10-000354 Madison Reserve, Ltd vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Tuesday, November 9, 2010.

Summary: Petitioner proved that it met zoning threshold and Priority I by a preponderance of the evidence.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MADISON RESERVE, LTD , )

)

Petitioner , )

)

vs. ) Case No. 10 - 0354

)

FLORIDA HOUSING FINANCE )

CORPORATION , )

)

Respondent . )

)

RECOMMENDED ORDER

Pu rsuant to notice to all parties, a final hearing was

conducted in this case on August 30, 2010, in Tampa, Florida,

before Administrative Law Judge R. Bruce McKibben of the

Division of Administrative Hearings

APPEARANCES

For Petitioner: Douglas P. Manso n, Esquire

Manson Law Group, P.A.

1101 W est Swann Avenue

Tampa, Florida 33606 - 2637

For Respondent: Matthew A. Sirmans, Esquire

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Fl orida 32301 - 1329

STATEMENT OF THE ISSUES

The issues in this case are: (1) Whether Respondent,

Florida Housing Finance Corporation (Florida Housing), erred in

its determination that Petitioner, Madison Reserve, Ltd. 's

(Madison Reserve), application seek ing an allocation of Housing

Credits from the 2009 Universal Cycle failed to meet threshold

and should not receive an Ability to Proceed Tie - Breaker Point

with regard to zoning; and (2) Whether Florida Housing erred in

its characterization of Madison Reser ve's application as a

Priority II application.

PRELIMINARY STATEMENT

On December 3, 2009, Florida Housing advised Madison

Reserve that its application in the 2009 Universal Cycle failed

to meet threshold with respect to zoning and was deemed to be a

Priori ty II application. Madison Reserve timely filed a

Petition for Informal Administrative Hearing contesting the

final agency action by Florida Housing. After a review of the

P etition, Florida Housing decided there were disputed issues of

material fact. Th e matter was forwarded to the Division of

Administrative Hearings for assignment of an Administrative Law

Judge to conduct a formal hearing.

At the final hearing, Petitioner called one witness:

Todd L. Borck, managing member of Florida Reserve, Ltd.

Respo ndent also called one witness: Steve Auger, executive

director of Florida Housing. The parties offered 17 joint

exhibits which were admitted into evidence.

A Transcript of the final hearing was ordered by the

parties and was filed at the Division of Admi nistrative Hearings

on September 8, 2010. By rule, the parties were allowed ten

days to submit proposed recommended orders, but requested 30

days. Each party timely submitted a Proposed Recommended Order,

and each was duly considered in the preparation o f this

Recommended Order.

FINDINGS OF FACT

1. Madison Reserve is a Florida limited partnership made

up of a general partner, Madison Reserve Apartments, LLC, and an

"initial limited partner," Todd L. Borck. The members of the

general partner are Todd L. Borck and Patrick E. Law. Borck and

Law are experienced developers of real estate properties,

especially those which qualify for Low Income Housing Tax

Credits ("Housing Credits") from Florida Housing.

2. Borck and Law are affiliated with two other enti ties

which filed applications for Housing Credits in the 2009

Universal Cycle. Those two entities, Madison Heights and

Madison Terrace, are also Florida limited partnerships in which

Borck and Law are members of the general partners. As part of

its appli cation, Madison Reserve submitted a "Declaration of

Priority I Related Applications" form , which identified the

other two entities as part of the Pool of Related Applications

for the Madison Reserve application.

3. Florida Housing is a public corporation organized

pursuant to Section 420.504, Florida Statutes (2009), to provide

and promote the public welfare by administering the governmental

function of financing and refinancing affordable housing and

related facilities in Florida.

4. The 2009 Universal Cycle was the first time that

applicants were required to designate themselves as Priority I

or Priority II applicants. Preference for funding was to be

given to Priority I applicants. With certain exceptions, all

Priority I applications for a given Set - Aside were to be funded

before any Priority II applications were funded.

5. In essence, the rules in effect for the 2009 Universal

Cycle require that applications submitted by related applicants

be considered a "Pool of Related Applications." While t here is

no limit to the number of related applications within a Pool of

Related Applications that may be submitted, there can be no more

than three related applications in order to file under

Priority I. There is an exception to that rule if applicants

ha ve entered into joint ventures with a not - for - profit entity or

a public housing authority. In those cases, applicants are

permitted to up to three additional Priority I applications.

6. The Priority I/Priority II designations were upheld as

valid rules in Atlantic Housing Partners, LLP v Florida Housing

Finance Corporation , Case No. 09 - 2276RP (DOAH July 14, 2009 ) .

7 . On August 20, 2009, Madison Reserve submitted an

application seeking an allocation of Housing Credits from the

2009 Universal Cycle. Madi son Reserve's submission was assigned

Application No. 2009 - 197C. Two - thousand and nine (2009)

designates the year the application was filed ; 197 indicates

that Madison Reserve application was the 197th application

processed in that cycle ; and C indicates the application was

seeking Housing Credits. The application was basically a

"shell" application as is the general practice among entities

seeking an allocation of Housing Credits. A shell application

contains only minimal information about the applicant and the

proposed project. The remaining portions of the application are

filed during the "cure" period and, thereafter, pursuant to

specific requests by Florida Housing. The shell application

provides only the essential information needed by Florida

Hou sing to make a preliminary assessment of the applicant's

ability to proceed through the process.

8 . Application 2009 - 197C designated ARD MR, LLC, as the

developer for the proposed project for which Madison Reserve was

seeking Housing Credits. Exhibit 9 t o the application

designates the developer and sets forth the ownership of the

applicant entity. In both cases, Borck and Law are the only

natural persons listed with any interest in the project.

9 . Borck is experienced with the 2009 Universal Cycle and

the application process. He has filed over 100 applications for

various entities and acts as a consultant for other entities

with which he has no ownership interest. One such entity is

Madison Springs, LLC (Madison Springs) . Borck assisted that

entity w ith filing an application in the 2009 Universal Cycle.

Madison Springs' application was assigned number 2009 - 195C.

Related Application Issue

10. For the 2009 Universal Cycle, Florida Housing, for the

first time, limited applicants to only three related en tity

applications. That is to say, applicants , such as Borck and

Law , could not be affiliated with more than three entities who

had filed for Housing Credits in the 2009 Universal Cycle. In

fact, Borck and Law were affiliated with Madison Reserve,

Madiso n Heights and Madison Terrace.

11. However, in Exhibit 9 of the application filed by

Madison Springs, Borck and Law were listed as owners of TLB

Madison Springs, LLC, and PEL Madison Springs, LLC,

respectively. Those two entities are the members of Madiso n

Springs Apartments, LLC, the managing member of Madison Springs ,

Borck and Law are also listed as owners of the two limited

liability companies that comprise the members of ARD MT, LLC,

the developer identified in Exhibit 9 of the Madison Springs

applica tion. However, Exhibits 11 and 53 of the Madison Springs

application list CAS Orlando Development , Inc . (CAS Orlando), as

the developer for the project. There are obvious errors in the

Madison Springs application.

12. Borck and Law had previously held ow nership of the

entities as set forth in the Madison Springs ' Exhibit 9 to its

application. However, Borck and Law's ownership interests had

been rescinded prior to the filing of the Madison Springs

application. The Exhibit 9 , filed by Madison Springs , wa s in

error as to Borck and Law's involvement with the project. The

Exhibit 9 was also in error as to the developer. The correct

developer for Madison Springs is CAS Orlando.

1 3 . In order to correct its error, Madison Springs filed a

corrected Exhibit 9 d uring the cure period. That Exhibit 9

clarified that neither Borck , nor Law , had any ownership

interest in or affiliation with Madison Springs or its

developer. The cure document was filed with Florida Housing on

November 3, 2009. Included within the cu re documents were

Articles of Amendment to Articles of Organization of Madison

Springs. The Articles of Amendment were filed with the

Secretary of State on April 13, 2009, some four months prior to

filing of applications in the 2009 Universal Cycle. The

Articles of Amendment clearly indicate the deletion of Borck and

Law from the ownership of Madison Springs.

1 4 . Florida Housing did not accept the cure submitted by

Madison Springs concerning Borck and Law's non - affiliation with

Madison Springs. The reaso n stated by Florida Housing's

e xecutive d irector was that when Madison Springs initially filed

its cure documents, it did so under the wrong application

number. The documents came in under A pplication No. 2009 - 194C ,

instead of 2009 - 195C. That mistake was a typographical or

clerical error. In fact, A pplication No. 2009 - 194C had already

been withdrawn prior to the time Madison Springs submitted its

cure documents intended for A pplication No. 2009 - 195C. Thus,

there would have been no reason for cure docume nts to have been

filed for A pplication No. 2009 - 194C.

1 5 . The cure documents submitted by Madison Springs

included a revised Exhibit 9 , as discussed above. Florida

Housing at some point realized that the cure documents,

including Exhibit 9, actually belon ged to the Madison Springs

A pplication (2009 - 195C) , rather than the withdrawn application.

However, the cure was still not accepted because it had been

filed under the incorrect application number initially. Florida

Housing's e xecutive d irector opined th at there was, in effect,

no way to cure the error once it had been made. No credible

rationale for that position was espoused.

1 6 . Nevertheless, the evidence is clear that the owners of

Madison Reserve are not affiliated with Madison Springs and were

not affiliated with Madison Springs at the time the applications

were filed in the 2009 Universal Cycle. The fact that Madison

Springs submitted an Exhibit 9 in its application that was in

error, stating that Borck and Law were owners of Madison

Springs, does not independently create a legal ownership

interest.

1 7 . Clearly, Madison Springs did not intend to sabotage

the application of Madison Reserve. The principals of those

entities are friends and have done business together. But the

action taken begs the question of whether Florida Housing would

allow representations in competing applications to void or

undermine another applicant's submission. Florida Housing's

executive director spoke frankly at the final hearing and said

that sabotage scenarios would h ave to be looked at, but he did

not believe that the instant case was such a scenario.

Project Designation Issue

1 8 . The Madison Reserve application designated its

intended project as "Garden Apartments" at page 7 of the

application. The site plan form (E xhibit 26 to the application)

submitted along with the application refers to the project as a

"Garden" development type. In the local government verification

form (Exhibit 32) accompanying the application, the development

type is listed as "Planned Develo pment Project Multi - Family"

(PDP MF). The parties stipulate that " [a] lthough undefined in

the Rules, 'Garden Apartments' means multi - family developments,

and is considered a term of art within the development and real

estate community." 1

1 9 . The project t ype is an essential part of an

application because it puts other applicants on notice as to

what their competitors are planning. Further, the project type

dictates the kind of zoning that must be available in order to

pursue the project. Part and parcel of the designation of

project type is the verification by local zoning authority that

the proposed site of the project is properly zoned. Applicants

must show that the proposed development is appropriately zoned

and is consistent with local land use regul ations regarding

density and intended use or that the proposed development is

legally non - conforming.

20 . Neither "Garden Apartments , " nor "Garden , " is a term

defined by the rules of Florida Housing, nor is the term used in

the Hernando County Zoning Code. When the Hernando County

zoning authority submitted its verification of zoning - -

Exhibit 32 - - Garden Apartments was not listed as the development

type , because there was no zoning designation in the county for

that phrase. Rather, the zoning authority use d the term ,

PDP MF , because it encompasses all permitted uses in the R - 3

zon ing district for which Madison Reserve's project was to be

located. Hernando County recognized Madison Reserve's Garden

Apartments as an intended PDP MF , but could not verify it u nder

the name Garden Apartments.

21 . Madison Reserve's proposed development is

appropriately zoned and is consistent with local land - use

regulations regarding density and intended use as required. 2

Gary Fisher, Hernando County Zoning Authority, provided

v erification on Madison Reserve's z oning f orm that the proposed

development was properly zoned and that for zoning purposes in

Hernando County, the proper development type for Madison

Reserve's proposed Garden Apartments would be "Planned

Development Projec t , Multi - Family." In Hernando County, PDP MF

would allow for the construction of multi - family developments ,

such as the Garden Apartments proposed by Madison Reserve.

22 . Florida Housing maintains that despite its stipulation

to the facts stated above, th e Madison Reserve application fails

because the application was not properly completed.

Specifically, the use of varying terms , such as Garden, Garden

Apartments, and PDP - MF , although meant to be the same project by

Madison Reserve, were not the exact sam e wording. There is no

dispute as to what the project is meant to be, so the

discrepancy is basically form over substance.

CONCLUSIONS OF LAW

2 3 . The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

p roceeding pursuant to Section 120.569 and Subsection 120.57(1),

Florida Statutes (20 10 ).

2 4 . The applicant seeking funding has the burden of

proving the material allegations concerning its application.

Department of Transportation v. J.W.C. Company, Inc. , 396 So. 2d

778 (Fla. 1st DCA 1981).

2 5 . Florida Administrative Code Rule 67 - 48.002(100)

defines a "related application" as one which is :

[S]ubmitted in the same Funding Cycle that

shares one or more Principals or Affiliates

of an Applicant or Developer co mmon to any

or all of the Principals or Affiliates of an

Applicant or Developer in another

Application in the same Funding Cycle.

2 6 . "Principal" is then defined in Florida Administrative

Code Rule 67 - 48.002(92) as :

(i) any general partner of an Applic ant

or Developer, any limited partner of an

Applicant or Developer, any manager or

member of an Applicant or Developer, any

officer, director or shareholder of an

Applicant or Developer, (ii) any officer,

director, shareholder, manager, member,

general par tner or limited partner of any

general partner and limited partner of an

Applicant or Developer, (iii) any officer,

director, shareholder, manager, member,

general partner or limited partner of any

manager or member of an Applicant or

Developer, and (iv) a ny officer, director,

shareholder, manager, member, general

partner or limited partner of any

shareholder of an Applicant or Developer.

2 7 . "Affiliate" is defined in Florida Administrative Code

Rule 67 - 48.002(4) as :

[A]ny person that, (i) directly or

in directly, through one or more

intermediaries, controls, is controlled by,

or is under common control with the

Applicant or Developer, (ii) serves as an

officer or director of the Applicant or

Developer or of any Affiliate of the

Applicant or Developer, (ii i) directly or

indirectly receives or will receive a

financial benefit from a Development except

as further described in Rule 67 - 48.0075,

F.A.C., or (iv) is the spouse, parent,

child, sibling, or relative by marriage of a

person described in (i), (ii) or ( iii)

above.

2 8 . As to whether Madison Reserve was related to more than

three other applicant entities during the 2009 Universal Cycle,

Petitioner met its burden of proof. The applicant was not

related to more than three other applicant entities as define d

by rule. A third party may not create a legal ownership

interest simply by stating that such interest exists.

2 9 . Madison Reserve is entitled to Priority I status in

its applications filed in the 2009 Universal Cycle.

30 . Florida Administrative Code R ule 67 - 48.004(14)(g)

prohibits an applicant from changing its Development Type after

the application deadline. It states in pertinent part:

Notwithstanding any other provision of

these rules, there are certain items that

must be included in the Applicat ion and

cannot be revised, corrected or supplemented

after the Application Deadline. Failure to

submit these items in the Application at the

time of the Application Deadline shall

result in rejection of the Application

without opportunity to submit additi onal

information. Any attempted changes to these

items will not be accepted. Those items are

as follows:

* * *

(g) Development Type; . . . .

31 . Although Madison Reserve referred to its Development

Type with different words, it did not change the stated

Development Type. The Development Type identified in the

initial application is essentially the same as that addressed

elsewhere in the application package.

32 . As to whether the county zoning authority gave its

approval for Madison Reserve 's project as a Garden Apartment,

Garden, or PDP - MF, Petitioner met its burden of proof. The

proposed Garden Apartments project is consistent with local

land - use regulations for PDP MF as stipulated to by the parties.

3 3 . The "discrepancies" in the applicati on package

concerning the Development Type do not mislead Florida Housing

or any competing applicant as to Madison Reserve's intent.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be en tered by Respondent,

Florida Housing Finance Corporation, deeming Petitioner, Madison

Reserve, Ltd.,'s, application to have met the zoning threshold;

that the application be granted Priority I status; and that the

application meets or exceeds all statutory and rule criteria.

DONE AND ENT ERED this 9th day of November , 2010 , in

Tallahassee, Leon County, Florida.

S

R. BRUCE MCKIBBEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalac hee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of November , 2010 .

ENDNOTES

1/ See Joint Prehearing Stipulation, Pa ge 11, Paragraph 4.

2/ See Joint Prehearing Stipulation, Page 12, Paragraph 7.

COPIES FURNISHED :

Wellington H. Meffert, II, General Counsel

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 1329

Del ia Harrell, Corporation Clerk

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 1329

Douglas P. Manson, Esquire

Manson Law Group, P.A.

1101 West Swann Avenue

Tampa, Florida 33606 - 2637

Matthew A. Sirm ans, Esquire

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

15 days from the date of this Rec ommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.