01-003502 Miami Sunset Bay Apartments, Limited Partnership vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Wednesday, January 30, 2002.

Summary: Only portion of applicant`s permanent financing known at time of application, therefore not precluded from seeking State Apartment Incentive Loan.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MIAMI SUNSET BAY APARTMENTS, )

LIMITED PARTNERSHIP, )

)

Petitioner, )

)

vs. ) Case No. 01 - 3502

)

FLORIDA HOUSING FINANCE )

CORPORATION, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDE R

Pursuant to notice, a formal hearing was held in

this case on November 8, 2001, in Tallahassee, Florida,

before J. D. Parrish, a designated Administrative Law

Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Margaret - Ray Ke mper, Esquire

Ruden, McClosky, Smith,

Schuster & Russell, P.A.

215 South Monroe Street

Suite 815

Tallahassee, Florida 32301

For Respondent: Andrew T. Price, Esquire

Elizabeth G. Arthur, Esquire

Florida Housing Finance Corporation

227 North Bronough Street

Suite 5000

Tallahassee, Florida 32301 - 1329

STATEMENT OF THE ISSUE

Whether th e Respondent, Florida Housing Finance

Corporation, properly rejected the application filed by

the Petitioner, Miami Sunset Bay Apartments, Limited

Partnership, for State Apartment Incentive Loan (SAIL)

funds during the 2001 Combined Cycle. In rejecting th e

application the Respondent concluded that the bond

closing of December 15, 2000, constituted "permanent

financing" such that the Petitioner was not entitled to

participate in the allocation of SAIL funds.

PRELIMINARY STATEMENT

On September 4, 2001, the R espondent forwarded the

instant case to the Division of Administrative Hearings

for formal proceedings. The Petitioner challenged the

Respondent's determination that it had failed to meet the

threshold requirements of Rule 67 - 48.002(97)(b), Florida

Admini strative Code, and was therefore properly

disallowed pursuant to Rule 67 - 48.004(17), Florida

Administrative Code. More specifically, the Petitioner

contested the determination that the closing on bond

financing constituted "permanent financing."

At the he aring, the Petitioner presented testimony

from Oliver Pfeffer, president of the Petitioner's

general partner, and Patricia Green, an expert in

affordable housing development transactions. Mark

Mustian, an expert in bond transactions, testified on

behalf o f the Respondent. Joint Exhibits 1 through 23

were admitted into evidence as were Petitioner's Exhibits

1 through 4.

The transcript of these proceedings was filed on

November 19, 2001. Thereafter, the Petitioner filed an

agreed motion for the extension o f time to file P roposed

R ecommended O rders that was granted. The parties timely

filed such proposed orders which have been considered in

the preparation of this order.

FINDINGS OF FACT

1. On February 26, 2001, the Petitioner applied to

the Respondent for SAIL funding for the 2001 Combined

Cycle.

2. The Petitioner seeks funding for the

construction of Sunset Bay Apartments, a 308 - unit

residential housing development, located in Miami - Dade

County, Florida.

3. The Petitioner's application for funding was

d esignated Application No. 2001 - 007S. It is undisputed

that the Petitioner's project is the type eligible for

SAIL funding.

4. The Respondent determined the Petitioner's

application did not meet threshold requirements for

consideration.

5. The Petitione r timely challenged the rejection

of its application.

6. The Respondent is a public corporation organized

to provide and promote funding for decent, safe, and

sanitary housing for persons and families of low,

moderate, and middle incomes.

7. The Responde nt receives its funds for the SAIL

program from an allocation of documentary stamp tax

revenue. When such funds are available, the Respondent

processes applications for entities seeking to

participate in the SAIL funds.

8. On December 22, 2000, the Respo ndent published a

Notice of Fund Availability that represented

$36,470,000.00 was available for the SAIL 2001 Combined

Cycle.

9. In response, the Respondent received requests

for SAIL funding that totaled $65,565,926.00.

10. The Respondent is obligated b y law to apportion

the SAIL funds among counties and to competitively award

the funds based upon the statutory and rule criteria.

11. Each applicant for SAIL funds is reviewed to

assure compliance with the threshold requirements and to

assign a score bas ed upon review criteria.

12. In this instance, the Petitioner was initially

approved and scored. Such approval was challenged and a

Notice of Possible Scoring Error (NOPSE) was filed.

13. The Respondent was then obligated to

investigate the allegations of the NOPSE. Accordingly,

the Respondent determined that the Petitioner had failed

to meet the threshold requirement found in Rule 67 -

48.002(97)(b), Florida Administrative Code.

14. The Petitioner was given an opportunity to

explain its apparent non - co mpliance and to submit

additional documentation regarding the issue. All

applicants considered for funding had the opportunity to

review the information submitted by the Petitioner.

15. Thereafter, any applicant could submit a Notice

of Alleged Deficienc ies (NOAD) to the Respondent. In

fact, the Respondent received NOADs challenging this

Petitioner's application.

16. After reviewing the matter further, the

Respondent determined that the Petitioner failed to meet

threshold requirements because it had clo sed on its

permanent financing prior to the submission of the SAIL

application.

17. The Petitioner closed on a $13,335,000.00

Housing Finance Authority of Miami - Dade County, Florida

Multifamily Housing Revenue Bond Series 2000 - 5A, and a

$740,000.00 Hous ing Finance Authority of Miami - Dade

County, Florida Taxable Multifamily Housing Revenue Bond

Series 2000 - 5B on December 15, 2000. Thereafter, the

Petitioner began construction of the project.

18. The financing described in paragraph 17

constituted a subs tantial portion of the financing for

the construction of this project. It was not, however,

the only source of financing for the development.

19. On June 27, 2001, the Petitioner closed on a

Surtax Loan from Miami - Dade County that provided

financing in t he amount of $281,000.00 for the subject

development.

20. Additionally, the Petitioner has applied to

Miami - Dade County for an additional surtax loan in the

amount of $719,000.00 for the 2002 cycle for this

development.

21. The Respondent maintains that the bond closing

of December 15, 2000, constituted "permanent financing"

such that Petitioner is not entitled to participate in

the SAIL funds.

22. Unlike conventional financing that may require

two closings (one for the construction phase, one for the

mortgage phase), the Petitioner sought bond financing

that was completed with one closing. Thus, all loan

documents (Joint Exhibits 8 through 23) were brought to

closing and executed on December 15, 2000.

23. The bond documents recognized the constructi on

phase of the project as well as the permanent terms that

would govern the repayment of the monies. The bond

documents provided for a draw process during the period

of construction similar to conventional financing.

24. A second closing after the const ruction phase

is completed is not necessary as the bond documents have

pre - determined how the indebtedness is to be calculated

and repaid.

25. The Petitioner fully and accurately disclosed

bond financing on its application for SAIL funds. As of

the date of its application, the Petitioner had begun

construction of its development. Moreover, all SAIL

funds sought in this cause were to be used for

construction of the project, its various amenities, and

were not for the refinancing of the project.

CONCLUSION S OF LAW

26. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter

of these proceedings. Section 120.57, Florida Statutes.

27. Rule 67 - 48.002(97), Florida Administrative

Code, provides, in pertinent part:

"S AIL Development" means a residential

development which provides one or more

housing units proposed to be

constructed or substantially

rehabilitated with SAIL funds for

Eligible Persons. A SAIL Development

which is under construction, in the

process of reh abilitation or which has

been completed may be considered for

the SAIL Program funding only if:

* * *

(b) Permanent financing of the costs

associated with construction or

rehabilitation of the SAIL Development

has not closed as of the date the SAIL

loan A pplication was received by the

Corporation

28. The term "Permanent F inancing" is not defined

by rule or statute. The Respondent has interpreted such

term to mean financing that provides for a repayment of

the loan by an amortization from revenues derive d from

the project.

29. As such, the Respondent maintains that the bond

closing (which contained all material provisions to

compute the repayment of the loan) constitutes the point

in time from which the "permanent financing" must be

considered.

30. Su ch conclusion presumes the bond financing

constituted the entire amount needed to construct the

project. It also ignores the surtax loan not closed

until June 27, 2001.

31. Additionally, such conclusion requires that

bond financed projects be treated dif ferently from those

financed through conventional means that hold a separate

closing subsequent to the construction phase.

32. Under the Respondent's view, the rule would not

preclude an applicant that has closed on construction

financing from filing an a pplication for SAIL funds.

33. The Petitioner's substantial interests have

been affected by the Respondent's determination that the

bond closing constituted permanent financing.

34. Additionally, the Petitioner's substantial

interests have been affected since the Respondent treated

the bond closing as the only permanent financing for the

project.

35. The surtax loan, also identified as part of the

Petitioner's financial package, was part of its permanent

financing.

36. In this case the Petitioner has demonstrated

that the bond documents recognize and provide for a 24 -

month construction period. The "permanent financing

phase" follows that period. During the construction

period there is no amortization of the principal. Thus

"permanent financing" is n ot finalized until the

construction is completed. More critical, however, it is

the undisputed fact that SAIL funds will not refinance

enhancements to the project. Thus it is clear that the

SAIL funds would be used as contemplated by the rules.

RECOMMEND ATION

Based on the foregoing Findings of Fact and

Conclusions of Law, it is RECOMMENDED that the Respondent

enter a final order that approves the Petitioner for

consideration of SAIL funds as it has demonstrated

compliance with the threshold requirements o f Rule 67 -

48.002(97)(b), Florida Administrative Code.

DONE AND ENTERED this 30th day of January, 2002, in

Tallahassee, Leon County, Florida.

___________________________________

J. D. PARRISH

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 30th day of January, 2002.

COPIES FURNISHED:

Margaret - Ray Kemper, Esquire

Ruden, McClosky, Smith,

Schuster & Russell, P.A.

215 South Monroe Street

Suite 815

Tallahassee, Florida 32301

Andrew T. Price, Esquire

Florida Housing Finance Corpor ation

227 North Bronough Street

Suite 5000

Tallahassee, Florida 32301 - 1329

Mark Kaplan, Executive Director

Florida Housing Finance Corporation

227 North Bronough Street

Suite 5000

Tallahassee, Florida 32301

Steven M. Seibert, Secretary

Department of Co mmunity Affairs

2555 Shumard Oak Boulevard

Suite 100

Tallahassee, Florida 32399 - 2100

Cari L. Roth, General Counsel

Department of Community Affairs

2555 Shumard Oak Boulevard, Suite 325

Tallahassee, Florida 32399 - 2100

NOTICE OF RIGHT TO SUBMIT EXCEPTION S

All parties have the right to submit written exceptions

within 15 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.