16-006699RU Jonathan L. Wolf, Berkshire Square, Ltd., Hawthorne Park, Ltd., And Southwick Commons, Ltd. vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Wednesday, January 25, 2017.

Summary: Petitioners failed to establish that certain specifications in a solicitation were unreasonable, arbitrary, or capricious.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMERICAN RESIDENTIAL DEVELOPMENT

LLC; PATRICK LAW; MADISON

HIGHLANDS, LLC; JONATH A N L.

WOLF ; BERKSHIRE SQUARE, LTD;

HAWTHORNE PARK, LTD; AND

SOUTHWICK COMMONS, LTD,

Petitioner s,

vs. Case Nos. 16 - 66 98BID

16 - 66 99BID

FLORIDA HOUSING FINANCE

CORPORATION ,

Respondent ,

and

HERITAGE OAKS, LLLP; AND

HTG ANDERSON TERRACE, LLC ,

Intervenor s .

_______________________________/

RECOMMENDED ORDER

This matter came before D. R. Alexander, Administrative Law

Judge of the Division of Administrative Hearings (DOAH) , after

the parties waived a final hearing and submitted a stipulate d

record. The parties are represented as follows .

APPEARANCES

For Petitioner s : Craig D. Varn, Esquire

Manson Bolves Donaldson Varn, P.A.

Suite 201

204 South Monroe Street

Tallahassee, Florida 32301 - 1591

For Respondent : Christopher Dale McGuire, Esquire

Florida Housing Finance Corporation

227 North Bronough Street , Suite 5000

Tallahassee, Florida 32301 - 13 29

For Intervenor: Michael P. Donaldson, Esquire

(Heritage Park) Carlton Fields Jorden Burt, P.A.

Post Office Box 190

Tallahassee , Florida 32 3 02 - 0190

For Intervenor: Maureen McCarth y Daughton, Esquire

(HTG) Maureen McCarthy Daughton, LLC

Suite 3 04

1725 Capital Circle Northeast

Tallahassee, Florida 32308 - 0595

STATEMENT OF THE ISSUE

The issue is wheth e r certain specifications in Request for

Application s 2016 - 113 (RFA - 113) issued by Respondent, Florida

Housing Finance Corporation ( Florida Housing), are contrary to

Florida Housing's governing statutes, rules, or policies in

violation of section 120. 5 7 (3) ( f) , Florida Statutes (2016) . 1/

PRELIMINARY STATEMENT

After Florida Housing published its notice soliciting

applications pursuant to RFA - 113, o n November 1 5 , 201 6 , American

Residential Development, LLC (ARD) , Madison Highlands, LLC

(Madison) , and Patrick L aw (Law) filed with Florida Housing a

Petition for Administrative Determination of Invalidity of

RFA - 2016 - 113 (Petition) . On the same date, Jonathan L. Wolf

(Wolf) , Berkshire Square, Ltd (Berkshire) , Hawthorne Park, Ltd

(Hawthorne) , and Southwick Common s, Ltd (Southwick) , filed with

Florida Housing a second Petition challenging the same

specifications. The Petitions were referred by Florida Housing

to DOAH with a request that a formal hearing be conducted. They

were docketed as Case Nos. 16 - 6698 and 16 - 6699, assigned to

Administrative Law Judge Peterson, consolidated, and then

transferred to the undersigned. Intervenors Heritage Oaks, LLLP

( H eritage) , and HTG Anderson Terrace, LLC (HTG) , who intend to

file applications in response to the RFA - 113 solici tation, were

authorized to inter vene in support of Florida Housing.

Because rule challenge s related to RFA - 113 w ere also filed

by the same Petitioners, a separate final order was entered in

Case Nos. 16 - 6610RU and 16 - 6611RU. See § 120.57(1)(e) , Fla.

Sta t., which now authorizes a person challenging agency action

to file a collateral rule challenge under section 120.56

regarding the agency's use of an invalid or unadopted rule in a

section 120.57 proceeding.

All parties agreed to waive a final hearing and submit a

stipulated record. The record consists of J oint E xhibits 1

through 3 : RFA - 113, as modified ; 26 U.S.C. S . § 42 of the

Internal Revenue Code (IRC); and Florida Housing ' s 2016

Qualified Allocation Plan (QAP) . Also, Florida Housing offered

Exhibit 1 , which is the deposition of former Executive Director

Steve Auger . Although Petitioners do not stipulate to any parts

of the deposition , a ll exhibits are accepted in evidence .

Finally, t he parties submitted a Joint S tipulation of certain

facts .

P ropos ed recommended orders (P R Os) were filed by

Petitioners and Florida Housing , and they have been consid ered

in the preparation of this Recommended Order. Intervenors have

joined in Florida Housing 's P R O .

F INDINGS OF FACT

A. The Parties

1. Florida Housin g is a public corporation created

pursuant to section 420.504. One of its responsibilities is to

award low - income housing tax credits, which developers use to

finance the construction of affordable housing. Tax credits are

made available to states annual ly by the United States Treasury

Department and are then awarded pursuant to a competitive cycle

that starts with Florida Housing's issuance of a n RFA. This

proceeding concerns RFA - 113.

2. Petitioner s ARD and Madison are developer s of

affordable housin g units and submit applications for tax

credits. Law and Wolf are principal s of a developer of

affordable housing units. Berkshire , Hawthorne , and Southwick

are limited partnerships that have submitt ed applications for

tax credits . All Petitioners inten d to submit application s in

response to RFA - 113 .

3. Intervenors Heritage and HTG are developers of

affordable housing who intend to file applications pursuant to

RFA - 113.

B. Background

4. On October 28, 2016, Florida Housing published on its

website pr oposed solicitation RFA - 113 , a 121 - page document

inviting a pplic ations for the award of up to $14,669,052.00 in

housing tax credits for the development of affordable ,

multifamily housing located in Broward, Duval, Hillsborough,

Orange, Palm Beach, and Pine llas Counties . After Petitioners

gave notice of their intent to challenge RFA - 113 , Florida

Housing attempted to resolve the dispute by modifying the

solicitation on November 13, 2016 . The modification did not

resolve the dispute.

5 . On November 1 5 , 2016 , Petitioners timely filed with

Florida Housing two Petitions, each challenging the same

specifications in RFA - 113 , as modified .

C. The RFA Process

6 . The federal Low - Income Housing Credit Program is

governed by 26 U.S.C.S. § 42 (section 42) . The prog ram

allocates f ederal income tax credits to states annually on a per

capita basis to help facilitate private development of

affordable low - income housing.

7 . As the housing credit agency for the State of Florida ,

Florida Housing has the authority to ad minister various federal

and state affordable housing programs, including the Low - Income

H ousing C redit P rogram. See § 420.5099(1), Fla. Stat.

8. Because the demand for housing credits exceeds the

amount available, Florida Housing administers the progr am

through a competitive process using RFAs. Based upon factors in

the RFAs, t he applications are scored and competitively ranked

by an evaluation committee to determine which applications will

be allocated tax credits.

9 . Selection and preference crit eria for the low - income

housing tax credit programs are found in the 2016 QAP adopted by

Florida Administrative Code Rule 67 - 48.002(95). These criteria

are intended to provide general , but not specific, guidance for

the entire housing credit program, and not just RFA - 113. More

specific guidance is found in the individual RFAs, tailored to

each type of solicitation.

10. Florida Housing issues around 15 to 20 RFAs annually.

Th e specifications being challenge d in this case are found in

RFA - 113. The Peti tions raise two broad areas of concern, which

are labeled in Petitioners' PRO as "Exclusion of Eligible

Developments from Funding" and "Illegal Delegation to Local

Governments . "

D . Exclusion of Eligible Developments

1 1 . A new eligibility provision in RFA - 113 is the Racially

and Ethnically Concentrated Areas of Poverty (RECAP). RECAP

areas make up less than 3.5 percent of all census tracts in the

State and are defined in the RFA as an area where "at least

40 percent of the population is living below the poverty line

and in which a concentration of individuals who identify as

other than non - Hispanic White exceeds 50 percent of the

population of the census tract." Jt. Ex. 1, p. 2. Florida

Housing has placed a link on its website identifying each RECA P

area in the State. Petitioners do not contend they were unaware

of RECA P areas before RFA - 113 was issued.

12. The RECAP concept was developed after a series of

workshops, public dialogue, and discussions with stakeholders.

The purpose of the concept is to allow Florida Housing to

"appropriately balance" the location of affordable housing

projects. Without the RECAP limitation, described below,

Florida Housing is concerned that developers would choose to

build low - income housing only in the poorest a reas of a county

or areas with the highest concentration of minorities. The

RECAP limitation ensures that affordable housing will be

available throughout the county. Whether this concept will be a

permanent fixture in future RFAs depends on whether RECAP

achieves its intended purpose.

13. RFA - 113 provides that f ive categories of development

are eligible for receiving tax credits: new construction,

rehabilitation, acquisition and rehabilitation, redevelopment,

and acquisition and redevelopment. See § 4A.5.c.(2).

14. Section 4A.5.c.(1) provides the following limitation

on eligibility for tax credit funding for three categories of

development located within a RECAP area:

With one exception, proposed Developments

that select a Development Category of N ew

Construction, Rehabilitation, or Acquisition

and Rehabilitation at question 5.c.(2) of

Exhibit A are not eligible to receive

funding under this RFA if any part of the

proposed D evelopment is located in a RECAP

designated area. The one exception to the

above prohibition is for a proposed

Development where the Applicant selects and

qualifies for Local Government Areas of

Opportunity Funding points as outlined in

Section Four A.10.(b) of the RFA. Proposed

Developments that are located in a RECAP

designate d area where the Applicant selects

and qualifies for the Development Category

of Redevelopment or Acquisition and

Redevelopment at question 5.c.(2) of

Exhibit A are eligible for funding under

this RFA.

1 5 . Therefore, new construction, rehabilitation, an d

acquisition and rehabilitation categories are no t eligible to

receive funding if any part of the proposed development is

located in a RECAP area. If, h owever, such a development is in

a RECAP area and qualifies for Local Government Areas of

Opportunity Funding points, the project is eligible for funding.

16. A Local Government Area of Opportunity is defined in

Section Two of the RFA as follows:

D e velopments receiving a high level of Local

Government interest in the project as

demonstrated by an irrevo cable funding

contribution that equals or exceeds 2.5

times the Total Development Cost Per Unit

Base Limitation (exclusive of any add - ons or

multipliers), as provided in Item 7 of

Exhibit C to the RFA, for the Development

Type committed to for the proposed

Development.

17. In plainer terms, in order for an applicant to receive

points for a local government contribution, it must demonstrate

that the county has contributed a cash loan or grant for the

proposed development. See § 4A.10.b. H aving done so, t he

applicant is then eligible for funding even if all or part of

the proposed development lies within a RECAP area.

18. Petitioners contend the specifications which limit

funding for certain types of projects violate section 42 and are

illegal. But they cite no provision in section 42 which

requires Florida Housing to conform to every requirement in the

IRC in order to allocate housing credit s . And nothing in the

IRC prevents local housing agencies from setting eligibility

requirements for funding, or r equires that all projects located

in low - income areas are automatically eligible for funding.

19. Petitioners also assert the limitations in the RFA run

afoul of chapter 420 . However, Florida Housing has the

authority to adopt allocation procedures tha t take into account

a number of considerations during the competitive solicitation

process. They include "the timeliness of the application, the

location of the proposed housing project, the relative need in

the area for low - income housing and the availab ility of such

housing, the economic feasibility of the project, and the

ability of the application to proceed to completion of the

project in the calendar year for which the credit is sought."

§ 420.5099(2), Fla. Stat. The challenged specifications addr ess

these considerations.

20. In conjunction with their RECAP argument , Petitioners

contend the limitations prevent the same th ree categories of

development from receiving a 30 percent "boost" in the ir cost

basis, which allows them to receive a larger all ocation of tax

credits and make s the project more financially feasible . They

argue this violates section 42. For the reasons cited above,

this contention is rejected. Notably, an application without a

boost could be selected for funding , while an applic ation

receiving one is not automatically selected for funding.

E . Illegal Delegation to Local Governments

2 1. Petitioners generally contend Florida Housing has

unlawfully delegated authority to local governments to select

eligible applications. More spe cifically, t hey assert Florida

Housing has failed to establish any standards to be used by

local government s when providing cash or loans ; the local

government essentially pick s the winner , as RFA section 2 limits

funding eligibility to only one locally - fu nded developer for

each jurisdiction ; and section 4A.6.a.(2) allows a locally -

funded developer to receiv e preferential treatment in the award

process by waiving two eligibility requirements .

22. For many years , Florida Housing has considered local

gover nment input in the selection process by giving applicants

points for local government contributions and requiring forms

signed by the local government officials certifying compliance

with zoning , site plan, and infrastructure requirements. Thus,

r eliance on local government input is not a new concept in the

solicitation process .

2 3 . Florida Housing relies on local governments to

evaluate such things as the location of the proposed housing

project, the relative need in the a rea for low - income housing,

the availability of such housing, the economic feasibility of

the project, and the ability of the applicant to proceed to

completion of the project. This is because without local input,

it would be difficult , if not impossible , for Florida Housing to

evaluat e these factors for every applicant for every RFA.

Florida Housing also takes into account a local government's

revitalization plan in making its funding selection , a

requirement in the QAP . See Jt. Ex. 3, p. 1, § I.B.

(in allocating credits, t he agency must consider the "project's

characteristics including housing as part of a community

revitalization plan").

2 4 . Other than establishing the minimum amount and type of

funding by a local government , Florida Housing does not direct

local govern ments how to evaluate or select projects to receive

local approvals or funding. Attempting to provide specific

criteria for local governments would be impractical , as there

are hundreds of local jurisdictions in the State, and Florida

H ousing believes tha t local governments , and not someone in

Tallahassee, can best evaluate local con cerns for revitalizing

those communities. Notably, local governments do not have a

final say over which projects get funded and which do not , and

local funding does not guaran tee an applicant will be awarded

tax credits .

CONCLUSIONS OF LAW

2 5 . This case involves a protest to specifications in

RFA - 113. Section 120.57(3) (f) provides:

Unless otherwise provided by statute, the

burden of proof shall rest with the party

protesti ng the proposed agency action. In a

competitive - procurement protest, other than

a rejection of all bids, proposals, or

replies, the administrative law judge shall

conduct a de novo proceeding to determine

whether the agency's proposed action is

contrary t o the agency's governing statutes,

the agency's rules or policies, or the

solicitation specifications. The standard

of proof shall be whether the proposed

agency action was clearly erroneous,

contrary to competition, arbitrary, or

capricious.

2 6 . Petiti oners must demonstrate the factual basis for

their challenge by a preponderance of the evidence. Fla. Dep't

of Transp. v. J.W.C. Co. , 396 So. 2d 778, 788 (Fla. 1st DCA

1981); § 120.57(1), Fla. Stat.

2 7 . Petitioners are substantially affected by the

chall enged specifications and have standing to bring this

action. Intervenors also have standing to participate.

2 8 . Petitioners are challenging the specifications in the

RFA as opposed to challenging an award of tax credits.

Therefore, " a challenge to the [ RFA ] must be directed to

specifications that are so vague that applicants cannot

formulate an accurate [ application ] , or are so unreasonable that

they are either impossible to comply with or too expensive to do

so and remain competitive. " Advocacy Ctr. f o r Pers. w ith

Disab., Inc. v. Dep't of Child. & Fam. Servs. , 721 So. 2d 753,

755 (Fla. 1st DCA 1998). See also Hadi v. Liberty Behavioral

Health Corp. , 927 So. 2d 34, 38 (Fla. 1st DCA 2006)(to prevail

in a challenge to specifications, a challenger must sho w the

agency's decision to include the specifications in the

solicitation was arbitrary or capricious).

2 9 . Petitioners do not claim the challenged specifications

are so vague that they cannot formulate an accurate application .

Rather, t hey contend the specifications a re unreasonable and

arbitrary and capricious. On these issues, t he record shows the

RECAP s pecifications were adopted after a thoughtful and

deliberative process which included workshops, public dialogue ,

and discussions with stakeholders , including presumably

Petitioners . Their purpose is to ensure low - income affordable

housing is available throughout the local jurisdiction, and not

just in limited areas. Similarly, reliance on local government

input was shown to be necessary, as the lo cal governments

provide essential insight and information on how tax credits can

best be used to revitalize th eir communities. The

specifications are neither unreasonable nor arbitrary or

capricious .

30 . T hroughout their PRO , Petitioners argue that Flo rida

Housing has violated section 42 by excluding certain

developments from funding and illegally delegating authority to

local governments. But federal law does not govern this

proceeding , and there is no evidence that the Department of

Housing and Urban Development or the Internal Revenue Service

has mandated that Florida Housing comply with section 42, word

for word, as a condition precedent to serving as the state's

housing credit agency. Absent a statutory requirement that

Florida Housing seek pre - ap proval from the federal government or

adopt procedures that are identical to federal procedures,

allegations concerning a deviation from federal standards cannot

be adjudicated in this forum. See, e.g. , Bridges of Am., Inc.

v. Dep't of Corr. , Case No. 16 - 5237BID (Fla. DOAH Nov. 23, 2016 ;

Fla. DOC Dec. 15, 2016).

3 1 . Finally, nothing in chapter 420 prevents Florida

Housing from set ting eligibility requirements for funding ,

excluding certain categories of projects from eligibility , or

receiving local gove rnment input in the manner that it does .

32. In summary, Petitioners have failed to prove t he

specifications are contrary to Florida Housing's governing

statutes, rules, or policies or that they are unreasonable,

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

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that Florida Housing Finance Corporation enter

a final order d i smissing the Petitions.

DONE AND ENTERED this 25th day of January, 2017, in

T alla hassee, Leon County, Florida.

S

D . R. ALEXANDER

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

Fi led with the Clerk of the

Division of Administrative Hearings

this 25th day of January, 2017.

ENDNOTE

1/ As a basis for relief, t he Petitions allege RFA - 113 exceeds

the agency's grant of legislative authority ; enl arges, modifies,

or contravenes the spe cific provisions of law implemented ; and

contains "non - rule policies that are arbitrary and capricious."

Petitions, pp . 17 and 18 . None implicate section 120.57(3) (f) .

In t he parties' Joint Stipulation , however, the issue is broadly

redefined as "[w]het her the terms, conditions and specifications

of RFA 2016 - 113 are invalid pursuant to Section 120.57(3), F.S."

Jt. Stip., ¶ H.4.

COPIES FURNISHED:

Kate Flemming, Corporation Clerk

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 1329

(eServed)

Craig D. Varn, Esquire

Manson Bolves Donaldson Varn, P.A.

204 South Monroe Street, Suite 201

Tallahassee, Florida 32301 - 1591

(eServed)

Michael P. Donaldson, Esquire

Carlton Fields Jorden Burt, P.A.

Post Of fice Box 190

Tallahassee, Florida 32302 - 0190

(eServed)

Ch r istopher Dale M cGuire, Esquire

Florida Housing Finance Corporation

227 North Bronough Street , Suite 5000

Tallahassee, Florida 323 01 - 13 29

(eServed)

Douglas P. M anson, Esquire

Manson Bolves Donald son Varn, P.A.

1101 Swann Avenue

Tampa, Florida 33606 - 2637

(eServed)

Maureen M. Daughton, Esquire

Maureen McCarthy Daughton, LLC

1725 Capital Circle Northeast, Suite 304

Tallahassee, Florida 32308 - 0595

(eServed)

Hugh R. Brown, General Counsel

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 13 29

(eServed)

NOTICE OF RIGHT TO SUBMIT E XCEPTIONS

A ll parties have the right to submit written exceptions within

10 days from the date of this Recommended O rder. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.