10-000896 Rst Fruitland Housing, L.P. vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Wednesday, June 9, 2010.

Summary: Florida Housing properly found that Petitioner's failure to meet the required occupancy standard results in a rescission of its Federal Tax Credits in the 2008 Universal Cycle.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RST FRUITLAND HOUSING, L.P., )

)

Petitioner, )

)

vs. ) Case No. 10-0896

)

FLORIDA HOUSING FINANCE )

CORPORATION, )

)

Respondent. )

)

RECOMMENDED ORDER

A final hearing was held in this matter before Robert S.

Cohen, Administrative Law Judge with the Division of

Administrative Hearings, on April 27, 2010, in Tallahassee,

Florida.

APPEARANCES

For Petitioner: Michael P. Donaldson, Esquire

Carlton Fields, P.A.

215 South Monroe Street, Suite 500

Post Office Drawer 190

Tallahassee, Florida 32302-0190

For Respondent: Hugh R. Brown, Esquire Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301-1329

STATEMENT OF THE ISSUE

The issue is whether the Florida Housing Finance

Corporation ("Florida Housing") properly rescinded the

preliminary funding awarded to RST Fruitland Housing, L.P.

("RST"), pursuant to applicable rules, prior agency practice,

and the existing case law.

PRELIMINARY STATEMENT

On October 23, 2009, Respondent Florida Housing rescinded

funding tentatively awarded to Petitioner RST. Petitioner

timely submitted a Petition for Administrative Hearing, which

challenged Florida Housing's actions, on November 13, 2009. On

February 10, 2010, RST filed an Amended Petition with Florida

Housing, which was forwarded to the Division of Administrative

Hearings on February 18, 2010.

The final hearing was first scheduled for April 8 and 9,

2010, by Notice of Hearing entered March 1, 2010. The hearing

was continued upon motion filed by Florida Housing. The final

hearing was rescheduled and held on April 27, 2010. On

April 21, 2010, the parties filed a Joint Pre-Hearing

Stipulation containing extensive stipulated findings of fact.

At the hearing, RST presented the testimony of two expert

witnesses: Michael A. Hartman (expert in affordable housing)

and Robert Vogt (expert in market study preparation and

analysis). RST offered Exhibits 1 through 10, which were

received into evidence. Florida Housing presented the testimony

of three expert witnesses: Robert Von (expert in market study

preparation and analysis), Ben Johnson (expert in credit

underwriting of affordable housing developments), and Stephen

Auger (expert in affordable housing programs). Florida Housing

offered Exhibits 1 through 3, which were received into evidence.

Joint Exhibits 1 through 6, were received into evidence. The

parties asked that Official Recognition be taken of Florida

Administrative Code Rule Chapter 67-48.

A Transcript was filed on May 7, 2010. After the hearing,

Petitioner and Respondent filed their Proposed Recommended

Orders on May 24, 2010.

References to statutes are to Florida Statutes (2009)

unless otherwise noted.

FINDINGS OF FACT

1. RST is a limited partnership authorized to do business

in Florida and is controlled by Roundstone Development, LLC

("Roundstone"). Roundstone is in the business of providing

affordable rental housing. In addition to Florida, Roundstone

operates in Texas, Arkansas, Mississippi, and South Carolina.

Michael Hartman, the consultant for Roundstone, has been

involved in the development of over 70 affordable housing

developments, including many in Florida.

2. Florida Housing is a public corporation created by

Section 420.504, Florida Statutes, to administer the

governmental function of financing or refinancing of affordable

housing and related facilities in Florida. Florida Housing's

statutory authority and mandates appear in Part V of

Chapter 420, Florida Statutes. Florida Housing is governed by a

Board of Directors consisting of nine individuals appointed by

the Governor and confirmed by the Senate.

3. On July 31, 2009, Florida Housing issued RFP 2009-04

(the "RFP") setting forth criteria and qualifications for

developers to seek funding for affordable housing projects from

funds that Florida received through the American Recovery and

Reinvestment Act of 2009, PL 111-5 ("ARRA"). ARRA was enacted

in 2009 by Congress as part of federal economic stimulus

efforts.

4. RST received notice of the RFP through e-mail

notification on July 31, 2009. The RFP required applicants to

submit proposals to Florida Housing no later than 2:00 p.m. on

August 14, 2009. RST submitted an application and intended to

seek financing for its affordable housing project by applying

for funding from the sources that are proposed to be allocated

through the RFP.

Florida Housing's Programs

5. Florida Housing administers numerous programs aimed at

assisting developers to build affordable housing. These

programs include: the Multi-Family Mortgage Revenue Bond

Program ("MMRB") established under Section 420.509, Florida

Statutes; the State Apartment Incentive Loan Program ("SAIL")

created pursuant to Section 420.5087, Florida Statutes; and the

Low Income Housing Tax Credit Program (the "Tax Credit program")

established under the authority of Section 420.5093, Florida

Statutes.

6. These funding sources are allocated by Florida Housing

to finance the construction or substantial rehabilitation of

affordable housing. A portion of the units constructed based

upon funding from these programs must be set aside for residents

earning a certain percentage of area median income ("AMI"). For

purposes of these proceedings, the primary program of interest

is the Tax Credit program.

Tax Credits

7. The Tax Credit program was created in 1986 by the

federal government. Tax Credits come in two varieties:

competitively awarded nine percent tax credits, and non-

competitively awarded four percent tax credits. For the nine

percent credits, the federal government annually allocates to

each state a specific amount of tax credits using a population-

based formula. Tax Credits are a dollar for dollar offset to

federal income tax liability over a 10-year period. A developer

awarded Tax Credits will often sell the future stream of Tax

Credits to a syndicator who in turn sells them to investors

seeking to shelter income from federal income taxes.

8. The developer receives cash equity with no debt

associated with it. Thus, Tax Credits provide an attractive

subsidy and, consequently, are a highly sought after funding

source. Florida Housing is the designated agency in Florida to

allocate Tax Credits to developers of affordable housing. Every

year since 1986, Florida Housing has received an allocation of

Tax Credits to be used to fund the construction of affordable

housing.

Universal Application

9. Florida Housing has historically allocated funds from

the MMRB, SAIL, and Tax Credit programs through a single annual

application process. Since 2002, Florida Housing has

administered the three programs through a combined competitive

process known as the "Universal Cycle." The Universal Cycle

operates much the same as an annual competitive bidding process

in which applicants compete against other applicants to be

selected for limited funding.

10. Florida Housing has adopted rules which incorporate by

reference the application forms and instructions for the

Universal Cycle as well as general policies governing the

allocation of funds from the various programs it administers.

Typically, Florida Housing amends its Universal Cycle rules,

forms, and instructions every year.

11. The typical process used by Florida Housing to review

and approve the Universal Cycle applications operates as set

forth in Florida Administrative Code Rule 67-48.004, and is

summarized as follows:

a. Interested developers submit applications by a

specified date.

b. Florida Housing reviews all applications to determine

if certain threshold requirements are met. A score is assigned

to each application. Applications receive points towards a

numerical score, based upon such features as programs for

tenants, amenities of the development as a whole and of tenants'

units, local government contributions to the specific

development, and local government ordinances and planning

efforts that support affordable housing in general.

c. Florida Housing has built into its scoring and ranking

process a series of "tiebreakers" to bring certainty to the

selection process. The tiebreakers are written into the

application instructions which, as indicated above, are

incorporated by reference into Florida Housing's rules.

d. After the initial review and scoring, a list of all

applications, along with their scores, is published by Florida

Housing on its website. The applicants are then given a

specific period of time to alert Florida Housing of any errors

they believe Florida Housing made in its initial review of the

applications. An appeal procedure for challenging the scores

assigned by Florida Housing is set forth in Florida

Administrative Code Rule 67-48.005.

e. Following the completion of the appeal proceedings,

Florida Housing publishes final rankings which delineate the

applications that are within the "funding range" for the various

programs. In other words, the final rankings determine which

applications are preliminarily selected for funding. The

applicants ranked in the funding range are then invited into a

"credit underwriting" process. Credit underwriting review of a

development selected for funding is governed by Florida

Administrative Code Rule 67-48.0072. In the credit underwriting

process, third party financial consultants (selected by

Respondent, but paid for by the individual applicants) determine

whether the project proposed in the application is financially

sound. The independent third party examines every aspect of the

proposed development, including the financing sources, plans and

specifications, cost analysis, zoning verification, site

control, environmental reports, construction contracts, and

engineering and architectural contracts.

f. Subsection (10) of Florida Administrative Code Rule 67-

48.0072 expressly requires that an appraisal (as defined by the

Uniform Standards of Professional Appraisal Practice), and a

market study be ordered by the Credit Underwriter, at the

applicant's expense. The Credit Underwriter is required to

consider the market study, as well as the development's

financial impact on other developments in the area previously

funded by Florida Housing, and make a recommendation to approve

or disapprove a funding allocation.

RST's Application in the 2008 Universal Cycle

12. RST timely submitted an application in the 2008

Universal Cycle seeking an award of Tax Credits and a

supplemental loan to construct a 100-unit garden style apartment

complex ("Plata Lago") in Fruitland Park, Lake County, Florida.

13. RST complied with all of the requirements of the 2008

Universal Cycle Application and Instructions, and achieved a

perfect score for its application. RST also achieved maximum

tie-breaker points. As a result, RST was allocated by Florida

Housing $1,334,333 in Tax Credits from the Universal Cycle

allocation.

14. Based on the final ranking of its application, RST was

invited into the credit underwriting process on October 6, 2008.

RST timely accepted the invitation and paid the necessary

underwriting fees.

Credit Underwriting

15. Under the credit underwriting process, a professional

credit underwriter is appointed by Florida Housing to review the

proposed project that qualified for funding as a result of the

Universal Cycle. The credit underwriter reviews and assesses

numerous financial, demographic, and market factors concerning

the proposed project. The credit underwriter selected by

Florida Housing to review the RST application was Seltzer

Management Group, Inc. ("Seltzer").

16. As required by the applicable 2008 Universal Cycle

Application requirements and rule, the credit underwriting

process required the preparation of a Market Study by an

independent appraiser. Seltzer engaged Meridian Appraisal Group

("Meridian") to perform an independent appraisal and market

study as required by the RFP. This initial Market Study was

issued with the identified purpose defined as follows:

a. Provide a site analysis for the subject property.

b. Provide regional and neighborhood analyses for the

subject property.

c. Provide an Apartment Market Overview for the subject

market area.

d. Provide an evaluation of market demand within the

competitive area for affordable rental apartment products.

e. Identify and evaluate the relevant competitive supply

of affordable apartments.

f. Perform an income band analysis for the subject

property based on achievable restricted rents.

g. Perform a Capture Rate analysis for the subject

property as a restricted property, and estimate an absorption

rate.

h. Establish rental estimates for the subject, both as a

market rate project and as restricted by the Housing Credit

program.

i. Illustrate the difference between our estimate of the

market rental rates and restricted rental rates.

j. Estimate the impact of the subject project on the

existing rental inventory.

Economic Downturn

17. By the fall of 2008, significant changes were taking

place in the economic environment and the affordable housing

market in particular. Many of the projects that had been

awarded funding through Florida Housing allocation process were

encountering difficulties and in many instances were unable to

close. By the latter part of 2008, it became evident that the

market for Tax Credits had precipitously dropped as a result of

the changed economic environment.

18. Shortly before RST was to complete the credit

underwriting process, the syndicator who had originally

expressed its intent to purchase the Tax Credits awarded to RST

announced that it would not go forward with the syndication.

This withdrawal was a direct result of the nationwide downturn

in economic conditions.

19. Many other projects that were awarded Tax Credits

during the 2007 and 2008 (and later the 2009) Universal Cycles

similarly experienced difficulty in finding syndicators to

purchase the awarded Tax Credits and were also unable to proceed

to closing.

20. In early 2009, in recognition of the collapse of the

housing market and the difficulty in marketing Tax Credits, the

federal government, as part of its economic stimulus efforts,

established mechanisms to assist in the development of

affordable housing and offset some of the economic devastation

to developers.

ARRA

21. The ARRA enacted by Congress and signed by the

President on February 17, 2009, included specific provisions

intended to address the collapse of the Tax Credit market. ARRA

gives states the ability to return to the federal government

previously awarded Tax Credits that had not been utilized.

These Tax Credits are exchanged for a cash distribution of 85

cents for each tax credit dollar returned. The money that is

awarded to the states for the return Tax Credits (the "Exchange

Funds") is to be used by Florida Housing to fund developers who

were unable to syndicate their Tax Credits due to the economic

downturn. In other words, the Tax Credits that had not been

utilized as a result of the declining economic conditions were

allowed to be converted into cash from the federal government to

be allocated to developers who were ready to proceed with their

affordable housing projects but for the inability to syndicate

their Tax Credits.

22. ARRA also included a direct allocation of funds to

state housing finance agencies under the Tax Credit Assistance

Program ("TCAP"). These funds were allocated to the states to

"resume funding of affordable rental housing projects across the

nation while stimulating job creation in the hard-hat

construction industry." TCAP is a separate program included as

part of ARRA to provide gap financing for affordable housing

projects that have been affected by the economic downturn.

The RFP

23. In response to ARRA, on July 31, 2009, Florida Housing

issued RFP 2009-04 (the "RFP"), setting forth criteria and

qualifications for developers to seek funding for affordable

housing projects from money that had been allotted by the

federal government as part of economic stimulus efforts. RST

received notice of the RFP through e-mail notification on

July 31, 2009. The RFP required applicants to submit proposals

to Florida Housing by no later than 2:00 p.m. on August 14,

2009.

24. The RFP solicits proposals from applicants with an

"Active Award" of Tax Credits who were unable to close and are

seeking alternate funding to construct affordable housing

utilizing Exchange Funds from the Tax Credit Exchange Program

authorized under Section 1602 of ARRA.

25. The RFP provides a general description of the type of

projects that will be considered eligible for this alternate

funding. The RFP also sets forth eligibility criteria that are

a precondition to award of an allocation of Exchange Funds, and

also specifies that projects allocated Exchange Funds and also

specifies that projects allocated Exchange Funds will be

required to meet new credit underwriting standards.

Occupancy Standards

26. Section 5B.1b. of the RFP states that a tentative

funding award under the RFP will be rescinded "if the submarket

of the Proposed Development does not have an average occupancy

rate of 92% or greater for the same Demographic population, as

determined by a market study ordered by the Credit Underwriter,

and analyzed by the Credit Underwriter and Florida Housing

staff, as well as approved by the Board." The RFP does not

define "submarket." Likewise, there was no definition of

"submarket" in the rules which governed the 2008 or 2009

Universal Cycle. The word "submarket" is included in the 2009

Universal Cycle Rule, but it is not defined.

27. RST timely submitted a response to the RFP on

August 14, 2009, which sought additional funding for the Plata

Lago project. On August 20, 2009, Florida Housing issued a

Notice of Awards for RFP #2009-04. Based on the Notice, RST was

one of the responders awarded funds subject to successfully

completing the underwriting criteria listed in the RFP.

Accordingly, RST was once again invited into credit

underwriting. By accepting the invitation, RST was required by

the credit underwriter to update its Market Study ("2009

Study"). This Second Market Study, which was completed

approximately eight months after the 2008 study, was also

prepared by Meridian on July 14, 2009. Likewise, Seltzer was

the assigned underwriter.

28. On September 9, 2009, Seltzer issued a letter to

Florida Housing concerning the Plata Lago project. In essence,

Seltzer in the letter considered the 2009 Market Study and

concluded that "the submarket average occupancy rate for the

subject does not meet the minimum requirement of 92%."

29. On October 23, 2009, Florida Housing's Board of

Directors considered Seltzer's letter and a staff recommendation

and voted to rescind funding to RST because of the alleged

failure to satisfy the 92 percent occupancy requirement. This

action effectively stopped the underwriting process.

30. While RST timely filed its petition with the Division,

it also intervened in a challenge to the provisions of the RFP.

The challenge specifically involved a review of the 92 percent

occupancy standard. In that matter, Elmwood Terrace Ltd. P'ship

v. Fla. Hous. Fin. Corp. , Case No. 09-4682BID, 2009 Fla. Div.

Adm. Hear. Lexis 816 (Final Order entered December 7, 2009), the

administrative law judge entered a Recommended Order on

November 12, 2009, holding that the provision of the RFP which

required a 92 percent occupancy rate is contrary to Florida

Housing's governing statutes and rules. The administrative law

judge concluded that Florida Housing is limited to using the

90 percent occupancy test established at Florida Administrative

Code Rule 67-48.0072(10).

31. Florida Housing issued its Final Order in the Elmwood

case on December 7, 2009, adopting the administrative law

judge's Recommended Order. Based upon the Final Order in

Elmwood , Florida Housing has reevaluated the RST Market Study

under the provisions of the 2009 Universal Cycle Rule which

established a 90 percent occupancy test. Florida Housing has

now concluded that RST's Market Study indicates an 87 percent

occupancy rate. Accordingly, Florida Housing has not changed

its previous position and refuses to allow Petitioner to move

forward in the underwriting process.

Unstipulated Findings of Fact

32. Two market studies were commissioned by Florida

Housing and Seltzer regarding the proposed Plata Lago

development, the first in November 2008 and the second in

July 2009.

33. Both the First and Second Market Studies were

performed by Meridian Appraisal Group and Robert Von, a state-

certified general appraiser.

34. While purported to be a new stand-alone study, the

Second Market Study is identical in many respects to the First

Market Study. However, the First Market Study predated the

requirement of the occupancy test in Florida Administrative Code

Rule 67-48.0072(10), while the Second Market Study included the

90 percent occupancy test analysis. In each of the two studies,

a circle is drawn extending out 10 miles from the proposed

location of the Plata Lago development. That circle represents

the primary market area ("PMA") which includes Fruitland Park,

Lady Lake, and Leesburg. The PMA is where generally two-thirds

to three-quarters of the demand for a facility originates.

35. In the Second Market Study, when the occupancy rate of

the three existing senior apartment developments within the PMA

is considered, the threshold requirement of 90 percent is met.

If the PMA alone were considered, Florida Housing would not have

rescinded the Tax Credits, and Petitioner would be entitled to

move forward with its project.

36. The Second Market Study, performed in 2009, added an

additional factor to the analysis. The concept of a Competitive

Market Area ("CMA") was introduced. A CMA was not designated in

the 2008 Market Study.

37. CMA is neither defined in the 2009 Universal Cycle

Rule or RFP 2009-04. The delineation of a CMA was not a

requirement of the RFP, nor was it otherwise requested by

Florida Housing.

38. CMA is not a term defined in either the development or

market analysis industries. The term appears to have been

created or borrowed by Florida Housing's designated market

analyst based upon his experience as a certified appraiser.

39. Unlike the PMA, the CMA was not mapped or otherwise

designated in the Second Market Study. However, both the First

and Second Market Studies included information regarding a

development known as Lake Point Senior Village ("Lake Point").

40. Both Plata Lago and Lake Point are affordable housing

developments targeted at the elderly demographic category.

41. Lake Point is not in the PMA of the proposed Plata

Lago development as PMA is defined in the Second Market Study.

42. The PMA as defined in the Second Market Study is a

predetermined geographic area used for purposes of demographic

analysis, but not for competitive analysis. A set unmovable

circle on a map could lead to skewed or absurd results if the

nature and character of the developments within and without the

circle are not considered by the appraiser.

43. Lake Point is an elderly affordable housing

development located 13 miles from the proposed location of Plata

Lago. It is located in Tavares which is outside the 10-mile

radius from the proposed development and is past two lakes that

separate Tavares from those developments contained within the

PMA.

44. The analysis by Florida Housing's expert was that an

individual moving into the Lake County area would look for

elderly housing developments in close proximity to his or her

work, shopping, health care, and other amenities they deemed

important. The tenant does not necessarily look to see if other

elderly housing developments are nearby. This is especially

true when only four elderly developments are located in the

county.

45. Plata Lago and Lake Point are similar to each other,

both serve the elderly demographic category, and each would

compete with the other for residents if the Plata Lago

development were built.

46. It was appropriate for the Second Market Study to

include Lake Point in its analysis of occupancy data for the

purpose of determining whether Plata Lago passed the test set

forth in the rule requiring a 90 percent occupancy rate in its

applicable submarket.

47. To address the requirement of the rule regarding

occupancy rates for the submarket of the Plata Lago development,

it was necessary for Florida Housing's consultant to determine

what developments would compete with the proposed project. To

do a competitive analysis, it is necessary for the consultant to

move beyond the fixed PMA to a study of the market as real

people in the real world look at it.

48. In the Second Market Study, the term CMA is used to

describe the "submarket" as it applies to the occupancy test of

the rule, as well as to distinguish this area from the PMA and

from other incidental uses of the term "submarket."

49. Florida Housing's consultant investigated all the

comparable properties and interviewed the manager of Lake Point

about where the competition lay. The manager mentioned a

property around the corner from the proposed Plata Lago (Silver

Pointe) as a competitor which led the consultant to expand the

CMA to include Lake Point. The manager at Silver Pointe named

Lake Point as part of its competition.

50. Florida Housing's appraiser considers the submarket to

be where a project's competitive property is located. In this

case, the submarket or competitive market is larger than the

PMA.

51. Lake Point suffered a drop in its occupancy between

the First and Second Market Studies. This was most likely

attributable to the nature of elderly developments. Elderly

residents tend to expire or suffer health issues that cause them

to move to facilities providing health care or assisted living

services.

52. On October 23, 2009, Florida Housing's Board of

Directors met and considered the market study letter prepared by

Seltzer along with its finding that the Plata Lago development

did not pass the required occupancy test of 90 percent set forth

in the rule. Based upon the occupancy rate being only 87

percent, as well as the results of the market study and credit

underwriter recommendations, the Board voted to rescind Florida

Housing's commitment to fund the Plata Lago development.

CONCLUSIONS OF LAW

53. The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to this

proceeding. §§ 120.569 and 120.57(1), Fla. Stat.

54. Petitioner challenges an action of the Florida Housing

Finance Corporation, a public instrumentality and agency of the

State of Florida pursuant to Section 120.52 and Subsection

420.504(2), Florida Statutes.

55. Petitioner has the burden of going forward with the

evidence as well as the ultimate burden of establishing the

basis for their claim, The Envtlust v. Dep't of Envtl.

Prot. , 714 So. 2d 493, 497 (Fla. 1st DCA 1998), and therefore

must demonstrate the impropriety of Florida Housing's actions.

56. Since this case involves an agency interpretation of a

rule, Petitioner's burden is to show that Florida Housing's

interpretation of the term "submarket" in the rule is clearly

erroneous, and not simply that alternative interpretations of

the rule exist. Golfcrest Nursing Home v. Agency for Health

Care Admin. , 662 So. 2d 1330 (Fla. 1st DCA 1995).

57. Florida courts generally defer to an agency's

interpretation of its own rules and the statutes that it

administers. See D.A.B. Constructors, Inc. v. State Dep't of

Transp. , 656 So. 2d 940, 944 (Fla. 1st DCA 1995); Humana, Inc.

v. Dep't of Health and Rehab. Servs. , 492 So. 2d 388, 392 (Fla.

4th DCA 1986) (an agency's interpretation of its own rule is

entitled to great weight and persuasive force). This deference

is given to the interpretation of, and meanings assigned to,

such rules and statutes by the officials charged with their

administration. Pan Am. Airways, Inc. v. Fla. Public Serv.

Comm'n , 427 So. 2d 716, 719 (Fla. 1983).

58. However, "[w]hen the agency's construction clearly

contradicts the unambiguous language of the rule, the

construction is clearly erroneous and cannot stand." Woodley v.

Dep't of Health and Rehab. Servs. , 505 So. 2d 676, 678 (Fla. 1st

DCA 1987); see also Legal Envtl. Assistance Found. v. Bd. of

County Comm'rs of Brevard County , 642 So. 2d 1081, 1083-84 (Fla.

1994) ("unreasonable interpretation" will not be sustained).

59. Petitioner's central argument is that the Lake Point

Senior Housing development should not have been included in

Florida Housing's analysis of occupancy rates for the purposes

of Florida Administrative Code Rule 67-48.0072(10), which

states, in pertinent part: "For the Credit Underwriter to make a

favorable recommendation, the submarket of the proposed

Development must have an average occupancy of 90 percent or

greater." As testified to by Florida Housing's market analyst

and set forth in his Second Market Study, determining the

submarket in this context logically requires an analysis of what

existing developments would compete with a proposed development.

Petitioner's market analysis expert agrees that if Lake Point

Senior Village would compete with Plata Lago, it would be

appropriate to include it in such an analysis. Conversely, he

could not state it was inappropriate not to include it.

60. In support of its argument, RST relies upon a finding

of fact from a previous case in which RST intervened, Elmwood

Terrace Ltd. P'ship v. Fla. Hous. Fin. Corp. , Case No. 09-4682,

2009 Fla. Div. Adm. Hear. Lexis 816 (Final Order Dec. 7, 2009),

specifically referring to a single sentence found in

paragraph 45 of the Recommended Order which states "'Submarket'

and 'primary market area' are synonymous terms." Petitioner

argues that this single sentence within this finding of fact is

controlling in this case, meaning that in all circumstances

"submarket" means "primary market area."

61. First, this argument fails because this sentence is

found in a finding of fact specific to the Elmwood case. Since

the statement is not a conclusion of law, it does not constitute

an agency interpretation of a rule as formulated in a de novo

proceeding under Subsection 120.57(1), Florida Statutes. The

only conclusion of law made in the Recommended Order concerning

the term "submarket" is found in paragraph 67, in pertinent

part:

Florida Administrative Code Chapter 67-48

uses, but does not define, the term

"submarket." Elmwood has not established

that the lack of criteria for determining a

submarket in the market study is arbitrary,

capricious, clearly erroneous, or contrary

to competition. The market studies are site

specific, and the results of the market

study can be challenged.

Unless the conclusion is made that the Recommended Order

contradicts itself in simultaneously stating that "submarket"

always means "primary market area" while stating that it is

permissible for Florida Housing to define it as primary market

area (or anything else) in the rule, the only logical conclusion

to be made is that the sentence in paragraph 45 of the

Recommended Order is a finding of fact specific to the market

study conducted for the Elmwood Terrace development, and not a

statement of what the rule means generally.

62. The second reason this argument fails is that when

stating the two terms are synonymous, the Recommended Order does

not state that they are exclusively so or always so.

"Submarket" may be synonymous with "primary market area" in some

factual circumstances, but may be synonymous with other terms in

other factual circumstances. The Elmwood Recommended Order

itself points to this conclusion when it states at paragraph 45

that "determining a submarket or primary area market [ sic ] is

very subjective; even two adjacent sites may have different

submarkets."

63. Finding these terms synonymous in all circumstances

contradicts testimony from both parties in this case. Credible

testimony from Florida Housing's market analyst and credit

underwriter demonstrates that "submarket," for purposes of

applying the occupancy test of the rule, cannot be based on a

predetermined geographic area in order to avoid absurd or

incorrect results. RST's expert agrees that primary market area

is a predetermined geographic area, and further agrees that

"submarket" and "primary market area" can, in some

circumstances, mean different things. "Primary market area" and

"submarket" cannot be synonymous in all circumstances if

"primary market area" is a predefined geographic area and, as

found above, developments adjacent to each other can also be in

different submarkets.

64. This conclusion is further supported by the fact that

within the Second Market Study itself, information from a third

party uses the term "submarket" in a way that does not match the

definition of "primary market area," thus creating the necessity

to distinguish the term from how the market analyst used it for

purposes of the rule. Here, Florida Housing's analyst used the

term "competitive market area" to clarify this distinction. The

fact that Petitioner's market analyst used the term differently

does not prove that Florida Housing used the term arbitrarily or

capriciously.

65. Petitioner's argument that "submarket" and "primary

market area" are synonymous in all circumstances is not

supported by the language of the Florida Administrative Code

Rule 67-48.0072(10). The Rule does not use the terms

interchangeably, but uses them separately and for differing

purposes within its text. The last three sentences of the Rule

read:

The Credit Underwriter must review and

determine whether there will be a negative

impact to Guarantee Fund Developments within

the primary service area or five (5) miles

of the proposed Development, whichever is

greater. The Credit Underwriter shall also

review the appraisal and other market

documentation to determine if the market

exists to support both the demographic and

income restriction set-asides committed to

within the Application. For the Credit

Underwriter to make a favorable

recommendation, the submarket of the

proposed Development must have an average

occupancy rate of 90 percent or greater.

The term "primary market area" that appears in the first

sentence above does not appear elsewhere in the section, and

specifically refers to Guarantee Fund Developments. The term

does not refer to the occupancy test. The term "submarket"

appears in the last sentence of the section quoted above and

likewise does not appear elsewhere in the section. This term

refers specifically to the occupancy test. If Florida Housing

meant for these terms to be used synonymously in all

circumstances, it would have used them synonymously in the Rule.

As it expressly did not, the rule of statutory interpretation

expressio unius est exclusivo alterius ("the inclusion of one is

the exclusion of the other") mandates that the difference in the

purposes for which the two terms are used must be respected.

When a term is used in one section of a statute (or, as here, a

rule), but is omitted in another section of the same statute (or

rule), the courts will not imply it where it has been excluded.

Avila v. Miami-Dade County , 29 So. 3d 301 (Fla. 3d DCA 2010).

Moreover, the principle of statutory construction expressum

facit cessare tacitum ("what is expressed renders what is

implied silent") means that the use of the express term

precludes the implication that the two terms are synonymous or

implied to be construed as such.

66. In another recent case at the Division, Vestcor Fund

XII, Ltd. V. Fla. Hous. Fin. Corp. , DOAH Case No. 09-0366 (Final

Order July 24, 2009), an existing development known as Madalyn

Landing protested the funding and construction of a proposed new

development, Malabar Cove, on the grounds that the existing

development would suffer a negative impact by competition within

the same "sub-market." The administrative law judge found that

Florida Housing's Board of Directors did not act unreasonably or

inappropriately in approving the Malabar Cove development, where

Florida Housing, its Board, and agents complied with the

applicable rules and requirements therein, and where the Board

relied on a commissioned market study and recommendation from

its credit underwriter, even when it was established that

Madalyn Landing would suffer an adverse impact. The

administrative law judge found that the Board did not act

arbitrarily, capriciously, or inappropriately or otherwise abuse

its discretion by reaching a decision based upon that

information. While the holding in the Vestcor XII case was

different from this case, the principle is the same: Florida

Housing's Board may rely on the findings of its professional

analysts or credit underwriters so long as those findings are

not clearly erroneous.

67. Florida Housing's reliance on the occupancy rate

derived from the competitive market area was neither arbitrary,

capricious, nor anti-competitive. Moreover, its findings in

this case have not been proven to be clearly erroneous.

Unfortunately, the result of Florida Housing's rescission of

Petitioner's application from credit underwriting is a harsh

result in this case. Petitioner will lose its Tax Credits of

$1,334,333 from the 2008 Universal Cycle. Moreover, RST has

most certainly expended great sums to bring its project to this

point. However, the harshness of the result cannot be a

consideration when Petitioner is unable to prove that Florida

Housing abused its discretion by relying on the professional

opinions of its market analyst and credit underwriter. Based

upon the evidence and facts of this case, the only conclusion

that can be made is that Florida Housing's decision to rescind

RST's funding commitment for failure to meet the occupancy

standard was appropriate.

RECOMMENDATION

Based upon the Findings of Fact and Conclusions of Law,

it is

RECOMMENDED that the Florida Housing Finance Corporation

enter a final order rescinding funding to the Plata Lago

development for failing to pass the occupancy standard set forth

in Florida Administrative Code Chapter 67-48.

DONE AND ENTERED this 9th day of June, 2010, in

Tallahassee, Leon County, Florida.

S

ROBERT S. COHEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of June, 2010.

COPIES FURNISHED :

Wellington H. Meffert, II, General Counsel

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301-1329

Michael P. Donaldson, Esquire

Carlton Fields, P.A.

215 South Monroe Street, Suite 500

Post Office Drawer 190

Tallahassee, Florida 32302-0190

Hugh R. Brown, Esquire

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301-1329

Della Harrell, Corporation Clerk

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301-1329

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

5 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.