10-002799RX Elmwood Terrace Limited Partnership vs. Florida Housing Finance Corporation Status: Closed DOAH Final Order on Wednesday, October 6, 2010.

Summary: Challenged provision was not a "rule" and, if so, was not invalid.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ELMWOOD TERRACE LIMITED )

PARTNERSHIP , )

)

Petitioner , )

)

vs. ) Case No. 10 - 2799RX

)

FLORIDA HOUSING FINANCE )

CORPORATION , )

)

Respondent . )

)

FINAL 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

The issue in this case is whether a portion of Florida

Administrative Code Rule 67 - 48.0072 is an invalid exercise of

delegated legislative authority.

PRELIMINARY STATEMENT

In 2007, Elmwood Terrace Limited Partnership (Petitioner)

first proposed to develop an affordable housing apartment

complex in Ft. Myers, Florida. After completion of an

evaluation and approval process, Florida Housing and Finance

Corporation (Respondent) aw arded 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 themselves in similar c ircumstances.

In 2009, the federal government provided an alternative

affordable housing funding mechanism that permitted the exchange

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

The Respondent returned federal tax credits initially gra nted to

Petitioner, as well as credits granted to other developers, to

the federal government in exchange for the discounted cash.

The Respondent subsequently issued a Request for Proposal

to allocate the cash, and, after the resolution of related

litigati on addressed herein, the Petitioner participated in the

allocation process. Ultimately, the Respondent denied the

Petitioner's funding request based on a second analysis of the

Petitioner's development proposal.

By Petition for Hearing dated March 29, 201 0, the

Petitioner challenged the denial. The Respondent forwarded the

Petition for Hearing to the Division of Administrative Hearings,

where it was designated as DOAH Case No . 10 - 1975. The challenge

to the denial of the funding application is addressed by a

separate Recommended Order issued contempora neously with this

Final Order.

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

Administrative Determination of Invalidity o f Existing Rule that

is addressed in this Final Order.

The Petitioner asserts that a portion of text (referred to

by the parties as the "Impact Rule") that is contained within

Florida Administrative Code Rule 67 - 48.0072 (the "Credit

Underwriting Rule") is an invalid exercise of de legated

legislative authority.

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

Final Order and a re otherwise 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 ranscript 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 Final Orders that have been

considered in the preparation of this Final 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) , to administer state

programs that provide financial support to developers seeking to

co nstruct 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 created in 1986 to

promote the construction and operation of privately - developed

afforda ble 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 cre dits. 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 credi ts 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 an nual competitive process known as the "Universal

Cycle."

7. Every three years, the Respondent commissions a study

(the "Shimberg Report") , which measures, within each Florida

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

or less of an are a'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 classified into four groups: families, the elderly,

farm workers, and commercial fisher men. 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 aside a portion of the proposed

units for income - limited residents. Access to affordab le

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 specific housing deficiencies in terms of geographic

availability and population demographi cs and to preserve the

stock o f existing affordable housing.

10. During the Universal Cycle process, the Respondent

identifies areas where additional affordable housing is

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 Cycl e 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 close of the review and comment period, the

Respondent publishes a revised competitive ranki ng of the

proposals. Developers may challenge the second ranking through

an administrative hearing.

14. After the second ranking process is final, developers

achieving 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

independent credit underwriter who reviews each proposal

according to requirements set forth by a dministrative 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 aspects 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 - created Board of

Directors (Board). The Board approves or denies each

appl ication for financ ial 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 perfect 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 require d 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 research indicated that the Elmwood Terrace

project would adversely affect the existing affordab le 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 Res pondent'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

person s 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 resolv e the anticipated negative

impact on the existing affordable housing developments, the

Petitioner agreed to target the 50 percent AMI population.

25. In September 2008, the credit underwriter issued his

report and recommended that the Petitioner receive t he

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

Respondent's Board accepted the credit underwriting report an d

followed the recommendation.

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

tax credits, the nation's economic envi ronment 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 occur. The Petitioner was unable to locate

an alternate purchaser for the tax credits.

27. T he 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 Respondent

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 cash , and they were of

little value in provi ding funds for the project.

29. The Petit ioner 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

through the sale of their tax credits.

30. In early 2009, Congress adopted the Americ an 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 ARRA was the "Tax Credit E xchange

P rogram" that provided for the return by the appro priate 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 addit ional 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, 200 9, 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.

36. 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 ag ainst 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

subsequent ly 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

evaluatio n 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 chall enge 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 challenge

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 un derwriting 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

performed 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 retain 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 com pleted 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 actual economic

conditions experienced in Lee County, Florida, including the

extre mely 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

Elmwood 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 1992.

51. The existing Guarantee Fund properties referenced in

the SMG recommenda tion 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 d ocumentary 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 the

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 includes restrictions

that mandate the inclusion of a specific number of affordable

hou sing 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 ratio 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 u sed 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 create d 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, Meridian did not

review the VWB market analysis performed as part of the 2007

appl ication. 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

developments in the area previously funded by Florida Housing

and an anticipated negat ive 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 improperly completed. There is no evidence that

the SMG's reliance on the Meridi an 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 development with newer

amenities, would compete for residents with the Bernwood Tr ac e

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 occu pancy 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 existing

development, whether based on economic conditions or resulting

from compet ition, 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 eviden ce 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 establish 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 Guarantee Fund units if the Elmwood Terrace

units were set aside for such i ndividuals. 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. Following 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 housing needs and general concerns of the

Board. The amendments are applicab le 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 process.

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

the "Impac t 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 within

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

G uarantee 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 th at 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 c onsideration.

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 added

language, consideration of any negative impact to competing

develo pments 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 complied with the

directive.

83. Prior to determining that the Petitio ner'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

feasib ility 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 and 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 af fordable

housing developments.

88. The protection of Guarantee Fund devel opments 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. §§ 120.56, 120.569 , and 120.57(1), Fl a. Stat .

(20 09 ).

90. The Petitioner has asserted that a portion of text ,

referred to by the parties a s the "Impact Rule" and set forth

within Florida Administrative Code Rule 67 - 48.0072 (the "Credit

Underwriting Rule") , is an invalid exercise of de legated

legislative authority.

91. The evidence fails to establish that the challenged

language meets the de finition of "rule." S ubs ection 120.52(16),

Florida Statutes (20 09 ) , defines a "rule" as follows:

(16) ÐRuleÑ means each agency statement of

general applicability that implements,

interprets, or prescribes law or policy or

describes the procedure or pract ice

requirements of an agency and includes any

form which imposes any requirement or

solicits any information not specifically

required by statute or by an existing rule.

The term also includes the amendment or

repeal of a rule. The term does not

include:

(a) Internal management memoranda which do

not affect either the private interests of

any person or any plan or procedure

important to the public and which have no

application outside the agency issuing the

memorandum.

(b) Legal memoranda or opinions issued to

an agency by the Attorney General or agency

legal opinions prior to their use in

connection with an agency action.

(c) The preparation or modification of:

1. Agency budgets.

2. Statements, memoranda, or instructions

to state agencies issued by the Chief

Financial Officer or Comptroller as chief

fiscal officer of the state and relating or

pertaining to claims for payment submitted

by state agencies to the Chief Financial

Officer or Comptroller.

3. Contractual provisions reached as a

result of collective bargaining.

4. Memoranda issued by the Executive Office

of the Governor relating to information

resources management.

92. The fact that the parties refer to the challenged

language as the "Impact Rule" does not make it a rule. The fact

that the Respondent adopted the language through the rulemaking

process set forth in Chapter 120, Florida Statutes (2009) , does

not make it a "rule. "

93. The challenged language does not "implement, interpret

or prescribe law or policy or describe the pr ocedure or practice

requirements of the agency." The challenged language does no

more than direct the credit underwriter to review specific

information and make a determination as to whether a proposed

development will have a negative impact on existing d evelopments

in which the Respondent has funds at risk.

94. The challenged language does not require that the

credit underwriter recommend against granting an application for

funding where the proposed development would negatively impact a

Guarantee Fund d evelopment.

95. The challenged language does not require that the

Respondent deny an application for funding if the credit

underwriter determines that proposed development would

negatively impact a Guarantee Fund development.

96. The Petitioner has failed to establish that it was

"substantially affected" by the requirement that the credit

underwriter include the relevant analysis within his report.

S ubs ection 120.56(3)(a), Florida Statutes (20 09 ) , provides as

follows:

A substantially affected person may seek an

administrative determination of the

invalidity of an existing rule at any time

during the existence of the rule. The

petitioner has a burden of proving by a

preponderance of the evidence that the

existing rule is an invalid exercise of

delega ted legislative authority as to the

objections raised.

97. The evidence establishes that, prior to the inclusion

of the challenged language within the Credit Underwriting Rule,

such information had previously been considered by the Board

during its revie w of pen ding applications for funding.

98. The Respondent could reasonably have required the

credit underwriter to "review and determine" the potential

negative impact of a proposed development on a Guarantee Fund

development, regardless of the insertion of the challenged

language into the Credit Underwriting Rule. The credit

underwriter could have included the analysis within his report,

as part of the project analysis, without the specific directiv e

to do so from the Respondent.

99. Assuming that the c hallenged language was a "rule" and

that the Petitioner had been "substantially affected," the

Petitioner has the burden in a challenge to an existing rule of

establishing , by a preponderance of the evidence , that the cited

rule is an invalid exercise of d elegated legislative authority

as to the objections raised. § 120.56(3)(a), Fla . Stat . (2009) .

See also Florida Department of Transportation v. J.W.C. Company ,

396 So. 2d 778, (Fla. 1st DCA 1981); Dravo Basic Materials Co.,

Inc., v. Department of Transpo rtation , 602 So. 2d 632 (Fla. 2d

DCA 1992). In this case , the burden has not been met.

100. S ubs ection 120.52(8), Florida Statutes (20 09 ) ,

provides, in relevant part, as follows:

ÐInvalid exercise of delegated legislative

authorityÑ means action that goes beyond the

powers, functions, and duties delegated by

the Legislature. A proposed or existing

rule is an invalid exercise of delegated

legislative authority if any one of the

following applies:

(a) The agency has materially failed to

follow the app licable rulemaking procedures

or requirements set forth in this chapter;

(b) The agency has exceeded its grant of

rulemaking authority, citation to which is

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

(c) The rule enlarges, modifies, or

contravenes the specific pro visions of law

implemented, citation to which is required

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

(d) The rule is vague, fails to establish

adequate standards for agency decisions, or

vests unbridled discretion in the agency;

(e) The rule is arbitrary or capricious. A

r ule is arbitrary if it is not supported by

logic or the necessary facts; a rule is

capricious if it is adopted without thought

or reason or is irrational; or

(f) The rule imposes regulatory costs on

the regulated person, county, or city which

could be re duced by the adoption of less

costly alternatives that substantially

accomplish the statutory objectives.

A grant of rulemaking authority is necessary

but not sufficient to allow an agency to

adopt a rule; a specific law to be

implemented is also required . An agency may

adopt only rules that implement or interpret

the specific powers and duties granted by

the enabling statute. No agency shall have

authority to adopt a rule only because it is

reasonably related to the purpose of the

enabling legislation a nd is not arbitrary

and capricious or is within the agencyÓs

class of powers and duties, nor shall an

agency have the authority to implement

statutory provisions setting forth general

legislative intent or policy. Statutory

language granting rulemaking authority or

generally describing the powers and

functions of an agency shall be construed to

extend no further than implementing or

interpreting the specific powers and duties

conferred by the enabling statute.

101 . In the Petition for Administrative Determination of

Invalidity of Existing Rule, the Petitioner twice cites to the

definition set forth at S ubs ection 120.52(8), Florida Statutes

(20 09 ) , of an "invalid exercise of delegated legislative

authority," but fa ils to identify the specific subsections under

which the challenge is brought; accordingly, all subsections are

addressed herein .

102. There is no allegation or evidence that the

Respondent failed to follow applicable rulemaking procedures or

requirements in inserting the challenged language into the

Credit Underwriting Rule .

103. The evidence fails to establish that the Respondent

has exceeded its grant of rulemaking authority in adopting the

challenged language. The Respondent clearly has sufficient

au thority to adopt appropriate rules. The Respondent also has

clear authority to contract with private consultants, to target

funding based on geographic and demographic factors, and to

administer the Guarantee Fund. Section 420.507, Florida

Statutes (20 09 ) , provides, in relevant part, as follows

Powers of the corporation.

The corporation shall have all the powers

necessary or convenient to carry out and

effectuate the purposes and provisions of

this part, including the following powers

which are in additi on to all other powers

granted by other provisions of this part:

* * *

(12) To make rules necessary to carry out

the purposes of this part and to exercise

any power granted in this part pursuant to

the provisions of chapter 120.

(13) To engage the services of private

consultants on a contract basis for

rendering professional and technical

assistance and advice.

* * *

(22) To develop and administer the State

Apartment Incentive Loan Program. In

developing and administering that progr am,

the corporation may:

* * *

(d) Geographically and demographically

target the utilization of loans.

* * *

(h) Establish, by rule, the procedure for

evaluating, scoring, and competitively

ranking all applications based on the

criter ia set forth in s. 420.5087(6)(c);

determining actual loan amounts; making and

servicing loans; and exercising the powers

authorized in this subsection.

* * *

(24) To do any and all things necessary or

convenient to carry out the purposes of, and

exercise the powers given and granted in,

this part.

(25) To develop and administer the Florida

Affordable Housing Guarantee Program. In

developing and administering the program,

the corporation may:

(a) Develop criteria for determining the

priority for expending the moneys in the

State Housing Trust Fund.

(b) Select affordable housing debt to be

guaranteed or additionally secured by

amounts on deposit in the Affordab le Housing

Guarantee Fund.

(c) Adopt rules for the program and

exercise the powers authorized in this

subsection.

104. The evidence fails to establish that the challenged

language enlarges, modifies, or contravenes the specific

provisions of law implem ented. Section 420.5099, Florida

Statutes (20 09 ), cited as the specific provision of law

implemented, provides, in relevant part, as follows :

Allocation of the low - income housing tax

credit. Ï -

(1) The Florida Housing Finance Corporation

is designated th e housing credit agency

for the state within the meaning of

s. 42(h)(7)(A) of the Internal Revenue Code

of 1986 and shall have the responsibility

and authority to establish procedures

necessary for proper allocation and

distribution of low - income housing tax

credits and shall exercise all powers

necessary to administer the allocation of

such credits.

(2) The corporation shall adopt allocation

procedures that will ensure the maximum use

of available tax credits in order to

encourage development of low - inc ome housing

in the state, taking into consideration the

timeliness of the application, the location

of the proposed housing project, the

relative need in the area for low - income

housing and the availability of such

housing, the economic feasibility of the

project , and the ability of the applicant to

proceed to completion of the project in the

calendar year for which the credit is

sought.

(3) The corporation may request such

information from applicants as will enable

it to make the allocations according to the

guidelines set forth in subsection (2),

including, but not limited to, the

information required to be provided the

corporation by chapter 67, Florida

Administrative Code.

(4) The executive director of the

corporation shall administer the allocation

procedures and determine allocations on

behalf of the corporation. Any applicant

disputing the amount of an allocation or the

denial of a request for an allocation may

request an appeal to the board of directors

of the corporation. (Emphasis supplied )

1 05. There is no evidence that the challenged language is

vague, fails to establish adequate standards for agency

decisions, or vests unbridled discretion in the agency. The

challenged language clearly, and only, directs the credit

underwriter to evaluate the circumstances. The challenged

language does not require the Board to render any specific

decision based on such circumstances .

106. There is no evidence that the rule is arbitrary or

capricious. Again, the challenged language does nothing more

than direct the credit underwriter to review the information and

make a related determination within his report to the

Respondent. The facts clearly establish the rationale for the

Respondent's interest in evaluating the potential negative

impact of a propose d development on the existing developments in

which the Respondent has a financial risk. It is little more

than common sense for the Board to consider the potential

financial consequences, and prospective loss of affordable

housing units, presented by an application to fund a proposed

development in an area where there is no need for additional

afford able housing.

107. There is no evidence or allegation that any

regulatory costs are imposed by the rule.

FINAL ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, the Petition for Administrative Determination of Invalidity

of Existing Rule is DISMISSED.

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

Tallahassee, Leon County, Florida.

S

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative 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 O ctober , 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, Suit e 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

F. Scott Boyd, Executive Director

and General Counsel

Joint Administrative Procedures Committee

120 Holland Building

Tallahassee, Florida 32399 - 1300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are comme nced by

filing one copy of a Notice of Administrative Appeal with the

agency clerk of the Division of Administrative Hearings and a

second copy, accompanied by filing fees prescribed by law, with

the District Court of Appeal, First District, or with the

Di strict Court of Appeal in the appellate district where the

party resides. The Notice of Administrative Appeal must be

filed within 30 days of rendition of the order to be reviewed.