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.
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 Whether the Petitions filed by Ambar Trail, Ltd.; Sierra Meadows Apartments, Ltd.; and Quail Roost Transit Village IV, Ltd., should be dismissed for lack of standing.
Findings Of Fact Florida Housing is a public corporation created under Florida law to administer the governmental function of financing or refinancing affordable housing and related facilities in Florida. Florida Housing administers a competitive solicitation process to implement the provisions of the housing credit program, under which developers apply and compete for funding for projects in response to RFAs developed by Florida Housing. The RFA in this case was specifically targeted to provide affordable housing in Miami-Dade County, Florida. The RFA introduction provides: 2 As this Recommended Order of Dismissal is based upon a motion to dismiss, the factual allegations of the three Petitions filed by the Petitioners in this consolidate case are accepted as true, and the Findings of Fact are derived from the four corners of those Petitions, see Madison Highlands. LLC v. Florida Housing Finance Corp., 220 So. 3d 467, 473 (Fla. 5th DCA 2017), and facts that are not otherwise in dispute. This Request for Applications (RFA) is open to Applicants proposing the development of affordable, multifamily housing located in Miami- Dade County. Under this RFA, Florida Housing Finance Corporation (the Corporation) expects to have up to an estimated $7,195,917 of Housing Credits available for award to proposed Developments located in Miami-Dade County. After Florida Housing announced its preliminary funding award decisions for RFA 2019-112 for Housing Credit Financing for Affordable Housing Developments Located in Miami-Dade County, each of the Petitioners filed Petitions challenging the decisions. Petitioners do not allege that Florida Housing improperly scored or evaluated the applications selected for funding, nor do they contend that Petitioners' applications should be funded. Instead, Petitioners allege that the evaluation was fundamentally unfair and seeks to have the entire RFA rescinded based on alleged improprieties of one responding entity and its affiliates. Petitioners claim that the evaluation process was fundamentally unfair is based entirely on allegations that several entities associated with Housing Trust Group, LLC (HTG), combined to submit 15 Priority I applications in contravention of the limitation in the RFA on the number of Priority I applications that could be submitted. Even assuming Petitioners' assertions are correct, there is no scenario in which Petitioners can reach the funding range for this RFA. In order to break ties for those applicants that achieve the maximum number of points and meet the mandatory eligibility requirements, the RFA sets forth a series of tie-breakers to determine which applications will be awarded funding. The instant RFA included specific goals to fund certain types of developments and sets forth sorting order tie-breakers to distinguish between applicants. The relevant RFA provisions are as follows: Goals The Corporation has a goal to fund one (1) proposed Development that (a) selected the Demographic Commitment of Family at questions 2.a. of Exhibit A and (b) qualifies for the Geographic Areas of Opportunity/SADDA Goal as outlined in Section Four A. 11. a. The Corporation has a goal to fund one (1) proposed Development that selected the Demographic Commitment of Elderly (Non-ALF) at question 2.a. of Exhibit A. *Note: During the Funding Selection Process outlined below, Developments selected for these goals will only count toward one goal. Applicant Sorting Order All eligible Priority I Applications will be ranked by sorting the Applications as follows, followed by Priority II Applications. First, from highest score to lowest score; Next, by the Application's eligibility for the Proximity Funding Preference (which is outlined in Section Four A.5.e. of the RFA) with Applications that qualify for the preference listed above Applications that do not qualify for the preference; Next, by the Application's eligibility for the Per Unit Construction Funding Preference which is outlined in Section Four A.lO.e. of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Application's eligibility for the Development Category Funding Preference which is outlined in Section Four A.4.(b)(4) of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); Next, by the Applicant's Leveraging Classification, applying the multipliers outlined in Item 3 of Exhibit C of the RFA (with Applications having the Classification of A listed above Applications having the Classification of B); Next, by the Applicant's eligibility for the Florida Job Creation Funding Preference which is outlined in Item 4 of Exhibit C of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference); and And finally, by lotterv number, resulting in the lowest lottery number receiving preference. This RFA was similar to previous RFAs issued by Florida Housing, but included some new provisions limiting the number of Priority I applications that could be submitted. Specifically, the RFA provided: Priority Designation of Applications Applicants may submit no more than three (3) Priority I Applications. There is no limit to the number of Priority II Applications that can be submitted; however, no Principal can be a Principal, as defined in Rule Chapter 67- 48.002(94), F.A.C., of more than three ( 3) Priority 1 Applications. For purposes of scoring, Florida Housing will rely on the Principals of the Applicant and Developer(s) Disclosure Form (Rev. 05-2019) outlined below in order to determine if a Principal is a Principal on more than three (3) Priority 1 Applications. If during scoring it is determined that a Principal is disclosed as a Principal on more than three (3) Priority I Applications, all such Priority I Applications will be deemed Priority II. If it is later determined that a Principal, as defined in Rule Chapter 67-48.002(94), F.A.C., was not disclosed as a Principal and the undisclosed Principal causes the maximum set forth above to be exceeded, the award(s) for the affected Application(s) will be rescinded and all Principals of the affected Applications may be subject to material misrepresentation, even if Applications were not selected for funding, were deemed ineligible, or were withdrawn. The Petitioners all timely submitted applications in response to the RFA. Lottery numbers were assigned by Florida Housing, at random, to all applications shortly after the applications were received and before any scoring began. Lottery numbers were assigned to the applications without regard to whether the application was a Priority I or Priority II. The RFA did not limit the number of Priority II Applications that could be submitted. Review of the applications to determine if a principal was a principal on more than three Priority 1 Applications occurred during the scoring process, well after lottery numbers were assigned. The leveraging line, which would have divided the Priority I Applications into Group A and Group B, was established after the eligibility determinations were made. All applications were included in Group A. There were no Group B applications. Thus, all applications were treated equally with respect to this preference. The applications were ultimately ranked according to lottery number and funding goal. . If Florida Housing had determined that an entity or entities submitted more than three Priority I Applications with related principals, the relief set forth in the RFA was to move those applications to Priority II. Florida Housing did not affirmatively conclude that any of the 15 challenged applications included undisclosed principals so as to cause a violation of the maximum number of Priority I Applications that could be submitted. All of the applications that were deemed eligible for funding, including the Priority II Applications, scored equally, and met all of the funding preferences. After the applications were evaluated by the Review Committee appointed by Florida Housing, the scores were finalized and preliminary award recommendations were presented and approved by Florida Housing's Board. Consistent with the procedures set forth in the RFA, Florida Housing staff reviewed the Principal Disclosure Forms to determine the number of Priority I Applications that had been filed by each applicant. This review did not result in a determination that any applicant had exceeded the allowable number of Priority I Applications that included the same principal. One of the HTG Applications (Orchid Pointe, App. No. 2020-148C) was initially selected to satisfy the Elderly Development goal. Subsequently, three applications, including Slate Miami, that had initially been deemed ineligible due to financial arrearages were later determined to be in full compliance and, thus, eligible as of the close of business on January 8, 2020. The Review Committee reconvened on January 21, 2020, to reinstate those three applications. Slate Miami was then recommended for funding. The Review Committee ultimately recommended to the Board the following applications for funding: Harbour Springs (App. No. 2020-101C), which met the Geographic Areas of Opportunity/SADDA Goal; Slate Miami (App. No. 2020-122C), which met the Elderly (non-ALF) Goal; and Naranja Lakes (App. No. 2020-117C), which was the next highest-ranked eligible Priority I Application. The Board approved the Committee's recommendations at its meeting on January 23, 2020, and approved the preliminary selection of Harbour Springs, Slate Miami, and Naranja Lakes for funding. The applications selected for funding held Lottery numbers 1 (Harbour Springs), 2 (Naranja Lakes), and 4 (Slate Miami). Petitioners' lottery numbers were 16 (Quail Roost), 59 (Sierra Meadows) and 24 (Ambar Trail). The three applications selected for funding have no affiliation or association with HTG, or any of the entities that may have filed applications in contravention of the limitation in the RFA for Priority I applications. The applications alleged in the Petitions as being affiliated with HTG received a wide range of lottery numbers in the random selection, including numbers: 3, 6, 14, 19, 30, 38, 40, 42, 44, 45, 49, 52 through 54, and 58. If Petitioners prevailed in demonstrating an improper principal relationship between the HTG applications, the relief specified in the RFA (the specifications of which were not challenged) would have been the conversion of the offending HTG applications to Priority II applications. The relief would not have been the removal of those applications from the pool of applications, nor would it have affected the assignment of lottery numbers to any of the applicants, including HTG. The Petitions do not allege any error in scoring or ineligibility with respect to the three applications preliminarily approved for funding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Petitioners lack standing and dismissing the Petitions with prejudice. DONE AND ENTERED this 3rd day of April, 2020, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of April, 2020. COPIES FURNISHED: Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC Suite 3-231 1400 Village Square Boulevard Tallahassee, Florida 32312 (eServed) Michael P. Donaldson, Esquire Carlton Fields Jorden Burt, P.A. 215 South Monroe Street, Suite 500 Post Office Drawer 190 Tallahassee, Florida 32302-0190 (eServed) Donna Elizabeth Blanton, Esquire Brittany Adams Long, Esquire Radey Law Firm, P.A. Suite 200 301 South Bronough Street Tallahassee, Florida 32301 (eServed) Hugh R. Brown, General Counsel Betty Zachem, Esquire Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) M. Christopher Bryant, Esquire Oertel, Fernandez, Bryant & Atkinson, P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 (eServed) J. Stephen Menton, Esquire Tana D. Storey, Esquire Rutledge Ecenia, P.A. 119 South Monroe Street, Suite 202 Post Office Box 551 (32302) Tallahassee, Florida 32301 (eServed) Corporation Clerk Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed)
The Issue The issues in this case are whether Florida Housing Finance Corporation ("Florida Housing" or "Respondent") made a decision to determine Oasis at Renaissance Preserve I, LP ("Oasis" or "Petitioner") ineligible for SAIL funding for Request for Applications 2016-109 SAIL Financing of Affordable Multifamily Housing Developments to be used in Conjunction with Tax-Exempt Bond Financing and Non-competitive Housing Credits ("RFA"), that was contrary to a governing statute, rule, or solicitation specification, and, if so, whether that action was clearly erroneous, arbitrary, capricious, or contrary to competition.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation, enter a final order consistent with its initial decisions: (1) dismissing the formal written protests of Oasis at Renaissance Preserve I, LP, and (2) awarding funding to Osceola Palos Verdes, Ltd. DONE AND ENTERED this 15th day of March, 2017, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 2017. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) Michael P. Donaldson, Esquire Carlton Fields Jorden Burt, P.A. 215 South Monroe Street, Suite 500 Tallahassee, Florida 32302 (eServed) Betty Zachem, Esquire Marisa G. Button, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) M. Christopher Bryant, Esquire Oertel, Fernandez, Bryant & Atkinson, P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 (eServed) Kate Flemming, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed)
The Issue The issues in this bid protest are whether, in making the decision to award funding pursuant to Request for Applications 2017-103, Housing Credit and State Apartment Incentive Loan ("SAIL") Financing to Develop Housing in Medium and Large Counties for Homeless Households and Persons with a Disabling Condition (the "RFA"), Florida Housing Finance Corporation ("Florida Housing" or "Respondent"), acted contrary to a governing statute, rule, or solicitation specification; and, if so, whether such action was clearly erroneous, contrary to competition, arbitrary, or capricious. The question of whether the application of Northside Commons Residential, LLC ("Northside"), met the requirements of the RFA with respect to demonstrating the availability of water and sewer services as of the Application Deadline is the only question at issue in this case. No other parts of its Application are being challenged, and the parties all agree that its Application was otherwise properly scored. No parties have raised objections to any parts of Warley Park's application, and all parties agree that its Application was properly scored.
Findings Of Fact The Parties Petitioner Warley Park, Ltd., is the applicant entity of a proposed affordable housing development to be located in Seminole County, Florida. Petitioners Warley Park Developer, LLC, and Step Up Developer, LLC, are Developer entities as defined by Florida Housing in Florida Administrative Code Rule 67-48.002(28). Northside is a Florida limited liability company based in Miami-Dade County, Florida, in the business of providing affordable housing. 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 Programs 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 which qualify. These credits are then normally sold by developers for cash to raise capital for their projects. The effect of this 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 up 50 years as consideration for receipt of the tax credits. SAIL provides low-interest loans on a competitive basis to affordable housing developers each year. This money often serves to bridge the gap between the development's primary financing and the total cost of the development. SAIL dollars are available to individuals, public entities, not-for-profit, or for-profit organizations that propose the construction or substantial rehabilitation of multifamily units affordable to very low-income individuals and families. Florida Housing is authorized to allocate housing tax credits, SAIL funding, and other funding by means of request for proposal or other competitive solicitation in section 420.507(48) and 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 were made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3). The RFA 2017-103 Housing tax credits and SAIL funding are made available through a competitive application process commenced by the issuance of a RFA. A RFA is equivalent to a "request for proposal" as indicated in rule 67-60.009(3). The RFA at issue here is RFA 2017-103, which was issued on March 22, 2017. A modification was issued on April 11, 2017, and responses were due April 20, 2017. Through the RFA, Florida Housing seeks to award up to an estimated $6,075,000 of housing tax credits, along with $11,500,000 of SAIL financing, to qualified applicants to provide affordable housing developments. A review committee, made up of Florida Housing staff, reviews and scores each application. Florida Housing scored applicants in six areas worth a total of 145 points: General Development Experience; Management Company Experience with Permanent Supportive Housing; Tenant Selection for Intended Residents; Community-Based General Services and Amenities Accessible to Tenants; Access to Community-Based Resources and Services that Address Tenants' Needs; and Approach Toward Income and Credit Status of Homeless Households Applying for Tenancy. Florida Housing scored Northside as the highest scoring applicant, awarding it 128 points. Warley Park was the fourth highest scored applicant with 112 points. These scores are presented in a public meeting and the committee ultimately makes a recommendation as to which projects should be funded. This recommendation is presented to Florida Housing's Board of Directors ("the Board") for final agency action. On June 16, 2017, Petitioners and all other participants in RFA 2017-103 received notice that the Board had determined which applications were eligible or ineligible for consideration for funding and selected certain applications for awards of tax credits, subject to satisfactory completion of the credit underwriting process. Such notice was provided by the posting of two spreadsheets, one listing the "eligible" and "ineligible" applications and one identifying the applications that Florida Housing proposed to fund, on Florida Housing's website, www.floridahousing.org. Florida Housing announced its intention to award funding to three developments, including Northside. Warley Park's application was deemed eligible, but it was not selected for funding. The RFA at Section Four A.5.g. requires the applicant to demonstrate its "Ability to Proceed" by including the following as attachments to its application: Availability of Water. The Applicant must demonstrate that as of the Application Deadline water is available to the entire proposed Development site by providing as Attachment 9 to Exhibit A: The properly completed and executed Florida Housing Finance Corporation Verification of Availability of Infrastructure – Water form (Form Rev. 08-16); or A letter from the water service provider that is Development-specific and dated within 12 months of the Application Deadline. The letter may not be signed by the Applicant, by any related parties of the Applicant, by any Principals or Financial Beneficiaries of the Applicant, or by any local elected officials. Availability of Sewer. The Applicant must demonstrate that as of the Application Deadline sewer capacity, package treatment or septic tank service is available to the entire proposed Development site by providing as Attachment 10 to Exhibit A: The properly completed and executed Florida Housing Finance Corporation Verification of Availability of Infrastructure – Sewer Capacity, Package Treatment, or Septic Tank form (Form Rev. 08-16); or A letter from the waste treatment service provider that is Development-specific and dated within 12 months of the Application Deadline. The letter may not be signed by the Applicant, by any related parties of the Applicant, by any Principals or Financial Beneficiaries of the Applicant, or by any local elected officials. (emphasis added). Section 5.g. of Exhibit A to RFA 2017-103, the Application and Development Cost Pro Forma, requires that the applicant include the following information: Ability to Proceed: As outlined in Section Four A.5.g. of the RFA, the Applicant must provide the following information to demonstrate Ability to Proceed: Availability of Water. The Applicant must provide, as Attachment 9 to Exhibit A, an acceptable letter from the service provider or the properly completed and executed Florida Housing Finance Corporation Verification of Availability of Infrastructure – Water form (Form Rev. 08-16). Availability of Sewer. The Applicant must provide, as Attachment 10 to Exhibit A, an acceptable letter from the service provider or the properly completed and executed Florida Housing Finance Corporation Verification of Availability of Infrastructure – Sewer Capacity, Package Treatment, or Septic Tank form (Form Rev. 08-16). The Verification of Availability of Infrastructure – Sewer Capacity, Package Treatment, or Septic Tank form requires the service provider to certify that on or before the submission deadline for the RFA, "Sewer Capacity or Package Treatment is available to the proposed Development." Similarly, the Verification of Availability of Infrastructure – Water form requires the service provider to certify that on or before the submission deadline for the RFA, "Potable water is available to the proposed Development." Each form also includes the following caveat: To access such [waste treatment] [water] service, the Applicant may be required to pay hook-up, installation and other customary fees, comply with other routine administrative procedures, and/or install or construct line extensions and other equipment, including but not limited to pumping stations, in connection with the construction of the Development. The RFA does not define the term "Development- specific," and the term is not used in Section 5.g. of Exhibit A to RFA 2017-103 where the requirement for the water and sewer letters is included. Further, the term "Development-specific" is not defined in any Florida Housing rule. Miami-Dade County has had a longstanding practice of refusing to complete Florida Housing's water and sewer verification forms. Florida Housing added the water and sewer letter as an additional method to demonstrate availability in light of the county's refusal. Thus, an applicant, such as Northside, has no alternative when proposing a Miami-Dade project other than providing a water and sewer letter as opposed to Florida Housing's Verification form. Northside's Water and Sewer Letter Accordingly, in response to this RFA requirement, Northside submitted a letter from Miami-Dade County Water and Sewer Department as Attachment 9 to its application. The letter was sought by Oscar Sol, one of the principals of the developer working with the applicant in the project at issue in this case. The WASA letter at issue in this case was dated December 12, 2016. It was addressed to "Northside Commons LTD," and referenced water and sewer availability for "Northside Commons," construction and connection of 108 apartments, located at 8301 Northwest 27th Avenue, Miami-Dade County, Florida, Folio #30-3110-000-0210. The identical WASA letter was submitted as Attachments 10 and 11 to application 2017-155C in response to a prior RFA, RFA 2016-114. That prior application was submitted by Northside Commons, Ltd., for a 108-unit elderly development called Northside Commons, located at 8301 Northwest 27th Avenue, Miami- Dade County, Florida, Folio #30-3110-000-0210. The application deadline for RFA 2016-114 was December 15, 2016. In the present case, Northside's application for RFA 2017-103, application 2017-254CSN, was submitted by Northside Commons Residential, LLC. It was for an 80-unit development for homeless persons and persons with disabling conditions, also to be called "Northside Commons," located at 8301 Northwest 27th Avenue, Miami-Dade County, Florida, Folio #30-3110-000-0210. The application deadline for RFA 2017-103 was April 20, 2017. The WASA letter contains several paragraphs of details about hookups to water and sewer service, and also includes the following boilerplate language: "This letter is for informational purposes only and conditions remain in effect for thirty (30) days from the date of this letter. Nothing contained in this letter provides the developer with any vested rights to receive water and/or sewer service." Warley Park raised three issues regarding the WASA letter. First, was the letter valid for more than 30 days after it was signed? Second, did the letter meet the requirement of the RFA that it be "development specific?" Third, did the letter demonstrate the availability of sewer services? Was the WASA letter valid for more than 30 days after it was signed? Florida Housing and Northside contend that there is no provision in the WASA letter stating that it becomes "invalid" after 30 days, or that water and sewer services will not be available after 30 days. Douglas Pile, the representative for Miami-Dade County, testified that the second and third paragraphs of the letter included the conditions necessary to service the availability of water and sewer, and that it was these conditions that remained in effect for 30 days. He described the purpose of the 30-day language as follows: We're not saying that availability disappears or terminates after 30 days. We're just saying this letter is good for informational purposes for 30 days. We don't want people to come back a year later and say I bought this property based upon this letter of availability saying I have water and sewer under certain conditions, and then a year later the conditions are different and maybe they have to put in a water main extension or maybe their local pump station is in moratorium. When asked specifically whether the entire letter was valid for only 30 days, he responded, "Right. Well, the conditions are – the nearby water and sewer facilities that the project would connect to." Mr. Pile explained that the letter is "a snapshot of what our facilities are at the time they make the request." He further stated that: the letter . . . has to have an expiration date either explicit or implicit. If a utility is going to give a letter saying they have water and sewer availability, that cannot be forever, you know. You assume a natural termination point . . . we just explicitly say this letter is good for 30 days. In its Pre-Hearing Position Statement, Florida Housing argued that it did not interpret this language to mean that the letter became invalid after 30 days. However, according to Mr. Reecy,1/ there was no "interpretation" done by Florida Housing. Specifically, when asked how Florida Housing interpreted the phrase, he stated: We have basically ignored that phrase. We actually do not know what--given the context of this situation, how, within 30 days, the--that information is only good for 30 days. So we have not considered that to be a relevant factor in our consideration of the information provided in the letter. A plain and common reading of the quoted language indicates Miami-Dade limited the validity of the information in the letters to 30 days. Florida Housing provided no explanation for its decision to ignore the language and made no attempt to inquire of Miami-Dade County as to what it intended by including the language. This 30-day limitation is generally known by the applicants and nearly every previously funded application included a letter from Miami-Dade County dated within 30 days of the application deadline. Only one Miami-Dade WASA letter submitted by applicants within the last two RFAs was dated outside of the 30-day window. That letter was deemed ineligible for other reasons. Had Petitioner wanted to demonstrate availability as of the application deadline, it only needed to request a letter from Miami-Dade County within the 30 days prior to the application deadline, giving Miami-Dade sufficient time to respond. In fact, the letter was initially submitted as part of a response to RFA 2016-114, with a due date of December 15, 2016. Because the letter was issued on December 12, 2016, it remained valid through the application deadline for RFA 2016-114. There is no limit to the number of times a developer can obtain a letter of availability from Miami-Dade County. The requirements of the RFA are clear that water and sewer availability must be shown "as of the Application Deadline." Because the WASA letter submitted with Petitioner's Application only provided a snapshot of availability for a 30-day window after the issuance of the letter (or until January 11, 2017), the letter failed to address the availability of water or sewer services as of April 20, 2017. As a practical matter, the WASA letter provides that water hook-up is readily available to existing infrastructure and sewer availability is dependent upon a developer building a pumping station. It could be inferred that these conditions would remain available at this location for 12 months. However, the testimony of Mr. Pile makes clear that Miami-Dade County is not willing to make that assumption for a period beyond 30 days due to the possibility of intervening events.2/ Presumably, this is why the vast majority of applicants for this type of RFA secures and provides a Miami-Dade WASA letter dated within 30 days of the RFA application deadline. Because the WASA letter was not valid beyond January 11, 2017, Petitioner cannot demonstrate availability of water and sewer as of the Application Deadline. The fact that the WASA letter was no longer valid is fatal to Petitioner's application in that it failed to satisfy a mandatory requirement of RFA 2017-103, i.e., the availability of water and sewer services. Was the WASA letter "development specific?" The RFA requires that the Applicant demonstrate water and sewer service availability for "the entire proposed Development site," and it also requires that the letter from the service provider be "Development-specific." The application in this matter was filed by Northside Commons Residential, LLC, for an 80-unit development for the homeless and persons with disabling conditions. However, the WASA letter was issued to, and discussed the availability of water and sewer service for, a different entity, Northside Commons, Ltd., the applicant for a 108-unit elderly development. According to Mr. Reecy, the reuse of a letter that was previously submitted in a different application does not follow the "letter" of the criteria in the RFA. Florida Housing and Northside even agree that the letter does not reference the specific proposed development that is at issue and instead focuses on the location of the proposed development. Mr. Sol, Northside's representative, suggested that it is "irrelevant" to which entity the letter is issued because what is relevant is whether water and sewer availability exists. However, as stated by Mr. Reecy, what Florida Housing considers when determining whether a letter of availability is "Development-specific" is the location, the number of units, and the applicant. Because the WASA letter was issued to a entirely different applicant, based upon Mr. Reecy's testimony, it is not "Development-specific." However, Mr. Reecy noted that such a letter could be considered a Minor Irregularity if there is some commonality between the applicant entities. Northside argues that the failure of the letter to be "Development-specific" should be waived as a Minor Irregularity. This issue was not considered during scoring, nor was it a determination made by the Board of Florida Housing prior to awarding funding to Northside. Mr. Reecy acknowledged that it is a judgment call when determining whether a letter addressed to a different entity with different principals is a Minor Irregularity. That call depends upon the number of common principals. While the number of principals that must be the same is discretionary, there must be at least some commonality of principals for it to be considered a Minor Irregularity. The principals of Northside Commons, Ltd., the entity to which the letter was actually issued and the applicant that originally submitted the WASA letter, are completely different from the principals of Northside Commons Residential, LLC. Despite a full understanding of all the similarities between the two applications and the differences in the requirements of the RFA and being given a number of opportunities to change his position, Mr. Reecy repeatedly declined to do so. Mr. Sol suggested that it is common practice for Florida Housing to accept letters issued to entities other than the applicant and with different principals. After hearing Mr. Sol's opinion and discussing the issue further with Northside, Mr. Reecy remained steadfast in his position that the error in the Letter could not be waived as a Minor Irregularity. At the request of Northside, Mr. Reecy agreed to review past practices of the agency during a break in the hearing. As stated by counsel for Florida Housing, if it is established that Florida Housing has a long-standing practice of accepting similar letters, then the question is whether Northside Commons may rely upon that practice. The review during the break was limited to the issue of whether Florida Housing had previously accepted Miami-Dade letters addressed to an entity who was not the applicant and who shared no principals in common with the applicant. No such long- standing practice was demonstrated. Mr. Reecy directed staff to pull all of the Miami-Dade letters of availability from the last two RFAs, to determine, first, whether or not there were sewer letters addressed to someone other than the applicant entity. Second, for those so identified, staff was to compare the principals of the applicant entity and the entity that was the addressee for commonality. Mr. Reecy was provided a list of approximately a dozen letters from the past several RFAs that compared the applicant entity and the addressee entity. This list did not identify whether or not the letters were submitted by successful credit applicants. Based upon this list, Mr. Reecy then reviewed each letter to determine whether or not it was issued to the applicant. He then reviewed the principals list for the applicant as identified in the application and compared that to data from the state of Florida's Sunbiz.org website for the addressee of the letter. Mr. Reecy compared this information to determine if the two had any principals in common. After reviewing this information, Mr. Reecy recanted his earlier testimony and stated that he felt that Florida Housing historically accepted letters with addressees that were not the applicant entity and did not have common principals. Mr. Reecy further testified that based upon this understanding of Florida Housing's past practice, the Northside's letter should be accepted. The information Mr. Reecy reviewed, specifically that obtained from the state of Florida's Sunbiz.org website, did not demonstrate, as Mr. Reecy believes, that Florida Housing previously accepted Miami-Dade WASA letters from applicants in a similar position to that of Northside. Notably, Florida Housing does not accept documentation from the Sunbiz.org website to demonstrate the principals of the Application as required by this and other RFAs. The Sunbiz.org website does not identify the level of detail of principals which Florida Housing requests in its "Principals of the Applicant and Developer(s) Disclosure Form". Further, even if Sunbiz.org did identify all of the principals Florida Housing requires to be disclosed, in this case, the Sunbiz.org information reviewed was dated 2017.3/ As this information was filed after the application deadlines for the respective RFAs, it fails to identify any of the principals related to the entities in the "comparable" letters for the 2015 and 2016 RFAs. No information was provided as to any of the principals in either 2015 or 2016. Accordingly, Mr. Reecy and Mr. Sol's belief that Florida Housing had previously accepted letters in a similar position to that of Northside Commons' letter has not been demonstrated. Because Mr. Reecy's new position, that Northside Commons' letter should be accepted, is based upon this incorrect understanding, and the alleged prior agency action was not demonstrated, Mr. Reecy's initial testimony is found to be more credible. Therefore, the record demonstrates that the WASA letter was not "Development-specific" and, therefore, contrary to the solicitation specifications. Did the letter demonstrate availability of sewer services? The RFA requires each applicant to provide a form or letter demonstrating that "as of the Application Deadline sewer capacity, package treatment or septic tank service is available to the entire proposed Development site." Petitioner presented the testimony of Jon Dinges, P.E., an environmental engineer with expertise in designing wastewater systems who was accepted as an expert in civil engineering, specifically in the area of sewer infrastructure and design. Mr. Dinges' testimony was simply that the problem with the WASA letter in this case is that it does not actually say that capacity is available. In a prior RFA, Florida Housing rejected an application that included a Miami-Dade WASA letter because it specifically stated that no gravity sewer capacity analysis had been conducted. According to Mr. Dinges, without conducting a gravity sewer capacity analysis, it is not possible to determine whether capacity, if any, exists. However, the RFA makes no mention of requiring a gravity sewer capacity analysis to demonstrate availability. Mr. Reecy testified that Florida Housing has been accepting WASA letters without mention of gravity analysis from Miami-Dade County for many years. He stated that the detailed description of how a proposed project could connect to an existing sewer service met the requirement of the RFA that the Applicant demonstrate the availability of sewer service. He also testified that if Florida Housing were to change its position and determine that the form of the letter was not adequate to demonstrate capacity, it would do so in a public process. The testimony was clear that Florida Housing does not do any independent analysis of whether water and sewer service is actually available to a proposed development, but instead relies on the expertise of the local government to do this analysis. Applicants are not required to include or demonstrate the specific requirements or technical specifications of how a connection to water or sewer services will be made. This interpretation is consistent with the specifications of the RFA.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order amending its preliminary decision awarding funding to Warley Park by: finding Northside ineligible for funding; and awarding funding to Warley Park as the next highest scoring eligible applicant. DONE AND ENTERED this 19th day of October, 2017, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of October, 2017.
The Issue Whether Respondent, Florida Housing Finance Corporation’s (“Florida Housing”), intended action to award housing credit funding to Marquis Partners, Ltd. (“Marquis Partners”), based on the Request for Applications 2017-113 Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas Counties (the “RFA”) is contrary to governing statutes, Florida Housing rules, or the RFA specifications; and, if so, whether the award is contrary to competition, clearly erroneous, or arbitrary and capricious.
Findings Of Fact Based on the stipulated findings of fact, the oral and documentary evidence presented at hearing, and the entire record in this proceeding, the Findings of Fact are as follows: Parties 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. HTG Village and Marquis Partners submitted applications for funding from Florida Housing to develop affordable housing developments. Both applications were deemed “eligible” for funding. Marquis Partners was preliminarily selected for funding under the RFA. While HTG Village was determined to be eligible for funding, it was not selected for an award of funding. The “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. These credits are then normally sold by developers for cash to raise capital for their projects. The effect is that it reduces the amount that the developer would have to borrow otherwise. Because the total debt is lower, a tax credit property can (and must) offer lower, more affordable rents. Developers also covenant to keep rents at affordable levels for periods of 30 to 50 years as consideration for receipt of the tax credits. Competitive Application Process Florida Housing is authorized to allocate tax credits, SAIL funding, and other funding by means of requests for proposal or other competitive solicitation in section 420.507(48), and adopted Florida Administrative Code Chapter 67-60, which govern the competitive solicitation process for several different programs, including the program for tax credits. Chapter 67-60 provides that Florida Housing handles disputes regarding the allocation of its tax credits, which were made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3). In their applications, applicants request a specific dollar amount of housing credits to be given to the applicant each year for a period of 10 years. Applicants 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 areas of some counties. This, however, is not an exhaustive list of the factors considered. Tax credits are made available through a competitive application process commenced by the issuance of an RFA. An RFA is equivalent to a “request for proposal” as indicated in rule 67-60.009(3). At issue here is RFA 2017-113: Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas Counties. The RFA was issued on October 6, 2017, and responses were due December 28, 2017. The RFA was modified on November 1 and November 29, 2017. Through the RFA, Florida Housing seeks to award up to an estimated $14,601,863.00 of housing credits to applicants that propose developments in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas Counties. Florida Housing received 33 applications in response to RFA 2017-113. 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 25 applications eligible and eight applications ineligible. Through the ranking and selection process outlined in the RFA, seven applications were recommended for funding, including Marquis Partners. On March 16, 2018, Florida Housing’s Board met and considered the recommendations of the review committee for RFA 2017-113. Later, on March 16, 2018, at approximately 1:05 p.m., Petitioners and all other applicants in RFA 2017-113 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 tax 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, one listing the "eligible" applications in RFA 2017-113 and one identifying the applications which Florida Housing proposed to fund. In that March 16, 2018, posting, Florida Housing announced its intention to award funding to seven applicants, including Marquis Partners. HTG Village was eligible, but not recommended for funding. All of the parties in this case applied for funding to develop a proposed development in Broward County. According to the terms of the RFA, a maximum of two Broward County applications are to be funded. Sailboat Bend was the other application, in addition to that of Marquis Partners that was selected for funding in Broward County. Once Marquis Partners dismissed its petition in DOAH Case No. 18-2157BID, there were no remaining challenges to Sailboat Bend. Petitioner timely filed a Notice of Protest and Petition for Formal Administrative Proceedings. Marquis Partners timely intervened. No challenges were made to the terms of RFA 2017-113. RFA 2017-113 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 list of the eligibility items is available in section 5.A.1, beginning on page 63 of the RFA. Only applications that meet all the eligibility items will be eligible for funding and considered for funding selection. The eligibility items also include Submission Requirements, Financial Arrearage Requirements, and the Total Development Cost Per Unit Limitation requirement. Applicants can earn points for each of the following items (for a maximum of 20): Submission of Principal Disclosure Form stamped by Corporation as “Pre-Approved” (maximum 5 points); Development Experience Withdrawal Disincentive (maximum 5 points); and either Local Government Contribution Points (maximum 5 points) or Local Government Area of Opportunity Points (10 points). The RFA’s stated goal is to fund one application wherein the applicant applied and qualified as a non-profit applicant. As part of the funding selection process, the RFA starts with the application sorting order. All eligible applications are ranked by first sorting all eligible Applications from the 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 eligibility for the Per Unit Construction Funding Preference which is outlined in Section Four A.11.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 And finally, by lottery number, resulting in the lowest lottery number receiving preference. The RFA also outlines the funding selection process as follows: The highest ranking eligible Application will be selected for funding for proposed Developments located in each of the following counties for which an eligible Application was received: Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas. If funding remains after funding the highest ranking eligible Applications as outlined in a. above, and if none of the Applications selected for funding in a. above qualify for the Non-Profit goal, the next Application selected for funding will be the highest ranking eligible unfunded Application wherein the Applicant applied and qualified as a Non-Profit Applicant, regardless of county. If the selected Application cannot be fully funded, it will be entitled to receive a Binding Commitment for the unfunded balance. If funding remains after funding the highest ranking eligible Applications as outlined in a. above and at least one (1) of the selected Applications qualified for the Non-Profit goal, the next Application selected for funding will be the highest ranking eligible unfunded Application in Broward County. If the selected Application cannot be fully funded, it will be entitled to receive a Binding Commitment for the unfunded balance. If funding remains after selecting the highest ranking eligible unfunded Broward County Application, or if there is no eligible unfunded Application located in Broward County, no additional Applications from any county will be selected for funding and any remaining funding will be distributed as approved by the Board. HTG Village Standing One of the eligibility requirements in the RFA is that applicants are required to demonstrate site control by providing certain documentation as Exhibit 8 to the application. The RFA provides three ways to demonstrate site control: 1) eligible contract, 2) deed or certificate of title, or 3) lease. In order to demonstrate site control as an eligible contract, the following must be demonstrated: Eligible Contract - For purposes of this RFA, an eligible contract is one that has a term that does not expire before June 30, 2018 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 June 30, 2018; specifically states that the buyer’s remedy for default on the part of the seller includes or is specific performance; and the buyer MUST be the Applicant unless an assignment of the eligible contract which assigns all of the buyer's rights, title and interests in the eligible contract to the Applicant, is provided. Any assignment must be signed by the assignor and the assignee. If the owner of the subject property is not a party to the eligible contract, all documents evidencing intermediate contracts, agreements, assignments, options, or conveyances of any kind between or among the owner, the Applicant, or other parties, must be provided, and, if a contract, must contain the following elements of an eligible contract: a) have a term that does not expire before June 30, 2018 or contain 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 June 30, 2018, and b) specifically state that the buyer’s remedy for default on the part of the seller includes or is specific performance. In response to RFA 2017-113, HTG Village timely submitted application number 2018-303C (“HTG Village Application”) requesting an allocation of $2,561,000 in housing credits. HTG Village proposed to develop a 96-unit affordable, multifamily housing development in Broward County. The address of the development site provided within the application of HTG Village is “N Andrews Ave and NE 6th St., Fort Lauderdale.” (“HTG Village Development Site”). HTG Village had a contractual right to purchase the HTG Village Development Site as of the application deadline and satisfied the site control requirement of RFA 2017-113 as of the application deadline. HTG Village terminated its contract to purchase the HTG Village Development Site in a letter dated January 16, 2018, and delivered on January 17, 2018. HTG Village entered a First Amendment and Reinstatement to the original Purchase and Sale Agreement on May 8, 2018 (“Amended Purchase and Sale Agreement”), with a retroactive effective date of January 17, 2018. Although HTG Village terminated its purchase agreement after the application deadline, Ms. Button credibly testified that the determination of whether the applicant is ready to proceed with the development is at the time of the application deadline (through submission of the completed application) and again at the time of underwriting. Of the applicants that submitted applications in response to the RFA, four applicants submitted applications for development in Broward County. Two applicants received a score of 20 points, Sailbooat Bend and Marquis Partners. Of the two applicants that received 20 points, Marquis Partners was assigned a lottery number of nine. HTG Village and another applicant, Casa St. Angelo, received scores of 15 points. HTG Village was assigned a lottery number 1. In the solicitation process, if Marquis Partners is deemed ineligible, HTG Village would be the next highest-ranked application for funding for development in Broward. If Marquis Partners remains eligible, but its score is reduced to 15, HTG Village would replace Marquis Partners in the line for funding because HTG Village has the lowest lottery number (1). Marquis Partners Application In response to RFA 2017-113, Marquis Partners timely submitted application number 2018-279C (“Marquis Partners Application”) requesting an allocation of $1,727,000 in housing credits. Marquis Partners proposed to develop a 100-unit affordable, multifamily housing development in Broward County. Florida Housing determined that the Marquis Partners Application was eligible for an award of housing credits and preliminarily selected the Marquis Partners Application for an award of housing credits. The Marquis Partners Application was selected as the second Broward County application under subpart (c) of the funding selection process. As another eligibility item, RFA 2017-113 required that applicants identify their “Principals” by completing and submitting with their applications a Principal Disclosure Form as follows: Eligibility Requirements to meet the submission requirements, the Applicant must upload the Principals of the Applicant and Developer(s) Disclosure Form (Form Rev. 08- 16) (“Principals Disclosure Form”) with the Application and Development Cost Pro Forma, as outlined in Section Three above. The Principals Disclosure Form must identify the Principals of the Applicant and Developer(s) as of the Application Deadline and should include, for each applicable organizational structure, only the types of Principals required by Subsection 67- 48.002(93), F.A.C. 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. RFA 2017-113 also enabled an applicant to obtain “points” by participating in Florida Housing’s advance review process as follows: Point Item: Applicants will receive 5 points if the uploaded Principal Disclosure Form was stamped “Approved” during the Advance Review Process provided (a) it is still correct as of Application Deadline, and (b) it was approved for the type of funding being requested (i.e., Housing Credits or Non-Housing Credits). The Advance Review Process for Disclosure of Applicant and Developer Principals is available on the Corporation’s Website http://www.floridahousing.org/programs/ developers-multifamilyprograms/competitive/ 2017/2017-113 (also accessible by clicking here) 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. Marquis Partners participated in the advance review process, and on or about December 21, 2017, Florida Housing approved the Principal Disclosure Form submitted by Marquis Partners for an award of housing credits. The Principal Disclosure Form approved by Florida Housing during the advance review process did not properly identify Marquis Partners’ Principals for the corresponding types of entities as provided in Florida Administrative Code Rule 67-48.002(93). Rule 67-48.002(93) defined the term “Principal” based on the applicant or developer entity, and then by the organizational structure of those specific entities. The term “Principal” was capitalized in the RFA. The RFA provided that unless otherwise defined, capitalized terms within the RFA have the meaning as set forth in Exhibit B, in chapters 67-48 and 67-60, or in applicable federal regulations. Within the disclosure form, the applicant was required to disclose the type of Principal, name of the Principal and organization structure of that Principal at each disclosure level. There were three disclosure levels provided on the disclosure form. The Principal Disclosure Form submitted with the Marquis Partners Application included errors at the second Principal disclosure level. The second Principal disclosure level required Marquis Partners to provide the type of Principal being associated with the corresponding first-level Principal entity and the name of the Principal. Marquis Partners failed to disclose one Principal at the second level as further outlined below. As of the application deadline and at all times pertinent to this case, amongst other partners, Cornerstone Marquis, LLC (“Cornerstone Marquis”), was identified as a general partner of Marquis Partners. As of the application deadline and at all times pertinent to this case, the members of Cornerstone Marquis were as follows: a) Jorge Lopez; b) Awilda Lopez; c) Mara Mades; and d) M3 Acquisitions, LLC. The members were properly disclosed at the second Principal disclosure level. As of the application deadline and at all times pertinent to this case, the managers of Cornerstone Marquis, LLC, were as follows: a) Jorge Lopez; b) Mara Mades; and c) Leon Wolfe. At the second Principal disclosure level, Awilda Lopez and M3 Acquisitions were incorrectly identified as managers of Cornerstone Marquis, LLC, when they were in fact only members. More importantly, Leon Wolfe was not identified at the second Principal disclosure level as a manager of Cornerstone Marquis. Since Leon Wolfe was a manager of Cornerstone Marquis, he should have been identified as a manager of Cornerstone Marquis, LLC, at the second Principal disclosure level. Florida Housing’s approval of Marquis Partners’ Principal Disclosure Form during the advance review process did not verify the accuracy of the information contained within the Principal Disclosure Form. The information in the Principal Disclosure Form was incorrect at the time it was submitted for approval and remained incorrect when it was submitted with the Marquis Partners’ Application. Florida Housing evaluates omissions from the Principal Disclosure Form based on whether the inclusion of the incorrect information negatively impacts other applicants. Marisa Button, director of multifamily allocation, testified that the misidentification of Awilda Lopez and M3 Acquisitions, LLC, as managers of Cornerstone Marquis is a minor irregularity. On the other hand, Florida Housing considered the failure to properly disclose Leon Wolfe as a manager of Cornerstone Marquis to be a material deviation. Leon Wolfe was disclosed on the Principal Disclosure Form at the third disclosure level as a member and manager of M3 Acquisitions, LLC. However, Mr. Wolfe was not properly disclosed at the second level of disclosure as required. The RFA required that applicants disclose Principals in the Principal Disclosure Form for each type of entity. Ms. Button testified that the purpose of proper disclosure of all Principals of the entities that are associated with the applicant is so that Florida Housing is aware of who it is doing business with. Florida Housing screens the Principals to determine whether a Principal has been deficient to the corporation on prior affordable housing deals, identify bad actors, or to limit the amount of funding received by any related applicants. Florida Housing uses the disclosed Principals to determine if applications are related. Florida Housing made the advance review process available to assist applicants with completing the Principal Disclosure Form. During the process, there were sample charts provided to assist the applicants with completing the form. Marquis Partners participated in the review process and Florida Housing approved the form. The greater weight of the evidence demonstrates that Marquis Partners did not properly disclose Mr. Wolfe on its Principal Disclosure Form and, as a result, it should not have been awarded the additional five points for the advance review approval. Moreover, the omission of Mr. Wolfe as a manager of Cornerstone Marquis is a material deviation that cannot be waived. Thus, the evidence shows that Marquis Partners is not eligible for funding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued finding that Florida Housing’s initial scoring decision regarding the Marquis Partners Application was erroneous, concluding that Marquis Partners was ineligible for funding and not eligible for five additional points, and awarding funding to HTG Village. DONE AND ENTERED this 27th day of July, 2018, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of July, 2018. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation Suite 5000 227 North Bronough Street Tallahassee, Florida 32301-1329 (eServed) Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC Suite 304 1725 Capital Circle Northeast Tallahassee, Florida 32308 (eServed) Michael J. Glazer, Esquire Anthony L. Bajoczky, Jr., Esquire Ausley & McMullen, P.A. 123 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 (eServed) Betty Zachem, Esquire Florida Housing Finance Corporation Suite 5000 227 North 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 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 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 Whether Florida Housing Finance Corporation’s (Florida Housing, Corporation, or Respondent) rejection of the funding for the application submitted by Capital Grove Limited Partnership (Capital Grove) was contrary to Florida Housing’s governing statutes, rules, policies, or the specifications of Request for Applications 2014-114 (the RFA). If so, whether Florida Housing’s decision to fund the application submitted by HTG Wellington Family, LLC (HTG Wellington), is contrary to governing statutes, rules, policies, or the RFA specifications.
Findings Of Fact 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. 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 by Congress in 1986 to incentivize the private market to invest in affordable rental housing. Tax credits are competitively awarded to applicants in Florida for qualified rental housing projects. Applicants then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the owner would otherwise have to borrow. Because the debt is lower, a tax-credit property can offer lower, more affordable rents. Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their federal tax liability each year over a period of ten years. The amount of the annual credit is based on the amount invested in the affordable housing. Tax credits are made available by the U.S. Treasury to the states annually. Florida Housing is authorized to allocate tax credits and other funding by means of request for proposal or other competitive solicitation in section 420.507(48), and adopted Florida Administrative Code chapter 67-60 to govern the competitive solicitation process for several different programs, including the one for tax credits. Rule 67-60.002(1) defines “Applicant” as “any person or legally-formed entity that is seeking a loan or funding from the Corporation by submitting an application or responding to a competitive solicitation pursuant to this rule chapter for one or more of the Corporation’s programs.” Applicants request in their applications a specific dollar amount of housing credits to be given to the applicant each year for a period of 10 years. Applicants typically 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 majority of the capital necessary to construct the Development. The amount of housing credits an Applicant may request is based on several factors, including but not limited to 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. Florida Housing’s competitive application process for the allocation of tax credits is commenced by the issuance of a Request for Applications. In this case, that document is Request for Applications 2014-114 (the RFA). The RFA was issued November 20, 2014, and responses were due January 22, 2015. Capital Grove submitted Application No. 2015-045C in RFA 2014-114 seeking $1,509,500 in annual allocation of housing credits to finance the construction of a 94-unit residential rental development in Pasco County (a Medium County), to be known as Highland Grove Senior Apartments. HTG Wellington submitted Application No. 2015-101C seeking $1,510,000 in annual allocation of housing credits to finance the construction of a 110-unit multifamily residential development in Pasco County, Florida, to be known as Park at Wellington Apartments. Florida Housing has announced its intention to award funding to nine Medium County Developments, including Park at Wellington in Pasco County (Application No. 2015-101C), but not Highland Grove Senior Apartments. Florida Housing received 82 applications seeking funding in RFA 2014-114, including 76 for Medium County Developments. The process employed by Florida Housing for this RFA makes it virtually impossible for more than one application to be selected for funding in any given medium county. Because of the amount of funding available for medium counties, the typical amount of an applicant’s housing credit request (generally $1.0 to $1.5 million), and the number of medium counties for which developments are proposed, many medium counties will not receive an award of housing credit funding in this RFA. Florida Housing intends to award funding to nine developments in nine different medium counties. The applications were received, processed, deemed eligible or ineligible, scored, and ranked, pursuant to the terms of RFA 2014-114; Florida Administrative Code chapters 67- 48 and 67-60; and applicable federal regulations. Florida Housing’s executive director appointed a Review Committee of Florida Housing staff to evaluate the applications for eligibility and scoring. Applications are considered for funding only if they are deemed “eligible,” based on whether the application complies with Florida Housing’s various content requirements. Of the 82 applications submitted to Florida Housing in RFA 2014-114, 69 were found “eligible,” and 13 were found ineligible, including Capital Grove. Florida Housing determined that Capital Grove was ineligible on the ground that its Letter of Credit was deficient under the terms of the RFA. A five-page spreadsheet created by Florida Housing, entitled “RFA 2014-114 – All Applications,” identifying all eligible and ineligible applications was provided to all Applicants. In addition to scoring, Applicants received a lottery number to be applied in tie situations, with the lower number given preference. Capital Grove received lottery number 12. HTG Wellington received lottery number 9. On March 11, 2015, the Review Committee met and considered the applications submitted in response to the RFA, and made recommendations regarding the scoring and ranking of the applications to Florida Housing’s Board of Directors (the Board). Capital Grove’s Letter of Credit The RFA provides for a Withdrawal Disincentive in which an applicant could either provide a $25,000 check or a $25,000 Letter of Credit that would be forfeited if the application was withdrawn by the applicant before a certain period of time. Applicants so withdrawing would also suffer a deduction from the full developer-experience point total in certain future Requests for Applications issued by Florida Housing. According to specifications in the RFA, any Letter of Credit submitted must be in compliance with all the requirements of subsection 4.a. of Section Three, Procedures and Provisions of the RFA, which provides in pertinent part: 4. $25,000 Letter of Credit. Each Applicant not submitting a $25,000 Application Withdrawal Cash Deposit (as outlined in 3 above) must submit to the Corporation a letter of Credit that meets the following requirements with its Application: a. The Letter of Credit must: Be issued by a bank, the deposits of which are insured by the FDIC, and which has a banking office located in the state of Florida available for presentation of the Letter of Credit. Be on the issuing bank’s letterhead, and identify the bank’s Florida office as the office for presentation of the Letter of Credit. Be, in form, content and amount, the same as the Sample Letter of Credit set out in Item 14 of Exhibit C of the RFA, and completed with the following: Issue Date of the Letter of Credit (LOC) which must be no later than January 22, 2015. LOC number. Expiration Date of the LOC which must be no earlier than January 22, 2016. Issuing Bank’s legal name. Issuing Bank’s Florida Presentation Office for Presentation of the LOC. Florida Housing’s RFA number RFA 2014- 114. Applicant’s name as it appears on the Application for which the LOC is issued. Development name as it appears on the Application for which the LOC is issued. Signature of the Issuing Bank’s authorized signatory. Printed Name and Title of the Authorized Signatory. The Sample Letter of Credit included in Exhibit C, Item 14 of the RFA reads: (Issuing Bank’s Letterhead) Irrevocable Unconditional Letter of Credit To/Beneficiary: Florida Housing Finance Corporation Issue Date: [a date that is no later than January 22, 2015] Attention: Director of Multifamily Programs 227 N. Bronough Street, Suite 5000 Tallahassee, Florida 32301 Letter of Credit No.: Expiration Date: [a date that is no earlier than January 22, 2016] Issuing Bank: Florida Presentation Office: FHFC RFA # 2014-114 Applicant: Development: Gentlemen: For the account of the Applicant, we, the Issuing Bank, hereby authorize Florida Housing Finance Corporation to draw on us at sight up to an aggregate amount of Twenty- Five Thousand and No/100 Dollars ($25,000.00). This letter of credit is irrevocable, unconditional, and nontransferable. Drafts drawn under this letter of credit must specify the letter of credit number and be presented at our Florida Presentation Office identified above not later than the Expiration Date. Any sight draft may be presented to us by electronic, reprographic, computerized or automated system, or by carbon copy, but in any event must visibly bear the word “original.” If the document is signed, the signature may consist of (or may appear to us as) an original handwritten signature, a facsimile signature or any other mechanical or electronic method of authentication. Payment against this letter of credit may be made by wire transfer of immediately available funds to the account specified by you, or by deposit of same day funds in a designated account you maintain with us. Unless we notify you in writing at least thirty (30) days prior to the Expiration Date, the Expiration Date of this letter of credit must be extended automatically for successive one-month periods. This letter of credit sets forth in full the terms of our obligations to you, and such undertaking shall not in any way be modified or amplified by any agreement in which this letter is referred to or to which this letter of credit relates, and any such reference shall not be deemed to incorporate herein by reference any agreement. We engage with you that sight drafts drawn under, and in compliance with, the terms of this letter of credit will be duly honored at the Presentation Office. We are an FDIC insured bank, and our Florida Presentation Office is located in Florida as identified above. Yours very truly, [Issuing Bank] By Print Name Print Title Despite these requirements, Capital Grove submitted an “Irrevocable Standby Letter of Credit” issued by PNC Bank National Association (PNC). Capital Grove’s Letter of Credit provides, in pertinent part: Beneficiary: Applicant: Florida Housing Finance Westbrook Housing Corp. Corp. Development, LLC 4110 Southpoint Blvd., 227 North Bronough Street Ste 206 Suite 5000 Jacksonville, Fl 32216 Tallahassee, Fl 32301 ATTENTION: DIR. OF MULTI- FBO CAPITAL GROVE FAMILY PROGRAMS LIMITED PARTNERSHIP IRREVOCABLE STANDBY LETTER OF CREDIT OUR REFERENCE: 18123166-00-00 AMOUNT: USD $25,000.00 ISSUE DATE: JANUARY 20, 2015 EXPIRY DATE: JANUARY 22, 2016 EPIRY PLACE: OUR COUNTER RE: FHFC RFA #2014-114 DEVELOPMENT: HIGHLAND GROVE SENIOR APARTMENTS GENTLEMEN: WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. 18123166-00-000 IN FAVOR OF FLORIDA HOUSING FINANCE CORPORATION FOR THE ACCOUNT OF WESTBROOK HOUSING DEVELOPMENT LLC AVAILABLE FOR PAYMENT AT OUR COUNTERS IN AN AMOUNT OF USD $25,000.00 (TWENTY FIVE THOUSAND AND 00/100 UNITED STATES DOLLARS) AGAINST BENEFICIARY'S PURPORTEDLY SIGNED STATEMENT AS FOLLOWS: "I (INSERT NAME AND TITLE) CERTIFY THAT I AM AN AUTHORIZED REPRESENTATIVE OF FLORIDA HOUSING FINANCE CORPORATION AND HEREBY DEMAND PAYMENT OF USD (INSERT AMOUNT) UNDER PNC BANK, NATIONAL ASSOCIATION LETTER OF CREDIT NO. 18123166-00-000. I FURTHER CERTIFY THAT WESTBROOK HOUSING DEVELOPMENT, LLC HAS FAILED TO COMPLY UNDER THE PROJECT NAME: HIGHLAND GROVE SENIOR APARTMENTS BETWEEN FLORIDA HOUSING FINANCE CORPORATION AND WESTBROOK HOUSING DEVELOPMENT, LLC." Ken Reecy, Director of Multifamily Programs for Florida Housing, personally reviewed all Letters of Credit submitted by RFA applicants, and reported his findings to the Review Committee. The Review Committee recommended finding Capital Grove’s application nonresponsive and ineligible for funding because Capital Grove failed to include a responsive Letter of Credit. The Review Committee also found four other applications ineligible for failing to meet the Letter of Credit requirements, all of which used PNC Bank and involved entities related to Capital Grove, including Westbrook Housing Development, LLC, appearing as Co-Developer. All such PNC Letters of Credit failed for the same reasons. Mr. Reecy and the Review Committee found that the Letters of Credit from PNC Bank (including that submitted by Capital Grove) did not meet the facial requirements of the RFA, in that the Letters of Credit were not in the name of the applicant. The General Partner of the applicant, Capital Grove Limited Partnership, is Capital Grove GP, LLC. The Co-Developer entities are JPM Development, LLC, and Westbrook Housing Development, LLC. Co-Developer Westbrook Housing Development, LLC, a Michigan Company authorized to conduct business within the State of Florida, is a different legal entity from Co-Developer JPM Development, LLC. Mr. Reecy and the Review Committee also found the PNC Letters of Credit (including that submitted by Capital Grove) nonresponsive to the specification of the RFA because the Letters included a condition requiring Florida Housing, in order to draw on the Letter of Credit, to certify that the Co- Developer (and not the applicant) had “failed to comply under the project name: Highland Grove Senior Apartments.” However, under the RFA specifications, the action that is the basis for the presentment of the Letter of Credit is a withdrawal of the application by the applicant, not the developer. Only an applicant may withdraw an application. If the Letter of Credit cannot be drawn upon, the RFA provides that the applicant, “shall be responsible for the payment of the $25,000 to the Corporation; payment shall be due from the applicant to the Corporation within 10 calendar days following written notice from the Corporation.” Applicant Capital Grove is a single-purpose entity that has no assets. In order to collect on the Letter of Credit submitted by Capital Grove, Florida Housing would have to submit a different certification than that called for under the RFA sample letter of credit. According to Kathleen Spiers, Vice President of PNC Bank, to draw down the Letter of Credit, Florida Housing would have to copy the statement outlined in paragraph 2 of the Capital Grove Letter of Credit, sign it, and submit it to PNC to draw upon the letter of credit. At the final hearing, Mr. Reecy testified, “I am not prepared to certify to something that isn’t true. I am not going to certify that the developer didn’t comply by the Applicant withdrawing.” All other Letters of Credit submitted by applicants under this RFA were accepted as responsive. HTG Wellington’s Unit Count HTG Wellington indicated in its application to Florida Housing that its proposed Park at Wellington Development would be 110 multifamily units. In its application for Local Government Support, HTG Wellington described the Development as a 120-unit, multifamily development in five three-story buildings. The RFA requires a minimum $50,000 Local Government Contribution in Pasco County for an applicant to receive the maximum of five points. In order to obtain a Local Government Contribution, tax credit developers must submit an application to Pasco County at least six weeks before the matter is presented to the Board of County Commissioners for approval. Pasco County, in turn, has their underwriter, Neighborhood Lending Partners ("NLP"), organize the applications and create an underwriting package. NLP does not make a recommendation to the Board of County Commissioners for funding. Rather, NLP alerts Pasco County if there is a red flag concerning the Development and scores the applications based upon financial stability of the organization, financing of the project, and the development pro forma. HTG Wellington submitted an application for Local Government Contribution to Pasco County in November 2014. The application contemplated a 120-unit development. Impact fees schedules are adopted by the Pasco County Board of Commissioners. Pasco County has established an impact fee rate for affordable and non-affordable development and the difference between the two is multiplied by the number of units to determine the impact fee amount. The impact fee waiver amount approved for Park at Wellington Apartments was $219,600. This amount was calculated based upon 120 units contemplated in November 2014, multiplied by $1830.00, which is the difference between the normal impact fee rate, minus the rate for affordable housing development. The $219,600 figure was used in HTG Wellington’s application. At 110 units (as opposed to 120 units), the total Local Government Contribution available to HTG Wellington is $201,300. Either amount ($219,600 or $201,300) meets the minimum for HTG Wellington to receive five points for its Local Government Contribution. The change in the contribution amount would have no effect on the scoring of the HTG Wellington application. Pasco County’s Manager of Community Development and Officer of Community Development, George Romagnoli, testified that for approximately 15 years, Pasco County has employed a strategy to approve all applications for Local Government Contribution and then let Florida Housing choose which Development will receive tax credits. Pasco County is not concerned about the ultimate accuracy of the number of units submitted for a Contribution –- as stated by Mr. Romagnoli: "We funded 84, 120, whatever. It's really not material to the approval one way or the other." Although Florida Housing approved HTG Wellington’s application before discovering the discrepancy, had Florida Housing discovered the discrepancy in the number of units during the scoring process, the discrepancy would have been deemed a minor irregularity unless the discrepancy resulted in a change in scoring or otherwise rendered the application nonresponsive as to some material requirement and the discrepancy would generally be handled with a simple adjustment to the amount presented on the application Pro Forma, if necessary. Additionally, changes to the number of units in a development may be increased (but not decreased) under certain circumstances during the credit underwriting process which follows the competitive solicitation process. The discrepancy in the number of units does not provide any competitive advantage to HTG Wellington. The discrepancy in the number of units does not provide a benefit to HTG Wellington not enjoyed by others. Florida Housing’s waiver of the discrepancy in the number of units does not adversely impact the interests of the public. HTG Wellington’s Bus Stop The RFA allows an applicant to obtain 18 proximity points, including six points for a Public Bus Transfer Stop. Florida Housing awarded HTG Wellington 4.5 proximity points for its purported Public Bus Transfer Stop. The RFA defines a Public Bus Transfer Stop as: This service may be selected by all Applicants, regardless of the Demographic Commitment selected at question 2 of Exhibit For purposes of proximity points, a Public Bus Transfer Stop means fixed location at which passengers may access at least three routes of public transportation via buses. Each qualifying route must have a scheduled stop at the Public Bus Transfer Stop at least hourly during the times of 7 am to 9 am and also during the times of 4 pm to 6 pm Monday through Friday, excluding holidays on a year-round basis. This would include both bus stations (i.e. hub) and bus stop with multiple routes. Bus routes must be established or approved by a Local Government department that manages public transportation. Buses that travel between states will not be considered. In response to this requirement HTG Wellington submitted a Surveyor Certification Form which lists coordinates submitted to qualify for a Public Bus Transfer Stop. The site identified by HTG Wellington as a Public Bus Transfer Stop, however, is not a fixed location where passengers may access at least three routes of public transportation. While another bus stop which serves an additional two routes is within 700 feet, stops cannot be combined for purposes of the RFA. Therefore, the site designated as a Public Bus Transfer Stop by HTG Wellington is not a “fixed location” for purposes of the RFA and HTG Wellington is not entitled to obtain proximity points for a Public Bus Transfer Stop. Not including the 4.5 proximity points for a Public Bus Transfer Stop, HTG was awarded 11.5 total proximity points for selected Community Services. The required minimum total of proximity points for developments located in a medium county that must be achieved in order to be eligible to receive the maximum amount of 18 points as set forth in the RFA is 9. HTG had more than the required minimum total of proximity points to receive the maximum award of 18 proximity points based on its Community Services score alone. The disqualification of HTG’s submitted Public Bus Transfer Stop would have no effect on the scoring or ranking of the HTG Wellington application, nor affect its ranking relative to any other application, nor affect the ultimate funding selection. The RFA requires each applicant to read and sign at Attachment A, an Applicant Certification and Acknowledgement Form (the Form). The signing of the Form is mandatory. Page 5, Paragraph 8 of the Form provides: In eliciting information from third parties required by and/or included in this Application, the Applicant has provided such parties information that accurately describes the Development as proposed in this Application. The Applicant has reviewed the third party information included in this Application and/or provided during the credit underwriting process and the information provided by any such party is based upon, and accurate with respect to, the Development as proposed in this Application. Even though there was a discrepancy in the unit numbers submitted to Pasco County for a Local Government Contribution and its application submitted in response to the RFA, HTG signed the Form. No evidence was submitted indicating that HTG signed the Form with knowledge of the discrepancy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order: Rejecting Capital Grove’s application as nonresponsive and denying the relief requested in its Petition; Concluding that Capital Grove lacks standing to bring allegations against HTG Wellington; and, Upholding Florida Housing’s scoring and ranking of the HTG Wellington application. DONE AND ENTERED this 3rd day of August, 2015, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, Florida32399-3060 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 2015.
