16-004132BID St. Elizabeth Gardens Apartments, Ltd. vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Tuesday, October 18, 2016.

Summary: Petitioners failed to demonstrate that the Florida Housing Finance Corporation's intended award of tax credits was clearly erroneous, contrary to competition, arbitrary, or capricious.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ST. ELIZABETH GARDENS

APARTMENTS, LTD.,

Petitioner,

vs. Case No. 16 - 4132BID

FLORIDA HOUSING FINANCE

CORPORATION,

Respondent,

and

ISLES OF PAHOKEE PHASE II, LLC;

HALEY SOFGE PRESERVATION PHASE

ONE; THREE RO UND TOWER A, LLC;

CATHEDRAL TOWERS, LTD.; AND SP

MANOR , LLC,

Intervenors.

_______________________________/

MARIAN TOWERS, LTD.,

Petitioner,

vs. Case No. 16 - 4133BID

FLORIDA HOUSING FINANCE

CORPORATION,

Respondent,

and

ISLES OF PAHOKEE PHASE II, LLC;

HALEY SOFGE PRESERVATION PHASE

ONE; THREE ROUND TOWER A, LLC;

CATHEDRAL TOWERS, LTD.; AND SP

MANOR , LLC,

Intervenors.

_______________________________/

WCAR, LTD.,

Petitioner,

vs. Case No. 16 - 4134BID

FLORIDA HOUSING FINANCE

CORPORATION,

Respondent,

and

SP MANOR , LLC ; AND CATHEDRAL

TOWERS, LTD.,

Intervenor s .

_______________________________/

SJRAR, LTD.,

Petitioner,

vs. Case No. 16 - 4135BID

FLORIDA HOUSING FINANCE

CORPORATION,

Respondent,

and

SP MANOR , LL C ; AND CATHEDRAL

TOWERS, LTD.,

Intervenor s .

_______________________________/

CPAR, LTD.,

Petitioner,

vs. Case No. 16 - 4136BID

FLORIDA HOUSING FINANCE

CORPORATION,

Respondent,

and

SP MANOR , LLC ; AND CATHEDRAL

TOWERS, LTD.,

Interv enor s .

_______________________________/

RECOMMENDED ORDER

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

on August 16, 2016, in Tallahassee, Florida, befor e Garnett W.

Chisenhall, a duly - designated Administrative Law Judge of the

Division of Administrative Hearings (ÐDOAHÑ).

APPEARANCES

For Petitioners St. Elizabeth Gardens Apartments, Ltd.,

and Marian Towers, Ltd.:

Donna Elizabe th Blanton, Esquire

Radey Law Firm, P.A.

301 South Bronough Street, Suite 200

Tallahassee, Florida 32301 - 1706

For Petitioners WCAR, Ltd.; SJRAR, Ltd.;

and CPAR, Ltd.:

M. Christopher Bryant, Esquire

Oertel, Fernandez, Bryant

& Atkinson, P.A.

Po st Office Box 1110

2060 Delta Way

Tallahassee, Florida 32302 - 1110

For Respondent Florida Housing Finance Corporation:

Christopher Dale McGuire, Esquire

Betty Zachem, Esquire

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tal lahassee, Florida 32301

For Intervenors Haley Sofge Preservation Phase One;

Three Round Tower A, LLC; Cathedral Towers, Ltd.;

and SP Manor, LLC:

Michael P. Donaldson, Esquire

Carlton Fields Jorden, Burt, P.A.

215 South Monroe Street, Suite 500

Tallahas see, Florida 32302

For Intervenor Isles of Pahokee Phase II, LLC:

Maureen McCarthy Daughton, Esquire

Maureen McCarthy Daughton, LLC

1725 Capital Circle Northeast, Suite 304

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The issue for determination in this consolidated bid

protest proceeding is whether the Florida Housing Finance

CorporationÓs (ÐFH F CÑ) intended award of tax credits for the

p reservation of e xisting a ffordable h ousing d evelopments was

clearly erroneous, contrary to competition, arbitra ry , or

capricious.

PRELIMINARY STATEMENT

On October 23, 2015, FHFC so licited applications for an

allocation of f ederal l ow - i ncome h ousing t ax c redit s through a

document entitled ÐRequest for Applications 2015 - 111 for Housing

Credit Financing for the Pre servation of Existing Affordable

Multifamily Housing DevelopmentsÑ (ÐRFA 2015 - 111Ñ) . On

December 4, 2015, 24 developers (including Petitioners and

Intervenors in the instant case) submitted applications in

response to RFA 2015 - 111.

On June 24, 2016, FH F C posted notice of its intent to award

funding to five applicants, including Intervenors Three Round

Tower A , LLC (ÐThree RoundÑ) ; Cathedral Towers, Ltd . (ÐCathedral

TowersÑ) ; Isles of Pahokee Phase II, LLC (ÐIsles of PahokeeÑ) ;

and SP Manor, LLC (ÐLummus ParkÑ) . 1/ FHFC determined that

Petitioners St. Elizabeth Gardens Apartments, Ltd .

(ÐSt. ElizabethÑ) ; Marian Towers , Ltd . (ÐMarian TowersÑ) ; WCAR,

Ltd. (ÐWoodcliffÑ) ; SJRAR , Ltd. (Ð St. Johns Ñ) ; and CPAR, Ltd.

(Ð Colonial Ñ) , were ineligible for funding. FHF C also determined

that Intervenor Haley Sofge Preservation Phase One (ÐHaley

SofgeÑ) was eligible for funding , but Haley SofgeÓs application

did not earn a sufficient score relative to those of the

competing applicants.

Pursuant to section 120.57(3), Flori da Statutes (201 6 ) , 2 /

St. Elizabeth, Marian Towers, Woodcliff, St. Johns, and Colonial

filed timely notices of intent to protest followed by formal

written protests. Those cases were referred to DOAH on July 22,

2016, and ultimately consolidate d via an Or der issued on

August 10, 2016.

Initially, St. Elizabeth and Marian Towers were challeng ing

FHFCÓs determination that arrearage issues rendered their

applications ineligible . F HFC has since agreed that its initial

determination was erroneous , and FHFC n ow agrees that

St. Elizabeth Ós and Marian Tower Ó s applications should be deemed

eligible for funding. However , FHFC maintains that

St. Elizabeth Ós and Marian Tower Ó s applications were not

entitled to funding.

The p arties agreed that there were no disput ed issues of

material fact. Accordingly, t he final hearing was conducted

pursuant to section 120.57(2) and took place as scheduled on

August 16, 2016.

During the course of that final hearing, the undersigned

accepted Joint Exhibits J - 1 through J - 14 into evidence.

St. Elizabeth and Marian Towers presented the testimony of

Kenneth Naylor (the C hief O perating Officer for Atlantic Pacific

Communities ) and offered Exhibits 1 through 5, which were

accepted into evidence. Woodcliff , St. Johns , and Colonial

pr esented the testimony of Angela Hatcher of Flynn Development

Corporation and offered Exhibit 1 that was accepted into

evidence. Cathedral Towers presented the testimony of Shawn

Wilson (the President of Blue Sky Communities) and offered

E xhibit 1 that was accepted into evidence over objection. FHFC

presented the testimony of Kenneth Reecy (the Director of

Multifamily Programs for FHFC) and offered Exhibits FH - 1 and

FH - 2 that were accepted into evidence.

Intervenors Three Round, Haley Sofge, Isles of Pah okee, and

Lummus Park called no witnesses and offered no exhibits.

The parties stipulated to the official recognition of any

rules or f inal o rder s issued by FHFC.

All of the parties filed timely proposed recommended orders

that have been considered in th e preparation of this Recommended

Order.

FINDING S OF FACT

FHFC and Affordable Housing Tax Credits

1. FH FC is a public corporation that financ e s affordable

housing in Florida by allocating and distributing low income

housing tax credits. See § 420.504(1), Fla. Stat. ( providing

that FH F C is Ðan entrepreneurial public corporation organized to

provide and promote the public welfare by administering the

governmental function of financing or refinancing housing and

related facilities in this state .Ñ ) ; § 420.509 9(2), Fla. Stat.

(providing that Ð[t]he corporation shall adopt allocation

procedures that will ensure the maximum use of available tax

credits in order to encourage development of low - income housing

in the state, taking into consideration the timeliness o f 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 applica nt to proceed to

completion o f the project in the calendar year for which the

credit is sought.Ñ).

2. The tax credits allocated by FH F C encourage invest ment

in affordable housing and are awarded through competitive

solicitations to developers of qualifying rental housing .

3. Tax credits are not tax deductions. For example, a

$1 , 000 deduction in a 15 - percent tax bracket reduces taxable

income by $1,000 and reduces tax liability by $150 . In

contrast, a $1 , 000 tax credit reduces tax liability by $1 , 000.

4. Not surprisingly, t he d emand for tax credits provided

by the federal government exceeds the supply.

5 . A s uccessful applicant /developer normally sell s the tax

credits in order to raise capital for a housing development .

That results in the developer being less reliant on debt

financing .

6 . In exchange for the tax credits , a successful

applicant /developer must offer affordable rents and c ovenant to

keep those rents at a ffordable levels for 30 to 50 years .

The Selection Process

7 . FH F C awards tax credits through competitive

solicitations, and that process is commenced by the issuance of

a Request for Applications (ÐRFAÑ) .

8 . Florida Administrative Code Rule 67 - 60.009(2) provides

that unsuccessful applicants for tax credits Ðmay only protest

the results of the competitive so licitation process pursuant

to the procedures set forth in Secti on 120.57(3), F.S., and

Chapter 28 - 110, F.A.C.Ñ

9. F or purposes of section 120.57(3), an RFA is equivalent

to a Ðrequest for proposal.Ñ See Fla. Admin. Code R.

67.60.009(4), F.A.C.

10 . FH F C issued RFA 2015 - 111 on October 23, 2015, and

responses from applicants were due on December 4, 2015.

11. Through RFA 2015 - 111, FH F C seeks to award up to

$5,901,631 of tax credits to qualified applicants that commit to

preserve existing affordable mu ltifamily housing developments

for the demographic categories of ÐFamilies,Ñ Ðthe Elderly,Ñ and

ÐPersons with a Disability . Ñ

1 2 . FHFC only considered an application e ligible for

funding from RFA 2015 - 111 , if that particular application

complied with cer tain content requirements.

13. FHFC ranked all eligible applications pursuant to an

ÐApplication Sorting OrderÑ set forth in RFA 2015 - 111.

14. The first consideration was the applicantsÓ scores.

Each application could potentially receive up to 23 po ints based

on the developerÓs experience and the proximity to services

needed by the developmentÓs tenants .

15. Applicants demonstrating that their developments

received funding from a U.S. Department of Agriculture (ÐUSDAÑ)

Rural Development program know n as RD 515 were enti t led to a

3.0 point proximity score Ðboost.Ñ

16. That proximity score boost was important because RFA

2015 - 111 characterized counties as small, medium, or large .

A pplications associated with small co unties had to achieve at

least fo ur proximity point s to be considered eligible for

funding. Applications associated with medium - sized counties and

those associated with large counties had to achieve at least

seven and 10.25 proximity points respectively in order to be

considered eligible for funding.

17. Because i t is very common for several tax credit

applicants in a particular RFA to receive identical scores,

FH F C incorporated a series of Ðtie - breakersÑ into RFA 2015 - 111.

18. The tie - breakers for RFA 2015 - 111, in order of

applicab ility, were:

a. First, by Age of Development, with

developments built in 1985 or earlier

receiving a preference over relatively

newer developments.

b. Second, if necessary, by a Rental

Assistance (ÐRAÑ) preference. Applicants

were to be assigned an RA level based on

the percentage of units r eceiv ing rental

assistance through either a U.S. Department

of Housing and Urban Development (ÐHUDÑ) or

USDA Rural Development program. Applicants

with an RA level of 1, 2, or 3 (meaning at

least 75 percent of the units r eceive d

rental a ssistance) were to receive a

preference.

c. Third , by a Concrete Construction Funding

Preference, with developments incorporating

certain specified concrete or masonry

structural elements receiving the

preference.

d. Fourth, by a Per Unit C onstruction Funding

Preference, with applicants proposing at

least $32,500 in Actual Construction Costs

per unit receiving the preference.

e. Fifth, by a Levera ging Classification

favor ing applicants requir ing a lower

amount in housing credits per unit tha n

other applicants. Generally, the least

expensive 80 percent of eligible applicants

were to receive a preference over the most

expensive 20 percent.

f. Sixth, by an ApplicantÓs specific RA level,

with Level 1 applicants receiving the most

preference and Leve l 6 the least.

g. Seventh, by a Florida Job Creation

Preference, which estimate d the number of

jobs created per $1 million of housing

credit equity investment the developments

were to receive based on formulas contained

in the RFA . A pplicants achieving a Jo b

Creation score of at least 4.0 were to

receiv e the preference.

h. Eig h th, by lottery number, with the lowest

(smallest) lottery number receiving the

preference.

19. Rental assistance from the USDA or HUD is provided to

existing developments in order to make up for shortfalls in

monthly rent paid by tenants. For example, if an apartmentÓs

base rent is $500 per month and the tenantÓs income limits him

or her to paying only $250 towards rent, then the USDA or HUD

rental assistance pays the other $250 so th at the total rent

received by the development is $500.

20. As evident from the tie - breakers incorporated into RFA

2015 - 111 , the amount of r ental a ssistance , or ÐRA L evel , Ñ played

a prominent role in distinguishing between RFA 2015 - 111

applicants ha ving i dentical scores.

21. RFA 2015 - 111 required that applicants demonstrate RA

L evels by providing a letter containing the following

information : ( a ) th e d evelopment Ós name ; ( b ) the d evelopment Ós

address ; ( c ) the year the development was built ; (d ) the t otal

number of units that currently receive PBRA and/or ACC; /3 ( e ) t he

t otal number of units that w ould receive PBRA and/or ACC if the

proposed d evelopment were to be funded; ( f ) a ll HUD or RD

financing program(s) originally and/or currently associated with

th e existing development; and ( g ) c onfirmation that the

d evelopment ha d not received fina ncing from HUD or RD after

1995 whe n the rehabilitation was at least $10,000 per unit in

any year.

22. In order to determine an applicantÓs RA Level

Classification, RF A 2015 - 111 further stated that

Part of the criteria for a proposed

Development that qualifies as a Limited

Development Area (LDA) Development to be

eligible for funding is based on meeting a

minimum RA Level, as outlined in Section

Four A.7.c of the RFA .

The total nu mber of units that will

receive rental assista nce (i.e., PBRA

and/or ACC), as stated in t he Development

Category qualificatio n letter provided as

Attachment 7, will be considered to be the

proposed DevelopmentÓs RA units and will be

the basis of the ApplicantÓs RA Level

Classification. The Corporation will divide

the RA units by the total units stated by

the Applicant at question 5.e. of Exhibit A,

resulting in a Percentage of Total Units

that are RA units. Using the Rental

Assistance Level C lassification Chart below,

the Corporation will determine the RA Level

associated with both the Percentage of Total

Units and the RA units. The best rating of

these two (2) levels will be assigned as the

ApplicationÓs RA Level Classification.

23. RFA 2 015 - 111 then outlined a Rental Assistance Level

Classification Chart to delineate between the RA L evels. That

c hart described six possible RA L evels, with one being

developments that have the most units receiving rental

assistance and six pertaining to de velopments with the fewest

units receiving rental assistance. A development with at least

100 rental assistance units and greater than 50 percent of the

total units receiving rental assistance was to receive an RA

Level of 1 .

24. FH F C also utilized a ÐF unding TestÑ to assist in the

selection of applications for funding. The Funding T est

required that the amount of unawarded housing credits be enough

to satisfy any remaining applicantÓs funding request. In other

words, FH F C prohibited partial funding.

2 5. In addition, RFA 2015 - 111 applied a ÐCounty Award

TallyÑ designed to prevent a disproportionate concentration of

funded developments in any one county. As a result, all other

applicants from other count ies had to receive an award before a

second appli cation from a pa rticular county could be funded .

26. After ranking of the el igible applicants, RFA

2015 - 111 set forth an order of funding selection based on county

size, demographic category, and the receipt of RD 515 financing.

The Order wa s:

a. One R D 515 Development (in any demographic

category) in a medium or small county;

b. One Non - RD 515 Development in the Family

Demographic Category (in any size county);

c. The highest ranked Non - RD 515 application

or applications with the demographic of

E lderly or P erson s with a D isability; and

d. If funding remains after all eligible Non -

RD 515 applicants are funded, then the

highest ranked RD 515 applicant in the

E lderly demographic (or, if none, then the

highest ranked RD 515 applicant in the

F amily demographic).

27. Draft versions of every RFA are posted on - line in

order for stakeholders to provide FHFC with their comments. In

addition, every RFA goes through at least one workshop prior to

being finalized.

28. FHFC often makes changes to RFAs based on stakeho lder

comments.

29. No challenge was filed to the terms, conditions, or

requirements of RFA 2015 - 111 .

30. A review committee consisting of FH F C staff members

reviewed and scored all 24 application s associated with RFA

2015 - 111 . During this process, F H F C staff determined that none

of the RD - 515 applicants satisfied all of the threshold

eligibility requirements.

31. On June 24, 2016, FH F C Ós Board of Directors announced

its intention to award funding to five applicants , subject to

those applicants suc cessfully completing the credit underwriting

process . Pineda Village in Brevard County was the only

successful applicant in the Non - RD 515 Family Demographic .

The four remaining successful applicants were in the No n - RD

515 Elderly or Persons with Disabil ity Demographic: Three Round

Tower in Miami - Dade County ; Cathedral Towers in D uval County ;

Isles of Pahokee in Palm Beach County; and Lummus Park in Miami -

Dade County.

32. The randomly - assigned lottery number tie - breaker

played a role for the successfu l Non - RD 515 appl icants with

Three Round Tower having lottery number one , Cathedral Towers

having lottery number nine , and Isles of Pahokee having lottery

number 18.

33. While Lummus Park had a lottery number of 12, the

County Award Tally prevented it f rom being selected earl ier

because Three Round Tower had already been selected for funding

in Miami - Dade County . However, after the first four applicants

were funded, only $526,880 of credits remained, and Lummus Park

was the only eligible applicant with a request small enough to

be fully funded.

34. All Petitioners timely filed Notices of Protest and

petitions for administrative proceedings.

The Challenge by Woodcliff, Colonial, and St. Johns

35. Woodcliff is seeking an award of tax credits in order

to acquire and preserve a 34 - unit development for elderly

residents in Lake County. 4 /

36. Colonial is seeking an award of tax credits in order

to acquire and preserv e a 30 - unit development for low - income

families in Lake County. 5 /

37. St. Johns is seek ing an award of tax credits to

acquire and preserve a 48 - unit development for elderly residents

in Putnam County. 6 /

38. FH F C deemed Woodcliff, Colonial and St. Johns to be

ineligible because of a failure to demonstrate the existence or

availability of a particular source of financing relied upon in

their applications. Specifically, FH F C determined that the

availability of USDA RD 515 financial assistance was not

properly documented .

39. For applicants claiming the existence of R D 515

financing, RFA 201 5 - 111 state d :

(2) If the proposed Development will be

assisted with funding under the United

States Department of Agriculture RD 515

Program and/or RD 538 Program, the

following information must be provided:

(a) Indicate the applicable RD Program(s)

a t question 11.b.(2) of Exhibit A.

(b) For a proposed Development that is

assisted with funding from RD 515 and

to qualify for the RD 515 Proximity

Point Boost (outlined in Section Four

A.6.b.(1)(b) of the RFA), the Applicant

must:

(i) Include the fun ding amount at the USDA

RD Financing line item on the

Development Funding Pro Forma

(Construction/Rehab Analysis and/or

Permanent Analysis); and

(ii) Provide a letter from RD, dated within

six (6) months of the Application

Deadline , as Attachment 17 to

Exhibit A, which includes the following

information for the proposed

Preservation Development:

¤ Name of existing development;

¤ Name of proposed Development;

¤ Current RD 515 Loan balance;

¤ Acknowledgment that the property is

applying for Housing C redits; and

¤ Acknowledgment that the property

will remain in the USDA RD 515 loan

portfolio.

(emphasis added ).

40. FHFC was counting on the letter mentioned directly

above to function as proof that : (a) there was RD 515 financing

in place when the l etter was issued ; and that (b) the RD 515

financing would still be in place as of the applicat ion deadline

for RFA 2015 - 111.

41. FH F C deemed Woodcliff, Colonial and St. Johns

ineligible because the ir RD letter s were not dated within six

months of the Dec ember 4, 2015, deadline for RFA 2015 - 111

applications . The Woodcliff letter was dated May 15, 2015, t he

Colonial letter was dated May 15, 2015, and t he St. Johns letter

was dated May 5, 2015.

4 2 . FHCA had previously issued RFA 2015 - 104, which also

propos ed to award Housing Credit Financing for the Preservation

of Existing Affordable Multifamily Housing Developments. The

deadline for RFA 2015 - 104 was June 23, 2015, and Woodcliff,

Colonial, and St. Johns applied using the same USDA letter that

they used in their RFA 2015 - 111 applications.

4 3 . Woodcliff, Colonial, a nd St. Johns argued during the

f inal h earing that FHFC should have accepted their letters

because: (a) they gained no competitive advantage by using

letters that were more than six months old; ( b) waiving the six -

month Ðshelf lifeÑ requirement would enable FHFC to satisfy one

of its stated goals for RFA 2015 - 111, i.e., funding of an

RD 515 development; and (c) other forms of financing (such as

equity investment) have no ÐfreshnessÑ or Ðshelf life Ñ

requirement.

4 4 . However, it is undisputed that no party (including

Woodcliff, Colonial, and St. Johns) challenged any of the terms,

conditions, or requirements of RFA 2015 - 111.

4 5 . In addition, Kenneth Reecy (FHFCÓs Director of

Multifamily Programs) testified that there must be a point at

which FHFC must ensure the viability of the information

submitted by applicants. If the information is Ðtoo old,Ñ then

it may no longer be relevant to the current application process.

4 6 . Under the circumstances , it was no t unreaso nable for

FHFC to utilize a six - month shelf life for USDA letters. 7/

4 7 . Furthermore, Mr. Reecy testified that excusing

Woodcliff, Colonial, and St. JohnsÓ noncompliance could lead to

FHFC excusing all deviations from all other date re quirements in

future RFAs. In other words, applicants could essentially

rewrite those portions of the RFA, and that would be an

unreasonable result.

48. E xcusing the noncompliance of Woodcliff, Colonial, and

St. Johns could lead to a Ðsli ppery slopeÑ i n which any shelf -

life requirement has no meaning. T he letters utilized by

Woodcliff, Colonial, and St. Johns were slightly more than six

months old . But, exactly when would a letter become too old to

satisfy the Ðshelf lifeÑ requirement? If three weeks can be

excused today, will four weeks be excused next year?

St. ElizabethÓs and Marian TowersÓ Challenge

49. St. Elizabeth is seeking low - income housing tax credit

financing in order to acquire and preserve a 151 - unit

development for elderly residents in Broward County, Florida.

50. Marian Towers is an applicant for RFA 2015 - 111 funding

seeking low - income housing tax credits to acquire and preserve a

220 - unit development for elderly residents in Miami - Dade County,

Florida.

51. The same devel oper is associated with the

St. Elizabeth and Marian Towers projects.

52. In its scoring and ranking process, FH FC assigned

St. Elizabeth a n RA Level of two . RFA 2015 - 111 requires that

Applicants demonstrate RA Levels by providing a letter from HUD

or the U SDA with specific information. That information is then

used to establish an RA Level for the proposed development.

53. As noted above , the RFA requires the letter to contain

several pieces of information, including: (a) the total number

of units that currently receive PBRA and/or ACC; and (b) the

total number of units that will receive PBRA and/or ACC if the

proposed development is funded.

54. RFA 2015 - 111 provided that a development with at least

100 re ntal units would receive an RA L evel of one .

55. St. Elizabeth included with its application a letter

from HUDÓs Miami field office stating in pertinent part that:

(iv) Total number of units that currently

receive PBRA and/or ACC: 99 units .

(v) Total number of units that will receive

PBRA and/or ACC if the proposed

Development is funded: 100 units*.

56. The asterisk in the preceding paragraph directed

reader s of St. ElizabethÓs HUD letter to a paragraph stating

that:

HUD is currently processing a request from

the owner to increase the number of units

subsidized under a HAP Contract to 100 by

transferring budget authority for the one

additional unit from another Catholic

Housing Services Section 8 project under

Secti o n 8(bb) in accordance with Notice

H - 2015 - 03.

57. Because of the foregoing statement from HUD, FHFC

concluded that St. Elizabeth did not have 100 units receiving

rental assistance as of the application deadline. Accordingly,

FHFC used 99 units as the total number of units that w ould

receive rental assistance when calculating St. ElizabethÓs RA

Level, and that le d to FHFC assigning an RA Level of two to

St. ElizabethÓs application. 8 /

58. If St. Elizabeth had been deemed eligible and if FHFC

had used 100 units as the total number of units that w ould

receive rental assistance, th en St. Elizabeth would have

received an RA Level of one . Given the application sorting

order and the selection proces s outlined in RFA 2015 - 111,

St. Eliza beth (with a lottery number of six ) would have been

recommended for funding by FHFC , and that outcome would have

resulted in Intervenors Isles of Pahokee and Lummus Park losing

their funding .

59. St. Elizabeth asserted during the f inal h earing that

the 100th unit had obtained rental assistance financing since

the application deadline on December 4, 20 15 . However, FHFC

could only review, score, and calculate St. ElizabethÓs RA Level

based on the information available as of the application

deadline.

60. While St. Elizabeth argues that the asterisk paragraph

sets forth a Ðcondition,Ñ Kenneth Reecy ( FHFCÓs Director of

Multifamily Housing) agreed during the f inal h earing that the

asterisk paragraph was more akin to information that was not

explicitly required by RFA 2015 - 111.

61. FHFC did not use that ad ditional information to

declare St. ElizabethÓs application ineligible for funding.

Despite being assigned an RA Level of two , St. ElizabethÓs

application still could have been selected for funding because

RFA 2015 - 111 merely established RA Level as a basis for breaking

ties among competing applicatio ns . However, too many applicants

for RFA 2015 - 111 had identical scores, and RFA 2015 - 111Ós use of

RA Level as a tiebreaker forced St. ElizabethÓs application out

of the running.

62. Under the circums tances, FHFCÓs treatment of

St. ElizabethÓs applicatio n was not clearly erroneo us, contrary

to competition, arbitrary , or capricious . As noted above, tie -

breakers are very important, because there is often very little

to distinguish one application for tax credits from another.

Given that there was a degree of uncertainty about whether

St. ElizabethÓs would have 100 qualifying units, FHFC acted

reasonably by assigning St. Elizabeth Ós application an RA Level

of two for this tie - breaker rather than an RA Level of one .

63. St. Elizabeth and Marian Towers ar gue that other

applications contained language that indicated a degree of

u ncertainty . Nevertheless , those other applications received an

RA Level of one .

64. For example, FHFC assigned an RA Level of one to Three

Round and Haley Sofge even though the ir HUD letters stated that

both developments would be Ðsubject to a Subsidy Layering Review

to be conducted by HUD.Ñ

65. Marian Towers argued that if FHFC does not accept HUD

or RD letters containing conditional language about the number

of units that wi ll be subsidized, then FHFC should have assigned

an RA Level of six to Three Round and Haley Sofge. If Three

Round and Haley Sofge had been assigned an RA Level of six , then

Marian Towers (with a lottery number of five ) would have been

recommended for fun ding.

66. St. Elizabeth and Marian Towers cited another instance

in which an application received an RA Level of one , even though

its application contained a letter from the RD program stating

that ÐUSDA Rural Development will consent to the transfer if all

regulatory requirements are met .Ñ (emphasis added).

67. However, St. Elizabeth and Marian Towers failed to

demonstrate that the language cited above applied only to those

particular applications rather than to all applications for tax

credits. For example, if all applications are subject to a

subsidy layering review and compliance with all regulatory

requirements, then inclusion of such language in a HUD letter

(in and of itself) should not prevent an applicant from being

assigned an RA Level of one .

68. St. Elizabeth and Mari a n Towers also cited a HUD

Letter used in another recent RFA by an applicant that received

an RA Level of one . The HUD letter in question contained an

asterisk followed by the following statement: ÐIt is HUDÓs

understandin g that two separate applications are being submitted

Î one for each tower comprising St. Andrew Towers. If funded,

HUD will consider a request from the owner to bifurcate the

St. Andrew Towers HAP contract in order to facilitate the

sepa rate financing of each tower.Ñ

69. However, St. Elizabeth and Marian Towers failed to

demonstrate why the language quoted directly above should have

resulted in the applicant in question being awarded an RA Level

less than one . There is no indication that the total numb er of

units receiving rental assistance would change.

CONCLUSIONS OF LAW

70. Florida Housing has jurisdiction over this matter,

pursuant to sections 120.569, 120.57(2) , and 120.57 (3), Florida

Statutes. Florida Housing has contracted with DOAH to prov ide

an Administrative Law Judge to conduct the informal hearing in

this case.

71. It has been stipulated that all parties have standing

to participate in this proceeding. §§ 120.52(13) and

120.569(1), Fla. Stat. The evidence demonstrated that this

proc eeding and the various potential outcomes could impact the

p arties in many different ways.

72. This is a competitive procurement protest proceeding

and , as such , is governed by section 120.57(3) (f), which

provides as follows in pertinent part:

Unless othe rwise provided by statute, the

burden of proof shall rest with the party

protesting the proposed agency action. In a

competitive - procurement protest, other than

a rejection of all bids, proposals, or

replies, the administrative law judge shall

conduct a d e novo proceeding to determine

whether the agencyÓs proposed action is

contrary to the agencyÓs governing statutes,

the agencyÓs rules or policies, or the

solicitation specifications. The standard

of proof for such proceedings shall be

whether the propose d agency action was

clearly erroneous, contrary to competition,

arbitrary, or capricious. . . .

73. Pursuant to section 12 0.57(3)(f), Petitioners (as the

parties opposing the proposed agency action) had the burden of

pro ving Ð a ground for invalidating t he award. Ñ See State

Contracting and EngÓg Corp. v. DepÓt of Transp. , 709 So. 2d 607,

609 (Fla. 1st DCA 1998).

74. Moreover, Petitioners must prove by preponderance of

the evidence th at FHFC Ós proposed award of tax credits to the

successful applicants i s arbitrary, capricious, or beyond the

scope of FH FC Ós discretion as a state agency. DepÓt of Transp.

v. Groves - Watkins Constructors , 530 So. 2d 912, 913 - 914 (Fla.

1988); DepÓt of Transp. v. J.W.C. Co. , 396 So. 2d 778, 787 (Fla.

1st DCA 1981). See also § 120.57(1)(j), Fla. Stat.

75. The First District Court of Appeal has interpreted the

process set forth in section 120.57(3)(f) as follows:

A bid protest before a state agency is

governed by the Administrative Procedure

Act. Section 120.57(3), Florida St atutes

(Supp. 1996) provides that if a bid protest

involves a disputed issue of material fact,

the agency shall refer the matter to the

Division of Administrative Hearings. The

administrative law judge must then conduct a

de novo hearing on the protest. See

§ 120.57(3)(f), Fla. Stat. (Supp. 1996). In

this context, the phrase Ð de novo hearing Ñ

is used to describe a form of intra - agency

review. The judge may receive evidence, as

with any formal hearing under section

120.57(1), but the object of the procee ding

is to evaluate the action taken by the

agency. See Intercontinental Properties,

Inc. v. Department of Health and

Rehabilitative Services , 606 So. 2d 380

(Fla. 3d DCA 1992) (interpreting the phrase

"de novo hearing" as it was used in bid

protest proce edings before the 1996 revision

of the Administrative Procedure Act).

State Contracting and EngÓg Corp. , 709 So. 2d at 609.

76. The ultimate issue in this proceeding is Ð whether the

agency's proposed action is contrary to the agency's governing

statut es, the agency's rules or policies, or the bid or proposal

specifications. Ñ In addition to proving that FHFC breached this

statutory standard of conduct, Petitioners also must establish

that FHFC's violation was either clearly erroneous, contrary to

compe tition, arbitrary, or capricious. § 120.57(3)(f), Fla.

Stat.

77. The First District Court of Appeal has described the

Ð clearly erroneous Ñ standard as meaning that an agency's

interpretation of law will be upheld Ð if the agency's

construction falls within the permissible range of

interpretations. If, however, the agency's interpretation

conflicts with the plain and ordinary intent of the law,

judicial deference need not be given to it. Ñ Colbert v. DepÓt

of Health , 890 So. 2d 1165, 1166 (Fla. 1st DCA 2004 )(citations

omitted). See also Anderson v. Bessemer City , 470 U.S. 564,

573 - 74; 105 S. Ct. 1504, 1511; 84 L. Ed. 2d 518, 528 (1985)

(ÐWhere there are two permissible views of the evidence, the

factfinderÓs choice between them cannot be clearly erroneous.Ñ ).

78. An agency decision is Ð contrary to competition Ñ when it

unreasonably interferes with the objectives of competitive

bidding. Those objectives have been stated to be:

[T]o protect the public against collusive

contracts; to secure fair competition u pon

equal terms to all bidders; to remove not

only collusion but temptation for collusion

and opportunity for gain at public expense;

to close all avenues to favoritism and fraud

in various forms; to secure the best values

for the [public] at the lowest po ssible

expense; and to afford an equal advantage to

all desiring to do business with the

[government], by affording an opportunity

for an exact comparison of bids.

Harry Pepper & Assoc., Inc. v. City of Cape Coral , 352 So. 2d

1190, 1192 (Fla. 2d DCA 1977 )(quoting Wester v. Belote , 138 So.

721, 723 - 724 (Fla. 1931)).

79. An agency action is capricious if the agency takes the

action without thought or reason or irrationally. An agency

action is arbitrary if it is not supported by facts or logic.

See Agric o Chem. Co. v. DepÓt of Envtl. Reg. , 365 So . 2d 759,

763 (Fla. 1st DCA 1978).

80. To determine whether an agency acted in an arbitrary

or capricious manner, it must be determined Ð whether the agency:

(1) has considered all relevant factors; (2) has given actual,

good faith consideration to those factors; and (3) has used

reason rather than whim to progress from consideration of these

factors to its final decision. Ñ Adam Smith Enters . v. DepÓt of

Envtl. Reg. , 553 So. 2d 1260, 1273 (Fla. 1st DCA 1989).

81. However, if a decision is justifiable under any

analysis that a reasonable person would use to reach a decision

of similar importance, the decision is neither arbitrary nor

capricious. Dravo Basic Materials Co. v. DepÓt of Transp. ,

602 So. 2d 632, 634 n .3 (Fla. 2d DCA 1992).

The Challenge by Woodcliff, Colonial, and St. Johns

82. Woodcliff, Colonial, a nd St. Johns argued during the

final h earing that FHFC should have accepted their letters

because: (a) they gained no competitive advantage by using

lett ers that were more than six months old; (b ) waiving the

six month Ðshelf lifeÑ requirement would enable FHFC to satisfy

one of its stated goals for RFA 2015 - 111, i.e., funding of an RD

515 development; and (c) other forms of financing (such as

equity inves tment) have no ÐfreshnessÑ or Ðshelf lifeÑ

requirement.

83. However, during the time period wh en stakeholders

could have objected to one of RFA 2015 - 111Ós provisions,

Woodcliff, Colonial, and St. Johns did not challenge the

portion of RFA 2015 - 111 requi ring that the USDA letters be no

more than six months old at the application deadline . As a

result, Woodcliff, Colonial, and St. Johns have waived this

argument. See Optiplan, Inc. v. School Bd. , 710 So. 2d 569,

572 - 73 (Fla. 4th DCA 1998) (stating that Ð with respect to the

constitutional challenge to the RFPÓs specifications because it

was awarded points tied to race - based classifications, we agree

with the hearing officer that Opti plan waived its right to

contest the School BoardÓs use of the criteria by failing to

formally challenge the criteria within 72 hours of the

publication of the specifications in a bid solicitation protest.

The purpose of such a protest is to allow an agency to correct

or clarify plans and specifications prior to accepting bids in

order to save expense to the bidders and to assure fair

competition among them. See Capeletti Bros., Inc. v. Dep Ó t of

Transp. , 499 So. 2d 855, 857 (Fla. 1st DCA 1986) . ( Having

failed to file a bid specification protest, and having submitted

a proposal based on the published criteria, Optiplan has waived

its right to challenge the criteria.Ñ); Consultech of

Jacksonville, Inc. v. DepÓt of Health , 876 So. 2d 731 , 734 (Fla.

1st DCA 2004)(stating that Ð[a] further bar to appellantÓs

attempt to inject the co st issue into this proceeding is its

failure to timely protest the provisions of the RFP with respect

to the financial aspects of the project. Because Consultech

failed to file a protest to the terms and conditions of the RFP

as required by section 120.57 (3), Florida Statutes, its belated

attempt to challenge the award to ISF on this basis must

fail.Ñ ).

St. ElizabethÓs and Marian TowerÓs Challenge

84. St. Elizabeth argue s that FHFC erred by assigning its

application an RA Level of two rather than an R A Level of one .

However, St. Elizabeth fails to demonstrate that FHFCÓs action

was clearly erroneous, contrary to competition, or arbitrary and

capricious.

85. As noted above, there is very little to differentiate

applications for tax credits, and sev eral of the applicants for

RFA 2015 - 111 had identical scores. FHFC designated RA Level as

a tie - breaker among competing applications. Given the

uncertainty about whether St. Elizabeth would have 100 units

receiving rental assistance after the application deadline, FHFC

acted appropriately by giving St. ElizabethÓs applicatio n less

than a perfect score for RA Level. Even if the degree of doubt

that St. Elizabeth would ultimately have 100 units receiving

rental assistance was low , FHFC acted appr opriately by

distinguishing St. ElizabethÓs application from those that had

no such uncertainty. 9 /

86. St. Elizabeth argues that the undersigned should have

accounted for St. Elizabeth allegedly gaining that 100th unit

following the application deadline. Howeve r, that would have

been contrary to section 120.57(3) (f) , which provides that Ð[i]n

a protest to an invitation to bid or request for proposals

procurement, no submissions made after the bid or proposal

opening which amend or supplement the bid or proposal shall be

considered.Ñ

87. As for St. ElizabethÓs and Marian TowersÓ argument

that other comparable RFA language did not result in applicants

being assigned a score less than an RA Level of one ,

St. Elizabeth and Marian Towers failed to carry their burd en of

proof on this point by demonstrating that : (a) the other RFA

language pertained to a specific applicant rather than all

applicants seeking tax credit funding ; or that (b) the language

in question should have led to the applicant(s) receiving an RA

L evel less than one . See § 120.57(3)(f) , Fla. Stat. (providing

that Ð[u]nless otherwise provided by statute, the burden of

proof shall rest with the party protesting the proposed agency

actionÑ).

RECOMMENDATION

Based on the foregoing Findings of Fact a nd Conclusions of

Law, it is RECOMMENDED that the Florida Housing Finance

Corporation enter a f inal o rder awarding funding to Three Round

Tower A , LLC ; Cathedral Towers, Ltd ; Isles of Pahokee Phase II,

LLC ; SP Manor, LLC ; and Pineda Village.

DONE AND EN TERED this 1 8 th day of October , 2016, in

Tallahassee, Leon County, Florida.

S

G.W. CHISENHALL

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 1 8 th day of October , 2016 .

ENDNOTE S

1/ The fifth funded applicant, Pineda Village, did not intervene

in this proceeding and is not a party.

2/ Unless stated otherwise, all statutory references will be to

the 2016 version of the Florida Statutes.

3 / A website operated by the National Council of State Housing

Agencies ( ww w.ncsha.org ) describes P BRA as follows: ÐProject -

based Section 8 rental assistance (PBRA) contracts provide

subsidies for affordable multifamily rental developments to

lower rental costs for low - income families and to help offset

construction, rehabilita tion, and preservation costs. PBRA

makes up the difference between market rents and what low - income

tenants can afford, based on paying 30 percent of household

income for rent.Ñ See generally Oken v. Williams , 23 So. 3d

140, 148 n.2 (Fla. 1 st DCA 2009)( n oting several instances in

which courts have taken judicial notice of information found on -

line). As for ACC, 24 C . F . R . § 982.151(a)(1) states that Ð[a]n

annual contributions contract (ACC) is a written contract

between HUD and [ a public housing agency]. Under the [ ACC ] , HUD

agrees to make payments to the [public housing agency], over a

specified term, for housing assistance payments to owners and

for the [public housing agency] administrative fee. The ACC

specifies the maximum payment over the ACC term. The [public

housing agency] agrees to administer the program in accordance

with HUD regulations and requirements.Ñ

4/ If Woodcliff had been deemed e ligible, it would have been

the first applicant selected for funding, since it is an RD -

515 assisted a pplicant from a Medium County. Its lottery number

is 19, which places it as the third best lottery number among

RD - 515 applicants, but the two applicants with better lottery

numbers were deemed ineligible by FHFC and did not file a formal

written protest.

5 / If Colonial had been deemed eligible, it may have been

selected for funding. ColonialÓs lottery number is 22, which

places it as the fifth b est lottery number among RD -

515 applicants, but the two RD - 515 applicants with the best

lottery numbers were deemed ineligible. If Woodcliff, is also

successful in its challenge, then Woodcliff would be the first

applicant selected to satisfy the funding goal for an RD

515 applicant in a medium or small c ounty. Following selection

of the highest ranked Non - RD 5 15 applicants and depending on the

amount of tax credits awarded to such applicants, there may be

sufficient funding to fund Colonial.

6 / If St. Johns had been deemed e ligible, it could have been

the second RD applicant selected for funding, depending on

which Non - RD applicants are ultimately selected for funding.

St. Johns' lottery number is 21 , which places it as the

fourth best lottery number among RD - 515 applicants, but the two

RD 515 applicants with the best lottery numbers were deemed

ineligible by FHFC . The third b est lottery number among

RD - 515 applicants, Woodcliff, would have been selected first in

order to satisfy t he RD 515 Development in a medium or small

c ounty funding goal. If sufficient funds remained after funding

Non - RD applicants, St . Johns would have been select ed as the

highest ranked RD 515 applicant in the Elderly demographic.

7/ Cathedral Towers presented the testimony of Shawn Wilson (the

President of Blue Sky Communities) , and Mr. Wilson testified

that it typically takes one to two weeks to obtain a letter from

HUD or the USDA. Mr. Wilson further testified that RFA

applicants can even ask HUD or the USDA to revise a letterÓs

wording if that wording does not strictly adhere to a particular

RFAÓs requirements.

8 / In respon se to a previous RFA (2015 - 104), St. Elizabeth

submitted a similar RFA letter date d June 18, 2015, which had an

asterisk paragraph stating that Ð[i]f funded, HUD will consider

a request from the owner to increase the number of units

subsidized under a HAP Contract to 100 by transferring budget

authority for the one additional unit from another Catholic

Housing Management Section 8 project under Section 8(bb) in

accordance with Notice H - 2014 - 14, or such other allowable action

which would increase the total n umber of subsidized units at the

property to 100 . Ñ FHFC awarded St. ElizabethÓs application an

RA Level of two for that RFA. The foregoing language is

strikingly similar to the asterisk paragraph at issue in the

instant case. As a result, St. Elizabeth was familiar with how

FHFC treated such language.

9 / During the Final Hearing and in its Proposed Recommended

Order, St. Elizabeth argued that there were numerous instances

in which RFA 2015 - 111 expressly required that certain forms and

other informatio n be finalized by the ÐApplication Deadline.Ñ

However, there was nothing in RFA 2015 - 111 requiring that the

number of units that will be subsidized if the proposed

development is funded b e finalized by the ÐApplication

Deadline.Ñ This argument would have appeal if St. ElizabethÓs

failure to definitively have 100 units receiving rental

assistance as of the applic ation deadline had rendered

St. ElizabethÓs application ineligible for funding. Instead,

the uncertainty regarding the 100 th unit merely led to

S t. Elizabeth receiving a lower score on the RA Level tie -

breaker.

COPIES FURNISHED:

Donna Elizabeth Blanton, Esquire

Radey Law Firm, P.A.

Suite 200

301 South Bronough Street

Tallahassee, Florida 32301 - 1706

(eServed)

Betty Zachem, Esquire

Florida Housing Finance Corporation

Suite 5000

227 North Bronough Street

Tallahassee, Florida 32301

(eServed)

Maureen McCarthy Daughton, Esquire

Maureen McCarthy Daughton, LLC

Suite 304

1725 Capital Circle Northeast

Tallahassee, Florida 32308

(eServed)

Christop her Dale McGuire, Esquire

Florida Housing Finance Corporation

Suite 5000

227 North Bronough Street

Tallahassee, Florida 32301

(eServed)

Michael P. Donaldson, Esquire

Carlton Fields Jorden Burt, P.A.

Suite 500

215 South Monroe Street

Tallahassee, Florida 3 2302

(eServed)

Hugh R. Brown, Gen eral Co unsel

Florida Housing Finance Corporation

Suite 5000

227 North Bronough Street

Tallahassee, Florida 32301 - 1329

(eServed)

M. Christopher Bryant, Esquire

Oertel, Fernandez, Bryant

& Atkinson, P.A.

Post Office Box 1110

2060 Delta Way

Tallahassee, Florida 32302 - 1110

(eServed)

Kate Flemming , Corporation Clerk

Florida Housing Finance Corporation

Suite 5000

227 North Bronough Street

Tallahassee, Florida 32301 - 1329

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to sub mit written exceptions within

10 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.