09-004682BID Elmwood Terrace Limited Partnership vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Thursday, November 12, 2009.

Summary: Specifications of the RFP were contrary to the agency's governing statutes and rules.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ELMWOOD TERRACE LIMITED )

PARTNERSHIP, )

)

Petitioner, )

)

and )

)

RST FRUITLAND HOUSING, L.P., )

)

Intervenor, )

)

vs. ) Case No. 09-4682BID

)

FLORIDA HOUSING FINANCE )

CORPORATION, )

)

Respondent, )

)

and )

)

BROWNSVILLE VILLAGE, II, LTD., )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was held in this case

on September 23 through 25, 2009, in Tallahassee, Florida,

before Susan B. Harrell, a designated Administrative Law Judge

of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: J. Stephen Menton, Esquire

Rutledge, Ecenia, & Purnell, P.A.

119 South Monroe Street, Suite 202

Post Office Box 551

Tallahassee, Florida 32302

For Intervenor RST Fruitland Housing, L.P.:

Michael P. Donaldson, Esquire

Carlton Fields, P.A.

215 South Monroe Street, Suite 500

Post Office Drawer 190

Tallahassee, Florida 32302-0190

For Respondent: Wellington Meffert, Esquire

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301-1329

For Intervenor Brownsville Village II, Ltd.:

Donna E. Blanton, Esquire

Radey, Thomas, Yon & Clark, P.A.

301 South Bronough Street, Suite 200

Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

The issue in this case is whether the specifications,

terms, and conditions of the Request for Proposals 2009-04

issued by Respondent are contrary to Respondent’s governing

statutes, rules, or policies.

PRELIMINARY STATEMENT

On July 31, 2009, Respondent, Florida Housing Finance

Corporation (Florida Housing), issued Request for Proposals

2009-04 (the RFP), which solicited proposals from developers

seeking funding for affordable housing projects in Florida. On

August 5, 2009, Petitioner, Elmwood Terrace Limited Partnership

(Elmwood), timely submitted a notice of intent to protest

certain specifications in the RFP. Elmwood timely filed a

Formal Written Protest and Petition for Administrative Hearing

(the Petition) on August 17, 2009.

The Petition was forwarded to the Division of

Administrative Hearings on August 26, 2009. RST Fruitland

Housing, L.P. (Fruitland), filed a Petition for Leave to

Intervene on September 9, 2009. Brownsville Village II, Ltd.

(Brownsville), filed a Petition for Leave to Intervene on

September 10, 2009. By Order dated September 17, 2009, the

petitions to intervene were granted.

At the commencement of the final hearing, Elmwood submitted

a Motion to Amend Petition. The motion was orally granted at

the final hearing. The parties submitted an executed Joint Pre-

hearing Stipulation at the commencement of the final hearing.

The Joint Pre-hearing Stipulation contained admitted facts on

pages 8 through 19. To the extent relevant, those admitted

facts have been incorporated into this Recommended Order.

At the final hearing, Elmwood called the following

witnesses: Donald Paxton, Kevin Tatreau, and Rob Vogt.

Fruitland called Michael Hartman as its witness. Florida

Housing called Steve Auger as its witness and submitted the

deposition of Laura Cox. Brownsville did not present any

witnesses at the final hearing, but submitted the deposition of

Lloyd Boggio.

Joint Exhibits 1 through 35 were admitted in evidence.

Elmwood’s Exhibits 1, 2, 3, 6, and 7 were admitted in evidence.

Fruitland’s Exhibits 1 through 4 were admitted in evidence.

Florida Housing’s and Brownsville’s Joint Exhibits 1 through 8

were admitted in evidence.

The four-volume Transcript was filed on October 12, 2009.

On October 21, 2009, Elmwood and Fruitland filed an Unopposed

Motion for Leave to Exceed Page Limitation. The motion was

granted by Order dated October 21, 2009. The parties timely

filed their proposed recommended orders on October 22, 2006.

The proposed recommended orders have been given consideration in

the preparation of this Recommended Order.

FINDINGS OF FACT

1. Elmwood is a Florida limited partnership and is engaged

in the development of affordable housing in Florida.

2. RST is a Florida limited partnership authorized to do

business in Florida and is in the business of providing

affordable housing.

3. Florida Housing is a public corporation created by

Section 420.504, Florida Statutes (2009), 1 to administer the

governmental function of financing or refinancing of affordable

housing and related facilities in Florida. Florida Housing’s

statutory authority and mandates are contained in Chapter 420,

Part IV, Florida Statutes. Florida Housing is governed by a

Board of Directors (Board), consisting of nine individuals

appointed by the Governor and confirmed by the Senate.

4. On July 31, 2009, Florida Housing issued the RFP,

setting forth criteria and qualifications for developers to seek

funding for affordable housing projects from funds that Florida

has received through the American Recovery and Reinvestment Act

of 2009, PL 111-5 (ARRA). ARRA was enacted in 2009 by Congress

as part of the federal economic stimulus efforts and was signed

into law on February 17, 2009.

5. Elmwood and 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. Elmwood and RST are “applicants”

as defined in the RFP. Elmwood and RST submitted separate

applications, intending to seek financing for their affordable

housing projects by applying for funding from the sources that

are proposed to be allocated through the RFP.

6. On August 5, 2009, Elmwood timely submitted notice of

its intent to protest the RFP, and, on August 17, 2009, timely

filed its Formal Written Protest and Petition for Administrative

Hearing, in accordance with the provisions of Subsection

120.57(3)(b), Florida Statutes, and Florida Administrative Code

Rule 28-110.004. As an interested developer, who intended to,

and did, seek funding from the sources being allocated through

the RFP, Elmwood’s substantial interests are affected by the

terms of the RFP.

7. On August 18, 2009, Florida Housing issued its RFP

2009-04 Statement of Necessity to Continue RFP Process After Bid

Protest is Filed (Statement of Necessity), pursuant to

Subsection 120.57(3)(c), Florida Statutes. The Statement of

Necessity was not challenged. On August 20, 2009, Florida

Housing proceeded with making determinations of eligibility for

funding under the RFP.

8. Both RST and Brownsville were selected for funding and

invited into credit underwriting as provided in the RFP.

Elmwood was not selected for funding.

9. On September 9, 2009, RST filed its Petition for Leave

to Intervene on behalf of Elmwood to challenge the minimum

occupancy standard of 92% required in the RFP. On September 10,

2009, Brownsville filed its Petition for Leave to Intervene on

behalf of Florida Housing.

10. Florida Housing administers several programs aimed at

assisting developers to build affordable multi-family rental

housing in an attempt to protect financially marginalized

citizens in Florida from excessive housing costs. The programs

through which Florida Housing allocates resources to fund such

affordable housing in Florida include: a federally funded

multi-family mortgage revenue bond program (MMRB), established

under Section 420.509, et. seq. , Florida Statutes; the State

Apartment Incentive Loan Program (SAIL), created pursuant to

Section 420.5087, et seq. , Florida Statutes; and the federal Low

Income Housing Tax Credit Program (the Tax Credit Program),

established in Florida pursuant to Section 420.5099, Florida

Statutes.

11. 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 on

funding from these programs must be set aside for residents

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

Generally, the units are targeted to tenants earning 60% of AMI

or below. The primary program at issue in this proceeding is

the Tax Credit Program.

12. The Tax Credit Program was created by the Federal

Income Tax Reconciliation Act of 1986, as a means to induce the

private sector to construct and manage affordable housing

projects. The Tax Credit Program is governed by the Internal

Revenue Code, 26 U.S.C. Section 42.

13. Low income housing tax credits (Tax Credits) come in

two varieties: competitively awarded “9%” Tax Credits and non-

competitively awarded “4%” Tax Credits. For the 9% Tax Credits,

the federal government annually allocates a specific amount of

Tax Credits to each state using a population-based formula.

14. Tax Credits are a dollar-for-dollar offset to federal

income tax liability. Developers awarded the Tax Credits get

the credit amount every year for ten years. The developer 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. For example, a developer who

receives a $1,000,000 award of Tax Credits is entitled to that

amount of tax credit paid each year for ten years, for a face

value of $10,000,000. The developer sells the Tax Credits to a

syndicator or investor who has tax liability sufficient to

absorb the amount of credits. If the selling price is 85 cents

on the dollar, the sale of the Tax Credits would generate

$8,500,000 cash.

15. Unlike a loan or the proceeds from issuance of bonds,

a developer who is awarded Tax Credits and syndicates those Tax

Credits 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.

16. Florida Housing is the designated agency in Florida to

allocate Tax Credits to developers of affordable housing,

pursuant to Section 420.5099, Florida Statutes. Every year

since 1986, Florida has received an allocation of Tax Credits to

be used to fund construction of affordable housing.

17. As required by Section 42 of the Internal Revenue

Code, each year Florida Housing adopts a Qualified Allocation

Plan (QAP), which sets forth the allocation methodology for the

competitive 9% Tax Credits. The QAP must be approved by the

Governor each year. The QAP is also adopted and incorporated by

reference into Florida Housing’s rules. See Fla. Admin. Code

R. 67-48.002(95).

18. The 2009 QAP includes the following provision:

In order for the Corporation to implement

the provisions of the Recovery and

Reinvestment Act of 2009 (the “2009 Stimulus

Act”), any funds received pursuant to 2009

Stimulus Act may be allocated by a

competitive request for proposal or

competitive application process as approved

by the Board. Any such process will be

governed by Section 42, IRC, and Chapter 67-

48, F.A.C., as applicable, or, an emergency

rule authorized by the Florida Legislature

specifically for the 2009 Stimulus Act, if

any.

The 2009 QAP was adopted as part of the 2009 Universal Cycle

rules by Florida Housing’s Board on March 13, 2009. At that

time, Florida Housing had not yet received guidance from the

federal government as to how the ARRA funds should be allocated.

19. The Florida Affordable Housing Guarantee Program was

created in Section 420.5092, Florida Statutes, for the purposes

of stimulating creative private section lending activities to

increase the supply and lower the cost of financing or

refinancing eligible housing, creating security mechanisms to

allow lenders to sell affordable housing loans in the secondary

market, and encouraging affordable housing lending activities

that would not have taken place or that serve persons who would

not have been served but for the creation of this program.

Florida Housing has accomplished these goals by issuing

capitalizing bonds to create the Guarantee Fund, which lowers

the interest paid on the MMRB bond debt by serving as a credit

enhancer.

20. Since 2002, Florida Housing has allocated funding from

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

competitive application process known as the “Universal Cycle,”

in which the applicants compete against one another for funding.

The Universal Cycle and the attendant complex application review

process are intended to equitably and reasonably distribute

affordable housing throughout Florida.

21. Florida Housing has adopted rules which incorporate by

reference the application forms and instructions for the

Universal Cycle to govern the allocation of funds from the

various programs it administers. Florida Housing amends it

Universal Cycle rules, forms, and instructions every year.

Following the completion of the Universal Cycle, Florida Housing

engages in an extensive public comment process through which it

solicits feedback and comments from developers for the next

year’s cycle. Any new amendments are adopted to take effect

prior to an established Application Deadline for the ensuing

year.

22. The process used by Florida Housing to review and

approve the Universal Cycle applications is set forth in Florida

Administrative Code Rule 67-48.004. Florida Housing reviews all

timely-filed applications to determine if threshold requirements

are met and scores each application based on factors such as

programs for tenants, amenities of the development as a whole

and of the tenants’ units, local government contributions to the

specific development, and local government ordinances and

planning efforts that support affordable housing in general.

The process includes a series of tiebreakers to choose among

applications with otherwise equal scores.

23. After the initial review and scoring by Florida

Housing, all applications and included exhibits, along with the

scores for the applications, are posted on Florida Housing’s

website. Applicants are given a specific time period to alert

Florida Housing of any errors they believe Florida Housing made

in its initial scoring. Florida Administrative Code Rule 67-

48.005 sets forth an appeal procedure for challenging the

scores.

24. After any appeal proceedings, Florida Housing

publishes final rankings which determine which applications are

preliminarily selected for funding. The applicants for those

applications selected are invited to participate in the credit

underwriting process, which is governed by Florida

Administrative Code Rule 67-48.0072. A third party financial

consultant, who is selected by Florida Housing but paid for by

the individual applicant, determines whether the proposed

project is financially sound. The credit underwriter reviews

all aspects of the proposed development, including financing

sources, plans and specifications, cost analysis, zoning, site

control, environmental reports, construction contracts, and

engineering and architectural contracts. Florida Administrative

Code Rule 67-48.0072(10) requires an appraisal and market study.

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 for approval or disapproval of

funding.

25. Each year the Universal Cycle provides a mechanism for

selecting applications to meet statutory geographic

requirements; for certain targeting goals that address housing

needs of particular demographic groups, such as farm workers,

commercial fishery workers, the homeless, or the elderly; for

specific set-asides or targeting goals aimed at addressing

identified needs, such as the Florida Keys, inner city areas, or

rural development; and for the preservation of existing

affordable housing complexes. Each set-aside group essentially

has its own separate funding from its share of the funds

distributed by Florida Housing.

26. After the set-aside goals are addressed, Florida

Housing then uses the final rankings to try to achieve a

distribution of affordable housing units among the county

groupings (small, medium, and large, based on population) in

accordance with the adopted percentages. Each of the three

groups must receive at least 10% of the funds. Within the

county size groups, Florida Housing uses a formula called SAUL,

which is an acronym for Set-Aside Unit Limitation. The formula

is set forth in the application instructions and incorporated by

reference into the rules for each Universal Cycle in an attempt

to evenly distribute the units.

27. As part of the Universal Cycle process, Florida

Housing designates certain geographic areas of the state that

are considered soft markets as “Location A” areas. Florida

Housing first began incorporating into its application process a

mechanism for identifying weak markets, known as “Location A” in

2003. The Location A designations are included in the Universal

Cycle Application Instructions, which are incorporated by

reference in the rules of Florida Housing.

28. Elmwood timely filed an application in the 2007

Universal Cycle, seeking an award of Tax Credits and a

supplemental loan to construct a 116-unit family apartment

complex, Elmwood Terrace, in Fort Myers, Lee County, Florida.

Elmwood’s application received a perfect score and maximum

tiebreaker points. As a result, Elmwood was allocated

$1,498,680 in Tax Credits. During the credit underwriting

process, Elmwood committed to set aside more than the required

units for Extremely Low-Income (ELI) households.

29. Based on the final ranking of its application, Elmwood

was invited into the credit underwriting process. The credit

underwriter designated by Florida Housing conducted the analysis

required under Florida Housing’s rules and issued a favorable

recommendation for funding. The Credit Underwriting Report for

Elmwood Terrace was accepted by the Florida Housing Board on

September 22, 2008.

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

place in the economic environment and the housing market in

particular, and it became evident that the market for Tax

Credits had precipitously dropped. Tax credits had typically

sold in the range of 85 to 95-cents on the dollar in recent

years, but the value of Tax Credits had plummeted in the last

two years. Sales, when a buyer can be found, are currently in

the low 60-cents on the dollar range. Shortly before Elmwood

was scheduled to close on its Tax Credits in the fall of 2008,

the syndicator who had originally expressed its intent to

purchase Elmwood’s Tax Credits informed Elmwood that it would

not go forward with the syndication.

31. Many other projects that were awarded Tax Credits

during the 2007 and 2008 Universal Cycles similarly experienced

difficulty in finding syndicators to purchase the awarded Tax

Credits and, thus, were unable to proceed to closing.

32. In order to accomplish the legislative mandate to pay,

Florida Housing attempted to assist these troubled projects by

granting extensions of time to meet various benchmarks in the

Tax Credit program.

33. In January 2009, the Florida Legislature met in

special session to address budget revenue shortfalls for the

2008-2009 fiscal year. Legislation was adopted and signed into

law on January 27, 2009, which swept trust fund balances,

transferred $30 million from multi-family housing programs to

the State Housing Initiative Partnership (SHIP) program, and

required Florida Housing to pay $190 million in previously

appropriated funds to the treasury by June 1, 2009. These funds

were to be taken first from developments that would provide new

construction.

34. In order to accomplish the legislative mandate to pay

$190 million to the treasury, Florida Housing had to deobligate

approximately $80 to $90 million of funds preliminarily

committed to SAIL-funded projects and from funds preliminarily

committed to the Community Workforce Housing Innovation Pilot

Program (CWHIP) projects. For the first time in Florida

Housing’s history, it was compelled to take money away from

people at the Legislature’s direction.

35. 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 it economic stimulus efforts,

established mechanisms to assist in the development of

affordable housing and offset some of the economic devastation

to developers. Congress included specific provisions in ARRA

intended to address the condition of the Tax Credit market.

36. Section 1602 of ARRA allows the state Tax Credit

allocating agencies to return up to 40% of the state’s annual

Tax Credit allocation, as well as Tax Credits awarded in 2007

and 2008 to the federal government, to be exchanged for a cash

distribution of 85 cents for each tax credit dollar returned.

The exchange of Tax Credits generated a pool of $578,701,964 for

the State of Florida.

37. The Tax Credit Assistance Program (TCAP), a separate

provision in ARRA, includes a direct allocation of funds to

state housing finance agencies from the Department of Housing

and Urban Development to provide gap financing for affordable

housing projects that have been affected by the economic

downturn. 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.”

38. Florida Housing issued the RFP as the method for

allocating the Exchange Funds and to provide an opportunity for

applicants to request TCAP funds. 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.

39. Section 4D.2 of the RFP provides:

2. Proposed Developments located within a

2009 Location A Area are eligible to apply

only under the following circumstances:

a. Developments where the original

Application for the Proposed Development was

funded under the Housing Credit Hope VI

goal.

b. Developments where the Original

Application for the Proposed Development

reflects the Housing Credit Preservation

Designation.

c. Proposed Developments that are located

in a 2009 Location A Area that does not have

a Guarantee Fund Development with the same

Demographic category located in the same

county. (Emphasis in original)

40. The Location A areas in the RFP are the Location A

areas in the rules adopted for the 2009 Universal Cycle. The

Elmwood Terrace project is located in Lee County, which was not

designated as a part of Location A in the 2007 Universal Cycle.

The rules for the 2008 Universal Cycle provided that Location A

included that part of Lee County lying south of State Road 80

and the Caloosahatchee River. The 2008 Location A for Lee

County did not specify demographic categories. For the 2009

Universal Cycle, all of Lee County was designated Location A for

both the family and elderly designations.

41. The Universal Application Package, which is

incorporated by reference in Florida Administrative Code

Rule 67-48.004(1)(a), provides:

(1) Set-Aside Location A Development

(Threshold)

A proposed Development qualifies as a Set-

Aside Location A Development if the location

of the proposed Development is within a Set-

Aside Location A Area and the Applicant

selected the applicable Demographic

Commitment (Elderly or Family) at Part III.D

of the Application. The only exception to

this provision is if the proposed

Development also qualifies as a HOPE VI

Development at Part III.A.2.d. of the

Application.

Applicants with a Set-Aside Location A

Development must meet the following set-

aside requirements:

(a) Applicants requesting Competitive HC

must commit to set aside 100 percent of the

Development’s residential units at

50 percent AMI or less; or

(b) Applicants requesting MMRB must commit

to set aside at least 85 percent of the

Development’s residential units at

50 percent AMI or less.

(c) All Applicants must meet the minimum

ELI Set-Aside threshold set out in Part III

E.1.b.(2)(a)(iii) of these instructions.

42. Because Elmwood’s proposed development is located in

Lee County, Florida, the specifications of the RFP prohibit

Elmwood from being considered for the allocation of funds in

exchange for its Tax Credits.

43. The RFP provides that any project that receives an

allocation of Exchange Funds and/or TCAP Funds will be required

to go through the credit underwriting process, including an

assessment of market need and impact.

44. 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.”

45. The term “submarket” is used in Florida Housing’s

credit underwriting rules in Florida Administrative Code

synonymous terms. Determining a submarket or primary area

market is very subjective; even two adjacent sites may have

different submarkets. Determination of a submarket is an art

that involves making judgments. The market analysis, which is

required to be done as part of the credit underwriting process,

will delineate the primary market area or submarket area of the

proposed project. Such delineation will be based on criteria

which may be unique to that proposed site. Thus, it is not

practical to specify what criteria are used to establish the

primary market area or submarket area of a proposed project.

46. The RFP provides that the demographic grouping

submitted in the original application cannot be changed. The

RFP allows applicants to change other aspects of their original

proposal, including that an applicant may increase the number of

proposed units.

47. Subsequent to the withdrawal of its anticipated equity

syndicator in September 2008, Elmwood explored other options

that could potentially enable it to proceed to closing. One

option that Elmwood proposed to Florida Housing was to change

the demographic grouping of Elmwood Terrace to an elderly

project. Elmwood formally requested a change to its demographic

grouping in a letter from Elmwood’s attorney, Warren Husband, to

Florida Housing’s deputy development officer, Deborah

Blinderman, dated January 26, 2009. That request was not

approved.

48. Elmwood contends that the prohibition on changing a

development’s demographic grouping is contrary to Florida

Housing’s policy of allowing other developers to change their

demographic groupings. Florida Housing did allow two

developments to change their demographic groupings.

49. On April 24, 2009, the Board granted River Trace

Senior Apartments’ request to change its demographic grouping

from elderly to family. River Trace Senior Apartments was a

development which had been funded in 2000 as an elderly

development. It operated for eight years as an elderly

development without achieving satisfactory occupancy in its

178 units. Based on the development’s history, the Board

allowed a demographic grouping change in hopes of achieving

satisfactory occupancy levels. Unlike Elmwood’s proposed

development, River Trace Senior Apartments was a housing

development, which was already built and in operation.

50. In October 2008, Florida Housing approved a request

for a change in demographic grouping in a proposed project. The

proposed development, Bradenton Village II, was the third phase

of a large HOPE VI redevelopment project and consisted of

36 units designated as family units. During the permitting

process, the City of Bradenton informed the developer that the

proposed site could not accommodate the number of parking spaces

required for a family development, but the required parking

could be provided if 32 of the units were designated as elderly

units. Bradenton Village had an investor who was willing to

remain in and go forward with the project redesignated as

elderly.

51. Florida Housing did not allow changes in pending deals

after the Legislature’s special session budget action in

January 2009 because of the large number of projects that had

lost their funding and proposed changing the scope of their

projects to qualify for ARRA funds. These included a number of

CWHIP projects. The director for Florida Housing felt that he

could not justify allowing Elmwood to change its demographic

designation while refusing to allow the deobligated CWHIP

developers to change their target markets.

52. The evaluation process for the RFP is set forth in

Section 7 of the RFP and provides that the Florida Housing

Review Committee will:

[S]elect Applicants most likely to be

considered for award, make any adjustments

deemed necessary to best serve the interest

of Florida Housing’s mission, and develop a

recommendation or series of recommendations

to the Board. The Committee will then rank

the Applications deemed eligible for funding

with preference given to Applications that

are Shovel-Ready. The Board may use the

Proposals, the Committee’s scoring, and any

other information or recommendation provided

by the Committee or staff, and any other

information the Board deems relevant in the

selection of Applicants to whom to award

funding.

CONCLUSIONS OF LAW

53. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding. §§ 120.569 and 120.57, Fla. Stat.

54. Florida Housing has challenged Fruitland’s standing to

intervene in this bid protest. Fruitland’s substantial

interests are affected by the specifications that deal with the

92% occupancy requirement. Although Fruitland has moved to the

credit underwriting process, it is still affected by this

requirement. Therefore, Fruitland has standing to intervene.

55. Brownsville also has standing to intervene. Like

Fruitland, Brownsville has moved into the credit underwriting

process, and a change in the specifications could affect its

ability to continue in the process.

56. As the party protesting the specifications of the RFP,

Elmwood has the burden of proof. See State Contracting and

Engineering Corp. v. Dept. of Transportation , 709 So. 2d (Fla.

1st DCA 1998). Subsection 120.57(3)(f), Florida Statutes,

provides:

Unless otherwise provided by statute, the

burden of proof shall rest with the party

protesting the proposed agency action. In a

competitive-procurement protest, other than

a rejection of all bids, proposals, or

replies, the administrative law judge shall

conduct a de novo proceeding to determine

whether the agency's proposed action is

contrary to the agency's governing statutes,

the agency's rules or policies, or the

solicitation specifications. The standard

of proof for such proceedings shall be

whether the proposed agency action was

clearly erroneous, contrary to competition,

arbitrary, or capricious. In any bid-

protest proceeding contesting an intended

agency action to reject all bids, proposals,

or replies, the standard of review by an

administrative law judge shall be whether

the agency's intended action is illegal,

arbitrary, dishonest, or fraudulent.

57. Elmwood is contesting certain terms, conditions, and

specifications of the RFP. Thus, the issue is whether those

terms, conditions, and specifications are contrary to Florida

Housing’s governing statutes, rules, or policies. Section

420.5099, Florida Statutes, designates Florida Housing as the

housing credit agency for Florida within the meaning of

Subsection 42(h)(7)(A) of the Internal Revenue Code of 1986 and

gives Florida Housing “the responsibility and authority to

establish procedures necessary for proper allocation and

distribution of low-income housing tax credits and [to] exercise

all powers necessary to administer the allocation of such

credits.” Subsection 420.507(10), Florida Statutes, gives

Florida Housing the authority to accept grants from the United

States government.

58. Pursuant to ARRA, Florida Housing is the recipient of

a Grant to States for Low-Income Housing Projects in Lieu of

Low-Income Housing Credits for 2009 (Grant) in which Tax Credits

are exchanged for cash. Florida Housing is required to use the

Grant to make subawards to finance the construction or

acquisition and rehabilitation of qualified low-income

buildings. Subsection 1602(c)(2) of ARRA further requires that

“[a]ny such subaward with respect to any qualified low-income

building shall be made in the same manner and shall be subject

to the same limitations (including rent, income, and use

restrictions on such building) as an allocation of housing

credit dollar amount allocated by such State housing credit

agency under section 42 of the Internal Revenue Code of 1986.”

59. Subsection 42(m)(1)(C) of the Internal Revenue Code of

1986 requires that Florida Housing set forth its selection

criteria for the allocation of Tax Credits in a qualified

allocation plan. Florida Housing has adopted rules which

establish the criteria to be used for the allocation of Tax

Credits. Those rules are contained in Florida Administrative

Code Chapter 67-48. The QAP, which sets out the allocation for

the competitive award of Tax Credits, is incorporated by

reference in Florida Administrative Code Rule 67-48.002(95).

The QAP provides that any funds received pursuant to ARRA will

be allocated by a competitive request for proposal or

competitive allocation process as approved by the Board. It

further provides that the selection process will be governed by

Section 42 of the Internal Revenue Code and Florida

Administrative Code Chapter 67-48, as applicable, 2 or an

emergency rule authorized by the Florida Legislature for ARRA,

if any. There were no emergency rules authorized by the

Legislature, and none were adopted by Florida Housing.

60. Subsection 420.507(41), Florida Statutes, provides

that Florida Housing has the authority “[t]o conduct and fund,

solely from funds derived from amounts other than those

deposited into the State Housing Trust Fund, demonstration

programs and projects which further the statutory purposes of

the corporation, including the power to establish selection

criteria by rule or by means of requests for proposals.” No

evidence was presented to definitively establish that the Grant

funds are not deposited in the State Housing Trust Fund. Based

on the terms and conditions of the Grant, Florida Housing is

required to “open a new account (Grant Account) with a financial

institution for the purpose of receiving grant elections

amounts, for making distributions of grant election amounts to

other agencies within the State, and for making subawards.” It

appears that the monies received from the Grant are not funds

that are deposited in the State Housing Trust Fund.

Additionally, any interest earned in the Grant Account above

$200 must be returned to the United States Treasury.

61. The Grant is not a demonstration program and is not a

project; thus, the provisions of Subsection 420.507(41), Florida

Statutes, are not applicable to the RFP at issue. Assuming,

arguendo , that the Grant is a demonstration program or a

project, Florida Housing elected to establish the selection

criteria by rule when it included the allocation of ARRA in the

2009 QAP, which was incorporated by reference in Florida

Administrative Code Rule 67-48.002(95).

62. Based on the requirement of Subsection 1602(c)(2) of

ARRA that the allocation of the Grant funds be allocated in the

same manner and subject to the same limitations as an allocation

of Tax Credits and the requirement in the 2009 QAP that the

selection process will be governed by Section 42 of the Internal

Revenue Code and Florida Administrative Code Chapter 67-48 that

are applicable to the allocation of Tax Credits, it is concluded

that the RFP specifications are governed by Florida

Administrative Code Chapter 67-48, as applicable to the

allocation of Tax Credits, and Section 42 of the Internal

Revenue Code.

63. Florida Administrative Code Rule 67-48.004(1)(a)

incorporates by reference the Universal Application Package,

which is Form UA1016 and which includes the Universal Cycle

Application Instructions.

64. Elmwood challenges the RFP specification that

prohibits the consideration of developments located in a

Location A area. The RFP specifications relating to Location A

developments are contrary to the rules which govern Florida

Housing’s allocation of ARRA funds. The Universal Application

Package does not prohibit an applicant from being considered for

Tax Credits if the applicant commits to set aside 100% of its

residential units at 50% AMI or less. The RFP uses the Location

A areas as a bar to being considered without consideration of

whether the applicant is willing to commit to setting aside 100%

of the residential units at 50% AMI or less and includes

criteria not set forth in the Universal Application Package such

as precluding consideration of developments in a Location A area

that contains a Guarantee Fund Development.

65. The RFP specifications precluding consideration of

developments located in a Location A area without consideration

of whether the applicant is willing to set aside 100% of its

units at 50% AMI or less is clearly erroneous because it is

contrary to the Universal Application Package.

66. Elmwood challenges the RFP requirement that the

submarket of the development proposed by an applicant must have

a 92% or greater occupancy rate for the same demographic

population. Florida Administrative Code Rule 67-48.0072(10)

provides that, in order for the credit underwriter to make a

favorable recommendation, the submarket of the proposed

development must have an average occupancy rate of 90% or

greater. The RFP requirement for the 92% occupancy rate is

clearly erroneous because it is contrary to Florida Housing’s

governing rules.

67. Elmwood has also challenged the 92% occupancy

requirement because the term “submarket” is not defined.

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.

68. The Universal Application Package, which is

incorporated by reference in Florida Administrative Code

Rule 67-48.004, provides detailed evaluation criteria for the

applications that are submitted for Tax Credit developments.

Section 7 of the RFP sets forth the evaluation process that is

to be used in allocation of funds for the Tax Credit Exchange

Program. The RFP provides that the review committee will select

applicants “most likely to be considered for award, make any

adjustments deemed necessary to best serve the interests of

Florida Housing’s mission and develop a recommendation or series

of recommendations to the Board.” The review committee will

rank the applications deemed eligible for funding and give

preference to applications that are shovel ready. The Board

then makes an award using the “Proposals, the Committee’s

scoring, and any other information or recommendation provided by

the Committee or Staff, and any other information the Board

deems relevant in its selection of Applicants to whom to award

funding.” The RFP is contrary to the Florida Housing’s

governing rules as set forth in Florida Administrative Code

Rule 67-48.004, which incorporates by reference the evaluation

process that is to be used in the selection of applications for

awards of Tax Credits.

69. In a competitive bidding process, it is important to

have uniform standards for evaluating the proposals and for such

standards to be published at the outset of the process.

Otherwise, there is no way to determine whether each proposal is

being measured by the same yardstick. The principle was

succinctly summarized in Deloitte & Touche LLP v. Dept. of

Health and Rehabilitative Services , Case No. 95-0727BID (DOAH

May 12, 1995)(citations omitted)( quoting Courtenay v. Dept. of

Health and Rehabilitative Services , 12 F.A.L.R. 2226 (1990)).

Part of the reciprocity achieved under the

competitive bidding process is achieved in

the bid specifications and weighted

criteria. Potential bidders are advised in

advance of the requirements to be met in

order to receive the contract award, as well

as the standards by which each bid will be

evaluated by the agency and each standard’s

relative importance to the agency. . . . .

Therefore, central to the integrity and

reciprocity of the competitive bidding

process is the requirement that an agency’s

action on a bid can be expressed within the

bid specifications and evaluation criteria

which it created.

70. The QAP provides that the Board’s determination of

funding for applications must be consistent with the provisions

of the QAP. Section 7 of the RFP gives the reviewing committee

and the Board unbridled discretion in determining which

applicants will be allocated funds. The method of selection is

not clearly stated. No criteria are set forth for the ranking

of the applications. No criteria are given for how the

applications will be scored. Such discretion is contrary to

competition, arbitrary, and clearly erroneous.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that a final order be entered finding:

1. The specifications of the RFP which exclude

consideration of funding for projects located in a Location A

area without regard to whether the applicant is willing to lower

the AMI for its units to 50% or less are contrary to Florida

Housing’s governing statutes.

2. The provision in the RFP which precludes the applicant

from changing its demographic grouping is not contrary to

Florida Housing’s policies.

3. The provision of the RFP which requires 92% occupancy

is contrary to Florida Housing’s governing statutes.

4. The lack of a definition of “submarket” in the RFP is

not arbitrary, capricious, clearly erroneous, or contrary to

competition.

5. The provisions of the RFP which eliminate from

consideration for funding any project in a county with a

Guarantee Fund development is contrary to Florida Housing’s

governing statutes.

6. The evaluation criteria in Section 7 of the RFP which

sets forth the evaluation procedure is contrary to the Florida

Housing’s governing rules and statutes.

DONE AND ENTERED this 12th day of November, 2009, in

Tallahassee, Leon County, Florida.

S

SUSAN B. HARRELL

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 12th day of November, 2009.

ENDNOTES

1/ Unless otherwise indicated, all references to the Florida

Statutes are to the 2009 version.

2/ Florida Administrative Code Chapter 67-48 deals with other

programs in addition to Tax Credit. Therefore, only those

provisions of Florida Administrative Code Chapter 67-48 dealing

with Tax Credits would be applicable.

COPIES FURNISHED :

J. Stephen Menton, Esquire

Rutledge, Ecenia, & Purnell, P.A.

119 South Monroe Street, Suite 202

Post Office Box 551

Tallahassee, Florida 32302

Donna E. Blanton, Esquire

Radey, Thomas, Yon & Clark, P.A.

301 South Bronough Street, Suite 200

Tallahassee, Florida 32301

Michael P. Donaldson, Esquire

Carlton Fields, P.A.

215 South Monroe Street, Suite 500

Post Office Drawer 190

Tallahassee, Florida 32302-0190

Frederick J. Springer, Esquire

Bryant, Miller & Olive, P.A.

101 North Monroe Street, Suite 900

Tallahassee, Florida 32301

Wellington Meffert, 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

10 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.