10-001975 Elmwood Terrace Limited Partnership vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Wednesday, October 6, 2010.

Summary: Development failed to establish need for project. Respondent's consideration of Guarantee Fund impact was appropriate.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ELMWOOD TERRACE LIMITED )

PARTNERSHIP , )

)

Petitioner , )

)

vs. ) Case No. 10 - 1975

)

FLORIDA HOUSING FINANCE )

CORPORATION , )

)

Respondent . )

)

RECOMMENDED ORDER

On June 14 through 16 and 22, 2010, a formal administrative

hearing was conducted in Tallahassee, Florida, before William F.

Quattlebaum, Administrative Law Judge, Divisi on 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 Respondent: Hugh R. Brown, Esquire

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 1329

STATEMENT OF THE ISSUE

In 2009, Elmwood Terrace Limited Partnership (Petitioner)

filed an application with the Florida Housing Finance

Corporation (Respondent) , seeking funding to develop an

affordabl e housing apartment complex in Ft. Myers, Florida. The

Respondent denied the application. The issue in this case is

whether the Petitioner's applica tion should have been granted.

PRELIMINARY STATEMENT

In 2007, the Petitioner first proposed to develop an

affordable housing apartment complex in Ft. Myers, Florida.

After completion of an evaluation and approval process, the

Respondent awarded federal tax credits to the Petitioner. The

Petitioner intended to sell the tax credits for cash, but there

were no buyers , and the tax credits were of little value to the

Petitioner. Other affordable housing developers found

themse lves in similar circumstances.

In 2009, the federal government provided an alternative

affordable housing funding mechanism that required t he exchange

of the unmarketable tax credits for cash at a discounted rate.

The federal tax credits issued by the Respondent to the

Petitioner as well as other developers were returned by the

Respondent to the federal government and exch anged for the

discounted cash.

The Respondent thereafter issued a Request for Proposal to

allocate the cash, and, after the resolution of related

litigation addressed herein, the Petitioner participated in the

allocation process. Ultimately, the Respondent denied the

P etitioner's funding request based on a second analysis of the

Petitioner's development proposal.

By Petition for Hearing dated March 29, 2010, the

Petitioner challenged the denial. The Respondent forwarded the

Petition for Hearing to the Division of Admin istrative Hearings,

which scheduled and conducted the proceeding.

On June 10, 2010, the parties filed a Joint Pre - hearing

Stipulation that included a statement of stipulated facts. The

stipulated facts have been incorporated as necessary into this

Recomme nded Order and are otherw ise adopted in their entirety.

At the hearing, the Petitioner presented the testimony of

two witnesses and had Exhibits 3 through 5, 7 through 13, 15 ,

16, 18 , 19, 22 , 23, 25 through 28, 31 through 36, 39, 42

through 44, 53 through 55, 58 , 59, 61, 63, and 70 through 72

admitted into evidence. The Respondent presented the testimony

of three witnesses and had two e xhibits admitted into evidence.

Joint E xhibits 1 , 2 , and 4 through 12 wer e also admitted into

evidence.

The six - volume T r anscript of the hearing was filed on

June 29, 2010. The final volume of the T ranscript (the rebuttal

testimony of Robert Vo gt) was filed on July 8, 2010.

All parties filed Proposed Recommended Orders that have

been considered in the preparation of this Re commen ded Order.

On May 21, 2010, the Petitioner filed a Petition for

Administrative Determination of Invalidity of Existing Rule

(DOAH Case No. 10 - 2799RX) that was consolidated for hearing with

the instant proceeding. The rule challenge is addressed by a

separate Final Order issued contemporaneousl y with this

Recommended Order.

FINDINGS OF FACT

1. The Petitioner is a limited partnership and developer

of affordable housing in Florida. The Petitioner is seeking to

construct a 116 - unit affordable housing family apartment complex

("Elmwood Terrace") in Fort Myers, Lee County, Florida. The

Petitioner has standing to initiate and p articipate in this

proceeding.

2. The Respondent is a public corporation organized under

Chapter 420, Florida Statutes (2010) , t o administer state

programs that provide financial support to developers seeking to

construct affordable housing. Such support is provided through

a variety of mechanisms, including t he use of federal tax

credits.

3. The federal tax credit program was cr eated in 1986 to

promote the construction and operation of privately - developed

affordable housing. The tax credits relevant to this proceeding

provide a dollar - for - dollar credit against federal tax

liabilit ies for a period of ten years.

4. The Respondent is the designated Florida agency

responsible for distribution of the federal tax credits. The

tax credits are awarded pursuant to a "Qualified Allocation

Plan" (QAP) that must be annually approved by the Governor and

adopted as an administ rative rule by the Respondent.

5. As a matter of course, developers receiving the federal

tax credits sell them through syndicators for discounted cash.

The sale of the tax credits generates debt - fr ee cash equity for

developers.

6. Developers seeking financial support to build

affordable housing units submit applications to the Respondent

during an annual competitive process known as the "Universal

Cycle."

7. Every three years, the Respondent commissions a study

(the "Shimberg Report") , which measures, within each Flo rida

county, the number of "cost - burden" renters earning 60 percent

or less of an area's median income (AMI) who pay more

than 40 percent of their income in rent. The AMI is determined

by the federal government. The cost - burden households are

further cla ssified into four groups: families, the elderly,

farm workers, and commercial fishermen. The Shimberg Report

also assesses needs related to homeless people in the state.

8. Developers seeking to obtain affordable housing

financing are required to set as ide a portion of the proposed

units for income - limited residents. Access to affordable

housing units is generally targeted towards persons receiving no

more than 60 percent of the AMI.

9. The Universal Cycle process allows the Respondent to

target specif ic housing deficiencies in terms of geographic

availability and population demographics and to preserve the

stock o f existing affordable housing.

10. During the Universal Cycle process, the Respondent

identifies areas where additional affordable housing i s

unnecessary, to discourage additional development in weak

markets and to encourage development in those locations where

there is a lack of access to affordable housing. The Respondent

classifies areas where there is little need for additional

affordable housing as "Location A" areas .

11. Each application filed during the Universal Cycle is

evaluated, scored, and competitively ranked against other

applications filed du ring the same Universal Cycle.

12. After the Respondent completes the competitive ranking

of the applications submitted in the Universal Cycle, the

applicants are provided with an opportunity to review and

comment on the evaluation and scoring of the proposals.

Applicants may also cure d efects in their own proposals.

13. After the clo se of the review and comment period, the

Respondent publishes a revised competitive ranking of the

proposals. Developers may challenge the second ranking through

an administrative hearing.

14. After the second ranking process is final, developers

achievi ng an acceptable score receive preliminary funding

commitments and proceed into a "credit und erwriting" evaluation

process.

15. The credit underwriting process is governed by Florida

Administrative Code Rule 67 - 48 . 0072. The Respondent selects an

independ ent credit underwriter who reviews each proposal

according to requirements set forth by administrative rule (the

"Credit Underwriting R ule"). The cost of the credit

underwriting r eview is paid by the developer.

16. The credit underwriter considers all as pects of the

proposed development, including financing sources, plans and

specifications, cost analysis, zoning verification, site

control, environmental reports, construction contracts, and

engineering and architectural contracts. The responsibility for

the market study is assigned by the credit underwriter to an

independent market analyst.

17. The credit underwriter prepares a report for each

applicant invited into the process. The reports are submitted

to the Respondent's nine - member, statutorily - crea ted Board of

Directors (Board). The Board approves or denies each

appl ication for financial support.

18. The Petitioner applied for funds for the Elmwood

Terrace project du ring the 2007 Universal Cycle.

19. The Petitioner's application received a perfec t score ,

maximum points, and was allocated tax credits in the amount of

$1,498,680. The Petitioner thereafter entered th e credit

underwriting process.

20. The credit underwriting analysis was performed by

Seltzer Management Group (SMG). SMG contracted with a market

analyst, Vogt, Williams & Bowen Research, Inc. (VWB) , to prep are

the required market study.

21. The affordable units at Elmwood Terrace were initially

intended for persons receiving incomes no more than 60 percent

of the AMI. The VWB resear ch indicated that the Elmwood Terrace

project would adversely affect the existing affordable housing

developments , if the Elmwood Terrace units were available to the

60 percent AMI population.

22. The existing affordable housing developments, also

serving the 60 percent AMI population, included two developments

that had participated in the Respondent's "Guarantee Fund"

progra m, addressed elsewhere herein.

23. VWB determined that the impact of the Elmwood Terrace

project on the existing developments could be ameliorated were

some of the Elmwood Terrace units targeted during "lease - up" to

persons at income levels of not more than 50 percent of the AMI.

The lease - up period is the time required for a new development

to reach anticipated occupancy levels.

24. The issue was the subject of discussions between the

Petitioner, VWB , and SMG. To resolve the anticipated negative

impact on the existing affordable housing developments, the

Petitioner agreed to target the 50 percent AMI population.

25. In September 20 08, the credit underwriter issued his

report and recommended that the Petitioner receive the

previously - allocated tax credits. On September 22, 2008, the

Respondent's Board accepted the credit underwriting report an d

followed the recommendation.

26. In t he fall of 2008, after the Petitioner received the

tax credits, the nation's economic environment deteriorated

considerably. As a result, the syndicator with whom the

Petitioner had been working to sell the tax credits advised that

the sale would not occu r. The Petitioner was unable to locate

an alternate purchaser for the tax credits.

27. The Petitioner considered altering the target

population of the project in an attempt to attract a buyer for

the tax credits, and there were discussions with the Respo ndent

about the option, but there was no credible evidence presented

that such an alteration would have resulted in the sale of the

Petitioner's tax credits.

28. Lacking a buyer for the tax credits, the Petitioner

was unable to convert the credits to cas h , and they were of

little value in provi ding funds for the project.

29. The Petitioner was not alone in its predicament, and

many other developers who received tax credits in the 2007 and

2008 Universal Cycles found themselves unable to generate cash

thr ough the sale of their tax credits.

30. In early 2009, Congress adopted the American Recovery

and Reinvestment Act of 2009 (PL 111 - 5) , referred to herein as

ARRA , which incorporated a broad range of economic stimulus

activities.

31. Included within the A RRA was the "Tax Credit E xchange

P rogram" that provided for the return by the appropriate state

agency of a portion of the unused tax credits in exchange for a

cash distribution of 85 pe rcent of the tax credit value.

32. The State of Florida received $578 ,701,964 through the

T ax C redit E xchange P rogram.

33. The ARRA also provided additional funds to state

housing finance agencies through a "Tax Credit Assistance

Program" intended to "resume funding of affordable housing

projects across the nation while stimulating job creation in the

hard - hat construction industry."

34. On July 31, 2009, the Respondent issued a Request for

Proposals (RFP 2009 - 04) to facilitate the d istribution of the

ARRA funds.

35. The Respondent issued the RFP because the 2009 QAP

specifically required the Respondent to allocate the relevant

federal funds by means of a "competitive request for proposal or

competitive application process as approved by the board." The

2009 QAP was adopted as part of t he 2009 Universal Cycle rules.

3 6. Projects selected for funding through the RFP would be

evaluated through the routin e credit underwriting process.

37. Participation in the RFP process was limited to

developers who held an "active award" of tax credits as of

February 17, 2009 , and who were unable to clo se on the sale of

the credits.

38. The RFP included restrictions against proposals for

development within are as designated as "Location A."

39. Although the location of the Elmwood Terrace project

had not been within an area designated as "Location A" during

the 2007 Universal Cycle process, the Respondent had

subsequently designated the area as "Location A" by the time of

the 2009 Universal Cycle.

40. The RFP also established occupancy standards for

projects funded under the RFP that exceeded the standards

established in the Universal Cycle instructions and an

evaluation process separate from the Universal Cycle

requirem ents.

41. Although the restrictions in the RFP would have

automatically precluded the Petitioner from being awarded funds,

the Petitioner submitted a response to the RFP and then filed a

successful challenge to the RFP specifications (DOAH Case

No. 09 - 4682BID ) .

42. In a Recommended Order issued on November 12, 2009,

the Administrative law Judge presiding over the RFP c hallenge

determined that certain provisions of the RFP, including the

automatic rejection of Location A projects, the increased

occupancy standards, and the RFP eval uation criteria, were

invalid.

43. The Respondent adopted the Recommended Order by a

Final Order issued on December 4, 2009, and invited the

Petitioner into the credit underwriting process by a letter

dated December 9, 2009.

44. The credit underwriter assigned to analyze the

Petitioner's project was SMG, the same credit underwriter that

perfor med the original analysis of the Petitioner's project

du ring the 2007 Universal Cycle.

45. SMG retained Meridian Appraisal Group, Inc.

(Meridian) , to prepar e the required market study.

46. The Respondent was not consulted regarding the SMG

decision to r etain Meridian for the market analysis. The

decision to retain Meridian for the market anal ysis was entirely

that of SMG.

47. The Respondent did not direct SMG or Meridian in any

manner regarding the assessment or evaluation of any negative

impact of the proposed project on existing affordable housing

developments.

48. Meridian completed the market study and forwarded it

to SMG on January 26, 2010.

49. The Meridian market analysis included a review of the

relevant data as well as consideration of the ac tual economic

conditions experienced in Lee County, Florida, including the

extremely poor performance of the existing housing stock, as

well as significant job losses and c onsiderable unemployment.

50. The Meridian market analysis determined that the

Elmw ood Terrace development would have a negative impact on two

existing affordable housing apartment developments that were

underwritten by the Respondent through a Guarantee Fund created

at Section 420.5092, Florida Statutes, by th e Florida

Legislature in 19 92.

51. The existing Guarantee Fund properties referenced in

the SMG recommendation are "Bernwood Trace" and "Westwood," both

family - oriented apartment developments within five miles of the

Elmwood Terrace location.

52. The Guarantee Fund essentially obligates the

Respondent to satisfy mortgage debt with the proceeds of

Florida's documentary stamp taxes , if an affordable housing

development is unable to generate sufficient revenue to service

the debt.

53. Because the Guarantee Fund program essentially serves

to underwrite the repayment of mortgage debt for a "guaranteed"

affordable housing development, the program increases the

availability, and lowers the cost, of credit for developers.

54. The Guarantee Fund program has participated in the

financing of more than 100 projects, most of which closed

between 1999 and 2002.

55. Since 2005, the Respondent has not approved any

additional Guarantee Fund participation in any affordable

housing devel opments.

56. The Respondent's total risk exposure through t he

Guarantee Fund is appr oximately 750 million dollars.

57. Prior to October 2008, no claims were made against the

Guarantee Fund. Since November 2008, there have been eight

claims filed against the G uarantee Fund.

58. Affordable housing financing inclu des restrictions

that mandate the inclusion of a specific number of affordable

housing units. Such restrictions are eliminated through

foreclosure proceedings, and , accordingly, access to affordable

housing units can be r educed if a development fails.

59. Presuming that the eight claims pending against the

Guarantee Fund eventually proceeded through foreclosure, as many

as 2,300 residential units could be deducted from th e stock of

affordable housing.

60. When there is a claim on the Guarantee Fund, the

Respondent has to assume payment of the mortgage debt. The

claims are paid from the Guarantee Fund capital, which is

detrimental to the Respondent's risk - to - capital ratio. The

risk - to - capital ratio is presently four to one. The maximum

risk - to - capital r atio acceptable to r ating agencies is five to

one.

61. The eight claims against the Guarantee Fund have

ranged between ten and 18 million dollars each. The

Respondent's bond rating has declined because of th e eight

claims.

62. A continued decline in the Respondent's bond rating

could result in documentary stamp tax receipts being used for

payment of Guarantee Fund claims and directed away from the

Respondent's programs that are intended to support the creation

of affordable housing.

63. In an effort to prevent additional claims against the

Guarantee Fund, the Respondent has created the "Subordinate

Mortgage Initiative" to provide assistance in the form of two -

year loans to troubled Guarantee Fund properties.

64. When preparing the 2010 market study, Me ridian did not

review the VWB market analysis performed as part of the 2007

application. Although the Petitioner has asserted that Meridian

should have reviewed the 2007 VWB analysis, there is no evidence

that Meridian's decision to conduct an independent market study

without reference to the prior ma rket review was inappropriate.

65. On February 8, 2010, SMG issued a recommendation that

the Petitioner's funding request be denied "because of the

proposed development's potential financial impacts on

develo pments in the area previously funded by Florida Housing

and an anticipated negative impact to the two Guarantee Fund

properties located within five miles of the proposed

development."

66. There is no evidence that the Meridian analysis was

inadequate or i mproperly completed. There is no evidence that

the SMG's reliance on the Meridian analysis was inappropriate.

For purposes of this O rder, the Meridian analysis and the SMG

credit underwrit ing report have been accepted.

67. Elmwood T er race, a newer deve lopment with newer

amenities, would compete for residents with the Bernwood Tr ace

and Westwood developments.

68. The financing for Bernwood Trace and Westwood was

premised on projections that the affordable housing units would

be leased to the 60 percent AMI population; however, the

developments have been unable to maintain full occupancy levels,

even though a number of units in the two properties are leased

at reduced rates based on 50 percent AMI income levels.

69. A rent reduction implemented by an exi sting

development, whether based on economic conditions or resulting

from competition, constitutes a negat ive impact on the

development.

70. There is no credible evidence that the occupancy rates

are attributable to any difficulty in management of the two

developments. It is reasonable to conclude that the leasing

issues are related to economic conditions p resent in Lee County,

Florida.

71. In January 2010, VWB conducted an alternative market

analysis. The VWB analysis was not provided to SMG or to the

Respondent at any time during th e credit underwriting process.

72. Based on the 2010 VWB analysis, the Petitioner

asserted that economic conditions in Lee County, Florida, have

improved since the first credit underwriting report was

completed in 2008 and that the improvement is expected to

continue.

73. There is no noteworthy evidence that economic

conditions have improved or will significantly improve in the

Lee County , Florida, market in the predictable future, and the

VWB analysis is rejected.

74. The Petitioner offered to mitigate any negative impact

on the Guarantee Fund properties by committing affordable units

to 50 percent AMI income levels. Given the existing economic

and rental market conditions in Lee County, Florida, the

evidence fails to est ablish that the offer would actually

alleviate the negative impact on the affecte d Guarantee Fund

developments.

75. The 2010 VWB analysis states that there is substantial

unmet demand for housing at 50 percent AMI and that there will

be no impact on the G uarantee Fund units if the Elmwood Terrace

units were set aside for such individuals. There is no credible

evidence that there is a substantial and relevant unmet

affordable housing demand in Lee County, Florida. The VWB

analysis is rejected.

76. Follow ing the completion of each annual Universal

Cycle process, the Respondent actively solicits feedback from

developers and the public and then amends the Universal Cycle

requirements to address the issues raised, as well as to reflect

existing affordable hou sing needs and general concerns of the

Board. The amendments are applicable for the following

Universal Cycle.

77. In 2009, the Respondent amended subsection (10) of the

Credit Underwriting R ule as part of the annual revisions t o the

Universal Cycle proc ess.

78. The relevant amendment (referred to by the parties as

the "Impact Rule") added this directive to the credit

underwriter:

The Credit Underwriter must review and

determine whether there will be a negative

impact to Guarantee Fund Developments withi n

the primary market area or five miles of the

proposed deve lopment, whichever is greater.

79. The amendment was prompted by the Respondent's

experience in the fall of 2008 when considering two separate

applications for affordable housing financing. The potential

negative impact of a proposed development on an existing

Guarantee Fund property was central to the Board's consideration

of one application, and the Board ultimately denied the

application. In the second case, the Board granted the

application , despite the potential negative impact on a

competing development that was not under written by the Guarantee

Fund.

80. The intent of the language was to advise developers

that the existence of Guarantee Fund properties within the

competitive market area would be part of the credit underwriting

evaluation and the Board's consideration.

81. Notwithstanding the language added to the rule, the

credit underwriter is charged with reviewing the need for

additional affordable housing. Even in absence of the add ed

language, consideration of any negative impact to competing

developments based on inadequate need for additional affordable

housing would be appropriate.

82. In rendering the 2010 c redit underwriting report on

Elmwood Terrace, the credit underwrite r co mplied with the

directive.

83. Prior to determining that the Petitioner's funding

application should be denied, the Respondent's Board was clearly

aware of the Petitioner's application, the credit underwriting

report and market analysis, and the economic conditions in Lee

Cou nty, Florida.

84. There is no credible evidence of any need for

additional affordable h ousing in Lee County, Florida.

85. There is no credible evidence that the Lee County ,

Florida, market can sustain the addition of the units proposed

by the Petitioner without adversely affecting the financial

feasibility of the existin g Guarantee Fund developments.

86. The Board was aware that the Elmwood T errace

development could attract residents from the nearby Guarantee

Fund properties an d that local economic conditions threatened

the financia l viability of the properties.

87. Given current economic conditions, approval of the

application at issue in this proceeding would reasonably be

expected to result in a negative impact to existing a f fordable

housing developments.

88. The protection of Guarantee Fund developments is

necessary to safeguard the resources used to support the

creation and availability of af fordable housing in the state.

CONCLUSIONS OF LAW

89. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding. §§ 120.569 and 120.57(1), Fla . Stat . (200 9 ).

90. All parties identified herein have standing to

p articipate in this proceeding.

91. The a pplicant for the funding at issue in this

proceeding has the burden of establishing entitlement to the

requested funds by a preponderance of the evidence. Florida

Dept . of Transportation v. J.W.C. Co., Inc. , 396 So. 2d 778

(Fla. 1st DCA 1981). In this ca se , the burden has not been met.

92. The issue in this case is whether the Petitioner's

application for funding should be approved. The Petitioner also

has asserted that the Respondent acted in a manner contrary to

law when determining that the Petitione r would not be awarded

funds provided by the federal government in 2009 through t he

programs referenced herein.

93. The evidence fails to establish that the Petitioner's

application for funding should be approved. The evidence

further fails to establish that the Respondent's decision not to

fund the Petitioner's affordable housing development was

contrary to l aw or otherwise inappropriate.

94. Florida Administrative Code Rule 67 - 48.0072 provides ,

in relevant part , as follows:

67 - 48.0072 Credit Underwrit ing and Loan

Procedures.

The credit underwriting review shall include

a comprehensive analysis of the Applicant,

the real estate, the economics of the

Development, the ability of the Applicant

and the Development team to proceed, the

evidence of need for affordable housing in

order to determine that the Development

meets the program requirements and determine

a recommended SAIL or HOME loan amount,

Housing Credit allocation amount or a

combined SAIL loan amount and Housing Credit

Allocation amount, if any. Corporation

funding will be based on appraisals of

comparable developments, cost benefit

analysis, and other documents evidencing

justification of costs. As part of the

credit underwriting review, the Credit

Underwriter will consider the applicable

prov isions of Rule Chapter 67 - 48, F.A.C.

* * *

(5) The Credit Underwriter shall verify all

information in the Application, including

information relative to the Applicant,

Developer, Housing Credit Syndicator,

General Contractor, and, if an ALF, the

service provider(s), as well as other

members of the Development team.

* * *

(10) A full or self - contained appraisal as

defined by the Uniform Standards of

Professional Appraisal Practice and a

separate market study shall be ordered by

the Cred it Underwriter, at the ApplicantÓs

expense, from an appraiser qualified for the

geographic area and product type not later

than completion of credit underwriting. The

Credit Underwriter shall review the

appraisal to properly evaluate the proposed

property Ós financial feasibility.

Appraisals which have been ordered and

submitted by third party credit enhancers,

first mortgagors or Housing Credit

Syndicators and which meet the above

requirements and are acceptable to the

Credit Underwriter may be used inste ad of

the appraisal referenced above. The market

study must be completed by a disinterested

party who is approved by the Credit

Underwriter. The Credit Underwriter shall

consider the market study, the DevelopmentÓs

financial impact on Developments in the area

previously funded by the Corporation, and

other documentation when making its

recommendation of whether to approve or

disapprove a SAIL or HOME loan, a Housing

Credit Allocation, or a combined SAIL loan

and Housing Credit Allocation or Housing

Credit Allocation and HOME loan. The Credit

Underwriter must review and determine

whether there will be a negative impact to

Guarantee Fund Developments within the

primary market area or five (5) miles of the

proposed Development, whichever is greater.

The Cred it Underwriter shall also review the

appraisal and other market documentation to

determine if the market exists to support

both the demographic and income restriction

set - asides committed to within the

Application. For the Credit Underwriter to

make a fav orable recommendation, the

submarket of the proposed Development must

have an average occupancy rate of 90 percent

or greater.

95. The evidence establishes that both the credit

underwriter and the Board complied wit h all applicable

requirements.

96. The credit underwriter considered all of the required

eleme nts of the Credit Underwriting Ru le in rendering his

evaluation to the Board.

97. The Board was fully aware of the Petitioner's

application, the credit underwriting report and market analysis,

the lo cal economic conditions, and the potential adverse impact

to the Guarantee Fund properties presented by addition of

unnecessary addit ional housing into the market.

98. There is no credible evidence that there is need for

additional affordable housing in t he Lee County, Florida ,

market. The location of the Petitioner's proposed development

is within an area with a "Location A" designation, indicating

that the market will not support the development of additional

affordable housing at this time. There was no credible evidence

that economic conditions have improved in the area since the

"Location A" designation was assigned. There is no credible

evidence that the designation of the relevant area as

" Location A" was inappropriate.

99. The Petitioner suggest s that application of the

"Impact Rule" is legally inappropriate in this case. It should

be noted that the challenged provision does nothing more than

direct the credit underwriter to review the competitive

circumstances of a proposed development and to d etermine the

impact of the proposed development on any existing affordable

housing projects to which the Respondent has a potential and

sub stantial financial obligation.

100. The language does not require the credit underwriter

to recommend against a prop osed development that would have a

"negative impact" on an existing Guarantee Fund project;

likewise, the rule does not require that the Respondent's Board

deny funds to such a proposed development. Absent the cited

provision, the credit underwriter could properly have considered

the same factors under the remaining language of the C redit

U nderwriting R ule, which requires that the credit underwriterÓs

review include a comprehensive analysis of the applicant, the

real estate, the economics of the project, t he ability of the

applicant and developer to proceed, and the evidence of need for

affordable housing.

101. To some extent, the Petitioner has also suggested

that because the project was approved for funding as part of

the 2007 U niversal C ycle, the Respon dent must grant

the 2009 application and award the funds that were received by

2 5

the Respondent during the exchange of what were the Petitioner's

unmarketable tax credit s . Such a result is not required by law

and is not supported by the evidence.

102. Had the T ax C redit E xchange P rogram been intended

merely as a pass - through of cash to the holders of the

previously - unmarketable tax credits, there would have been no

reason to implement an RFP process or to subject the proposals

to an addition al credit underwriting review.

103. The Respondent's initial decision to fund the

Petitioner's project was rendered under the economic

circumstances existing at that time. Had the federal government

not agreed to provide cash in exchange for the tax credits held

b y the Petitioner and other developers, there would have

apparently been no financing available for continued affordable

housing development. However, nothing in the exchange program

required the funds to be returned directly to the developers who

previous ly held the tax credits. Logically, the rationale for

implementing an RFP and for requiring developers to submit to a

second credit underwriting review would be to permit re -

evaluation of the proposed developments with regard to the

decline in economic co nditions. It would also be logical to

presume that such a re - evaluation could result in a di fferent

result.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Florida Housing Finance

Corporation enter a f inal o rder denying the application for

funding filed by Elmwood Terrace Limited Partnership.

DONE AND ENTERED this 6th day of October , 2010 , in

Tallahassee, Leon County, Florida.

S

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administra tive Hearings

The DeSoto Building

1230 Apalachee 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 6th day of October , 2010 .

COPIES FURNISHED :

Hugh R. Brown, Esquire

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 1329

J. Stephen Menton, Esquire

Rutledge, Ecenia, & Purnell, P.A.

119 South Monroe Street, Suite 202

Post Office Box 551

Tallahassee, Florida 32302

Wellington Meffert, General Counsel

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

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.