5D05-1697 Holly Ridge v. Pritchett

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State: Florida

Court: Florida Fifth District Court

Docket No: 5D05-1697

Case Date: 07/31/2006

Preview:IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FIFTH DISTRICT JULY TERM 2006 HOLLY RIDGE LIMITED PARTNERSHIP , Appellant, v. LARRY PRITCHETT, AS PUTNAM, etc., et al., Appellees. ________________________________/ Opinion filed August 4, 2006 Appeal from the Circuit Court for Putnam County, Edward E. Hedstrom, Judge. M. Stephen Turner, P.A. and David K. Miller, P.A., of Broad & Cassel, Tallahassee, and John P. Harllee, III, of Harllee & Bald, Bradenton, Of Counsel, for Appellant. Loren E. Levy, of The Levy Law Firm, Tallahassee, for Appellee Larry Pritchett. Victoria L. Weber of Hopping, Green & Sams, P.A., Tallahassee, for Amicus Curiae, Coalition of Affordable Housing Providers, Inc. Wellington H. Meffert II, General Counsel, Florida Housing Finance Corporation, Tallahassee, for Amicus Curiae Florida Housing Finance Corporation. Case No. 5D05-1697

EVANDER, J., The issue in this case is whether Putnam County's property appraiser complied with the requirements of sections 193.011 and 420.5099, Florida Statutes, in assessing

the value of Holly Ridge L.P.'s (Holly Ridge) property for the years 2002 and 2003. The trial court ruled in favor of the property appraiser. However, we find the property

appraiser failed to comply with the law in determining just valuation and therefore reverse the final judgment and remand for a new trial. Holly Ridge owns 120 senior rental apartments and amenities built with tax credit financing under the Low Income Housing Tax Credit ("LIHTC") program administered by the Florida Housing Finance Corporation. The LIHTC program was created by

Congress as part of the Tax Reform Act of 1986. Pub. L. No. 99-514, 100 Stat. 2085 (1986). The purpose of this program is to encourage the priva te sector to develop affordable rental housing. Each state receives an annual allotment of low income

housing ta x credits. Tax credits equate to a dollar-for-dollar reduction of the holder's federal tax liability, which can be taken for up to ten years if the project satisfies governmental requirements each year. Florida Housing Finance Corporation is the statutorily-created agency

responsible for the allocation and distribution of tax credits to Florida applicants. The tax credits are awarded to qualified applicants through a competitive process. The tax credits provide a financing mechanism for the developer t o pay most of the project construction costs. Upon receiving the tax credits, the developer typically sells them to a banking institution that qualifies to use the credits and pays the developer approximately eighty cents for each dollar of tax credit purchased. The banking

institution that purchases the tax credits then becomes a limited partner in the entity owning the development and the developer becomes the general partner. Once

construction is completed and the project is placed in service, the banking institution

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may use one-tenth of the tax credits each year for ten consecutive years. After ten years, the tax credits are exhausted. The tax credit sales proceeds are used to minimize project debt and thereby enable the project to be economically feasible given the substantial and long-term restrictions placed on the developed property. These restrictions are set forth in a Land Use Restriction Agreement ("LURA"). The LURA is recorded in the public records to insure compliance. The developer must submit annual compliance reports and projects are audited every year to enforce compliance. recaptured if a project is out of compliance. In the present case, the Florida Housing Finance Corporation allocated approximately $8 million in income tax credits to Holly Ridge's developer/general partner, Picerne Holly Ridge, LLC. The developer sold the tax credits for approximately $6.4 million to investor limited-partner entities affiliated with PNC Bank. The developer used the tax credit sales proceeds to pay most of the construction costs. Holly Ridge used a construction loan mortgage of $1.5 million to pay construction costs that were not paid by tax credit sales proceeds. In exchange for tax credits, the developer/general partner placed the property under a LURA that substantially restricts its use for fifty (50) years. The developer is obligated to build and manage the project in accordance with the LURA restrictions and to deliver the tax credits upon the agreed schedule. Among the numerous restrictions set forth in the LURA (which runs with the land and inures to successors and assigns of the owner), is that fifteen percent of the units must be set aside for tenants whose income is at or below forty percent of Putnam County's median income, twenty-five Tax credits may be disallowed or

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percent of the units are to be set aside for tenants whose income is at or below fifty percent of the County's median income, and sixty percent of the units must be reserved for tenants whose income is at or below sixty percent of the County's median income. Such tenants may be charged not more than thirty percent of their maximum monthly income as gross rent for the apartments. Rent cannot be changed during a tenancy and rental rates cannot be increased even if expenses or taxes increase. The property can only be used for rental apartments. The size of units and rooms and the type of furnishings and facilities are specified in detail in the LURA. Tenant services and

programs must be provided by the owner, including on-site health care, regular health screening, food and clothing assistance, and activities such as computer courses and credit counseling. The project manager must be approved by the Florida Housing Finance Corporation and can be removed at its direction. The property cannot be sold without written consent of the Florida Housing Finance Corporation. Article VII, section 4 of the Florida Constitution provides: By general law regulations shall be prescribed which shall secure a just valuation of all property for ad valorem taxation, . . . . Just valuation has been determined by the Florida Supreme Court to be synonymous with fair market value, to -wit, the amount a purchaser willing but not obliged to buy, would pay a seller who is willing but not obliged to sell. See Valencia Center, Inc. v. Bystrom, 543 So. 2d 214, 216 (Fla. 1989); Walter v. Schuler, 176 So. 2d 81 (Fla. 1965). The framers of the Constitution delegated to the Legislature the responsibility for deciding the specifics of how "just valuation" would be secured. Condo. Ass'n v. Robbins, 914 So. 2d 925, 932 (Fla. 2005). Sunset Harbour

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Section 193.011 sets forth various factors which a property appraiser is required to take into consideration in determining just valuation. Of particular significance in this case is subsection (2), which provides, in part, that a property appraiser shall consider the effect that any local or state land use regulation will have on the value of the assessed property. Section 420.5099 sets forth additional directives which the property appraiser is required to follow in determining just valuation for LIHTC apartments. In 2002, the applicable statute provided: For purposes of implementing this program in Florida and in assessing the property for ad valorem taxation under s. 193.011, neither the tax credits, nor financing generated by tax credits, shall be considered as income to the property, and the rental income from rent restricted units in a lowincome tax credit development shall be recognized by the property appraiser.

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