19-002328BID The Vistas At Fountainhead Limited Partnership vs. Florida Housing Finance Corporation Status: Closed Recommended Order on Tuesday, July 16, 2019.

Summary: Respondent's intended action of deeming an application ineligible due to material ambiguity in the application regarding the amount of equity to be paid prior to construction completion should not be disturbed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE VISTAS AT FOUNTAINHEAD

LIMITED PARTNERSHIP,

Petitioner,

vs. Case No. 19 - 2328BID

FLORIDA HOUSING FINANCE

CORPORATION,

Respondent,

and

WINCHESTER PLACE, LTD. ; AND

WINCHESTER PLACE DEVELOPER, LLC ,

Intervenor s .

_______________________________/

RECOMMENDED ORDER

Th is case came before Administrative Law Judge John G.

Van Laningham for final hearing on June 3 and 4 , 201 9 , in

Tallahassee , Florida.

APPEARANCES

For The Vistas at Fountainhead Limited Partner ship :

M. Christopher Bryant, Esquire

Oertel, Fernandez, Bryant &

Atkinson, P.A.

Post Office Box 1110

Tallahassee, Florida 32302 - 1110

For Florida Housing Finance Corporation :

Christopher D. McGuire, Esquire

Betty Zachem, Esquire

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 1329

For Winchester Place, LTD., and Winchester Place

Developer, LLC :

Craig D. Varn, Esquire

Manson Bolves Donaldson Varn, P.A.

106 East College Avenue, Suite 820

Tallahassee, Florida 32301

Amy Wells Brennan, Esquire

Manson Bolves Donaldson Varn, P.A.

109 North Brush Street, Suite 300

Tampa, Florida 33602

STATEMENT OF THE ISSUES

The issues in this protest are whether Respondent ' s

intended action ÏÏ i.e., deeming Petitioner's application

in eligible for funding on the grounds that the amount of capital

the applicant's equity proposal states will be invested during

construction is in sufficient to cover development costs ÏÏ is

contrary to governing statutes, administrative rules, or the

specifications of the solicitation; and, if so, whether th is

erroneous action is contrary to competition, clearly erroneous,

or arbitrary or capricious.

PRELIMINARY STATEMENT

On January 9 , 201 9 , Respondent Florida Housing Finance

Corporation ( " FHFC " ) issued Request for Applications 201 9 - 10 5

for the pur pose of awarding low - income housing tax credits . On

March 22, 2019, FHFC announced its intent to award funding to

Intervenor Winchester Place, Ltd. , and Winchester Place

Developer, LLC (collectively, "Winchester Place") , and one other

applicant .

Petitio ner, The Vistas at Fountainhead Limited Partnership

("Vistas"), timely filed a Notice of Protest, and on April 19,

2019, filed its formal written protest of the intended action.

FHFC referred Vistas' formal protest to the Division of

Administrative Hearin gs ("DOAH") on March 15, 2019. On May 2,

2019, Winchester Place filed a Notice of Intervention , which was

considered a Motion to Intervene and granted on May 6, 2019.

On May 24, 2019, FHFC filed an unopposed motion to

consolidate this proceeding with HTG Oak Valley, LLC v. Florida

Housing Finance Corp. , DOAH Case No s . 19 - 2275 BID and 19 - 2276BID

(the " 2018 - 110 Protests "), for hearing only, which was granted.

The three consolidated cases were scheduled for final hearing

together on June 3 and 4, 2019.

The parties entered into a detailed Joint Pre - hearing

Stipulation, which was filed on May 30, 2019. To the extent

relevant, the stipulated facts have been incorporated herein.

The final hearing took place as scheduled, with all parties

present . The parties presented the testimony o f Marisa Button,

FHFC ' s Director of Multifamily Programs. Vistas called as

witnesses David Urban of RBC Capital Markets and Scott Deaton, a

principal of BCP Development LLC . Joint Exhibits 1 through 6

were received into evidence. Vistas' Exhibits 1 through 4 were

admitted as well . FHFC offered no additional exhibits.

The three - volume transcript was filed on June 18, 2019.

All parties timely filed Proposed Recommended Orders , which were

considered in preparing this Re commended Order .

U nless otherwise indicated, citations to the official

statute law of the state of Florida refer to Florida Statutes

201 8 .

FINDINGS OF FACT

1. FHFC is the housing credit agency for the state of

Florida whose responsibilities include the awarding of low -

income housing tax credits, which developers use to finance the

construction of affordable housing. Tax credits are distributed

pursuant to a competi tive process similar to a public

procurement that starts with FHFC ' s issuance of a r equest for

a pplications. 1 /

2. On January 9 , 201 9 , FHFC issued Request for

Applications 201 9 - 1 0 5 ( the " RFA " ) . Eighteen applications were

submitted in response to the RFA on February 6, 2019.

3. A Review Committee was appointed to evaluate the

applications and make recommendations to FHFC ' s Board of

Directors (the " Board " ). Pursuant to the ranking and selection

process outlined in the RFA, applicants were evaluated on

eli gibility items and were awarded points for other items.

4. Florida Administrative Code Rule 67 - 60.006 provides

that "[t]he failure of an Applicant to supply required

information in connection with any competitive solicitation

. . . shall be grounds for a determination of nonresponsiveness

with respect to its Application. If a determination of

nonresponsiveness is made by [FHFC] , the Application shall be

considered ineligible . "

5. The RFA sets forth a list of mandatory Eligibility and

Point Items that must be included in a response. The RFA

expressly provides that "[o]nly Applications that meet all of

the Eligibility Items will be eligible for funding and

considered for funding selection."

6. As an E ligibility I tem, each applicant was required to

submit, as part of its application, a Development Cost Pro Forma

detailing both the anticipated costs of the proposed

development , as well as the anticipated funding sources for the

proposed development. In order to demonstrate adequate funding,

the Total Construction Sources (including equity

proceeds/capital contributions and loans) as shown in the pro

forma must equal or exceed the Total Development Costs reflected

therein. During the scoring process, if a funding source is not

considered or is adjuste d downward, then Total Development Costs

might wind up exceeding Total Construction Sources, in which

event the applicant is said to suffer from a construction

funding shortfall (deficit). If an applicant has a funding

shortfall, it is ineligible for fund ing.

7. The Development Cost Pro Forma does not allow

applicants to include in their Total Construction Sources any

equity proceeds to be paid after construction completion.

Instead, the applicant must state only the amount of "Equity

Proceeds Paid Prior to Completion of Construction." The pro

forma defines "Prior to Completion of Construction" as "Prior to

Receipt of a Final Certificate of Occupancy."

8. The RFA requires, as well, that an equity proposal

letter be included as an attachment to the app lication. For a

housing credit equity proposal to be counted as a source of

financing, it must meet the following criteria:

• Be executed by the equity provider;

• Include specific reference to the Applicant

as the beneficiary of the equity proceeds;

• State the proposed amount of equity to be

paid prior to construction completion ;

• State the anticipated Eligible Housing

Credit Request Amount;

• State the anticipated dollar amount of

Housing Credit allocation to be purchased;

and

• State the anticipated total amo unt of equity

to be provided.

(Emphasis added).

9. The Review Committee found 14 applications eligible and

four applications ineligible , including the Vistas application .

T wo applications were recommended for funding: Lincoln Village

Apartments and Win chester Place. At a meeting on March 22,

2019, the Board approved the Review Committee's eligibility and

funding recommendations.

10. In its application, Vistas request ed an allocation of

$1,325,000 in housing credits . In formulating its intended

action on the RFA, FHFC determined that Vistas is not eligible

for an award of housing credits for failing to state in its

application that an amount of equity sufficient to cover the

anticipated development costs would be invested in the project

prior to constr uction completion. Vistas protests this

determination of ineligibility. Due to the limited availability

of credits and Vistas' position in the ranking, Winchester

Place, a putatively successful applicant, would end up being

deselected if FHFC's final age ncy action were to fin d Vistas

eligible . Thus, Winchester Place has intervened in this

proceeding to defend the intended agency action.

11. As Attachment 14 to its application, Vistas submitted

an equity proposal letter from RBC Capital Markets ("RBC")

executed by David J. Urban ( the "Equity Proposal"). In relevant

part, the Equity Proposal states:

Anticipated Total

Equity to be provided: $1 2 , 586 , 241 *

Equity Proceeds Paid

Prior to or simultaneous to

closing the construction

financing: $2 , 013 ,7 99 * (min. 15%)

Equity Proceeds to be

Paid Prior to Construction

Completion: $ 7 , 048 , 295

Pay - In Schedule: Funds available for Capital

Contributions

#1: $2, 013 ,7 99 * be paid prior

to or simultaneously with the

closing of the construction

financing.

Funds available for Capital

Contribution #2 $ 1 , 887 , 936 *

prior to construction

completion .

Funds available for Capital

Contribution #3 $3, 146 , 560 *

concurrent with perma nent loan

closing.

Equity Proceeds Paid at Lease

Up $ 4 , 405 , 184 *

Equity Proceeds Paid at 8609

$1, 132 , 762 *

*All numbers rounded to nearest dollar.

1 2. The Pay - In Schedule in t he Equ ity Proposal refers

to "permanent loan closing" as the moment when C apital

C ontribution #3 will be made "available." The Equity Proposal

does not, however, define or discuss permanent loan closing,

and , to the point , does not specify when it is expected to

occur. Of potential relevance in this regard is a letter from

JP Morgan Chase Bank, N.A. (the "Chase Letter"), which is

included as Attachment 15 to Vistas' application .

13 . Unlike the Equity Proposal, the Chase Letter, if not

the last word on the subject, at least sheds some light on the

timing of th e crucial mileston e , i.e., "permanent loan closing."

Although the Chase Letter is full of escape clauses and does

"not represent a commitment" or "an offer to commit," the

document nevertheless outlines the terms for the closing of the

proposed construction and permanent l oans. T he proposed terms

call for the payment of a $10,000 Conversion Fee at p ermanent

l oan closing and impose preconditions for the conversion from

the construction loan to the permanent loan , which include a

requirement that there have been "90% economi c and physical

occupancy for 90 days." No evidence was presented as to the

meaning of this language, but the term "physical occupancy" is

clear and unambiguous ÏÏ and it plainly happens after receipt of a

final certificate of occupancy, which , under the RFA, is the end

point of the construction phase.

14 . Winchester Place argues that the Pay - In Schedule casts

doubt on whether the entire amount stated in the Equity

Proposal's line - item entry for "Equity Proceeds to be Paid Prior

to Construction Completion " ($ 7 , 048, 295 ) will be paid before the

final certificate of occupancy is issued. According to

Winchester Place , the Pay - In Schedule shows that the third

c apital c ontribution will be paid after construction completion

because the second c apital c ontribution, which is the earlier of

the two, is due to occur "prior to construction completion."

Thus, Winchester Place contends that Vistas ' construction

financing sources should be reduced by $3, 146 , 560 , thereby

creating a construction financing shortf all and rendering the

Vistas a pplication ineligible for funding.

15 . Winchester Place's argument supports FHFC's intended

action but is opposed by FHFC in this proceeding. This

turnabout on the part of FHFC is the result of FHFC's intended

acceptance, as eligible, of the application that Fountains at

King's Pointe Limited Partnership ("Fountains") submitted in

response to Request for Applications 201 8 - 1 1 0 ("RFA 201 8 - 1 1 0").

That proposed agency action is relevant because Fountains had

attached to its application an equity proposal letter from RBC

whose terms and conditions ÏÏ other than the dollar amounts and

(obviously) the applicant's name ÏÏ are identical to those of the

Equity Proposal for Vistas .

16. During the evaluation of appl ications under

RFA 201 8 - 1 1 0, which took place at around the same time as the

review of applications pursuant to the RFA at issue here, FHFC's

scorer determined that C apital C ontribution #3 should be

included in t he amount of equity proceeds to be paid to

F ountains prior to construction completion, with the result that

Fountains' application , showing a construction funding surplus,

was deemed eligib le for funding .

17 . The Vistas and Fountains applications , competing in

separate solicitations, were scored by different FHFC staff

members . The evaluator who scored the financial section of

Vistas' application sought advice concerning her interpretation

of the Equity P roposal , discussing the matter with FHFC's

Director of Multifamily Programs and legal counsel at a

reconciliation meeting that occurred before the R eview C ommittee

convened ; this evaluator encountered no resistance to her plan

of making a downward adjustment to Vistas' equity funding . The

evaluator of the Fountains application did not like wise discuss

her scoring rationale and thus received no input or guidance

from FHFC's management. Ultimately, however, because each

scoring determination belongs to the R eview C ommittee member

herself or himself , inconsistent or conflicting results are

po ssible , as these cases demonstrate .

18 . Once in litigation, FHFC discovered that it had

reached opposite scoring conclusions based on the same material

facts. In t his proceeding and in the 2018 - 110 Protest s , FHFC

has stressed its desire to take a consi stent approach to the

identical Equity Proposals. To that end, FHFC has reversed

course here and argued that , contrary to its intended action,

the Equity Proposal provided by Vistas fully satisfies the

requirements of RFA; there is no funding shortfall; and Vistas '

application is eligible and should be selected for funding.

Deeming Vistas' application eligible would achieve consistency,

of course, by giving favorable treatment to the applications of

both Fountains and Vistas, which are similarly situated as to

the Equity Proposal. Naturally, Winchester Place urges that

consistency be found the other way around, through the rejection

of both applications , or , alternatively, that the inconsistency

be tolerated as the price of affording the agency wide

disc retion in making scoring decisions .

19 . In support of its decision to change position s on

Vistas' Equity Proposal, FHFC relies upon the following

premises: (i ) the Equity Proposal plainly specifies, in the

line - item entry for "Equity Proceeds to be Pa id Prior to

Construction Completion , " the amount to be paid prio r to

construction completion; (ii) permanent loan closing does not

necessarily have to occur after construction completion ; and

(iii ) th e information contained in the Pay - In S chedule is not

in f ormation that is required by the RFA .

2 0 . The disputes arising from the scoring of the Equity

Proposal are solvable as matters of law and therefore will be

addressed below.

CONCLUSIONS OF LAW

21 . DOAH has personal and subject matter jurisdiction

in this proceeding pursuant to sections 120.569, 120.57(1),

and 120.57(3), Florida Statutes. See also Fla. Admin. Code

R. 67 - 60.009. FHFC ' s decisions in this competitive process

determin e the substantial interests of Vistas and Winchester

Place , each of whom therefore has standing to participate in

this proceeding .

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

rests with the party opposing the propos ed agency action, s ee

State Contracting & Eng ' g Corp. v. Dep ' t of Transp. , 709 So. 2d

607, 609 (Fla. 1st DCA 1998) , wh ich must establish its

allegations by a preponderance of the evidence. Dep ' t of

Transp. v. J.W.C. Co., Inc. , 396 So. 2d 778, 787 (Fla. 1st

DCA 1981).

23 . Section 120.57(3)(f) spells out the rules of decision

applicable in bid protests. In pertinent part, the statute

provides:

In a competitive - procurement protest, other

than a rejection of all bids, the

administrative law judge shall conduct a de

novo proceeding to determine whether the

agency ' s proposed action is contrary to the

agency ' s governing statutes, the agency ' s

rules or policies, or the bid or proposal

specifications. The standard of proof for

such proceedings shall be whether the

proposed agency action was clearly

erroneous, contrary to competition,

arbitrary, or capricious.

24 . The undersigned has discussed elsewhere, at length ,

the meaning of this statutory language, the analytical framework

established thereby, and the levels of deference to be afforded

to the agency ' s preliminary findings and conclusions. See,

e.g. , Care Access PSN, LLC v. Ag. for Health Care Admin. ,

Case No. 13 - 4113BID, 2014 Fla. Div. Adm. Hear. LEXIS 3,

at * 41 - 55 (Fla. DOAH Jan. 2, 2014) . It is not necessary to

review these principles here.

25 . The decision whether to " count " or " exclude " all or

part of a funding source is at heart a scoring function.

Instead of awarding points , the evaluator in effect assigns a

grade of " pass " (count the funds) or " fail " (exclude /reduce the

funds). Scoring decisions are committed to the agency ' s

discretion and thus are accorded the highest deference on

review. In a protest governed by section 120.57(3), therefore,

the undersigned must be reluctant to upset a scoring decision

and even less willing, should it be necessary to invalidate a

score, to re - score the improperly rated item.

26 . The parties have paid considerable attention to

Rosedale Holding v. Florida Housing Finance Corp. , FHFC Case

No. 2013 - 038BP (R ecommended O rder May 12, 2014; FHFC June 13,

2014). They dispute whether that case is distinguishable or

precedential as regards the scoring of Capital Contribution #3

as de scribed in the Equity Proposal.

27 . In his Recommended Order in Rosedale (the " Rosedale

RO " ), the hearing officer made the following findings of fact:

30. In response to [the requirement in

the RFA that an equity proposal " state the

proposed amount of equity to be paid prior

to construction completion, " ] Palm Village

provided at Attachment 13 a Term Sheet

setting forth the proposed eq uity investment

in the proposed Palm Village Project from

SunTrust Community Capital, LLC. At page 2

the Term Sheet states: " The proposed amount

of equity to be paid prior to construction

completion is $2,127,118. " This total is to

be paid in two separat e capital

contributions referenced in the Term Sheet.

31. The first capital contribution of an

estimated $1,160,246 would be paid when the

partnership was entered into. The second

capital contribution of an estimated

$966,872 would be paid only upon rec eipt of

each of the following: 1) final Certificates

of Occupancy on all units by the appropriate

authority; 2) certification by the STCC

Construction Inspector that the project was

completed in accordance with the plans and

specifications, and 3) acknowle dgements by

Lender of completion of the Project in

accordance with the Project documents.

32. The Development Cost Pro Forma in the

RFA defines " Prior to Completion of

Construction " as " Prior to Receipt of Final

Certificate of Occupancy or in the case of

Rehabilitation, prior to placed - in - service

date as determined by the Applicant. "

Rosedale RO at 12 - 13 .

28 . Regarding the equity proposal at issue in Rosedale ,

the hearing officer concluded as follows:

41. The equity proposal from Sun Trust

Community Ca pital included a statement that

$2,127,118 would be paid prior to

construction completion. On its face this

appears to meet the requirements of the RFA

and to demonstrate adequate funding levels.

However, the equity proposal also stated

that almost half of this amount would in

fact not be paid until final certificates of

occupancy on all units were received, not

until the construction inspector certified

that the project was completed, and not

until the lender agreed that the project was

complete.

42. I t is quite clear from the terms of

the RFA that equity to be paid " prior to

construction completion " means that it must

be paid before the final certificates of

occupancy are obtained. Regardless of the

rather generic statement of how much would

be paid p rior to construction completion,

the most reasonable reading of the Term

Sheet is that some $966,862 would not be

paid prior to construction completion.

There is an internal inconsistency in the

Term Sheet, but it does not appear to be a

typographical or mathematical error and

Florida Housing was correct not to consider

this a minor irregularity that could be

waived. Furthermore, it was at least not

unreasonable for Florida Housing to give

more weight to the specific and detailed

limitations on the second capital

contribution than to the general statement

about how much would be paid prior to

construction completion.

43. Palm Village argues that because

there is no definition of " prior to

construction completion " the interpretation

of this phrase must be left up to the

Applicant. In fact, that term is defined in

the Development Cost Pro Forma. Even if it

were not, the Applicant would not be free to

interpret the phrase however it wished, no

matter how illogical. It is simply

unreasonable to think that " prior to

construction completion " actually means

sometime after the construction engineer has

certified that the project is complete.

44. Florida Housing ' s determination that

Palm Village failed to demonstrate adequate

funding is not clearly erroneous, nor was it

arbitrary or capricious. There is also

nothing in the record to suggest that this

determination is contrary to competition.

Rosedale RO at 35 - 36.

29 . To summarize, i n the relevant part of Rosedale , the

hearing officer upheld the intended score of " fail " given to the

proposed second capital contribution from SunTrust Community

Capital, LLC. ( " STCC " ) , a score which had been based on the Term

Sheet ' s plain disclosure that the payment was not going to occur

" prior to construction completion " as that term was defined in

the applicable pro forma .

30 . Rosedale is analogous to th is case inasmuch as the

intended a ction in Rosedale was , as it is here , to exclude a

proposed capital contribution deemed to be payable after the

completion of construction. There is a factual distinction

between the cases, however. The Term Sheet at issue in Rosedale

unambiguously conditioned the payment of the second capital

contribution on events that clearly would take place after

" Receipt of Final Certificate of Occupancy, " which, according to

the Development Cost Pro Forma in Rosedale , was the milestone

that would signal the completion of construction. In contrast,

the Equity Proposal for Vistas unambiguously condition s th e

availability of Capital Contribution #3 on the simultaneous

occurrence of " permanent loan closing " without clearly stating

when that event will take place in relation to Receipt of a

Final Certificate of Occupancy, which the applicable pro forma

(as in Rosedale ) designates as the end point of construction.

3 1 . The Rosedale RO arguably veils this distinction

because it concludes that the STCC Term Sheet ÏÏ by stating

" generically " that a total of $2.1 million would be paid prior

to construction completion, while also specifying that nearly

$1 million of that sum would not be paid until after the receipt

of final certificates of occupancy ÏÏ suffered from " an internal

inconsistency . " The reasonable inference , however, is that the

parties to the Term Sheet ( STCC and Palm Village) had reached a

private agreement regarding the meaning of the term " prior to

completion of construction . " T he Term Sheet was presumably

internally consistent with the parties ' intent that $2.1 million

would be paid " prior to construc tion completion " as they used

and mutually understood that term . In any event, the Term Sheet

was not facially or patently ambiguous because the term

" construction completion " is not literally or exclusively

synonymous with " Receipt of a Final Certificate of Occupancy "

but could be understood and used by the parties to a consensual

agreement to mean, e.g., " permanent loan closing, " among other

possible events, so that , as between the parties, any event

occurring prior to permanent loan closing would be deemed by

contract to have taken place prior to construction completion. 2 /

32 . Palm Village ' s problem was that it and STCC ' s

definition of " prior to construction completion " differed from

the d efinition of that same term as set forth in the Development

Cost Pro Forma, and it was that latter definition, of course,

which determined whether a funding source could be considered as

part of an applicant ' s construction financing. The bottom line,

ther efore, is that although the Term Sheet was internally

consistent , it nevertheless unambiguously showed that a

substantial portion (about $1 million) of the STCC equity

investment would not be paid " prior to construction completion "

under the external, but controlling , definition of that term.

33 . Once this is recognized, it becomes clear that, in

Rosedale , FHFC had no choice but to deduct, from the applicant ' s

total construction financing, the second capital contribution,

which the equity proposal clearl y and unambiguously stated would

not be made until after events that could not occur " prior to

construction completion " as that term was defined in the request

for applications , because the agency ' s discretion, though broad,

does not authorize it to act in contravention of the

solicitation ' s plain language.

34 . In sum, then, a careful reading of Rosedale reveals it

to be distinguishable from this case , because while the Equity

Proposal, unlike the STCC Term Sheet, truly is internally

inconsistent (as will be discussed below), it do es not (again

unlike the Term Sheet) clearly and unambiguously state that

Capital Contribution #3 will be not be paid " prior to

construction completion " as that term is defined in the RFA.

But ne ither, however, do es it clearly and unambiguously state

that Capital Contribution #3 will be paid " prior to construction

completion " as that term is defined in the RFA.

35 . The internal inconsistency in the Equity Proposal

stems from the Pay - In Schedule. As a preliminary matter, FHFC

and Vistas argue that, because the RFA does not require an

equity proposal to include a detailed timetable, the Pay - In

Schedule is mere surplusage that can and should be ignored.

This is not a persuasive argument. First, th e premise is only

trivially true. The RFA does not specifically require an equity

pay - in schedule, but it does instruct that an equity proposal be

attached to the application. So, whatever is in the equity

proposal must be submitted ÏÏ that is the importan t requirement.

In that sense, therefore, the RFA did require the submission of

the Pay - In Schedule, as it was part of the Equity Proposal.

36 . Second, and more important, whether required or not,

the Pay - In Schedule contains language bearing on the timin g of

certain capital contributions, which is specifically relevant

because of the instruction to " [s]tate the proposed amount of

equity to be paid prior to construction completion, " and is

generally relevant, in any event, as part of the application.

FHFC cannot pick and choose which language of the application to

consider and which to overlook; that would be arbitrary and

contrary to competition. The upshot is that the Pay - In Schedule

cannot be ignored simply because it creates uncertainty that

otherwise would not exist.

37 . The Pay - In Schedule prescribes the timetable for RBC ' s

proposed equity contributions in chronological order from the

first payment to the fifth (and final) payment. Each

installment (or funding window for the second and third

contri butions, respectively) is tied to ÏÏ and scheduled to occur

before/at , before , or at ÏÏ a milestone in the life cycle of the

project as follows: #1 Î (before/at) closing of construction

financing; #2 Î (before) construction completion; #3 Î (at)

permanent loa n closing; #4 Î (at) lease up; and #5 Î (at) filing

of IRS Form 8609 (after the building is placed in service).

38 . Regardless of how " construction completion " is

defined, the most natural reading of this schedule is that

Capital C ontribution #3 is scheduled to be made after

construction completion, since Capital Con tribution #2 covers

the entire period during which construction is ongoing. 3 / If

Capital C ontribution #3 were intended to be made while

construction continued; that is, if the second and third

contributions were intended to overlap, the Pay - In Schedule

clearly fails to express such intention in an ordinary fashion.

Rather, this normally would be communicated either by tying

Capital C ontribution # 2 to permanent loan clos ing and making

Capital C ontribution # 3 available prior to construction

completion (reversing the order of these two installments), or

by combining the two contributions into one installment, with

the sum being available prior to construction completion.

39 . If the Pay - In Schedule were the only language in the

application pertaining to the amounts to be paid prior to

construction completion, the undersigned would not hesitate to

conclude, based on the schedule ' s fairly straightforward

timetable, that the amount of equity to be paid prior to

construction completion is the sum of Capital C ontribution #1

and Capital C ontribution #2. But the Pay - In Schedule does not

stand alone; within just the Equity Proposal, it is attended by

the line item stating that an amount equal to the sum of the

first three c apital c ontributions will be " Paid Prior to

Construction Completion. " As used in the line item, the term

" Prior to Construction Completion " must be synonymous with

" prior to construction completion " as used in t he Pay - In

Schedule, given the identity of the language. Consequently, the

line item can only be understood as meaning that Capital

C ontribution #3 is payable prior to the completion of

construction even though the Pay - In Schedule states that Capital

C ontr ibution #3 is payable after the completion of construction.

Hence the internal inconsistency.

40 . Ordinarily, when a legal dispute arises from such an

inconsistency in the terms of an instrument, resolution requires

the judge to engage in a two - step analysis. The first step is

to determine " whether the language at issue is either clear or

ambiguous . " Famiglio v. Famiglio , 44 Fla. L. Weekly D1260, 2019

Fla. App. LEXIS 7204, at *17 n.3 (Fla. 2d DCA May 10, 2019).

This is a question of law. Id. If the terms at issue are

ambiguous, then, in step two, the judge must apply the canons of

construction a nd interpret the uncertain language, as a matter

of law. See, e.g. , Holmes v. Fla. A&M Univ. , 260 So. 3d 400,

404 (Fla. 1st DCA 2018). In some instances, it is permissible

for the judge to receive and consider parol or extrinsic

evidence bearing on the p arties ' intent, to assist in the

interpretation. E.g. , Famiglio , 2019 Fla. App. LEXIS 7204 ,

at *7 - 8. In such cases, the parties ' intent becomes a material

fact, but the interpretation of the instrument remains a matter

of law.

41 . It is tempting to trav el this familiar path and simply

construe the Equity Proposal, reaching a legal conclusion as to

its best meaning. But this is not an ordinary legal dispute

arising from competing interpretations of a writing. For one

thing, the parties to the E quity P ro posal under consideration

are not in doubt about what they meant to say therein, nor is

there a dispute between these parties regarding their rights and

obligations under the proposal.

4 2 . Moreover, if the rights and obligations of the parties

to the E q uity P roposal were relevant to the question at hand ÏÏ

which, not to forget, is whether FHFC should consider Capital

C ontribution #3 as part of the applicant ' s total construction

funding ÏÏ it is not clear that FHFC would be empowered to

determine such rights and obligations, because jurisdiction to

interpret a contract for that purpose is vested exclusively in

the judiciary. Eden Isles Condo. Ass ' n v. Dep ' t of Bus. &

Prof ' l Reg. , 1 So. 3d 291, 293 (Fla. 3d DCA 2009). Fortunately,

the meaning of the Equity Pr oposal, as between the parties

thereto , is irrelevant to the instant dispute.

43 . What FHFC does have the authority (and, indeed, the

duty) to determine is whether an application meets the

requirements of the RFA. This includes the power to decide

whether an equity proposal states an amount of equity to be paid

prior to construction completion that (together with other

funding) is sufficient to cover the projected costs of

development as set forth in the pro forma. Such an exercise

might seem to involve the same analysis as a straightforward

contract interpretation. There is a difference, however,

between FHFC ' s setting out to determine the intended meaning of

contractual terms to which private parties have given their

mutual assent, on the one hand; and, on the other, FHFC ' s

deciding whether the parties ' written instrument, as measured

against the specifications of the RFA, complies with the

agency ' s requirements.

44 . FHFC and Vistas advocate an interpretive analysis that

blurs this distinction; they would construe the Equity Proposal

to show that the letter states an adequate amount of equity to

be paid prior to construction completion. Their argument goes

something like this. There is no legal or other mandate that

prohibits permanent loan closing from occurring prior to

construction completion. To be sure, permanent loans typically

close aft er the completion of construction, but that is not

necessarily the sequence of events in every instance. Thus, the

Pay - In Schedule does not clearly and definitively eliminate the

possibility that Capital C ontribution #3 might be paid prior to

construction completion. Because the relevant line item clearly

states an amount of equity to be paid prior to construction

completion that obviously includes the third c apital

c ontribution, the parties must have intended that the permanent

loan would close prior to construction completion ÏÏ which, while

admittedly uncommon, is not unheard of. The Equity Proposal

should be interpreted as reflecting such intent, and, as so

construed, be deemed to state a sufficient amount of equity to

cover the anticipated development costs, in conformity with the

RFA.

45 . Regardless of whether the foregoing reasoning is

persuasive, it is neither irrational nor clearly erroneous,

provided the premise behind it is correct. The underlying

premise is that, in determining conformity, FHFC may use its

best judgment to ascertain the most reasonable meaning of an

uncertain or unclear response. For the reasons th at follow,

however, it is concluded that this premise is clearly erroneous

and contrary to competition and therefore must be rejecte d.

46 . To begin, it will be helpful to recall that the RFA

specification at issue here is the requirement that an equity

proposal must " [s]tate the amount of equity to be paid prior to

construction completion. " An equity proposal that failed to

state any amount of pre - completion equity, even if the number

were zero, would be nonresponsive; unless the applicant ' s other

financing sources were sufficient, its application would have to

be deemed ineligible. In contrast, an equity proposal that

states any amo unt of pre - completion equity is facially

responsive; however, it is responsive in this regard only to the

extent the amount of equity to be paid prior to construction

completion is clearly stated. To the extent the amount of pre -

completion equity is uncle ar, the equity proposal must be

considered nonresponsive, because an ambiguously expressed

amount is no different, in the context of a competitive

evaluation, from an unexpressed amount.

47 . Why is this so? For starters, ambiguity is

nonresponsive beca use the relevant RFA provision does not permit

uncertain responses. It should go without saying that the RFA

plainly requires the proposed amount of pre - completion equity to

be clearly stated. Presumably no one would seriously suggest

that the specificat ion should be read to mean: " State at least

ambiguously the proposed amount of equity, " etc. Yet, a fatal

flaw in FHFC and Vistas' position is that it implicitly revises

the specification to include an unstated proviso to the effect

that ambiguous or unc ertain responses will be given the most

reasonable interpretation . This is a clearly erroneous

construction of the plain language of the RFA.

48 . Ambiguity is nonresponsive because Florida

Administrative Code Rule 67 - 60.008 says so. That rule defines

th e term " minor irregularities, " which FHFC in its discretion

may waive or correct, as errors that, among other things, " do

not create any uncertainty that the terms and requirements of

the competitive selection have been met. " An ambiguous response

by its very nature creates uncertainty that the response is

conforming; absent such uncertainty, the issue of ambiguity

would not surface. 4 /

49 . Rule 67 - 60.008 makes clear that a material ambiguity,

that is , one which creates any uncertainty that the terms and

requirements of the RFA have been met, is an irregularity ÏÏ and

not a minor one at that. Such an irregularity is otherwise

known as a material variance or substantial deviation . By

excluding material ambiguities from the su bset of errors known

as minor irregularities, FHFC ' s own rule, by necessary

implication, classifies an ambiguity involving material

information as a substantial deviation from the specifications,

for deficiencies in a response or bid are either minor (and

waivable) or material (and nonwaivable); there is no middle

ground. FHFC does not have the authority, under r ule 67 - 60.008

or procurement law generally, to waive or correct a material

variance.

50 . To give an unclear provision its most reasonable

interpr etation, as FHFC (with the support and encouragement of

Vistas ) urges be done in regard to the Equity Proposal, would be

tantamount to " correcting " the irregularity by removing any

uncertainty that the terms and requirements of the RFA have been

satisfied. In and of itself, the resolution of ambiguity

through reasonable interpretation is, of course, neither

arbitrary nor illogical; indeed, such an a pproach is required in

some contexts. But this is not a declaratory judgment suit or

breach of contract action in circuit court between parties to a

written instrument whose meaning is in dispute; it is an

administrative competitive - selection protest. In this context,

construing an ambiguous response violates r ule 67 - 60.008 and for

that reason is plainly and undeniably impermissible. Doing so

would be clearly erroneous.

51 . Finally, even if not otherwise prohibited (which it

is) , resolution of ambiguity by the agency would be contrary to

competition at both ends of the spectrum. At the front end,

FHFC ' s willingness to " correct " uncertainties in an application

at a minimum would remove a salutary disincentive to sloppy

draftsmanship, and might even encou rage applicants to use

studied ambiguity on occasion for competitive advantage. Apart

from that, rare is the sentence so clearly written as to

foreclose a semantic dispute if the stakes are high enough. The

suggestion that material ambiguity should be ha ndled as a minor

irregularity smells like litigation fuel.

52 . The bigger threat to competition, however, comes at

the back end. An uncertain response inherently presents wiggle

room for interpretation, and if FHFC were able to exercise the

power to cons true, it would have opportunities to show

favoritism and, conversely, to act on bias. To be clear, the

undersigned is not suggesting that FHFC has done anything of the

sort or otherwise improper here ÏÏ to the contrary, the agency has

handled th is case and the 2018 - 110 Protests in a most

professional and competent manner, and its conduct has been

beyond reproach. Nor does the undersigned mean to imply that

FHFC is somehow likely to behave improperly in the future.

Prohibiting the interpretation of an ambig uous response should

be viewed as a prophylactic measure rather than a remedial or

punitive one.

53. To elaborate, there are grounds for genuine confusion

about what would constitute the proper purpose of an

interpretation in this context. In a civil act ion where the

parties to an agreement dispute its meaning, the court is

required to construe ambiguous language so as to bring it in

line with the parties ' intent. E.g. , Charbonier Food Servs.,

LLC v. 121 Alhambra Tower, LLC , 206 So. 3d 755, 758 (Fla. 3d

DCA 2016). In that context, in other words, the goal of the

interpretative process is to give the writing the meaning its

subscribers intended it to have. The court does not have a free

hand in choosing between reasonable interpretations.

54 . In a compe titive selection, however, similar reliance

upon the parties ' intent would be problematic. This is because,

it may reasonably be presumed that the applicant always intends

its response to conform to the RFA and maximize the applicant ' s

chances of being se lected for funding. Where the terms of an

equity proposal are at issue, as here, the reasonable

presumption again would be, in all cases, that the applicant and

the potential investor intended the proposal to satisfy fully

all applicable provisions of the RFA. Thus, if the parties '

intent were to be the determinative factor, as in civil

litigation, the rule, as a practical matter, whether explicitly

acknowledged or not, would be that an ambiguous response must be

construed in favor of the applicant. By r ewarding ambiguity,

however, such a rule, it may be confidently predicted, would

have unintended consequences unfavorable to competition.

55 . The undersigned believes, therefore, that if ambiguous

responses are to be tolerated, they must not be favored, w hich

means that the use of the parties ' (or applicant ' s) intent as

the polestar for interpretation should be discouraged . But

while this would solve one problem, it would create another. If

FHFC were not required to construe an ambiguous response

pursuant to the parties ' intent, what limiting principle would

take its place to assist the agency in choosing which reasonable

interpretation to adopt? Where a writing supports two or more

reasonable interpretations (the definition of ambiguity), could

i t ever be said that the agency ' s selection of one reasonable

interpretation over another was arbitrary, capricious, or

clearly erroneous?

56 . Without the parties ' intent for guidance, the agency

would have no choice but to resort to seeking the " most

reas onable " interpretation, which is basically what FHFC

advocates should be done here. But there is little

" limitation, " if any, in this principle, for, like beauty,

reasonableness is not quantifiable. Allowing FHFC to adopt the

" most reasonable " interpreta tion of an ambiguous response would

undermine confidence in the integrity of the competition

because, no matter how responsibly and ethically the agency

carried out this task, the possibility of favoritism could never

be completely eliminated, and suspicio ns of such impropriety

inevitably would arise. For these reasons, the undersigned

concludes that, however good the agency ' s intentions, its

exercise of the power of interpretation to shore up an ambiguous

application would open a Pandora ' s Box and hence m ust be deemed

contrary to competition.

57 . Having concluded that material ambiguity in a response

is a substantial, nonwaivable deviation , the question as to

Vistas ' application boils down to whether an amount of equity to

be paid prior to construction completion sufficient to cover

projected construction costs was clearly and unambiguously

stated. As discussed above, the question of whether a written

instrument is ambiguous is a matter of law. Further, although

an agency ' s exercise of interpretive aut hority over an ambiguous

instrument might raise separation - of - powers concerns, there

should be no similar objection to a quasi - judicial officer ' s

determination of ambiguity when necessary to the performance of

an agency ' s clear statutory responsibilities. See Eden Isles ,

1 So. 3d 291 at 293.

58 . Because this proceeding is governed by section

120.57(3), the question arises whether FHFC ' s preliminary

decision regarding the ambiguity of a response, to the extent it

has made such a decision, is entitled to de ferential review.

The undersigned concludes that ambiguity, like historical facts,

must be determined de novo in an administrative bid protest.

This conclusion is based on the grounds that (i) the

identification of ambiguity does not require the applicat ion of

special rules tailored for competitive selection or procurement

processes but, rather, is a function of general law; and,

relatedly, (ii) determining whether an instrument is ambiguous

does not fall within FHFC ' s substantive jurisdiction or call

upon any agency ' s special expertise.

59 . " An agreement is ambiguous if as a whole or by its

terms and conditions it can reasonably be interpreted in more

than one way. " Nationstar Mortg. Co. v. Levine , 216 So. 3d 711,

715 (Fla. 4th DCA 2017). For reas ons previously discussed, the

Equity Proposal is burdened with an internal inconsistency

regarding the amount of capital contributions to be paid to

Vista s prior to the completion of construction. Because of this

inconsistency, the proposal can reasonably be interpreted as

providing that Vistas would be paid $7,048,295 prior to

construction completion, and it also can reasonably be

interpreted as calling for the payment of $3,901,735 in pre -

completion equity. In and of itself, therefore, the Equity

Propos al is ambiguous in this regard.

60 . This does not necessarily mean that the application as

a whole must be deemed ambiguous as to the amount of pre -

completion equity Vistas would receive. Conceivably, some other

part of the application might make clear t hat the permanent loan

likely would close prior to construction completion. Were that

the case, the internal inconsistency would disappear, and it

might be concluded that the application unambiguously states

that Vistas would be paid $7,048,295 prior to c onstruction

completion.

61 . As it happens, there is another part of the

application that speaks to the timing of permanent loan closing ,

namely the Chase Letter . The Chase Letter sets forth the terms

on which the bank might make a construction loan to Vi stas,

which would be converted to a permanent loan later on. Although

the Chase Letter clearly states that it does not constitute a

binding commitment, it is nevertheless the only source of

information in the application concerning the timing of a

potenti al permanent loan closing. Moreover, notwithstanding the

qualifications and caveats contained therein, the Chase Letter

offers to make a construction loan to Vistas of approximately

$7,986,382, which is precisely the amount of first mortgage

financing sho wn in the applicant ' s Development Cost Pro Forma.

62 . FHFC and Vistas argue that the Chase Letter is

irrelevant and should not be considered. Their arguments might

be pers u asive if this were a civil action between Vistas and RBC

in which the terms of the Equity Proposal were in dispute. But,

of course, this is not such a case, and the ultimate question

here is not whether the Equity Proposal per se is

ambiguous/nonresponsive, but whether the application as a whole

is ambiguous/nonresponsive. It would be arbitrary and

capricious not to consider the entirety of the application in

determining this issue. 5 / The Chase Letter might not be part of

the Equity Proposal, but it is part of the application.

63 . The Chase Letter prescribes certain conditions tha t

must occur prior to conversion of the construction loan into a

permanent loan. One of these conditions is " physical occupancy

for 90 days. " Because it is highly unlikely that three months

of physical occupancy would take place prior to the receipt of a

final certificate of occupancy, the Chase Letter is inconsistent

(to say the least) with the notion that permanent loan closing

would occur prior to construction completion. Consequently, the

Chase Letter does not erase the ambiguity appearing on the fac e

of the Equity Proposal; to the contrary, it underscores the

uncertainty arising from the proposal ' s internal inconsistency

regarding the timing of Capital C ontribution #3.

64 . It is concluded that the Vistas application is

ambiguous on the question of whether Capital C ontribution #3

would be paid prior to construction completion. This ambiguity

creates uncertainty that the amount of $3,146,560 would be

available for construction funding. Because uncertainty makes a

response nonconforming to the exten t thereof, FHFC 's evaluator

was justified in exclud ing this portion of the total equity

proceeds from the applicant's construction funding and deeming

Vistas ' application ineligible as a result . 6 /

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Florida Housing Finance

Corporation enter a f inal o rder fully implementing its intended

action , as no basis for reversal has been established in this

proceeding .

D ONE AND ENTERED this 16th day of July, 2019, in

Tallahassee, Leon County, Florida.

S

JOHN G. VAN LANINGHAM

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 16th day of July, 2019.

ENDNOTES

1 / Much like a request for proposals or an invitation to bid, a

request for applications solicits competitive responses from

qualified developers. See Fla. Admin. Code R. 67 - 60.009(4)

(A request for applications "shall be considered a 'request for

proposal.'").

2 / To be clear, while the parties to an equity proposal are free

to define the term "prior to construction completion" however

they choose for purposes of their agreement, even to the point

of formulating a definition that others might consider

"unreasonable, " the parties are not free to define that same

term for purposes of the RFA, as the hearing officer in Rosedale

correctly concluded. FHFC is free to define "construction

completion" as "Receipt of a Final Certificate of Occupancy," as

it has done, and tha t is the definition which must be applied in

evaluating equity proposals submitted in an application for

funding in response to the RFA.

3 / It is logically possible to read the schedule as meaning that

Capital C ontribution #3 will be available at constru ction

completion, but this must be regarded as, at best, a strained

interpretation.

4 / An ambiguous writing is one whose meaning is uncertain.

Thus, the term "uncertainty," as used in r ule 67 - 60.008, plainly

includes ambiguity in the legal sense, i.e . , language which is

susceptible to two or more reasonable interpretations. Whether

"uncertainty" is limited to such ambiguity need not be decided

here. The discussion in this Recommended Order focuses on

semantic ambiguity because that is the nature of the case.

Nothing herein is intended to imply a conclusion that

"uncertainty" for purposes of the r ule is indistinguishable from

"ambiguity" as the latter term is defined in the common law.

5 / Strictly speaking, it is the equity proposal that the RFA

requi res must state the amount of equity to be paid prior to

construction completion. The sufficiency of this amount,

however, depends upon sum total of construction funding

available to the applicant from all sources, including, e.g.,

financing obtained throu gh construction loans, as shown in the

Development Cost Pro Forma. Ultimately, therefore, the

responsiveness of the equity proposal cannot be determined

without referring to other parts of the application.

6 / The evidence was insufficient to support a finding as to the

evaluator's specific rationale for not counting the ambiguously

stated portion of the applicant's equity proceeds. This is of

no moment, however, because an intended scoring decision that is

neither arbitrary nor capricious, even if arri ved at using

flawed reasoning (which was not shown here), cannot be

disturbed.

COPIES FURNISHED :

M. Christopher Bryan t , Esquire

Oertel, Fernandez, Bry ant &

Atkinson, P.A.

Post Office Box 1110

Tallahassee, Florida 32302 - 1110

(eServed)

Christopher D. McGuire, Esquire

Betty Zachem, Esquire

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.

106 East College Avenue, Suite 820

Tallahassee, Florida 32301

(eServed)

Amy Wells Brennan, Esquire

Manson Bolves Donaldson Varn, P.A.

109 North Brush Street, Suite 300

Tampa, Florida 33602

(eServed)

Hugh R. Brown, General Counsel

Florida Housing Finance Corporation

227 North Bronough Street, Suite 5000

Tallahassee, Florida 32301 - 1329

(eServed)

Corporation Clerk

Florida Housing Finance Corporation

227 North Bronough Street, Suite 500 0

Tallahassee, Florida 32301 - 1329

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

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

to this Recommended Order should be filed w ith the agency that

will issue the Final Order in this case.