The Issue Whether HTG Harbor Village, Ltd's, as Applicant for Crestwood Apartments, ("Petitioner" or "Crestwood") application for funding of Housing Credits and Exchange Funding awards should be granted by Florida Housing Corporation ("Florida Housing").
Findings Of Fact Based on the entire record of this proceeding including the necessary stipulated facts submitted by parties, oral and documentary evidence presented at the final hearing, the following findings of fact are made: Florida Housing is a public corporation organized under chapter 420, Florida Statutes, promote the public welfare by administering the governmental function of financing and refinancing houses and related facilities in Florida in order to provide decent, safe, and affordable housing to persons and families of low, moderate, and middle income. Florida Housing is governed by the Board consisting of nine individuals appointed by the Governor and confirmed by the Florida Senate. Florida Housing provides funding through a number of different federal and state programs to assist in the development of affordable housing in this state. As required by the federal government, the state each year adopts a Qualified Allocation Plan ("QAP"), which is incorporated into Florida Housing's rules. The QAP sets forth the selection criteria and the preferences for developments that will be awarded Housing Credits each year. Each year Florida Housing conducts a "Universal Cycle," through which applicants for certain Florida Housing multi- family programs submit a single application by which projects are evaluated, scored, and competitively ranked. Among the programs included in the Universal Cycle is the Housing Credit program, which was created by the federal government in 1986. Housing Credits (also called tax credits) come in two varieties: competitively awarded nine percent credits and non-competitively awarded four percent credits. For the nine percent credits, the federal government annually allocates to each state a specific amount of credits using a population-based formula. Housing Credits are a dollar for-dollar offset to federal income tax liability over a 10-year period. Developers receiving the federal awarded Housing Credits often sell the future stream of credits to a syndicator, which in turn sell the credits to investors seeking to shelter income from federal income taxes. The sale of the credits generates dept-free cash equity for developers. With the recent economic downturn, the market for Housing Credits dropped significantly. A number of development projects awarded funding in recent Universal Cycles have been unable to close on such funding because of the poor market for Housing Credits. In recognition of the Housing Credit market collapse, the federal government, as part of its economic stimulus efforts, established mechanisms to assist in the development of affordable housing. The American Recovery and Reinvestment Act ("ARRA"), was enacted on February 17, 2009, and includes provisions relating to the Low Income Housing Tax Credit Program. Among those provisions are the Tax Credit Exchange Program, which allows agencies that allocate Housing Credits (such as Florida Housing) to "exchange" a portion of their 2009 Housing Credit ceiling, as well as previously awarded and returned housing credits, for cash grants from the U.S. Treasury that can be used to make "sub-awards" to finance the construction of, or acquisition and rehabilitation of, qualified low-income buildings. Following the enactment of ARRA, Florida Housing issued several Requests for Proposals ("RFPs")to take advantage of the federal stimulus funds. The federal programs have quick deadlines to stimulate activity. RFP 2010-04, issued on February 26, 2010, anticipated that $150 million in Exchange Funding would be available through the RFP. In order to be eligible for funding under RFP 2010-04, applicants were required to have an active award of nine percent Housing Credits. RFP 2010-04 provided that proposed developments receiving Exchange Funding would be governed by the same rules that govern the Universal Cycle's Housing Credit Program, including credit underwriting requirements.1 HTG Harbor Village Ltd,2 a Florida-limited partnership, submitted an application for funding for Crestwood to Florida Housing in 2009. Crestwood is a proposed 114-unit affordable housing complex in Palm Beach county that will serve elderly residents. Crestwood submitted an application for nine-percent low-income Housing Tax Credits during the 2009 Universal Application Cycle. On February 26, 2010, the Board approved the final rankings for the 2009 Universal Application Cycle and Crestwood was awarded the Housing Credits. Florida Housing staff issued an invitation to Crestwood to enter into the credit underwriting. Crestwood also received a recommendation for Exchange Funding pursuant to RFP 2010-04, which the Board accepted on March 17, 2010. Subsequently, Crestwood was included in the ranked list of proposed developments that were awarded Exchange Funding and invited into credit underwriting. The credit underwriting process is governed by Florida Administrative Code Rule 67-48.0072 ("Credit Underwriting Rule"). Florida Housing is obligated to satisfy mortgage dept under its Guarantee Fund. It has close to $800 million in outstanding mortgage guarantee commitments. Florida Housing's Guarantee Fund has paid out eight claims since November 2008 for approximately 90 million dollars when borrowers failed to make their payments. Each payout impacted Florida Housing's risk-to capital-ratio. Before the 2009 Universal Cycle in order to try to prevent future defaults and protect the fund from additional claims, the Board amended rule 67-48.0072(10) to require the credit underwriter to review and determine whether a proposed development "will be a negative impact on a Guarantee Fund development within the primary market area." The costs associated with the credit underwriting review is paid by the developer, including the credit underwriting fee and costs of a market study. Florida Housing selects an independent credit underwriter for each developer who reviews each proposal according to requirements set forth by the Credit Underwriting Rule. The credit underwriter prepares a report, known as the Preliminary Recommendation Letter ("PRL"), for each applicant invited into the process. The reports are submitted to Florida Housing's Board, who makes the final decision for funding by approving or denying each application. Florida Housing chose Seltzer Management Group, Inc. ("Seltzer") as the credit underwriter for Crestwood. Seltzer conducted both the credit underwriting for Crestwood's Housing Credit allocation and its Exchange Funding simultaneously. As the credit underwriter, Seltzer, has to re-evaluate the proposed development by performing a comprehensive analysis of all of the aspects of the proposed development. Seltzer sent Crestwood an email checklist to complete in order to have the PRL ready for the July 2010 Board meeting. The responsibility for the market study is assigned by the credit underwriter to an independent market analyst. Seltzer retained Clobus, McLemore & Duke, Inc. ("CMD") of Fort Lauderdale to conduct the market study for Crestwood. CMD completed the market study and issued it on April 6, 2010. CMD's market study report stated in its cover letter that: There are two Elderly Guarantee Fund Developments within the subject's PMA. It is CMD's opinion that the subject's units will not have a negative impact on one or any of the Guarantee Fund Developments. Historically, low-income properties are not significantly affected by new developments other than during lease-up. Occupancy is lower now primarily due to the current economic conditions, not over-improvement. There has always been a demand for low- income housing and the impact on additional properties, including Guarantee Fund Developments may be on occupancy during lease-up. In mid-April of 2010, Seltzer provided a copy of the market study to Crestwood's developers. Crestwood compared CMD's market study with their own conducted by Reinhold Wolff and determined that it was a positive market study. The determination helped Petitioner decide to continue the credit underwriting process and increase its efforts to comply with Seltzer's checklist and quick driven federal deadlines by expending additional funds to complete the process. While seeking credit underwriting approval, Crestwood was required to expend considerable time and money to proceed as an applicant in the process seeking credit underwriting approval. Crestwood developers spent approximately $653,854.94. Soon thereafter, Seltzer prepared the Crestwood PRL signed by John Elasser and emailed it to Florida Housing on May 3, 2010. The cover email stated that the PRL draft was attached. The PRL discussed the CMD market study noting specifically that CMD's opinion is that Crestwood "will not have a long-term negative impact" on Guarantee fund properties near the proposed development. Seltzer concludes the May 3, 2010, PRL by recommending that Crestwood receive both Exchange Funding and Housing Credits. Three days later, on May 6, 2010, Lindsay Lockhart, Florida Housing's Guarantee Program Asset Manager, sent an email to Ben Johnson, the president of Seltzer, providing additional information on Windsor Park Apartments ("Windsor"), one of the Guarantee Fund developments referenced in the May 3, 2010, PRL. Lockhart's email discussed occupancy figures for Windsor, as well as rent concession policies and marketing strategies of Windsor. Windsor was built in the late 1990s and is 1.4 miles northeast of the proposed Crestwood site. Historically, Windsor has struggled financially. Windsor has had over three-and-half million dollars in operating deficits. The next day, May 7, 2010, Seltzer's president emailed Tatreau, Director of multi-family development programs at Florida Housing and stated: The market study indicated that adding the Crestwood units may have a negative impact on the Guarantee Properties during the lease up period. I have reviewed the market study and other economic data and I think that I support that conclusion. That being said, what additional data, analysis, conclusions, recommendations, etc., are you requesting that we include in the PRL? I would appreciate w[hat] ever guidance you ca[n] give us. On May 12, 2010, Johnson followed up and emailed his employee, Elasser, instructing him to incorporate and wordsmith the language attached to the email and utilize it while revising the PRL. On May 13, 2010, Elasser signed and sent a second draft Crestwood PRL to Florida Housing. His cover email states: Revised Preliminary Recommendation Letter for Crestwood, with expanded discussion of Windsor Park and Pinnacle Palms (the two Guarantee fund transactions within Crestwood's submarket). The May 13, 2010, draft PRL again referred to the CMD market study not anticipating "a long-term negative impact" on any Guarantee Fund properties. However, the letter further delineated some of Seltzer's "concerns" regarding Windsor Park by stating: Crestwood will provide potential Windsor Park residents an additional choice when looking for rental housing-an option that will be newer and with a better unit mix. CMDuke suggests, and it is reasonable to conclude, that occupancy at Windsor may drop during Crestwood's lease-up. It is difficult, however, to quantify the number of units lost or how long Crestwood will impact Windsor Park. Seltzer again concludes its May 13, 2010, PRL by recommending that Crestwood receive both Exchange Funding and Housing Credits. Two days after the second draft PRL was sent by Seltzer to Florida Housing, Tatreau emailed Johnson and set up a teleconference call meeting with Florida Housing staff to discuss several proposed developments under review by Seltzer that have Guarantee Fund developments nearby. Crestwood was specifically included. The call took place the following day, May 19, 2010. Most of the talking was done by the Guarantee Fund staff. During the Crestwood credit underwriting process, numerous appropriate communications took place between Seltzer and Florida Housing staff about the impact that the Crestwood transaction would have on Windsor Park and Pinnacle Palms. Florida Housing Staff wanted to make sure that Seltzer had enough information relating to Guarantee Fund developments in the Crestwood market area for Seltzer's analysis and recommendation to be complete. Throughout the process, Florida Housing staff provided Seltzer some of Windsor's data. Seltzer received Windsor information including the: demographic demand; good management; poor unit design of 2/3 bedrooms; occupancy problems; good maintenance; long term struggling finances; operating deficit; and rental concessions and incentives. On May 26, 2010, Seltzer sent a third draft Crestwood PRL to Florida Housing. Unlike the first two draft PLRs, Seltzer had looked through all the information received regarding Windsor for the May 26, 2010, PRL and recognized Windsor's vulnerability to new developments. Even though the third draft was signed by both Elasser and Johnson, and reversed Seltzer's earlier recommendation that Crestwood receive funding, Florida Housing neither told nor instructed Seltzer to change its recommendation for Crestwood. Seltzer concluded after its complete analysis the following: Based upon the information presented in CMDuke's Market Study and its own Due Diligence, SMG concludes that the average occupancy rate within the Subject's submarket meets the minimum requirement of 90%. In accordance with the RFP 2010-04, however, SMG finds its concerns with regard to historical and current occupancy rates for the Elderly at prior and existing Guarantee Fund Properties within the Subject's submarket leads it to recommend FHFC rescind Applicant's tentative award of Exchange Program Funding. Construction of the Subject Development has the potential to negatively impact Affordable Housing Properties previously funded by FHFC in the area, especially the' two Guarantee Fund Properties located within Crestwood's submarket. Seltzer subsequently sent a fourth draft PRL to Florida Housing on June 1, 2010, and a fifth final PRL to Florida Housing on June 3, 2010. The last PRL's cover email stated "Here is the final." The negative recommendations remained in both the PRL of June 1 and 3, 2010, even though the language was slightly different from the language used in previous PRLs. The final June 3, 2010, PRL discusses the operating deficits and Seltzer's "serious concerns." It recommends not only that Crestwood's Exchange Funding be rescinded, but that its Housing Credit allocation also be taken back. Additionally, the recommendation in the June 1 PRL and the final June 3 PRL is based only on an the negative impact on Windsor Park, not on any other Guarantee Fund development or other affordable housing development in the area. The final version provides: Information presented by CMDuke's Market Study and developed through its own Due Diligence leads SMG to conclude the average occupancy rate within the Subject's submarket meets the minimum requirement of 90% for the same demographic population. RFP 2010-04, however, also requires consideration of the potential impact of the Subject Development on existing Guarantee Fund Properties. Based upon marginal occupancy rates and resulting Operating Deficits, SMG has serious concerns regarding the potential negative impact of the Subject Development on Windsor Park. SMG therefore recommends FHFC rescind Applicant's HC allocation award and its Exchange Program Funding. The June 3, 2010, PRL from Seltzer concerning Crestwood was the subject of the Staff Recommendation from the Florida Housing staff to the Florida Housing Board on June 18, 2010. The Staff Recommendation states: Staff has received a preliminary recommendation letter for Crestwood Apartments (Exhibit A) containing a negative recommendation because the Development would cause a negative impact on a Guarantee Fund transaction in the area. Staff has reviewed this report and finds that the Development does not meet all of the requirements of Rule Chapter 67-48., F.A.C. and RFP 2010-04 to be approved for further credit underwriting consideration. The Staff Recommendation concluded by recommending that the Board "[r]escind and return the nine-percent Low-Income Housing Tax Credit award and Exchange Funding to Florida Housing Finance Corporation." Petitioner was first notified of the negative recommendation concerning Crestwood by email on June 2, 2010. After notification of the negative recommendation, Crestwood's developer presented several proposals to Florida Housing's staff in an effort to mitigate any impact of Crestwood on Windsor, the nearby Guarantee Fund development. All of Crestwood's proposals were rejected including the proposal to provide a reserve after Florida Housing determined that what was offered did not mitigate the risk for the Guaranteed Fund. At the June 18, 2010, Florida Housing Board meeting, the Board considered the final PRL of June 3, 2010, with the Crestwood application. Seltzer's president, Johnson, presented Seltzer's recommendation and stated "[it] just doesn't match what's happening on the ground" and that he found it "prudent" to protect the Windsor development.3 There was no discussion at the Board meeting about Seltzer's first two draft recommendations to approve the Housing Credit allocation and Exchange Funding for Crestwood. Steve Auger, executive director of Florida Housing, admitted to the Board at the meeting that he did not know whether Crestwood would have any negative impact on Windsor, but said: And, Mr. Chair, if I may, just one thing, potential impact is all we've got. You know, we're talking about a development that's not built and we're talking about guessing about people's behavior. So potential - we will never have anything other than potential when we're talking about, you know, the possibilities there. At the meeting, the Florida Housing Board considered the Staff Recommendation for Crestwood and voted unanimously to accept it, which denied Crestwood's application and rescinded the award of Housing Credits and Exchange Funding. Petitioner received formal notice of Florida Housing's decision to rescind the Housing Credit and Exchange Program funding awarded to Crestwood on June 25, 2010. On July 12, 2010, Crestwood filed a petition with Florida Housing that commenced this proceeding. A day after the hearing closed, on January, 21, 2011, the Florida Housing Board voted through Item N on its Consent Agenda to approve a credit underwriting letter authorizing $1.8 million loan to Windsor from RFP 2010-16. The credit underwriting letter states "[T]he Guarantee Program's credit exposure will be eliminated or greatly reduced." Upon the approval, staff was directed to proceed with loan closing activities. During 2010, Windsor Park's occupancy rate increased. The occupancy report for Windsor shows the following occupancy rate increases: January 2010, 87.08 percent; February 2010, 88.75 percent; March 2010, 87.50 percent; April 2010, 89.17 percent; May 2010, 89.58 percent; June 2010, 88.75 percent; July 2010, 92.25 percent; August 2010, 94.17 percent; September 2010, 96.25 percent; and October 2010, 95.00 percent. No credible evidence was presented to show that the increased occupancy rate trend had a correlating financial improvement for Windsor's long term financial struggles. There is insufficient evidence to show that the addition of Crestwood to the Windsor market area would not adversely affect the financial feasibility of the existing Guarantee Fund. Florida Housing's priority to protect the Guarantee Fund is necessary to safeguard the resources used to support the creation and availability of affordable housing in the state.
Recommendation Upon consideration of the Findings of Fact and the Conclusions of Law reached, it is RECOMMENDED that the Florida Housing enter a final order denying Petitioner's application for funding. DONE AND ENTERED this 16th day of March, 2011, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of March, 2011.
The Issue The issue is whether the Florida Housing Finance Corporation (“Florida Housing” or “FHFC”) properly rescinded the preliminary funding awarded to SAS Fountains of Pershing Park, Ltd. (“Pershing Park”), pursuant to applicable rules, prior agency practice, and the existing case law.
Findings Of Fact Pershing Park is a Florida limited partnership whose business address is 655 West Morse Boulevard, Suite 212, Winter Park, Florida 32789. Pershing Park is engaged in the development of affordable housing in this state. Pershing Park is an "Applicant," as defined in Florida Administrative Code 67-8, and RFP 2010-04. Florida Housing is a public corporation created by Section 420.504, Florida Statutes, to administer the governmental function of financing or refinancing of affordable housing and related facilities in Florida. Florida Housing’s statutory authority and mandates appear in Part V of Chapter 420, Florida Statutes. Florida Housing is governed by a Board of Directors consisting of nine individuals, representing various affordable housing stakeholder interests1/ and two consumer members appointed by the Governor and confirmed by the Senate. The Secretary of the Department of Community Affairs sits as a voting ex officio member of the board. On February 26, 2010, Florida Housing issued RFP 2010- 04 (the “RFP”) setting forth criteria and qualifications for applicants to seek funding for affordable housing projects from funds that Florida received through the American Recovery and Reinvestment Act of 2009, PL 111-5 (“ARRA”). ARRA was enacted in 2009 by Congress as part of federal economic stimulus efforts. The RFP was issued on February 26, 2010, and required applicants to submit proposals to Florida Housing no later than 2:00 p.m. on March 12, 2010. Pershing Park submitted an application and intends to seek financing for its affordable housing project by applying for funding from the sources that are proposed to be allocated through the RFP. Florida Housing’s Programs Florida Housing administers several programs aimed at assisting developers to provide affordable multifamily rental housing for low-income Floridians. These programs include: the Multi-Family Mortgage Revenue Bond Program (“MMRB”) established under Section 420.509, Florida Statutes; the State Apartment Incentive Loan Program (“SAIL”) created pursuant to Section 420.5087, Florida Statutes; and the federal Low Income Housing Tax Credit Program (the “Tax Credit program”) established in Florida under the authority of Section 420.5093, Florida Statutes. Most relevant to this case is the Tax Credit Program, the allocation of which is governed by Section 420.5099, Florida Statutes. These funding sources are allocated by Florida Housing to finance the construction or substantial rehabilitation of affordable housing. A portion of the units constructed based upon funding from these programs must be set aside for residents earning a certain percentage of area median income (“AMI”). Historically, the units have typically been targeted to tenants earning 60 percent of AMI or below. Tax Credits The Tax Credit program was created in 1986 by the federal government. Tax Credits come in two varieties: competitively awarded 9 percent tax credits, and non- competitively awarded 4 percent tax credits. For the 9 percent credits, the federal government annually allocates to each state a specific amount of tax credits using a population-based formula. Tax Credits are a dollar-for-dollar offset to federal income tax liability over a ten-year period. A developer awarded Tax Credits will often sell the future stream of Tax Credits to a syndicator who in turn sells them to investors seeking to shelter income from federal income taxes. The developer receives cash equity with no debt associated with it. Thus, Tax Credits provide an attractive subsidy and, consequently, are a highly sought-after funding source. Florida Housing is the designated agency in Florida to allocate Tax Credits to developers of affordable housing. Every year since 1986, Florida Housing has received an allocation of Tax Credits to be used to fund the construction of affordable housing. As required by Section 42 of the Internal Revenue Code, each year Florida Housing adopts a Qualified Allocation Plan ("QAP"), which sets forth the allocation methodology for the competitive (9 percent) tax credits. The QAP must be approved by the Governor each year. The QAP is also adopted and incorporated by reference in Florida Housing's rules. See Fla. Admin. Code R. 67-48.002(88). The 2009 QAP includes the following provision: "In order for the Corporation to implement the provisions of The Recovery and Reinvestment Act of 2009 (the "2009 Stimulus Act"), any funds received pursuant to the 2009 Stimulus Act may be allocated by a competitive request for proposal or competitive application process as approved by the Board. Any such process will be governed by Section 42, IRC, and Chapter 67-48, F.A.C., as applicable, or, an emergency rule authorized by the Florida Legislature specifically for the 2009 Stimulus Act, if any." The 2009 QAP was adopted as part of the 2009 Universal Cycle rules by Florida Housing's Board of Directors on March 13, 2009. Universal Application Florida Housing has historically allocated funds from the MMRB, SAIL, and Tax Credit programs through a single annual application process. Since 2002, Florida Housing has administered the three programs through a combined competitive process known as the “Universal Cycle.” The Universal Cycle operates much the same as an annual competitive bidding process in which applicants compete against other applicants to be selected for limited funding. The Universal Cycle and the attendant application review process are intended to equitably and reasonably distribute affordable housing throughout the state. Florida Housing has adopted rules which incorporate by reference the application forms and instructions for the Universal Cycle as well as general policies governing the allocation of funds from the various programs it administers. Typically, Florida Housing amends its Universal Cycle rules, forms, and instructions every year. Each year, the Universal Cycle provides a mechanism for selecting applications to meet statutory geographic requirements, specific targeting goals that address housing needs of particular demographic groups (such as farm workers, commercial fishery workers, the homeless, or the elderly), as well as specific set asides or targeting goals aimed at addressing identified needs (such as the Florida Keys, inner city areas, or rural development), and for preservation of existing affordable housing complexes. Each set-aside group essentially has its own separate funding from its share of the funds distributed by Florida Housing. The typical process used by Florida Housing to review and approve the Universal Cycle applications operates as set forth in Florida Administrative Code Rule 67-48.004, and is summarized as follows: Interested developers submit applications by a specified date. Florida Housing reviews all applications to determine if certain threshold requirements are met. A score is assigned to each application. Applications receive points towards a numerical score, based upon such features as programs for tenants, amenities of the development as a whole and of tenants’ units, local government contributions to the specific development, and local government ordinances and planning efforts that support affordable housing in general. Florida Housing has built into its scoring and ranking process a series of “tiebreakers” to bring certainty to the selection process. The tiebreakers are written into the Application Instructions which, as indicated above, are incorporated by reference into Florida Housing’s rules. After the initial review and scoring, a list of all applications, along with their preliminary scores, is published by Florida Housing on its website. The applicants are then given a specific period of time to alert Florida Housing of any errors they believe Respondent made in its initial review of competitors' applications. These potential scoring errors are submitted through a Notice of Possible Scoring Error, or "NOPSE". After Florida Housing staff has reviewed the NOPSEs, a revised scoring summary (the "NOPSE Scores") is published. Applicants can then attempt to "cure" certain items within their applications by supplementing, correcting or amending the application or its supporting documentation. Following the timely submittal of "cures", an applicant's competitors have an opportunity to comment on the attempted cures by filing a Notice of Alleged Deficiency, or "NOAD." Florida Housing staff reviews all of the submitted cures and NOADs and prepares its "final" scoring summary for all applications. An appeal procedure for challenging the final scores is set forth in Florida Administrative Code Rule 67-48.005. Following the completion of any appeal proceedings, Florida Housing publishes final rankings which delineate the applications that are within the “funding range” for the various programs. In other words, the final rankings determine which applications are preliminarily selected for funding. The applicants ranked in the funding range are then invited into a “credit underwriting” process. Credit underwriting review of a development selected for funding is governed by Florida Administrative Code Rule 67-48.0072. In the Credit Underwriting Process, third party financial consultants (selected by Respondent, but paid for by the individual applicants) determine whether the project proposed in the application is financially sound. The independent third party looks at every aspect of the proposed development, including the financing sources, plans and specifications, cost analysis, zoning verification, site control, environmental reports, construction contracts, and engineering and architectural contracts. Pershing Park’s Application in the 2009 Universal Cycle Pershing Park timely submitted an application in the 2009 Universal Cycle seeking an award of Tax Credits and a supplemental loan to construct a 92-unit affordable rental housing development in Orlando, Orange County, Florida. The application proposed total development costs of $16,321,711 of which $14,429,558 were considered "allowable" costs on which an allocation of Housing Credits could be based. Pershing Park projected that approximately $8.8 million in construction financing and approximately $9.77 million in permanent financing would be generated from the sale of housing credits. The 2009 Universal Cycle also permitted applicants to project that a portion of their construction and permanent financing would be sought from funding made available through the ARRA. Pershing Park proposed in its application that $3.38 million in construction and permanent financing would result from an anticipated award of ARRA funding. The Pershing Park application was the subject of multiple NOPSEs, which questioned whether it was part of a pool of related applications (which would have relegated it to Priority II status under the 2009 rules); whether the required developer experience was demonstrated; whether the density on site allowed construction of 92 units; and whether the development site had a valid address. None of these NOPSEs was adopted by Florida Housing. Pershing Park complied with all of the requirements of the 2009 Universal Cycle Application and Instructions, and achieved a perfect score for its application. Pershing Park also achieved maximum tie-breaker points. As a result, Pershing Park was allocated $1,502,550 in annual Tax Credits. Economic Downturn and ARRA By the fall of 2008, significant changes were taking place in the economic environment and the affordable housing market in particular, and it became evident that the market for Tax Credits had dropped precipitously. Many projects that were awarded Tax Credits during the 2007 and 2008 Universal Cycles experienced difficulty in finding syndicators to purchase the awarded Tax Credits, or to purchase them at previously available rates, and, thus, were unable to proceed to closing. In February, 2009, in recognition of the collapse of the housing market and the difficulty in marketing and syndicating Tax Credits, Congress, as part of its economic stimulus efforts, enacted the ARRA, which established mechanisms to assist in the development of affordable housing and offset some of the economic devastation to developers. Congress included specific provisions in the ARRA intended to address the condition of the Tax Credit market. Section 1602 of the ARRA authorized the state Tax Credit allocating agencies to return up to 40 percent of the state's 2009 annual Tax Credit allocation, as well as Tax Credits awarded in 2007 and 2008 to the federal government, to be exchanged for a cash distribution of 85 cents for each tax credit dollar returned. The exchange of 2007 and 2008 Tax Credits generated a pool of $578,701,964 for the State of Florida. The RFP In response to ARRA, on February 26, 2010, Florida Housing issued RFP 2010-04 (the “RFP”), setting forth criteria and qualifications for developers to seek funding for affordable housing projects from money that had been allotted by the federal government as part of economic stimulus efforts. Except as specified otherwise in the RFP, the provisions of (Fla. Admin. Code) R. 67-48 (2009), governed the allocation of Exchange funds. The RFP solicited proposals from applicants with an “Active Award” of 9 percent (competitively awarded) Tax Credits. Pershing Park and 29 other applicants submitted proposals in response to the RFP, seeking awards ranging from $1.8 million to $5.0 million. Pershing Park and 28 of the 29 other applicants met the threshold requirements of the RFP. Pershing Park was preliminarily awarded $4.1 million in Exchange funding, and was invited into the credit underwriting process for both its 2009 award of tax credits and its 2010 award of Exchange funding. Credit Underwriting The representations contained in the applications for funding through FHFC are essentially taken at "face value" during the application scoring process. However, if invited to enter the underwriting process, the applicant's information is examined with an elevated level of scrutiny. Indeed, RFP 2010- 04 expressly advised applicants of this additional layer of review: An analysis of the Sponsor shall be completed with more in-depth consideration to key topics than typically completed by Florida Housing, including liquidity, net worth, unrestricted assets, and contingent liabilities. An analysis of the credit worthiness of the Developer shall be completed with more in-depth review than typically considered, including areas of past performance, default history, failed conversions, guarantor performance, and outstanding contingencies. (RFP 2010-04, Section Five, C.1.f, g.) Under the Credit Underwriting process, a professional credit underwriter is appointed by Florida Housing to review the proposed project that qualified for funding as a result of the Universal Cycle. Pursuant to the procedures set forth in Florida Administrative Code Rule 67-48.0072, Fla. Admin. Code, the credit underwriter reviews and assesses numerous financial, demographic, and market factors concerning the proposed project. The credit underwriter selected by Florida Housing to review the Pershing Park application was First Housing Development Corporation (“First Housing”). The credit underwriting process resulted in a negative recommendation from First Housing, based primarily on the "Developer Experience," contained at Exhibit 11 of Pershing Park's application. On June 18, 2010, Florida Housing’s Board of Directors considered First Housing's recommendation and voted to rescind funding to Pershing Park. This action effectively stopped the underwriting process. At hearing, Douglas McCree, CEO of underwriter First Housing, elaborated on his concerns regarding the Developer which formed the basis for his recommendation to deny funding to Pershing Park: The experience provided by the Developer's Principal (Mr. White) is more than 25 years old and involved a project completed before the Low Income Housing Tax Credit Program existed; One of the two projects identified as developer experience was foreclosed upon shortly after being placed in service; The Developer was not forthcoming with requested information, and in particular, did not reveal an action brought by the Securities and Exchange Commission against one of Mr. White's former companies (Whitemark Homes, Inc.); Mr. White apparently took no part in any activity as Principal of the Developer, and that all work normally done by or at the instance of the Principal was done by others without input from the Developer's Principal; The Pershing Park application was prepared and delivered to Florida Housing by employees of the GC, not the Developer. The Applicant, Developer, and General Contractor Southern Affordable Services, Inc. ("SAS") was formed in 2009 when more opportunities opened up for the development of affordable housing by non-profit entities. SAS is the sole member of the general partner and of the limited partner in SAS Fountains at Pershing Park, Ltd., the limited partnership which is the applicant. In Florida Housing's application process, the applicant is the owner. The owner directly contracts with the architect, the engineer, the developer, the general contractor ("GC"), and the management company. The applicant signs the notes for the financing and signs the loans. The applicant entity will become the owner of the project upon its completion. Applicants for Tax Credit financing are single asset, single purpose entities, usually established as limited partnerships, often with the same entity initially serving in the capacity of both a fractional (0.01%) general partner and a majority (99.99%) limited partner. A Housing Credit Syndicator purchases the limited partnership interest and either sells the credits to investors or uses the credits itself to offset tax liability. SAS is also the sole member of the developer, Southern Affordable Development, LLC. If SAS makes a profit from the Pershing Park development, such profit would be held and used to further the mission of the 50l(c)(3) corporation that is SAS. That mission is to help those who are disadvantaged, poor, and distressed, particularly in the area of housing. SAS also anticipates engaging in some wellness services and wellness care within its affordable housing developments. Scott Culp is a Principal with CPG Construction, LLLP ("CPG") and a licensed GC in the State of Florida. CPG is a multi-family residential builder almost exclusively of affordable rental housing. CPG is a general contracting company, but the services it provides to its clients include anything that relates in any manner to the construction of multi-family communities. CPG would be the GC on the Pershing Park project if the FHFC funding is restored. Mr. Culp has been involved in the development of approximately 75 affordable rental housing developments from 1995-2010, containing over 20,000 units. Over 50 of those 75 developments are in Florida. He has been involved in preparing and submitting between 400 and 500 applications to FHFC for financing. SAS relied on CPG and its Principal, Mr. Culp, to do the mechanical preparation of the forms, and particularly to give SAS guidance on how to prepare them correctly, and avoid errors. SAS's President, Scott Clark, understood the process to be very complicated and exacting, and one that was beyond his expertise. Thus, he leaned on the expertise of Mr. Culp and CPG to see that it was done correctly. Mr. Clark has known Mr. Culp for over 20 years. Generally, the primary role of the GC is to build the project. The GC's role is different from the Developer, in that the GC's obligation in a construction contract is for the construction in accordance with the plans and specifications, the contract documents, and whatever the owner has chosen to include in those documents. Typically, the Developer is involved with the owner making sure all those contract documents accurately reflect what the owner wants. The contractor is ultimately responsible for the actual construction in accordance with those contract documents. Pershing Park did not use a paid consultant to prepare its application. CPG assisted SAS with most parts of the application, but did not charge SAS a consulting fee for its services. CPG did the work because it was trying to maintain construction volume, and will likely be the GC on the project and earn a GC fee if the funding is approved. There is no requirement in Florida Housing's rules that a Principal of the owner or applicant must personally fill in the dots and check the boxes in the application submission process. However, there is a certification page included in the application that the owner must sign, indicating what he is proposing and what he is committing to. In this instance, the certification was appropriately signed by Scott Clark as President of SAS, the sole member of the general partner and of the limited partner in the applicant, SAS Fountains at Pershing Park, Ltd. In the development of affordable housing, as with any real estate development, a team approach is taken to development. The owner/applicant is ultimately responsible for the project, but the development team must be identified in the application. FHFC defines the development team to include the Developer, Management Agent, General Contractor, Architect/Engineer, Attorney, and Accountant. Florida Housing's rules define "Developer" as "any individual, association, corporation, joint venturer, or partnership which possesses the requisite skill, experience, and credit worthiness to successfully produce affordable housing as required in the Application." Fla. Admin. Code R. 67- 48.002(29). The developer routinely relies on the work of other professionals to perform their part of the job. For example, the developer relies on the architect to review plans for compliance with code, and if deemed necessary, the developer or contractor may even hire a third party architect to do peer review to ensure the project architect got it right. However, despite the developer’s hiring an architect to do code review, the developer is still responsible to the owner to perform his tasks with regard to ensuring those things are done. The developer does not have a contract with the architect; rather, the developer is coordinating that professional's work on behalf of the owner. While the developer may be responsible for seeing that necessary steps for the construction of the development have been done, there are many tasks which the developer does not and cannot personally do. For example, the developer may be responsible for assuring that the project is appropriately engineered to accommodate site conditions and utilities, but it is the project's licensed engineer that directly performs that work. And the developer may be ultimately responsible for the design and location of the buildings on the site to comply with site planning requirements, but the developer would rely on a licensed architect to design the buildings, and possibly a licensed engineer as to their configurations on the site. Similarly, the developer may be responsible for the design and location of landscaping features, but would rely on the landscape architect to perform those functions. And again, the developer may be responsible for compliance within environmental constraints on the site, and for ensuring that soil and other site conditions are conducive to the site development plan, but would rely on soil scientists and environmental consultants to actually perform those tasks. Although the developer is responsible for delivery of the finished product, FHFC's own rules specify that it is the GC who bears the responsibility for managing and controlling the construction of the development. Fla. Admin. Code R. 67- 48.0072(17)(e). By contrast, FHFC's rules do not specifically identify any task of the developer which is not delegable. Developer Experience The 2009 Universal Cycle Application Instructions set forth the experience that a Developer must demonstrate in order to be a candidate for funding in that cycle: Each experienced Developer or Principal of Developer must demonstrate experience in the completion; i.e., the certificate of occupancy has been issued for at least one building, of at least two affordable rental housing developments, at least one of which consists of a total number of units no less than 50 percent of the total number of units in the proposed Development, by providing a prior experience chart behind a tab labeled “Exhibit 11”. If providing experience acquired from a previous affordable housing Developer entity, the person signing the Developer or Principal of Developer Certification form must have been a Principal or Financial Beneficiary of that Developer entity. (Instructions, Part II B.1.C.) (Emphasis in original.) As noted, the Developer entity for Pershing Park, Southern Affordable Development, LLC, is a newly formed company with no development experience in its own right. Pursuant to FHFC rules, the developer identified as its manager Kenneth L. (Larry) White as bringing development experience to the organization.2/ It was necessary to have an experienced developer like Mr. White involved in this project. Otherwise, Mr. Clark, as president of the sole member of Southern Affordable Development, would have to run the development. But Mr. Clark is not a developer, and recognized he was in no position to run the development. Rather, he needed someone who had been in the development arena before, and knew that Mr. White was an experienced developer. Mr. White was retained as manager by the Developer entity through an Independent Services Agreement. As such, he is not part of the ownership structure, nor is he an employee. Rather, he is an independent contractor, engaged with particular duties as the manager of that business. Mr. White's scope of services is set out in Article 3 of the Agreement, and requires him to serve as an officer or manager of the Developer entity. Specifically, Mr. White is to provide the Developer entity with his expertise and advice relating to the development of affordable housing as the Developer entity deems necessary. The Agreement also states that Mr. White has no authority to bind the Developer entity, and cannot make any discretionary decisions on behalf of the Company. Mr. White reasonably understands this latter restriction to mean he may not exceed his scope of services. Mr. White's specific direction from SAS's President was to see that the construction of the project is done in a timely and appropriate manner. Consistent with the 2009 Universal Cycle Instructions, the Pershing Park application identified two affordable housing developments that Mr. White had been involved in developing: the 180-unit Holly Creek Apartments in Texas; and the 168-unit Woodbridge Apartments in Orlando, Florida. Both of these developments were developed as affordable housing, and Mr. White played a key role in their development. Holly Creek was completed in 1984, and Woodbridge was developed from 1985 to 1986. Notably, FHFC rules impose no standard for how recently a development must have been constructed in order for it to serve as proof of developer experience. Florida Housing does not dispute that Pershing Park's developer experience as set forth in Exhibit 11 of Petitioner's application facially satisfies the threshold requirements of the 2009 Universal Cycle. FHFC Concern over the Woodbridge Development Respondent's (and First Housing's) concerns regarding reliance on the Woodbridge development as a source of developer experience is that shortly after its completion in 1985 a foreclosure action was initiated. However, the unrebutted evidence established that the foreclosure was unrelated to any deficiency in the development of the project, or in Mr. White's services as the developer of the project. Rather, the foreclosure was apparently the result of the owner, Goldenrod Partnership, not making required payments on the debt incurred to construct the project. Although Mr. White was a general partner of the owner entity, he was not personally involved in the decisions not to service the debt. The evidence established that those decisions were made by the two financial partners in Goldenrod, Robert Brunson and Barry Ellis. Respondent does not contend that Mr. White failed to satisfactorily exercise his duties relating to the design, permitting, construction, and lease-up of the project. The fact that subsequent to the completion of the Woodbridge project a summary judgment of foreclosure was entered against Goldenrod Partnership and its general partners, does not negatively reflect on Mr. White's abilities as a developer. And given the circumstances of the foreclosure as established in this record, nor should it tarnish Mr. White's credit worthiness. The unrebutted evidence established that, following the foreclosure on Woodbridge, Mr. White has had a successful career in residential real estate development, and has had no trouble accessing credit to do so. Mr. White has constructed roughly ten multi-family developments containing approximately 2,000 units, and more than 40 single-family developments, containing over 3,000 units. FHFC Concern over Whitemark and the SEC Respondent’s other primary concern over Mr. White's development experience centers on his service as CEO of Whitemark Homes, Inc., a publicly traded company, at the time that the Securities and Exchange Commission ("SEC") investigated some financial reporting issues regarding Whitemark. Those reporting issues concerned how Whitemark prepared consolidated financial statements after its acquisition of another company in north Florida. Specifically, the acquired company had certain contracts and options to purchase valuable beachfront property for condominium development. Whitemark's chief financial officer (not Mr. White) and the company's certified public accounting firm agreed on the approach to valuing and reporting these assets on financial disclosures filed with the SEC. At hearing, unrebutted testimony established that the CFO and the accounting firm took additional due diligence steps to verify that the manner of reporting these assets was appropriate. The SEC disagreed with that conclusion and initiated an enforcement action. Ultimately, after spending a significant amount of money, energy, and attention on the SEC matter, Mr. White and Whitemark elected to settle the matter with the SEC. According to the terms of the settlement, Mr. White was ordered to disgorge the proceeds of certain sales of stock he had engaged in as part of a regular, structured stock sale. He also was required to pay interest connected with those stock sales. No fines or penalties were imposed, and no restrictions regarding Mr. White's service to the company were imposed.3/ Neither the SEC order, nor the underlying factual basis for it, related to Mr. White's skills or abilities as a developer. They were not the result of any failed or incomplete developments, nor of any misappropriation of company funds or shareholder money. Rather, the matter appears to have resulted from a difference of professional opinion on a complex accounting matter. More importantly, the entry of the cease and desist order did not affect Mr. White's credit worthiness. It has not impaired his ability to access credit for development activities. Although the company with which Mr. White is now associated, Lifeway Homes, is not currently developing home sites due to economic conditions and the poor market for new construction, Mr. White has successfully engaged in development activities after the entry of the cease and desist order, developing five projects totaling around 700 units. At hearing, First Housing's representative criticized the Applicant for not providing complete information during the credit underwriting process. However, there is no competent substantial evidence of record that the Applicant or its representatives or Development team members withheld or concealed any information from the credit underwriter, or failed to provide information in response to a request from the underwriter.4/
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a Final Order directing SAS Fountains at Pershing Park, LTD; proceed to closing on its requested tax credit and Exchange Program financing. DONE AND ENTERED this 30th day of September, 2010, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS 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 30th day of September, 2010.
The Issue The issue in this case is whether Florida Housing's proposed action to deem Madison Landing eligible for an award of housing tax credit funds, as contemplated under Request for Applications 2020-202 Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach and Pinellas Counties ("the 2020 RFA"), is contrary to governing statutes, rules or policies, or the 2020 RFA specifications. The standard of proof is whether Florida Housing's proposed action is clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Florida Housing is a public corporation organized pursuant to Chapter 420, Part V, Florida Statutes, whose address is 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301, and for the purposes of these proceedings, an agency of the State of Florida. Madison Landing is an Applicant requesting an allocation of $1,950,000 in competitive housing credits in in the 2020 RFA. Its application, 2021-021C, was deemed eligible, but was not selected for funding by Florida Housing. Madison Park is an Applicant requesting an allocation of $2,881,960 in competitive housing credits in the 2020 RFA. Its application, 2021-004C, was deemed eligible, but was not selected for funding by Florida Housing. WRDG is an Applicant requesting an allocation of $2,375,000 in competitive housing credits in the 2020 RFA. Its application, 2021-025C, was deemed eligible and was preliminarily selected for funding by Florida Housing. Florida Housing administers various affordable housing programs, including the Housing Credit Program, pursuant to Section 42 of the Internal Revenue Code (the "IRC" or "the Code") and section 420.5099, under which Florida Housing is designated as the Housing Credit agency for the State of Florida within the meaning of Section 42(h)(7)(A) of the IRC, and Florida Administrative Code Chapters 67-48 and 67-60. Florida Housing has established, by rule, a competitive solicitation process known as the Request for Applications ("RFA") to assess the relative merits of proposed developments, pursuant to chapters 67-48 and 67-60. An RFA sets forth the information required to be provided by an Applicant, which includes a general description of the type of projects that will be considered eligible for funding and delineates the submission requirements. While there are numerous references to Florida Housing's rules throughout the RFA, RFAs themselves are not adopted or incorporated by rule. Florida Housing issues many RFAs each year. Although an issued RFA may be similar to these issued in previous years, each RFA is unique. The RFA process begins when Florida Housing requests the Florida Housing Board of Directors ("the Board") to approve Florida Housing's plan for allocating its resources through the various RFAs. If the plan is approved by the Board, Florida Housing begins working on each individual RFA. Florida Housing posts draft documents to its website for public review, such as a draft of the RFA, and holds a workshop in which the RFA is discussed in detail, highlighting language that changed from the previous year. The public is given the opportunity to ask questions and submit written comments for further suggestions and/or additional edits prior to the RFA's issuance. Marisa Button, Director of Multifamily Programs for Florida Housing, credibly and persuasively testified that Questions and Answers are provided as guidance, but do not provide new requirements to override the terms of an RFA. In the event of an inconsistency between Questions and Answers and another form of guidance for applicants, Florida Housing has maintained the position that the least restrictive guidance controls. Rule 67-60.006 provides, in pertinent part, that "[t]he failure of an Applicant to supply required information in connection with any competitive solicitation pursuant to this rule chapter shall be grounds for a determination of non-responsiveness with respect to its Application." By applying, each Applicant certifies that: Proposed Developments funded under this RFA will be subject to the requirements of the RFA, inclusive of all Exhibits, the Application requirements outlined in Rule Chapter 67-60, F.A.C., the requirements outlined in Rule Chapter 67-48, F.A.C. and the Compliance requirements of Rule Chapter 67-53, F.A.C. On August 26, 2020, Florida Housing issued the 2020 RFA, proposing to provide an estimated $18,669,520 of Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas Counties. Modifications to the 2020 RFA were made on September 11 and October 12, 2020. The Application Deadline for the 2020 RFA was October 20, 2020. On or about October 20, 2020, 35 applications were submitted in response to the 2020 RFA. A Review Committee was appointed to review the applications and make recommendations to the Board. The Review Committee found 34 applications eligible and one application ineligible. Through the ranking and selection process outlined in the 2020 RFA, eight applications were recommended for funding. In accordance with the funding selection process set forth in the 2020 RFA, one application was selected from each of Duval, Palm Beach, Pinellas, Hillsborough, and Orange counties; two applications were selected from Broward County; and one application (WRDG) was selected from any of these counties. On December 4, 2020, the Board approved these recommendations. On December 17, 2020, Madison Landing timely filed a Petition for Formal Administrative Proceedings, which was referred to DOAH and assigned Case No. 21-0146BID. This petition challenged the eligibility of both WRDG and MHP FL II, LLC. On January 13, 2021, Madison Landing dismissed all of its allegations against MHP FL II, LLC. On December 17, 2020, Madison Park timely filed a Petition for Formal Administrative Proceedings, which was referred to DOAH and assigned Case No. 21-0147BID. An amended petition was filed on January 13, 2021. This petition challenged the eligibility of both WRDG and Madison Landing. On January 26, 2021, all parties entered into a Stipulation for Entry of Findings of Fact in which WRDG conceded that its application should have been found ineligible. WRDG is ineligible for funding under the 2020 RFA. With WRDG ineligible for funding, Madison Landing would be selected for funding in place of WRDG. If both WRDG and Madison Landing were found to be ineligible for funding, Madison Park would be selected for funding in place of WRDG and Madison Landing. No other Applicant selected for funding will be impacted regardless of the outcome of this case. No challenges were made to the terms of the 2020 RFA. Madison Landing's application includes an executed Applicant Certification and Acknowledgment Form, which provides, "The Applicant, the Developer and all Principals are in good standing among all other state agencies and have not been prohibited from applying for funding." The phrase "good standing among all other state agencies" is not defined; and no evidence was presented as to the definitive meaning of the phrase. No evidence was presented that Madison Landing's Principals are not in good standing with any state agency or have been prohibited from applying for funding. The 2020 RFA at Section Four A.3.a. provides that Applicants must disclose the name of the Applicant entity and provide evidence that it is legally formed: (2) The Applicant must be a legally formed entity [i.e., limited partnership, limited liability company, etc.] qualified to do business in the state of Florida as of the Application Deadline. Include, as Attachment 2 to Exhibit A, evidence from the Florida Department of State, Division of Corporations, that the Applicant satisfies the foregoing requirements. Such evidence may be in the form of a certificate of status or other reasonably reliable information or documentation issued, published or made available by the Florida Department of State, Division of Corporations. Rule 67-48.002(9) (6/23/2020), defines "Applicant" as follows: (9) "Applicant" means any person or legal entity of the type and with the management and ownership structure described herein that is seeking a loan or funding from the Corporation by submitting an Application or responding to a competitive solicitation pursuant to rule Chapter 67-60, F.A.C., for one or more of the Corporation's programs. For purposes of Rules 67-48.0105, 67-48.0205 and 67- 48.031, F.A.C., Applicant also includes any assigns or successors in interest of the Applicant. Unless otherwise stated in a competitive solicitation, as used herein, a 'legal entity' means a legally formed corporation, limited partnership or limited liability company. The 2020 RFA at Section Four A.3.c. provides that Applicants must disclose Principals of both the Applicant and Developer entities. The 2020 RFA provides in pertinent part: c. Principals Disclosure for the Applicant and for each Developer (5 points) (1) Eligibility Requirements To meet the submission requirements, upload the Principals of the Applicant and Developer(s) Disclosure Form (Form Rev. 05-2019) ("Principals Disclosure Form") as outlined in Section Three above. Prior versions of the Principal Disclosure Form will not be accepted. To meet eligibility requirements, the Principals Disclosure Form must identify, pursuant to Subsections 67-48.002(94), 67-48.0075(8) and 67- 48.0075(9), F.A.C., the Principals of the Applicant and Developer(s) as of the Application Deadline. A Principals Disclosure Form should not include, for any organizational structure, any type of entity that is not specifically included in the Rule definition of Principals. For Housing Credits, the investor limited partner of an Applicant limited partnership or the investor member of an Applicant limited liability company must be identified on the Principal Disclosure Form. Rule 67-48.002(94) defines "Principal" as follows: (94) "Principal" means: For a corporation, each officer, director, executive director, and shareholder of the corporation. For a limited partnership, each general partner, and each limited partner of the limited partnership. For a limited liability company, each manager and each member of the limited liability company. For a trust, each trustee of the trust and all beneficiaries of majority age (i.e., 18 years of age) as of the Application Deadline. Page 10 of 22. For a Public Housing Authority, each officer, director, commissioner, and executive director of the Authority. The requirement to provide evidence that the Applicant is a legally formed entity, as well as the requirement to provide a Principals for Applicant and Developer(s) Disclosure Form, are identified as "Eligibility Items." Section Five A.1. of the 2020 RFA states that "only Applications that meet all of the following Eligibility Items will be eligible for funding and considered for funding selection." Madison Landing submitted Principals of the Applicant and Developer(s) Disclosure Form(s) with its application. Both forms were approved during the Advance Review Process. On the Principals of the Applicant form, Madison Landing II, LLC, was identified as the Applicant entity. The Principals of the Applicant entity were identified as Patrick E. Law, Manager; Madison Landing II Apartments, LLC, Non-Investor Member; and Patrick E. Law, Investor Member. Madison Landing II Apartments, LLC, filed Articles of Organization for Florida Limited Liability Company with the Florida Division of Corporations on January 5, 2021, with an effective date of December 31, 2020. The 2020 RFA requires that the Applicant demonstrate that it is a legally formed entity as of the Application Deadline; however, there is no explicit requirement in the 2020 RFA that each Principal of the Applicant demonstrate that it is a legally formed entity as of the Application Deadline. Ms. Button testified that her initial view was that the failure of Madison Landing's Principal, Madison Landing II Apartments, LLC, to incorporate by the application deadline should render the application ineligible. However, upon further research, she changed her position, believing that Florida Housing was precedentially bound by a previous final order, which found that an application was eligible under similar legal and factual circumstances. The previous case, on which Florida Housing relied, was decided before Florida Housing adopted the current RFA procedures for awarding funding. Ms. Button testified, however, that while some of the processes followed during the Universal Cycle, in place at that time, were different than the RFA process, the requirements for disclosure of Principals were essentially the same. Florida Housing allows interested parties to submit written questions to be answered by Florida Housing staff for each RFA that is issued. The Question-Answer period is referenced specifically within each RFA. The following Question and Answer are posted on Florida Housing's website for RFA 2018-111: Question 12: Do the entities listed on the Principal Disclosure Form have to be active as of the stamped "Approved" date or as of the Application Deadline? Answer: As of the Application Deadline. The Applicant may upload a Principals Disclosure Form stamped "Approved" during the Advance Review Process provided (a) it is still correct as of the Application Deadline, (b) it was approved for the type of funding being requested (i.e., Housing Credits or Non-Housing Credits) The same Question and Answer above are on Florida Housing's website for RFA 2018-110; RFA 2018-112; and RFA 2018-113. The same Question and Answer, however, do not appear in Questions and Answers for the 2020 RFA at issue in this case. Although Questions and Answers from past RFAs remain on the Florida Housing website, they are discrete to the specific RFA for which they were issued. Rule 67-48.002(9) (7/2018) defines Applicant as follows: (9) "Applicant" means any person or legal entity of the type and with the management and ownership structure described herein that is seeking a loan or funding from the Corporation by submitting an Application or responding to a competitive solicitation pursuant to rule chapter 67-60, F.A.C., for one or more of the Corporations programs. For purposes of rules 67-48.0105. 67-48.0205 and 67- 48.031, F.A.C., Applicant also includes any assigns or successors in interest of the Applicant. Unless otherwise stated in a competitive solicitation, as used herein, a legal entity means a legally formed corporation, limited partnership or limited liability company with a management and ownership structure that consists exclusively of all natural persons by the third principal disclosure level. For Applicants seeking Housing Credits, the Housing Credits Syndicator/Housing Credit investor need only be disclosed at the first principal level and no other disclosure is required. The terms "first principal disclosure level" and "third principal disclosure level" have the meanings attributed to them in the definition of "Principal." Rule 67-48.002(9) (11/2011) defines Applicant as follows: (9) "Applicant" means any person or legally formed entity that is seeking a loan or funding from the Corporation by submitting an Application or responding to a request for proposal for one or more of the Corporation's programs. For purposes of Rules 67-48.0105, 67-48.0205 and 67-48031, F.A.C., Applicants also includes any assigns or successors in interest of the Applicant. Madison Park argues that Madison Landing's Principal, Madison Landing II Apartments, LLC, did not demonstrate that it was a legally- formed entity as of the Application Deadline, and therefore, Madison Landing's Principal Disclosure Form did not satisfy the 2020 RFA's requirements. Madison Park argues that Madison Landing's application should be deemed ineligible for funding as a result. Based on the weight of the credible evidence and the language of the 2020 RFA and the governing law, the undersigned finds that Florida Housing did not contravene the 2020 RFA, or any other applicable authority, through the process by which it determined that Madison Landing's application was eligible for the award.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order: (1) finding the application of WRDG ineligible for funding; (2) finding the application of Madison Landing eligible for funding; and (3) dismissing the protest of Madison Park. DONE AND ENTERED this 29th day of March, 2021, in Tallahassee, Leon County, Florida. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 Christopher Dale McGuire, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC S BRITTANY O. FINKBEINER Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of March, 2021. J. Timothy Schulte, Esquire Zimmerman, Kiser & Sutcliffe, P.A. 315 East Robinson Street Post Office Box 3000 (32802) Orlando, Florida 32801 Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 1400 Village Square Boulevard, Suite 3-231 Tallahassee, Florida 32312
The Issue The issue is whether Florida Housing Finance Corporation’s (Florida Housing) intended decision on January 29, 2016, to award low-income housing tax credits for an affordable housing development in Hillsborough County pursuant to Request for Applications 2015-107 (RFA-107) was contrary to Florida Housing’s rules, policies, or solicitation specifications; and, if so, whether that determination was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact The Parties Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. One of its responsibilities is to award low-income housing tax credits, which developers use to finance the construction of affordable housing. Tax credits are made available to states annually by the United States Treasury Department and then are awarded pursuant to a competitive cycle that starts with Florida Housing’s issuance of an RFA. This proceeding concerns RFA-107. Madison is an applicant entity for a proposed affordable housing development in Hillsborough County. ARD is a developer entity of affordable housing. SP Gardens and City Edge are entities in the business of providing affordable housing and filed applications pursuant to RFA-107. Background On September 21, 2015, Florida Housing published on its website proposed solicitation RFA-107, inviting applications for the award of tax credits for the development of affordable housing located in six counties, including Hillsborough County. The RFA provided that only one applicant would be awarded tax credits for Hillsborough County. In response to the RFA, six applications were submitted for Hillsborough County. A scoring committee appointed by Florida Housing evaluated the applications and submitted a recommendation to the Board of Directors (Board). On January 29, 2016, all participants received notice that the Board had determined which applicants were eligible or ineligible for consideration of funding. Only the application filed by a non- party, Mango Blossoms, was found ineligible. The Board determined that SP Gardens and City Edge satisfied all mandatory and eligibility requirements for funding and received “perfect” scores of 28 points out of a total of 28 points. They were ranked one and four, respectively, based on random lottery numbers assigned by the luck of the draw. Because Bethune and The Boulevard are no longer parties, and their applications have been deemed to be ineligible by Florida Housing, SP Gardens and City Edge are now ranked one and two. The Board also determined that Petitioners satisfied all mandatory and eligibility requirements for funding; however, they received a score of 23 out of 28 total points, and were ranked below SP Gardens and City Edge. In this bid dispute, Petitioners contend that Florida Housing erred in the scoring, eligibility, and award decision of the applications of SP Gardens and City Edge. But for the incorrect scoring of those two applications, Petitioners argue they would have been entitled to an allocation of housing credits or would have been moved up in the ranking. SP Gardens Consistent with its policy, even though an appeal was taken by Petitioners, in 2016, Florida Housing awarded tax credits to the highest ranked applicant, SP Gardens. On April 21, 2016, Florida Housing issued an invitation to credit underwriting, which was accepted by the applicant on April 25, 2016. SP Gardens closed on the purchase and sale agreement, as amended, on June 15, 2016, and Florida Housing issued a carry- over allocation agreement on August 5, 2016. The applicant has since completed a credit underwriting with a positive recommendation, closed on the financing with the tax credit investor, and commenced construction of its development. Petitioners contend the application of SP Gardens is deficient in three respects, which renders the applicant ineligible for funding. First, they contend SP Gardens failed to demonstrate control over the site of the project, as required by the RFA. Second, they contend the purchase and sale agreement is invalid because the applicant cannot enforce the specific performance of the contract. Finally, they contend the development location point (DLP) is not located on the parcel where most of the units will be constructed. Section 4.A.8.a. of the RFA requires in part that the applicant demonstrate site control in the following manner: The Applicant must demonstrate site control by providing, as Attachment 15 to Exhibit A, the documentation required in Items a., b., and/or c., as indicated below. If the proposed Development consists of Scattered Sites, site control must be demonstrated for all of the Scattered Sites. SP Gardens submitted documentation to satisfy item a., which requires that an “eligible contract” be provided with the application in order to demonstrate control over the project site. An applicant typically submits an address, property description, metes and bounds, folio number, intersections of streets, or other information that describes the subject property. Florida Housing’s practice is to accept the representations of an applicant. SP Gardens’ purchase and sale agreement (contract) identifies the subject property using an engineer’s drawing with sketched hash marks, a description of the property as “approximately two acres,” and an address of “1108 E. Bloomingdale Avenue” in Valrico. County records do not reflect that such an address exists. However, the records do indicate an address of 1108 East Bloomindale Avenue that is on the proposed site and is owned by GF Financial, LLC, the seller of the property. Except for this scrivener’s error, the purchase and sale agreement is otherwise an acceptable agreement. An eligible contract must include a specific performance remedy. Petitioners contend the purchase and sale agreement cannot be enforced because of various alleged deficiencies in the agreement, including a failure to provide a legal description of the property and language in the agreement which does not reflect a meeting of the minds of the buyer and seller. However, a legal description of the property is not required. Then, too, Florida Housing does not attempt to determine if there was a meeting of the minds of the parties or if the agreement is legally enforceable. Only a circuit court may do so. See § 26.012, Fla. Stat. Petitioners also contend the DLP is not located on a parcel where most of the units will be constructed. The DLP is located on the property that is identified in the purchase and sale agreement. Whether or not the property ends up consisting of scattered sites will be addressed during the credit underwriting process. Florida Administrative Code Rule 67- 48.0072 provides in part that “credit underwriting is a de novo review of all information supplied, received or discovered during or after any competitive solicitation scoring and funding preference process, prior to the closing on funding.” Pursuant to this rule, during the credit underwriting process, a scattered site applicant must demonstrate compliance with the RFA. Also, in the final site plan approval process, the configuration of the proposed development will be fleshed out. With the advantage of hindsight in this case, this is exactly what SP Gardens did after it was issued an invitation to credit underwriting. By providing all required forms, a DLP, and appropriate assurances that it would comply with all RFA terms, SP Gardens has satisfied all RFA requirements. See, e.g., Brownsville Manor, LP v. Redding Dev. Partners, LLC, 224 So. 3d 891, 894 (Fla. 1st DCA 2017). The preponderance of the evidence supports a finding that the application of SP Gardens is eligible for funding. City Edge Petitioners allege that City Edge failed to disclose all of the principals of the applicant and developer. They also contend that City Edge is unable to pursue specific performance of its sale and agreement contract against the developer or the seller of the property. The RFA requires an applicant to “provide a list identifying the principals for the applicant and for each developer.” The application identifies City Edge as the applicant entity. It also identifies the general partner of the applicant entity, City Edge Senior GP, LLC, and its limited partner, The Richman Group of Florida, Inc. (TRGF). TRGF is both the limited partner of the applicant entity and the developer entity for City Edge. City Edge identified the principals for TRGF as of the application deadline. Florida Housing determined that this form was adequate to meet the requirements of the RFA. The application names James P. Hussey as the developer entity’s Treasurer. At hearing, Mr. Hussey’s position with TRGF was verified by TRGF’s vice president and a corporate document. Petitioners point out that, according to a printout of the annual report filed by TRGF with the Secretary of State, as shown on the SunBiz website, at the time the application was filed, the Treasurer of TRGF was Doreen Cole, and not Mr. Hussey. However, the evidence shows that Ms. Cole was removed from the position of Treasurer on or about September 1, 2015, and she subsequently separated from the company in late 2015. Through sworn testimony and a corporate record, City Edge established that Mr. Hussey was Treasurer at the time of the application deadline, November 5, 2015. Notably, Florida Housing does not rely on SunBiz for establishing who the principals of an entity are as of the application deadline. This is because SunBiz does not definitively identify the corporate officers as of the application deadline, and it sometimes contains errors. See, e.g., Warley Park, LTD v. Fla. Housing Fin. Corp., Case No. 17- 3996BID (Fla. DOAH Oct. 19, 2017; FHFC Dec. 8, 2017). For this reason, Florida Housing does not require applicants to provide SunBiz printouts to verify the names of the principals. Petitioners also contend that because of various deficiencies, the purchase and sale agreement cannot be enforced in circuit court. For the reasons expressed above, this determination does not lie within the jurisdiction of Florida Housing. In any event, the RFA requires that if the owner of the property is not a party to the eligible contract, the applicant must submit documents evidencing intermediate agreements between or among the owner, or other parties, and the applicant. Here, City Edge included in its application: (a) a purchase and sale agreement between 301 and Bloomingdale, LLC (the seller), and TRGF (the purchaser), and (b) a purchase and sale agreement between TRGF (the seller) and City Edge (the buyer). The latter document is the intermediate contract and meets all RFA-specified requirements for an intermediate contract. The documents reflect that TRGF possesses a specific performance remedy to compel 301 and Bloomingdale, LLC, to sell the property, and City Edge possesses the right to compel TRGF to perform under the intermediate contract. For purposes of ascertaining compliance with the RFA, the documents submitted by City Edge suffice. In a similar vein, Petitioners contend City Edge did not demonstrate site control because it did not include an eligible contract. Currently, 301 and Bloomingdale, LLC, is the owner of the property on which the housing will be built. City Edge attached to its application a purchase and sale agreement and an intermediate contract. The two contracts satisfy the elements of an eligible contract necessary to demonstrate control over the project site, they provide a specific performance remedy, and they conform to the RFA. The preponderance of the evidence supports a finding that City Edge’s application is eligible for funding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order dismissing the Protest of Petitioners. It is further recommended that Florida Housing reaffirm its decision to award tax credits to SP Gardens. DONE AND ENTERED this 6th day of June, 2018, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of June, 2018. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) Sarah Pape, Esquire Zimmerman, Kiser & Sutcliffe, P.A. Suite 600 315 East Robinson Street Orlando, Florida 32801-1607 (eServed) J. Timothy Schulte, Esquire Zimmerman, Kiser & Sutcliffe, P.A. Suite 600 315 East Robinson Street Orlando, Florida 32801-1607 (eServed) Craig D. Varn, Esquire Manson Bolves Donaldson Varn Suite 820 106 East College Avenue Tallahassee, Florida 32301-7740 (eServed) Christopher Dale McGuire, Esquire Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) Lawrence E. Sellers, Jr., Esquire Holland and Knight, LLP Suite 600 315 South Calhoun Street Tallahassee, Florida 32301-1872 (eServed) Tiffany A. Roddenberry, Esquire Holland & Knight, LLP Suite 600 315 South Calhoun Street Tallahassee, Florida 32301-1872 (eServed) M. Christopher Bryant, Esquire Oertel, Fernandez, Bryant & Atkinson, P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 (eServed) Amy Wells Brennan, Esquire Manson Bolves Donaldson Varn, P.A. Suite 300 109 North Brush Street Tampa, Florida 33602-2637 (eServed) Douglas P. Manson, Esquire Manson Bolves Donaldson Varn, P.A. Suite 300 109 North Brush Street Tampa, Florida 33602-2637 (eServed) Corporation Clerk Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed)
The Issue At issue in this proceeding is whether the actions of the Florida Housing Finance Corporation (“Florida Housing”) concerning the review and scoring of the responses to Request for Applications 2016-110, Housing Credit Financing for Affordable Housing Developments Located in Medium and Small Counties (the “RFA”), was clearly erroneous, contrary to competition, arbitrary or capricious. Specifically, the issue is whether Florida Housing acted contrary to the agency’s governing statutes, rules, policies, or the RFA specifications in finding that the applications of Petitioners JPM Outlook One Limited Partnership (“JPM Outlook”) and Grande Park Limited Partnership (“Grande Park”) were ineligible for funding.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: JPM Outlook is a Florida limited partnership based in Jacksonville, Florida, that is in the business of providing affordable housing. Grande Park is a Florida limited partnership based in Jacksonville, Florida, that is in the business of providing affordable housing. Hammock Ridge is a Florida limited liability company based in Coconut Grove, Florida, that is in the business of providing affordable housing. Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. For the purposes of this proceeding, Florida Housing is an agency of the State of Florida. Its purpose is to promote public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Housing is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code and has the responsibility and authority to establish procedures for allocating and distributing low-income housing tax credits. The low income housing tax credit program was enacted to incentivize the private market to invest in affordable rental housing. These tax credits are awarded competitively to housing developers in Florida for rental housing projects that qualify. The credits are then normally sold by developers for cash to raise capital for their projects. The effect of this sale is to reduce the amount that the developer would have to borrow otherwise. Because the total debt is lower, a tax credit property can (and must) offer lower, more affordable rents. Developers also covenant to keep rents at affordable levels for periods of 30 to 50 years as consideration for receipt of the tax credits. Housing tax credits are not tax deductions. For example, a $1,000 deduction in a 15-percent tax bracket reduces taxable income by $1,000 and reduces tax liability by $150, while a $1,000 tax credit reduces tax liability by $1,000. The demand for tax credits provided by the federal government exceeds the supply. Florida Housing is authorized to allocate housing tax credits and other funding by means of a request for proposal or other competitive solicitation in section 420.507(48). Florida Housing has adopted chapter 67-60 to govern the competitive solicitation process for several different programs, including the program for tax credits. Chapter 67-60 provides that Florida Housing allocate its housing tax credits, which are made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3). In their applications, applicants request a specific dollar amount of housing tax credits to be given to the applicant each year for a period of 10 years. Applicants will normally sell the rights to that future stream of income tax credits (through the sale of almost all of the ownership interest in the applicant entity) to an investor to generate the amount of capital needed to build the development. The amount which can be received depends upon the accomplishment of several factors, such as a certain percentage of the projected Total Development Cost; a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated area of some counties. This, however, is not an exhaustive list of the factors considered. Housing tax credits are made available through a competitive application process commenced by the issuance of a Request for Applications. A Request for Applications is equivalent to a “request for proposal,” as indicated in rule 67-60.009(3). The RFA in this case was issued on October 7, 2016. A modification to the RFA was issued on November 10, 2016, and responses were due December 2, 2016. A challenge was filed to the terms, conditions, or requirements of the RFA by parties not associated with the instant case, but that challenge was dismissed prior to hearing. Through the RFA, Florida Housing seeks to award up to an estimated $12,312,632 of housing tax credits to qualified applicants to provide affordable housing developments in Medium Counties, as well as up to an estimated $477,091 of housing tax credits to qualified applicants to provide affordable housing developments in Small Counties other than Monroe County. By the terms of the RFA, a review committee made up of Florida Housing staff reviewed and scored each application. These scores were presented in a public meeting and the committee ultimately made a recommendation as to which projects should be funded. This recommendation was presented to Florida Housing’s Board of Directors (“the Board”) for final agency action. On March 24, 2017, all applicants received notice that the Board had approved the recommendation of the review committee concerning which applications were eligible or ineligible for funding and which applications were selected for awards of housing tax credits, subject to satisfactory completion of the credit underwriting process. The notice was provided by the posting on Florida Housing’s website (www.floridahousing.org) of two spreadsheets, one listing the “eligible” and “ineligible” applications and one identifying the applications which Florida Housing proposed to fund. Florida Housing announced its intention to award funding to 10 developments, including Intervenor Hammock Ridge. Petitioners JPM Outlook and Grande Park were deemed ineligible. If JPM Outlook and Grande Park had been deemed eligible, each would have been in the funding range based on its assigned lottery number and the RFA selection criteria. If Grande Park had been deemed eligible, Hammock Ridge would not have been recommended for funding. Petitioners JPM Outlook and Grande Park timely filed notices of protest and petitions for administrative proceedings. The scoring decision at issue in this proceeding is based on Florida Housing’s decision that Petitioners failed to submit as Attachment 1 to Exhibit A the correct and properly signed version of the Applicant Certification and Acknowledgment Form. Petitioners’ admitted failure to submit the correct Applicant Certification and Acknowledgement Form was the sole reason that Florida Housing found Petitioners’ applications to be ineligible for funding. Section Four of the RFA was titled, “INFORMATION TO BE PROVIDED IN APPLICATION.” Listed there among the Exhibit A submission requirements was the Applicant Certification and Acknowledgement Form, described as follows: The Applicant must include a signed Applicant Certification and Acknowledgement form as Attachment 1 to Exhibit A to indicate the Applicant’s certification and acknowledgement of the provisions and requirements of the RFA. The form included in the copy of the Application labeled “Original Hard Copy” must reflect an original signature (blue ink is preferred). The Applicant Certification and Acknowledgement form is provided in Exhibit B of this RFA and on the Corporation’s Website http://www.floridahousing.org/Developers/ MultiFamilyPrograms/Competitive/2016- 110/RelatedForms/ (also accessible by clicking here). Note: If the Applicant provides any version of the Applicant Certification and Acknowledgement form other than the version included in this RFA, the form will not be considered. The final sentence of the quoted language is referred to by Florida Housing as the “effects clause.” The November 10, 2016, modifications to the RFA were communicated to applicants in three ways. First, Florida Housing provided a Web Board notice. The Florida Housing Web Board is a communication tool that allows interested parties and development partners to stay apprised of modifications to procurement documents. Second, each RFA issued by Florida Housing, including the one at issue in this proceeding, has its own specific page on Florida Housing's website with hyperlinks to all documents related to that RFA. Third, Florida Housing released an Official Modification Notice that delineated every modification, including a “blackline” version showing the changes with underscoring for emphasis. Brian Parent is a principal for both JPM Outlook and Grande Park. Mr. Parent received the Web Board notification of the RFA modifications via email. Upon receiving the email, Mr. Parent reviewed the modifications on the Florida Housing website. The modification to the RFA, posted on Florida Housing’s website on November 10, 2016, included the following modification of the Applicant Certification and Acknowledgement Form, with textual underscoring indicating new language: Pursuant to Rule 67-60.005, F.A.C., Modification of Terms of Competitive Solicitations, Florida Housing hereby modifies Item 2.b.(4) of the Applicant Certification and Acknowledgement Form to read as follows: (4) Confirmation that, if the proposed Development meets the definition of Scattered Sites, all Scattered Sites requirements that were not required to be met in the Application will be met, including that all features and amenities committed to and proposed by the Applicant that are not unit- specific shall be located on each of the Scattered Sites, or no more than 1/16 mile from the Scattered Site with the most units, or a combination of both. If the Surveyor Certification form in the Application indicates that the proposed Development does not consist of Scattered Sites, but it is determined during credit underwriting that the proposed Development does meet the definition of Scattered Sites, all of the Scattered Sites requirements must have been met as of Application Deadline and, if all Scattered Sites requirements were not in place as of the Application Deadline, the Applicant’s funding award will be rescinded; Note: For the Application to be eligible for funding, the version of the Applicant Certification and Acknowledgement Form reflecting the Modification posted 11-10-16 must be submitted to the Corporation by the Application Deadline, as outlined in the RFA. Rule 67-48.002(105) defines “Scattered Sites” as follows: “Scattered Sites,” as applied to a single Development, means a Development site that, when taken as a whole, is comprised of real property that is not contiguous (each such non-contiguous site within a Scattered Site Development, is considered to be a “Scattered Site”). For purposes of this definition “contiguous” means touching at a point or along a boundary. Real property is contiguous if the only intervening real property interest is an easement, provided the easement is not a roadway or street. All of the Scattered Sites must be located in the same county. The RFA modification included other changes concerning Scattered Sites. Those changes either modified the Surveyor Certification Form itself or required applicants to correctly provide information concerning Scattered Sites in the Surveyor Certification Form. Each Petitioner included in its application a Surveyor Certification Form indicating that its proposed development sites did not consist of Scattered Sites. The Surveyor Certification Forms submitted were the forms required by the modified RFA. There was no allegation that Petitioners incorrectly filled out the Surveyor Certification Forms. However, the Applicant Certification and Acknowledgement Form submitted by each of the Petitioners was the original form, not the form as modified to include the underscored language set forth in Finding of Fact 20 regarding the effect of mislabeling Scattered Sites on the Surveyor Certification Form. The failure of JPM Outlook and Grande Park to submit the correct Applicant Certification and Acknowledgement Form was the sole reason that Florida Housing found them ineligible for funding. In deposition testimony, Ken Reecy, Florida Housing’s Director of Multifamily Programs, explained the purpose of the Applicant Certification and Acknowledgement Form: There’s a number of things that we want to be sure that the applicants are absolutely aware of in regard to future actions or requirements by the Corporation. If they win the award, there are certain things that they need to know that they must do or that they are under certain obligations, that there’s certain obligations and commitments associated with the application to make it clear what the requirements--what certain requirements are, not only now in the application, but also perhaps in the future if they won awards. At the conclusion of a lengthy exposition on the significance of the modified language relating to Scattered Sites, Mr. Reecy concluded as follows: [W]e wanted to make sure that if somebody answered the question or did not indicate that they were a scattered site, but then we found out that they were, in fact, a scattered site, we wanted to make it absolutely clear to everyone involved that in the event that your scattered sites did not meet all of those requirements as of the application deadline, that the funding would be rescinded. Petitioners argue that the failure to submit the modified Applicant Certification and Acknowledgement Form should be waived as a minor irregularity. Their simplest argument on that point is that their applications did not in fact include Scattered Sites and therefore the cautionary language added to the Applicant Certification and Acknowledgement Form by the November 10, 2016, modifications did not apply to them and could have no substantive effect on their applications. Petitioners note that their applications included the substantive changes required by the November 10, 2016, modifications, including those related to Scattered Sites. Petitioners submitted the unmodified Applicant Certification and Acknowledgement Form as Attachment 1 to their modified Exhibit A. Petitioners further note that the “Ability to Proceed Forms” they submitted with their applications on December 2, 2016, were the forms as modified on November 10, 2016. They assert that this submission indicates their clear intent to acknowledge and certify the modified RFA and forms, regardless of their error in submitting the unmodified Applicant Certification and Acknowledgement Form. Petitioners assert that the Scattered Sites language added to the Applicant Certification and Acknowledgement Form by the November 10, 2016, modifications was essentially redundant. Mr. Reecy conceded that the warning regarding Scattered Sites was not tied to any specific substantive modification of the RFA. The language was added to make it “more clear” to the applicant that funding would be rescinded if the Scattered sites requirements were not met as of the application deadline. Petitioners point out that this warning is the same as that applying to underwriting failures generally. Petitioners assert that the new language had no substantive effect on either the Applicant Certification and Acknowledgement Form or on the certifications and acknowledgements required of the applicants. Even in the absence of the modified language, Petitioners would be required to satisfy all applicable requirements for Scattered Sites if it were determined during underwriting that their applications included Scattered Sites. Petitioners conclude that, even though the modified Applicant Certification and Acknowledgement Form was not included with either of their applications, the deviation should be waived as a minor irregularity. Florida Housing could not have been confused as to what Petitioners were acknowledging and certifying. The unmodified Applicant Certification and Acknowledgement Form was submitted with a modified Attachment 1 that included all substantive changes made by the November 10, 2016, modifications to the RFA. Petitioners gained no advantage by mistakenly submitting an unmodified version of the Applicant Certification and Acknowledgement Form. The submittal of the unmodified version of the form was an obvious mistake and waiving the mistake does not adversely impact Florida Housing or the public. Mr. Reecy testified that he could recall no instance in which Florida Housing had waived the submittal of the wrong form as a minor irregularity. He also observed that the credibility of Florida Housing could be negatively affected if it waived the submission of the correct form in light of the “effects clause” contained in Section Four: Due to the fact that we did have an effects clause in this RFA and we felt that, in accordance with the rule requirements regarding minor irregularities, that it would be contrary to competition because we wanted everybody to sign and acknowledge the same criteria in the certification; so we felt that if some did--some certified some things and some certified to others, that that would be problematic. And the fact that we had very specifically instructed that if we did not get the modified version, that we would not consider it, and then if we backed up and considered it, that that would erode the credibility of the Corporation and the scoring process. Mr. Reecy testified that the modification to the Applicant Certification and Acknowledgement Form was intended not merely to clarify the Scattered Sites requirement but to strengthen Florida Housing’s legal position in any litigation that might ensue from a decision to rescind the funding of an applicant that did not comply with the Scattered Sites requirements as of the application deadline. He believed that waiving the “effects clause” would tend to weaken Florida Housing’s legal position in such a case. Petitioners had clear notice that they were required to submit the modified Applicant Certification and Acknowledgement Form. They did not avail themselves of the opportunity to protest the RFA modifications. There is no allegation that they were misled by Florida Housing or that they had no way of knowing they were submitting the wrong form. The relative importance of the new acknowledgement in the modified form may be a matter of argument, but the consequences for failure to submit the proper form were plainly set forth in the effects clause. Florida Housing simply applied the terms of the modified RFA to Petitioners’ applications and correctly deemed them ineligible for funding.
Recommendation Based on the foregoing, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order confirming its initial decision finding JPM Outlook One Limited Partnership and Grande Park Limited Partnership ineligible for funding, and dismissing each Formal Written Protest and Petition for Administrative Hearing filed by JPM Outlook One Limited Partnership and Grande Park Limited Partnership. DONE AND ENTERED this 29th day of June, 2017, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 2017.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the Hearing Officer recommends that the Florida Real Estate Commission revoke the registration of Ronald W. Hoffman as a registered real estate salesman. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 15th day of August, 1977. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of August, 1977. COPIES FURNISHED: Bruce I. Kamelhair, Esquire Florida Real Estate Commission 2699 Lee Road Winter Park, Florida 32789 Mr. Ronald W. Hoffman 722 Lithia Road Brandon, Florida 33511 ================================================================= AGENCY FINAL ORDER ================================================================= FLORIDA REAL ESTATE COMMISSION FLORIDA REAL ESTATE COMMISSION, An Agency of the State of Florida, Petitioner, PROGRESS DOCKET NO. 3140 HILLSBOROUGH COUNTY vs. CASE NO. 77-679 RONALD W. HOFFMAN, Respondent. /
The Issue Whether Respondent, Florida Housing Finance Corporation’s ("Florida Housing") intended action to award housing tax credit funding to Intervenors Westside Phase, I, LLLP ("Westside"), HTG Edgewood, Ltd. ("HTG Edgewood"), Diplomat South, LLC ("Diplomat"), and Tranquility at Milton, LLC ("Tranquility"), under Request for Applications 2019-113 Housing Credit Financing for Affordable Housing Developments Located in Medium and Small Counties (the "RFA"), is contrary to governing statutes, rules, the RFA specifications, and clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. Its purpose is to promote public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Housing is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code, and has the responsibility and authority to establish procedures for allocating and distributing low income housing tax credits. The low income housing tax credit program (commonly referred to as "tax credits" or "housing credits") was enacted to incentivize the private market to invest in affordable rental housing. These housing tax credits are awarded competitively to housing developers in Florida for rental housing projects that qualify. These credits are then normally sold by developers for cash to raise capital for their projects. The effect is that the credits reduce the amount that the developer would otherwise have to borrow. Because the total debt is lower, a housing 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 housing credits. The demand for housing tax credits provided by the federal government exceeds the supply. The Competitive Application Process Florida Housing is authorized to allocate housing tax credits and other funding by means of a request for applications or other competitive solicitation in section 420.507(48) and Florida Administrative Code Chapter 67-60, which govern the competitive solicitation process for several different programs, including the program for housing tax credits. Chapter 67-60 provides that Florida Housing allocate its competitive funding through the bid protest provisions of section 120.57(3), Florida Statutes. 1 In their applications, applicants request a specific dollar amount of housing tax credits to be given to the applicant each year for a period of ten years. Applicants normally sell the rights to that future stream of income housing tax credits (through the sale of almost all of the ownership interest in the applicant entity) to an investor to generate the amount of capital needed to build the development. The amount which can be received depends 1 A request for application is equivalent to a "request for proposal" as indicated in rule 67- 60.009(3). upon the accomplishment of several factors, such as a certain percentage of the projected total development cost; a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated areas of some counties. This, however, is not an exhaustive list of the factors considered. The RFA was issued on August 20, 2019, and responses were initially due October 29, 2019. The RFA was modified on September 10, 2019, and the application deadline was extended to November 5, 2019. No challenges were made to the terms of the RFA. Through the RFA, Florida Housing expects to award up to an estimated $14,805,028 of housing tax credits to proposed developments in medium counties and up to an estimated $1,413,414 of housing credits to proposed developments in small counties. Florida Housing received 184 applications in response to the RFA. A review committee was appointed to review the applications and make recommendations to Florida Housing's Board of Directors (the "Board"). The review committee found 169 applications eligible and 15 applications ineligible. Through the ranking and selection process outlined in the RFA, 11 applications were preliminarily recommended for funding. The review committee developed charts listing its eligibility and funding recommendations to be presented to the Board. On March 6, 2020, the Board met and considered the recommendations of the review committee. Also, on March 6, 2020, at approximately 9:35 a.m., Petitioners and all other applicants received notice that the Board determined whether applications were eligible or ineligible for consideration for funding, and that certain eligible applicants were selected for award of housing credits, subject to satisfactory completion of the credit underwriting process. Such notice was provided by the posting of two spreadsheets on the Florida Housing website, www.floridahousing.org, one listing the Board approved scoring results and one identifying the applications which Florida Housing proposed to fund. In the March 6, 2020, posting, Florida Housing announced its intention to award funding to 11 applicants, including Westside, HTG Edgewood, Diplomat, and Tranquility. Petitioners timely filed notices of protest and petitions for formal administrative proceedings, and Intervenors timely intervened. The RFA Ranking and Selection Process The RFA contemplates a structure in which the applicant is scored on eligibility items and obtains points for other items. A summary of the eligibility items is available in section 5.A.1., beginning on page 64 of the RFA. Only applications that meet all the eligibility items will be eligible for funding and considered for funding selection. There were two total point items scored in this RFA. Applicants could receive five points for Submission of Principals Disclosure Form, stamped by the Corporation as "Pre-Approved," and five points for Development Experience Withdrawal Disincentive, for a total application score of up to ten points. The RFA has three funding goals: The Corporation has a goal to fund four Medium County Developments that qualify for the Local Government Areas of Opportunity Funding Goal outlined in Section Four A.11.a. of the RFA. The Corporation has a goal to fund two Developments with a Demographic commitment of Family that select and qualify for the Geographic Areas of Opportunity/SADDA Goal outlined in Section Four A.11.b. of the RFA. The Corporation has a goal to fund one (1) Development that qualifies for the Local Community Revitalization Initiative Goal outlined in Section Four A.11.c. of the RFA. *Note: During the Funding Selection Process outlined below, Developments selected for these goals will only count toward one goal. As part of the funding selection process, the RFA starts with the application sorting order on page 68. The highest scoring applications are determined by first sorting together all eligible applications from the highest score to lowest score, with any scores that are tied separated as follows: First, by the Application's eligibility for the Proximity Funding Preference (which is outlined in Section Four A.5.e. of the RFA) with Applications that qualify for the preference listed above Applications that do not qualify for the preference; Next, by the Application's eligibility for the Per Unit Construction Funding Preference which is outlined in Section Four A.10.e. of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Application's eligibility for the Development Category Funding Preference which is outlined in Section Four A.4.b.(4) of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Application's Leveraging Classification, applying the multipliers outlined in item 3 of Exhibit C of the RFA (with Applications having the Classification of A listed above Applications having the Classification of B); Next, by the Application's eligibility for the Florida Job Creation Funding Preference which is outlined in Item 4 of Exhibit C of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); And finally, by lottery number, resulting in the lowest lottery number receiving preference. The RFA includes a Funding Test where small county applications will be selected for funding only if there is enough small county funding available to fully fund the eligible housing credit request amount, and medium county applications will be selected for funding only if there is enough medium county funding available to fully fund the eligible housing credit request amount. The RFA outlines a specific County’s Award Tally: As each application is selected for tentative funding, the county where the proposed Development is located will have one Application credited towards the County’s Award Tally. The Corporation will prioritize eligible unfunded Applications that meet the Funding Test and are located within counties that have the lowest County Award Tally above other eligible unfunded Applications with a higher County Award Tally that also meet the Funding Test, even if the Applications with a higher County Award Tally are higher ranked. According to the RFA, the funding selection process is as follows: The first Application selected for funding will be the highest ranking eligible Applications that qualifies for the Local Community Revitalization Initiative Goal. The next four Applications selected for funding will be the highest ranking eligible Medium County Applications that qualify for the Local Government Areas of Opportunity Funding Goal, subject to the Funding Test and the County Award Tally. The next two Applications selected for funding will be the highest ranking eligible Family Applications that qualify for the Geographic Areas of Opportunity/HUD-designated SADDA Goal, subject to the Funding Test and the County Award Tally. The next Applications selected for funding will be the highest ranking eligible unfunded Small County Applications that (i) can meet the Small County Funding Test and (ii) have a County Award Tally that is less than or equal to any other eligible unfunded Small County Applications. If Small County funding remains and no unfunded eligible Small County Application can meet the Small County Funding Test, no further Small County Applications will be selected and the remaining Small County funding will be added to the Medium County funding amount. The next Application(s) selected for funding will be the highest ranking eligible unfunded Medium County Applications that (i) can meet the Medium County Funding Test and (ii) have a County Award Tally that is less than or equal to any other eligible unfunded Medium County Applications. If Medium County funding remains and no unfunded eligible Medium County Application can meet the Medium County Funding Test, no further Applications will be selected and the remaining funding will be distributed as approved by the Board. According to the terms of the RFA: Funding that becomes available after the Board takes action on the [Review] Committee’s recommendation(s), due to an Applicant withdrawing its Application, an Applicant declining its invitation to enter credit underwriting, or an Applicant’s inability to satisfy a requirement outlined in this RFA, will be distributed as approved by the Board. All 184 applications for the RFA were received, processed, deemed eligible or ineligible, scored, and ranked, pursuant to the terms of the RFA, Florida Administrative Code Chapters 67-48 and 67-60, and applicable federal regulations. HTG Edgewood’s Application (DOAH Case No. 20-1778BID) During scoring, Florida Housing determined that the HTG Edgewood application was eligible and, pursuant to the terms of the RFA, selected HTG Edgewood for funding. HTG Edgewood, Florida Housing, and Rochester now agree that HTG Edgewood’s application is ineligible for consideration for funding and the application of Rochester is eligible for funding. Accordingly, HTG Edgewood, Florida Housing, and Rochester agree that Florida Housing should deem the HTG Edgewood application ineligible for funding and Rochester’s application eligible for funding. Diplomat’s Application (DOAH Case No. 20-1779BID) During scoring, Florida Housing deemed the Diplomat application eligible and, pursuant to the terms of the RFA, preliminarily selected Diplomat for funding. Diplomat and Madison Square now agree that Diplomat is ineligible for funding. Florida Housing does not contest Diplomat’s admission of ineligibility. Madison Square, Diplomat, and Florida Housing agree that Madison Square is eligible for funding. Tranquility’s Application (DOAH Case No. 20-1780BID) Florida Housing deemed the Tranquility application eligible for funding, and pursuant to the terms of the RFA, Tranquility was selected for preliminary funding. Tranquility’s Principals Disclosure Form Madison Oaks contests Florida Housing’s preliminary selection of Tranquility for an award of housing tax credits. In its challenge, Madison Oaks argues that Tranquility failed to correctly complete its Principals Disclosure Form by not identifying the multiple roles of its disclosed principal. Specifically, Madison Oaks argues that Tranquility failed to list Tranquility Milton Manager, LLC, which is disclosed as a manager, as a non- investor member as well. Accordingly, Madison Oaks contends Tranquility is not eligible or should lose five points. The purpose of the Principals Disclosure Form is to allow Florida Housing to track an entity’s past and future dealings with Florida Housing so that Florida Housing is aware of the entity with which it is dealing. In regard to principal disclosure, the RFA states, in relevant part: c. Principals Disclosure for the Applicant and for each Developer (5 points) Eligibility Requirements To meet the submission requirements, the Applicant must upload the Principals of the Applicant and Developer(s) Disclosure Form (Form Rev. 05-2019)("Principals Disclosure Form") with the Application and Development Cost Pro Forma, as outlined in Section Three above. Prior versions of the Principal Disclosure Form will not be accepted. The Principals Disclosure Form must identify, pursuant to subsections 67-48.002(94), 67- 48.0075(8) and 67-48.0075(9), the Principals of the Applicant and Developer(s) as of the Application Deadline. The investor limited partner of an Applicant limited partnership or the investor member of an Applicant limited liability company investor must be identified. A Principals Disclosure Form should not include, for any organizational structure, any type of entity that is not specifically included in the Rule definition of Principals. Point Item Applicants will receive 5 points if the uploaded Principal Disclosure Form was stamped "Approved" during the Advance Review Process. The Advance Review Process for Disclosure of Applicant and Developer Principals is available on the RFA Website and also includes samples which may assist the Applicant in completing the required Principals Disclosure Form. Note: It is the sole responsibility of the Applicant to review the Advance Review Process procedures and to submit any Principals Disclosure Form for review in a timely manner in order to meet the Application Deadline. The RFA website provides guidance and instructions to assist applicants in completing the principal disclosure. The instructions state: "List the name of each Member of the Applicant Limited Liability Company and label each as either non-investor Member or investor Member (i.e., equity provider and/or placeholder), as applicable." The RFA website guidance and instructions further provides Frequently Asked Questions ("FAQ’s") concerning principal disclosures. FAQ number 4 states: Q: If the Applicant entity is a member managed limited liability company, how should it be reflected on the form since there is no "member-manager" choice at the First Principal Disclosure Level? A: Each member-manager entity/person should be listed twice—once as a non-investor member and once as a manger. If Housing Credits are being requested, the investor-member(s) must also be listed in order for the form to be approved for a Housing Credit Application. On its Principals Disclosure Form, Tranquility listed two entities at the first principal disclosure level: Tranquility Milton Manager, LLC, identified as a manager of the applicant and Timshel Partners, LLC, identified as an investor member of the applicant. However, Tranquility failed to identify the dual role of Tranquility Milton Manager, LLC, as a non- investor member in addition to its disclosed role as a manger. Nevertheless, Tranquility’s equity proposal letter submitted as part of its application identified Tranquility Milton Manager, LLC, as a member of the LLC because according to the equity proposal, Tranquility Milton Manager, LLC, would retain a .01% ownership interest in the company. Thus, the role of Tranquility Milton Manager, LLC, as a member is available within Tranquility’s application. Tranquility participated in Florida Housing’s Advance Review Process, and on October 17, 2019, Florida Housing approved the Principals Disclosure Form submitted by Tranquility during the Advance Review Process for an award of housing credits. During scoring, Tranquility received five points for having its Principals Disclosure Form stamped "Approved" by Florida Housing. Tranquility’s Principals Disclosure Form met the eligibility requirements of the RFA and Tranquility is entitled to the five points. In addition, Ms. Button persuasively and credibly testified that even if Tranquility’s failure to list the dual role of its disclosed principal on the Principals Disclosure Form is an error, it is so minor as to constitute a waivable, minor irregularity. As detailed above, Tranquility Milton Manager, LLC, was specifically designated as a manager on the form and information identifying Tranquility Milton Manager, LLC’s, additional role as a member is included in the equity proposal letter submitted with the application. Madison Oak’s Application (DOAH Case No. 20-1779BID) Madison Oaks’ application was deemed eligible for funding, but pursuant to the terms of the RFA, Madison Oaks was not selected for preliminary funding. Madison Oaks Site Control Certification Florida Housing and Tranquility now argue that Madison Oaks failed to demonstrate site control. As an eligibility item, the RFA requires applicants to demonstrate site control by providing a properly completed and executed Florida Housing Finance Corporation Site Control Certification form ("Site Control Form"). For the Site Control Form to be considered complete, the applicant must attach documentation demonstrating that it is a party to an eligible contract or lease or is the owner of the subject property. Applicants can demonstrate site control by providing documentation that meets the requirements in the RFA for an eligible contract, deed or certificate of title, or a lease. An eligible contract must meet all of the following conditions: It must have a term that does not expire before April 30, 2020 or that contains extension options exercisable by the purchaser and conditioned solely upon payment of additional monies which, if exercised, would extend the term to a date that is not earlier than April 30, 2020; It must specifically state that the buyer’s remedy for default on the part of the seller includes or is specific performance; The Applicant must be the buyer unless there is an assignment of the eligible contract, signed by the assignor and the assignee, which assigns all of the buyer’s rights, title and interests in the eligible contract to the Applicant; and The owner of the subject property must be the seller, or is a party to one or more intermediate contracts, agreements, assignments, options, or conveyances between or among the owner, the Applicant, or other parties, that have the effect of assigning the owner’s right to sell the property to the seller. Any intermediate contract must meet the criteria for an eligible contract in (a) and (b) above. In demonstrating site control, the RFA states: Note: The Corporation will not review the site control documentation that is submitted with the Site Control Certification form during the scoring process unless there is a reason to believe that the form has been improperly executed, nor will it in any case evaluate the validity or enforceability of any such documentation. During scoring, the Corporation will rely on the properly executed Site Control Certification form to determine whether an Applicant has met the requirements of this RFA to demonstrate site control. The Corporation has no authority to, and will not, evaluate the validity or enforceability of any eligible site control documentation that is attached to the Site Control Certification form during the scoring process. During credit underwriting, if is determined that the site control documents do not meet the above requirements, the Corporation may rescind the award. Additionally, the RFA requires that the site control "documentation include all relevant intermediate contracts, agreements, assignments, options, conveyances, intermediate leases, and subleases." In the instant case, Madison Oaks attached a Purchase and Sale Agreement ("Madison Oaks Agreement") to its Site Control Form. The Madison Oaks Agreement lists West Oak Developers, LLC, as the "Seller" and Madison Oaks East, LLC, as the "Purchaser." However, the City of Ocala owns the property in question. The Madison Oaks Agreement in section 12 states that: "Seller has a valid and binding agreement with the City of Ocala, Florida pursuant to which Seller has the right to acquire fee simple title to the Property …." Tranquility and Florida Housing contend that Madison Oaks failed to demonstrate site control because Madison Oaks failed to include the City of Ocala Redevelopment Agreement for Pine Oaks ("Redevelopment Agreement") in its site control documentation. Madison Oaks maintains that the City of Ocala is a seller, pursuant to the Joinder and Section 28 of the Madison Oaks Agreement, and therefore, the Redevelopment Agreement did not need to be included. However, the Madison Oaks Agreement clearly identifies West Oak as the "Seller" and the City of Ocala as the "City." At hearing, Ms. Button persuasively and credibly testified that the Madison Oaks application is ineligible because it did not include the Redevelopment Agreement, which is a relevant agreement for purposes of demonstrating site control. The Redevelopment Agreement was a relevant intermediate contract, which was required to be included in Madison Oak’s application. Madison Oak’s failure to include the Redevelopment Agreement renders its application ineligible. Madison Oaks contends that including the Redevelopment Agreement in its application was unnecessary because of a joinder provision within the Madison Oaks Agreement. The Madison Oaks Agreement contains a Joinder and Consent of the City of Ocala approved by the City Council ("the Joinder"), whereby the City of Ocala joined and consented to the Madison Oaks Agreement "solely for the purposes set forth in, and subject to, Section 28 herein." The Madison Oaks Agreement in Section 28 states that: "Seller hereby acknowledges and agrees that in the event of Seller’s default hereunder, that is not timely cured, or Seller's refusal to close hereunder, Purchaser shall be entitled to close on the property subject to this Agreement … directly with the City on the terms and conditions set forth in this Section 28." However, Section 28 only applies in the event of a default by West Oaks that is not timely cured or West Oak’s refusal to close. There is no information within the Madison Oaks application to determine whether a default or termination of the Redevelopment Agreement occurred as of the application deadline. Westside’s Application (DOAH Case No. 20-1770BID) Florida Housing deemed Westside’s application eligible and, pursuant to the terms of the RFA, Westside was preliminary selected for funding to meet the goal to fund one development that qualifies for the Local Community Revitalization Initiative Goal. Westside’s Election to Compete for the Local Community Revitalization Initiative Goal In order to qualify for the Local Community Revitalization Initiative Goal, the RFA states: Applicants for proposed Developments that are part of a local revitalization plan may elect to compete for this goal. To qualify for this goal, the Applicant must submit the properly completed Florida Housing Finance Corporation Local Government/Community Redevelopment Agency Verification That Development Is Part Of A Local Community Revitalization Plan form (Form Rev. 08-2019) as Attachment 18. The form is available on the RFA Website. Included with the form must be either (1) a link to the local community revitalization plan or (2) a copy of the local community revitalization plan. The plan must have been adopted on or before January 1, 2019. Florida Housing, pursuant to the terms of the RFA, also has a goal to fund four medium county developments that qualify for the Local Government Areas of Opportunity Funding Goal. Westside included an executed Florida Housing Finance Corporation Local Government/Community Redevelopment Agency Verification that Development is Part of a Local Community Revitalization Plan form (the "Local Community Revitalization Plan Form") and a link to the local government revitalization plan at Attachment 18 of its application. At question 11.c. in the application, applicants are asked to select "Yes" or "No" from a drop-down menu in response to the question: "Is the proposed Development eligible for the Local Community Revitalization Initiative Goal?" Westside selected "No" from the Yes/No drop-down menu in answering question 11.c. regarding the Local Community Revitalization Initiative Goal. At question 11.a. in the application, applicants are asked to select "Yes" or "No" from a drop-down menu in response to the question: "Is the proposed Development eligible for the Local Government Areas of Opportunity Funding Goal?" Westside selected "Yes" from the Yes/No drop-down menu in answering questions 11.a. regarding the Local Government Areas of Opportunity Funding Goal. During scoring, Westside was deemed to have qualified for the Local Government Areas of Opportunity Funding Goal and the Local Community Revitalization Initiative Goal. During the funding selection process, Westside was selected for funding to meet the Local Government Community Revitalization Initiative Goal. HTG Addison selected "Yes" from the Yes/No drop-down menu in answering question 11.c. regarding the Local Community Revitalization Initiative Goal. HTG Addison included an executed Local Community Revitalization Plan Form at Attachment 18 of its application. HTG Addison selected "No" from the Yes/No drop-down menu in answering question 11.a. regarding the Local Government Areas of Opportunity Funding Goal. HTG Addison is the next highest ranked eligible applicant qualified for the Local Community Revitalization Initiative Goal after Westside. If Westside is deemed not to have qualified for the revitalization goal, then HTG Addison, as the next highest ranked eligible applicant, would qualify for that goal. HTG Addison alleges that Westside should not be selected to meet the Local Community Revitalization Initiative Goal because Westside selected "No" from the drop-down menu in response Question 11.c. Ms. Button persuasively and credibly testified that Florida Housing does not rely on the drop-down responses to questions 11a., b., or c. in determining whether an applicant "elects to be eligible for a certain goal" because answering "Yes" or "No" to these requirements is not a requirement of the RFA. Rather, Ms. Button persuasively and credibly testified that in determining whether an applicant qualifies for a funding goal, Florida Housing relies on the documentation submitted with the application that is required for the funding goal. In the instant case, Westside included the executed Florida Housing Finance Corporation Local Government Revitalization Plan form and a link to the local community revitalization plan at Attachment 18 of its application.2 In addition, Ms. Button persuasively and credibly testified that even if Westside erred in selecting "Yes" in response to question 11.c., it is so minor as to constitute a waivable, minor irregularity because Florida Housing has the required information within the application (the executed form and a link to the local community revitalization plan at Attachment 18). 2 Notably, another applicant responding to the RFA, Tranquility at Ferry Pass, selected "Yes" in response to question 11.c., but failed to include at Attachment 18 either a copy of or a link to the local community revitalization plan. During scoring, Florida Housing determined that Tranquility at Ferry Pass did not qualify for the revitalization goal. Florida Housing’s scoring of the Westside application is consistent with its scoring of the Tranquility at Ferry Pass application because in both cases, Florida Housing scored the application based on the requirements of the RFA for the revitalization goal and the documentation submitted in response to those requirements. Florida Housing did not rely on the applicant’s response to question 11.c. regarding the applicant’s expressions of its own eligibility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order: dismissing the protests of HTG Addison and Madison Oaks; (2) finding the HTG Edgewood, Diplomat, and Madison Oaks applications ineligible for funding; and (3) finding the Rochester, Madison Square, Tranquility, and Westside applications eligible for funding. DONE AND ENTERED this 19th day of June, 2020, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ 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 COPIES FURNISHED: Filed with the Clerk of the Division of Administrative Hearings this 19th day of June, 2020. Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC 1400 Village Square Boulevard, Suite 3-231 Tallahassee, Florida 32312 (eServed) Amy Wells Brennan, Esquire Manson Bolves Donaldson Varn, P.A. 109 North Brush Street, Suite 300 Tampa, Florida 33602 (eServed) Michael P. Donaldson, Esquire Carlton Fields 215 South Monroe Street, Suite 500 Tallahassee, Florida 32302 (eServed) Sarah Pape, Esquire Zimmerman, Kiser & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Post Office Box 3000 (32802) Orlando, Florida 32801 (eServed) J. Timothy Schulte, Esquire Zimmerman, Kiser & Sutcliffe, P.A. 315 East Robinson Street Post Office Box 3000 (32802) Orlando, Florida 32801 (eServed) Craig D. Varn, Esquire Manson Bolves Donaldson Varn, P.A. 106 East College Avenue, Suite 820 Tallahassee, Florida 32301 (eServed) Donna Elizabeth Blanton, Esquire Radey Law Firm, P.A. 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) M. Christopher Bryant, Esquire Oertel, Fernandez, Bryant & Atkinson, P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 (eServed) Betty Zachem, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed)
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the parties' stipulations of fact, the following relevant facts are found: The petitioner Jose A. (Tony) Torres was employed by the respondent Office of the Comptroller, Department of Banking and Finance, Division of Finance from approximately June of 1963 until February of 1986. For about 13 years, he held the position of Area Financial Manager in the Tampa office and was responsible for and in charge of regulating mortgage brokerage businesses and licensees in ten counties along the west coast of Florida. By letter dated February 11, 1986, petitioner was notified of the respondent's intent to dismiss him from employment on the grounds that, in spite of prior warnings, he had obtained loans from licensed individuals and institutions he was responsible for regulating. Petitioner was given the opportunity to respond to this notice, did so and the respondent thereafter affirmed its intent to dismiss him. Petitioner did not contest or appeal his dismissal. On March 6, 1986, petitioner submitted to the respondent his application for registration as a mortgage broker. By Order dated and filed on May 23, 1986, respondent denied his application, concluding that petitioner does not have the requisite experience, background, honesty, truthfulness or integrity to act as a mortgage broker in Florida. The factual bases cited for this conclusion are that petitioner was arrested in September of 1979 for gambling; that he declared bankruptcy in 1980; and that he obtained loans in 1981, 1983, and 1984 from individuals and/or financial institutions which were licensed by the Division of Finance, and also that said loans have never been repaid. The Centro Asturiano Club is a private social club where gambling (poker) regularly occurs. On Friday, August 31, 1979, at approximately 3:00 p.m., petitioner and others were arrested for gambling at the Centro Asturiano. At the time of the arrest, the police seized certain items including a Smith and Wesson .38 caliber firearm and $670. A motion to suppress evidence and a motion to dismiss were ultimately granted and the petitioner was not convicted. The gambling arrest occurred on a regular business day in the Office of the Comptroller. Petitioner states that he was on annual leave at the time. An employee in his office observed petitioner's secretary make changes in the petitioner's leave slip forms on the afternoon of August 31, 1979. It was not established that such alterations were not proper. On May 30, 1980, petitioner filed a petition pursuant to Title 11, United States Code. An order for relief was entered under Chapter 7, with a Discharge of Debtor ordered on October 8, 1980, by the United States Bankruptcy Court for the Middle District of Florida (Bankruptcy No. 80-00750). At least six entities listed as creditors in petitioner's bankruptcy proceeding were licensees of the Department of Banking and Finance. At the time, petitioner was charged with examining and regulating those six entities in his capacity as the Area Financial Manager for the Division of Finance. In 1979 and/or 1980, petitioner's superiors in the Department admonished him to refrain from obtaining loans from the industry he regulated, and that such activity constituted a violation of Departmental policy and the Code of Ethics for Public Officers and Employees, Chapter 112, Florida Statutes. On March 1, 1983, petitioner obtained a signature loan of approximately $2,200 from the A. L. Machado, M.D. Pension Trust. Colonial Mortgage, Inc., which was then licensed with the Division of Finance as a mortgage broker, serviced the loan. Darrell T. DiBona, the director of Colonial, became licensed as an additional broker on June 19, 1983. The payment record on this loan, discovered during an examination by the Division of Finance in May of 1985, reflected that four interest payments had been made, but that the principal balance was still outstanding. Darrell T. DiBona made a check payable for one of the petitioner's interest payments owed to the Machado pension fund. The petitioner's version of the facts surrounding the Machado loan is not credible. He states that he had known Darrell T. DiBona for many years. DiBona handled petitioner's insurance needs, and petitioner, wishing to increase his coverage, had had a medical examination which indicated either an irregular heartbeat or fatty tissues in his blood. According to petitioner, he was having lunch with DiBona one day, and DiBona needed to stop by Dr. Machado's office on business. DiBona apparently handled pension funds for various physicians. While at Dr. Machado's office, the subject of petitioner's medical condition arose. Petitioner states that Dr. Machado offered to check his irregular heartbeat and gave him an EKG. During that examination petitioner asserts that he told Dr. Machado that he was having financial difficulties, and Dr. Machado offered to loan him $2,200. Petitioner insists that he made three or four payments on a note, and then paid it off in full in May or July of 1984. This latter payment, according to petitioner, was made in cash and handed to DiBona. Petitioner never received a receipt for the "$2,200 in cash plus the interest." Petitioner states that he subsequently asked for a receipt or the note on several occasions, but was told that it could not be found. The note and payment record were found by the respondent during an examination of Colonial Mortgage in May of 1985. As noted above, the payment record revealed that only three or four interest payments had been made. Dr. Machado has no recollection of examining petitioner in his office or otherwise discussing a loan with him. Had petitioner been examined by Dr. Machado, a ledger card or chart would have been prepared. No ledger card or chart for the petitioner could be discovered in Dr. Machado's office. Dr. Machado did not become aware that money from his pension fund was lent to petitioner until after DiBona's death. His office manager was then asked to write a letter stating that the petitioner's loan had been paid in full. Such a letter was written and petitioner picked up the letter from Dr. Machado's office. Although he had no knowledge concerning the loan, Dr. Machado agreed to sign the letter because he thought that petitioner could be one of DiBona's innocent victims. He, as well as other physicians, lost pension fund monies from accounts handled by Darrell DiBona. Beneficial Mortgage Company was licensed with the Division of Finance in November of 1984 as a mortgage broker. During that time, petitioner contacted the regional supervisor of Beneficial, who does not himself regularly take loan applications, regarding a home mortgage loan for his mother. On November 20, 1984, a $30,590 mortgage loan from Beneficial Mortgage was obtained, and petitioner co-signed the loan documents. The loan proceeds were utilized to pay off two prior mortgages, one of which was Colonial Mortgage. Petitioner's mother is elderly, speaks little English and petitioner often handled her financial affairs. According to the regional supervisor, petitioner was asked to co-sign the note in order to avoid any questions which might arise in the future regarding Mrs. Torres' competency to enter into such a transaction. As a co-signer, however, petitioner was guaranteeing the account. While the mortgage loan was for an amount less than the house was appraised and contained no preferential terms or rates, Beneficial required no standard credit report, income analysis or other financial documentation concerning the petitioner. Mrs. Torres' income and debt ratio were barely sufficient to make the monthly payments on the loan. Petitioner has two brothers and a sister who also live in Tampa. On December 6, 1984, petitioner obtained a $2,000 signature loan from N. D. Properties, Inc. N. D. Properties was solely owned at that time by Ben Langworthy, Jr., who also owned Diversified Mortgage Associates, Inc. At that time, both Diversified and Langworthy were licensed with the Department of Banking and Finance, Division of Finance. The petitioner made at least two loan payments directly to Ben Langworthy, who he knew was licensed by the Department. The $2,000 check given to petitioner was signed by Ben Langworthy. According to petitioner, Mr. Langworthy told him that N. D. Properties, Inc. was owned by two private investors. Petitioner's loan payment record with N. D. Properties shows that the loan has not been timely repaid.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of Jose A. (Tony) Torres for registration as a mortgage broker in Florida be DENIED. Respectfully submitted and entered this 3rd day of June, 1987, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of June, 1987. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 86-2473 The proposed findings of fact submitted by the petitioner and the respondent have been fully considered and have been accepted and/or incorporated in this Recommended Order, except as noted below. Petitioner p.1, last paragraph: Rejected; legal conclusion as opposed to factual finding p.2, 2nd paragraph, 2nd sentence: Rejected, irrelevant and immaterial p.2, 3rd paragraph: Rejected; immaterial p.2, 5th paragraph: Rejected; argumentative p.3, 1st two paragraphs: Rejected; argumentative p.3, paragraphs 7, 8 & 9: Accepted, but not included as irrelevant to ultimate disposition p.4, last four paragraphs: Rejected; contrary to the greater weight of the evidence p.5, paragraphs 3 - 5: Rejected; contrary to the greater weight of the evidence p.7, paragraphs 1 and 3: Rejected; not proper factual findings p.8, paragraphs 1 through 7: Rejected; argumentative and improper factual findings Respondent #6: Rejected; not supported by competent, substantial evidence #20 & 21: Rejected; not supported by competent, substantial evidence COPIES FURNISHED: Dick Greco, Esquire Molloy, James & Greco, P.A. 501 East Kennedy Boulevard Suite 910 Tampa, Florida 33602 Sharon L. Barnett Assistant General Counsel Office of the Comptroller 1313 Tampa Street, Suite 713 Tampa, Florida 33602-3394 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305 Charles Stutts General Counsel Department of Banking and Finance The Capitol - Plaza Level Tallahassee, Florida 32399-0305 =================================================================
The Issue The issues are whether the actions of Florida Housing concerning the review and scoring of the responses to Request for Applications 2020-208 (“RFA”), titled “SAIL and Housing Credit Financing for the Construction of Workforce Housing,” were contrary to the agency’s governing statutes, rules, policies, or the RFA specifications and, if so, whether the challenged award was contrary to competition, clearly erroneous, or arbitrary and/or capricious.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: THE PARTIES Quail Roost was an applicant for funding in the RFA. Quail Roost’s application was assigned number 2020-461SC and was preliminarily deemed eligible for consideration for funding, but was not selected for funding. Ali Baba was an applicant for funding in the RFA. Ali Baba’s application was assigned number 2020-476BS and proposed a development named City Terrace in Miami-Dade County. Ali Baba’s application was preliminarily deemed eligible and was selected for funding under the terms of the RFA. Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. Its purpose is to promote the public welfare by administering the governmental function of financing affordable housing in Florida. 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. § 420.5099, Fla. Stat. Florida Housing has the responsibility and authority to establish procedures for allocating and distributing low income housing tax credits. For purposes of this proceeding, Florida Housing is an agency of the State of Florida. THE COMPETITIVE APPLICATION PROCESS The low-income housing tax credit program was enacted to incentivize the private market to invest in affordable rental housing. Housing credits are awarded competitively to housing developers in Florida for qualifying rental housing projects. These credits are then typically sold by developers for cash to raise capital for their projects. The effect is to reduce the amount of money that the developer is required to borrow commercially. In return for the subsidized debt reduction, a housing credit property is required to offer lower, more affordable rents. Developers must also agree to keep rents at affordable levels for periods of thirty to fifty years. Florida Housing is authorized to allocate low-income housing tax credits, SAIL funding, and other named funding by section 420.507(48). Florida Housing has adopted Florida Administrative Code Chapter 67-60 to govern the competitive solicitation process. Rule 67-60.009(1) provides that parties wishing to protest any aspect of a Florida Housing competitive solicitation must do so pursuant to section 120.57(3), Florida Statutes. Funding is made available through a competitive application process commenced by the issuance of a request for applications. Rule 67-60.009(4) provides that a request for application is considered a “request for proposal” for purposes of section 120.57(3)(f). Applicants request a specific dollar amount of housing credits to be awarded to the applicant each year for a period of ten years. A successful applicant usually sells the rights to the future income stream of housing credits to an investor to generate the amount of capital needed to build the development. This sale is usually by way of an ownership interest in the applicant entity. The amount of funding that Florida Housing can award to an applicant depends on such factors as an RFA-designated percentage of the projected Total Development Cost; a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated areas of some counties. The RFA was issued on February 24, 2020, with responses due on March 30, 2020. The RFA was modified on March 13, 2020, and March 19, 2020, but the application deadline was unchanged. No challenges were made to the terms of the RFA. Florida Housing expects to award up to $17,954,000 in SAIL funding and up to $2,980,000 of housing credits through the RFA. Florida Housing received 22 applications in response to the RFA. A Review Committee was appointed to review the applications and make recommendations to Florida Housing’s Board of Directors (the “Board”). The Review Committee found 19 applications eligible and three applications ineligible for funding. Through the ranking and selection process outlined in the RFA, three applications were preliminarily recommended for funding, including that submitted by Ali Baba. The Review Committee developed charts listing its eligibility and funding recommendations to be presented to the Board. On June 11, 2020, Florida Housing’s Board met and considered the recommendations of the Review Committee. Also, on June 11, 2020, at approximately 4:35 p.m., Quail Roost and all other applicants in the RFA received notice via the Florida Housing website of the Board’s eligibility determinations and of the preliminary selection of certain eligible applicants for funding, subject to satisfactory completion of the credit underwriting process. The notice consisted of two spreadsheets, one listing the Board approved scoring results in RFA 2020-208 and one identifying the applications which Florida Housing proposed to fund. Ali Baba’s was one of the applications proposed for funding. Under the scoring and ranking mechanism of the RFA explained below, Quail Roost’s application would be selected for funding were Ali Baba’s application to lose points or be found ineligible. Quail Roost timely filed the Petition. Ali Baba timely intervened. The Petition was referred to the DOAH. The RFA provided point scoring for mandatory “eligibility items.” The RFA then set forth an “Application Sorting Order” of funding goals and priorities that were used to break ties in the point scoring. Only applications that met all the eligibility items could participate in the ranking scheme that determined funding selection. The RFA included only one point scoring item. Applicants could receive five points for submission of a Principals Disclosure Form stamped by Florida Housing as “Approved” during the Advance Review Process. The Advance Review Process is available online and includes instructions and samples to assist the applicant in completing the Principals Disclosure Form. Section Four A.3.c.(2) of the RFA states: “Note: It is the sole responsibility of the Applicant to review the Advance Review Process procedures and to submit any Principals Disclosure Form for review in a timely manner in order to meet the Application Deadline.” The stated goal of the RFA was to fund one application in Monroe County and one application in a “Large County,” i.e., Broward, Duval, Hillsborough, Miami-Dade, Orange, Palm Beach, or Pinellas County. The Application Sorting Order was set forth as follows at Section Five B.2. of the RFA: The highest scoring Applications will be determined by first sorting together all eligible Applications from highest score to lowest score, with any scores that are tied separated in the following order: First, by the Application’s eligibility for the Proximity Funding Preference (which is outlined in Section Four A.5.e. of the RFA) with Applications that qualify for the preference listed above Applications that do not qualify for the preference; Next, by the Application’s Leveraging Level which is outlined in Item 3 of Exhibit C of the RFA (with Applications that have a lower Leveraging Level listed above Applications with a higher Leveraging Level); Next, by the Application’s eligibility for the Florida Job Creation Funding Preference (which is outlined in Item 4 of Exhibit C) with Applications that qualify for the preference listed above Applications that do not qualify for the preference; and By lottery number, resulting in the lowest lottery number receiving preference. The RFA’s “Funding Test” provision at Section Five B.3. stated that applications “will only be selected for funding if there is enough Workforce SAIL funding available to fully fund the Applicant’s Workforce SAIL Request Amount, and, Monroe County Applications will only be selected for funding if there is enough Workforce SAIL funding available to fully fund the Applicant’s Workforce SAIL Request Amount, and enough Competitive 9% Housing Credit funding available to fully fund the Applicant’s Competitive 9% Housing Credit Request Amount.” The total available amount was $17,954,000 in SAIL funding, with at least $2,520,000 of that amount reserved for Monroe County. Section Five B.4. of the RFA described a “County Award Tally” that provided as follows: As each Application is selected for tentative funding, the county where the proposed Development is located will have one Application credited towards the County Award Tally. The Corporation will prioritize eligible unfunded Applications that meet the Funding Test and are located within counties that have the lowest County Award Tally above other eligible unfunded Applications with a higher County Award Tally that also meet the Funding Test, even if the Applications with a higher County Award Tally are higher ranked. The RFA’s “Funding Selection Order” was set forth as follows at Section Five B.5.: The first Application selected for funding will be the highest ranking eligible Application that is eligible for Monroe County Goal. The next Application selected for funding will be the highest ranking eligible Application that is eligible for the Large County Goal. Once the goals are met or if there are no eligible Applications that can meet the goals, then the Corporation will select the highest ranking eligible unfunded Application(s) subject to the Funding Test and County Award Tally. If funding remains after funding all eligible Application(s) that can meet the Funding Test or because there is no eligible unfunded Application that can be fully funded, then no further Applications will be selected for funding and any remaining Total Remaining SAIL funding, as well as any unallocated 9% HC funding, will be distributed as approved by the Board. PRINCIPALS DISCLOSURE FORM The RFA required applicants to upload the Principals Disclosure Form, the full title of which is “Principals of the Applicant and Developer(s) Disclosure Form” (Form Rev. 05-2019). As an eligibility item, Section Four A.3.c.(1) of the RFA required that the Principals Disclosure Form: must identify, pursuant to Subsections 67- 48.002(94), 67-48.0075(8) and 67-48.0075(9), F.A.C., the Principals of the Applicant and Developer(s) as of the Application Deadline. A Principals Disclosure Form should not include, for any organizational structure, any type of entity that is not specifically included in the Rule definition of Principals. As stated above, applicants received 5 points if the uploaded Principals Disclosure Form was stamped “Approved” during the Advance Review Process. Ali Baba’s Principals Disclosure Form went through the Advance Review Process and was stamped “Approved for Housing Credits” by Florida Housing staff on March 16, 2020. Ali Baba’s application was awarded the requisite 5 points. Rule 67-48.002(94)(a) defines “Principal” for entities including corporations, limited partnerships, limited liability companies, trusts, and public housing authorities. For a corporation, “Principal” means “each officer, director, executive director, and shareholder of the corporation.” Quail Roost alleges that Ali Baba is ineligible for funding and should lose 5 points for failure to disclose all of the principals of the applicant and its developer, Opa-Locka Community Development Corporation, Inc. (“Opa- Locka Corp.”). Specifically, Quail Roost alleges that the name of Chad Jackson, a member of the Board of Directors of Opa-Locka Corp., was not disclosed on Ali Baba’s Principals Disclosure Form. Ali Baba concedes that members of the Board of Directors of the Opa- Locka Corp. are by definition principals who must be included on the Principals Disclosure Form. Ali Baba also conceded that Mr. Jackson was a member of the Board of Directors and was not included on Ali Baba’s Principals Disclosure Form. Dr. Willie Logan, the President and CEO of Opa-Locka Corp., testified that Mr. Jackson is a local low-income housing resident who is an appointed member of the Board of Directors of Opa-Locka Corp. Dr. Logan testified that a resident such as Mr. Jackson must be on the Board of Directors in order for Opa-Locka Corp. to receive funding from the U.S. Department of Housing and Urban Development. Though Mr. Jackson’s name is not included on the Principals Disclosure Form, Ali Baba did disclose Mr. Jackson’s name in a list of its 2019-2020 Board of Directors included as part of Attachment 3 of its application. Non-Profit entities are required to submit “the names and addresses of the members of the governing board of the Non-Profit entity” in Attachment 3. Ali Baba argues that this submission should be sufficient to render Ali Baba’s failure to include Mr. Jackson’s name on the Principals Disclosure Form a minor irregularity. Marisa Button, Director of Multifamily Programs for Florida Housing, testified as to the reasons Florida Housing requires disclosure of all principals on the Principals Disclosure Form. The RFA includes a financial arrearage requirement stating that an application will be deemed ineligible for funding if the applicant or any affiliated entity is in financial arrears to Florida Housing. Ms. Button testified that Florida Housing uses the information on the Principals Disclosure Form to ensure that the financial arrearage requirement is met and no principals are in financial arrearages to Florida Housing. Ms. Button testified that Florida Housing also uses the Principals Disclosure Form as a cross-reference to determine whether any of the disclosed entities or individuals have been de-obligated or barred from participation in Florida Housing’s programs. Ms. Button testified that Florida Housing considers it a material deviation from the RFA requirements when an applicant fails to disclose a principal on the Principals Disclosure Form. She testified that the disclosure of Mr. Jackson’s name elsewhere in Ali Baba’s application does not change the analysis because Florida Housing cannot take it upon itself to presume that an individual not named in the Principals Disclosure Form is a principal of the applicant. Ms. Button explained that before adopting the RFA process in which a number of solicitations are issued for various funding sources over the course of a year, Florida Housing used a single annual application called the “Universal Cycle.” She stated that Attachment 3 is a holdover from the Universal Cycle process, which did not require the filing of a Principals Disclosure Form. Florida Housing used Attachment 3 to verify an applicant’s status as a nonprofit entity for those projects that included funding goals for nonprofits. Ms. Button testified that Florida Housing currently reviews Attachment 3 to ensure that entities designating themselves as nonprofits have included their supporting information. It is in no way interchangeable with the Principals Disclosure Form. Ms. Button also noted that the list of Ali Baba’s Board of Directors included in Attachment 3 was dated March 26, 2020. The application deadline was March 30, 2020. Ms. Button testified that, even if Florida Housing were inclined to allow Attachment 3 to supplement the Principals Disclosure Form, the time difference between the two documents would render Attachment 3 unreliable as an indicator of Ali Baba’s principals as of the application deadline. Quail Roost pointed to another discrepancy in Ali Baba’s Principals Disclosure Form. As stated above, the name of the applicant entity is “675 Ali Baba, LLC.” The project manager of 675 Ali Baba, LLC, is “675 Ali Baba Manager, LLC.” However, Ali Baba’s Principals Disclosure Form identified the manager as “Ali Baba Manager, LLC.” Ali Baba concedes that its manager was not accurately disclosed on the Principals Disclosure Form. Dr. Logan testified that this was a mere typographical error and that to his knowledge no entity called “Ali Baba Manager, LLC,” existed. Ali Baba pointed to multiple other places in its application that correctly identified the manager as “675 Ali Baba Manager, LLC.” Ms. Button testified that Florida Housing considers the misnaming of the management entity to be a material error for the same reason it finds the omission of an individual principal to be a material error: Florida Housing cannot perform due diligence checks on the entity if it is not correctly identified. Ms. Button acknowledged that Florida Housing has treated typographical or grammatical errors as minor irregularities in the past; however, this was not a minor irregularity because the failure to correctly name the manager affected Florida Housing’s ability to investigate the entity for financial arrears or debarment. As in the case of Mr. Jackson, the fact that 675 Ali Baba Manager, LLC, was correctly identified elsewhere in Ali Baba’s application did not affect the analysis. Ms. Button testified that Florida Housing does not, and cannot, under its rules and the principles of competitive bidding, look beyond the Principals Disclosure Form to determine the identities of the applicant’s principals. SCATTERED SITES As an eligibility requirement in the RFA, applicants were required to provide information regarding the location of their proposed developments. Section Four A.5.d.(1) of the RFA required that a Development Location Point (“DLP”) be stated for the latitude/longitude coordinates in decimal degrees, rounded to at least the sixth decimal place. The DLP identified by Ali Baba is not in dispute in this proceeding. Section Four A.5.d.(2) of the RFA stated that if the proposed development consists of Scattered Sites, i.e, non-contiguous parcels,2 then in addition to the DLP information, the applicant must “provide the latitude and longitude coordinates of one point located anywhere on the Scattered Site” for each Scattered Site. As with the DLP, the coordinates for the Scattered Sites were required to be stated in decimal degrees and rounded to at least the sixth decimal place. In its application, Ali Baba proposed a development that included three Scattered Sites. Ali Baba provided the following latitude and longitude coordinates for those sites: A) 25.901060, -80.251883; B) 25.901267, -80.251473; and C) 25.901884, -80.253365. Ms. Button testified that Florida Housing takes the coordinates in the application at face value and does not verify whether the coordinates provided for the Scattered Sites are actually on the proposed sites. During discovery in this proceeding, Quail Roost established that, due to a mapping error, Ali Baba’s identified coordinates for the three Scattered Sites were not located on the Scattered Sites, but approximately 35, 73, and 75 feet off the Scattered Sites, respectively. As an eligibility item, the RFA included a mandatory distance requirement. In Miami-Dade County, the distance between the DLP and the coordinates provided for any Scattered Sites must be at least 0.5 miles from the closest development that is identified as serving the same demographic as that proposed by the applicant. Ms. Button testified that the mandatory distance requirement ensures that Florida Housing does not fund developments in close proximity to other 2 A detailed definition of “Scattered Sites” is set forth in rule 67-48.002(106). recently funded developments serving the same demographic, thus avoiding issues with leasing and occupancy rates for new developments. To confirm distances from other developments, the RFA instructs applicants to use Florida Housing’s Development Proximity List, dated August 16, 2019 (“Proximity List”). The Proximity List contains information on recently funded developments, including latitude and longitude coordinates, addresses, and whether the demographic of the development is classified as Family, Elderly, Non-ALF, ALF, or Workforce Housing. Florida Housing uses the DLP and Scattered Sites coordinates provided by successful applicants to develop the Proximity List for the next funding cycle of applications. The developments receiving funding in this RFA will be added to the Proximity List for prospective applicants in the 2020-2021 funding cycle to evaluate for the mandatory distance requirement. Florida Housing has created a draft Proximity List for the next funding cycle that includes the coordinates provided in the Ali Baba application. The draft Proximity List puts future applicants on notice of applications that are in litigation, including the Ali Baba application. In its application, Ali Baba selected the Workforce Housing demographic. According to the Proximity List, the closest Workforce Housing development is approximately 5 miles from Ali Baba’s proposed development. Ali Baba argues that its inaccurate Scattered Sites coordinates should be considered a minor irregularity because the distances from the sites are less than 100 feet and did not change the finding that the Ali Baba development would not be located within 0.5 miles of the closest Workforce Housing development funded by Florida Housing. Ali Baba argues that because the draft Proximity List provides notice that its application is subject to litigation, no reasonable prospective applicant would rely on Ali Baba’s coordinates. Ali Baba notes that Florida Housing retains the authority to revise the coordinates on the draft Proximity List. Ali Baba contends that the purpose of the mandatory distance requirement is to measure proximity to the nearest development and that it is undisputed that Ali Baba’s proposed development is more than 0.5 miles away from the nearest Workforce Housing development funded by Florida Housing. Ali Baba urges that the minimal error as to the Scattered Sites coordinates in its application should be deemed a minor irregularity that conferred no competitive advantage on Ali Baba. Ms. Button testified that the error in Ali Baba’s coordinates for its Scattered Sites is a material deviation that renders the Ali Baba application ineligible for funding. The fact that the next closest Workforce Housing development was over 5 miles away does not make Ali Baba’s error a waivable minor irregularity because the coordinates provided did not meet the requirements of the RFA. Ms. Button testified that Scattered Sites coordinates are an eligibility item and Ali Baba’s error thus renders its application ineligible for funding. Absent litigation, Florida Housing would have no way of knowing that an applicant’s Scattered Sites coordinates were not accurate. Florida Housing takes the coordinates at face value and does not take measurements or have surveyors confirm the information. Instead, it relies on the application and the fact that the applicant certifies that the information in the application is true and correct. Ms. Button testified that inaccurate coordinates can affect a prospective applicant’s decision on whether to apply for funding because applicants rely on the coordinates in the Proximity List to determine whether or not they can meet the mandatory distance requirement. Florida Housing reasonably concludes that an applicant bears ultimate responsibility for the accuracy of the information submitted in its application. The fact that litigation has in this case provided a correction to Ali Baba’s erroneous Scattered Sites coordinates does not transform Ali Baba’s failure to comply with an eligibility item into a minor irregularity.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order as to 2020-208 finding that Ali Baba is ineligible for funding and awarding funding to Quail Roost, subject to the successful completion of credit underwriting. DONE AND ENTERED this 23rd day of September, 2020, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of September, 2020. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) Michael P. Donaldson, Esquire Carlton Fields, P.A. Suite 500 215 South Monroe Street Tallahassee, Florida 32302 (eServed) Betty Zachem, Esquire Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301 (eServed) Brittany Adams Long, Esquire Radey Law Firm, P.A. Suite 200 301 South Bronough Street Tallahassee, Florida 32301 (eServed) Corporation Clerk Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed)
The Issue The issues in this case are whether the Florida Housing Finance Corporation (“Florida Housing”) employed an unadopted rule when it used rounding on a competing application to place Petitioner’s application for Low Income Housing Tax Credits (“HC” or “Tax Credits”) in the 2004 Universal Application Cycle in the “B” leveraging tie-breaker group, and if so, whether Florida Housing complied with the requirements of Section 120.57(1)(e), Florida Statutes, when it employed rounding.
Findings Of Fact Petitioner is a Florida limited partnership. Reliance- Andrews, LLC, the sole general partner of Petitioner, is a non- profit entity under Florida Administrative Code Rule 67- 48.002(81). Petitioner’s address is 516 Northeast 13th Street, Fort Lauderdale, Florida 33304. The affected agency is the Florida Housing Finance Corporation (“Florida Housing”), 227 North Bronough Street, Suite 5000, Tallahassee, Florida 32301-1329. Florida Housing is a public corporation organized under Part V, Chapter 420, Florida Statutes, to provide and promote the public welfare by administering the governmental function of financing and refinancing houses and related facilities in Florida in order to provide decent, safe, and sanitary housing to persons and families of low, moderate, and middle income. Petitioner filed an application, number 2004-102C, with Florida Housing for tax credits under the Housing Credit (“HC”) program for a proposed development in Broward County, Florida, known as Flagler Point. Under the HC program, successful applicants receive a dollar-for-dollar reduction in federal tax liability in exchange for the development of units to be occupied by low-income households. Florida Housing is designated as the housing credit agency for the State of Florida and is authorized to establish procedures necessary for the allocation of Tax Credits under Section 420.5099, Florida Statutes. Florida Housing scores and ranks applications for the HC program pursuant to the Universal Application Package Instructions ("Application Instructions") which are adopted as rules pursuant to Florida Administrative Code Rule 67- 48.002(111). The applicants for housing credits are sophisticated, and the application process is highly competitive. Most applicants achieve a perfect score on applications, so Florida Housing has created a series of “tiebreakers” to determine which projects receive allocations of tax credits. These include “leveraging,” (the amount of requested funding over the number of set-aside units), proximity to services, proximity of other Florida Housing developments, and, finally, a lottery. Petitioner and numerous other applicants for the HC program received the maximum score on the application, 66 points. Florida Housing then ranked the applications that received perfect scores to determine priority for funding according to certain Ranking and Selection Criteria as outlined in the Application Instructions. Part of the Ranking Selection Criteria process includes "tie-breakers" as enumerated in the Application Instructions. The first of the applicable tie-breakers separates the applications into groups A and B based upon a formula used by Florida Housing to determine funding request per set-aside unit. Group A is comprised of the 80 percent of applications with the lowest amount of total funding request per set-aside unit. The 20 percent of applications with the highest per unit request amount are placed in Group B. Applications in Group A receive preference over Group B. The A/B leveraging tiebreaker alone does not determine who gets funded. Some leveraging Group B projects are funded. The total number of set-aside units for each Application is computed by multiplying the total number of units within the proposed development by the highest total set- aside percentage the applicant committed to in the Set-Aside Commitment section of the Application. Florida Housing rounded up the total set-aside units on application 2004-084C from 182.7 (the product of the total number of units (203) and the highest total set aside percentage (90%)) to 183. Rounding this figure produces a lower per unit funding request amount for application 2004-084C ($51,857.95 instead of $51,943.10). Petitioner's per unit funding request is $51,882.28, which would be lower than application number 2004-084C if the total set-aside unit figure was not rounded. Petitioner's application was placed in Group B instead of Group A. On May 7, 2004, Petitioner filed a Notice of Possible Scoring Error ("NOPSE") requesting correction of the set-aside unit rounding, which Petitioner contended was in error. Respondent did not adopt Petitioner’s NOPSE, and on May 28, 2004, issued its scoring summary for application number 2004- 084C indicating a per unit Florida Housing funding request of $51,857.95. On July 9, 2004, Respondent issued the 2004 Final Score Corporation Funding Per Set-Aside for A and B Groups indicating that Petitioner had been placed in Leveraging Group B. Florida Housing has used rounding to determine the number of set-aside units in the same manner each year from the 2002 Universal Application Cycle through the 2004 Universal Application Cycle. Applicants are encouraged to, and more often than not do, set aside 100 percent of the units for low or very low income tenants. As most applicants for Tax Credits do just that, rounding is not often an issue. The number of set-aside units represents a commitment the developer makes in return for funding, and the number in the application is the number of set aside units the developer must provide, and is used to determine whether the development is in compliance with its commitment to Florida Housing, and to the Internal Revenue Service. As a practical matter, the number of set-aside units cannot be a fraction of a unit. Rounding up to the next whole number is the only option, because if the unit number is rounded down, the percentage of set-aside units would be below the set- aside commitment, the IRS would deem that the property had not met its set-aside commitment, and the investors would not receive their tax credits. Florida Housing revises its Universal Cycle Application and Instructions through the rulemaking process each year, in response to stakeholder input, in reaction to litigation, and to clarify issues which arise during the year. During the rulemaking process, there is considerable dialogue between developers and Florida Housing. Public hearings (rule development workshops) are noticed in the Florida Administrative Weekly, with the agendas being posted on Florida Housing’s website and also made available for distribution at the public hearings. The affordable housing development community is small and its members pay close attention to Florida Housing’s application process, which is intensely competitive. Petitioner is an experienced developer, and has previously received funding from Florida Housing. Petitioner is a member of a coalition of affordable housing developers, which meets before the rule development workshops to discuss the agenda, and to attempt to reach consensus on agenda issues. Petitioner is part of the development community, which normally participates in the rule development process, and Petitioner has been an active participant in the 2005 rule development process. An active member of the affordable housing developer’s coalition, and a veteran participant in the Florida Housing application and funding process, would have been aware of Florida Housing’s use of rounding to determine the number of set-aside units to which each applicant committed. The rounding issue that is at the heart of this proceeding has been addressed by Florida Housing in its proposed rule amendments to Florida Administrative Code Rule 67-48.002 for the 2005 Universal Application Cycle.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued in this case dismissing the petition and denying all relief sought by Petitioner. DONE AND ENTERED this 18th day of November, 2004, in Tallahassee, Leon County, Florida. S MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 2004.
