98-003441RX Lakewood Senior Apartments Limited Partnership vs. Florida Housing Finance Corporation
 Status: Closed
DOAH Final Order on Thursday, January 7, 1999.

View Dockets  
Summary: Rule imposing 15 percent penalty for errors on application for affordable housing not an invalid exercise or delegated legislative authority. Rule properly applied to Petitioner.






16Petitioner, )


19vs. ) Case Nos. 98-3441RX

24) 98-3873




33Respondent, )


36and )







58Intervenors. )



63A formal hearing was held in these cases before Larry J.

74Sartin, a duly designated Administrative Law Judge of the

83Division of Administrative Hearings, on October 12, 13, and 23,

931998, in Tallahassee, Florida.


98For Petitioner: James C. Hauser, Esquire

104Warren H. Husband, Esquire

108Skelding, Labasky, Corry, Hauser,

112Joll y & Metz, P.A.

117Post Office Box 669

121Tallahassee, Florida 32302

124For Respondent: Michael J. Glazer, Esquire

130Stephanie W. Redfearn, Esquire

134Ausley & McMullen

137227 South Calhoun Street

141Tallahassee, Florida 32301


145Stephen M. Donelan, Esquire

149Florida Housing Finance Corporation

153227 North Bronough Street, Suite 5000

159Tallahassee, Florida 32301-1329

162For Intervenors: J. Stephen Menton, Esquire

168Rutledge, Ecenia, Underwood,

171Purnell & Hoffman, P.A.

175215 South Monroe Street, Suite 420

181Post Office Box 551

185Tallahassee, Florida 32302


192The issue in Case No. 98- 3441RX is whether a 15 percent

204penalty provision of the Florida Housing Finance Corporation's

2121998 Application Package for Low Income Housing Tax Credits,

221adopted and incorporated into the Florida Administrative Code, by

230reference pursuant to Rules 67-48.002(10) and 67-48.004(1),

237Florida Administrative Code, constitutes an invalid exercise of

245delegated legislative authority.

248The issue in Case No. 98-3873 is whether Respondent

257appropriately applied the 15 percent penalty to Petitioner on its

2671998 Application for Low Income Housing Tax Credits.


277On or about March 10, 1998, Petitioner submitted an

286application for 1998 Low Income Housing Tax Credits with

295Respondent. Petitioner requested tax credits of 1.1 million

303dollars to help finance a 150-unit apartment complex in Orange

313County, Florida. On or about May 13, 1998, Respondent notified

323Petitioner of its score. Petitioner learned that its score for

333Form 4 of its application had been subjected to a penalty of 22.5

346points. This penalty resulted from the imposition of a 15

356percent penalty for an error on Form 4 of Petitioner's


367On or about June 15, 1998, Petitioner filed a Petition for

378Informal Administrative Hearing with Respondent to contest the

386imposition of the 22.5 point penalty. On or about July 13, 1998,

398a second Petition for Informal Administrative Hearing was filed

407with Respondent challenging the rejection of its application. On

416or about July 28, 1998, Petitioner filed a Motion to Transfer

427Proceedings to the Division of Administrative Hearings with


436By letter dated August 31, 1998, Respondent filed the two

446petitions and the motion to transfer with the Division of

456Administrative Hearings and requested the assignment of an

464Administrative Law Judge to conduct formal proceedings. The

472petitions were designated Case No. 98-3873. The case was

481assigned to Administrative Law Judge Mary W. Clark.

489A related case, Oaks Trail Associates, Ltd. vs. Florida

498Housing Finance Corporation , DOAH Case No. 98-3874, was filed

507simultaneously with Case No. 98-3873. The Oaks Trail Associates,

516Ltd. (hereinafter referred to as "Oaks Trail") case was also

527assigned to Judge Clark.

531On July 28, 1998, Petitioner and Oaks Trail filed a Petition

542to Determine Invalidity of Existing Rules, alleging that the 15

552percent penalty provision of Respondent's 1998 Application

559Package for Low Income Housing Tax Credits, adopted and

568incorporated into the Florida Administrative Code, by reference

576pursuant to Rules 67-48.002(10) and 67-48.004(1), Florida

583Administrative Code, constitutes an invalid exercise of delegated

591legislative authority.

593Petitioner simultaneously filed a second Petition to

600Determine Invalidity of Existing Rules alleging that provisions

608of Respondent's 1998 Application Package for Low Income Housing

617Tax Credits, adopted and incorporated into the Florida

625Administrative Code, by reference pursuant to Rules 67-48.002(10)

633and 67-48.004(1), Florida Administrative Code, to the extent

641relied upon by Respondent to reject Petitioner's application for

"650altering" the application constituted an invalid exercise of

658delegated legislative authority.

661The rule challenge petition filed by Petitioner and Oaks

670Trail was designated Case No. 98- 3441RX. The rule challenge

680petition filed solely by Petitioner was designated Case No. 98-

6903442RX. Both cases were assigned to the undersigned by Orders of

701Assignment entered July 30, 1998.

706On August 14, 1998, Case Nos. 98- 3441RX and 98-3442RX were

717consolidated and scheduled for a September 28 and 29, 1998,

727hearing. On September 17, 1998, an order consolidating Case Nos.

73798- 3441RX, 98- 3442RX, 98-3873, and 98-3874 was entered without

747objection. By the same order, the formal hearing was rescheduled

757for October 12 and 13, 1998.

763On September 17, 1998, Petitions to Intervene filed by LCA

773Development, Inc., The Gatehouse Group, Inc., Vestcor Equities,

781Inc., and the Wilson Company in the four consolidated cases were


793On September 17, 1998, Oaks Trail filed a Notice of

803Dismissal in Case No. 98-3874. Oaks Trail also filed a Notice of

815Withdrawal from Case No. 98- 3441RX. By order entered September

82523, 1998, Case No. 98-3874 was closed and Oaks Trail was

836dismissed from Case No. 98- 3441RX.

842On October 5, 1998, Petitioner filed a Notice of Partial

852Dismissal Regarding DOAH Case No. 98-3873 and a Notice of

862Dismissal of Case No. 98- 3442RX. Based upon a Stipulation

872entered into by the parties and attached to the notices,

882Petitioner voluntarily dismissed those portions of its challenge

890in Case No. 98-3873 to the rejection by Respondent of its

901application for an "alteration" of its application and all of

911Case No. 98- 3442RX. By order entered October 8, 1998, Case No.

92398- 3442RX was closed and it was acknowledged that portions of

934Case No. 98-3873 had been dismissed by Petitioner.

942Prior to the formal hearing of the remaining cases, Case No.

95398- 3441RX and Case No. 98-3873, the parties filed a Joint

964Prehearing Stipulation. The parties stipulated to the issues

972which remained to be decided and certain facts, which have been

983included in this Final Order to the extent determined relevant.

993The parties also agreed that Case No. 98-3873 should be conducted

1004as a Summary Hearing pursuant to Section 120.574, Florida


1014At the final hearing Petitioner presented the testimony of

1023Gwen Lightfoot, Angeliki Sellers, Edward S. Ryan, and Don Paxton.

1033Petitioner's Exhibits 1-8, 10, 12-16, 18, 20-25, 27-30, 35-54,

104257-58, and 62-69 were accepted into evidence. Petitioner's

1050Exhibits 17 and 19 were marked for identification, but withdrawn.

1060Petitioner's Exhibit 55 was marked and offered into evidence, but

1070was rejected. Petitioner's exhibits 6-8, 13-15, 24-25, 28-30,

107835-54, 57, 62-63, and 67-69 were accepted into evidence only to

1089the extent ultimately determined relevant to this proceeding.

1097Respondent presented the testimony of Ms. Lightfoot and Ms.

1106Sellers. Respondent's Exhibits 1-11 were accepted into evidence.

1114Intervenors called no witnesses and offered no exhibits.

1122Official recognition of Part V, Chapter 420, Florida

1130Statutes, was taken.

1133The transcript of the formal hearing was filed on

1142November 9, 1998. Proposed orders were, therefore, required to

1151be filed on or before November 19, 1998. Petitioner filed a

1162proposed order on November 19, 1998. Respondent and Intervenors

1171jointly filed a proposed order on November 19, 1998. Those

1181proposed orders have been fully considered in entering this Final



1195A. The Parties .

11991. Petitioner, Lakewood Senior Apartments Limited

1205Partnership (hereinafter referred to as "Lakewood"), was an

1214applicant for 1998 Low Income Housing Tax Credit funding.

12232. Respondent, the Florida Housing Finance Corporation

1230(hereinafter referred to as "FHFC"), has been designated by the

1241State of Florida to administer a Low Income Housing Tax Credit

1252Program. Section 420.5099, Florida Statutes. FHFC is governed

1260by a nine-member board (hereinafter referred to as the "Board").

1271The members of the Board are appointed by the Governor.

12813. Intervenors, LCA Development, Inc. (hereinafter referred

1288to as " LCA"), The Gatehouse Group, Inc. (hereinafter referred to

1299as "Gatehouse"), Vestcor Equities, Inc. (hereinafter referred to

1308as " Vestcor"), and The Wilson Company (hereinafter referred to as

"1319Wilson"), were all applicants for 1998 Low Income Housing Tax

1330Credit funding.

1332B. The Low Income Housing Tax Credit Program .

13414. To encourage the development of low-income housing for

1350families, Section 42 of the Internal Revenue Code of 1986,

1360creates federal income tax credits that are allocated to each of

1371the states for award through state-administered programs to

1379developers of rental housing for low-income and very low-income

1388families. Tax credits allocated to developers through the

1396program may be sold by the developer to generate a substantial

1407portion of the funding necessary for construction of low-income

1416housing projects.

14185. The program has been in existence in Florida since 1987.

1429Since its inception, in excess of 43,000 affordable housing units

1440have been produced in Florida through the program.

14486. Every year each state receives an annual allotment of

1458tax credits. Generally, Florida's annual allotment of tax

1466credits is apportioned among three county groupings based on

1475population: large counties, medium counties, and small counties.

1483Applicants compete for the tax credits allocated to a group based

1494upon which county an applicant's proposed housing is to be

1504located in.

15067. Section 420.5099, Florida Statutes, establishes FHFC's

1513responsibility for the allocation of Florida's share of tax


1523The corporation shall adopt allocation procedures

1529that will ensure the maximum use of available tax

1538credits in order to encourage development of low-

1546income housing in the state, taking into

1553consideration the timeliness of the application,

1559the location of the proposed housing project, the

1567relative need in the area for low-income housing

1575and the availability of such housing, the

1582economic feasibility of the project, and the

1589ability of the applicant to proceed to completion

1597of the project in the calendar year for which the

1607credit is sought.

16108. Section 42 of the Internal Revenue Code of 1986,

1620requires that each state ensure that the minimum amount of tax

1631credits necessary for an applicant to implement a proposed

1640project are awarded in order to ensure the maximum use of a

1652state's available credits. How tax credits are allocated is

1661required to be reviewed at three distinct phases in order to

1672carry out this goal: the first phase is the initial

1682application/allocation phase; the second phase is a credit

1690underwriting carryover stage; and the last phase is a final cost

1701certification stage.

17039. Section 42 of the Internal Revenue Code of 1986,

1713requires that each state establish a qualified allocation plan

1722(hereinafter referred to as the "Allocation Plan") establishing

1731the procedures to be followed in awarding low income tax credits

1742allocated to the state. Consistent with this requirement, FHFC

1751has adopted an Allocation Plan for Florida through the adoption

1761of Chapter 67-48, Florida Administrative Code.

176710. The Allocation Plan establishes a competitive

1774application process intended to carry out the first stage

1783required by the Internal Revenue Code.

178911. The actual application (hereinafter referred to as the

"1798Application") used to carry out the first stage of the

1809allocation process provided for in the Application Plan is

1818revised by FHFC on an annual basis. The Application is adopted

1829as part of an Application Package, which includes the

1838Application, tabs, and instructions thereto adopted by FHFC. The

1847Application Package is amended each year to refine and clarify

1857the Application Package, and to implement any new directives from

1867the Board. Once revised, the Application Package is adopted by


187812. Once the annual Application Package is adopted and an

1888annual application cycle opens, the adopted Application Package

1896is made available to interested persons for completion and

1905submission to FHFC. Completed Applications received by FHFC are

1914evaluated and scored pursuant to the Application Package,

1922projects are ranked within their respective county groupings, and

1931the highest ranked projects are invited to participate in the

1941second stage of the allocation process, credit underwriting.

194913. Once an applicant completes credit underwriting and

1957receives a Preliminary Allocation Certification indicating the

1964amount of tax credits preliminarily allocated to the project, the

1974applicant may proceed to construct the project. Once the project

1984is completed, the applicant enters the final phase of the

1994process, the Final Cost Certification phase.

200014. The Internal Revenue Code requires that all credits

2009allocated to a state for a particular year must be allocated by

2021December 31 of that year. Any credits not allocated go into a

2033national pool consisting of all credits not used by December 31.

2044All states that use all their credits by December 31 are then

2056eligible to share in the credits available in the national pool.

2067FHFC makes every effort to ensure that it allocates all of

2078Florida's allocated credits so that the State may participate in

2088the national pool.

2091C. The Application Process .

209615. Prior to each application cycle, FHFC revised its

2105previous year's Application Package and adopts an Application

2113Package for the upcoming year by rule.

212016. After adopting the Application Package by rule, FHFC

2129opens the cycle and makes the Application Package available.

213817. All Applications are required to be fully completed and

2148filed by a date certain specified in the rules. Information

2158contained in the Application is required to be certified true and

2169accurate by the applicant.

217318. All submitted Applications are evaluated and scored by

2182a Review Committee pursuant to the procedures established in the

2192rules. See Rule 67-48.004, Florida Administrative Code.

219919. In 1998, the Review Committee was a committee of eight

2210persons designated by the rules to organize the scoring of all

2221applications. The Review Committee was made up of seven members

2231of the staff of FHFC appointed to by the Board and one member of

2245the staff of the Department of Community Affairs. Rule 67-

225548.002(80), Florida Administrative Code.

225920. Following the notification of preliminary scores,

2266applicants are given a week to review the scores of all

2277applicants. See Rule 67-48.005, Florida Administrative Code.

2284Once notified of the preliminary scores, applicants have the

2293right to file a written Notification of Possible Scoring Error

2303(hereinafter referred to as a " NOPSE"). A NOPSE could be filed

2315to point out a possible scoring error on the applicant's score or

2327on any other applicants' score.

233221. All NOPSE's filed during the 1998 cycle were reviewed

2342by FHFC to determine if any modification in an applicant's score

2353should be made.

235622. Following the resolution of all NOPSE's, the

2364preliminary scores of all applicants are reviewed by the Board.

2374After the Board's review and approval of the preliminary scores

2384and the ranking of applicants, notice of intended funding is

2394provided to each applicant.

239823. Following approval of preliminary scores by the Board,

2407applicants are given a second opportunity to challenge their

2416preliminary score or the preliminary score of any other applicant

2426by filing a Direct or Competitive Appeal. See Rule 67-48.005,

2436Florida Administrative Code.

243924. No authority for re-scoring any Application, other than

2448as the result of the filing of a NOPSE or a Direct or Competitive

2462Appeal, was authorized for the 1998 cycle pursuant to Chapter 67-

247348, Florida Administrative Code.

247725. Following the resolution of all Direct or Competitive

2486Appeals, the Board approves the final scores awarded to each

2496Application by final order of the FHFC.

250326. Final scores are ranked by county grouping and a

"2513funding line" is determined. The funding line is the point on

2524the ranking sheet for each county group which represents the cut-

2535off between those applicants that will be funded and those that

2546will not. Applicants ranked above the funding line are given the

2557opportunity to advance to the next two phases of the process

2568required for them to receive funds. See Rule 67-48.026, Florida

2578Administrative Code. For example, for the large county group,

2587the amount of tax credits requested by the highest ranked

2597applicant is deducted from the total tax credits available for

2607the large county group. The amount of tax credits sought by the

2619next highest ranked applicant is then deducted from the remaining

2629tax credits. This process is followed until all the tax credits

2640available for the large county group are allocated.

2648D. The Credit Underwriting Phase .

265427. Those applicants to whom tax credits are tentatively

2663allocated during the application process are next invited to

"2672credit underwriting." Rule 67-48.026, Florida Administrative


267928. A "credit underwriter" is defined in Rule 67-

268848.002(25), Florida Administrative Code, as follows:

2694(25) "Credit Underwriter" means the legal

2700representative under contract with [FHFC] having

2706the responsibility for providing stated credit

2712underwriting services. Such services shall

2717include, but not be limited to, reviewing the

2725financial feasibility and viability of Projects

2731and proposing to the Corporation the amount of a

2740SAIL or HOME loan and/or the amount of Tax Credit

2750needed, if any.

2753The credit underwriter provides a comprehensive analysis of the

2762preliminarily approved Applications, the applicant, the real

2769estate market, the development economics, and the project's

2777ability to proceed.

278029. The credit underwriter verifies the accuracy of

2788information contained in the Application, confirms that the

2796Application complies with applicable statutory and rule

2803requirements of the FHFC, and determines whether the project is

2813financially feasible as presented.

281730. Although Applications are required by the rules to be

2827reviewed on their face, during the credit underwriting phase the

2837credit underwriter is allowed to look at pertinent information

2846not contained within the submitted Application. The credit

2854underwriter verifies the accuracy and reasonableness of the

2862information provided in an Application. The credit underwriter

2870looks at the availability of financing, the structure of the

2880proposal, and the estimated total project cost.

288731. The credit underwriter may adjust the financial

2895projections set forth in the Application. Historically, the

2903credit underwriter typically increases project costs.

290932. Ultimately, the credit underwriter recommends a

2916preliminary allocation of tax credits to each applicant above the

2926funding line. The amount of tax credits recommended may differ

2936from that requested by the applicant. The amount initially

2945requested by the applicant, however, cannot be exceeded. The

2954applicant is limited to the lower of the amount applied for, the

2966lowest amount needed for financial viability, or the qualified

2975basis calculation amount.

297833. FHFC may accept, modify, or reject the credit

2987underwriter's recommendations. Rule 67-48.026(10), Florida

2992Administrative Code.

299434. Applicants successfully completing the credit

3000underwriting phase are issued a Preliminary Allocation

3007Certification which indicates the amount of tax credits

3015preliminarily allocated to the project.

3020E. The Final Cost Certification Phase .

302735. Construction of the project typically takes two to

3036three years from the submittal of the Application.

304436. If a project cannot be completed by the end of the

3056calendar year, the applicant must enter into a Carryover

3065Agreement. Pursuant to this agreement, FHFC promises to allocate

3074a "not to exceed" amount of tax credits to the project if it is

3088completed within two years in accordance with the Carryover


309837. Once the project is completed, the applicant is

3107required to submit a Final Cost Certification. The Final Cost

3117Certification details the actual costs incurred in completing the

3126project, verified by an independent certified public accountant.

3134Prior to 1998, the Final Cost Certification had to be certified

3145by a credit underwriter.

314938. One purpose for the Final Cost Certification is to

3159ensure that actual costs are consistent with, and do not exceed,

3170those allowed by federal and state requirements.

317739. The applicant is issued an IRS Form 8609 which

3187establishes the amount of tax credits allocated to the applicant.

3197The amount of tax credits allocated after the Final Cost

3207Certification may be less than the originally approved tax

3216credits for the project.

3220F. The 1998 Application Package; Project Funding & Economic

3229Viability (Project Cost Pro Forma), Form 4 .

323740. Effective January 6, 1998, FHFC adopted by reference in

3247its rules the 1998 Application Package, "Form CAP98." Rules 67-

325748.002(10) and 67-48.004(1), Florida Administrative Code.

326341. The adoption of the 1998 Application Package and the

3273allocation of tax credits through the application phase was

3282consistent with the description of the application process,

3290supra .

329242. Among the forms required to be submitted as part of the

33041998 Application was Form 4, "Project Funding & Economic

3313Viability (Project Cost Pro Forma)."

331843. The purpose of Form 4 is to ensure that an applicant

3330had firm commitments for funding from financially capable sources

3339sufficient to cover the costs of the project which would not be

3351covered by tax credits.

335544. A total of 150 points were available for the

3365information on Form 4. This was the highest possible single

3375award of points in the 1998 Application.

338245. To the extent that firm commitments were not

3391demonstrated on Form 4, an applicant was to be awarded less than

3403150 points.

340546. In two places on Form 4, applicants are informed that

3416they could not request a developer fee in excess of the limits

3428established by the FHFC rules and the 1998 Application Package.

3438For Lakewood's Application, the maximum developer fee was 20

3447percent of project cost.

345147. The parties stipulated that Lakewood's Form 4

3459demonstrated that all necessary funding for its project was

3468firmly secured. Therefore, the parties agreed that, but for the

3478imposition of the penalty provision at issue in this proceeding,

3488Lakewood was entitled to an award of 150 points for Form 4.

3500G. The 15% Penalty .

350547. The following provision appears on Form 4 of the 1998












3584(This provision will hereinafter be referred to as the

"359315% Penalty"). The 15% Penalty appears in materially

3602identical form on Forms 5, 6, 7, 8, 10, and 22 of the

36151998 Application.

3617H. The Development of the 15% Penalty .

362548. Since the inception of the Low Income Housing Tax

3635Credit Program in Florida, the application process has become

3644increasingly competitive and litigious. For example, for the

36521998 cycle FHFC received Applications for approximately 72.6

3660million dollars but only approximately 10.7 million dollars of

3669tax credits available. Consequently, only eleven of the ninety

3678Applications will likely be funded from the 1998 cycle.

368749. Because of the increased competitiveness and the

3695litigious nature the application process, the Board appointed a

3704Combined Cycle Committee (hereinafter referred to as the "Cycle

3713Committee") to work with the staff of FHFC to improve the

3725Application and application process for the 1998 cycle. The

3734Board also instructed staff to strictly construe the Application,

3743make sure forms in the 1998 Application were as clear as

3754possible, and to implement a penalty for failures to follow the


376650. The development of the 1998 Application Package began

3775in the spring of 1997. On July 14, 1997, the first rule

3787development workshop was held. The purpose of the workshop,

3796which was attended by approximately forty individuals, was to

3805provide a forum for comments and suggestions from developers and

3815other interested persons concerning the Application Package and

3823the process.

382551. Following the July 1997 workshop, FHFC prepared a draft

3835of the 1998 Application Package. The draft consisted of the 1997

3846Application Package with changes proposed for the 1998 cycle

3855noted with strike-through for deleted language and underlining

3863for added language. See Respondent's Exhibit 2, the "Red Book."

387352. Among the proposed changes to the 1997 Application

3882Package contained in the Red Book was the inclusion of the

3893following language on Page 1 of the Instructions:











3970This language was repeated throughout the Red Book,

3978modified only to specify that the penalty was 15 percent

3988and to refer to the specific section or form the language

3999was included in.

400253. The 15% Penalty applied only to the points available

4012for a form on which an error or omission occurred. The penalty

4024applied regardless of the number of errors or omissions on a form

4036and regardless of the significance of the error or omission.

404654. FHFC was aware at the time that it was considering the

405815% Penalty that the point difference between the highest and

4068lowest point totals above the funding line for the 1997 cycle for

4080the large county category was 43.03 points. FHFC also knew that

4091historically only a half point to two points separated funded

4101applicants and unfunded applicants.

410555. The 15% Penalty modified the previous treatment of

4114errors or omissions on Applications. Prior to 1998 if an error

4125was made in an Application, the Application was either rejected

4135if the error related to certain specified "threshold

4143requirements" or staff simply corrected the error. For example,

4152if an applicant requested a developer fee in excess of the

4163developer fee cap, scorers would adjust the claimed fee downward.

4173No penalty would be imposed on the applicant.

418156. Copies of the Red Book were made available to

4191interested persons to review before and during a second rule

4201development workshop held on September 22, 1997. The purpose of

4211this workshop was to review the proposed changes in the Red Book

4223and to give the approximately sixty-five individuals that

4231attended the workshop an opportunity to make comments and

4240suggestions as to how to improve the Application Package and the

4251application process.

425357. The 15% Penalty was specifically explained during the

4262September 22, 1997, workshop. Lakewood was represented at the

4271meeting. The following explanation of the 15% Penalty was given:

4281Before we go on into rules and QAP things, I

4291want to add one more global comment to be sure

4301everybody in this room understands the new big

4309change in the application whereby you [sic] if

4317you don't fill it out exactly the way the

4326instructions tell you, you're going to get

4333penalized then and there, okay? There's a 15%

4341penalty on many of these forms. On Form 3 we set

4352out a chart for you to show that if you don't

4363give all the information exactly where you say it

4372is in the application, all your T's are crossed

4381and your I's dotted, you're going to get reduced


4391Now, the whole purpose of this is not to make

4401your life miserable or to make our lives

4409miserable. It is to make you pay attention to

4418the application and to reduce appeals, okay?

4425FHFC Exhibit 11.

442858. In addition to the two workshops, two public meetings

4438were held by the Cycle Committee to discuss the proposed

4448Application Package. Questions and comments concerning the

4455proposed Application Package were invited.

446059. FHFC staff were also available to answer questions

4469concerning the 1998 Application Package and the process at any

4479time up until the deadline for submittal of the 1998 Application.

449060. Throughout the period of time during which the 1998

4500Application Package was being developed, FHFC staff emphasized

4508the need for accuracy on the Application and explained to

4518prospective applicants that the 15% Penalty existed.

452561. FHFC formally adopted the 1998 Application Package

4533containing the 15% Penalty. No challenges to the rule which

4543incorporated the 1998 Application Package were filed before the

4552rule became effective.

455562. Full-day workshops were subsequently conducted by FHFC

4563throughout the State to explain how to complete the 1998

4573Application and to answer questions thereon. The 15% Penalty was

4583explained during these workshops.

4587I. Purpose for the 15% Penalty .

459463. It is important for Applications to be complete and

4604accurate during the application phase. The application phase is

4613FHFC's first opportunity to analyze proposed projects in

4621accordance with the Internal Revenue Code and FHFC's rules. The

4631Internal Revenue Code requires that the minimum number of tax

4641credits necessary to complete a project be determined during the

4651application phase. Therefore, even though modifications may be

4659made during the credit underwriting and final phases, FHFC is

4669still required to make sure that Applications approved in the

4679application phase are as accurate as possible. FHFC's purpose

4688for adopting the 15% Penalty was described by Gwen Lightfoot,

4698Deputy Development Officer for FHFC:

4703Well, it's - we have to go into a little bit of

4715history in order to really understand from whence

4723this approach came. When I first came to the

4732Agency, that was in 1992, we had enough credits

4741that everybody that applied that was really ready

4749to go would be able to get the credits. And

4759there were times at the end of the year when

4769staff would be frantically calling up developers

4776and saying, Do you have a site, are you ready to

4787go? You know, you told me that you were going to

4798turn this application in and we didn't get it and

4808we need one more to secure the national pool.

4817And so, you know, that was the atmosphere under

4826which the credit program was operating six years


4835It was critical for us to get the national pool

4845in those days because that would add, oh, $6

4854million to the amount of credits that we would

4863have, which is thousands of unit. So, each year

4872we got more and more competitive, more and more

4881developers learned about the program, more and

4888more developers realized that they could make a

4896good living with, you know, affordable housing.

4903The mechanism that the code creates encourages

4910public/private partnerships, so this is a good

4917way for the private community to provide

4924affordable housing and make a living. So, the

4932competition became more and more intense.

4938In 1997, by then, it was extremely contentious,

4946litigious, extremely competitive. I can remember

4952- I think it was in 1996, it might have been the

4964year before, we had over 300 issues on appeal,

4973and that's just insanity. So in this scope of

4982things we tried to come up with a way to make

4993sure that this application was accurate and

5000complete and - well, I guess those are the best

5010words - because we have a mandate in the Federal

5020code and in the State code that we can allocate

5030no more credits than is absolutely necessary for

5038the project viability. That means it is critical

5046for us to have an accurate and complete


5055The overall purpose of the app is to be an

5065objective mechanism by which we can maximize the

5073use of the credits. We have got to have a way to

5085be sure that we are getting the best bang for our

5096buck, I guess is a good way to say it. So, when

5108we laid the penalty over the entire application,

5116we were searching for a rational, fair, objective

5124approach which was designed to reduce appeals, to

5132be fair to everybody, come up with a mechanism by

5142which we could award partial points for people

5150who had done, you know, the main thrust of the

5160particular question but had for some reason not

5168done it perfectly, rather than make them lose all

5177of the points for an issue, we only make them

5187lose a%age of the points.

5192The other big thing that played into the

5200decision to go with this penalty approach is that

5209in the six years that I have been reviewing these

5219applications there is a very strong and direct

5227correlation between an applicant's ability to put

5234together a complete, thorough, accurate, well

5240thought out and organized application. And the

5247product that they produce and the way that they

5256handle the compliance period.

5260These properties are not just coming in the

5268door, getting their credits and going out the

5276door and never seeing the agency again. We have

5285to monitor them for 50 years. So, the attention

5294to detail is so critical that, in addition to

5303being a mechanism to select between really good

5311applicants, it is also - it lets them know, it

5321helps teach the applicant what they are in for

5330with regard to detail and long-term commitments.

5337It is just the whole thing to help us get an

5348accurate and complete application so we can

5355accurately allocate credits. (Transcript 71)

536064. By its terms, the 15% Penalty applied regardless of the

5371magnitude of the error committed on an Application. For example,

5381if an amount was overstated by $1.00, a 15 percent penalty

5392applied. The application of the 15% Penalty was based upon an

5403objective determination of whether an error occurred. The staff

5412had no discretion to make a subjective determination as to the

5423significance of an error or omission.

542965. Although it was not the intent of FHFC for the

5440imposition of the 15% Penalty to be the determining factor in

5451whether an applicant was awarded tax credits, the effect of the

546215% Penalty can have that impact.

5468J. Imposition of the 15% Penalty on Lakewood .

547766. On or about March 10, 1998, Lakewood submitted a

5487completed 1998 Application to FHFC for 1998 tax credit funding.

5497Lakewood sought approximately 1.14 million dollars in tax credits

5506for a 150-unit apartment complex to be located in Orange County,


551867. Lakewood's Application was completed by Don Paxton, an

5527employee of the developer, contractor, and management company for


553768. Mr. Paxton attended the September 22, 1997, rule

5546development workshop. Mr. Paxton was aware and understood that

5555the 15% Penalty had been included in the 1998 Application and

5566that it was intended to punish for inaccuracies contained in

5576submitted Applications. He also was aware that the 15% Penalty

5586applied to inaccuracies on Form 4. Finally, Mr. Paxton was aware

5597that the developer fee available for Lakewood's proposed project

5606was limited to 20 percent of project cots.

561469. On Form 4 of Lakewood's Application, Lakewood claimed a

5624developer fee in excess of the 20 percent of project cost

5635limitation Lakewood was subject to. The developer fee requested

5644by Lakewood was $1,959,714.00, or $240,000.00 in excess of the

5657maximum developer fee Lakewood could request.

566370. The excess amount included in the developer fee cost

5673claimed by Mr. Paxton represented an advisory fee which Lakewood

5683had agreed to pay to Affordable Housing, an advisory group

5693specializing in the development and marketing of tax credit-

5702financed housing for senior citizens. Nothing in Lakewood's

5710submitted 1998 Application informed FHFC that the excess amount

5719included as a development fee by Lakewood was attributable to

5729Affordable Housing. Based upon what was provided to FHFC by

5739Lakewood in its Application, it was reasonable for FHFC to

5749conclude that Lakewood was requesting a developer's fee in excess

5759of 20 percent of project cost.

576571. Mr. Paxton included the advisory fee because of an

5775instruction of page 10 of Form 4 that "Consulting fees, if any,

5787must be paid out of the developer fee." Mr. Paxton knew,

5798however, that Affordable Housing was not a consultant as the term

"5809consultant" is used in the 1998 Application Package.

581772. Mr. Paxton's interpretation of the instruction

5824concerning the payment of consultant fees on page 10 of Form 4

5836was not reasonable.

583973. Mr. Paxton also included the advisory fee as part of

5850the developer fee because that was the only way for Lakewood to

5862treat the $240,000.00 fee as a cost eligible for tax credit

5874reimbursement. While it was a part of the total project cost, it

5886was not part of the project cost eligible for reimbursement with

5897tax credits.

589974. The inclusion of the advisory fee as part of the

5910developer fee did not diminish the fact that Lakewood's Form 4

5921demonstrated secure financing and, consequently, the economic

5928feasibility of its project and its ability to proceed.

593775. Due to the excessive developer fee included by Lakewood

5947on Form 4, the scorers of Lakewood's Application imposed the 15%

5958Penalty. A total of 22.5 points was deducted from the 150 points

5970Lakewood would otherwise have been entitled to for Form 4.

598076. With the reduction of Lakewood's total score by 22.5

5990points, Lakewood fell below the funding line for the 1998 cycle.

6001Without the 22.5 point penalty, Lakewood would have been above

6011the funding line.

6014K. Other Applications of the 15% Penalty .

602277. FHFC applied the 15% Penalty to other applicants during

6032the 1998 cycle for errors on Form 4, including the inclusion of

6044developer fees in excess of applicable limits. For example, the

6054penalty was imposed on Applications 8, 9, 30, 58, and 59.

606578. FHFC initially imposed the 15% Penalty on the

6074Application of Kay Larkin because the requested developer fee

6083combined with the requested consulting fee, which was separately

6092listed, exceeded the applicable developer fee. FHFC took this

6101position even though the separately listed consulting fee was

6110included as an ineligible cost. Kay Larkin challenged the 15%

6120Penalty. FHFC subsequently agreed to remove the penalty because

6129it was decided that FHFC should not have combined the eligible

6140developer costs and the ineligible consulting fee. The developer

6149fee standing alone did not exceed the developer fee cap. The Kay

6161Larkin matter is distinguishable from this matter because

6169Lakewood listed the entire amount as an eligible developer fee.

617979. In the case of the 1998 Application filed by Harvard

6190House, FHFC did fail to impose the 15% Penalty for the inclusion

6202of a developer fee in excess of the developer fee cap. It failed

6215to impose the penalty through oversight. Although Lakewood

6223pointed this error out in a NOPSE it filed concerning its score,

6235no NOPSE or direct or competitive appeal was filed by any

6246applicant concerning the Harvard House Application. FHFC,

6253therefore, had no authority pursuant to the 1998 Application to

6263modify the score it had awarded Harvard House.

627180. FHFC committed the same error in scoring the

6280Application submitted by Orchid Trace, which had included a

6289developer fee in excess of the limit of $1.00. Again, although

6300Lakewood raised this error in a NOPSE concerning its score, no

6311NOPSE or direct or competitive appeal concerning Orchid Trace's

6320score was filed.

632381. FHFC's imposition of the 15% Penalty to Applications

6332which included developer fees in excess of the developer fee caps

6343was consistent except to the extent that FHFC inadvertently

6352failed to impose the penalty on Harvard House and Orchid Trace.

636382. Some applicants failed to include a general contractor

6372fee on the Project Cost Pro Forma of Form 4. General contractor

6384fees were limited to 14 percent of project cost. FHFC did not,

6396however, impose the 15% Penalty on those applicants for their

6406omission. Two applicants above the funding line, Magnolia Pointe

6415and Nantucket Bay, failed to include any general contractor fee

6425on the appropriate line. Most applicants, including Lakewood,

6433left some line blank on the 1998 Application and were not


644583. The following instruction was included on page 1 of the

64561998 Application:






650184. Applicants were not specifically required to report a

6510general contractor fee on their Form 4. In some cases,

6520applicants did not incur general contractor fees. Consequently,

6528on those forms where the applicant did not include a general

6539contractor fee, the FHFC had to assume that the applicant did not

6551intend to pay a general contractor fee.

655885. Where a particular item was not specifically required

6567or FHFC could not know whether an item had been left off in

6580error, FHFC interpreted the 15% Penalty to not require the

6590imposition of a penalty for merely failing to mark the item


6602L. Intervenors' Standing .

660686. Intervenors are engaged in the business of providing

6615affordable residential rental units for low income and/or very

6624low income persons.

662787. Intervenors, through subsidiaries or affiliates,

6633submitted Applications to FHFC seeking allocation of tax credits

6642from the 1998 combined cycle pursuant to Section 420.5099,

6651Florida Statutes (1998). Intervenors, through subsidiaries or

6658affiliates, also submitted Applications seeking tax credits from

6666one or both of the preceding two cycles (1996 and 1997), and

6678anticipate filing Applications in the 1999 cycle.

668588. For the 1998 cycle, Intervenors, through subsidiaries

6693or affiliates, submitted the following Applications for projects

6701located in FHFC's large county group and were awarded the

6711following points:

6713Company Project Scores

6716LCA 050C - Magnolia Pointe 652.75

6722Gatehouse 075CS - Nantucket Bay

6727Apartments 644.47

6729077C - The Rosemary 656.00

6734Vestor 040C - Courtney Manor

6739Apartments 640.75

6741Wilson 047C - Windermere

6745Apartments 640.75

674789. The scores for Intervenors' projects were based upon

6756FHFC staff's comparative review and scoring of the Applications

6765submitted in the 1998 cycle, resolution of all direct and

6775competitive appeals, informal hearings conducted by FHFC

6782designated Hearing Officers, and Board action at its August 21

6792and September 11, 1998, meetings.

679790. At the commencement of the final hearing in these

6807cases, the Board had not entered final orders on the scoring of

6819the 1998 Application. The projects of LCA and Gatehouse,

6828however, were above the funding line and were issued "at risk"

6839invitations to credit underwriting. The projects of Vestcor and

6848Wilson were tied with a third applicant for the remaining tax

6859credits for the large county group, which was not sufficient to

6870fund all three projects.

687491. On October 16, 1998, the Board voted to issue final

6885orders confirming the scores of all applicants except Lakewood.

6894The Board issued final orders for the funding of all of

6905Intervenors' projects.

690792. If Lakewood prevailed in this proceeding and the 15%

6917Penalty was not imposed, its score would rank it ahead of

6928Vestcor's and Wilson's projects. Based upon the Board's action

6937at the October 16, 1998, meeting, however, the projects of

6947Vestcor and Wilson will still be funded.


6957A. Jurisdiction .

696093. The Division of Administrative Hearings has

6967jurisdiction over the parties to, and the subject matter of, this

6978proceeding. Sections 120.56(1) and (3), 120.569, and 120.57(1),

6986Florida Statutes (1997).

6989B. Standing .

699294. Sections 120.56(1) and (3), Florida Statues, allow any

7001person that is "substantially affected by an agency rule" to

7011institute a proceeding to determine whether the rule is "an

7021invalid exercise of delegated legislative authority."

702795. Section 120.569, Florida Statutes, allows any person

7035whose "substantial interests" are determined by proposed agency

7043action to challenge the agency's action through a proceeding

7052pursuant to Section 120.57, Florida Statutes. If the proceeding

7061involves a disputed issue of material fact, the proceeding is to

7072be conducted pursuant to Section 120.57(1), Florida Statutes.

708096. The evidence in these cases proved that Lakewood was

7090denied tax credits by FHFC. The evidence also proved that the

7101Department, in denying tax credits to Lakewood, applied the 15%

7111Penalty and that the 15% Penalty constitutes a rule of FHFC.

7122Lakewood, therefore, was "substantially affected" by the

7129Department's rule and action, and had standing to institute this

7139proceeding under both Sections 120.56 and 120.569, Florida


714897. As to Intervenors, the evidence proved and the parties

7158stipulated that Intervenors participated in the 1998 cycle and

7167were governed by the 15% Penalty provision. The evidence,

7176however, failed to prove that Intervenors were "substantially"

7184affected by the 15% Penalty.

718998. In order to conclude that Intervenors were

"7197substantially affected" by the 15% Penalty or the application of

7207the 15% Penalty to Lakewood, Intervenors were required to prove

7217that they will suffer an injury of sufficient immediacy to

7227entitle them to participate in this proceeding. See Ameristeel

7236Corporation v. Clark , 691 So. 2d 473 (Fla. 1997).

724599. The only possible injury which Intervenors could suffer

7254in this proceeding would be a loss of tax credits for the 1998

7267cycle. The evidence, however, proved that the tax credits for

7277the 1998 cycle have already been awarded to Intervenors and that

7288the award will not be changed as a result of this proceeding.

7300Consequently, Intervenors will not be impacted by any decision

7309concerning the validity of the 15% Penalty or Lakewood's

7318challenge to its score.

7322100. The only possible impact on Intervenors which could

7331occur as a result of this proceeding is that credits otherwise

7342available for the 1999 cycle could be reduced by any credits

7353awarded to Lakewood. Such an impact is too speculative and not

7364of sufficient immediacy to conclude that Intervenors will suffer

7373an injury of sufficient immediacy to entitle them to participate

7383in this proceeding. See Brasfiled & Gorrie General Contractors,

7392Inc. v. Ajax Construction Company , 627 So. 2d 1200 (Fla. 1st DCA

74041993); and Grimes v. Walton County , 591 So. 2d 1091 (Fla. 1st DCA


7418101. As to the rule challenge proceeding, the evidence

7427proved that the 15% Penalty is a rule that only applies to the

74401998 cycle. It cannot, therefore, have any direct impact on the

74511999 cycle or Intervenors' participation in that cycle. Nor can

7461it be assumed that Intervenors will be subjected to the 15%

7472Penalty even if it were adopted for the 1999 cycle.

7482C. Burden of Proof .

7487102. The burden of proof, absent a statutory directive to

7497the contrary, is on the party asserting the affirmative of the

7508issue in a Chapter 120, Florida Statutes, proceeding. Antel v.

7518Department of Professional Regulation , 522 So. 2d 1056 (Fla. 5th

7528DCA 1988); Department of Transportation v. J.W.C. Co., Inc. , 396

7538So. 2d 778 (Fla. 1st DCA 1981); and Balino v. Department of

7550Health and Rehabilitative Services , 348 So. 2d 249 (Fla. 1st DCA


7562103. In Case No. 98- 3441RX, the rule challenge proceeding,

7572Lakewood had the burden of proving the invalidity of the

7582challenged rule. See St. Johns River Water Management District

7591v. Consolidated- Tomoka Land Co. , 23 Fla. L. Weekly D1787b (Fla.

76021st DCA 1998).

7605104. In Case No. 98-3873, Lakewood also had the burden of

7616proving its entitlement to the tax credits it has sought from


7628D. The Rule Challenge .

7633105. An "invalid exercise of delegated legislative

7640authority" is defined in Section 120.52(8), Florida Statutes, as

"7649action which goes beyond the powers, functions, and duties

7658delegated by the Legislature." In particular, an existing rule

7667is to be considered an "invalid exercise of delegated legislative

7677authority" if any one or more of the following apply:

7687(a) The agency has materially failed to follow

7695the applicable rulemaking procedures or

7700requirements set forth in this chapter;

7706(b) The agency has exceeded its grant of

7714rulemaking authority, citation to which is

7720required by s. 120.54(3)(a)1;

7724(c) The rule enlarges, modifies, or

7730contravenes the specific provisions of law

7736implemented, citation to which is required by s.


7745(d) The rule is vague, fails to establish

7753adequate standards for agency decisions, or vest

7760unbridled discretion in the agency;

7765(e) The rules is arbitrary or capricious;

7772(f) The rules is not supported by competent

7780substantial evidence; or

7783(g) The rules imposes regulatory costs on the

7791regulated person, county, or city which could be

7799reduced by the adoption of less costly

7806alternatives that substantially accomplish the

7811statutory objectives.

7813106. Lakewood has alleged that the 15% Penalty is an

7823invalid exercise of delegated legislative authority as defined in

7832Section 120.52(8)(b), (c), (d), (e), and (f), Florida Statutes.

7841E. Grant of Rulemaking Authority .

7847107. The specific rulemaking authority cited by FHFC for

7856the 15% Penalty is Section 420.507(12), Florida Statutes:

7864[FHFC] shall have all the powers necessary or

7872convenient to carry out and effectuate the

7879purposes and provisions of this part, including

7886the following powers which are in addition to all

7895other powers granted by other provisions of this


7904. . . .

7908(12) To make rules necessary to carry out the

7917purposes of this part and to exercise any power

7926granted in this part pursuant to the provisions

7934of chapter 120.

7937108. The foregoing grant of rulemaking authority is broad

7946enough to allow the adoption of any rule by FHFC that does not

7959enlarge, modify, or contravene the specific provisions of law

7968FHFC is attempting to implement.

7973109. The evidence failed to prove that FHFC "has exceeded

7983its grant of rulemaking authority, citation to which is required

7993by s. 120.54(3)(a)1" in adopting the 15% Penalty.

8001F. The Law Implemented by the 15% Penalty .

8010110. The specific law implemented by FHFC in adopting the

802015% Penalty is Section 420.5099, Florida Statutes:

8027(1) The [FHFC] is designated the housing

8034credit agency for the state within the meaning of

804342(h)(7)(A) of the Internal Revenue Code of 1986

8051and shall have the responsibility and authority

8058to establish procedures necessary for proper

8064allocation and distribution of low-income housing

8070tax credits and shall exercise all powers

8077necessary to administer the allocation of such


8085(2) The corporation shall adopt allocation

8091procedures that will ensure the maximum use of

8099available tax credits in order to encourage

8106development of low-income housing in the state,

8113taking into consideration the timeliness of the

8120application, the location of the proposed housing

8127project, the relative need in the area for low-

8136income housing and the availability of such

8143housing, the economic feasibility of the project,

8150and the ability of the applicant to proceed to

8159completion of the project in the calendar year

8167for which the credit is sought.

8173. . . .

8177111. Section 420.5099, Florida Statutes, requires and

8184authorizes FHFC to accomplish two things: (a) establish

8192procedures for the allocation of credits; and (2) ensure maximum

8202use of available tax credits.

8207112. While Section 420.5099, Florida Statutes, establishes

8214the criteria FHFC should take into account in carrying out the

8225charge to ensure maximum use of available tax credits, virtually

8235no guidance is provided as to the procedures to be established by


8248113. FHFC has attempted to design an application process

8257that is fair to all applicants. One that gives all applicants an

8269equal opportunity to complete for tax credits. FHFC has

8278encouraged and facilitated the participation of all potential

8286applicants in the development of the process. Every year FHFC

8296reviews the process and modifies it in an effort to achieve the

8308best procedure possible. These efforts are consistent with and

8317well within the authority of FHFC under Section 420.5099, Florida


8328114. In adopting the 15% Penalty, FHFC followed all of the

8339steps it normally takes in adopting the procedures governing the

8349allocation process for 1998. FHFC elected to adopt the 15%

8359Penalty in order to encourages accuracy by applicants in

8368completing the application process, to increase the level of

8377fairness and objectivity in evaluating Applications, and to

8385impose a penalty for errors committed by some applicants that

8395were not committed by others. All of these goals were intended

8406to improve the allocation procedures which the Legislature

8414charged FHFC with the responsibility and authority to adopt.

8423115. In adopting the 15% Penalty, FHFC has not adopted an

8434additional substantive criterion not authorized by the

8441Legislature in Section 420.5099(2), Florida Statutes, as argued

8449by Petitioner. It has only adopted one of the procedural

8459requirements for allocation which was not specified by the

8468Legislature, but it was authorized to adopt.

8475116. The 15% Penalty provision is no different in its

8485purpose than prohibiting modifications or amendments to

8492Applications after they are filed. Like a cut-off date for when

8503Applications are deemed complete, ensuring accuracy in

8510Applications and reducing discretion in evaluating Applications

8517are reasonable facets of the allocation procedures FHFC is

8526authorized to adopt.

8529117. Even Lakewood has accepted the authority of FHFC to

8539adopt a scoring mechanism that penalizes Applicants for providing

8548unclear and incomplete information "that impairs FHFC's ability

8556to assess satisfaction of the statutory criteria." Lakewood,

8564however, argues that the 15% Penalty goes too far when it applies

8576to immaterial errors that "do not impair this assessment and are

8587unrelated to satisfaction of the statutory criteria." This

8595argument, however, goes to the question of whether the procedure

8605adopted by FHFC is arbitrary and capricious.

8612118. The evidence failed to prove that the 15% Penalty

"8622enlarges, modifies, or contravenes the specific provisions of

8630law implemented . . . ."

8636G. Vagueness, Adequacy of Standards, and Discretion .

8644119. The 15% Penalty is not vague. A rule is vague or

8656fails to establish adequate standards for agency decisions when

8665the terms of the rule are so vague that persons of common

8677intelligence must guess as to the rule's meaning. See Department

8687of Health and Rehabilitative Services v. Health Care and

8696Retirement Corporation , 593 So. 2d 539 (Fla. 1st DCA 1992).

8706120. There is nothing complicated or vague about the 15%

8716Penalty. The 15% Penalty provides that if an applicant commits

8726an error in completing a form of the 1998 Application, the points

8738otherwise awarded for that form are reduced by 15%. Lakewood's

8748representative understood this result.

8752121. Any confusion suffered by Lakewood's representative in

8760this matter related not to the imposition of the 15% Penalty, but

8772to the complexity of the 1998 Application Package itself. At

8782best, Lakewood's representative may have been confused about how

8791to treat the advisory fee Lakewood had incurred. He was not,

8802however, confused about the fact that developer fees were limited

8812to 20% of project costs, that the amount included on Lakewood's

88231998 Application exceeded that limitation, and that the 15%

8832Penalty applied to inaccuracies.

8836122. The fact that FHFC scorers made errors in applying the

884715% Penalty does not support a conclusion that the 15% Penalty is

8859vague. Again, it merely supports the conclusion that the 1998

8869Application and the evaluation thereof was complex.

8876H. Arbitrary and Capricious; Competent Substantial

8882Evidence .

8884123. A rule is considered arbitrary if it is not supported

8895by logic or reasons. It is capricious if it is irrational and

8907not supported by reason. Agrico Chemical Company v. Department

8916of Environmental Regualtion , 365 So. 2d 759, 763, (Fla. 1st DCA

89271978), cert . denied , 376 So. 2d 74 (Fla. 1979).

8937124. The evidence in this case proved that FHFC's rationale

8947for adopting the 15% Penalty was based upon logic and reason. It

8959was not irrational. Nor was it unsupported by the evidence. The

8970process of allocating tax credits is a detailed and highly

8980competitive process. FHFC has made every effort to ensure that

8990the process is as subjective as possible and that its discretion

9001is limited.

9003125. The 15% Penalty does have the effect of imposing the

9014penalty on a wide range of errors. From the fairly insignificant

9025to the significant. It would not be reasonable, however, to

9035adopt a penalty for every possible situation. And it would

9045defeat one of the purposes for adopting the 15% Penalty to adopt

9057a penalty that allows FHFC to exercise discretion in deciding

9067when a penalty should be imposed or the extent to which a penalty

9080should be applied.

9083126. The evidence failed to prove that the 15% Penalty is

9094arbitrary or capricious. The evidence also failed to prove that

9104the 15% Penalty is not supported by competent substantial


9114I. Application of the 15% Penalty to Lakewood .

9123127. In Case No. 98-3873, Lakewood has argued that FHFC

9133arbitrarily and capriciously applied the 15% Penalty to its

9142application. The evidence failed to support this argument.

9150128. The evidence failed to prove that FHFC applied the 15%

9161Penalty in an inconsistent manner to similar facts. See Amos v.

9172Department of Health and Rehabilitative Services , 444 So. 2d 43,

9182(Fla. 1st DCA 1983).

9186129. The evidence also failed to prove that FHFC

9195interpreted or applied the 15% Penalty inconsistently to

9203similarly-situated parties. See Central Florida Regional

9209Hospital, Inc. v. Department of Health and Rehabilitative

9217Services , 582 So. 2d 1193 (Fla. 5th DCA).

9225130. The evidence proved that in those cases where the 15%

9236Penalty was not applied, it was not applied through error only.

9247The evidence also proved that, when FHFC learned of the error, it

9259was prohibited from taking an action to correct its mistake by

9270its rules. These facts distinguish FHFC's actions from its

9279application of the 15% Penalty to Lakewood in these cases.

9289131. The evidence also failed to prove that the failure to

9300penalize applicants that did not fill in blanks with a "N/A"

9311constitutes a similar situation to Lakewood. Failing to include

"9320N/A" on a line is not the same as including a dollar amount in

9334excess of the clear instructions as to the amount of developer

9345fee that an applicant could seek tax credits for. Additionally,

9355even if the situations were similar, the remedy would not be to

9367forgive Lakewood's error. The appropriate remedy would be to

9376impose the penalty on those applicants that failed to include an

"9387N/A" on blank lines in their applications. This remedy is not

9398available because all the applicants who made this error are not

9409before this forum.

9412132. Finally, the evidence failed to prove that the

9421application of the 15% Penalty to Lakewood under the

9430circumstances of this matter was not consistent with the mandate

9440of the 15% Penalty.


9445Based on the foregoing Findings of Fact and Conclusions of

9455Law, it is

9458ORDERED that Petition to Determine Invalidity of Existing

9466Rules filed in Case No. 98- 3441RX is DISMISSED. It is further

9478ORDERED that the Florida Housing Finance Corporation

9485correctly applied the 15% Penalty on Form 4 of Lakewood Senior

9496Apartments Limited Partnership's 1998 Application.

9501DONE AND ORDERED this 7th day of January, 1999, in

9511Tallahassee, Leon County, Florida.



9519Administrative Law Judge

9522Division of Administrative Hearings

9526The DeSoto Buildi ng

95301230 Apalachee Parkway

9533Tallahassee, Florida 32399-3060

9536(850) 488-9675 SUNCOM 278-9675


9541Fax Filing (850) 921-6847

9545Filed with the Clerk of the

9551Division of Administrative Hearings

9555this 7th day of January, 1999.


9563James C. Hauser, Esquire

9567Warren H. Husband, Esquire

9571Skelding, Labasky, Corry, Hauser,

9575Jolly & Metz, P.A.

9579Post Office Box 669

9583Tallahassee, Florida 32302

9586Stephen M. Donelan, Esquire

9590Florida Housing Finance Corporation

9594Suite 5000

9596227 North Bronough Street

9600Tallahassee, Florida 32301-1329

9603Michael J. Glazer, Esquire

9607Stephanie W. Redfearn, Esquire

9611Ausley & McMullen

9614227 South Calhoun Street

9618Tallahassee, Florida 32301

9621Michael G. Maida, Esquire

9625J. Stephen Menton, Esquire

9629Rutledge, Ecenia, Underwood,

9632Purnell & Hoffman, P.A.

9636215 South Monroe Street, Suite 420

9642Post Office Box 551

9646Tallahassee, Florida 32302

9649Carroll Webb

9651Executive Director and General Counsel

9656Joint Administrative Procedures Committee

9660Holland Building, Room 120

9664Tallahassee, Florida 32399-1300


9673All parties have the right to submit written exceptions within 15

9684days from the date of this Recommended Order. Any exceptions to

9695this Recommended Order should be filed with the agency that will

9706issue the final order in this case.

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Date: 06/04/1999
Proceedings: Case files returned to the Agency sent out.
Date: 01/07/1999
Proceedings: DOAH Final Order
Date: 01/07/1999
Proceedings: CASE CLOSED. Final Order sent out. Hearing held 10/12-13/98 & 10/23/98.
Date: 11/19/1998
Proceedings: Lakewood`s Proposed Final Order filed.
Date: 11/19/1998
Proceedings: Respondent`s and Intervenors` Proposed Final Order; Disk filed.
Date: 11/09/1998
Proceedings: Notice of Filing; DOAH Court Reporter Final Hearing Transcripts (volumes 1, 2, 3, 4, 5/tagged) filed.
Date: 10/23/1998
Proceedings: Notice of Filing; DOAH Court Reporter Excerpt of Proceedings (Testimony of Edward S. Ryan and Gwen Lightfoot, tagged) filed.
Date: 10/12/1998
Proceedings: CASE STATUS: Hearing Held.
Date: 10/09/1998
Proceedings: Joint Prehearing Stipulation filed.
Date: 10/09/1998
Proceedings: Case: 98-003442 Unconsolidated and Closed.
Date: 10/08/1998
Proceedings: (M. Glazer) Motion for Summary Hearing in DOAH Case No. 97-3873 filed.
Date: 10/08/1998
Proceedings: FHFC`s Notice of Taking Deposition Duces Tecum filed.
Date: 10/08/1998
Proceedings: (Petitioner) Notice of Taking Deposition filed.
Date: 10/07/1998
Proceedings: Petitioner`s Notice of Deposition filed.
Date: 10/07/1998
Proceedings: Florida Housing Finance Corporation`s Response to Petitoner`s Second Request for Production of Documents filed.
Date: 10/06/1998
Proceedings: Petitioner`s Notice of Deposition filed.
Date: 10/05/1998
Proceedings: (Petitioner) Notice of Dismissal of DOAH Case No. 98-3442RX; Notice of Partial Dismissal Regarding DOAH Case No. 98-3873 filed.
Date: 10/02/1998
Proceedings: Notice of Taking Deposition Duces Tecum filed.
Date: 10/02/1998
Proceedings: FHFC`s Notice of Taking Deposition Duces Tecum; Petitioner`s Second Request for Production of Documents to Respondent, Florida Housing Finance Corporation filed.
Date: 10/02/1998
Proceedings: Notice of Taking Deposition Duces Tecum filed.
Date: 10/02/1998
Proceedings: Florida Housing Finance Corporation`s Notice of Intent to Use Summaries filed.
Date: 10/02/1998
Proceedings: Petitioner`s Notice of Rule 1.310(b)(6) Depositions Duces Tecum; Notice of Taking Depositions Duces Tecum filed.
Date: 09/30/1998
Proceedings: (M. Glazer, J. Hauser, M. Maida) Stipulation filed.
Date: 09/30/1998
Proceedings: (M. Glazer) Notice of Withdrawal of Motion for Protective Order filed.
Date: 09/29/1998
Proceedings: (Lakewood) Notice of Taking Depositions Duces Tecum filed.
Date: 09/25/1998
Proceedings: Florida Housing Finance Corporation`s Response to Petitioner`s First Request for Production of Documents filed.
Date: 09/25/1998
Proceedings: Florida Housing Finance Corporation`s Motion for Protective Order filed.
Date: 09/25/1998
Proceedings: Florida Housing Finance Corporation`s Notice of Serving Answers to Petitioner`s First Interrogatories filed.
Date: 09/23/1998
Proceedings: Case No/s: 98-3874 unconsolidated. Case Closed, Notice of Dismissal.
Date: 09/23/1998
Proceedings: Petitioner`s Notice of Serving Answers to Respondent`s First Interrogatories; Petitioner`s Written Response to Respondent`s First Request for Production of Documents filed.
Date: 09/18/1998
Proceedings: Petitioner`s Notice of Propounding First Set of Interrogatories to Respondent, Florida Housing Finance Corporation; Petitioner`s First Set of Interrogatories to Respondent, Florida Housing Finance Corporation filed.
Date: 09/17/1998
Proceedings: Order Granting Intervention sent out. (for LCA Development, Gatehouse Group, Vestcor Equities, Wilson Company)
Date: 09/17/1998
Proceedings: Order Granting Joint Motion to Consolidate and Rescheduling Formal Hearing sent out. (98-3441RX, 98-3442RX, 98-3873 & 98-3874 consolidated; Hearing set for Oct. 12-13, 1998; 9:00am; Tallahassee)
Date: 09/17/1998
Proceedings: (W. Husband) Notice of Withdrawal; Letter to LJS from J. Hauser Re: Petitions to intervene filed.
Date: 09/15/1998
Proceedings: (LCA Development, Inc., The Gatehouse Group, Inc., Vesstcor Equities, Inc. and The Wilson Company) Petition to Intervene filed.
Date: 09/15/1998
Proceedings: Memo to LJS from M. Glazer (RE: notice of conference call hearing) (filed via facsimile).
Date: 09/14/1998
Proceedings: (Respondent) Notice of Hearing (filed via facsimile).
Date: 09/14/1998
Proceedings: Respondent`s First Request for Production of Documents to Lakewood Senior Apartments Limited Partnership filed.
Date: 09/11/1998
Proceedings: (S. Redfearn) Notice of Propounding First Interrogatories to Lakewood Senior Apartments Limited Partnership; Respondent`s First Request for Production of Documents to Lakewood Senior Apartments Limited Partnership filed.
Date: 09/11/1998
Proceedings: Respondent`s First Request for PRoduction of Documents to Oaks Trail Associates, Ltd.; Notice of Propounding First Interrogatories to Oaks Trail Associates, Ltd. filed.
Date: 09/11/1998
Proceedings: (S. Redfearn) Notice of Propounding First Interrogatories to Lakewood Senior Apartments Limited Partnership; Respondent`s First Request for Production of Documents to Oaks Trail Associates, Ltd. filed.
Date: 09/11/1998
Proceedings: (S. Redfearn) Notice of Propounding First Interrogatories to Oaks Trail Associates, Ltd.; Respondent`s First Request for Production of Documents to Lakewood Senior Apartments Limited Partnership filed.
Date: 09/08/1998
Proceedings: Response to Motion to Consolidate (Respondent) filed.
Date: 09/02/1998
Proceedings: (M. Glazer) Notice of Appearance filed.
Date: 09/01/1998
Proceedings: (J. Hauser) (2) Notice of Filing of Amended Petition for Formal Administrative Hearing; Amended Petition for Formal Administrative Hearing; Joint Notice of Related Case filed.
Date: 09/01/1998
Proceedings: Joint Motion to Consolidate (Cases requested to be consolidated: 98-3441RX, 98-3442RX) filed.
Date: 08/14/1998
Proceedings: Notice of Hearing sent out. (hearing set for Sept. 28-29, 1998; 9:00am; Tallahassee)
Date: 08/14/1998
Proceedings: Prehearing Order sent out.
Date: 08/14/1998
Proceedings: Order Granting Joint Motion for Consolidation and for Prehearing Discovery Order sent out. (Consolidated cases are: 98-3441RX & 98-3442RX)
Date: 08/12/1998
Proceedings: Joint Response to Order of Assignment filed.
Date: 08/06/1998
Proceedings: Joint Motion for Consolidation and for Prehearing Discovery Order (Cases requested to be consolidated: 98-3441RX, 98-3442RX) filed.
Date: 07/30/1998
Proceedings: Order of Assignment sent out.
Date: 07/29/1998
Proceedings: Letter to Liz Cloud & Carroll Webb from M. Lockard w/cc: Agency General Counsel sent out.
Date: 07/28/1998
Proceedings: Petition to Determine Invalidity of Existing Rules filed.

Case Information

Date Filed:
Date Assignment:
Last Docket Entry:
Tallahassee, Florida
Department of Community Affairs

Related DOAH Cases(s) (2):

Related Florida Statute(s) (7):

Related Florida Rule(s) (3):