their HUD letters stated that both developments would be “subject to a Subsidy Layering Review to be conducted by HUD.” Marian Towers argued that if FHFC does not accept HUD or RD letters containing conditional language about the number of units that will be subsidized, then FHFC should have assigned an RA Level of six to Three Round and Haley Sofge. If Three Round and Haley Sofge had been assigned an RA Level of six, then Marian Towers (with a lottery number of five) would have been recommended for funding. St. Elizabeth and Marian Towers cited another instance in which an application received an RA Level of one, even though its application contained a letter from the RD program stating that “USDA Rural Development will consent to the transfer if all regulatory requirements are met.” (emphasis added). However, St. Elizabeth and Marian Towers failed to demonstrate that the language cited above applied only to those particular applications rather than to all applications for tax credits. For example, if all applications are subject to a subsidy layering review and compliance with all regulatory requirements, then inclusion of such language in a HUD letter (in and of itself) should not prevent an applicant from being assigned an RA Level of one. St. Elizabeth and Marian Towers also cited a HUD Letter used in another recent RFA by an applicant that received an RA Level of one. The HUD letter in question contained an asterisk followed by the following statement: “It is HUD’s understanding that two separate applications are being submitted – one for each tower comprising St. Andrew Towers. If funded, HUD will consider a request from the owner to bifurcate the St. Andrew Towers HAP contract in order to facilitate the separate financing of each tower.” However, St. Elizabeth and Marian Towers failed to demonstrate why the language quoted directly above should have resulted in the applicant in question being awarded an RA Level less than one. There is no indication that the total number of units receiving rental assistance would change.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order awarding funding to Three Round Tower A, LLC; Cathedral Towers, Ltd; Isles of Pahokee Phase II, LLC; SP Manor, LLC; and Pineda Village. DONE AND ENTERED this 18th day of October, 2016, in Tallahassee, Leon County, Florida. S G.W. CHISENHALL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of October, 2016.
The Issue 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)
Findings Of Fact The only facts that were here presented are those contained in the petition which were admitted in the Answer by Respondent. The sole issue here presented is the effect of the appreciation in the value of property between time of acquisition and November 2, 1971 when such property is sold subsequent to January 1, 1972 and a capital gain is realized thereon.
The Issue The issue in this case is whether a portion of Florida Administrative Code Rule 67-48.0072 is an invalid exercise of delegated legislative authority.
Findings Of Fact The Petitioner is a limited partnership and developer of affordable housing in Florida. The Petitioner is seeking to construct a 116-unit affordable housing family apartment complex ("Elmwood Terrace") in Fort Myers, Lee County, Florida. The Petitioner has standing to initiate and participate in this proceeding. The Respondent is a public corporation organized under Chapter 420, Florida Statutes (2010), to administer state programs that provide financial support to developers seeking to construct affordable housing. Such support is provided through a variety of mechanisms, including the use of federal tax credits. The federal tax credit program was created in 1986 to promote the construction and operation of privately-developed affordable housing. The tax credits relevant to this proceeding provide a dollar-for-dollar credit against federal tax liabilities for a period of ten years. The Respondent is the designated Florida agency responsible for distribution of the federal tax credits. The tax credits are awarded pursuant to a "Qualified Allocation Plan" (QAP) that must be annually approved by the Governor and adopted as an administrative rule by the Respondent. As a matter of course, developers receiving the federal tax credits sell them through syndicators for discounted cash. The sale of the tax credits generates debt-free cash equity for developers. Developers seeking financial support to build affordable housing units submit applications to the Respondent during an annual competitive process known as the "Universal Cycle." Every three years, the Respondent commissions a study (the "Shimberg Report"), which measures, within each Florida county, the number of "cost-burden" renters earning 60 percent or less of an area's median income (AMI) who pay more than 40 percent of their income in rent. The AMI is determined by the federal government. The cost-burden households are further classified into four groups: families, the elderly, farm workers, and commercial fishermen. The Shimberg Report also assesses needs related to homeless people in the state. Developers seeking to obtain affordable housing financing are required to set aside a portion of the proposed units for income-limited residents. Access to affordable housing units is generally targeted towards persons receiving no more than 60 percent of the AMI. The Universal Cycle process allows the Respondent to target specific housing deficiencies in terms of geographic availability and population demographics and to preserve the stock of existing affordable housing. During the Universal Cycle process, the Respondent identifies areas where additional affordable housing is unnecessary, to discourage additional development in weak markets and to encourage development in those locations where there is a lack of access to affordable housing. The Respondent classifies areas where there is little need for additional affordable housing as "Location A" areas. Each application filed during the Universal Cycle is evaluated, scored, and competitively ranked against other applications filed during the same Universal Cycle. After the Respondent completes the competitive ranking of the applications submitted in the Universal Cycle, the applicants are provided with an opportunity to review and comment on the evaluation and scoring of the proposals. Applicants may also cure defects in their own proposals. After the close of the review and comment period, the Respondent publishes a revised competitive ranking of the proposals. Developers may challenge the second ranking through an administrative hearing. After the second ranking process is final, developers achieving an acceptable score receive preliminary funding commitments and proceed into a "credit underwriting" evaluation process. The credit underwriting process is governed by Florida Administrative Code Rule 67-48.0072. The Respondent selects an independent credit underwriter who reviews each proposal according to requirements set forth by administrative rule (the "Credit Underwriting Rule"). The cost of the credit underwriting review is paid by the developer. The credit underwriter considers all aspects of the proposed development, including financing sources, plans and specifications, cost analysis, zoning verification, site control, environmental reports, construction contracts, and engineering and architectural contracts. The responsibility for the market study is assigned by the credit underwriter to an independent market analyst. The credit underwriter prepares a report for each applicant invited into the process. The reports are submitted to the Respondent's nine-member, statutorily-created Board of Directors (Board). The Board approves or denies each application for financial support. The Petitioner applied for funds for the Elmwood Terrace project during the 2007 Universal Cycle. The Petitioner's application received a perfect score, maximum points, and was allocated tax credits in the amount of $1,498,680. The Petitioner thereafter entered the credit underwriting process. The credit underwriting analysis was performed by Seltzer Management Group (SMG). SMG contracted with a market analyst, Vogt, Williams & Bowen Research, Inc. (VWB), to prepare the required market study. The affordable units at Elmwood Terrace were initially intended for persons receiving incomes no more than 60 percent of the AMI. The VWB research indicated that the Elmwood Terrace project would adversely affect the existing affordable housing developments, if the Elmwood Terrace units were available to the 60 percent AMI population. The existing affordable housing developments, also serving the 60 percent AMI population, included two developments that had participated in the Respondent's "Guarantee Fund" program, addressed elsewhere herein. VWB determined that the impact of the Elmwood Terrace project on the existing developments could be ameliorated were some of the Elmwood Terrace units targeted during "lease-up" to persons at income levels of not more than 50 percent of the AMI. The lease-up period is the time required for a new development to reach anticipated occupancy levels. The issue was the subject of discussions between the Petitioner, VWB, and SMG. To resolve the anticipated negative impact on the existing affordable housing developments, the Petitioner agreed to target the 50 percent AMI population. In September 2008, the credit underwriter issued his report and recommended that the Petitioner receive the previously-allocated tax credits. On September 22, 2008, the Respondent's Board accepted the credit underwriting report and followed the recommendation. In the fall of 2008, after the Petitioner received the tax credits, the nation's economic environment deteriorated considerably. As a result, the syndicator with whom the Petitioner had been working to sell the tax credits advised that the sale would not occur. The Petitioner was unable to locate an alternate purchaser for the tax credits. The Petitioner considered altering the target population of the project in an attempt to attract a buyer for the tax credits, and there were discussions with the Respondent about the option, but there was no credible evidence presented that such an alteration would have resulted in the sale of the Petitioner's tax credits. Lacking a buyer for the tax credits, the Petitioner was unable to convert the credits to cash, and they were of little value in providing funds for the project. The Petitioner was not alone in its predicament, and many other developers who received tax credits in the 2007 and 2008 Universal Cycles found themselves unable to generate cash through the sale of their tax credits. In early 2009, Congress adopted the American Recovery and Reinvestment Act of 2009 (PL 111-5), referred to herein as ARRA, which incorporated a broad range of economic stimulus activities. Included within the ARRA was the "Tax Credit Exchange Program" that provided for the return by the appropriate state agency of a portion of the unused tax credits in exchange for a cash distribution of 85 percent of the tax credit value. The State of Florida received $578,701,964 through the Tax Credit Exchange Program. The ARRA also provided additional funds to state housing finance agencies through a "Tax Credit Assistance Program" intended to "resume funding of affordable housing projects across the nation while stimulating job creation in the hard-hat construction industry." On July 31, 2009, the Respondent issued a Request for Proposals (RFP 2009-04) to facilitate the distribution of the ARRA funds. The Respondent issued the RFP because the 2009 QAP specifically required the Respondent to allocate the relevant federal funds by means of a "competitive request for proposal or competitive application process as approved by the board." The 2009 QAP was adopted as part of the 2009 Universal Cycle rules. Projects selected for funding through the RFP would be evaluated through the routine credit underwriting process. Participation in the RFP process was limited to developers who held an "active award" of tax credits as of February 17, 2009, and who were unable to close on the sale of the credits. The RFP included restrictions against proposals for development within areas designated as "Location A." Although the location of the Elmwood Terrace project had not been within an area designated as "Location A" during the 2007 Universal Cycle process, the Respondent had subsequently designated the area as "Location A" by the time of the 2009 Universal Cycle. The RFP also established occupancy standards for projects funded under the RFP that exceeded the standards established in the Universal Cycle instructions and an evaluation process separate from the Universal Cycle requirements. Although the restrictions in the RFP would have automatically precluded the Petitioner from being awarded funds, the Petitioner submitted a response to the RFP and then filed a successful challenge to the RFP specifications (DOAH Case No. 09-4682BID). In a Recommended Order issued on November 12, 2009, the Administrative law Judge presiding over the RFP challenge determined that certain provisions of the RFP, including the automatic rejection of Location A projects, the increased occupancy standards, and the RFP evaluation criteria, were invalid. The Respondent adopted the Recommended Order by a Final Order issued on December 4, 2009, and invited the Petitioner into the credit underwriting process by a letter dated December 9, 2009. The credit underwriter assigned to analyze the Petitioner's project was SMG, the same credit underwriter that performed the original analysis of the Petitioner's project during the 2007 Universal Cycle. SMG retained Meridian Appraisal Group, Inc. (Meridian), to prepare the required market study. The Respondent was not consulted regarding the SMG decision to retain Meridian for the market analysis. The decision to retain Meridian for the market analysis was entirely that of SMG. The Respondent did not direct SMG or Meridian in any manner regarding the assessment or evaluation of any negative impact of the proposed project on existing affordable housing developments. Meridian completed the market study and forwarded it to SMG on January 26, 2010. The Meridian market analysis included a review of the relevant data as well as consideration of the actual economic conditions experienced in Lee County, Florida, including the extremely poor performance of the existing housing stock, as well as significant job losses and considerable unemployment. The Meridian market analysis determined that the Elmwood Terrace development would have a negative impact on two existing affordable housing apartment developments that were underwritten by the Respondent through a Guarantee Fund created at Section 420.5092, Florida Statutes, by the Florida Legislature in 1992. The existing Guarantee Fund properties referenced in the SMG recommendation are "Bernwood Trace" and "Westwood," both family-oriented apartment developments within five miles of the Elmwood Terrace location. The Guarantee Fund essentially obligates the Respondent to satisfy mortgage debt with the proceeds of Florida's documentary stamp taxes, if an affordable housing development is unable to generate sufficient revenue to service the debt. Because the Guarantee Fund program essentially serves to underwrite the repayment of mortgage debt for a "guaranteed" affordable housing development, the program increases the availability, and lowers the cost, of credit for developers. The Guarantee Fund program has participated in the financing of more than 100 projects, most of which closed between 1999 and 2002. Since 2005, the Respondent has not approved any additional Guarantee Fund participation in any affordable housing developments. The Respondent's total risk exposure through the Guarantee Fund is approximately 750 million dollars. Prior to October 2008, no claims were made against the Guarantee Fund. Since November 2008, there have been eight claims filed against the Guarantee Fund. Affordable housing financing includes restrictions that mandate the inclusion of a specific number of affordable housing units. Such restrictions are eliminated through foreclosure proceedings, and, accordingly, access to affordable housing units can be reduced if a development fails. Presuming that the eight claims pending against the Guarantee Fund eventually proceeded through foreclosure, as many as 2,300 residential units could be deducted from the stock of affordable housing. When there is a claim on the Guarantee Fund, the Respondent has to assume payment of the mortgage debt. The claims are paid from the Guarantee Fund capital, which is detrimental to the Respondent's risk-to-capital ratio. The risk-to-capital ratio is presently four to one. The maximum risk-to-capital ratio acceptable to rating agencies is five to one. The eight claims against the Guarantee Fund have ranged between ten and 18 million dollars each. The Respondent's bond rating has declined because of the eight claims. A continued decline in the Respondent's bond rating could result in documentary stamp tax receipts being used for payment of Guarantee Fund claims and directed away from the Respondent's programs that are intended to support the creation of affordable housing. In an effort to prevent additional claims against the Guarantee Fund, the Respondent has created the "Subordinate Mortgage Initiative" to provide assistance in the form of two- year loans to troubled Guarantee Fund properties. When preparing the 2010 market study, Meridian did not review the VWB market analysis performed as part of the 2007 application. Although the Petitioner has asserted that Meridian should have reviewed the 2007 VWB analysis, there is no evidence that Meridian's decision to conduct an independent market study without reference to the prior market review was inappropriate. On February 8, 2010, SMG issued a recommendation that the Petitioner's funding request be denied "because of the proposed development's potential financial impacts on developments in the area previously funded by Florida Housing and an anticipated negative impact to the two Guarantee Fund properties located within five miles of the proposed development." There is no evidence that the Meridian analysis was inadequate or improperly completed. There is no evidence that the SMG's reliance on the Meridian analysis was inappropriate. For purposes of this Order, the Meridian analysis and the SMG credit underwriting report have been accepted. Elmwood Terrace, a newer development with newer amenities, would compete for residents with the Bernwood Trace and Westwood developments. The financing for Bernwood Trace and Westwood was premised on projections that the affordable housing units would be leased to the 60 percent AMI population; however, the developments have been unable to maintain full occupancy levels, even though a number of units in the two properties are leased at reduced rates based on 50 percent AMI income levels. A rent reduction implemented by an existing development, whether based on economic conditions or resulting from competition, constitutes a negative impact on the development. There is no credible evidence that the occupancy rates are attributable to any difficulty in management of the two developments. It is reasonable to conclude that the leasing issues are related to economic conditions present in Lee County, Florida. In January 2010, VWB conducted an alternative market analysis. The VWB analysis was not provided to SMG or to the Respondent at any time during the credit underwriting process. Based on the 2010 VWB analysis, the Petitioner asserted that economic conditions in Lee County, Florida, have improved since the first credit underwriting report was completed in 2008 and that the improvement is expected to continue. There is no noteworthy evidence that economic conditions have improved or will significantly improve in the Lee County, Florida, market in the predictable future, and the VWB analysis is rejected. The Petitioner offered to mitigate any negative impact on the Guarantee Fund properties by committing affordable units to 50 percent AMI income levels. Given the existing economic and rental market conditions in Lee County, Florida, the evidence fails to establish that the offer would actually alleviate the negative impact on the affected Guarantee Fund developments. The 2010 VWB analysis states that there is substantial unmet demand for housing at 50 percent AMI and that there will be no impact on the Guarantee Fund units if the Elmwood Terrace units were set aside for such individuals. There is no credible evidence that there is a substantial and relevant unmet affordable housing demand in Lee County, Florida. The VWB analysis is rejected. Following the completion of each annual Universal Cycle process, the Respondent actively solicits feedback from developers and the public and then amends the Universal Cycle requirements to address the issues raised, as well as to reflect existing affordable housing needs and general concerns of the Board. The amendments are applicable for the following Universal Cycle. In 2009, the Respondent amended subsection (10) of the Credit Underwriting Rule as part of the annual revisions to the Universal Cycle process. The relevant amendment (referred to by the parties as the "Impact Rule") added this directive to the credit underwriter: The Credit Underwriter must review and determine whether there will be a negative impact to Guarantee Fund Developments within the primary market area or five miles of the proposed development, whichever is greater. The amendment was prompted by the Respondent's experience in the fall of 2008 when considering two separate applications for affordable housing financing. The potential negative impact of a proposed development on an existing Guarantee Fund property was central to the Board's consideration of one application, and the Board ultimately denied the application. In the second case, the Board granted the application, despite the potential negative impact on a competing development that was not underwritten by the Guarantee Fund. The intent of the language was to advise developers that the existence of Guarantee Fund properties within the competitive market area would be part of the credit underwriting evaluation and the Board's consideration. Notwithstanding the language added to the rule, the credit underwriter is charged with reviewing the need for additional affordable housing. Even in absence of the added language, consideration of any negative impact to competing developments based on inadequate need for additional affordable housing would be appropriate. In rendering the 2010 credit underwriting report on Elmwood Terrace, the credit underwriter complied with the directive. Prior to determining that the Petitioner's funding application should be denied, the Respondent's Board was clearly aware of the Petitioner's application, the credit underwriting report and market analysis, and the economic conditions in Lee County, Florida. There is no credible evidence of any need for additional affordable housing in Lee County, Florida. There is no credible evidence that the Lee County, Florida, market can sustain the addition of the units proposed by the Petitioner without adversely affecting the financial feasibility of the existing Guarantee Fund developments. The Board was aware that the Elmwood Terrace development could attract residents from the nearby Guarantee Fund properties and that local economic conditions threatened the financial viability of the properties. Given current economic conditions, approval of the application at issue in this proceeding would reasonably be expected to result in a negative impact to existing affordable housing developments. The protection of Guarantee Fund developments is necessary to safeguard the resources used to support the creation and availability of affordable housing in the state.
The Issue The issue for determination in this bid protest proceeding is whether the Florida Housing Finance Corporation’s (“Florida Housing”) intended award of tax credits for the preservation of existing affordable housing developments was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Based on the oral and documentary evidence presented at hearing, and the entire record in this proceeding, the Findings of Fact are as follows: Parties Petitioner, Madison Point, is a Florida limited liability company and the designated applicant for funding through the RFA to construct an 85-unit development for low- income elderly persons in Pinellas County, Florida. Petitioner, American Residential Development, LLC, is the designated developer for the proposed development. Intervenor, Heritage Oaks, is a Florida limited liability limited partnership in the business of providing affordable housing. Heritage Oaks is an applicant for financing in response to the RFA to construct an 85-unit development for low-income elderly persons in Pinellas County, Florida. Intervenor, HTG Hudson, is a Florida limited liability company in the business of developing affordable housing. HTG Hudson was an applicant for financing in response to the RFA to construct an 87-unit development for low-income elderly persons in Pinellas County, Florida. However, all issues regarding HTG Hudson have been resolved pursuant to a settlement agreement which was attached as Exhibit “A” to the Joint Prehearing Stipulation. Pursuant to the settlement agreement, HTG Hudson’s application is ineligible for funding. Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes, and for the purpose of this proceeding, an agency of the State of Florida. Its purpose is to promote public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Housing is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code and has the responsibility and authority to establish procedures for allocating and distributing low income housing tax credits. Affordable Housing Tax Credits The low-income housing tax credit program (commonly referred to as “tax credits” or “housing credits”) was enacted to incentivize the private market to invest in affordable rental housing. These tax credits are awarded competitively to housing developers in Florida for rental housing projects which qualify. These credits are then normally sold by developers for cash to raise capital for their projects. The effect is that it reduces the amount that the developer would have to borrow otherwise. Because the total debt is lower, a tax credit property can (and must) offer lower, more affordable rents. Developers also covenant to keep rents at affordable levels for periods of 30 to 50 years as consideration for receipt of the tax credits. The demand for tax credits provided by the federal government exceeds the supply. Florida Housing is authorized to allocate tax credits, State Apartment Incentive Loan (“SAIL”) funding, and other funding by means of request for proposal or other competitive solicitation in section 420.507(48), and adopted Florida Administrative Code Chapter 67-60, to govern the competitive solicitation process for several different programs, including the program for tax credits. Chapter 67-60 provides that Florida Housing allocate its tax credits, which were made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3). Application Process In their applications, applicants request a specific dollar amount of housing credits to be given to the applicant each year for a period of 10 years. Applicants will normally sell the rights to that future stream of income tax credits (through the sale of almost all of the ownership interest in the applicant’s entity) to an investor to generate the amount of capital needed to build the development. The amount which can be received depends upon the accomplishment of several factors such as a certain percentage of the projected “total development cost” (total costs incurred in the completion of a development); a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated areas of some counties. This, however, is not an exhaustive list of the factors considered. Tax credits are made available through a competitive application process commenced by the issuance of an RFA. An RFA is equivalent to a “request for proposal” as indicated in rule 67-60.009(3). The RFA at issue here is RFA 2016-113, Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas counties. The RFA was issued on October 28, 2016, and responses were initially due December 8, 2016. The RFA was modified on November 10, 2016, and, among other revisions, the application deadline was extended to December 30, 2016. Through the RFA, Florida Housing seeks to award up to an estimated $14,669,052 of housing credits to qualified applicants in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas counties. In response to RFA 2016-113, 43 applications were submitted for funding, including Madison Point and Heritage Oaks. Madison Point submitted application No. 2017-232C seeking $1,660,000 in annual allocation of housing credits to finance the construction of an 80-unit development in Pinellas County. Heritage Oaks submitted application No. 2017-201C, seeking $1,660,000 in annual allocation of housing credits to finance the construction of an 85-unit development in Pinellas County. The RFA sets forth the information required to be provided by an applicant, which includes a general description of the type of projects that will be considered eligible for funding and delineates the submission requirements. In order to be considered for funding selection, the application must meet all of the eligibility requirements set forth in the RFA. The eligibility requirements include, among other things, “[a]ll “Mandatory Items” described in section five of the RFA.” The RFA sets forth a list of mandatory items that must be included in a response including, but are not limited to, appropriate zoning, site control, development category, and occupancy status of any existing units. As part of the general development information, the RFA requires applicants to select a development category applicable to its proposed development. This is a mandatory item of the RFA. Applicants are instructed to select amongst the following categories: New Construction (where 50 percent or more of the units are new construction) Rehabilitation (where less than 50 percent of the units are new construction) Acquisition and Rehabilitation (acquisition and less than 50 percent of the units are new construction) Redevelopment (where 50 percent or more of the units are new construction) Acquisition and Redevelopment (acquisition and 50 percent or more of the units are new construction) Once disclosed in the application, the development category cannot be changed. In the RFA, “new construction” while capitalized is not a defined term. However, rule 67-48.002(98), defines “redevelopment” as follows: With regard to a proposed Development that involves demolition of multifamily rental residential structures currently or previously existing that were originally built in 1986 or earlier and either originally received financing or are currently financed through one or more of the following HUD or RD programs: Sections 202 of the Housing Act of 1959 (12 U.S.C. §1701q), 236 of the National Housing Act (12 U.S.C. §1701), 514, 515, or 516 of the U.S. Housing Act of 1949 (42 U.S.C. §1484), 811 of the U.S. Housing Act of 1937 (42 U.S.C. §1437), or have PBRA; and new construction of replacement structures on the same site maintaining at least the same number of PBRA units; or With regard to proposed Developments that involve demolition of public housing structures currently or previously existing on a site with a Declaration of Trust that were originally built in 1986 or earlier and that are assisted through ACC; and new construction of replacement structures on the same site, providing at least 25 percent of the total new units with PBRA, ACC, or both, after Redevelopment. Although the Rehabilitation Category is defined, it is not relevant for purposes of this proceeding. Additionally, the RFA requires applicants to answer whether the proposed development consists of: a) 100 percent new construction units; b) 100 percent rehabilitation units; or c) a combination of new construction units and rehabilitation units, and state the quantity of each type. This is a mandatory item of the RFA. Selection Process Florida Housing received 43 applications seeking funding in RFA 2016-113. Florida Housing’s executive director appointed a Review Committee of Florida Housing staff to evaluate the applications for eligibility and scoring and to make recommendations to Florida Housing’s Board of Directors. Pursuant to the terms of the RFA, the applications were received, processed, deemed eligible or ineligible, scored, and ranked. The Review Committee determined that, among other applicants, the applications of Heritage Oaks and Madison Point were eligible for funding. Through the ranking and selection process outlined in the RFA, Heritage Oaks was recommended to the Board of Directors to be selected for funding within Pinellas County. The Review Committee developed a chart listing its funding recommendations for the RFA to be presented to Florida Housing’s Board of Directors. On May 5, 2017, Florida Housing’s Board of Directors met and considered the recommendations of the Review Committee for RFA 2016-113. Also, on May 5, 2017 following the Board meeting, Petitioners, and all other applicants in RFA 2016-113, received notice that Florida Housing’s Board of Directors determined whether applications were eligible or ineligible for consideration for funding, and that certain eligible applicants were selected for award of tax credits. Such notice was provided by the posting of two spreadsheets, one listing the “eligible” and “ineligible” applications in RFA 2016-113 and one identifying the applications which Florida Housing proposed to fund on the Florida Housing website, www.floridahousing.org. Of the 43 applications submitted, 37 were deemed “eligible” and six were deemed “ineligible.” In that May 5, 2017, posting, Florida Housing announced its intention to award funding to seven applications, including Heritage Oaks. Madison Point was deemed eligible but not selected for funding. Madison Point timely filed a Notice of Protest and Petition for Formal Administrative Proceedings. Heritage Oaks intervened as a named party and intervention was granted. The scoring decisions at issue in this proceeding are related to Florida Housing’s decision to award funding to Heritage Oaks based on its responses regarding occupancy status and local government contribution. The RFA specifies an “application sorting order” to rank applicants for potential funding. The first consideration in sorting eligible applications for potential funding is application score. The maximum score an applicant can achieve is 28 points. In the case of a tie score, Florida Housing incorporated a series of “tie breakers” into the sorting process. The tiebreakers for this RFA, in order of applicability, are: First, by Development Category Funding Preference; Second, by a Per Unit Construction Funding Preference; Third, by a Leveraging Classification based on the amount of total Florida Housing funding per set-aside unit; Fourth, by the eligibility for the 75 or More Total Unit Funding Preference; Fifth, by satisfaction of a Florida Job Creation Funding preference, which applies a formula to reflect the estimated number of jobs created per $1 million of funding; Lastly, if necessary, by randomly assigned lottery number. The RFA set out a selection process for eligible applicants, after the sorting and ranking process outlined above. That selection process consisted of selecting the highest ranking eligible application for a proposed development in each of the following counties first: Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas. If funding remained after those selections, then the highest ranking eligible unfunded application in Broward would be selected next. Heritage Oaks and Madison Point selected the elderly non-Assisted Living Facility (“ALF”) demographic and the proposed developments were located in Pinellas County. Florida Housing’s preliminary agency action selected Heritage Oaks for funding for Pinellas County. Heritage Oaks’ Application Heritage Oaks’ proposed development site consists of approximately 4.99 acres. Heritage Oaks’ proposed development site contains existing roads owned by Pinellas County. Heritage Oaks indicates that its proposed development site was comprised of scattered sites. There are existing housing units on Heritage Oaks’ development site. However, Heritage Oaks’ application indicates that “there are no existing units.” Heritage Oaks’ application selected “new construction” as its development category. Heritage Oaks’ proposed development involves demolition of currently-occupied, multifamily, public housing rental structures that were originally built in 1986 or earlier and either originally received financing or are currently financed through one or more of the following HUD or RD programs: Sections 202 of the Housing Act of 1959 (12 U.S.C. § 1701 q); 236 of the National Housing Act (12 U.S.C. § 1701); 514, 515, or 516 of the U.S. Housing Act of 1949 (42 U.S.C. § 1484); and 811 of the U.S. Housing Act of 1937 (42 U.S.C. § 1437). Development Category In response to the RFA requirements, Heritage Oaks selected “New Construction” as its development category. Heritage Oaks also indicated that its proposed development consists of 100 percent new construction. Mr. Evjen acknowledged that Heritage Oaks’ proposed development involves the demolition of existing structures on the proposed development site and the construction of 85 new units. Mr. Evjen explained that the proposed development includes 71 senior units in a three-story, mid-rise building, and seven duplex buildings, which would include the other 14 units on the proposed development site. The testimony at hearing indicated that at the time of the application deadline, Heritage Oaks’ proposed development did not satisfy all of the criteria set forth in the definition of redevelopment, as set forth in paragraph 18, supra. At hearing, Mr. Evjen and Ms. Blinderman testified that to qualify as redevelopment, at least 25 percent of the new units must receive Project Based Rental Assistance (“PBRA”). PBRA units are those with a rental subsidy through a contract with the United States Department of Housing and Urban Development (“HUD”) or the Rural Development Services (formerly the Farmer’s Home Administration) of the United States Department of Agriculture. See Fla. Admin. Code Rules 67-48.002(72), (85), and (98). Heritage Oaks intends to develop the proposed development with Pinellas County Housing Authority (“Housing Authority”). At the time of the application deadline, the Housing Authority was in discussions with HUD regarding the final count, if any, of PBRA units. The lack of a resolution with HUD is beyond the authority of Heritage Oaks and remains uncertain. As of the application deadline, Heritage Oaks could not know if 25 percent of its new units would receive PBRA and, therefore, could not classify the proposed development as redevelopment. While it may be possible that Heritage Oaks’ proposed development may meet the definition of redevelopment at some point in the future, at the time of the application it did not meet the definition. At hearing, no testimony or documentary evidence was offered to establish that the proposed development currently falls within the definition of redevelopment. Respondent found this classification to be acceptable. Petitioners assert that it is reasonable that Heritage Oaks would meet the threshold to satisfy the criteria for the redevelopment category. However, it was more reasonable that Heritage Oaks would not meet the threshold and be ineligible for funding, if the redevelopment category had been incorrectly selected. Therefore, the evidence supports that it was reasonable for Heritage Oaks to identify its development project as new construction. Occupancy Status Petitioners also argue that Heritage Oaks should not be awarded funding because it failed to disclose the occupancy status of existing units on the proposed development site. In the RFA, the subheading and language for section four (A)(5)(e)(3) provides as follows: Number of Units in Proposed Development: The Applicant must indicate which of the following applies with regard to the occupancy status of any existing units: Existing units are currently occupied Existing units are not currently occupied There are no existing units The section then instructs the applicant to refer to section four (A)(5)(e) of the RFA instructions before answering the occupancy status question. The RFA instructions at section four (A)(5)(e) provide as follows: e. Number of Units in Proposed Development: The Applicant must state the total number of units. Note: The proposed Development must consist of a minimum of 50 total units. Proposed Developments consisting of 75 or more total units will be eligible for the 75 or More Total Unit Funding Preference (outlined at Section Four B.2. of the RFA). If the Elderly Demographic Commitment (ALF or Non- ALF) is selected at question 2.b. of Exhibit A, the proposed Development cannot exceed the maximum total number of units outlined in Item 1 of Exhibit C of the RFA. The Applicant must indicate whether the proposed Development consists of (a) 100% new construction units, (b) 100% rehabilitation units, or (c) a combination of new construction units and rehabilitation units, and state the quantity of each type. The Applicant must indicate the occupancy status of any existing units at question 5.e.(3) of Exhibit A. Developments that are tentatively funded will be required to provide to the Credit Underwriter a plan for relocation of existing tenants, as outlined in Item 2.b.(6) of the Applicant Certification and Acknowledgement form. The plan shall provide information regarding the relocation site; accommodations relevant to the needs of the residents and length of time residents will be displaced; moving and storage of the contents of a resident’s dwelling unit; as well as the approach to inform and prepare the residents for the rehabilitation activities. In response to this RFA requirement and the cited RFA Instructions concerning Occupancy Status, Heritage Oaks indicated that “there are no existing units” in its proposed development. However, Mr. Evjen testified that there were existing units on the development site as of the application deadline and some of those units were occupied. Heritage Oaks pointed out that a review of the RFA reflects that it is organized in an outline format with headings and subheadings. For example, section four concerns information to be provided in the application. Section four A(5) then requests general development information. Section four (A)(5)(e) requests information concerning the number of units in the proposed development. Mr. Evjen further testified that, based on review of the RFA and the instructions, Heritage Oaks took a three-step approach in responding to the occupancy status question. Heritage Oaks properly answered the first two questions. First, Heritage Oaks provided the total number of units as 85. Second, Heritage Oaks indicated that “all 85 units would be new construction.” In the final question, Heritage Oaks considered whether any existing units would remain as a “part of its proposed development.” Because no existing units would be part of its proposed development, Heritage Oaks responded “there are no existing units” in its proposed development. However, the term “proposed” was not used in question 5.e.(3) as was the case in the prior questions in the same subsection. Mr. Evjen also testified that he read the question as “if there are rehab[ilitation] units, are they occupied? Heritage Oaks’ erroneous interpretation of the question resulted in its failure to provide an accurate answer. The question simply requested the “occupancy status of any existing units.” The question was clear and unambiguous. The parties have stipulated that there are existing housing units on the Heritage Oaks proposed development site. However, Heritage Oaks’ application indicates that there are no existing units. The representation that there were no existing units was a false statement of material fact. It is worth noting that the parties stipulated at the beginning of the hearing that there is no allegation of fraud or intentional deception. There is also no evidence in the record of intentional deception and therefore, there is no finding by the undersigned that Heritage Oaks engaged in intentional misconduct. However, whether intentional or not, Heritage Oaks’ representation of no existing units is a false statement. According to Mr. Reecy, Florida Housing asks the question regarding occupancy status of existing units because Florida Housing wants to make sure that the developer can handle the cost issues related to relocation and that the relocation needs of the existing tenants will be met. Additionally, Mr. Reecy testified that Florida Housing relies upon applicants to accurately respond to questions in the RFA because, at the time of scoring, no independent research is conducted to verify responses. Regarding a relocation plan, Heritage Oaks relies on the Declaration of Trust’s requirement to have a tenant relocation plan as a remedy for the failure to properly respond to the occupancy status question. However, the Declaration of Trust is a HUD requirement that is not controlled by Florida Housing. In fact, Mr. Evjen testified that Heritage Oaks’ co-developer was researching terminating the Declaration of Trust. Given the fact that Heritage Oaks could terminate its Declaration of Trust, the Declaration of Trust does not provide adequate assurance that the tenants in the existing housing units will be adequately relocated once Florida Housing allocates its funding. Florida Housing has a material interest in ensuring that tenants located in existing housing units are properly and adequately relocated during the development phase of any Florida Housing-funded development. Accordingly, Florida Housing’s scoring decision with regard to Heritage Oaks’ response to the occupancy status question was contrary to the terms of the RFA and clearly erroneous. Heritage Oaks is ineligible for funding under RFA 2016-113. Local Government Contribution At section four (A)(10)(b), an applicant can obtain 10 points if it can demonstrate a high level of local government interest in its project via an increased amount of local government contribution. To satisfy this requirement, an applicant must attach a properly completed and executable Florida Housing Finance Corporation Local Government Verification of Contribution-Loan Form (“loan form”). The RFA establishes a contribution threshold amount which qualifies an application for the local government area of opportunity points. The RFA defines “local government areas of opportunity” as follows: Developments receiving a high level of Local Government interest in the project as demonstrated by an irrevocable funding contribution that equals or exceeds 2.5 times the Total Development Cost Per Unit Base Limitation (exclusive of any add-ons or multipliers), as provided in Item 7 of Exhibit C to the RFA, for the Development Type committed to for the proposed Development. The minimum local government areas of opportunity funding amounts are outlined in section four A.10.b. of the RFA. A single jurisdiction (i.e., the county or a municipality) may not contribute cash loans and/or cash grants for any other proposed development applying in the same competitive solicitation in an amount sufficient to qualify as Local Government Areas of Opportunity, per the competitive solicitation. In response to this RFA requirement, Heritage Oaks submitted Attachment 15, a loan form from Pinellas County, Florida, in the amount of $551,000. Based upon the minimum local government area of opportunity funding amounts established in the RFA, this amount qualified Intervenor Heritage Oaks for 10 points. Petitioners challenge Intervenor Heritage Oaks’ loan form for two reasons. First, Petitioners opine that the face value of the commitment and the net present value included in the loan form cannot be the same amount and, therefore, a calculation error must have occurred. Petitioners rely on examples of various calculations found in the RFA. Next, Petitioners allege that the loan form was not properly signed and no final approval was given by Pinellas County. Intervenor Heritage Oaks provided a loan form from Pinellas County. The loan form committed Pinellas County to a loan in the amount of $551,000. Mr. Bussey, the individual who processed the application and award of commitment, indicated that the commitment was a loan that would be forgiven as long as certain requirements were met and kept. Mr. Bussey further indicated that there were no loan payments or interest rates associated with the loan. Accordingly, he indicated that the loan value was the net present value of the loan, which means the commitment amount and the net present value for the Pinellas County loan is the same number, $551,000. While Petitioners allege that the loan form was not appropriately signed and no final approval had occurred, the greater weight of the evidence shows otherwise. Specifically, Petitioners opine that either a resolution or some action by the Pinellas County Board of County Commissioners or the County Administrator was necessary as asserted by their witness, Mr. Banach. While Mr. Banach was critical of the loan verification form, he acknowledged that he is not an expert regarding the process for Pinellas County loan contribution and he did not process the loan application. He further acknowledged that Mr. Bussey, the individual who processed the loan, found no error with the form. The evidence shows that the loan form was executed by Charles Justice, who at the time of the loan form’s execution was the Chairman of the Pinellas County Board of County Commissioners. Mr. Bussey explained the process for approving the loan form and indicated that Mr. Justice, as Chairman, had the authority to sign the loan form. Mr. Bussey also pointed out language in the loan form which provides as follows: “This certification must be signed by the chief appointed official (staff) responsible for such approval, . . . Chairperson of the Board of the County Commissioners.” Mr. Justice is one of the designated individuals the form itself indicated is acceptable. Mr. Bussey indicated that no further approvals were necessary. At hearing, Florida Housing indicated that the loan form submitted by Heritage Oaks satisfied the requirements of the RFA and this position was not shown to be erroneous or unreasonable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order rescinding the intended award to Heritage Oaks and designating Madison Point and America Residential Development, LLC, as the recipients of the funding under RFA 2016-113. DONE AND ENTERED this 11th day of August, 2017, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2017. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Betty Zachem, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) Marisa G. Button, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Michael G. Maida, Esquire Michael G. Maida, P.A. 1709 Hermitage Boulevard, Suite 201 Tallahassee, Florida 32308 (eServed) Douglas P. Manson, Esquire Manson Bolves Donaldson & Varn, P.A. 1101 West Swann Avenue Tampa, Florida 33606-2637 (eServed) Paria Shirzadi, Esquire Manson Bolves Donaldson & Varn, P.A. 1101 West Swann Avenue Tampa, Florida 33606-2637 (eServed) Craig D. Varn, Esquire Manson Bolves Donaldson Varn, P.A. 204 South Monroe Street, Suite 201 Tallahassee, Florida 32301 (eServed) J. Timothy Schulte, Esquire Zimmerman, Kiser, & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Orlando, Florida 32801 (eServed) Sarah Pape, Esquire Zimmerman, Kiser, & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Orlando, Florida 32801 (eServed) Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC 1725 Capital Circle Northeast, Suite 304 Tallahassee, Florida 32308 (eServed) Michael P. Donaldson, Esquire Carlton Fields Jorden Burt, P.A. Post Office Drawer 190 215 South Monroe Street, Suite 500 Tallahassee, Florida 32302-0190 (eServed) Kate Flemming, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed)
The Issue The issue for determination is whether Respondent's intended decision to award low-income housing tax credits in Miami-Dade County through Request for Applications 2013-003 to HTG Miami-Dade 5, LLC, and Allapattah Trace Apartments, Ltd., is contrary to governing statutes, the corporation’s rules or policies, or the solicitation specifications.
Findings Of Fact Overview FHFC is a public corporation created pursuant to section 420.504, Florida Statutes (2013).1/ Its purpose is to promote the public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, FHFC 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 by Congress in 1986 to incentivize the private market to invest in affordable rental housing. Tax credits are competitively awarded to housing developers in Florida for qualified rental housing projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the developer would otherwise have to borrow. Because the debt is lower, a tax credit property can offer lower, more affordable rents. Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their federal tax liability each year over a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing. These are tax credits and 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. However, a $1,000 tax credit reduces tax liability by $1,000. Developers that are awarded tax credits can use them directly. However, most sell them to raise equity capital for their projects.2/ Developers sell these credits for up-front cash. A developer typically sets up a limited partnership or limited liability company to own the apartment complex. The developer maintains a small interest but is responsible for building the project and managing (or arranging for the management) of the project. The investors have the largest ownership interest but are typically passive investors with regard to development and management.3/ Because the tax credits can be used by the investors that provide the equity for 10 years, they are very valuable. When sold to the investors, they provide equity which reduces the debt associated with the project. With lower debt, the affordable housing tax credit property can (and must) offer lower, more affordable rent. The demand for tax credits provided by the federal government far exceeds the supply. FHFC has adopted Florida Administrative Code Rule chapter 67-60, to govern the competitive solicitation process for several different programs, including the one for tax credits. Chapter 67-60 was newly enacted on August 20, 2013. It replaced prior procedures used by FHFC for the competitive process for allocating tax credits. FHFC has now adopted the bid protest provisions of section 120.57(3), Florida Statutes, as its process for allocating tax credits.4/ The Competitive Application Process Tax credits are made available annually. FHFC begins the competitive application process through the issuance of a Request for Applications.5/ In this case, that document is Request for Applications 2013-003. A copy of the RFA, including its Questions & Answers, is Joint Exhibit 1. The RFA was issued September 19, 2013 and responses were due November 12, 2013. According to the RFA, FHFC expected to award up to approximately $10,052,825 in tax credits for qualified affordable housing projects in Miami-Dade, Broward, and Palm Beach Counties. Knowing that there would be far more applications than available credits, FHFC established an order for funding in the three counties: The Applications will be considered for funding in the following funding order: first the highest scoring eligible Application located in Miami-Dade County that can meet the Funding Test, then the highest scoring eligible Application located in Broward County that can meet the Funding Test, then the highest scoring eligible Application located in Palm Beach County that can meet the Funding Test, then the highest scoring eligible unfunded Application located in Miami-Dade County that can meet the Funding Test and then the highest scoring eligible unfunded Application located in Broward County regardless of the Funding Test. If there is not enough funding available to fully fund this last Broward County Application, the Application will be entitled to receive a Binding Commitment for the unfunded balance. No further Applications will be considered for funding and any remaining funding will be distributed as approved by the Board. RFA at page 36. Applications were scored using a 27-point scale based on criteria in the RFA. RFA at page 37. This process was described in the RFA as follows: The highest scoring Applications will be determined by first sorting all eligible Applications from highest score to lowest score, with any scores that are tied separated first by the Application’s eligibility for the Development Category Funding Preference which is outlined in Section Four A.4.c.(1)(a) of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference), then by the Application’s eligibility for the Per Unit Construction Funding Preference which is outlined in Section Four A.9.e. of the RFA, (with Applications that qualify for the preference listed above Applications to [sic] do not qualify for the preference), then by the Application’s Leveraging Classification (applying the multipliers outlined in Exhibit C below and having the Classification of A be the top priority), then by the Application’s eligibility for the Florida Job Creation Preference which is outlined in Exhibit C below (with Applications that qualify for the preference listed above Applications that do not qualify for the preference), and then by lottery number, resulting in the lowest lottery number receiving preference. RFA at page 36 (emphasis added). The way this process works in reality is that the developers know that they must first submit a project that meets all the eligibility criteria and does not have any significant omissions or errors.6/ Developers also strive to submit projects structured to receive all 27 points. The tiebreaker is then the luck-of-the-draw. At the time each application is filed, it is randomly assigned a lottery number7/ used to break the ties. The role of the lottery numbers is demonstrated by the following facts. One hundred and nineteen applications were filed in response to the RFA. All but six received the maximum score of 27 points. Seventy of the 119 were deemed eligible. Of those 70, 69 received the maximum score of 27 points. A copy of the RFA Sorting Order is Joint Exhibit 2.8/ As such, the lottery numbers are a big factor in deciding the winners and, concomitantly, the challengers are (1) the projects with high lottery numbers that were deemed ineligible; and (2) those with lottery numbers outside the funding range that are trying to displace those with lower lottery numbers. A copy of the final Review Committee Recommendations is Joint Exhibit 3. This document shows the developers selected, the county and the lottery number. The two Miami-Dade projects selected for funding are: HTG Miami-Dade 5, LLC d/b/a Wagner Creek - lottery number 3 Allapattah Trace Apartments, Ltd. - lottery number 6 The Petitioners/Intervenors in these consolidated proceedings are: Town Center Phase Two, LLC - lottery number 7 Pinnacle Rio, LLC - lottery number 9 APC Four Forty Four, Ltd. - deemed ineligible and with a lottery number of 10 The protests here center upon whether various applicants were correctly deemed eligible or ineligible. Applications are competitively reviewed, and so determinations as to one applicant affect other applicants’ positions. Each application, and the allegations against it, will be considered in turn. HTG’s Application APC argues that HTG should be found ineligible for allocation of tax credits because HTG failed to disclose its principals and those of its developer, as required by the RFA. The RFA at Section Four A.2.d. provides, in part, that each applicant will submit an application that identifies: d. Principals for the Applicant and for each Developer. All Applicants must provide a list, as Attachment 3 to Exhibit A, identifying the Principals for the Applicant and for each Developer, as follows: * * * (2) For a Limited Liability Company, provide a list identifying the following: (i) the Principals of the Applicant as of the Application Deadline and (ii) the Principals for each Developer as of the Application Deadline. This list must include warrant holders and/or option holders of the proposed Development. * * * This eligibility requirement may be met by providing a copy of the list of Principals that was reviewed and approved by the Corporation during the advance-review process. To assist the Applicant in compiling the listing, the Corporation has included additional information at Item 3 of Exhibit C. RFA at page 5. The RFA goes on to provide in Exhibit C 3.: 3. Principal Disclosures for Applicants and Each Developer The Corporation is providing the following charts and examples to assist the Applicant in providing the required list identifying the Principals for the Applicant and for each Developer. The term Principals is defined in Section 67-48.002, F.A.C. a. Charts: (1) For the Applicant: * * * (b) If the Applicant is a Limited Liability Company: Identify All Managers and Identify All Members and For each Manager that is a Limited Partnership: For each Manager that is a Limited Liability Company: For each Manager that is a Corporation: Identify each General Partner Identify each Manager Identify each Officer and and and Identify each Limited Partner Identify each Member Identify each Director and Identify each Shareholder and For each Member that is a Limited Partnership: For each Member that is a Limited Liability Company: For each Member that is a Corporation: Identify each General Partner Identify each Manager Identify each Officer and and and Identify each Limited Partner Identify each Member Identify each Director and Identify each Shareholder For any Manager and/or Member that is a natural person (i.e., Samuel S. Smith), no further disclosure is required. RFA at page 61. The RFA at Section Three F.3. Provides: 3. Requirements. Proposed Developments funded with Housing Credits will be subject to the requirements of the RFA, the Application requirements outlined in Rule Chapter 67-60, F.A.C., the credit underwriting and HC Program requirements outlined in Rule Chapter 67-48, F.A.C., and the Compliance requirements of Rule Chapter 67-53, F.A.C. RFA at page 3. The term “principal” is defined by rule 67-48.002(89)9/, as follows: (89) “Principal” means: (a) Any general partner of an Applicant or Developer, any limited partner of an Applicant or Developer, any manager or member of an Applicant or Developer, any officer, director or shareholder of an Applicant or Developer, * * * (c) Any officer, director, shareholder, manager, member, general partner or limited partner of any manager or member of an Applicant or Developer, and . . . . HTG received an “advance review” approval of its designation of principals on October 8, 2013. HTG submitted this stamped and approved list of principals with its application. Applicant HTG is a limited liability company, as is its developer, HTG Miami-Dade 5 Developer, LLC. In its submission of principals, HTG disclosed the names of the manager and member of the applicant and the manager and member of the developer, all of which were also LLCs. HTG also disclosed the names of the managers and members of these component LLCs. HTG did not disclose any officers of the applicant, the developer, or any of the component LLCs. Other documents submitted as part of the application indicate that Mr. Matthew Rieger is a Vice President of the applicant, HTG Miami-Dade 5, LLC, and that the component LLCs also have officers. APC contends that the rule’s definition of principal requires HTG to disclose not only the managers and members of the applicant and developer, and those of their component LLCs, but also the officers of any of these entities, if they also have officers. FHFC asserts that such disclosure is not required, arguing that the term “officer” as found in the rule’s definition of “principal” only applies to corporations. FHFC argues that there is no inconsistency between the rule and the charts of the RFA with respect to disclosure of principals. FHFC contends that the charts in the RFA, read in conjunction with the rule, indicate that officers must be disclosed only when the entity is a corporation, and that members and managers must be disclosed when the entity is a LLC. FHFC interprets rule 67-48.002(89) in a manner consistent with the charts. It does not interpret the rule to require that an LLC disclose its officers, even if it has them, but only that an LLC disclose its managers and members. Both Ms. O’Neill and Ms. Thorp testified to that effect. The examples provided in the RFA are also consistent with this interpretation. The rule certainly might have been drafted with more precision to expressly indicate that a principal is any officer, director, or shareholder if the entity is a corporation; any manager or member if the entity is an LLC; and any general partner or limited partner if the entity is a Limited Partnership. It cannot be said, however, that the Corporation’s interpretation of the RFA and its rule is impermissible. ATA’s Application Mr. Kenneth Reecy, Director of Multifamily Programs, testified that FHFC revised the “Universal Application Cycle” process that had been conducted in the past. Under the old universal cycle, most of the criteria were incorporated into the rule, and then there was a “cure” process that provided an opportunity to correct errors that didn’t necessarily have a bearing on whether a project was good enough to be funded. Under the newer process, several issues were moved out of the eligibility and scoring phase and into the credit underwriting phase.10/ Specifically relevant here, site plan issues and the availability of infrastructure, such as sewer service, were no longer examined as part of the eligibility and scoring phase set forth in the RFA. Mr. Reecy testified that these issues were complex and had been intentionally pushed to the “rigorous review” that takes place during the credit underwriting phase. In signing and submitting Exhibit A of the RFA, each applicant acknowledges and certifies that certain information will be provided to FHFC by various dates in the future. RFA at page 46. Section Four 10.b.(2)(b) provides in part that the following will be provided: Within 21 Calendar Days of the date of the invitation to enter credit underwriting: Certification of the status of site plan approval as of Application Deadline and certification that as of Application Deadline the site is appropriately zoned for the proposed Development, as outlined in Item 13 of Exhibit C of the RFA; Certification confirming the availability of the following for the entire Development site, including confirmation that these items were in place as of the Application Deadline: electricity, water, sewer service, and roads for the proposed Development, as outlined in Item 13 of Exhibit C of the RFA; Item 13 of Exhibit C goes on to provide: 13. Certification of Ability to Proceed: Within 21 Calendar Days of the date of the invitation to enter credit underwriting, the following information must be provided to the Corporation: a. Submission of the completed and executed 2013 Florida Housing Finance Corporation Local Government Verification of Status of Site Plan approval for Multifamily Developments form. * * * c. Evidence from the Local Government or service provider, as applicable, of the availability of infrastructure as of Application Deadline, as follows: * * * Sewer: Submission of the completed and executed 2013 Florida Housing Finance Corporation Verification of Availability of Infrastructure — Sewer Capacity, Package Treatment, or Septic Tank form or a letter from the service provider which is dated within 12 months of the Application Deadline, is Development specific, and specifically states that sewer service is available to the proposed Development as of the Application Deadline. The 2013 Florida Housing Finance Corporation Local Government Verification of Status of Site Plan Approval for Multifamily Developments Form (Site Plan Approval Form) and the 2013 Florida Housing Finance Corporation Verification of Availability of Infrastructure — Sewer Capacity, Package Treatment, or Septic Tank Form (Certification of Sewer Capacity Form) are incorporated by reference in the RFA. The Site Plan Approval Form requires (in the case of Miami-Dade County which does not have a preliminary or conceptual site plan approval process) that the local government confirm that the site plan was reviewed as of the application deadline. Pinnacle and APC assert that the site plan that ATA submitted to the City of Miami for review included a strip of land that is not legally owned by the current owner and will not be conveyed to ATA under the Purchase and Sale Agreement. As a result, they contend, the site plan review which was required on or before the application deadline did not occur. Pinnacle argues that ATA’s certification in its application was incorrect, that this was a mandatory requirement that was not met, and that it will be impossible for ATA to provide the Site Plan Approval Form in credit underwriting. TC similarly maintains that ATA could not “acknowledge and certify” as part of its application that it would later certify that it had “ability to proceed” because the RFA (at Section Four 10.b.(2)(b) quoted above) requires that “sewer service” be “in place” for ATA’s proposed development as of the application deadline. TC also asserts that the Certification of Sewer Capacity Form explicitly states (and that any service provider letter must, too) that no moratorium is applicable to a proposed development. ATA did not submit a Certification of Sewer Capacity Form. Miami-Dade County will not complete such forms. The “letter of availability” option was created to accommodate Miami-Dade County. The November 12, 2013, letter from Miami-Dade Water and Sewer regarding ATA’s development does not state that there is no applicable moratorium in effect. In fact, the letter affirmatively acknowledges that flow to the gravity system already connected to the property cannot be increased because there is a moratorium in effect as to the pumping station serving the abutting gravity sewer basin. The letter from the County states that, if the pumping station is still in Moratorium Status “at the time this project is ready for construction,” that a private pump station is acceptable. It is logical to conclude that this means sewer service would be available at that time and that sewer service was similarly available at the time of application deadline. The letter, therefore, implies, but does not specifically state, that “sewer service is available to the proposed development as of the application deadline.” The moratorium in effect at the application deadline was not a “general” moratorium. It applied only to the pump station serving the abutting gravity sewer basin, but it was applicable to the proposed development and precluded any increase in the flow to the gravity system connected to the property. A moratorium pertaining to sewer service applicable to ATA’s proposed development was in effect at the time that ATA’s application was submitted. Sewer capacity was otherwise available for the proposed development through use of a private pump station. ATA asserts, first, that ATA has not yet filed certification of ability to proceed or the required forms or letter, that it is not to do so until after it is invited to enter credit underwriting, that FHFC has consequently yet to make a determination as to ATA’s ability to proceed, and that therefore any issues as to site plan or sewer service are not yet ripe for consideration. As to the site plan, ATA further maintains that even if it had been required to provide evidence of ability to proceed as part of its application, the site plan submitted to the City of Miami did not represent that the alley was part of the ATA site. ATA, therefore, asserts that the site plan that was reviewed was the correct one, and that its application certification was correct. The plan of the site of ATA’s development project indicates that the site is bifurcated by a private alley, which is not dedicated as a street, avenue, or boulevard. The legal description of the development project, as submitted to the Department of Planning and Zoning of the City of Miami, included lots 2 through 7 and lots 19 and 20. It did not include the strip of land that lies between these lots (lots 2 through 7 lie to the West of the alley and lots 19 and 20 lie to the East of it.) As to sewer availability, ATA asserts that the 2011 Universal Cycle and the RFA are significantly different. ATA maintains that while the former provided that the existence of a moratorium pertaining to sewer service meant that infrastructure was unavailable, this language was removed from the RFA. ATA contends that a letter of availability need not “mimic” the Certification of Sewer Capacity Form and that the RFA allows a development to certify sewer availability by other means when a moratorium is in effect. Mr. Reecy testified that FHFC takes the certified application at face value, regardless of what other information the Corporation might have at hand. As to the site plan, he testified that even had site plan approval been a part of the scoring process, FHFC would not have found ATA’s application ineligible on that ground. He testified that the alley would not be a problem unless it was a “road” or something similar. He testified that it also could have been a problem if the measurement point to measure the distance to nearby amenities was not on the property, but he was not aware that that was the case in ATA’s application. As for sewer service, Mr. Reecy testified that a letter from the service provider does not have to say “exactly” what is on the form, but stated that it does have to give “the relevant information” to let FHFC know if sewer is “possible.” He testified that the only guidance as to what constituted sewer “availability” was contained in the criteria found on the Certification of Sewer Capacity Form. One of the four numbered requirements on the Certification of Sewer Capacity Form is that there are no moratoriums pertaining to sewer service that are applicable to the proposed development. Under the RFA, the Certification of Sewer Capacity Form could not be completed for a proposed development for which a moratorium pertaining to sewer service was in effect at the time the application was submitted. The form could not be certified by the service provider even if it was possible for such a development to obtain sewer service by other means. The text on the 2013 form is substantively identical to that on the form used during the 2011 Universal Cycle, that wording was specifically drafted to require that any moratorium on sewer infrastructure would be a disqualifying criterion, and the 2013 Certification of Sewer Capacity Form still has that effect. No challenge to the use of the form in the RFA was filed. Even though the language of the 2011 Universal Cycle which paralleled the text on the form does not appear in the RFA, that criterion remains as part of the RFA because of the incorporated Certification of Sewer Capacity Form. In any event, the site plan and sewer availability issues must await at least initial resolution by FHFC during the credit underwriting phase. The testimony of Mr. Reecy clearly indicated that FHFC interprets the RFA specifications and its rules to move consideration of site plan issues and infrastructure availability to the credit underwriting phase. It has not been shown that this is an impermissible interpretation. Town Center’s Application Pinnacle alleges that TC’s application fails to demonstrate site control, because the applicant, Town Center Phase Two, LLC, is not the buyer of the site it intends to develop. The RFA requires at Section Four A.7. that an applicant must provide a copy of a contract, deed, or lease to demonstrate site control: 7. Site Control: The Applicant must demonstrate site control by providing, as Attachment 7 to Exhibit A, the documentation required in Items a., b., and/or c., as indicated below. If the proposed Development consists of Scattered Sites, site control must be demonstrated for all of the Scattered Sites. a. Eligible Contract - For purposes of the RFA . . . the buyer MUST be the Applicant unless an assignment of the eligible contract which assigns all of the buyer's rights, title and interests in the eligible contract to the Applicant, is provided. If the owner of the subject property is not a party to the eligible contract, all documents evidencing intermediate contracts, agreements, assignments, options, or conveyances of any kind between or among the owner, the Applicant, or other parties, must be provided . . . . RFA at page 23. The Contract for Purchase and Sale of Real Property submitted as Attachment 7 to TC’s application is signed by Mr. Milo, who is identified as Vice President. The Buyer on the signature page is incorrectly listed as RUDG, LLC. No other assignment, intermediate contract, agreement, option, or conveyance was included with TC’s application to indicate that TC otherwise had site control of the property. The applicant entity, Town Center Phase Two, LLC, is correctly listed in the opening paragraph of the Contract for Purchase and Sale of Real Property as the “Buyer.” RUDG, LLC, is the 99.99 percent Member of Town Center Phase Two, LLC, and is also the sole Member and Manager of Town Center Phase Two Manager, LLC, which is the .01 percent Managing Member of Town Center Phase Two, LLC. Mr. Milo is a Vice President of RUDG, LLC, a Vice President of Town Center Phase Two Manager, LLC, and a Vice President of the applicant, Town Center Phase Two, LLC. Florida Administrative Code Rule 67-60.008, provides that the Corporation may waive minor irregularities in an otherwise valid application. The term “Minor Irregularity” is defined by rule 67- 60.002(6), as follows: (6) “Minor Irregularity” means a 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. Mr. Reecy testified that FHFC interpreted the rule to mean that if information requested by the RFA is reasonably available within the Application, even if it was not provided exactly in the place where it was requested, the failure to have it in the particular place it was requested is a minor irregularity. Although the information on the signature page of the Contract for Purchase and Sale of Real Property identifying the Buyer as RUDG, LLC, was a discrepancy in the application, the contract elsewhere identified Town Center Phase Two, LLC, as the Buyer, and Mr. Milo was, in fact, authorized to sign for the true Buyer. Ms. Amy Garmon’s deposition testimony indicated that because she was able to determine from other places in the application that the Buyer was the applicant, and that Mr. Milo was authorized to sign for the Buyer, she found this portion of TC’s application to be compliant, and she didn’t see that there was a “minor irregularity” that needed to be waived. However, it is determined that FHFC actually did finally determine that the error in identification constituted a minor irregularity that was waived, in accordance with Mr. Reecy’s testimony. Although it was Ms. Garmon who called attention to the irregularity, Mr. Reecy is in a position of higher authority within the FHFC and is better able to address the Corporation’s actions with respect to TC’s application. Pinnacle also asserts that TC’s finance documents fail, based upon the same signature issue. TC submitted equity proposals detailing its construction funding sources that were addressed to Mr. Milo and endorsed by him as “Vice President.” FHFC similarly concluded that Mr. Milo had authority to endorse the finance letters on behalf of TC. There is evidence to support FHFC’s findings that TC was the actual Buyer, that Mr. Milo had authority to sign the contract and the equity documents, and that the discrepancies in the documents were minor irregularities. Pinnacle’s Application The equity commitment letter from Wells Fargo Bank regarding Pinnacle’s development, as submitted to FHFC, contained only pages numbered one, two, and four of a four-page letter. It is clear that page three is actually missing and the letter was not simply incorrectly numbered, because of discontinuity in the text and in the numbering of portions of the letter. APC contends that Pinnacle’s application should have been deemed ineligible for award because of the missing page. Mr. Reecy testified that even though a page of Pinnacle’s equity commitment letter was missing, all of the RFA requirements were set forth in the remaining pages. He acknowledged that the missing page might have included unacceptable conditions for closing or information that was inconsistent with the other things in the application, but stated that FHFC determined that the missing page from Pinnacle’s equity letter was a minor irregularity. There is evidence to support FHFC’s finding that the missing page was a minor irregularity. APC’s Application The RFA provides at Section Four, A.3.c., at page 5: c. Experienced Developer(s) At least one Principal of the Developer entity, or if more than one Developer entity, at least one Principal of at least one of the Developer entities, must meet the General Developer Experience requirements in (1) and (2) below. (1) General Developer Experience: A Principal of each experienced Developer entity must have, since January 1, 1991, completed at least three (3) affordable rental housing developments, at least one (1) of which was a Housing Credit development completed since January 1, 2001. At least one (1) of the three (3) completed developments must consist of a total number of units no less than 50 percent of the total number of units in the proposed Development. For purposes of this provision, completed for each of the three (3) developments means (i) that the temporary or final certificate of occupancy has been issued for at least one (1) unit in one of the residential apartment buildings within the development, or (ii) that at least one (1) IRS Form 8609 has been issued for one of the residential apartment buildings within the development. As used in this section, an affordable rental housing development, including a Housing Credit development that contains multiple buildings, is a single development regardless of the number of buildings within the development for which an IRS Form 8609 has been issued. If the experience of a Principal for a Developer entity listed in this Application was acquired from a previous affordable housing Developer entity, the Principal must have also been a Principal of that previous Developer entity. (2) Prior General Development Experience Chart: The Applicant must provide, as Attachment 4 to Exhibit A, a prior experience chart for each Principal intending to meet the minimum general development experience reflecting the required information for the three (3) completed affordable rental housing developments, one (1) of which must be a Housing Credit development. Each prior experience chart must include the following information: Prior General Development Experience Chart Name of Principal with the Required Experience Name of Developer Entity (for the proposed Development) for which the above Party is a Principal: ___ ___________ ___ Name of Development Location (City & State) Affordable Housing Program that Provided Financing Total Number Of Units Year Completed RFA at pages 5, 6. Exhibit A to the RFA, at 3.c., further provides: General Developer Experience For each experienced Developer entity, the Applicant must provide, as Attachment 4, a prior experience chart for at least one (1) experienced Principal of that entity. The prior experience chart for the Principal must reflect the required information for the three (3) completed affordable rental housing developments, one (1) of which must be a Housing Credit development. RFA at page 41. Ms. O’Neill, a Senior Policy Analyst at FHFC and member of the Review Committee responsible for scoring the applications’ developer information section, testified at hearing. When FHFC first started scoring applications, Ms. O’Neill was not taking any action to confirm principal developer experience, but rather was taking the information provided by applicants at face value, as it had been submitted on the chart. A colleague of Ms. O’Neill’s, not serving on the Review Committee, called her attention to the fact that a development that was then going through credit underwriting (following an award during the 2011 funding cycle) had recently requested that FHFC approve a change to the developer entity. Ms. O’Neill testified that this request raised a question at FHFC as to whether Ms. Wong, listed by APC as the principal with the required experience, met the requirements. FHFC decided to confirm that Ms. Wong had the required experience for the developments listed in the RFA. Ms. O’Neill stated that she did not make any inquiry to Ms. Wong or to Atlantic Pacific Communities as to whether Ms. Wong was, in fact, a principal of St. Luke’s Development, LLC, developer of St. Luke’s Life Center, because “we’re not really supposed to do that.” Ms. O’Neill instead looked at portions of a credit underwriting report on the St. Luke’s Life Center project that were researched and shown to her by a colleague. Ms. O’Neill did not see Ms. Wong listed in that report as a principal. She did find information in FHFC files that Ms. Wong was a principal on the other two listed developments. Ms. Thorp testified that she researched several documents in FHFC’s possession and found no information indicating that Ms. Wong was a principal for the St. Luke’s development. She testified that Ms. Wong or another representative of APC was not contacted about the issue because that would have given them an unfair advantage over other applicants. Based upon the information in its files, FHFC determined that Ms. Wong did not meet the requirements for principal developer experience. FHFC then similarly reviewed the files of other applicants who had listed in-state developments as their experience, but was unable to review out-of-state experience, so out-of-state experience continued to be accepted at face value. Ms. Wong was not originally a principal in the St. Luke’s development. However, it was demonstrated at hearing through documentary evidence that Ms. Wong was later appointed an officer of St. Luke’s Development, LLC, effective March 2007. That change was submitted to the credit underwriter, and Ms. Wong was a principal for the developer entity before it completed credit underwriting. Both Ms. O’Neill and Ms. Thorp testified that if the documents provided at hearing by APC had been in FHFC’s possession at the time APC’s application was scored, FHFC would have found that Ms. Wong was a principal of the St. Luke’s development and that her experience met principal developer experience requirements. In light of the evidence presented at hearing, it is clear that FHFC’s conclusion was wrong. The prior experience chart submitted by APC as part of its application provided all of the information requested by the RFA, and all of that information was accurate. The information available to FHFC in the application correctly indicated that Ms. Wong was a principle for the developer of the St. Luke’s Life Center development. APC’s application met all requirements of the RFA with respect to prior developer experience. The Corporation’s preliminary determinations that Ms. Wong was not a principal in the St. Luke’s development, and that the APC application did not, therefore, meet principal experience requirements to the contrary, made in good faith based upon incomplete information contained in its files, was clearly erroneous. FHFC’s contention that APC should have submitted explanations or further documentation of Ms. Wong’s developer experience at the time it submitted its application is untenable. APC submitted all of information requested of it. FHFC asked for a chart to be completed, which APC did, completely and accurately. An applicant cannot be found ineligible for failing to do more than was required by the RFA. Credit Underwriting A comparison of the RFA and rules with the 2011 Universal Cycle process shows that the Corporation has moved many requirements formerly required as part of the eligibility and scoring phase into a second review in the credit underwriting phase, as noted earlier. Rule 67-48.0072 provides in part: 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, including the issuance of IRS Forms 8609 for Housing Credits. 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 rule goes on to provide that this de novo review in the credit underwriting phase includes not only economic feasibility, but other factors statutorily required for allocation of tax credits, such as evidence of need for affordable housing and ability to proceed. These factors might cause an application to fail and never receive funding, even though it was nominally “awarded” the credits earlier. In that event, the RFA provides: Funding that becomes available after the Board takes action on the Committee’s recommendation(s), due to an Applicant declining its invitation to enter credit underwriting or the Applicant’s inability to satisfy a requirement outlined in this RFA, and/or Rule Chapter 67-48, F.A.C., will be distributed to the highest scoring eligible unfunded Application located in the same county as the Development that returned the funding regardless of the Funding Test. If there is not enough funding available to fully fund this Application, it will be entitled to receive a Binding Commitment for the unfunded balance. If an applicant nominally “awarded” funding in the eligibility and scoring phase fails credit underwriting, the next applicant in the queue of eligible applicants may still be granted funding, and so, is substantially affected by FHFC’s decisions in the credit underwriting phase.
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 APC Four Forty Four, Ltd., is eligible for funding, adjusting the Sorting Order accordingly, and otherwise dismissing the formal written protests of all Petitioners. DONE AND ENTERED this 4th day of June, 2014, in Tallahassee, Leon County, Florida. S F. SCOTT BOYD 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 4th day of June, 2014.
