17-003270BID Madison Point, Llc And American Residential Development, Llc vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Friday, August 11, 2017.

Summary: Intervenor's exclusion of existing, occupied units on the proposed development site constituted a material non-waivable error; tax credits should be awarded to Petitioners.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MADISON POINT, LLC ; AND AMERICAN

RESIDENTIAL DEVELOPMENT, LLC,

Petitioners,

vs. Case No. 17 - 3270BID

FLORIDA HOUSING FINANCE

CORPORATION,

Respondent,

and

HTG HUDSON, LLC ; AND HERITAGE

OAKS, LLLP,

Int ervenors.

_______________________________/

RECOMMENDED ORDER

On July 5 , 2017, Administrative Law Judge Yolonda Y. Green,

of the Division of Administrative Hearings (ÐDivisionÑ),

conducted a duly - noticed final hearing, pursuan t to section s

120.57(1 ) and (3) , in Tallahassee, Florida.

APPEARANCES

For Petitioner , Madison Point, LLC ; and American Residential

Development, LLC ( c ollectively referred to as ÐMadison

PointÑ) :

Douglas P. Manson, Esquire

Paria Shirzadi, Esquire

Manson Bolves Donaldson & Varn, P.A.

1101 West Swan n Avenue

Tampa, Florida 33606 - 2637

Craig D. Varn, Esquire

Manson Bolves Donaldson & Varn, P.A.

204 South Monroe Street, Suite 201

Tallahassee, Florida 32301

J. Timothy Schulte, Esquire

Sarah Pa pe, Esquire

Zimmerman, Kiser, & Sutcliffe, P.A.

315 East Robinson Street, Suite 600

Orlando, Florida 32801

Michael G. Maida, Esquire

Michael G. Maida, P.A.

1709 Hermitage Boulevard, Suite 201

Tallahassee, Florida 32308

For Respondent , Florida Ho using Finance Corporation

(ÐFlorida HousingÑ) :

Betty Zachem, Esquire

Marisa G. Button, Esquire

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 1329

For Intervenor, Heritage Oaks, LLLP (ÐHerit age OaksÑ):

Michael P. Donaldson, Esquire

Carlton Fields Jorde n Burt, P.A.

Post Office Drawer 190

215 South Monroe Street, Suite 500

Tallahassee, Florida 32302 - 0190

For Intervenor, HTG Hudson, LLC (ÐHTG HudsonÑ):

Maureen McCarthy Daughton, Esqui re

Maureen McCarthy Daughton, LLC

1725 Capital Circle Northeast, Suite 304

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The i ssue for determination in this bid protest proceeding

is whether the Florida Hous ing Finance CorporationÓs (ÐFlorida

Hous ing Ñ) intended award of tax credits for the preservation of

existing affordable housing developments was clearly erroneous,

contrary to competition, arbitrary, or capricious.

PRELIMINARY STATEMENT

On October 28, 2016, Respondent, Florida Housing , solicited

applications for an allocation of federal low - income housing tax

credits through a Request for Applications 2016 - 113 for H ousing

Credit Financing for Affordable Housing Developments (ÐRFA 2016 -

113Ñ or ÐRFAÑ ). The RFA 2016 - 1 13 was issued for the purpose o f

development of affordable housing located in Broward, Duval,

Hillsborough, Orange, Palm Beach, and Pinellas Counties. The

applications were initially due on December 8, 2016. The RFA was

modified on November 10, 2016 , and the application period was

ext ended to December 30, 2016. In response to RFA 2016 - 113,

43 developers (including Petitioners and Intervenor s in this

case ) submitted applications .

On May 5, 2017, Respondent posted notice of its intent to

award funding to seven applicants, including Heri tage Oaks , LLLP

(ÐIntervenorÑ or ÐHeritage OaksÑ ) . Florida Housing also

determined that Petitioners, Madison Point , LLC , and American

Residenti al Development, LLC (ÐPetitionersÑ or ÐMadison PointÑ) ,

were eligible for funding but PetitionersÓ application d id not

earn a sufficient score to exceed the scoring for Heritage Oaks.

Florida Housing initially determined that HTG Hudson, LLC (ÐHTG

HudsonÑ) , was eligible for funding . However, Florida Housing and

HTG Hudson subsequently stipulated that HTG HudsonÓs application

was ineligible for funding.

On May 9, 2017, Petit ioners timely filed their formal

written protest s. On June 7, 2017, this matter was referred to

the Division for a final hearing.

This matter was assigned to the undersigned to conduct the

final hearing. The undersigned issued a Notice of Hearing

scheduling this matter for July 5 and 7, 2017. The hearing

convened on July 5 , 2017, as scheduled , and concluded on the same

date.

During the final hearing, Joint Exhibits 1 through 7 were

admitted int o evidence . The deposition of Bruce Bussey, Planning

Division Manager, Pinellas County , Florida , was offered by the

parties as Joint Exhibit 7. The parties presented the live

testimony of Ken Reecy, Director of Multifamily Progr ams, Florida

Housing . Pet itionersÓ Exhibits 2, 4, 5, 13, 17 , and 27 were

admitted into evidence . Petition ers presented Stacy Banach, who

was accepted as an expert in affordable housing development in

Florida. Respondent offered Exhibit 1, which was admitted.

Intervenor Heritage OaksÓ Exhibits 4, 6, and 7 were admitted over

objection. Intervenor presented the live testimony of Brian

Evjen, Director of Developmen t, Norstar Development

USA, LP , and Debbie Blinderman, Affordable Housing Consulting,

LLC, was accepted as an expert i n affordable housing development

in Florida .

The parties stipulated to findings of fact which h ave been

incorporated into the Findings of F act below to the extent they

are relevant.

During preliminary matters, Petitioners withdrew their

Motion in Limine.

The parties ordered a copy of the transcript of the

proceeding. The one - volume Transcript was filed on July 12,

2017 . All of the parties timely filed Proposed Recommended

Orders that have been considered in preparation of this

Recommended Order.

Unless otherwise stated, a ll references to statutes or rules

are to those in effect in 2016 .

FINDING S OF FACT

Based on the oral and documentary evidence presented at

hearing, and the entire record in this proceeding, the Findings

of Fact are as follows:

Partie s

1. Petitioner, Madison Point , is a Florida limited

liability company and the designated a pplicant for funding

thr ough the RFA to construct an 85 - unit development for low -

income elderly persons in Pinellas County, Florida. Petitioner ,

American Residenti al Deve lopment, LLC , is the designated

developer for the proposed d evelopment.

2. In tervenor, Heritage Oaks, is a Florida limited

liability limited partnership in the business of providing

affordable housing. Heritage Oaks is an applicant for financing

i n response to the RFA to construct an 85 - unit development for

low - income elderly persons in Pinellas County, Florida.

3. Intervenor, HTG Hudson , is a Florida limited liability

company in the business of developing afforda ble housing.

HTG Hudson was an a pplicant for financing in response to the RFA

to construct an 87 - unit development for low - income elderly

persons in Pinellas County, Florida. However, all issues

regarding HTG Hudson have been reso lved pursuant to a settlement

a greement which was attached as Exhibit ÐA Ñ to the Joint

Prehearing S tipulation. Pursuant to the settlement a greement,

HTG Hudson Ós a pplication is ineligible for funding .

4 . Florida Housing is a public corporation created pursuant

to section 420.504 , Florida Statutes, and for the p urpose of this

proceeding, an agency of the State of Florida. Its purpose is to

promote public welfare by administering the governmental function

of financing affordable housing in Florida. Pursuant to section

420.5099, Florida Housing is designated as t he housing credit

agency for Florida within the meaning of section 42(h)(7)(A) of

the Internal Revenue Code and has the responsibility and

authority to establish procedures for allocating and distributing

low income housing tax credits.

Affordable Housing Tax Credits

5 . The low - income housing tax credit program (commonly

referred to as Ðtax creditsÑ or Ðhousing creditsÑ) was enacted to

incentivize the private market to invest in affordable rental

housing. These tax credits are awarded competitively to ho using

developers in Florida for rental housing projects which qualify.

These credits are then normally sold by developers for cash to

raise capital for their projects. The effect is that it reduces

the amount that the developer would have to borrow other wise.

Because the total debt is lower, a tax credit property can (and

must) offer lower, more affordable rents. Developers also

covenant to keep rents at afforda ble levels for periods of 30 to

50 years as consideration for receipt of the tax credits.

6 . The demand for tax credits provided by the federal

government exceeds the supply.

7 . Florida Housing is authorized to allocate tax credits,

State Apartment Incentive Loan (Ð SAIL Ñ) funding, and other

funding by means of request for proposal or oth er comp etitive

solicitation in section 420.507(48) , and adopted Florida

Administrative Code Chapter 67 - 60, to govern the competitive

solicitation process for several different programs, including

the program for tax credits. Chapter 67 - 60 provides that Florida

H ousing allocate its tax credits, which were made available to

Florida Housing on an annual basis by the U.Seasury, through

the bid protest provisions of section 120.57(3) .

Application Process

8 . In their applications, applicants request a specific

do llar amount of housing credits to be given to the appli ca nt

each year for a period of 10 years. Applicants will normally

sell the rights to that future stream of income tax credits

(through the sale of almost all of the ownership interest in the

applicant Ós entity) to an investor to generate the amount of

capital needed to build the development. The amount which can be

received depends upon the accomplishment of several factors such

as a certa in percentage of the projected Ðtotal development c ost Ñ

(total costs incurred in the completion of a development) ; a

maximum funding amount per development based on the county in

which the development will be located; and whether the

development is located within certain designated areas of some

counties. This, howev er, is not an exhaustive list of the

factors considered.

9 . Tax credits are made available through a competitive

application process commenced by the issuance of a n RFA . A n RFA

is equivalent to a Ðrequest for proposalÑ as indicated in r ule

67 - 60.009(3). The RFA at issue here is RFA 2016 - 113, Housing

Credit Financing for Affordable Housing Developments Located in

Broward, Duval, Hillsborough, Orange, Palm Beach, a nd Pinellas

c ounties .

10 . The RFA was issued on October 28, 2016 , and responses

were initi ally due December 8, 2016. The RFA was modified on

November 10, 2016 , and, among other revisions , the application

d eadline was extended to December 30, 2016.

11 . Through the RFA, Florida Housing seeks to award up to

an estimated $14,669,052 of housing c redits to qualified

applicants in Broward, Duval, Hillsborough, Or ange, Palm Beach,

and Pinellas c ounties.

12 . In response to RFA 2016 - 113, 43 applications were

submitted for funding, including Madison Point and Heritage Oaks .

13 . Madison Point submitte d a pplication No. 2017 - 232C

seeking $1,660,000 in annual allocation of housing credits to

finance the construction of an 80 - unit development in Pinellas

County.

14 . Heritage Oaks submitte d a pplication No. 2017 - 201C,

seeking $1,660,000 in annual allocatio n of housing credits to

finance the construction of an 85 - unit development in Pinellas

County.

15 . The RFA sets forth the information required to be

provided by an applicant, which includes a general description of

the type of projects that will be consid ered eligible for funding

and delineat es the submission requirements. In order to be

conside red for funding selection, the a p plication must meet all

of the eligibility r eq uirements set forth in the RFA. The

e li gibility r equirements include, among other t hings, Ð[a]ll

ÐMandatory ItemsÑ described in section f ive of the RFA. Ñ The RF A

sets forth a list of mandatory i tems that must be included in a

response incl uding, but are not limited to, appropriate zoning,

site control, development category, and o ccupanc y s tatus of any

existing units.

16. As part of the general d evelopment i nformation, the RFA

requires a pplicants to select a development c ategory applicab le

to its proposed d evelopment. This is a mandatory i tem of the

RFA.

17. Applicants are instruct ed to select amongst the

following categories:

a) New Construction (where 50 percent or

more of the units are new construction)

b) Reh abilitation (where less than 50

percent of the units are new construction)

c) Acquisition and Rehabilitatio n

(acqu isition and less than 50 percent of the

units are new construction)

d) Redevelopment (where 50 percent or more

of the units are new construction)

e) Acquisition and Re development

(acquisition and 50 percent or more of the

units are new construction)

18 . Once dis closed in the application, the d evelopm ent

c ategory cannot be changed. In the RFA, Ðnew c onstructionÑ while

capitalized is not a defined term . However, rule 67 - 48.002(98),

defines ÐredevelopmentÑ as follows :

(a) With regard to a proposed Development

that involves demolition of multifamily

rental residential structures currently or

previously existing that were originally

built in 1986 or earlier and either

originally received financing or are

currently financed through one or more of the

following HUD or RD programs: Sections 202

of the Housing Act of 1959 (12 U.S.C.

§1701q), 236 of the National Housing Act

(12 U.S.C. §1701), 514, 515, or 516 of the

U.S. Housing Act of 1949 (42 U.S.C. §1484),

811 of t he U.S. Housing Act of 1937

(42 U.S.C. §1437), or have PBRA; and new

construction of replacement structures on the

same site maintaining at least the same

number of PBRA units; or

(b) With regard to proposed Developments

that involve demolition of public housing

structures currently or prev iously existing

on a site with a Declaration of Trust that

were originally built in 1986 or earlier and

that are assisted through ACC; and new

construction of replacement structures on the

same site, providing at least 25 percent of

the total new units wit h PBRA, ACC, or both,

after Redevelopment.

19. Although the Rehabilitation Cate gory is defined, it is

not relevant for purposes of this proceeding.

20 . Additionally, the RFA requires a pplicants to answer

whether the proposed d evelopment consists of : a) 100 percent new

construction units; b) 100 percent rehabilitatio n units; or

c) a combination of new construction units and rehabilitation

units, and s tate the quantity of each type. This is a mandatory

i tem of the RFA.

Selection Process

2 1 . Florida H ousing received 43 a pplications s eeking

funding in RFA 2016 - 113. Florida HousingÓs executive director

appointed a R eview C ommittee of Florida Housing staff to evaluate

the applications for eligibility and scoring and to make

recommendations to Florida Hou singÓs Board of Directors .

Pursuant to the terms of the RFA, t he applications were received,

processed, deemed eligible or ineligible, scored, and ranked .

22 . The R eview Committee determined that, among other

applicants, the applications of Heritage Oa ks and Madison Point

were eligible for funding. Through the ranking and selection

process outlined in the RFA, Heritage Oaks was recommended to

the Board of Directors to be selected for funding within

Pinellas County. The Review Committee developed a cha rt listing

its funding recommendations for the RFA to be presented to

Florida HousingÓs Board of Directors.

23 . On May 5, 2017, Florida HousingÓs Board of Directors

met and considered the recommendations of the Review Committee

for RFA 2016 - 113. Also, o n May 5, 2017 following the Board

meeting , Petitioners , and all other applicants in RFA 2016 - 113 ,

received notice that Florida HousingÓs Board of Directors

determined whether applications were eligible or ineligible for

consideration for funding, and that certain eligible applicants

were selected for award of tax credits. Such notice was provided

by the posting of two spreadsheets, one listing the ÐeligibleÑ

and ÐineligibleÑ applications in RFA 2016 - 113 and one identifying

the applications which Florida Ho using proposed to fund on the

Florida Housing website, www.floridahousing.org . Of the

43 applications submitted, 37 were deemed ÐeligibleÑ and six were

deemed Ðineligible.Ñ

24 . In that May 5, 2017 , posting, Florida Housing announced

its intention to awar d funding to seven a pplications, including

Heritage Oaks. Madison Point was deemed eligible but not

selected for funding.

25 . Madison Point timely filed a Notice of Protest and

Petition for Formal Administrative Proceedings. Heritage Oaks

intervened as a named party and intervention was granted.

26 . The scoring decision s at issue in this proceeding are

related to Florida HousingÓs decision to award funding to

Heritage Oaks based on its responses regarding occupancy status

and local government contribut ion .

27 . The RFA specifies an Ðapplication sorting o rderÑ to

rank applicants for potential funding. The first consideration

in sorting eligible applica tions for potential funding is

a pplication score. The maximum score an a pplicant can achieve is

28 po ints.

28 . In the case of a tie score, Florida Housing

incorporated a series of Ðtie breakersÑ into the sorting proces s.

The tiebreakers for this RFA , in order of applicability, are:

a) First, by Development Category Funding

Preference;

b) Second, by a Per Unit Construction

Funding Preference;

c) Third, by a Leveraging Classification

based on the amount of total Florida Housing

funding per set - aside unit;

d) Fourth, by the eligibility for the 75 or

More Total Unit Funding Preference;

e) Fifth , by satisfaction of a Florida Job

Creation Funding preference, which applies a

formula to reflect the estimated number of

jobs created per $1 million of funding;

f) Lastly, if necessary, by randomly

assigned lottery number.

29 . The RFA set out a sel ection process for eligible

applicants, after the sorting and rankin g process outlined above.

That s election process consisted of selecting the highest ranking

eligible application for a proposed d evelopment in each of the

following counties first: Browa rd, Duval, Hillsborough, Orange,

Palm Beach, and Pinellas. If funding remained after those

selections, then the hig hest ranking eligible unfunded

a pplication in Broward would be selected next.

30 . Heritage Oaks and Madison Point selected the elderly

non - Assisted Living Facility (Ð AL F Ñ) demographic and the proposed

d evelopments were located in Pinellas County. Florida HousingÓs

preliminary agency action selected Heritage Oaks for funding for

Pinellas County.

Heritage OaksÓ Application

31 . Heritage Oaks Ó proposed d evelopment site consists of

approximately 4.99 acres.

32 . Heritage OaksÓ proposed d evelopment site contains

existing roads owned by Pinellas County. Heritage Oa ks indicates

that its proposed d evelopment site was comprised of s cattered

sites .

33 . There are existing hous ing units on Heritage Oaks Ó

d evel opment site. However, Heritage OaksÓ a pplication indicates

that Ðthere are no existing units.Ñ

3 4. Heritage OaksÓ a pplication sele cted Ðnew constructionÑ

as its d evelopment c ategory.

3 5. Heritage OaksÓ proposed d evelopment involves demolition

of currently - occupied , multifamily , public housing rental

structures that were originally built in 1986 or earlier and

either originally received financing or are currently financed

through one or m ore of the following HUD or RD programs:

Sections 202 of the Housing Act of 1959 (12 U.S.C. § 1701 q);

236 of the National Housing Act (12 U.S.C. § 1701); 514, 515, or

516 of the U.S. Housing Act of 1949 (42 U.S.C. § 1484); and

811 of the U.S. Housing Act of 1937 (42 U.S.C. § 1437).

Development Category

36. In response to the RFA requirements, Heritage Oaks

selected ÐNew ConstructionÑ as its development c ategory.

Heritage Oaks also indicated that its propo sed d evelopment

consists of 100 percent new c ons truction. Mr. Evjen acknowledged

that Heritage OaksÓ proposed d evelopment involves the demolition

of existing structures o n the proposed d evelopment site and t he

construction of 85 new units. Mr. Evj en explained that the

proposed d evelopment includes 71 senior units in a three - story ,

mid - rise building , and seven duplex buildings , which would

include the other 14 units on the pro posed d evelopment site.

37 . The testimony at hearing indicated that at the time of

the application d ea dline, Heritage OaksÓ pr oposed d evelopment did

not satisfy all of the criteria set forth in th e definition of

r edevelopment, as set forth in paragraph 18 , supra . A t hearing ,

Mr. Evjen a nd M s. Blinderman testified that to qualify as

r edevelopment , at least 25 percent of the new u nits must receive

Project Based Rental Assistance (ÐPBRAÑ). PBRA units are those

with a rental subsidy through a contract with the United States

Department of Housing and Urban Development (ÐHUDÑ) or the Rural

Deve lopment Services (formerly the FarmerÓs H ome Administration )

of the United States Department of Agriculture. See Fla. Admin.

Code R ule s 67 - 48.002(72), (85) , and (98) .

38. Heritage Oaks i ntends to develop the proposed

d evelopment with Pinellas County Housing Authority (ÐHousing

Authority Ñ). At the time of the application deadline, the

Housing Authority was in discussions with HUD regarding the final

count , if any, of PBRA units. T he lack of a resolution with HUD

is beyond the authority of Heritage Oaks and remains uncertain.

As of the a pplica tion d eadline, Her itage Oaks could not know if

25 percent of its new units would receive PBRA and , therefore ,

could not classify the proposed d evelopment as r edevelopment.

While it may be possible that Heritage OaksÓ proposed d evelopm ent

may meet the defi nition of r edevelopment at some point in the

future, at the time of the application it did not meet the

definition. At hearing, n o testimony or documentary evidence was

offered to establish that the proposed d evelopment currently

f alls within the definiti on of redevelopment. Respondent found

this classification to be acceptable. Petitioners assert that it

is reasonable that Heritage Oaks would meet the threshold to

satisfy the criteria for the redevelopment category. However, it

was more reasonable that Heritage Oaks would not meet the

threshold and be ineligible for funding, if the redevelopment

category had been incorrectly selected. Therefore, the evidence

supports that it was reasonable for Heritage O aks to identify its

development project as new co nstruction.

Occupancy Status

39. Petitioners also argue that Heritage Oaks should not be

awarded funding because it failed to disclose the occupancy

status of existing units on the proposed d evelopment site.

40. In the RFA, t he subheading and langua ge for section

f our (A)(5)(e)(3) provides as follows:

e. Number of Units in Proposed Development:

(3) The Applicant must indicate which

of the following applies with regard to

the occupancy status of any existing

units:

(a) Existing units are c urrently

occupied

(b) Existing units are not

currently occupied

(c) There are no existing units

The section then instructs the a pplicant to refer to s ection f ou r

(A)(5)(e) of the RFA i nstructions before answering the o ccupancy

s tatus question.

41. The RFA instructions at section f our (A)(5)(e) provide

as follows:

e. Number of Units in Proposed Development:

(1) The Applicant must state the total

number of units.

Note: The proposed Development must consist

of a minimum of 50 total units. Proposed

Developments consisting of 75 or more total

units will be eligible for the 75 or More

Total Unit Funding Preference (outlined at

Section Four B.2. of the RFA). If the

Elderly Demographic Commitment (ALF or Non -

ALF) is selec ted at question 2.b. of

Exhibit A, the proposed Development cannot

exceed the maximum total number of units

outlined in Item 1 of Exhibit C of the RFA.

(2) The Applicant must indicate whether the

proposed Development consists of (a) 100%

new constr uction units, (b) 100%

rehabilitation units, or (c) a combination

of new construction units and rehabilitation

units, and state the quantity of each type.

(3) The Applicant must indicate the

occupancy status of any existing units at

question 5.e.(3) of Exhibit A.

Developments that are tentatively funded

will be required to provide to the Credit

Underwriter a plan for relocation of

existing tenants, as outlined in Item

2.b.(6) of the Applicant Certification and

Acknowledgement form. The plan shall

prov ide information regarding the relocation

site; accommodations relevant to the needs

of the residents and length of time

residents will be displaced; moving and

storage of the contents of a residentÓs

dwelling unit; as well as the approach to

inform and pre pare the residents for the

rehabilitation activities.

42 . In response to this RFA requirement and the cited RFA

Instructions concerning Occupancy Status, Heritage Oaks

indicated that Ðthere are no existing unit sÑ in its proposed

d evelopment. However, M r. Evjen testified that there were

existing units on the d evelopment site as of the application

d eadline and some of those units were occupied.

43 . Heritage Oaks pointed out that a review of the RFA

reflects that it is organized in an outline format wit h headings

and subheadings. For example, section f our concerns information

to be p rovided in the a pplication. S ection f our A(5) then

requests general development i nformation. Section f our

(A)(5)(e) reque sts information concerning the number of units in

the p roposed d evelopment.

44 . Mr. Evjen further testified that , based on review of

the RFA and the instructions, Heritage Oaks took a three - step

approach in responding to the occupancy s tatus question.

Heritage Oaks properly answered the first two ques tions. First,

Heritage Oaks provided the total number of units as 85. Second ,

Heritage Oaks indicated that Ð all 85 units would be new

construction .Ñ

45. In the final question, Heritage Oaks considered

whether any existing units would remain as a Ð par t of its

proposed d evelopment. Ñ Because no existing units would be part

of it s proposed d evelopment , Heritage Oaks responded Ðthere are

no existing uni tsÑ in its proposed d evelopment. However, the

term ÐproposedÑ was not used in question 5.e.(3) as was t he case

in the prior questions in the same subsection. Mr. Evjen also

testified that he read the question as Ðif there are

rehab[ilitation] units, are they occupied? Heritage Oaks Ó

erroneous interpretation of the question resulted in its failure

to provi de an accurate answer . The question simply requested

t he Ðoccupancy status of any existing units. Ñ The question was

clear and unambiguous.

46 . The parties have stipulated that there are existing

housing units on the Heritage Oaks proposed d evelopm ent site.

However, Heritage OaksÓ application indicates that there are no

existing units . The representation that there were no existing

units was a false statement of material fact . It is worth

noting that the parties stipulated at the beginning of the

hearing that there is no allegation of fraud or intentional

deception . There is also no evidence in the record of

intentional deception and therefore, there is no finding by the

undersigned that Heritage Oaks engaged in intentional

misconduct. However, whether intentional or not, Heritage Oaks Ó

representation of no existing units is a false statement.

47 . According to Mr. Reecy, Florida Housing asks the

question regarding occupancy status of existing units because

Florida Housing wants to make sure th at the developer can handle

the cost issues related to relocation and that the relocation

needs of the existing tenants will be met. Additionally,

Mr. Reecy testified that Florida Housing relies upon applicants

to accurately respond to questions in the R FA because, at the

time of scoring, no independent research is conducted to verify

responses.

48 . Regarding a relocation plan, Heritage Oaks relies on

the Declaration of TrustÓs requirement to have a tenant

relocation plan as a remedy for the failure to properly respond

to the occupancy status question. However, the Declaration of

Trust is a HUD requirement that is not controlled by Florida

Housing. In fact, Mr. Evjen testified that Heritage OaksÓ

co - developer was researching terminating the Declara tion of

Trust. Given the fact that Heritage Oaks could terminate its

Declaration of Trust, the Declaration of Trust does not provide

adequate assurance that the tenants in the existing housing units

will be adequately relocated once Florida Housing alloca tes its

funding.

49 . Florida Housing has a material interest in ensuring

that tenants located in existing housing units are properly and

adequately relocated during the developme nt phase of any Florida

Housing - funded development.

50. Accordingly, Flori da HousingÓs scoring decision with

regard to Heritage OaksÓ response to the occupancy status

question was contrary to the terms of the RFA and clearly

erroneous. Heritage Oaks is ineligible for funding under RFA

2016 - 113.

Local Government Contribution

5 1 . At section f our (A)(10)(b) , an applicant can obtain

10 points if it c an demonstrate a high level of l ocal g overnment

interest in its project via an increased amount of local

government contribution. To satisfy this requirement , an

applicant must attac h a properly completed and executable Florida

Housing Finance Corporation Local Government Verification of

Cont ribution - Loan Form (Ðloan f ormÑ). The RFA establishes a

contribution threshold amount which qua lifies an application for

the local government ar ea of opportunity points. The RFA defines

Ðlocal government areas of o pportunityÑ as follows:

Developments receiving a high level of Local

Government interest in the project as

demonstrated by an irrevocable 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.

52 . The minimum local government a reas of opportunity

funding a mounts are outlined in s ection f our A.10.b. of the RFA.

A single jurisdiction (i.e., the county or a municipality) may

not contribute cash loans and/or cash grants for any other

proposed d evelopment applying in the same compet itive

solicitation in an amount sufficient to qualify as Local

Government Areas of Opportunity, p er the competitive

solicitation.

53 . In response to this RFA require ment, Heritage Oaks

submitted Attachment 15 , a loan f orm from Pinellas County,

Florida, i n the amount of $551,000. Ba sed upon the minimum local

government area of o pportunity funding amounts established in the

RFA , this amount qualified Intervenor Heritage Oaks for

10 points.

54 . Petitioners challenge Intervenor Heritage OaksÓ loan

form fo r two reasons. First, Petitioners opine that the face

value of the commitment and the net present value included in the

loan form cannot be the same amount and , therefore , a calculation

error must have occurred. Petitioners rely on examples of

various ca lculations found in the RFA. Next, Petitioners allege

that the loan form was not properly signed and no final approval

was given by Pinellas County.

55 . Intervenor Heritage Oaks provided a loan form from

Pinellas County. The loan form committed Pinell as County to a

loan in the amount of $551,000. Mr. Bussey , the individual who

processed the application and award of commitment , indicated that

the commitment was a loan that would be forgiven as long as

certain requirements were met and kept.

56 . Mr. Bussey further indicated that there were no loan

payments or interest rates associated with the loan.

Accordingly , he indicated that the loan value was the net present

value of the loan, which means the commitment amount and the net

present value for the Pinellas County loan is the same number,

$551,000.

57 . While Petitioners allege that the loan form was not

appropriately signed and no final approval had occurred , the

greater weight of the evidence shows othe rwise. Specifically ,

Petitioners opine that either a resolution or some action by the

Pinellas County Board of County Commissioners or the County

Administrator was necessary as asserte d by their witness,

Mr. Banach . While Mr. Banach was critical of the loan

verification form, he acknowledged that he is not an expert

regarding the process for Pine llas County loan contribution and

h e did not process the loan application . He furth er acknowledged

that Mr. Bussey, the individual who processed the loan, found no

error with the form.

58 . T he evidence shows that the loan form was executed by

Charles Justice , who at the time of t he loan f orm Ó s execution was

the Chairman of the Pinellas County Board of County

Commissioners. Mr. Bussey explained the process for approving

the loan form and indicated that M r. Justice , as Chairman , had

the authority to sign the loan form . Mr. Bussey also pointed out

language in the loan f orm which provides as follows: ÐThis

certification must be signed by the chief appointed official

(staff) re sponsible for such approval, . . . Chairperson of the

Board of the County Commissioners.Ñ

59 . Mr. Justice is one of the designated individuals the

form itself indicated is acceptable. Mr. Bussey indicated that

no further approvals were necessary. At hearing , Florida Housing

indica ted that the loan form submitted by Heritage Oaks satisfied

the r equirements of the RFA and this position was not shown to be

erroneous or unreasonable .

CONCLUSIONS OF LAW

60 . Pursuant to sections 120.569 and 120.57(1) and (3),

Florida Statutes, the Divi sion has jurisdiction of the parties

and the subject matter of this proceeding. Florida HousingÓs

decisions in this case affected the substantial interests of each

of the parties, and each has standing to challenge Florida

HousingÓs scoring and review dec isions.

61 . 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 otherwise provided by statute, the

burden of proof shall rest with the party

protestin g 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 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 proposed agency action was

clearly erroneous, contrary to competition,

arbitrary, or capr icious. . . .

62 . Pursuant to section 120.57(3)(f), the burden of proof

rests with Petitioners as the parties opposing the proposed

agency action. See State Contracting and EngÓg Corp. v. DepÓt

of Transp. , 709 So. 2d 607, 609 (Fla. 1st DCA 1998).

Petit ioners must prove by a preponderance of the evidence that

Florida HousingÓs proposed action is arbitrary, capricious, or

beyond the scope of Florida HousingÓs discretion as a state

agency. DepÓt of Transp. v. Groves - Watkins Constructors ,

530 So. 2d 912, 9 13 - 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.

63 . The First District Court of Appeal has interpreted the

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

A bid prote st before a state agency is

governed by the Administrative Procedure

Act. Section 120.57(3), Florida Statutes

(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 Admi nistrative 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 " de novo

hearing" is used to describe a form of

intra - agency review. The judg e may receive

evidence, as with any formal hearing under

section 120.57(1), but the object of the

proceeding is to evaluate the action taken

by the agency. See Intercontinent al

Properties, Inc. v. DepÓ t of Health and

Rehab . Services , 606 So. 2d 380 (Fla. 3d DCA

1992) (interpreting the phrase " de novo

hearing" as it was used in bid protest

proceedings before the 1996 revision of the

Administrative Procedure Act).

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

64 . The ultimate issue in this procee ding is "whether the

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

statutes, the agency's rules or pol icies, or the bid or proposal

specifications." In addition to proving that Florida Housing

breached this statutory standard of conduct, Petitioners also

must establish that Florida HousingÓs violation was either

clearly erroneous, contrary to competition, arbitrary, or

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

65 . The First District Court of Appeal has described the

"clearly erroneous" sta ndard as meaning that an agency's

interpretation of law will be upheld "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,

j udicial deference need not be given to it." Colbert v. DepÓt

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

omitted); see a lso Anderson v. Bessemer City , 470 U.S. 564,

573 - 74, 105 S. Ct. 15 04, 1511, 84 L. Ed. 2d 518, 528

(1985)(ÐWhere th ere are two permissible views of the evidence,

the factfinderÓs choice between them cannot be clearly

erroneous.Ñ).

66 . An agency decision is "contrary to competition" when

it unreasonably interferes with the objectives of competitive

bidding. Those obj ectives have been stated to be:

[T]o protect the public against collusive

contracts; to secure fair competition upon

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 form s; to secure the best values

for the [public] at the lowest possible

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)).

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

action without thou ght or reason or irrationally. An agency

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

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

763 (Fla. 1st DCA 1978).

68 . To determine whether an agency acted in an arbitrary

or ca pricious manner, it must be determined "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 t o its final decision." Adam Smith Enter. v. DepÓt of

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

69 . However, if a decision is justifiable under any

analysis that a reasonable person would use to reach a decision

of similar importance, the d ecision is neither arbitrary nor

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

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

70 . Rule 67 - 60.006 is titled, ÐResponsibility of

Applicants.Ñ S ection (1) of the rule provides as follows:

(1) The failu re of an Applicant to supply

required information in connection with any

competitive solicitation pursuant to this

rule chapter shall be grounds for a

determination of nonresponsiveness with

respect to its Application. If a

determination of nonresponsiven ess is made

by the Corporation, the Application shall

not be considered.

71 . Rule 67 - 60.008 provides:

The Corporation may waive Minor

Irregularities in an otherwise valid

Application. Mistakes clearly evident to

the Corporation on the face of the

App lication, such as computation and

typographical errors may be corrected by the

Corporation; however, the Corporation shall

have no duty or obligation to correct any

such mistakes.

72 . Rule 67 - 60.002(6) defines Ðminor irregularityÑ to mean

Ða variation i n a term or condition of an Application pursuant

to this rule chapter that does not provide a competitive

advantage or benefit not enjoyed by other Applicants, and does

not adversely impact the interests of the Corporation or the

public .Ñ See Tropabest Fo ods, Inc. v. State, Dep't of Gen.

Servs. , 493 So. 2d 50, 52 (Fla. 1st DCA 1986); Harry Pepper &

Assocs., Inc. v. City of Cape Coral , 352 So. 2d 1190, 1193 (Fla.

2d DCA 1977).

73 . In the instant case, Florida Housing provided adequate,

reasonable justifica tion for its determination that H eritage

OaksÓ selection of the development category of Ðn ew c onstructionÑ

satisfied the terms of the competitive solicitation.

74 . Mr. Evjen testified regarding the uncertainty on

whether the Heritage Oaks proposed d evelop ment would receive PBRA

from HUD and , therefore , qualify for the redevelopment category.

75 . On the other hand, the RFA clearly provides that New

Construction is Ðwhere 50% or more of the units are new

construction,Ñ and is withou t requirements regarding PBRA. Sin ce

the Heritage Oaks proposed development is 100 percent new

cons truction, the selection of the development category of new

construction was reasonable and consistent with the terms of the

RFA.

76 . Regarding the loan contribution form, Petiti oners made

numerous plausible arguments as to why the loan verification

forms may be in error. However, Petitioners offered no

compelling reason to disturb Florida HousingÓs acceptance of

Mr. JusticeÓs determination . T he decision whether to grant or

deny this particular form of (preliminary) local governmental

approval for a loan applicati on must be made by the local

government having jurisdiction over the proposed development.

Mr. Justice was the local offic ial with authority to sign the

form . Mr. Buss ey testified that the verification forms were

properly executed and accurate, and there was no evidence to

support a conclusion that his determination was tainted by fraud

or illegality.

77 . Petitioners failed to demonstrate that Florida

HousingÓs relia nce on the loan verification form was clearly

erroneous. Having considered the evidence presented at the

final hearing, the undersigned was not left with either a

definite or firm conviction that a mistake was made when Florida

Housing relied upon Mr. Jus ticeÓs certification .

78 . Thus, Petitioners failed to demonstrate that Florida

HousingÓs reliance on the loan verification forms was arbitrary

or capricious. It is reasonable for Florida Housing to rely

upon the local gover nment officialÓs determinatio n regarding the

loan approval for funding affordable housing project s.

79. Finally, but most important here, is the issue

regarding Heritage OaksÓ response regarding the occupancy status

of existing units on the proposed development site. Heritage

Oaks did not disclose in its application that there are existing

units on the proposed development site. Heritage Oaks argues

that the non - disclosure of this information should be treated as

a minor irregularity that may be waived at Florida Housing Ós

discret ion.

80. Mr. Reecy credibly testified that Florida Housing uses

the applicantÓs response to the occupancy status question to

determine whether to impose a requirement on applicants that are

tentatively selected for funding to submit a tenant relocation

plan during credit underwriting. More importantly, Florida

Housing has a material interest in ensuring that tenants located

in existing housing units are properly and adequately relocated

during the developme nt phase of any Florida Housing - funded

develop ment . As stated by Mr. Reecy, an incorrect answer

regarding occupancy status of existing units has an adverse

effect on the interests of Florida Housing and the public in

ensuring the process protects the welfare of the current housing

residents .

81. He ritage Oaks asserts that the Declaration of TrustÓs

requirement to h ave a tenant relocation plan could serve a s a

remedy for the failure to properly disclose the existence of

occupied units on the development site. However, the

Declaration of Trust is a H UD requirement that is not controlled

by Florida Housing. Furthermore , Mr. Evjen testified that

Heritage OaksÓ co - developer (the Housing Authority), is

considering terminating the Declaration of Trust. Given the

fact that Heritage Oaks could terminate it s Declaration of

Trust, the Declaration of Trust does not provide adequate

assurance that the tenants in the existing housing units will be

adequately relocated once Florida Housing allocates its funding.

Thus, the suggested remedy is not sufficient to ov ercome the

material deviation.

82 . T he greater weight of the evidence establishes that

Heritage OaksÓ failure to disclose the existing, occupied

housing units on the proposed development site is a material

deviation from the requirements of the RFA, whic h renders the

Heritage Oaks application ineligible for funding under the RFA.

83 . Based on the foregoing, the undersigned concludes that

Petitioners met their burden to establish that Heritage OaksÓ

failure to accurately respond to the occupancy status o f

existing units was a false statement and material deviation.

Therefore, Florida HousingÓ s scoring decision regarding the

occupancy status question was c ontrary to the terms of the RFA

and clearly erroneous. As a result, Heritage Oaks is not

eligible fo r funding.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Florida Housing Finance

Corporation enter a final o rder rescinding the intended award to

Heritage Oaks and designating Madison Point an d America

Residential Development, LLC , as the recipient s of the funding

under RFA 2016 - 113.

DONE AND ENTERED this 11th day of August , 2017 , in

Tallahassee, Leon County, Florida.

S

YOLONDA Y. GREEN

Administrative Law Judg e

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 11th day o f August, 2017 .

COPIES FURNISHED:

Hugh R. Brown, General Counsel

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301

(eServed)

Betty Zachem, Esquire

Florida Housing Finance Corporation

227 North Bronoug h Street, Suite 5000

Tallahassee, Florida 32301 - 1329

(eServed)

Marisa G. Button, Esquire

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301

(eServed)

Michael G. Maida, Esquire

Michael G. Maida, P.A.

1709 Hermitage Boulevard, Suite 201

Tallahassee, Florida 32308

(eServed)

Douglas P. Manson, Esquire

Manson Bolves Donaldson & Varn, P.A.

1101 West Swann Avenue

Tampa, Florida 33606 - 2637

(eServed)

Paria Shirzadi, Esquire

Manson Bolves Donaldson & Varn , P.A.

1101 West Swann Avenue

Tampa, Florida 33606 - 2637

(eServed)

C raig D. Varn, Esquire

Manson Bolves Donaldson Varn, P.A.

204 South Monroe Street, Suite 201

Tallahassee, Florida 32301

(eServed)

J. Timothy Schulte, Esquire

Zimmerman, Kiser, & Sutcliffe, P.A.

315 East Robinson Street, Suite 600

Orlando, Florida 32801

(eServed)

Sarah Pape, Esquire

Zimmerman, Kiser, & Sutcliffe, P.A.

315 East Robinson Street, Suite 600

Orlando, Florida 32801

(eServed)

Maureen McCarthy Daughton, Esquire

Maureen McCarthy Daughton, LLC

1725 Capital Circle Northeast, Suite 304

Tallahassee, Florida 32308

(eServed)

Michael P. Donaldson, Esquire

Carlton Fields Jorden Burt, P.A.

Post Office Drawer 190

215 South Monroe Street, Suite 500

Tallahassee, Florida 32302 - 0190

(eServed)

Kate Flemming, Corporation Clerk

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 1329

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

1 0 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.