The Issue The issue for determination in this consolidated bid protest proceeding is whether the Florida Housing Finance Corporation (“Florida Housing”) acted arbitrarily, capriciously, or contrary to competition by deeming the applications of Joe Moretti Phase Three, LLC. (“Moretti Phase Three”) and Stirrup Plaza Phase Three, LLC. (“Stirrup Plaza Phase Three”) ineligible for Request for Applications 2016-114, Housing Credit Financing for Affordable Housing Developments Located in Miami-Dade County (“RFA 2016-114”).
Findings Of Fact Facts Regarding Florida Housing and Affordable Housing Tax Credits Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes.1/ 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. Accordingly, Florida Housing 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. 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. This reduces the amount of capital that developers have to borrow. 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. 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. Accordingly, Florida Administrative Code Chapter 67-60 provides that Florida Housing allocates its 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), Florida Statutes. In their applications for tax credits, applicants request a specific dollar amount of housing credits to be supplied 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. Tax credits are made available through a competitive application process commenced by the issuance of a Request for Applications (“RFA”). An RFA is equivalent to a “request for proposal.” See Fla. Admin. Code R. 67-60.009(4)(providing that “[f]or purposes of Section 120.57(3), F.S., any competitive solicitation issued under this rule chapter shall be considered a ‘request for proposal.’”). “Applicants not selected for funding under any competitive solicitation issued pursuant to [Chapter 67-60, F.A.C.] may only protest the results of the competitive solicitation process pursuant to the procedures set forth in Section 120.57(3), F.S., and Chapter 28-110, F.A.C.” Fla. Admin. Code R. 67-60.009(2). Facts Specific to RFA 2016-114 RFA 2016-114 describes its purpose as follows: 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 Financing Corporation (the Corporation) expects to have up to an estimated $5,682,725 of Housing Credits available for award to proposed Developments located in Miami-Dade County. The Corporation is soliciting applications from qualified Applicants that commit to provide housing in accordance with the terms and conditions of this RFA, inclusive of Exhibits A, B, C, an D, applicable laws, rules and regulations, and the Corporation’s generally applicable construction and financial standards. Florida Housing’s Board of Directors approved the issuance of RFA 2016-114 on June 24, 2016. Prior to the issuance of RFA 2016-114, Florida Housing conducted a public workshop on August 25, 2016. A draft version of RFA 2016-114 was posted on Florida Housing’s website on September 15, 2016. The final version of RFA 2016-114 was issued on October 28, 2016, and applications were due by 11:00 a.m., Eastern Time on December 15, 2016. There were no challenges to the terms of RFA 2016- 114 after it was issued. A provision within RFA 2016-114 stated that “[a]pplicants should review subsection 67-48.023(1), F.A.C., to determine eligibility to apply for the Housing Credits offered in this RFA.” The aforementioned rule provides in pertinent part that an applicant is ineligible to apply for competitive housing credits if [t]he proposed Development site or any part thereof is subject to any Land Use Restriction Agreement or Extended Use Agreement, or both, in conjunction with any Corporation affordable housing finance intended to foster the development or maintenance of affordable housing ” (emphasis added). An Extended Use Agreement (“EUA”) is an agreement between an applicant seeking tax credits and Florida Housing. An EUA runs with a particular piece of property and is meant to assure that the property is devoted to affordable housing. In addition, Florida Administrative Code Rule 67- 48.002(44) defines an “EUA” in the context of this tax credit program as “an agreement which sets forth the set aside requirements and other Development requirements under the housing credit program.” Set aside requirements reflect how much of the development is set aside for low-income tenants. An applicant can seek to have an EUA amended by filing a request with Florida Housing. The request would begin with a staff member of Florida Housing, move to Florida Housing’s assistant director of multifamily programs, and then to the director of multifamily programs for an ultimate decision. The process by which an EUA is amended is not set forth in a rule or policy manual. There is no established time by which Florida Housing must act on a request to amend an EUA. There is no typical time by which Florida Housing grants or denies a request to amend an EUA. Also, there is nothing requiring Florida Housing to expedite a decision on whether to grant or deny a request to amend an EUA. Florida Housing received 25 applications in response to RFA 2016-114. Florida Housing received, processed, evaluated, scored, and ranked each of the applications pursuant to the terms of RFA 2016-114, Florida Administrative Code Chapters 67-48 and 67-60, and applicable federal regulations. The Executive Director of Florida Housing, Ken Reecy, appointed a Review Committee of Florida Housing staff to conduct the aforementioned evaluation, scoring, and ranking. Florida Housing only considered an application for funding if it was deemed “eligible” based on whether that application complied with Florida Housing’s various content requirements. Of the 25 applications submitted, Florida Housing deemed 19 to be “eligible,” and six were deemed “ineligible.” Florida Housing proposed to award funding to three developments: Ambar Key, Verbena, and Northside Property IV, Ltd. As discussed below, Florida Housing deemed the Moretti Phase Three and Stirrup Plaza Phase Three applications to be ineligible because the properties associated with those applications were still subject to EUAs at the December 15, 2016, deadline for RFA 2016-114. Facts Regarding Moretti Phase Three’s and Stirrup Plaza Phase Three’s Applications Moretti Phase Three submitted an application seeking $2,400,000 in annual allocation of housing credits to finance the construction of a 103-unit development. Stirrup Plaza Phase Three submitted an application seeking $1,950,000 in annual allocation of housing credits to finance the construction of an 85-unit development. The Moretti Phase Three and Stirrup Plaza Phase Three applications represent subsequent phases of existing developments, and both of those developments are devoted to affordable housing. All of the land associated with both developments had been subject to EUAs since 2015. Because Moretti Phase Three and Stirrup Plaza Phase Three wanted to obtain tax credit financing, they needed to have those EUAs amended.2/ Anthony Del Pozzo is the vice president for Moretti Phase Three and Stirrup Plaza Phase Three. Mr. Del Pozzo focuses much of his attention on affordable housing and has assisted with the preparation of 30 to 50 tax credit applications to Florida Housing. After RFA 2016-114 was issued, Mr. Del Pozzo contacted Florida Housing via telephone calls and e-mails in order to ascertain the process by which the EUAs could be amended. Mr. Del Pozzo’s initial e-mail to Florida Housing regarding amending the EUAs was transmitted on November 1, 2016, and stated the following: Libby, I will be sending this request to you, Amy and Lisa to modify the EUA’s for our Joe Moretti (first phase) and Stirrup Plaza (first phase) properties, both of which are 9% deals. I will also have to modify the EUA for our Seville Place deal, which was financed with bonds and 4% credits. Will that one also go to the same people or should I reach out to Bill Cobb or someone else?? Thanks!! Mr. Del Pozzo’s initial e-mail was acknowledged by an Florida Housing employee (Libby O’Neil) later that day. On November 2, 2016, Mr. Del Pozzo transmitted an e-mail to Amy Garmon, Libby O’Neil, and Lisa Nickerson of Florida Housing formally requesting to amend the Moretti Phase Three EUA: Please accept this e-mail as our formal request to modify the legal description of the EUA for Joe Moretti Preservation Phase One, LLC. Attached please find a copy of the recorded EUA, a sketch with Phase I modified legal description and a site plan showing the entire site and the portion where the Phase One building is located (cross-hatched). As you can see from the sketch we are modifying the legal description to include only the portion of the property where the building is located. We will be submitting a portion of the remainder of the property for 9% tax credits in the 2016 RFA.[3/] (emphasis added). Lisa Nickerson is a multifamily programs manager at Florida Housing, and one of her duties involves working with developers seeking EUA amendments. Ms. Nickerson completed the initial processing of all EUA Amendment requests at all times relevant to the instant case. However, Ms. Nickerson was not responsible for approving EUA amendments. On November 3, 2016, Ms. Nickerson responded to Mr. Del Pozzo’s November 2, 2016, e-mail with the following e- mail: We are happy to assist. Because this is a change to the legal description, we will treat it as a site change. Before we can amend the EUA we need the following, as outlined in the carryover agreement: $500 processing fee Affidavit from a Florida licensed surveyor certifying that the tie-breaker measurement point has not moved and that the change in the development site has not affected any zoning requirements. If the tie-breaker measurement point has moved from the location provided in the application, the change in location cannot affect the score and a new surveyor certification form is required. Upon receipt of the above items, we will process [an] amendment to the EUA. On November 8, 2016, Mr. Del Pozzo sent Ms. Nickerson an e-mail stating that he has a “PDF copy of the Survey Affidavit.” Mr. Del Pozzo then asked if he needed the surveyor to send him “an original for my package to FHFC??” Ms. Nickerson responded three minutes later by stating that Florida Housing “can use the PDF to start drafting the amendment, but we will need the original for the file.” On November 9, 2015, Ms. Nickerson sent an e-mail to Mr. Del Pozzo stating that she had reviewed the affidavit and found that application number was incorrect. She gave Mr. Del Pozzo the correct application number, asked him to make that change, and resend the affidavit. In another e-mail transmitted to Mr. Del Pozzo on November 9, 2016, Ms. Nickerson also asked him to send an updated legal description. At 6:52 p.m. on November 9, 2016, Mr. Del Pozzo transmitted an e-mail asking Ms. Nickerson to confirm “if this revised affidavit is acceptable. As requested, I’ve also attached a copy of the legal description. Thanks again for all your help.” At 10:04 a.m. on November 10, 2016, Mr. Nickerson responded with an e-mail stating, “This looks good. As soon as I receive the originals and the $500 fee I will send the amended EUA for you to sign.” On November 10, 2016, Mr. Del Pozzo transmitted an e-mail notifying Ms. Nickerson that he “will be submitting a similar modification request for Stirrup Plaza Preservation Phase One, LLC.” Accordingly, Ms. Nickerson received later that day a draft affidavit, a copy of the legal description of the property associated with the Stirrup Plaza Phase Three property, and a survey identifying the two parcels that were being carved out. However, on November 14, 2016, Mr. Del Pozzo sent Ms. Nickerson an e-mail stating that “[w]e will be making some additional revisions to the legal description for Stirrup Plaza. Please hold off on the request to modify the EUA on that one until I confirm the correct legal description. I apologize for the inconvenience.” By November 14, 2016, Florida Housing had received an explanation letter, a $500 fee, an affidavit, and a new legal description for the Moretti Phase Three EUA amendment. Florida Housing cashed a $500 check pertaining to the Moretti Phase Three application on approximately November 14, 2016. As a result, the request to amend the Moretti Phase Three EUA was transferred to Ken Reecy on November 29, 2016, for final approval. Ken Reecy is Florida Housing’s Director of Multifamily Programs and is generally responsible for the program that allocates tax credits in order to finance affordable housing. In addition, Mr. Reecy is the person ultimately responsible for determining whether a request to amend an EUA will be approved. Upon receiving the paperwork associated with the request to amend the Moretti Phase Three EUA, Mr. Reecy noticed that it was seeking to release an unusually large amount of land. That was a concern for Mr. Reecy because releasing that land from the EUA’s restrictions would enable it to become a “market rate development that could be worth . . . millions of dollars.” In contrast, Florida Housing wants land to remain affordable in the future and thus takes a very conservative approach toward releasing land under restrictions. Due to his concern regarding the amount of land in question and because he was very busy with other work, Mr. Reecy put the Moretti Phase Three EUA amendment aside. At this point in time, Mr. Reecy was unaware that the Moretti Phase Three EUA had to be amended prior to the December 15, 2016, deadline for RFA 2016-114. On December 1, 2016, Ms. Nickerson transmitted an e-mail to Mr. Del Pozzo regarding the Moretti Phase Three amendment stating that, “I received your voicemail. I am waiting for the site change approval to come back to me. Once I have it, I will email a copy of the EUA amendment with instructions. I am hopeful you will have it early next week, if not before.” While all of the required documentation for the Moretti Phase Three EUA amendment was received by November 14, 2016, Florida Housing did not receive the explanation letter or the affidavit pertaining to the Stirrup Plaza Phase Three EUA until December 5, 2016. After receiving the affidavit pertaining to the Stirrup Plaza Phase Three EUA, Ms. Nickerson sent Mr. Del Pozzo an e-mail on December 5, 2016, stating, “Thank you, Tony. I will get this underway, this week.” Mr. Reecy received the paperwork for the Stirrup Plaza Phase Three EUA amendment on approximately December 7, 2016. However, he was unaware that this amendment was necessary in order for Stirrup Plaza Phase Three to apply for RFA 2016-114. As the December 15, 2016, deadline for the RFA 2016- 114 applications drew near, Florida Housing had yet to approve Moretti Phase Three’s and Stirrup Plaza Plaza Phase Three’s requests to amend their EUAs. Accordingly, Mr. Del Pozzo wrote the following e-mail to Ms. Nickerson on Monday, December 12, 2016, at 1:54 p.m.: I left a voicemail message for Ken [Reecy] this morning, asking him to follow up with me if he had any questions or needed any additional information to sign-off on the modifications to the EUAs. I also wanted to make sure he was aware that we are modifying the EUA’s so that we can submit new phases to the projects in this year’s 9% LIHTC RFA for Miami-Dade County. Applications are due on 12/15. So, we would greatly appreciate it if he could sign off on the modifications in advance of the application deadline. I will take scanned copies whenever they are ready. This was the first time that Mr. Del Pozzo had communicated to Florida Housing staff that there was any sort of time constraint associated with the requests to amend the Moretti Phase Three and Stirrup Plaza Phase Three EUAs. On Tuesday, December 13, 2016, at 11:50 a.m., Mr. Del Pozzo sent the following e-mail to Mr. Reecy and Ms. Nickerson: I know that you are both extremely busy, so I’m sorry for being so persistent. As I mentioned to Lisa over the phone and indicated in my e-mail below, we will be submitting new phases of the Joe Moretti and Stirrup Plaza projects for funding in RFA #2016-114 for Miami-Dade County. As such, we have been working with Lisa for the past several weeks to ensure that we have submitted all of the information necessary to modify the Extended Use Agreements for the initial phases of these properties. We are removing the portion of the land that will be part of the new phases from the legal descriptions in the EUAs. Based on our latest discussions, I believe everything is in order and we are only awaiting final sign-off. If you could please sign off on these modifications in advance of the RFA due date (12/15/16), we would greatly appreciate it. Please call me if you have any questions or need any additional information. Thanks for all of your help. Four minutes later, Ms. Nickerson responded to the above e-mail by stating, “We are aware and your requests are currently under review. Thank you for your patience.” December 13, 2016, is the first day that Ms. Nickerson was aware that Moretti Phase Three and Stirrup Plaza Phase Three were planning to file applications in response to RFA 2016-114. On Thursday, December 15, 2016, at 8:30 a.m., Albert Milo4/ sent the following e-mail to Ms. Nickerson and Mr. Reecy: Good morning, Lisa I hope you are doing well. Just wanted to follow up again on the EUA modifications for our two projects since today is the Application Deadline. Can you please let me know if FHFC has finalized it? Thanks for your assistance. Have a great day. Mr. Reecy responded at 9:01 a.m. with an e-mail asking Mr. Milo “what is the best number to call you right now?” Mr. Reecy wanted to confer with Mr. Milo because Florida Housing had no verification that the land associated with the Stirrup Plaza Phase Three project was under a declaration of trust (“DOT”). Without a DOT, Mr. Reecy was concerned that the land would not be used for affordable housing. In contrast, Florida Housing already had verification that the land associated with Moretti Phase Three was under a DOT. On December 15, 2016, prior to 11:00 a.m., Mr. Reecy advised a representative from Moretti Phase Three and Stirrup Plaza Phase Three via a telephone call that he would approve Stirrup Plaza Phase Three’s EUA Amendment request if he could be provided with verification that the Stirrup Plaza Phase Three development site was subject to a DOT. During the same phone call, Mr. Reecy advised the representative that he did not believe that Moretti Phase Three and Stirrup Plaza Phase Three would be eligible for funding under RFA 2016-114 because their proposed development locations would still be subject to EUAs at the application deadline. On December 15, 2016, at 9:55 a.m., Mr. Milo sent an e-mail to Mr. Reecy providing him with the copy of the Stirrup Plaza Phase Three DOT: Hi Ken as per our conversation here is a copy of the actual DOT for Stirrup Plaza Preservation Phase one. I have also requested a letter from PHCD confirming the same. As I mentioned this was a Preservation deal that consisted of the rehabilitation of 100 Public Housing units. Please let me know if you need anything else from us. Thanks for your assistance getting this finalized. We really appreciate it. Exactly one hour later, Mr. Milo sent the following e-mail to Mr. Reecy: Hi Ken just want to confirm our conversation this morning where you informed me that you had approved and signed off on the EUA modification for Joe Moretti Preservation Phase One. As it relates to Stirrup Plaza Preservation Phase One, we have sent you a copy of the DOT and a letter from PHCD confirming the DOT. Please let me know if you require any additional information from us to finalize your approval as you mentioned in our phone conversation. Thanks for your assistance in this matter. Moretti Phase Three and Stirrup Plaza Phase Three filed applications for funding under RFA 2016-114 by the application deadline. As of the 11:00 a.m. application deadline, the Moretti Phase Three and Stirrup Plaza Phase Three proposed developments were subject to existing EUAs. At 1:05 p.m. on December 15, 2016, Ms. Nickerson e-mailed the following information to Mr. Milo: Attached, please find the First Amendment to the EUAs for Joe Moretti Preservation Phase One and for Stirrup Plaza Preservation Phase One. The amendments reflect the changes to the legal descriptions found at Exhibit A. Please review and execute the amendments, and return to me with a check made payable to the appropriate county in which the agreements will be recorded. Standard recording fees are $10 for the first page and $8.50 for every page thereafter. However, please contact the appropriate county for confirmation of their fees and any form of payment restrictions. On December 15, 2016, at 2:37 p.m., Moretti Phase Three and Stirrup Plaza Phase Three e-mailed Florida Housing PDF copies of the executed Amended EUAs and indicated the originals and recording fee checks were being sent via FEDEX the same day. Mr. Reecy received the signed amendments and then signed them himself on December 20, 2016. Mr. Reecy’s signature was the final step in the EUA amendment process other than the actual recording of the amended EUAs. The amended EUAs for Moretti Phase Three and Stirrup Plaza Phase Three were recorded on February 6, 2017. Florida Housing scored the applications for RFA 2016- 114 on January 25, 2017. On February 3, 2017, Florida Housing announced its intention to award funding to three applicants, two of which were Ambar Key and Verbena. Florida Housing did not select the applications of Moretti Phase Three and Stirrup Plaza Phase Three for funding because those applications were deemed ineligible given that the proposed development sites were subject to EUAs at the time their applications were filed. Findings Regarding Florida Housing’s Treatment of the EUA Amendment Applications The greater weight of the evidence demonstrates that no relevant personnel at Florida Housing knew about the time- sensitive nature of the requests to amend the EUAs before December 12, 2016. If Ms. Nickerson and/or Mr. Reecy had been advised of the time-sensitive nature within a reasonable time prior to December 15, 2016, the greater weight of the evidence indicates they would have made good faith efforts to expedite the process and that the EUAs would have likely been amended prior to the deadline. The greater weight of the evidence demonstrates that no one at Florida Housing did anything to delay the applications, to amend the EUAs, or anything to undermine Moretti Phase Three’s or Stirrup Plaza Phase Three’s applications for RFA 2016-114. In sum, the greater weight of the evidence demonstrates that Florida Housing did not act arbitrarily, capriciously, 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 issue a final order awarding funding to Ambar Key, Ltd.; Verbena, LLC; and Northside Property IV, Ltd. DONE AND ENTERED this 9th day of June, 2017, in Tallahassee, Leon County, Florida. S G. W. CHISENHALL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 2017.
The Issue The issue for determination in this consolidated bid protest proceeding is whether the Florida Housing Finance Corporation’s (“FHFC”) intended award of tax credits for the preservation of existing affordable housing developments was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact FHFC and Affordable Housing Tax Credits FHFC is a public corporation that finances affordable housing in Florida by allocating and distributing low income housing tax credits. See § 420.504(1), Fla. Stat. (providing that FHFC is “an entrepreneurial public corporation organized to provide and promote the public welfare by administering the governmental function of financing or refinancing housing and related facilities in this state.”); § 420.5099(2), Fla. Stat. (providing that “[t]he corporation shall adopt allocation procedures that will ensure the maximum use of available tax credits in order to encourage development of low-income housing in the state, taking into consideration the timeliness of the application, the location of the proposed housing project, the relative need in the area for low-income housing and the availability of such housing, the economic feasibility of the project, and the ability of the applicant to proceed to completion of the project in the calendar year for which the credit is sought.”). The tax credits allocated by FHFC encourage investment in affordable housing and are awarded through competitive solicitations to developers of qualifying rental housing. Tax credits are not tax deductions. For example, a $1,000 deduction in a 15-percent tax bracket reduces taxable income by $1,000 and reduces tax liability by $150. In contrast, a $1,000 tax credit reduces tax liability by $1,000. Not surprisingly, the demand for tax credits provided by the federal government exceeds the supply. A successful applicant/developer normally sells the tax credits in order to raise capital for a housing development. That results in the developer being less reliant on debt financing. In exchange for the tax credits, a successful applicant/developer must offer affordable rents and covenant to keep those rents at affordable levels for 30 to 50 years. The Selection Process FHFC awards tax credits through competitive solicitations, and that process is commenced by the issuance of a Request for Applications (“RFA”). Florida Administrative Code Rule 67-60.009(2) provides that unsuccessful applicants for tax credits “may only protest the results of the competitive solicitation process pursuant to the procedures set forth in Section 120.57(3), F.S., and Chapter 28-110, F.A.C.” For purposes of section 120.57(3), an RFA is equivalent to a “request for proposal.” See Fla. Admin. Code R. 67.60.009(4), F.A.C. FHFC issued RFA 2015-111 on October 23, 2015, and responses from applicants were due on December 4, 2015. Through RFA 2015-111, FHFC seeks to award up to $5,901,631 of tax credits to qualified applicants that commit to preserve existing affordable multifamily housing developments for the demographic categories of “Families,” “the Elderly,” and “Persons with a Disability.” FHFC only considered an application eligible for funding from RFA 2015-111, if that particular application complied with certain content requirements. FHFC ranked all eligible applications pursuant to an “Application Sorting Order” set forth in RFA 2015-111. The first consideration was the applicants’ scores. Each application could potentially receive up to 23 points based on the developer’s experience and the proximity to services needed by the development’s tenants. Applicants demonstrating that their developments received funding from a U.S. Department of Agriculture (“USDA”) Rural Development program known as RD 515 were entitled to a 3.0 point proximity score “boost.” That proximity score boost was important because RFA 2015-111 characterized counties as small, medium, or large. Applications associated with small counties had to achieve at least four proximity points to be considered eligible for funding. Applications associated with medium-sized counties and those associated with large counties had to achieve at least seven and 10.25 proximity points respectively in order to be considered eligible for funding. Because it is very common for several tax credit applicants in a particular RFA to receive identical scores, FHFC incorporated a series of “tie-breakers” into RFA 2015-111. The tie-breakers for RFA 2015-111, in order of applicability, were: First, by Age of Development, with developments built in 1985 or earlier receiving a preference over relatively newer developments. Second, if necessary, by a Rental Assistance (“RA”) preference. Applicants were to be assigned an RA level based on the percentage of units receiving rental assistance through either a U.S. Department of Housing and Urban Development (“HUD”) or USDA Rural Development program. Applicants with an RA level of 1, 2, or 3 (meaning at least 75 percent of the units received rental assistance) were to receive a preference. Third, by a Concrete Construction Funding Preference, with developments incorporating certain specified concrete or masonry structural elements receiving the preference. Fourth, by a Per Unit Construction Funding Preference, with applicants proposing at least $32,500 in Actual Construction Costs per unit receiving the preference. Fifth, by a Leveraging Classification favoring applicants requiring a lower amount in housing credits per unit than other applicants. Generally, the least expensive 80 percent of eligible applicants were to receive a preference over the most expensive 20 percent. Sixth, by an Applicant’s specific RA level, with Level 1 applicants receiving the most preference and Level 6 the least. Seventh, by a Florida Job Creation Preference, which estimated the number of jobs created per $1 million of housing credit equity investment the developments were to receive based on formulas contained in the RFA. Applicants achieving a Job Creation score of at least 4.0 were to receive the preference. Eighth, by lottery number, with the lowest (smallest) lottery number receiving the preference. Rental assistance from the USDA or HUD is provided to existing developments in order to make up for shortfalls in monthly rent paid by tenants. For example, if an apartment’s base rent is $500 per month and the tenant’s income limits him or her to paying only $250 towards rent, then the USDA or HUD rental assistance pays the other $250 so that the total rent received by the development is $500. As evident from the tie-breakers incorporated into RFA 2015-111, the amount of rental assistance, or “RA Level,” played a prominent role in distinguishing between RFA 2015-111 applicants having identical scores. RFA 2015-111 required that applicants demonstrate RA Levels by providing a letter containing the following information: (a) the development’s name; (b) the development’s address; (c) the year the development was built; (d) the total number of units that currently receive PBRA and/or ACC;/3 (e) the total number of units that would receive PBRA and/or ACC if the proposed development were to be funded; (f) all HUD or RD financing program(s) originally and/or currently associated with the existing development; and (g) confirmation that the development had not received financing from HUD or RD after 1995 when the rehabilitation was at least $10,000 per unit in any year. In order to determine an applicant’s RA Level Classification, RFA 2015-111 further stated that Part of the criteria for a proposed Development that qualifies as a Limited Development Area (LDA) Development to be eligible for funding is based on meeting a minimum RA Level, as outlined in Section Four A.7.c of the RFA. The total number of units that will receive rental assistance (i.e., PBRA and/or ACC), as stated in the Development Category qualification letter provided as Attachment 7, will be considered to be the proposed Development’s RA units and will be the basis of the Applicant’s RA Level Classification. The Corporation will divide the RA units by the total units stated by the Applicant at question 5.e. of Exhibit A, resulting in a Percentage of Total Units that are RA units. Using the Rental Assistance Level Classification Chart below, the Corporation will determine the RA Level associated with both the Percentage of Total Units and the RA units. The best rating of these two (2) levels will be assigned as the Application’s RA Level Classification. RFA 2015-111 then outlined a Rental Assistance Level Classification Chart to delineate between the RA Levels. That chart described six possible RA Levels, with one being developments that have the most units receiving rental assistance and six pertaining to developments with the fewest units receiving rental assistance. A development with at least 100 rental assistance units and greater than 50 percent of the total units receiving rental assistance was to receive an RA Level of 1. FHFC also utilized a “Funding Test” to assist in the selection of applications for funding. The Funding Test required that the amount of unawarded housing credits be enough to satisfy any remaining applicant’s funding request. In other words, FHFC prohibited partial funding. In addition, RFA 2015-111 applied a “County Award Tally” designed to prevent a disproportionate concentration of funded developments in any one county. As a result, all other applicants from other counties had to receive an award before a second application from a particular county could be funded. After ranking of the eligible applicants, RFA 2015-111 set forth an order of funding selection based on county size, demographic category, and the receipt of RD 515 financing. The Order was: One RD 515 Development (in any demographic category) in a medium or small county; One Non-RD 515 Development in the Family Demographic Category (in any size county); The highest ranked Non-RD 515 application or applications with the demographic of Elderly or Persons with a Disability; and If funding remains after all eligible Non- RD 515 applicants are funded, then the highest ranked RD 515 applicant in the Elderly demographic (or, if none, then the highest ranked RD 515 applicant in the Family demographic). Draft versions of every RFA are posted on-line in order for stakeholders to provide FHFC with their comments. In addition, every RFA goes through at least one workshop prior to being finalized. FHFC often makes changes to RFAs based on stakeholder comments. No challenge was filed to the terms, conditions, or requirements of RFA 2015-111. A review committee consisting of FHFC staff members reviewed and scored all 24 applications associated with RFA 2015-111. During this process, FHFC staff determined that none of the RD-515 applicants satisfied all of the threshold eligibility requirements. On June 24, 2016, FHFC’s Board of Directors announced its intention to award funding to five applicants, subject to those applicants successfully completing the credit underwriting process. Pineda Village in Brevard County was the only successful applicant in the Non-RD 515 Family Demographic. The four remaining successful applicants were in the Non-RD 515 Elderly or Persons with Disability Demographic: Three Round Tower in Miami-Dade County; Cathedral Towers in Duval County; Isles of Pahokee in Palm Beach County; and Lummus Park in Miami- Dade County. The randomly-assigned lottery number tie-breaker played a role for the successful Non-RD 515 applicants with Three Round Tower having lottery number one, Cathedral Towers having lottery number nine, and Isles of Pahokee having lottery number 18. While Lummus Park had a lottery number of 12, the County Award Tally prevented it from being selected earlier because Three Round Tower had already been selected for funding in Miami-Dade County. However, after the first four applicants were funded, only $526,880 of credits remained, and Lummus Park was the only eligible applicant with a request small enough to be fully funded. All Petitioners timely filed Notices of Protest and petitions for administrative proceedings. The Challenge by Woodcliff, Colonial, and St. Johns Woodcliff is seeking an award of tax credits in order to acquire and preserve a 34-unit development for elderly residents in Lake County.4/ Colonial is seeking an award of tax credits in order to acquire and preserve a 30-unit development for low-income families in Lake County.5/ St. Johns is seeking an award of tax credits to acquire and preserve a 48-unit development for elderly residents in Putnam County.6/ FHFC deemed Woodcliff, Colonial and St. Johns to be ineligible because of a failure to demonstrate the existence or availability of a particular source of financing relied upon in their applications. Specifically, FHFC determined that the availability of USDA RD 515 financial assistance was not properly documented. For applicants claiming the existence of RD 515 financing, RFA 2015-111 stated: If the proposed Development will be assisted with funding under the United States Department of Agriculture RD 515 Program and/or RD 538 Program, the following information must be provided: Indicate the applicable RD Program(s) at question 11.b.(2) of Exhibit A. For a proposed Development that is assisted with funding from RD 515 and to qualify for the RD 515 Proximity Point Boost (outlined in Section Four A.6.b.(1)(b) of the RFA), the Applicant must: Include the funding amount at the USDA RD Financing line item on the Development Funding Pro Forma (Construction/Rehab Analysis and/or Permanent Analysis); and Provide a letter from RD, dated within six (6) months of the Application Deadline, as Attachment 17 to Exhibit A, which includes the following information for the proposed Preservation Development: Name of existing development; Name of proposed Development; Current RD 515 Loan balance; Acknowledgment that the property is applying for Housing Credits; and Acknowledgment that the property will remain in the USDA RD 515 loan portfolio. (emphasis added). FHFC was counting on the letter mentioned directly above to function as proof that: (a) there was RD 515 financing in place when the letter was issued; and that (b) the RD 515 financing would still be in place as of the application deadline for RFA 2015-111. FHFC deemed Woodcliff, Colonial and St. Johns ineligible because their RD letters were not dated within six months of the December 4, 2015, deadline for RFA 2015-111 applications. The Woodcliff letter was dated May 15, 2015, the Colonial letter was dated May 15, 2015, and the St. Johns letter was dated May 5, 2015. FHCA had previously issued RFA 2015-104, which also proposed to award Housing Credit Financing for the Preservation of Existing Affordable Multifamily Housing Developments. The deadline for RFA 2015-104 was June 23, 2015, and Woodcliff, Colonial, and St. Johns applied using the same USDA letter that they used in their RFA 2015-111 applications. Woodcliff, Colonial, and St. Johns argued during the final hearing that FHFC should have accepted their letters because: (a) they gained no competitive advantage by using letters that were more than six months old; (b) waiving the six- month “shelf life” requirement would enable FHFC to satisfy one of its stated goals for RFA 2015-111, i.e., funding of an RD 515 development; and (c) other forms of financing (such as equity investment) have no “freshness” or “shelf life” requirement. However, it is undisputed that no party (including Woodcliff, Colonial, and St. Johns) challenged any of the terms, conditions, or requirements of RFA 2015-111. In addition, Kenneth Reecy (FHFC’s Director of Multifamily Programs) testified that there must be a point at which FHFC must ensure the viability of the information submitted by applicants. If the information is “too old,” then it may no longer be relevant to the current application process. Under the circumstances, it was not unreasonable for FHFC to utilize a six-month shelf life for USDA letters.7/ Furthermore, Mr. Reecy testified that excusing Woodcliff, Colonial, and St. Johns’ noncompliance could lead to FHFC excusing all deviations from all other date requirements in future RFAs. In other words, applicants could essentially rewrite those portions of the RFA, and that would be an unreasonable result. Excusing the noncompliance of Woodcliff, Colonial, and St. Johns could lead to a “slippery slope” in which any shelf- life requirement has no meaning. The letters utilized by Woodcliff, Colonial, and St. Johns were slightly more than six months old. But, exactly when would a letter become too old to satisfy the “shelf life” requirement? If three weeks can be excused today, will four weeks be excused next year? St. Elizabeth’s and Marian Towers’ Challenge St. Elizabeth is seeking low-income housing tax credit financing in order to acquire and preserve a 151-unit development for elderly residents in Broward County, Florida. Marian Towers is an applicant for RFA 2015-111 funding seeking low-income housing tax credits to acquire and preserve a 220-unit development for elderly residents in Miami-Dade County, Florida. The same developer is associated with the St. Elizabeth and Marian Towers projects. In its scoring and ranking process, FHFC assigned St. Elizabeth an RA Level of two. RFA 2015-111 requires that Applicants demonstrate RA Levels by providing a letter from HUD or the USDA with specific information. That information is then used to establish an RA Level for the proposed development. As noted above, the RFA requires the letter to contain several pieces of information, including: (a) the total number of units that currently receive PBRA and/or ACC; and (b) the total number of units that will receive PBRA and/or ACC if the proposed development is funded. RFA 2015-111 provided that a development with at least 100 rental units would receive an RA Level of one. St. Elizabeth included with its application a letter from HUD’s Miami field office stating in pertinent part that: Total number of units that currently receive PBRA and/or ACC: 99 units. Total number of units that will receive PBRA and/or ACC if the proposed Development is funded: 100 units*. The asterisk in the preceding paragraph directed readers of St. Elizabeth’s HUD letter to a paragraph stating that: HUD is currently processing a request from the owner to increase the number of units subsidized under a HAP Contract to 100 by transferring budget authority for the one additional unit from another Catholic Housing Services Section 8 project under Section 8(bb) in accordance with Notice H-2015-03. Because of the foregoing statement from HUD, FHFC concluded that St. Elizabeth did not have 100 units receiving rental assistance as of the application deadline. Accordingly, FHFC used 99 units as the total number of units that would receive rental assistance when calculating St. Elizabeth’s RA Level, and that led to FHFC assigning an RA Level of two to St. Elizabeth’s application.8/ If St. Elizabeth had been deemed eligible and if FHFC had used 100 units as the total number of units that would receive rental assistance, then St. Elizabeth would have received an RA Level of one. Given the application sorting order and the selection process outlined in RFA 2015-111, St. Elizabeth (with a lottery number of six) would have been recommended for funding by FHFC, and that outcome would have resulted in Intervenors Isles of Pahokee and Lummus Park losing their funding. St. Elizabeth asserted during the final hearing that the 100th unit had obtained rental assistance financing since the application deadline on December 4, 2015. However, FHFC could only review, score, and calculate St. Elizabeth’s RA Level based on the information available as of the application deadline. While St. Elizabeth argues that the asterisk paragraph sets forth a “condition,” Kenneth Reecy (FHFC’s Director of Multifamily Housing) agreed during the final hearing that the asterisk paragraph was more akin to information that was not explicitly required by RFA 2015-111. FHFC did not use that additional information to declare St. Elizabeth’s application ineligible for funding. Despite being assigned an RA Level of two, St. Elizabeth’s application still could have been selected for funding because RFA 2015-111 merely established RA Level as a basis for breaking ties among competing applications. However, too many applicants for RFA 2015-111 had identical scores, and RFA 2015-111’s use of RA Level as a tiebreaker forced St. Elizabeth’s application out of the running. Under the circumstances, FHFC’s treatment of St. Elizabeth’s application was not clearly erroneous, contrary to competition, arbitrary, or capricious. As noted above, tie- breakers are very important, because there is often very little to distinguish one application for tax credits from another. Given that there was a degree of uncertainty about whether St. Elizabeth’s would have 100 qualifying units, FHFC acted reasonably by assigning St. Elizabeth’s application an RA Level of two for this tie-breaker rather than an RA Level of one. St. Elizabeth and Marian Towers argue that other applications contained language that indicated a degree of uncertainty. Nevertheless, those other applications received an RA Level of one. For example, FHFC assigned an RA Level of one to Three Round and Haley Sofge even though their HUD letters stated that both developments would be “subject to a Subsidy Layering Review to be conducted by HUD.” Marian Towers argued that if FHFC does not accept HUD or RD letters containing conditional language about the number of units that will be subsidized, then FHFC should have assigned an RA Level of six to Three Round and Haley Sofge. If Three Round and Haley Sofge had been assigned an RA Level of six, then Marian Towers (with a lottery number of five) would have been recommended for funding. St. Elizabeth and Marian Towers cited another instance in which an application received an RA Level of one, even though its application contained a letter from the RD program stating that “USDA Rural Development will consent to the transfer if all regulatory requirements are met.” (emphasis added). However, St. Elizabeth and Marian Towers failed to demonstrate that the language cited above applied only to those particular applications rather than to all applications for tax credits. For example, if all applications are subject to a subsidy layering review and compliance with all regulatory requirements, then inclusion of such language in a HUD letter (in and of itself) should not prevent an applicant from being assigned an RA Level of one. St. Elizabeth and Marian Towers also cited a HUD Letter used in another recent RFA by an applicant that received an RA Level of one. The HUD letter in question contained an asterisk followed by the following statement: “It is HUD’s understanding that two separate applications are being submitted – one for each tower comprising St. Andrew Towers. If funded, HUD will consider a request from the owner to bifurcate the St. Andrew Towers HAP contract in order to facilitate the separate financing of each tower.” However, St. Elizabeth and Marian Towers failed to demonstrate why the language quoted directly above should have resulted in the applicant in question being awarded an RA Level less than one. There is no indication that the total number of units receiving rental assistance would change.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order awarding funding to Three Round Tower A, LLC; Cathedral Towers, Ltd; Isles of Pahokee Phase II, LLC; SP Manor, LLC; and Pineda Village. DONE AND ENTERED this 18th day of October, 2016, in Tallahassee, Leon County, Florida. S G.W. CHISENHALL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of October, 2016.
The Issue The issue for determination in this bid protest proceeding is whether the Florida Housing Finance Corporation’s (“Florida Housing”) intended award of tax credits for the preservation of existing affordable housing developments was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Based on the oral and documentary evidence presented at hearing, and the entire record in this proceeding, the Findings of Fact are as follows: Parties Petitioner, Madison Point, is a Florida limited liability company and the designated applicant for funding through the RFA to construct an 85-unit development for low- income elderly persons in Pinellas County, Florida. Petitioner, American Residential Development, LLC, is the designated developer for the proposed development. Intervenor, Heritage Oaks, is a Florida limited liability limited partnership in the business of providing affordable housing. Heritage Oaks is an applicant for financing in response to the RFA to construct an 85-unit development for low-income elderly persons in Pinellas County, Florida. Intervenor, HTG Hudson, is a Florida limited liability company in the business of developing affordable housing. HTG Hudson was an applicant for financing in response to the RFA to construct an 87-unit development for low-income elderly persons in Pinellas County, Florida. However, all issues regarding HTG Hudson have been resolved pursuant to a settlement agreement which was attached as Exhibit “A” to the Joint Prehearing Stipulation. Pursuant to the settlement agreement, HTG Hudson’s application is ineligible for funding. Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes, and for the purpose of this proceeding, an agency of the State of Florida. Its purpose is to promote public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Housing is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code and has the responsibility and authority to establish procedures for allocating and distributing low income housing tax credits. Affordable Housing Tax Credits The low-income housing tax credit program (commonly referred to as “tax credits” or “housing credits”) was enacted to incentivize the private market to invest in affordable rental housing. These tax credits are awarded competitively to housing developers in Florida for rental housing projects which qualify. These credits are then normally sold by developers for cash to raise capital for their projects. The effect is that it reduces the amount that the developer would have to borrow otherwise. Because the total debt is lower, a tax credit property can (and must) offer lower, more affordable rents. Developers also covenant to keep rents at affordable levels for periods of 30 to 50 years as consideration for receipt of the tax credits. The demand for tax credits provided by the federal government exceeds the supply. Florida Housing is authorized to allocate tax credits, State Apartment Incentive Loan (“SAIL”) funding, and other funding by means of request for proposal or other competitive solicitation in section 420.507(48), and adopted Florida Administrative Code Chapter 67-60, to govern the competitive solicitation process for several different programs, including the program for tax credits. Chapter 67-60 provides that Florida Housing allocate its tax credits, which were made available to Florida Housing on an annual basis by the U.S. Treasury, through the bid protest provisions of section 120.57(3). Application Process In their applications, applicants request a specific dollar amount of housing credits to be given to the applicant each year for a period of 10 years. Applicants will normally sell the rights to that future stream of income tax credits (through the sale of almost all of the ownership interest in the applicant’s entity) to an investor to generate the amount of capital needed to build the development. The amount which can be received depends upon the accomplishment of several factors such as a certain percentage of the projected “total development cost” (total costs incurred in the completion of a development); a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated areas of some counties. This, however, is not an exhaustive list of the factors considered. Tax credits are made available through a competitive application process commenced by the issuance of an RFA. An RFA is equivalent to a “request for proposal” as indicated in rule 67-60.009(3). The RFA at issue here is RFA 2016-113, Housing Credit Financing for Affordable Housing Developments Located in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas counties. The RFA was issued on October 28, 2016, and responses were initially due December 8, 2016. The RFA was modified on November 10, 2016, and, among other revisions, the application deadline was extended to December 30, 2016. Through the RFA, Florida Housing seeks to award up to an estimated $14,669,052 of housing credits to qualified applicants in Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas counties. In response to RFA 2016-113, 43 applications were submitted for funding, including Madison Point and Heritage Oaks. Madison Point submitted application No. 2017-232C seeking $1,660,000 in annual allocation of housing credits to finance the construction of an 80-unit development in Pinellas County. Heritage Oaks submitted application No. 2017-201C, seeking $1,660,000 in annual allocation of housing credits to finance the construction of an 85-unit development in Pinellas County. The RFA sets forth the information required to be provided by an applicant, which includes a general description of the type of projects that will be considered eligible for funding and delineates the submission requirements. In order to be considered for funding selection, the application must meet all of the eligibility requirements set forth in the RFA. The eligibility requirements include, among other things, “[a]ll “Mandatory Items” described in section five of the RFA.” The RFA sets forth a list of mandatory items that must be included in a response including, but are not limited to, appropriate zoning, site control, development category, and occupancy status of any existing units. As part of the general development information, the RFA requires applicants to select a development category applicable to its proposed development. This is a mandatory item of the RFA. Applicants are instructed to select amongst the following categories: New Construction (where 50 percent or more of the units are new construction) Rehabilitation (where less than 50 percent of the units are new construction) Acquisition and Rehabilitation (acquisition and less than 50 percent of the units are new construction) Redevelopment (where 50 percent or more of the units are new construction) Acquisition and Redevelopment (acquisition and 50 percent or more of the units are new construction) Once disclosed in the application, the development category cannot be changed. In the RFA, “new construction” while capitalized is not a defined term. However, rule 67-48.002(98), defines “redevelopment” as follows: With regard to a proposed Development that involves demolition of multifamily rental residential structures currently or previously existing that were originally built in 1986 or earlier and either originally received financing or are currently financed through one or more of the following HUD or RD programs: Sections 202 of the Housing Act of 1959 (12 U.S.C. §1701q), 236 of the National Housing Act (12 U.S.C. §1701), 514, 515, or 516 of the U.S. Housing Act of 1949 (42 U.S.C. §1484), 811 of the U.S. Housing Act of 1937 (42 U.S.C. §1437), or have PBRA; and new construction of replacement structures on the same site maintaining at least the same number of PBRA units; or With regard to proposed Developments that involve demolition of public housing structures currently or previously existing on a site with a Declaration of Trust that were originally built in 1986 or earlier and that are assisted through ACC; and new construction of replacement structures on the same site, providing at least 25 percent of the total new units with PBRA, ACC, or both, after Redevelopment. Although the Rehabilitation Category is defined, it is not relevant for purposes of this proceeding. Additionally, the RFA requires applicants to answer whether the proposed development consists of: a) 100 percent new construction units; b) 100 percent rehabilitation units; or c) a combination of new construction units and rehabilitation units, and state the quantity of each type. This is a mandatory item of the RFA. Selection Process Florida Housing received 43 applications seeking funding in RFA 2016-113. Florida Housing’s executive director appointed a Review Committee of Florida Housing staff to evaluate the applications for eligibility and scoring and to make recommendations to Florida Housing’s Board of Directors. Pursuant to the terms of the RFA, the applications were received, processed, deemed eligible or ineligible, scored, and ranked. The Review Committee determined that, among other applicants, the applications of Heritage Oaks and Madison Point were eligible for funding. Through the ranking and selection process outlined in the RFA, Heritage Oaks was recommended to the Board of Directors to be selected for funding within Pinellas County. The Review Committee developed a chart listing its funding recommendations for the RFA to be presented to Florida Housing’s Board of Directors. On May 5, 2017, Florida Housing’s Board of Directors met and considered the recommendations of the Review Committee for RFA 2016-113. Also, on May 5, 2017 following the Board meeting, Petitioners, and all other applicants in RFA 2016-113, received notice that Florida Housing’s Board of Directors determined whether applications were eligible or ineligible for consideration for funding, and that certain eligible applicants were selected for award of tax credits. Such notice was provided by the posting of two spreadsheets, one listing the “eligible” and “ineligible” applications in RFA 2016-113 and one identifying the applications which Florida Housing proposed to fund on the Florida Housing website, www.floridahousing.org. Of the 43 applications submitted, 37 were deemed “eligible” and six were deemed “ineligible.” In that May 5, 2017, posting, Florida Housing announced its intention to award funding to seven applications, including Heritage Oaks. Madison Point was deemed eligible but not selected for funding. Madison Point timely filed a Notice of Protest and Petition for Formal Administrative Proceedings. Heritage Oaks intervened as a named party and intervention was granted. The scoring decisions at issue in this proceeding are related to Florida Housing’s decision to award funding to Heritage Oaks based on its responses regarding occupancy status and local government contribution. The RFA specifies an “application sorting order” to rank applicants for potential funding. The first consideration in sorting eligible applications for potential funding is application score. The maximum score an applicant can achieve is 28 points. In the case of a tie score, Florida Housing incorporated a series of “tie breakers” into the sorting process. The tiebreakers for this RFA, in order of applicability, are: First, by Development Category Funding Preference; Second, by a Per Unit Construction Funding Preference; Third, by a Leveraging Classification based on the amount of total Florida Housing funding per set-aside unit; Fourth, by the eligibility for the 75 or More Total Unit Funding Preference; Fifth, by satisfaction of a Florida Job Creation Funding preference, which applies a formula to reflect the estimated number of jobs created per $1 million of funding; Lastly, if necessary, by randomly assigned lottery number. The RFA set out a selection process for eligible applicants, after the sorting and ranking process outlined above. That selection process consisted of selecting the highest ranking eligible application for a proposed development in each of the following counties first: Broward, Duval, Hillsborough, Orange, Palm Beach, and Pinellas. If funding remained after those selections, then the highest ranking eligible unfunded application in Broward would be selected next. Heritage Oaks and Madison Point selected the elderly non-Assisted Living Facility (“ALF”) demographic and the proposed developments were located in Pinellas County. Florida Housing’s preliminary agency action selected Heritage Oaks for funding for Pinellas County. Heritage Oaks’ Application Heritage Oaks’ proposed development site consists of approximately 4.99 acres. Heritage Oaks’ proposed development site contains existing roads owned by Pinellas County. Heritage Oaks indicates that its proposed development site was comprised of scattered sites. There are existing housing units on Heritage Oaks’ development site. However, Heritage Oaks’ application indicates that “there are no existing units.” Heritage Oaks’ application selected “new construction” as its development category. Heritage Oaks’ proposed development involves demolition of currently-occupied, multifamily, public housing rental structures that were originally built in 1986 or earlier and either originally received financing or are currently financed through one or more of the following HUD or RD programs: Sections 202 of the Housing Act of 1959 (12 U.S.C. § 1701 q); 236 of the National Housing Act (12 U.S.C. § 1701); 514, 515, or 516 of the U.S. Housing Act of 1949 (42 U.S.C. § 1484); and 811 of the U.S. Housing Act of 1937 (42 U.S.C. § 1437). Development Category In response to the RFA requirements, Heritage Oaks selected “New Construction” as its development category. Heritage Oaks also indicated that its proposed development consists of 100 percent new construction. Mr. Evjen acknowledged that Heritage Oaks’ proposed development involves the demolition of existing structures on the proposed development site and the construction of 85 new units. Mr. Evjen explained that the proposed development includes 71 senior units in a three-story, mid-rise building, and seven duplex buildings, which would include the other 14 units on the proposed development site. The testimony at hearing indicated that at the time of the application deadline, Heritage Oaks’ proposed development did not satisfy all of the criteria set forth in the definition of redevelopment, as set forth in paragraph 18, supra. At hearing, Mr. Evjen and Ms. Blinderman testified that to qualify as redevelopment, at least 25 percent of the new units must receive Project Based Rental Assistance (“PBRA”). PBRA units are those with a rental subsidy through a contract with the United States Department of Housing and Urban Development (“HUD”) or the Rural Development Services (formerly the Farmer’s Home Administration) of the United States Department of Agriculture. See Fla. Admin. Code Rules 67-48.002(72), (85), and (98). Heritage Oaks intends to develop the proposed development with Pinellas County Housing Authority (“Housing Authority”). At the time of the application deadline, the Housing Authority was in discussions with HUD regarding the final count, if any, of PBRA units. The lack of a resolution with HUD is beyond the authority of Heritage Oaks and remains uncertain. As of the application deadline, Heritage Oaks could not know if 25 percent of its new units would receive PBRA and, therefore, could not classify the proposed development as redevelopment. While it may be possible that Heritage Oaks’ proposed development may meet the definition of redevelopment at some point in the future, at the time of the application it did not meet the definition. At hearing, no testimony or documentary evidence was offered to establish that the proposed development currently falls within the definition of redevelopment. Respondent found this classification to be acceptable. Petitioners assert that it is reasonable that Heritage Oaks would meet the threshold to satisfy the criteria for the redevelopment category. However, it was more reasonable that Heritage Oaks would not meet the threshold and be ineligible for funding, if the redevelopment category had been incorrectly selected. Therefore, the evidence supports that it was reasonable for Heritage Oaks to identify its development project as new construction. Occupancy Status Petitioners also argue that Heritage Oaks should not be awarded funding because it failed to disclose the occupancy status of existing units on the proposed development site. In the RFA, the subheading and language for section four (A)(5)(e)(3) provides as follows: Number of Units in Proposed Development: The Applicant must indicate which of the following applies with regard to the occupancy status of any existing units: Existing units are currently occupied Existing units are not currently occupied There are no existing units The section then instructs the applicant to refer to section four (A)(5)(e) of the RFA instructions before answering the occupancy status question. The RFA instructions at section four (A)(5)(e) provide as follows: e. Number of Units in Proposed Development: The Applicant must state the total number of units. Note: The proposed Development must consist of a minimum of 50 total units. Proposed Developments consisting of 75 or more total units will be eligible for the 75 or More Total Unit Funding Preference (outlined at Section Four B.2. of the RFA). If the Elderly Demographic Commitment (ALF or Non- ALF) is selected at question 2.b. of Exhibit A, the proposed Development cannot exceed the maximum total number of units outlined in Item 1 of Exhibit C of the RFA. The Applicant must indicate whether the proposed Development consists of (a) 100% new construction units, (b) 100% rehabilitation units, or (c) a combination of new construction units and rehabilitation units, and state the quantity of each type. The Applicant must indicate the occupancy status of any existing units at question 5.e.(3) of Exhibit A. Developments that are tentatively funded will be required to provide to the Credit Underwriter a plan for relocation of existing tenants, as outlined in Item 2.b.(6) of the Applicant Certification and Acknowledgement form. The plan shall provide information regarding the relocation site; accommodations relevant to the needs of the residents and length of time residents will be displaced; moving and storage of the contents of a resident’s dwelling unit; as well as the approach to inform and prepare the residents for the rehabilitation activities. In response to this RFA requirement and the cited RFA Instructions concerning Occupancy Status, Heritage Oaks indicated that “there are no existing units” in its proposed development. However, Mr. Evjen testified that there were existing units on the development site as of the application deadline and some of those units were occupied. Heritage Oaks pointed out that a review of the RFA reflects that it is organized in an outline format with headings and subheadings. For example, section four concerns information to be provided in the application. Section four A(5) then requests general development information. Section four (A)(5)(e) requests information concerning the number of units in the proposed development. Mr. Evjen further testified that, based on review of the RFA and the instructions, Heritage Oaks took a three-step approach in responding to the occupancy status question. Heritage Oaks properly answered the first two questions. First, Heritage Oaks provided the total number of units as 85. Second, Heritage Oaks indicated that “all 85 units would be new construction.” In the final question, Heritage Oaks considered whether any existing units would remain as a “part of its proposed development.” Because no existing units would be part of its proposed development, Heritage Oaks responded “there are no existing units” in its proposed development. However, the term “proposed” was not used in question 5.e.(3) as was the case in the prior questions in the same subsection. Mr. Evjen also testified that he read the question as “if there are rehab[ilitation] units, are they occupied? Heritage Oaks’ erroneous interpretation of the question resulted in its failure to provide an accurate answer. The question simply requested the “occupancy status of any existing units.” The question was clear and unambiguous. The parties have stipulated that there are existing housing units on the Heritage Oaks proposed development site. However, Heritage Oaks’ application indicates that there are no existing units. The representation that there were no existing units was a false statement of material fact. It is worth noting that the parties stipulated at the beginning of the hearing that there is no allegation of fraud or intentional deception. There is also no evidence in the record of intentional deception and therefore, there is no finding by the undersigned that Heritage Oaks engaged in intentional misconduct. However, whether intentional or not, Heritage Oaks’ representation of no existing units is a false statement. According to Mr. Reecy, Florida Housing asks the question regarding occupancy status of existing units because Florida Housing wants to make sure that the developer can handle the cost issues related to relocation and that the relocation needs of the existing tenants will be met. Additionally, Mr. Reecy testified that Florida Housing relies upon applicants to accurately respond to questions in the RFA because, at the time of scoring, no independent research is conducted to verify responses. Regarding a relocation plan, Heritage Oaks relies on the Declaration of Trust’s requirement to have a tenant relocation plan as a remedy for the failure to properly respond to the occupancy status question. However, the Declaration of Trust is a HUD requirement that is not controlled by Florida Housing. In fact, Mr. Evjen testified that Heritage Oaks’ co-developer was researching terminating the Declaration of Trust. Given the fact that Heritage Oaks could terminate its Declaration of Trust, the Declaration of Trust does not provide adequate assurance that the tenants in the existing housing units will be adequately relocated once Florida Housing allocates its funding. Florida Housing has a material interest in ensuring that tenants located in existing housing units are properly and adequately relocated during the development phase of any Florida Housing-funded development. Accordingly, Florida Housing’s scoring decision with regard to Heritage Oaks’ response to the occupancy status question was contrary to the terms of the RFA and clearly erroneous. Heritage Oaks is ineligible for funding under RFA 2016-113. Local Government Contribution At section four (A)(10)(b), an applicant can obtain 10 points if it can demonstrate a high level of local government interest in its project via an increased amount of local government contribution. To satisfy this requirement, an applicant must attach a properly completed and executable Florida Housing Finance Corporation Local Government Verification of Contribution-Loan Form (“loan form”). The RFA establishes a contribution threshold amount which qualifies an application for the local government area of opportunity points. The RFA defines “local government areas of opportunity” as follows: Developments receiving a high level of Local Government interest in the project as demonstrated by an irrevocable funding contribution that equals or exceeds 2.5 times the Total Development Cost Per Unit Base Limitation (exclusive of any add-ons or multipliers), as provided in Item 7 of Exhibit C to the RFA, for the Development Type committed to for the proposed Development. The minimum local government areas of opportunity funding amounts are outlined in section four A.10.b. of the RFA. A single jurisdiction (i.e., the county or a municipality) may not contribute cash loans and/or cash grants for any other proposed development applying in the same competitive solicitation in an amount sufficient to qualify as Local Government Areas of Opportunity, per the competitive solicitation. In response to this RFA requirement, Heritage Oaks submitted Attachment 15, a loan form from Pinellas County, Florida, in the amount of $551,000. Based upon the minimum local government area of opportunity funding amounts established in the RFA, this amount qualified Intervenor Heritage Oaks for 10 points. Petitioners challenge Intervenor Heritage Oaks’ loan form for two reasons. First, Petitioners opine that the face value of the commitment and the net present value included in the loan form cannot be the same amount and, therefore, a calculation error must have occurred. Petitioners rely on examples of various calculations found in the RFA. Next, Petitioners allege that the loan form was not properly signed and no final approval was given by Pinellas County. Intervenor Heritage Oaks provided a loan form from Pinellas County. The loan form committed Pinellas County to a loan in the amount of $551,000. Mr. Bussey, the individual who processed the application and award of commitment, indicated that the commitment was a loan that would be forgiven as long as certain requirements were met and kept. Mr. Bussey further indicated that there were no loan payments or interest rates associated with the loan. Accordingly, he indicated that the loan value was the net present value of the loan, which means the commitment amount and the net present value for the Pinellas County loan is the same number, $551,000. While Petitioners allege that the loan form was not appropriately signed and no final approval had occurred, the greater weight of the evidence shows otherwise. Specifically, Petitioners opine that either a resolution or some action by the Pinellas County Board of County Commissioners or the County Administrator was necessary as asserted by their witness, Mr. Banach. While Mr. Banach was critical of the loan verification form, he acknowledged that he is not an expert regarding the process for Pinellas County loan contribution and he did not process the loan application. He further acknowledged that Mr. Bussey, the individual who processed the loan, found no error with the form. The evidence shows that the loan form was executed by Charles Justice, who at the time of the loan form’s execution was the Chairman of the Pinellas County Board of County Commissioners. Mr. Bussey explained the process for approving the loan form and indicated that Mr. Justice, as Chairman, had the authority to sign the loan form. Mr. Bussey also pointed out language in the loan form which provides as follows: “This certification must be signed by the chief appointed official (staff) responsible for such approval, . . . Chairperson of the Board of the County Commissioners.” Mr. Justice is one of the designated individuals the form itself indicated is acceptable. Mr. Bussey indicated that no further approvals were necessary. At hearing, Florida Housing indicated that the loan form submitted by Heritage Oaks satisfied the requirements of the RFA and this position was not shown to be erroneous or unreasonable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order rescinding the intended award to Heritage Oaks and designating Madison Point and America Residential Development, LLC, as the recipients of the funding under RFA 2016-113. DONE AND ENTERED this 11th day of August, 2017, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2017. COPIES FURNISHED: Hugh R. Brown, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Betty Zachem, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed) Marisa G. Button, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 (eServed) Michael G. Maida, Esquire Michael G. Maida, P.A. 1709 Hermitage Boulevard, Suite 201 Tallahassee, Florida 32308 (eServed) Douglas P. Manson, Esquire Manson Bolves Donaldson & Varn, P.A. 1101 West Swann Avenue Tampa, Florida 33606-2637 (eServed) Paria Shirzadi, Esquire Manson Bolves Donaldson & Varn, P.A. 1101 West Swann Avenue Tampa, Florida 33606-2637 (eServed) Craig D. Varn, Esquire Manson Bolves Donaldson Varn, P.A. 204 South Monroe Street, Suite 201 Tallahassee, Florida 32301 (eServed) J. Timothy Schulte, Esquire Zimmerman, Kiser, & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Orlando, Florida 32801 (eServed) Sarah Pape, Esquire Zimmerman, Kiser, & Sutcliffe, P.A. 315 East Robinson Street, Suite 600 Orlando, Florida 32801 (eServed) Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC 1725 Capital Circle Northeast, Suite 304 Tallahassee, Florida 32308 (eServed) Michael P. Donaldson, Esquire Carlton Fields Jorden Burt, P.A. Post Office Drawer 190 215 South Monroe Street, Suite 500 Tallahassee, Florida 32302-0190 (eServed) Kate Flemming, Corporation Clerk Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 (eServed)
The Issue 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.
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 Whether Respondent Florida Housing Finance Corporation’s intended decision to find the application of Clearlake Village, L.P., ineligible for funding is contrary to Respondent’s governing statutes, rules, policies, or the solicitation specifications.
Findings Of Fact Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. Its purpose is to promote the public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Statutes, Florida Housing is designated as the housing credit agency for Florida for purposes of allocating low-income housing tax credits. The low-income housing tax credit program incentivizes the private market to invest in affordable rental housing. Tax credits are competitively awarded to housing developers in Florida for qualified rental housing projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the developer would otherwise have to borrow. When sold to investors, the tax credits provide equity that reduces the debt associated with the project. With lower debt, the affordable housing tax credit property can (and must) offer lower, more affordable rent. As consideration for receipt of tax credits, developers covenant to keep rent at affordable levels for periods of 30 to 50 years. The demand for tax credits provided by the federal government far exceeds the supply. The Competitive Application Process Florida Housing is authorized to allocate tax credits and other funding by means of requests for proposals or other competitive solicitations allowed by section 420.507(48), Florida Statutes. Florida Housing adopted Florida Administrative Code Chapter 67-60 to govern the competitive solicitation process for several different programs, including the one for tax credits. Chapter 67-60 was adopted on August 20, 2013, replacing prior procedures used by Florida Housing for allocating tax credits, and provides that the bid protest provisions of section 120.57(3) govern its process for allocating tax credits. Applicants request in their applications a specific dollar amount of housing tax credits to be given to the applicant each year for a period of 10 years. The amount of housing tax 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. On November 21, 2014, Florida Housing issued the RFA at issue in the instant dispute. According to the RFA, Florida Housing expects to award an estimated $12,914,730 of housing tax credits which are available for award to proposed developments located in medium counties, and up to an estimated $1,513,170 of housing tax credits available for award to proposed developments located in small counties. On January 21, 2015, Petitioner, in response to the RFA, submitted an application seeking $1,418,185 in housing tax credits to finance the construction of an 80-unit residential rental development in Brevard County, Florida (a medium county), to be known as Clearlake Village. Though Petitioner has submitted other applications for housing tax credits, this is the first time Petitioner has done so in Florida. Petitioner’s application was assigned lottery number 4 by Florida Housing. On January 20, 2015, Intervenor, in response to the RFA, submitted an application requesting $1,475,000 in housing tax credits to support the construction on an 80-unit affordable housing development also in Brevard County. As part of the RFA process, Florida Housing announced its intention to award funding to nine medium county developments, including Intervenor’s application number 2015-073C for Brevard County. Notice On March 20, 2015, Petitioner received notice that Florida Housing intended to designate Petitioner’s application ineligible for funding and that other applications were selected for funding, subject to satisfactory completion of the credit underwriting process. In response to Respondent’s notice of intended action, Petitioner timely filed a Notice of Protest, and Petitioner’s Formal Written Protest and Petition for Formal Administrative Proceedings. RFA 2014-114 Ranking and Selection Process Florida Housing received 82 applications seeking funding in response to the RFA, including 76 for medium county developments. Developments were proposed in 21 different medium counties throughout the State, including four in Brevard County. 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, many medium counties will not receive an award of housing tax credit funding in this RFA, due to the typical amount of an applicant’s housing tax credit request (generally $1.0 to $1.5 million), and the number of medium counties for which developments are proposed. Florida Housing intends to award funding to nine developments in nine different medium counties. The RFA requires that applicants file an online electronic application with development cost pro forma. Each applicant is also required to submit several hard copies of its application and attachments. One of the applications is designated by the applicant as the “original,” which must contain an original signature in blue ink; and two others it designates as “copies,” which are used by Florida Housing staff to score the applications. Florida Housing scans the application attachments from the original and posts the online application with the scanned attachments on its web page. The applications were received, processed, deemed eligible or ineligible, scored, and ranked, pursuant to the terms of the RFA, Florida Administrative Code Rule Chapters 67-48 and 67-60, and applicable federal regulations. Applications are considered for funding only if they are deemed “eligible,” which means that the application complies with Florida Housing’s various content requirements. Of the 82 applications submitted to Florida Housing for the RFA, 69 were found “eligible,” and 13 were found ineligible. Petitioner’s application was found ineligible. A five-page spreadsheet created by Florida Housing, entitled “RFA 2014-114 – All Applications,” which identifies all eligible and ineligible applications, was provided to each applicant. The first consideration in sorting eligible applications for funding is application scores. Applicants can achieve a maximum score of 23 points. Eighteen of those 23 points are attributable to “proximity” scores based on the distance of the proposed development from services needed by tenants and the remaining five points are attributable to local government contributions. All 69 eligible applications received the maximum score of 23 points. Petitioner’s application was not fully scored, because it was deemed ineligible. If Petitioner’s application had been scored, rather than being found ineligible, it would have received a score of 23. Many applicants achieve tie scores, and in anticipation of that occurrence Florida Housing designed the RFA and rules to incorporate a series of “tie breakers,” the last of which is randomly assigned lottery numbers. Lottery numbers have historically played a significant role in the outcome of Florida Housing’s funding cycles, and lottery numbers were determinative of funding selections in the current RFA. Florida Housing employs a “funding test” to be used in the selection of medium county applications for funding in this RFA. The “funding test” requires that the amount of tax credits remaining (unawarded) when a particular medium county application is being considered for selection must be enough to fully fund that applicant’s request amount, and partial funding will not be given. The RFA also specifies a sorting order for funding selection, with applications first arranged from highest score to lowest. Applicants with tie scores are separated based on criteria not relevant to resolving the instant protest. Suffice to say that Petitioner’s application qualified for each funding preference and it had a better lottery number than Intervenor. County Award Tally In selecting among eligible applicants for funding, Florida Housing also applies a “County Award Tally.” The County Award Tally is designed to prevent a disproportionate concentration of funded developments in any one county. Generally, before a second application can be funded in any given county, all other counties that are represented by an eligible applicant must receive an award of funding. As there were eligible medium county applications submitted from 21 different counties for the RFA, there cannot be more than one applicant funded from any given medium county. The nine medium county applicants selected for funding had lottery numbers 1, 2, 6, 7, 9, 20, 26, 27, and 28. The applicant with lottery number 6 (Intervenor), is from Brevard County. If Petitioner is deemed eligible, it would be selected for funding because it has a lower lottery number (4) than Intervenor and would displace Intervenor as the only project funded in Brevard County. Basis for Petitioner’s Ineligibility Florida Housing reviewed Petitioner’s application and determined that it was ineligible as it failed to meet the RFA requirement that applicants must demonstrate control of the site upon which the development is to be constructed. Florida Housing rejected Petitioner’s site control documentation. Site control is an important element of an application––the “meat and potatoes of the application.” Proof that the applicant has control of the development site is a matter of “do or die if you miss a document.” The RFA has a general requirement that each application be complete, and must include all applicable documentation. Site control can be established through a deed, a long-term lease, or a contract for purchase and sale. In each case, the entity with control of the site must be the applicant entity. If the purchaser under a contract for purchase and sale is not the applicant, then the application must contain one or more assignments that give the applicant all rights and remedies of the purchaser. Section 4.A.7 of the RFA, at page 23, lists the requirements for site control. The instructions provide, in relevant part: Site Control: The Applicant must demonstrate site control by providing, as Attachment 7 to Exhibit A, the documentation required in Items a., b., and/or c., as indicated below. a. Eligible Contract - For purposes of the RFA, an eligible contract is one that[:] has a term that does not expire before a date that is six (6) months after the Application Deadline 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 six (6) months after the Application Deadline; 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. As an overall submittal requirement, the RFA requires that each application be complete and include all “applicable documentation.” The RFA process does not provide an opportunity for applicants to cure errors or omissions discovered after submission of an application to Florida Housing. Petitioner’s application sought to establish site control through attachment 13 to its application, which includes, among other things, a vacant land contract, and an assignment and assumption agreement. The vacant land contract pertains to the land that Petitioner intends to use for the site identified in its application. The vacant land contract was prepared using a Florida Association of Realtors form contract. Paragraph 12 of the vacant land contract contains boilerplate language which reads as follows: “ASSIGNABILITY; PERSONS BOUND: Buyer may not assign this Contract without Seller’s written consent.” According to Petitioner, the word “not” was struckthrough in the following manner, to wit: not. Amy Garmon, Florida Housing’s multi-family programs manager, scored the site control element of all 82 applications filed in response to the RFA. Ms. Garmon has scored site control applications for nine to ten years, and is very familiar with the Florida Association of Realtors’ form contract, having scored hundreds of contracts submitted on that form. Ms. Garmon reviewed paragraph 12 of the vacant land contract submitted by Petitioner and concluded that the language set forth therein does not allow for an assignment of the contract without written consent from the seller. Ms. Garmon reached her conclusion because in her opinion, the strikethrough of the word “not” in paragraph 12, although the word itself appears somewhat darker and not as clear as some of the other words in the paragraph, is not sufficiently obvious so as to alert a reader to the presence of the strikethrough. Upon review of paragraph 12, the undersigned agrees with Ms. Garmon, and concludes that the strikethrough of the word “not” is not sufficiently observable so as to alert a reviewer to the presence of the strikethrough. Given the findings in paragraph 31, the provision of the vacant land contract which provides that “[h]andwritten or typewritten terms inserted in or attached to th[e] contract prevail over preprinted terms” is not triggered because the purported strikethrough of the word “not” in paragraph 12 of the contract, given its ambiguity, does not rise to the level of constituting a “handwritten or typewritten” modification of a preprinted contractual term. Additionally, the finding in paragraph 31 also means that Petitioner, in order to demonstrate site control, must prove that the seller gave written consent to DPKY Development Company’s assignment of its interest in the vacant land contract to Petitioner. Petitioner also submitted with its application an assignment and assumption agreement which relates to paragraph 12 of the vacant land contract. The assignment and assumption agreement provides that DPKY Development Company, LLC, is assigning to Petitioner its interest in the vacant land contract it has with William T. Taylor. The vacant land contract provides that “William T. Taylor, in his capacity as trustee of the Hidden Creek Land Trust Agreement dated January 15, 2004,” is the “seller” of the land and “DPKY Development Company, LLC, or assigns” is the “buyer” of land. While the assignment and assumption agreement lists the name of the seller, it does not include a signature line for the seller or any other acknowledgement by the seller expressing consent to the assignment. Petitioner does not dispute that the assignment and assumption agreement is deficient in this regard. Turning to the vacant land contract, Petitioner contends that the first page of the vacant land contract identifies the buyer as “DPKY Development Company, LLC, or assigns,” and because the seller initialed the bottom of the first page of the vacant land contract this means that Respondent should have reasonably known that the presence of seller’s initials means that the seller is consenting to the assignment of DPKY Development Company’s interest in the property. The portion of page one of the vacant land contract initialed by the seller provides that “Buyer ( ) and Seller ( ) acknowledge receipt of a copy of this page, which is page 1 of 7.” Contrary to Petitioner’s assertion, the introductory provision of the vacant land contract that identifies the “buyer” as “DPKY Development Company, LLC, or assigns,” cannot be read in isolation when there is another provision in the contract which specifically addresses the issue of assignability, to wit: “[b]uyer may not assign th[e] contract without [s]ellers written approval.” The introductory provision of the vacant land contract relied upon by Petitioner may have conveyed a stronger expression of the seller’s purported intent to consent to an assignment if Petitioner removed from paragraph 12 of the vacant land contract any reference to assignability. Because Petitioner failed to do so, the fact that the seller acknowledged that it received a copy of the page of the contract identifying the buyer as “DPKY Development Company, LLC, or assigns” is not sufficient, in itself, to establish that the seller consented to DPKY Development Company’s assignment of its interest in the contract to Petitioner.2/ Ms. Garmon, after determining that the required consent of the seller to the assignment was not included in the original copy of Petitioner’s application, reviewed each of the other copies of Petitioner’s application in Respondent’s possession. Ms. Garmon’s review of the other copies of Petitioner’s application confirmed that the seller’s written consent to assignment was not a part of Petitioner’s application. The evidence supports the conclusions reached by Ms. Garmon and Florida Housing.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is recommended that Petitioner’s protest be dismissed. DONE AND ENTERED this 25th day of June, 2015, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN 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 25th day of June, 2015.
The Issue The issues for determination are: (1) whether Riverside Village Partners, LTD. (Riverside or Petitioner), has, or had at the time of application, a present plan to convert its proposed development to any use other than affordable residential rental property; (2) whether Provincetown Village Partners, LTD. (Provincetown or Petitioner), has, or had at the time of application, a present plan to convert its proposed development to any use other than affordable residential rental property; (3) whether Riverside irrevocably committed to set aside units in its proposed development for a total of 50 years; and (4) whether Provincetown irrevocably committed to set aside units in its proposed development for a total of 50 years.
Findings Of Fact Parties Petitioner, Provincetown Village Partners, LTD., is a Florida limited partnership with its business address at 1551 Sandspur Road, Maitland, Florida 32751, and is in the business of providing affordable housing units. Petitioner, Riverside Village Partners, LTD., is a Florida limited partnership with its business address at 1551 Sandspur Road, Maitland, Florida 32751, and is in the business of providing affordable housing units. Respondent, Florida Housing Finance Corporation (Florida Housing), is a public corporation that administers governmental programs relating to the financing and refinancing of affordable housing and related facilities in Florida pursuant to Section 420.504, Florida Statutes (2003). Florida Housing's Financing Mechanisms To encourage the development of affordable rental housing for low-income families, Florida Housing provides low-interest mortgage loans to developers of qualified multi-family housing projects. In exchange for an interest rate lower than conventional market rates, the developer agrees to "set-aside" a specific percentage of the rental units for low-income tenants. Through its Multi-Family Mortgage Revenue Bond (MMRB) program, Florida Housing funds these mortgage loans through the sale of tax-exempt and taxable bonds. Applicants then repay the loans from the revenues generated by their respective projects. Applicants who receive MMRB proceeds are required to execute a Land Use Restriction Agreement (LURA or Land Use Restriction Agreement), which is recorded in the official records of the county in which the applicant’s development is located. Through the State Apartment Incentive Loan (SAIL) program, Florida Housing funds low-interest mortgage loans to developers from various sources of state revenue, which are generally secured by second mortgages on the property. Applicants who receive SAIL proceeds are required to execute and record a LURA in the county records as with MMRB's Land Use Restriction Agreements. Florida Housing also distributes federal income tax credits for the development of affordable rental housing for low-income tenants; those tax credits are referred to as "housing credits." Generally, applicants who utilize tax-exempt bond financing for at least 50 percent of the cost of their development are entitled to receive an award of housing credits on a non-competitive basis. These non-competitive housing credits are received by the qualified applicant each year for ten consecutive years. Typically, applicants sell this future stream of housing credits at the initiation of the development process in order to generate a portion of the funds necessary for the construction of the development. The Application, Scoring, and Ranking Process Because Florida Housing’s available pool of tax-exempt bond financing and SAIL funds is limited, qualified projects must compete for this funding. To determine which proposed projects will put the available funds to best use, Florida Housing has established a competitive application process to assess the relative merits of proposed projects. Florida Housing’s competitive application process for MMRB and SAIL financing is included with other financing programs within a single application process (the 2003 Universal Application) governed by Florida Administrative Code Rule Chapters 67-21 and 67-48. The 2003 Universal Application form and accompanying instructions are incorporated as Form "UA1016" by reference into Florida Administrative Code Chapters 67-21 and 67-48 and by Florida Administrative Code Rules 67-21.002(97), and 67-48.002(111), respectively. For the 2003 Universal Application cycle, each applicant who completed and submitted Form UA1016 with attachments was given a preliminary score by Florida Housing. Following the issuance of preliminary scores, applicants are provided an opportunity to challenge the scoring of any competing application through the filing of a Notice of Possible Scoring Error (NOPSE). Florida Housing considers each NOPSE filed and provides each applicant with notice of any resulting change in their preliminary scores (the NOPSE scores). Following the issuance of NOPSE scores, Florida Housing provides an opportunity for applicants to submit additional materials to "cure" any items for which the applicant received less than the maximum score or for which the application may have been rejected for failure to achieve "threshold." There are certain portions of the application which cannot be cured; the list of noncurable items appears in Florida Administrative Code Rules 67-21.003(14) (for MMRB applicants) and 67-48.004(14) (for SAIL applicants). Following the cure period, applicants may again contest the scoring of a competing application by filing a Notice of Alleged Deficiencies (NOAD), identifying deficiencies arising from the submitted cure materials. After considering the submitted NOADs, Florida Housing provides notice to applicants of any resulting scoring changes. The resulting scores are known as "pre-appeal" scores. Applicants may appeal and challenge, via formal or informal hearings, Florida Housing’s scoring of any item for which the applicant received less than the maximum score or for any item that resulted in the rejection of the application for failure to meet "threshold." Upon the conclusion of the informal hearings, and of formal hearings where appropriate, Florida Housing issues the final scores and ranking of applicants. Applicants are then awarded tentative MMRB and/or SAIL funding in order of rank; Florida Housing issues final orders allocating the tentative funding and inviting successful applicants in the credit underwriting process. If an applicant who requests a formal hearing ultimately obtains a final order that modifies its score and threshold determinations so that its application would have been in the funding range had the final order been entered prior to the date the final rankings were presented to the Florida Housing Board of Directors (Board), that applicant’s requested funding will be provided from the next available funding or allocation. The 2003 Application Process On or about April 8, 2003, Riverside, Provincetown, and others submitted applications for MMRB and SAIL financing in the 2003 Universal Application cycle. Riverside requested $3,205,000 in tax-exempt MMRB funding and $1.6 million in SAIL funding to help finance its proposed development, a 34-unit development in Pinellas County, Florida. In its application, Riverside committed to lease all or most of these units to house families earning 60 percent or less of the area median income (AMI). However, depending on which Florida Housing funding source(s) Riverside’s application was deemed eligible to receive, it would commit to lease at least 17 percent of the units to families earning 50 percent or less of AMI, or would commit to lease only a total of 85 percent of the units to families earning 60 percent or less of AMI. Provincetown requested $4.5 million in tax-exempt MMRB funding and $2.0 million in SAIL funding to help finance its proposed development, a 50-unit development in Gadsden County, Florida. In its application, Provincetown committed to lease all or most of the units to families earning 60 percent or less of AMI. However, depending on which Florida Housing program(s) Provincetown’s application was deemed eligible to receive, it would commit to lease at least 11 percent of the units to families earning 50 percent or less of AMI, or would commit to lease only a total of 85 percent of the units to families earning 60 percent or less of AMI. Florida Housing evaluated all applications and notified applicants of their preliminary scores on or before May 12, 2003. Applicants were then given an opportunity to file NOPSEs on or before May 20, 2003. After considering all NOPSEs, Florida Housing notified applicants by overnight mail on or about June 9, 2003, of any resulting changes in the scoring of their applications. Applicants were then allowed to submit, on or before June 19, 2003, cure materials to correct any alleged deficiencies in their applications previously identified by Florida Housing. Applicants were also allowed to file NOADs on competing applications on or before June 27, 2003. After considering the submitted NOADs, Florida Housing issued notice to Provincetown, Riverside, and others of their adjusted scores on or about July 21, 2003. Commitment to Affordability Period Florida Administrative Code Rule 67-21.006, entitled "Development Requirements," lists certain minimum requirements that a development shall meet or that an applicant shall be able to certify that such requirements shall be met. One of these requirements is "The Applicant shall have no present plan to convert the Development to any use other than the use as affordable residential rental property." Part III.E.3 of the Application provides a line for an applicant to commit to an "affordability period" for its application. This subsection of the application form reads in its entirety: 3. Affordability Period for MMRB, SAIL, HOME, and HC Application: Applicant irrevocably commits to set aside units in the proposed Development for a total of years. Both Provincetown and Riverside filled in the number "50" on the blank line in this subsection of their respective applications. An applicant’s score on its application is determined in part by the length of its affordability period commitment. An applicant who commits to an affordability period commitment of 50 or more years received 5 points; 45 to 49 years, 4 points; 40 to 44 years, 3 points; 35 to 39 years, 2 points; 31 to 34 years, 1 point; and 30 years or less, 0 points. Scoring of Provincetown and Riverside Applications In its preliminary scoring of the Provincetown and Riverside applications, Florida Housing awarded each applicant the full 5 points on Part III.E.3 of his or her application for the 50-year affordability period commitment. Also, in the preliminary scoring of the Provincetown and Riverside applications, Florida Housing did not find any threshold failure regarding an alleged present plan to convert the development to a use other than affordable residential rental property. In its preliminary scoring of the Provincetown application, Florida Housing identified an alleged threshold failure related to the validity of the contract for purchase of the site of the proposed development. A subsequent cure submitted by Provincetown regarding the contract for purchase of the site has resolved this issue, and Florida Housing no longer takes the position that the Provincetown application fails threshold for any reason related to site control. In its preliminary scoring of the Riverside application, Florida Housing identified a threshold failure related to documentation of the status of site plan approval, or plat approval, for the proposed development. A subsequent cure submitted by Riverside regarding the status of site plan approval has resolved this issue, and Florida Housing no longer takes the position that the Riverside application fails threshold for any reason related to site plan approval, or plat approval. During the scoring process, Florida Housing received NOPSEs on both the Provincetown and Riverside applications, which asserted that these applicants were proposing transactions that were not financially feasible and would not pass subsequent credit underwriting requirements. The NOPSEs also alleged that the Riverside and Provincetown applications were for townhouses designed with an intent to eventually convert to home ownership in violation of Florida Administrative Code Rule 67-21.006(6). According to that rule, the applicant shall have no present plan to convert the development to any use other than the use as affordable residential rental property. After reviewing these NOPSEs, but before issuing revised NOPSE scores, Florida Housing determined that it was inappropriate to apply subsequent credit underwriting requirements during the scoring of these applications, and therefore, disagreed with the allegations of the NOPSEs on those grounds. Accordingly, Florida Housing's scoring summaries for Riverside and Provincetown issued, after receipt of the NOPSEs, raised no issues concerning financial feasibility, and it was not placed at issue in this proceeding. Following the filing of NOPSEs, Florida Housing released NOPSE scores for all applicants, including Riverside and Provincetown. The NOPSE scores are reflected on a NOPSE Scoring Summary dated June 9, 2003. For both Provincetown and Riverside, the NOPSE Scoring Summary contained the following statement regarding alleged threshold failure, identifying two separate reasons for the alleged threshold failure: The proposed Development does not satisfy the minimum Development requirements stated in Rule 67-21.006, F.A.C. The Development is not a multifamily residential rental property comprised of buildings or structures each containing four or more dwelling units. Further, the Applicant has a present plan to convert the Development to a use other than as an affordable residential rental property. The first threshold failure noted in the preceding paragraph relates to Florida Administrative Code Rule 67-21.006(2), which requires that there be four or more residential units per building for projects financed with MMRB. A subsequent cure regarding the design of the proposed developments has resolved this issue, and Florida Housing no longer contends that these applications, as cured, exhibit a threshold failure related to the number of residential units per building. The second threshold failure noted in the NOPSE Scoring Summary and quoted in paragraph 30 above, relates to Florida Administrative Code Rule 67-21.006(6), which requires that applicants "shall have no present plan to convert the Development to any use other than the use as affordable residential rental property." In response to the NOPSE Scoring Summaries, both Provincetown and Riverside submitted cures to their respective applications. In the cures, Provincetown and Riverside presented their explanations of how they believed their applications, as submitted, demonstrated a 50-year affordability period commitment and included these applicants’ contentions that they had no present plan to convert the developments to a use other than affordable residential rental property. For Provincetown, an issue had also been raised by a NOPSE concerning whether the Provincetown application was entitled to certain "tie-breaker" points for the distance from the proposed development to a public transportation stop. The points awardable to Provincetown for tie-breaker purposes are not in dispute, and Provincetown, if its application is otherwise deemed to meet threshold requirements, would be entitled to 5.0 of a possible 7.5 tie-breaker points. If Riverside's application were deemed to meet threshold requirements and if the 5 points for the affordability period commitment were restored, Riverside would have been within the funding range for applicants within the 2003 Universal Application cycle at the time the Board took final action on the ranking of applications on October 9, 2003. If Provincetown's application were deemed to meet threshold requirements and if the five points for the affordability period commitment were restored, Provincetown would have been within the funding range for applicants within the 2003 Universal Application cycle at the time the Board took final action on the ranking of applications on October 9, 2003. The Sciarrino Letter and Cures After reviewing the NOPSEs filed against the Provincetown and Riverside applications, Florida Housing received a letter dated June 2, 2003 (Sciarrino letter or letter), from Michael Sciarrino, president of the CED Companies, addressed to Orlando Cabrera, executive director of Florida Housing, with a copy to Kerey Carpenter, deputy development officer of Florida Housing. Michael Sciarrino is a manager of the sole general partner (CED Capital Holdings 2003 Y, LLC., a Florida limited liability company) of Provincetown. Mr. Sciarrino is also a Class B limited partner of the sole member of the general partner (CED Capital Holdings XVI, LTD., a Florida limited partnership). Michael Sciarrino is a manager of the sole general partner (CED Capital Holdings 2003 K, LLC., a Florida limited liability company) of Riverside. Mr. Sciarrino is also a Class B limited partner of the sole member of the general partner (CED Capital Holdings 2003 XVI, LTD., a Florida limited partnership). As manager of the sole general partner of Provincetown and Riverside, Mr. Sciarrino had supervisory authority and editorial control over the processing and preparation of the Provincetown and Riverside applications. The Sciarrino letter was drafted, in part, to respond to the allegations of the NOPSEs filed against Provincetown and Riverside applications and specifically addressed those issues pertaining to Provincetown and Riverside applications. Also, while the letter does not mention Petitioners by name, the description and location of the properties, as detailed in the letter, clearly refer to these applicants. The Sciarrino letter evinces a present plan on the part of Petitioners to convert the proposed developments to a use other than that of affordable residential rental housing. First, the letter describes in detail the economic motivations for the subsequent sale of the units of the proposed development within the 50-year extended affordability period stating that the "residual value potential" of such an arrangement "is the single biggest economic reason for our desire to develop these communities." Next, the letter describes in detail the means by which Petitioners would be relieved of the commitment to a 50-year affordability period as stated in their applications, that is, by seeking a waiver from Board after the 15-year period of tax credit recapture exposure had expired. Third, the letter plainly states that Petitioners had intended to request such relief from the 50-year affordability period in the future. Petitioners' present plan to convert the proposed developments for sale to homeowners during the 50-year extended affordability period is further evident by the fact that the concept of such a conversion existed prior to and at the time the applications were filed. Moreover, the Provincetown and Riverside developments were specially selected to test the concept. On or about June 19, 2003, Petitioners filed cures with Florida Housing addressing the issues raised in the NOPSEs. While the cures presented argument in favor of their respective applications and reiterated Petitioners' commitment to the 50-year extended affordability period for each proposed development, they did not deny that it was their intention to seek relief from this period in the future. Following review of the Sciarrino letter and the cures submitted by Petitioners, Florida Housing rejected both the Provincetown and Riverside applications for failing to meet the mandatory development requirement set forth in Florida Administrative Code Rule 67-21.006(6). The applications also had five points deducted from their scores on the grounds that, under the circumstances, their commitment to an affordability period could not be determined.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order that upholds the scoring of the applications of Riverside Village Partners, LTD., and Provincetown Village Partners, LTD.; that rejects the applications of Riverside Village Partners, LTD., and Provincetown Village Partners, LTD.; and that denies the relief requested in the Petitions. DONE AND ENTERED this 27th day of February, 2004, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of February, 2004. COPIES FURNISHED: Hugh R. Brown, Esquire Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301-1329 M. Christopher Bryant, Esquire Oertel, Fernandez & Cole, P.A. 301 South Bronough Street, Fifth Floor Post Office Box 1110 Tallahassee, Florida 32302-1110 Orlando J. Cabrera, Executive Director Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301 Wellington H. Meffert, II, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32301
The Issue 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)
