18-001558BID Madison Highlands, Llc And American Residential Development, Llc vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Wednesday, June 6, 2018.

Summary: Petitioners failed to prove that Florida Housing's intended award of tax credits violated section 120.57(3)(f).

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MADISON HIGHLANDS, LLC, AND

AMERICAN RESIDENTIAL

DEVELOPMENT, LLC,

Petitioners,

vs. Case No. 18 - 1558BID

FLORIDA HOUSING FINANCE

CORPORATION,

Respondent,

and

SP GARDENS, LLC, AND CITY EDGE

SENIOR APARTMENT S, LTD,

Intervenors.

_______________________________/

RECOMMENDED ORDER

Administrative Law Judge D. R. Alexander conducted a final

hearing in this case on April 12, 2018, in Tallahassee, Florida.

APPEARANCES

For Petitio ner s : Douglas P. Manson, Esquire

Amy Wells Brennan, Esquire

Manson Bolves Donaldson Varn, P.A.

Suite 300

1 09 North Brush Street

Tampa, Florida 3360 2 - 2637

Craig D. Varn, Esquire

Manson Bolves Donaldson Varn, P.A.

Suite 820

106 East College Avenue

Tallahassee, Florida 32301 - 7740

J. Timothy Schulte, Esquire

Zimmerman, Kiser & Sutcliffe, P.A.

Suite 600

315 East Robinson Street

Orlando, Florida 32801 - 1607

For Respondent: Christopher Dale McGuire, Esquire

Florida Housing Finance Corporation

Suite 5000

227 North Bronough Street

Tallahassee, Florida 32301 - 1329

For Intervenor: Lawrence E. Sellers, Esquire

(SP Gardens) Holland & Knight, LLP

Suite 600

315 South Calhoun Street

Tallahassee, Florida 32301 - 1872

For Intervenor: M. Christopher Bryant, Esquire

(City Edge) Oertel, Fernandez, Bryant

& Atkinson, P.A.

Post Office Box 1110

Tallahassee, Florida 32302 - 1110

STATEMENT OF THE ISSUE

The issue is whether Florida Housing Finance Corporation Ó s

(Florida Housing) intended decision on January 29, 2016, to award

low - income housing tax credits for an affordable housing

develop ment in Hillsborough County pursuant to Request for

Applications 2015 - 107 (RFA - 107) was contrary to Florida Housing Ó s

rules, policies, or solicitation specifications; and, if so,

whether that determination was clearly erroneous, contrary to

competition, ar bitrary, or capricious.

PRELIMINARY STATEMENT

On September 21, 2015, Florida Housing issued RFA - 107, which

solicited applications to compete for federal low - income housing

tax credit funding (tax credits) for affordable housing

developments in six countie s, including Hillsborough County.

Applications in response to the Hillsborough County portion of

the RFA were submitted by six applicants, including Madison

Highlands, LLC (Madison) ; American Residential Development, LLC

(ARD) ; SP Gardens, LLC (SP Gardens ) ; City Edge Senior Apartments,

Ltd. (City Edge) ; and three non - parties, West River 1A, LP

(Bethune) ; West River Phase 2, LP (The Boulevard) ; and Mango

Blossoms . The RFA provided that only one award for Hillsborough

County would be made. On January 29, 2 016, Florida Housing

posted a notice of its intended decision to award funding to the

top - ranked applicant, SP Gardens. N on - winners with eligible

applications , in order of ranking, were Bethune, The Boulevard,

City Edge, and Petitioners.

After Petitione rs filed a formal written protest challenging

the intended award, the protest was dismissed by Florida Housing

for lack of standing on the ground the protest did not contain

adequate allegations against all of the four higher - ranked

applicants that, if pro ven, would result in Petitioners being

ranked highest . Petitioners then sought review of their

dismissal in the Fifth District Court of Appeal. Notwithstanding

the appeal, Florida Housing awarded tax credits to the highest

ranked eligible applicant, SP G ardens. Later on, i n the case of

Madison Highlands, LLC v. Florida Housing Finance Corporation ,

220 So. 3d 467 (Fla. 5th DCA 2017), the court reversed the

dismissal of Petitioners Ó protest. The Supreme Court declined to

accept jurisdiction and denied a p etition for review. Fla. Hous.

Fin. Corp. v. Madison Highlands, LLC , 2017 Fla. LEXIS 2086

(Fla. Sup. Ct. Oct. 20, 2017). On remand, the parties engaged in

settlement negotiations but did not resolve the dispute.

On March 26, 2018, Petitioners filed a Third Amended Formal

Written Protest of Award and Petition for Administrative Hearing

(Protest). On the same date, Florida Housing forwarded the

Protest to the Division of Administrative Hearings to resolve the

dispute. In their Joint Pre - hearing Stipula tion, the parties

have agreed that this challenge will not affect the award of tax

credits to SP Gardens. They also agree that if Petitioners can

establish that the applications of SP Gardens and City Edge are

in eligible for funding, Petitioners will be f unded through a

forward allocation. Finally, they agree that if only SP Gardens Ó

application is determined to be ineligible, at the discretion of

Florida Housing, City Edge may be awarded a forward allocation of

credits.

On April 3, 2018, Bethune and The Boulevard, who each had

filed a Notice of Appearance and Request to Intervene with

Florida Housing in March 2016, filed a Notice of Withdrawal

stating that they no longer were substantially affected by the

proceeding. Florida Housing now agrees that the a pplications of

Bethune and The Boulevard are ineligible for funding because they

failed to disclose all principals. Accordingly, Petitioners Ó

unopposed Motion for Order of Dismissal of Bethune and The

Boulevard is granted. Petitioners Ó Motion to Dismiss City Edge

for lack of standing was denied at the outset of the hearing.

At the final hearing, Petitioners presented the testimony of

one witness. Petitioners Ó Exhibits 1 through 18 were accepted in

evidence. Florida Housing presented the testimony of one

witness. SP Gardens presented no witnesses or exhibits. City

Edge presented the testimony of one witness. A ruling was

reserved on City Edge Exhibit 1. That exhibit is accepted.

Finally, Jo int Exhibits 1 through 7 were accepted.

A one - volume Transcri pt of the hearing was prepared. All

parties filed proposed recommended orders (PROs) , which have been

considered.

FINDING S OF FACT

A. The Parties

1. Florida Housing is a public corporation created pursuant

to section 420.504 , Florida Statutes . 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 annually by

the United States Treasury Department and then are awarded

pursu ant to a competitive cycle that starts with Florida

Housing Ó s issuance of a n RFA. This proceeding concerns RFA - 107.

2. Madison is an applicant entity for a proposed affordable

housing development in Hillsborough County. ARD is a developer

entity of affo rdable housing.

3. SP Gardens and City Edge are entities in the business of

providing affordable housing and filed applications pursuant to

RFA - 107.

B. Background

4. On September 21, 2015, Florida Housing published on its

website proposed solicitation R FA - 107 , inviting applications for

the award of tax credits for the development of affordable

housing located in six counties, including Hillsborough County.

The RFA provided that only one applicant would be awarded tax

credits for Hillsborough County.

5. In response to the RFA, si x applications were submitted

for Hillsborough County. A scoring committee appointed by

Florida Housing evaluated the applications and submitted a

recommendation to the Board of Directors (Board). On January 29,

2016, all partic ipants received notice that the Board had

determined which applicants were eligible or ineligible for

consideration of funding. Only the application filed by a non -

party, Mango Blossoms, was found ineligible.

6. The Board determined that SP Gardens and C ity Edge

satisfied all mandatory and eligibility requirements for funding

and r eceived Ð perfect Ñ scores of 28 points out of a total of

28 points . They were ranked one and four, respectively, based on

random lottery numbers assigned by the luck of the dra w. Because

Bethune and The Boulevard are no longer parties, and their

applications have been deemed to be ineligible by Florida

Housing, SP Gardens and City Edge are now ranked one and two.

The Board also determined that Petitioners satisfied all

mandato ry and eligibility requirements for funding; however, they

received a score of 23 out of 28 total points , and were ranked

below SP Gardens and City Edge.

7. In this bid dispute, Petitioners contend that Florida

Housing erred in the scoring, eligibility, and award decision of

the applications of SP Gardens and City Edge. But for the

incorrect scoring of those two applications, Petitioners argue

they would have been entitled to an allocation of housing credits

or would have been moved up in the ranking.

C. SP Gardens

8. Consistent with its policy, even though an appeal was

taken by Petitioners, in 2016, Florida Housing awarded tax

credits to the highest ranked applicant, SP Gardens. On

April 21, 2016, Florida Housing issued an invitation to credit

underwriting, which was accepted by the applicant on April 25,

2016. SP Gardens closed on the purchase and sale agreement, as

amended, on June 15, 2016, and Florida Housing issued a carry -

over allocation agreement on August 5, 2016. The applicant has

si nce completed a credit underwriting with a positive

recommendation, closed on the financing with the tax credit

investor, and commenced construction of its development.

9. Petitioners contend the application of SP Gardens is

deficient in three respects, which renders the applicant

ineligible for funding. First, they contend SP Gardens failed to

demonstrate control over the site of the project, as required by

the RFA. Second, they contend the purchase and sale agreement is

invalid because the applicant c annot enforce the specific

performance of the contract. Finally, they contend the

development location point (DLP) is not located on the parcel

where most of the units will be constructed.

10. Section 4.A.8.a. of the RFA requires in part that the

applica nt demonstrate site control in the following manner:

The Applicant must demonstrate site control

by providing, as Attachment 15 to Exhibit A,

the documentation required in Items a., b.,

and/or c., as indicated below. If the

proposed Development consists o f Scattered

Sites, site control must be demonstrated for

all of the Scattered Sites.

11. SP Gardens submitted documentation to satisfy item a.,

which requires that an Ð eligible contract Ñ be provided with the

application in order to demonstrate control ov er the project

site. An applicant typically submits an address, property

description, metes and bounds, folio number, intersections of

streets, or other information that describes the subject

property. Florida Housing Ó s practice is to accept the

represen tations of an applicant. SP Gardens Ó purchase and sale

agreement (contract) identifies the subject property using an

engineer Ó s drawing with sketched hash marks, a description of

the property as Ð approximately two acres, Ñ and an address of

Ð 1108 E. B loomingdale Avenue Ñ in Valrico. County records do not

reflect that such an address exists. However, the records do

indicate an address of 1108 East Bloomindale Avenue that is on

the proposed site and is owned by GF Financial, LLC, the seller

of the prope rty. Except for this scrivener Ó s error, the purchase

and sale agreement is otherwise an acceptable agreement.

12. An eligible contract must include a specific

performance remedy. Petitioners contend the purchase and sale

agreement cannot be enforced bec ause of various alleged

deficiencies in the agreement, including a failure to provide a

legal description of the property and language in the agreement

which does not reflect a meeting of the minds of the buyer and

seller. However, a legal description of the property is not

required. Then, too, Florida Housing does not attempt to

determine if there was a meeting of the minds of the parties or

if the agreement is legally enforceable. Only a circuit court

may do so. See § 26.012, Fla. Stat.

13. Petitio ners also contend the DLP is not located on a

parcel where most of the units will be constructed. The DLP is

located on the property that is identified in the purchase and

sale agreement. Whether or not the property ends up consisting

of scattered sites will be addressed during the credit

underwriting process. Florida Administrative Code Rule 67 -

48.0072 provides in part that Ð credit underwriting is a de novo

review of all information supplied, received or discovered during

or after any competitive solici tation scoring and funding

preference process, prior to the closing on funding. Ñ Pursuant

to this rule, during the credit underwriting process, a scattered

site applicant must demonstrate compliance with the RFA. Also,

in the final site plan approval pro cess, the configuration of the

proposed development will be fleshed out. With the advantage of

hindsight in this case, this is exactly what SP Gardens did after

it was issued an invitation to credit underwriting. By providing

all required forms, a DLP, a nd appropriate assurances that it

would comply with all RFA terms, SP Gardens has satisfied all RFA

requirements. See, e.g. , Brownsville Manor, LP v. Redding Dev .

Partners , LLC, 224 So. 3d 891, 894 (Fla. 1st DCA 2017).

14. The preponderance of the evi dence supports a finding

that the application of SP Gardens is eligible for funding.

D. City Edge

15. Petitioners allege that City Edge failed to disclose

all of the principals of the applicant and developer. They also

contend that City Edge is unable t o pursue specific performance

of its sale and agreement contract against the developer or the

seller of the property.

16. The RFA requires an applicant to Ð provide a list

identifying the principals for the applicant and for each

developer. Ñ The applicati on identifies City Edge as the

applicant entity. It also identifies the general partner of the

applicant entity, City Edge Senior GP, LLC, and its limited

partner, The Richman Group of Florida, Inc. (TRGF). TRGF is both

the limited partner of the applica nt entity and the developer

entity for City Edge.

17. City Edge identified the principals for TRGF as of the

application deadline. Florida Housing determined that this form

was adequate to meet the requirements of the RFA. The

application names James P. Hussey as the developer entity Ó s

Treasurer. At hearing, Mr. Hussey Ó s position with TRGF was

verified by TRGF Ó s vice president and a corporate document.

18. Petitioners point out that, according to a printout of

the annual report filed by TRGF with t he Secretary of State, as

shown on the SunBiz website, at the time the application was

filed, the Treasurer of TRGF was Doreen Cole, and not Mr. Hussey.

However, the evidence shows that Ms. Cole was removed from the

position of Treasurer on or about Septe mber 1, 2015, and she

subsequently separated from the company in late 2015. Through

sworn testimony and a corporate record, City Edge established

that Mr. Hussey was Treasurer at the time of the application

deadline, November 5, 2015.

19. Notably, Flor ida Housing does not rely on SunBiz for

establishing who the principals of an entity are as of the

application deadline. This is because SunBiz does not

definitively identify the corporate officers as of the

application deadline, and it sometimes contains errors. See,

e.g. , Warley Park, LTD v. Fla. Housing Fin. Corp. , Case No. 17 -

3996BID (Fla. DOAH Oct. 19, 2017; FHFC Dec. 8, 2017). For this

reason, Florida Housing does not require applicants to provide

SunBiz printouts to verify the names of the princip als.

20. Petitioners also contend that because of various

deficiencies, the purchase and sale agreement cannot be enforced

in circuit court. For the reasons expressed above, this

determination does not lie within the jurisdiction of Florida

Housing. In any event, the RFA requires that if the owner of the

property is not a party to the eligible contract, the applicant

must submit documents evidencing intermediate agreements between

or among the owner, or other parties, and the applicant. Here,

City Edge included in its application: (a) a purchase and sale

agreement between 301 and Bloomingdale, LLC (the seller) , and

TRGF (the purchaser), and (b) a purchase and sale agreement

between TRGF (the seller) and City Edge (the buyer). The latter

document is the intermediate contract and meets all RFA - specified

requirements for an intermediate contract.

21. The documents reflect that TRGF possesses a specific

performance remedy to compel 301 and Bloomingdale, LLC, to sell

the property, and City Edge possesses th e right to compel TRGF to

perform under the intermediate contract. For purposes of

ascertaining compliance with the RFA, the documents submitted by

City Edge suffice.

22. In a similar vein, Petitioners contend City Edge did

not demonstrate site control b ecause it did not include an

eligible contract. Currently, 301 and Bloomingdale, LLC, is the

owner of the property on which the housing will be built. City

Edge attached to its application a purchase and sale agreement

and an intermediate contract. The two contracts satisfy the

elements of an eligible contract necessary to demonstrate control

over the project site, they provide a specific performance

remedy, and they conform to the RFA.

23. The preponderance of the evidence supports a finding

that Cit y Edge Ó s appl ication is eligible for funding .

CONCLUSIONS OF LAW

24 . Petitioners Ó protest to Florida Housing Ó s proposed

contract award is governed by section 120.57(3)(f) as follows:

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 Ó s proposed action is

contrary to the agency Ó s governing statutes,

the agency Ó s 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 capricious.

25. To prevail, P etitioners must prove, by a preponderance

of the evidence, that Florida Hous ing Ó s proposed scoring action

is either contrary to its governing statutes, contrary to its

rules or policies, or contrary to the specifications of the RFA.

The standard of proof Petitioners must meet to establish that the

scoring action violates this sta tutory standard of conduct is

whether Florida Housing Ó s decision was clearly erroneous,

contrary to competition, or arbitrary or capricious, that is, an

abuse of discretion. See, e.g. , R.N. Expertise, Inc. v. Miami -

Dade Cnty. Sch. Bd. , Case No. 01 - 2663BID (Fla. DOAH Feb. 4, 2002;

Sch. Bd. Miami - Dade Mar. 20, 2002).

26. Agency action will be found to be clearly erroneous if

it is without rational support and, consequently, the

Administrative Law Judge has a Ð definite and firm conviction that

a mistake ha s been committed. Ñ U.S. v. U.S. Gypsum Co. , 333 U.S.

364, 395 (1948).

2 7 . An act is contrary to competition if it : (1) creates

the appearance of opportunity for favoritism; (2) erodes public

confidence that contracts are awarded equitably and economical ly;

(3) causes the procurement process to be genuinely unfair or

unreasonably exclusive; or (4) is unethical, dishonest, illegal,

or fraudulent. Syslogic Tech. Servs., Inc. v. S. Fla. Water

Mgmt. Dist. , Case No . 01 - 4385BID (Fla. DOAH Jan. 18, 2002),

modif ied in part , Case No. 2002 - 051 (SFWMD Mar. 6, 2002).

28. Finally, section 120.57(3)(f) requires an agency action

to be set aside if it is Ð arbitrary, or capricious. Ñ If the

decision is not supported by facts or logic or is despotic, it is

an arbitrary de cision. A capricious decision is one taken

without thought or reason.

2 9 . For the reasons previously found, Petitioners have

failed to demonstrate that Florida Housing Ó s scoring decision was

contrary to the agency Ó s governing statutes, rules, or

solicit ation specifications, or that the action was clearly

erroneous, arbitrary or capricious, or contrary to competition.

Therefore, Florida Housing Ó s determination that SP Gardens is

eligible for funding under RFA 107 is correct. Because only one

award will be made, and City Edge and Petitioners are ranked

number two and three, respectively, no allocation of tax credits

should be made to those applicants.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that Flo rida Housing Finance Corporation enter a

final order dismissing the Protest of Petitioners. It is further

recommended that Florida Housing reaffirm its decision to award

tax credits to SP Gardens.

DONE AND ENTERED this 6 th day of June , 2018 , in Tallahasse e,

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

Filed with the Clerk of the

Division of Administrative Hearings

this 6 th day of June , 2018.

COPIES FURNISHED:

Hugh R. Brown, General Counsel

Florida Housing Finance Corporation

Suite 5000

227 North Bronough Street

Tallahassee, Flo rida 32301 - 1329

(eServed)

Sarah Pape, Esquire

Zimmerman, Kiser & Sutcliffe, P.A.

Suite 600

315 East Robinson Street

Orlando, Florida 32801 - 1607

(eServed)

J. Timothy Schulte, Esquire

Zimmerman, Kiser & Sutcliffe, P.A.

Suite 600

315 East Robinson Street

Orlando, Florida 32801 - 1607

(eServed)

Craig D. Varn, Esquire

Manson Bolves Donaldson Varn

Suite 820

106 East College Avenue

Tallahassee, Florida 32301 - 7740

(eServed)

Christopher Dale McGuire, Esquire

Florida Housing Finance Corporation

Suite 5000

227 N orth Bronough Street

Tallahassee, Florida 32301 - 1329

(eServed)

Lawrence E. Sellers, Jr., Esquire

Holland and Knight, LLP

Suite 600

315 South Calhoun Street

Tallahassee, Florida 32301 - 1872

(eServed)

Tiffany A. Roddenberry, Esquire

Holland & Knight, L LP

Suite 600

315 South Calhoun Street

Tallahassee, Florida 32301 - 1872

(eServed)

M. Christopher Bryant, Esquire

Oertel, Fernandez, Bryant & Atkinson, P.A.

Post Office Box 1110

Tallahassee, Florida 32302 - 1110

(eServed)

Amy Wells Brennan, Esquire

Manson B olves Donaldson Varn, P.A.

Suite 300

109 North Brush Street

Tampa, Florida 33602 - 2637

(eServed)

Douglas P. Manson, Esquire

Manson Bolves Donaldson Varn, P.A.

Suite 300

109 North Brush Street

Tampa, Florida 33602 - 2637

(eServed)

Corporation Clerk

Florid a 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 submit written exceptions within

1 0 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.